44
FINANCIAL STRUCTURE
into effect on the September 1, 1969, these old notes were demon- etised and the assets of the security funds held against these issues were transferred to general revenue. Any outstanding notes may be redeemed after this date on presentation to the Accountant General. Government also issues subsidiary coins of the value of 5 cents, 10 cents and 50 cents, and notes of the value of 1 cent.
The total currency in nominal circulation at December 31, 1969
was:
Bank note issue
Government $1 coin issue
Subsidiary coins
Government 1 cent note issue
$2,116,164,000.00
$
77,040,366.00
$
67,251,727.10
$
468,310,00
The Colony has been a part of the sterling area since August 1941. Exchange Control is administered under powers conferred by the Defence (Finance) Regulations 1940. The system of control is based on that in force in the United Kingdom, with some modi- fications made necessary by the position of Hong Kong as an entrepôt.
The exchange value of the Hong Kong dollar was established in 1935 at approximately 1s 3d. On the setting up of the International Monetary Fund after World War II, the Hong Kong dollar was given its own gold parity at a rate reflecting this relationship. Hong Kong followed fully Britain's 1949 devaluation, like the greater part of the sterling area. This relationship with sterling was at no time a statutory one; it was established and maintained by the operations of the Exchange, Fund in conjunction with the note- issuing banks. It came, however, to be generally regarded, in com- merce and banking, as a fixed relationship; while Hong Kong, as both a dependent territory and a member of the sterling area, was required in practice to keep its official reserves and the greater part of the reserves of the banking system (there being no central bank) in the form of sterling. Towards the end of 1967 Hong Kong's total sterling assets were of the order of £350 million.
In consequence of this situation, when sterling was devalued by 14.3 per cent in November 1967, the immediate effect was a loss to the Colony which may be estimated at $700 million; and Hong Kong was faced with the dilemma of following the pound down and so letting the loss fall directly and fully on the standard of