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FINANCIAL STRUCTURE
Business Registration is compulsory for every business operating in Hong Kong, except those carried on by charitable institutions. The annual registration fee is $150 but exemption from payment of the fee is granted where the business is small. The total income from these fees, service fees for copy documents and other fees for the fiscal year 1975-6 is expected to be $29.9 million.
Currency
Hong Kong has no central bank. Bank notes are issued by three commercial banks-the Hongkong and Shanghai Banking Corporation, the Chartered Bank and the Mercantile Bank. Currency notes of one cent denomination are issued by the government, as are coins of two dollars, one dollar, 50 cents, 20 cents, 10 cents and five cents. A $1,000 gold coin was issued in 1975 to commemorate the Queen's visit in May. The total currency in nominal circulation at the end of 1975, and details of its constitution, are shown in Appendix 11.
The value of currency issued by the note-issuing banks is regulated by an Exchange Fund, which was set up in 1935 when the Hong Kong dollar ceased to be based on silver. The fund receives payment from these banks in exchange for certificates of indebtedness denominated in Hong Kong dollars. These certificates are non-interest bearing and are issued and redeemed at the discretion of the Financial Secretary. They provide the legal backing for the notes issued by the banks-apart from their small 'fiduciary' issues which are limited to a total of $95 million and are issued against securities, of a kind approved by the Secretary of State, which are held by the banks and deposited with the Crown Agents in London. The Exchange Fund's resources are employed in a variety of investments, both long and short-term, denominated in several currencies. Out of the income derived, the fund bears the cost of the note issue except for a small proportion, equivalent to the proportion of the 'fiduciary' issues to the total note issue, which is met by the note-issuing banks.
The exchange value of the Hong Kong dollar was established in 1935 at about 1s 3d sterling ($16 to £1). 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. The relationship with sterling was, however, not a statutory one, and was established and maintained by the operations of the Exchange Fund in conjunc- tion with the note-issuing banks. It weakened after the devaluation of the pound in November 1967, and it ended after the pound was allowed to float downwards in June 1972. Early in the following month the Hong Kong Government decided to fix the exchange value of the Hong Kong dollar in terms of US dollars instead of sterling.
Appendix 5 sets out changes in the exchange value of the Hong Kong dollar from 1946 to November 1974, when the currency was allowed to float. It strengthened markedly against the US dollar, with some fluctuations, up to mid-February 1975. Later in the year, however, as the US dollar strengthened in world markets, it returned near to its previous central rate of HK$5.085 US$1. As measured by a trade-weighted index, the overall value of the Hong Kong dollar against the currencies of Hong Kong's major trading partners was some two per cent higher at the end of 1975 than in the period immediately before the currency floated.