27
vùil
widespread apprehensions existed that they might so
fail.
The
The "exchange premium" is of course quite a different thing and depends entirely on the direction and quantity of the flow of funds into and out of Hong Kong. As a financial unit the Hong Kong dollar is confined to the single small centre of Hong Kong. power of creating or withholding Hong Kong dollars therefore depends entirely on the banks carrying on business in Hong Kong, not only the 3 note-issuing British banks, but also the other twenty odd Banks which are mainly foreign. Of recent years, and probably as a general rule, there has been a steady flow of funds into Hong Kong due principally to the desire of overseas Chinese, particularly in Malaya, to remit funds to
China. What happens to these funds when they get to Hong Kong is obscure; as often as not apparently they stay there on deposit; otherwise they are remitted on to China in the form of Hong Kong bank-notes which are the only form of currency in Hong Kong acceptable in
Southern China.
Putting the matter another way Hong Kong has (viibh o invisikh) had an excess of exports over imports and her currency
therefore has been, and remains, at a premium.
The position therefore is that there has been
a steady flow of sterling credits to the Banks, to be exchanged for Hong Kong dollars in the form either of credit or notes, and the Banks have become "overbought
in
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