SECRET
8.
There is no formal minimum for any such account (unless imposed for account remuneration purposes), nor any formal maximum. Any bank facing a shortfall on its clearing account will obtain the necessary HK by borrowing in the local inter-bank market; by borrowing from the Hongkong and Shanghai Bank or (if it has one) from its "settlement bank"; or by selling US for HK in the local foreign exchange market (which operates on a same-day settlement basis).
Foreign Currency Notes
9. There is an active market in foreign currency notes in Hong Kong, and in certain specialised sectors of the economy eg retailers catering for tourists - a substantial (but unquantifiable) proportion of business is conducted in foreign currency notes. Indeed such notes are acceptable tender (although not strictly legal tender) in many parts of the territory, particularly when the exchange. value of the local currency is under pressure.
Foreign Currency Clearing Accounts
10.
etc.
There is a substantial (but again unquantifiable) number of manufacturing and import/export enterprises in Hong Kong operating effectively on a US basis, with their books maintained in that currency, and the local currency used mrerely for local wages, rates
There is no foreign currency clearing mechanism in Hong Kong; transactions between these companies (which clearly have an impact on the local economy) have to be settled by payments drawn on their US accounts, which may be with banks in Hong Kong, in Singapore, in New York or elsewhere (and the banks outside Hong Kong may or. may not be branches of Hong Kong-incorporated banks).
Wider Monetary Measures
11. Looking at the broader measures of money the most striking feature is the extent to which growth has been in foreign currency accounts rather than HK S accounts. Over the year to July HK SM3 rose by 5% to HK 150 billion, total M3 (including foreign currency balances) rose 27% to HK £280 billion.
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