ENG-1967 — Page 76

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FINANCIAL STRUCTURE

received in the course of business, many still remain unredeemed although few appear to be in active circulation. The dollar notes and coins are backed by security funds which maintain their assets partly in sterling and partly in Hong Kong dollar bank accounts. The 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 value of the Hong Kong dollar was established at approxi- mately 1s 3d sterling in 1935 and it was maintained at that level till 1967 when sterling devalued by 14.3 per cent. The Hong Kong dollar was subsequently revalued in terms of sterling at 1s 4łd. Banks may deal with the public at a few points on either side of this rate, both to allow for a profit margin and, to a slight extent, to meet fluctuations in demand and supply.”

The total currency in nominal circulation at December 31, 1967 was:

}

Bank note issue

Government $1 note issue Government $1 coin issue Subsidiary coins and notes

$2,176,270,000 14,408,487

...

...

$

...

$ 58,760,890 $ 58,217,747

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 modifications made necessary by the position of Hong Kong as an entrepôt.

BANKING

During 1967, banking deposits did not show their customary increase, largely because of the internal disturbances in the Colony. The net decrease in total bank deposits amounted to $243 million; total deposits remained at $8,162 million at Decem- ber 31, 1967. Loans and advances decreased by $36 million and at the end of the year represented 65.5 per cent of bank deposits, compared with 64 per cent at the end of 1966. Withdrawals of deposits in many cases were the result of a desire by some members of the public to hold their money in more liquid form. This resulted in an increase in the note issue at the time; the note issue at Decem- ber 31, 1967, was $2,176,270,000, representing 26.7 per cent of total deposits.