The Hong Kong dollar (sign: $; code: HKD) is the currency of Hong Kong. It is the 9th most traded currency in the world. In English, it is normally abbreviated with the dollar sign $, or alternatively HK$ to distinguish it from other dollar-denominated currencies. The dollar is subdivided into 100 cents.
In formal Cantonese, the 圓 character is used. In spoken Cantonese, 蚊 is used, perhaps a transliteration of the first syllable of "money", although some suggest that the character is a corruption of 緡. 元 is also used informally. The dollar is divided into 100 cents, with the character 仙 (a transliteration of "cent") used on coins and in spoken Cantonese. 分 is used in Mandarin. The amount of 10 cents is called 1 houh in Cantonese (毫 on coins and in spoken Cantonese, 毫子 in colloquial speech, 角 in Mandarin). The mil was known as the man or tsin in Cantonese (文 or 千 on coins and in spoken Cantonese and Mandarin).
To express prices in spoken Cantonese, for example $7.80, the phrase is 七個八 (chat go baat, seven units and eight [decimals]); in financial terms, where integer values in cents exist, e.g., $6.75, the phrase is 六個七毫半 (luhk go chat houh bun, six and seven "houh" half) (fives in cents is normally expressed as "half", unless followed by another five, such as 55 cents when preceded by a dollar value); $7.08 is 七蚊零八仙 (seven dollars "ling" (zero) eight cents).
In Hong Kong, the following are slang terms used to refer to various amounts of money:
- 辰砂: cents (Rarely used; lit. cinnabar, ground (therefore small-size) which used in Chinese medicine)
- 斗零: 5¢ coins (lit. weight of the coin ,approximately 1.37g; 5¢ is no longer in circulation.)
- 大餅: $1 (lit. big cracker; Refer to its circular shape.)
- 草／兜／條: $10 (lit. grass/bowl/stripe; Slang terms.)
- 青蟹: $10 (lit. green crab; Refer to the colour of the old style banknotes.)
- 花蟹／公仔紙: $10 (lit. flowery crab, colourful paper; Refer to the colour of the new style banknotes.)
- 舊水: $100 (lit. a lump of water; "Water" stands for money in Cantonese)
- 紅底、紅衫魚: $100 (lit. red back, red snapper; Refer to the red colour of the notes.)
- 大牛: $500 (lit. big bull); Refer to a picture of a bull on the note in pre-war.)
- 金牛: $1,000 (lit. golden bull; Refer to the gold colour of the notes.)
- 皮: $10,000 (lit. skin; Slang term.)
- 棟: $1,000 (lit. building; Uncommon slang term.)
- 雞嘢: $10,000 (lit. chicken stuff; Uncommon slang term, can also mean $1)
- 餅: $10,000 (lit. cracker; Uncommon slang term.)
- 球: $1,000,000 (lit. ball; Slang term, usually used in buying stocks.)
- 碼: $1,000,000,000 (lit. yard; )
Some of these terms are also used byoverseas Chinese to refer their local currency.
When Hong Kong was established as a free trading port in 1841, there was no local currency in everyday circulation. Foreign currencies such as Indian rupees, Spanish and Mexican 8 reales, Chinese cash and British currency were employed. In 1845, the Spanish and Mexican 8 reales coins were set at a value of 4 shillings 2 pence sterling. In 1863, the dollar was pegged to silver at a rate of 1 dollar = 24.44 grams pure silver and the first coins were issued. Banknotes also appeared in the 1860s, with a number of different private banks issuing notes.
Foreign currencies continued to circulate alongside local issues but the majority of these were not up to standard for government payments. Owing to financial losses, the Hong Kong Mint (located on Sugar Street) was closed in 1868 after two years operation. (The machinery was sold to Jardine Matheson, which in turn sold them to the Japanese government.) As a replacement for the local dollar coins, silver trade dollars from the USA, Japan and Britain were used.
From 1895, legislation was enacted in attempts to regulate the coinage. In 1935, the silver standard was replaced by a crawling peg to sterling of 1 pound = 15.36 to 16.45 dollars. The One-Dollar Currency Note Ordinance of that year lead to the introduction of 1 dollar notes by the government and the Government acknowledged the Hong Kong Dollar as the local monetary unit. It was not until 1937 that the legal tender of Hong Kong was finally unified. In 1939, the dollar was put on a fixed peg of 16 dollars = 1 pound (1 dollar = 1 shilling 3 pence).
During the Japanese occupation, Japanese military yen were the only means of everyday exchange in Hong Kong. When the yen was first introduced on 26 December 1941, the exchange rate was 1 yen = 2 dollars. However, in August, 1942, the rate was changed to 4 to 1. The yen became the only legal tender in on 1 June 1943. The issue of local currency was resumed by the Hong Kong Government and the authorised local banks after liberation, with the pre-war rate of 16 dollars = 1 pound being restored. The yen was exchanged at a rate of 100 yen = 1 dollar. On 6 September 1945, all yen notes were declared void.
In 1967, when sterling was devalued, the dollar's peg to the pound was increased from 1 shilling 3 pence to 1 shilling 4½ pence (14.5455 dollars = 1 pound) although this did not entirely offset the devaluation. In 1972, the Hong Kong dollar was pegged to the U.S. dollar at a rate of 5.65 H.K. dollar = 1 U.S. dollar. This was revised to 5.085 H.K. dollar = 1 U.S. dollar in 1973. Between 1974 and 1983, the Hong Kong dollar floated. On 17 October 1983, the currency was pegged at a rate of 7.8 H.K. dollar = 1 U.S. dollar, through the currency board system.
As of 18 May 2005, in addition to the lower guaranteed limit, a new upper guaranteed limit was set for the Hong Kong dollar at 7.75 to the USD. The lower limit will be lowered from 7.80 to 7.85 in five weeks, by 100 pips (0.01) each week. The Hong Kong Monetary Authority indicated this move is to narrow the gap between the interest rates in Hong Kong and those of the United States. A further aim of allowing the Hong Kong dollar to trade in a range is to avoid the HK dollar being used as a proxy for speculative bets on a renminbi revaluation.
The Basic Law of Hong Kong and the Sino-British Joint Declaration provides that Hong Kong retains full autonomy with respect to currency issuance. Currency in Hong Kong is issued by the Government and three local banks under the supervision of the territory's de facto central bank, the Hong Kong Monetary Authority. Bank notes are printed by Hong Kong Note Printing Limited.
A bank can only issue a Hong Kong dollar if it has the equivalent exchange in U.S. dollars on deposit. The currency board system ensures that Hong Kong's entire monetary base is backed with U.S. dollars at the linked exchange rate. The resources for this backing are kept in Hong Kong's exchange fund, which is among the largest official reserves in the world. Hong Kong also has huge deposits of U.S. Dollars, with the 2008 estimate being at over US$700 billion.
Coins and banknotes
In 1863, 1 mil, 1 and 10 cent coins were introduced, followed in 1866 by 5 and 20 cents, ½ and 1 dollar. The 1 mil and 1 cent were struck in bronze, with the 1 mil a holed coin. The remaining coins were struck in silver. Production of the 1 mil ended in 1866, whilst that of the ½ and 1 dollar ceased in 1868, with only the ½ dollar (now with the denomination given as 50 cents) resuming production in 1890. Production of all silver coins was suspended in 1905, only briefly resumed in 1932 and 1933 for the production of 5 cent coins.
In 1934, the last 1 cent coins were issued, but the last minting was 1941. These were not issued because of the Second World War. The following year (1935), cupro-nickel 5 and 10 cents were introduced, replaced by nickel in 1937 and nickel-brass between 1948 and 1949. Copper-nickel 50 cents were issued in 1951, these were changed to Nickel-brass in 1977.
In 1960, cupro-nickel 1 dollar coins were introduced, these were reduced in size in 1978. These were followed in 1975 by nickel-brass 20 cents and cupro-nickel 2 dollars (both scallop shaped), and in 1976 by decagonal, cupro-nickel 5 dollars, changed to a round thicker shape in 1980. The 5 cent was last issued in 1979, but last struck in 1988. In 1994, a bimetallic 10 dollar coin was introduced.
Starting in 1993, prior to the establishment of the SAR, coins with Queen Elizabeth II's portrait were gradually withdrawn from circulation. Most of the notes and coins in circulations feature Hong Kong's Bauhinia blakeana flower or other symbols. Coins with the Queen's portrait are still legal tender and can be seen, but these are slowly being phased out.
Because the redesign was highly sensitive with regard to political and economic reasons, the designing process of the new coins could not be entrusted to an artist but was undertaken by Joseph Yam, Chief Executive of the Hong Kong Monetary Authority, himself who found in the bauhinia the requested "politically neutral design" and did a secret scissors and paste job.
The issue of Hong Kong dollar notes is governed today by the Hong Kong Monetary Authority (HKMA), the governmental currency board of Hong Kong. Under licence from the HKMA, three commercial banks issue their own banknotes for general circulation in the region. Notes are also issued by the HKMA itself. In most countries of the world the issue of banknotes is handled exclusively by a single central bank or government. The arrangements in Hong Kong are unusual but not unique; a comparable system is used in the United Kingdom, where eight banks issue banknotes.
In 1845, the first private bank, the Oriental Bank, was founded. However, banknotes were not produced until the 1860s, when the Oriental Bank, the Chartered Bank of India, Australia and China and the Hong Kong and Shanghai Banking Company began issuing notes. Denominations issued in the 1860s and 1870s included 1, 5, 10, 25, 50, 100 and 500 dollars. These notes were not accepted by the Treasury for payment of government dues and taxes, although they were accepted for use by merchants. 25 dollar notes did not survive beyond the end of the 19th century, whilst the 1 dollar notes (only produced by the HSBC) were issued until 1935.
Under the Currency Ordinance of 1935, banknotes in denominations of 5 dollars and above issued by the three authorised local banks, (the Mercantile Bank of India Limited, the Chartered Bank of India, Australia and China and the Hong Kong and Shanghai Banking Corporation, were all declared legal tender. The government took over production of 1 dollar notes. In 1941, the government introduced notes for 1, 5 and 10 cents due to the difficulty of transporting coins to Hong Kong caused by the Second World War (a ship carrying 1941 1 cent coins was sunk, making this unissued coin very rare). Just before the Japanese occupation, an emergency issue of 1 dollar notes was made consisting of overprinted Bank of China 5 yuan notes.
In 1945, paper money production resumed essentially unaltered from before the war, with the government issuing 1, 5 and 10 cents, and 1 dollar notes, and the three banks issuing 5, 10, 50, 100 and 500 dollar notes. 1 dollar notes were replaced by coins in 1960, with only the 1 cent note issued by the government after 1965.
In 1975, the 5 dollar notes were replaced by a coin, whilst 1000 dollar notes were introduced in 1977. The Mercantile Bank was absorbed by the HSBC in 1978 and ceased issuing notes. In 1985, 20 dollar notes were introduced, whilst, in 1993, a 10 dollar coin was introduced and the banks stopped issuing 10 dollar notes. In 1994 the HKMA gave authority to the Bank of China to issue notes.
After a less-than-successful trial from 1994 to 2002 to move the 10-dollar denomination from the banknote format (issued by the banks) to the coin format (Government-issued), 10 dollar banknotes are currently the only denomination issued by the HKMA, having acquired the note printing plant at Tai Po from the De La Rue Group of the UK on behalf of the Government. The older 10-dollar banknotes are, although rare and being phased out, still circulating.
A commemorative polymer ten dollar note was issued in July 2007 to commemorate the 10th anniversary of Hong Kong's return to China. The new notes will circulate along with other issues for a trial period of two years, though the initial batch released was largely snapped up by collectors.
A new series on banknotes will be issued in 2010 and 2011
Linked exchange rate system
The primary monetary policy objective of the Hong Kong Monetary Authority is to maintain exchange rate stability within the framework of the linked exchange rate system through sound management of the Exchange Fund, monetary operations and other means deemed necessary.
The important underpinnings of the linked exchange rate system include the strong official reserves of Hong Kong, a sound and robust banking system, fiscal prudence and a flexible economic structure.
In 2007, Jim Rogers, a former partner in George Soros' Quantum Fund, said the Government should abolish the Hong Kong dollar and adopt the yuan as the official currency of the territory when the renminbi is freely convertible. (As of 2007, the renminbi was not, and still is not freely convertible.) However, in the same year, Rogers changed his position and believe the Hong Kong Government should adopt the renminbi even when it is non-freely convertible. "This is 2007; I don't know why the Hong Kong dollar exists any more.... You have a gigantic neighbor who is becoming the most incredible economy in the world." Rogers also believes the Renminbi is going to replace the US Dollar as world reserve currency.
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