Hong Kong dollar

Terminology

In formal Cantonese, the 圓 or 元 (Jyutping: jyun4) character is used. In spoken Cantonese, 蚊 (Jyutping: man1) is used, perhaps a transliteration of the first syllable of “money”, although some suggest that the character comes from the 緡 (Jyutping: man4). The dollar is divided into 100 cents, with the character 仙 (Jyutping: sin1, a transliteration of “cent”) used on coins and in spoken Cantonese. However, 仙 is now only used in the stock market, as now it no longer has a note or coin form due to its small value, and is no longer used in regular transactions. 分 (pinyin: fēn; Jyutping: fan1) is used in Mandarin. The amount of 10 cents is called 1 houh in Cantonese (毫, Jyutping: hou4, on coins and in spoken Cantonese, 毫子, Jyutping: hou4 zip, in colloquial speech, 角, pinyin: jiǎo; Jyutping: gok3, in Mandarin). The mil was known as the man or tsin in Cantonese (文, pinyin: wén; Jyutping: man4, or 千, pinyin: qiān; Jyutping: cin1, on coins and in spoken Cantonese and Mandarin).

To express prices in spoken Cantonese, for example $7.80, the phrase is 七個八 (Jyutping: cat1 go3 baat3; literally: "seven units and eight [tenths]"); in financial terms, where integer values in cents exist, e.g., $6.75, the phrase is 六個七毫半 (Jyutping: luk6 go3 cat1 hou4 bun3; literally: "six and seven ten cents 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 (Jyutping: cat1 man1 ling4 baat3 sin1; literally: "seven dollars zero eight cents").

Slang terms

In Hong Kong, the following are slang terms used to refer to various amounts of money:

Some of these terms are also used by overseas Chinese to refer their local currency. A slang term in English sometimes used for the Hong Kong dollar is "Honkie".

History

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, and Chinese cash coins circulated. Since 1825, it had been the policy of the British government to introduce sterling silver coinage to all of its colonies, and to this end, in 1845, the Spanish and Mexican 8 reales coins were set at a legal tender value of 4 shillings 2 pence sterling. But just as in the case of the British North American colonies, the attempts to introduce the sterling coinage failed to overcome the strong local adherence to the silver Spanish dollar system.

By 1858, London gave up all attempts to influence the currency situation in Canada, and, by the 1860s, it came to the same realisation in Hong Kong: that there was no point in trying to displace an already existing currency system.In 1863, the Royal Mint in London began issuing special subsidiary coinage for use in Hong Kong within the dollar system. In 1866, a local mint was established at Sugar Street in Causeway Bay on Hong Kong Island for the purpose of minting Hong Kong silver dollar and half dollar coins of the same value and similar likeness to their Mexican counterparts. The Chinese did not however receive these new Hong Kong dollars well, and in 1868 the Hong Kong Mint was closed down with a loss of $440,000. The machinery at the Hong Kong mint was sold first to Jardine Matheson and in turn to the Japanese and used to make the first Yen coins in 1870. In the 1860s, banknotes of the new British colonial banks, the Hong Kong and Shanghai Banking Corporation and the Chartered Bank of India, Australia and China, denominated in dollars, also began to circulate in both Hong Kong and the wider region.

In 1873, the international silver crisis resulted in a devaluation of silver against gold-based currencies. Since the silver dollars in the USA and Canada were attached to a gold exchange standard, this meant that the silver dollars circulating along the China coast dropped in value as compared to the US dollar and the Canadian dollar.

By 1895, the circumstances had changed to the extent that there was now a dearth of Mexican dollars and the authorities in both Hong Kong and the Straits Settlements were putting pressure on the authorities in London to take measures to have a regular supply of silver dollar coins. London eventually acquiesced and legislation was enacted in attempts to regulate the coinage. New British trade dollars were coined at the mints in Calcutta and Bombay for use in both Hong Kong and the Straits Settlements. In 1906, the Straits Settlements issued their own silver dollar coin and attached it to a gold sterling exchange standard at a fixed value of 2 shillings and 4 pence. This was the point of departure as between the Hong Kong unit and the Straits unit.

By 1935, only Hong Kong and China remained on the silver standard. In that year, Hong Kong, shortly after China, abandoned silver and introduced a crawling peg to sterling of £1 = $15.36 to $16.45. It was from this point in time that the concept of a Hong Kong dollar as a distinct unit of currency came into existence. The One-Dollar Currency Note Ordinance of that year led to the introduction of one-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 Hong Kong dollar was put on a fixed peg of $16 = £1 ($1 = 1s 3d).

During the Japanese occupation, the 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. However, in August 1942, the rate was changed to 4 to 1. The yen became the only legal tender 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 = £1 being restored. The yen was exchanged at a rate of ¥100 = $1. On 6 September 1945, all yen notes were declared void by the Japanese Ministry of Finance.

In 1967, when sterling was devalued, the dollar's peg to the pound was increased from 1s 3d to 1s  4 ¹⁄₂d ($14.5455 = £1) 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 HK$5.65 = US$1. This was revised to HK$5.085 = US$1 in 1973. Between 1974 and 1983, the Hong Kong dollar was floated. On 17 October 1983, the currency was pegged at a rate of HK$7.8 = US$1, 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 HK$7.75 to the US dollar. The lower limit has been lowered from 7.80 to 7.85 (by 100 pips per week from 23 May to 20 June 2005). 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 issue a Hong Kong dollar only if it has the equivalent exchange in US dollars on deposit. The currency board system ensures that Hong Kong's entire monetary base is backed with US dollars at the linked exchange rate. The resources for the 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 US dollars, with official foreign currency reserves of US$361 billion as of March 2016.

Coins

In 1863, 1-mil ( ¹⁄₁₀-cent), 1-cent and 10-cent coins were introduced, followed in 1866 by 5 and 20 cents, half dollar 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 half dollar and 1 dollar ceased in 1868, with only the half 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 the Japanese sank a ship carrying 1-cent coins bound for Hong Kong in 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 and first bore the name "fifty cents" in both Chinese and English, but these were changed to nickel-brass in 1977.

In 1960, cupro-nickel 1-dollar coins were introduced, these were then reduced in size in 1978. They 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 coin 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 HKSAR, 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 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. However, most still remain in legal tender and are in circulation. 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.

In 1997, to commemorate Hong Kong's transfer of sovereignty from Britain to the PRC, the government issued a new commemorative coin set which depicted Chinese cultural themes and Hong Kong's landmarks and 19 and 97, marking the year 1997, on each side of the designs.

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.

Numismatics