The History of Hong Kong’s Banks and Currency

Posted on 11/19/2019

Hong Kong has drawn worldwide attention since the 1500s, when Europeans established trade there.

Hong Kong has only 428 square miles of land yet it circulates notes from four issuers. The current notes are all issued in Hong Kong Dollars but are issued from four separate entities: the government of Hong Kong and three banks — HSBC, the Bank of China and Standard Chartered.

The history of Hong Kong lends itself to this variety of issuers.

Hong Kong became a focal point in the world's eye in the 1500s, when Europeans established trade in China’s port. Britain traded heavily with China for its tea supply and used opium to pay for some of its goods. This practice was common for many years. China began to have a drug crisis because of opium in the mid-18th century and decided to ban it from being imported.

Because Britain’s main source of income in China was from its sale of opium, the ban drastically changed its economic position in China. This led to the First Opium War between China and Britain, which ultimately Britain won. In 1842, control of Hong Kong went to Britain as reparations. Britain established a local government quickly and in 1860, after the Second Opium War, expanded Hong Kong to include Kowloon on the mainland across the harbor from Hong Kong Island.

Shortly after the establishment of Britain’s control, foreign investments began to flow in. Since the 1840s, commercial banks provided Hong Kong with its currency. A total of eight banks have issued currency for Hong Kong, with three of them still existing in some form today.

Britain attempted to form a local mint for Hong Kong in the 1860s, but it failed due to debasement and poor response, leaving an ongoing need for currency. Hong Kong would not have a government issue that lasted until 1935.

The Oriental Bank Corporation in 1845 became the first commercial bank to open in Hong Kong and began issuing notes in 1846. The bank was regarded as the most prestigious and powerful bank in its first 30 years of its operation, but a series of bad loans crippled the bank and it closed its doors in 1884.

Hong Kong, Oriental Bank Corp., Pick# 267b, 1879, 5 Dollars, front
PMG graded 15 Choice Fine
Click image to enlarge.

Hong Kong, Oriental Bank Corp., Pick# 267b, 1879, 5 Dollars, back
PMG graded 15 Choice Fine
Click image to enlarge.

Unlike the Oriental Bank Corporation, four of the eight banks that issued notes in Hong Kong lasted over 100 years. Those banks were: The Chartered Mercantile Bank of India, London, and China; The Charted Bank of India, Australia and China; The Hong Kong and Shanghai Banking Company Limited; and The Bank of China.

China later agreed to lease the Hong Kong area along with new territories in 1898 for 99 years. Britain would remain in control of Hong Kong and undoubtedly be the main reason why Hong Kong has four different issuers of its currency today.

Next month’s article will highlight the four banks that lasted over 100 years in Hong Kong, along with Hong Kong’s transition from British control to Chinese and the re-establishment of its government issue.

Sources:


Articles List