The Long-lived Banks of Hong Kong, China — Part II
Posted on 12/17/2019
Second in a series. Read Part I here.
Hong Kong, China has been a melting pot of many nations for hundreds of years. Last month’s article reviewed the British control of Hong Kong, China and the need for a dynamic currency that was accepted and stable for the territory. Four banks, The Charted Bank of India, Australia and China, The Hong Kong and Shanghai Banking Company, The Chartered Mercantile Bank of India, London, and China and The Bank of China all lasted over 100 years in Hong Kong, China. This article will focus on the government’s steps to establish a stable currency and the four banks that have made a lasting impression on the currency of Hong Kong, China.
The government of Hong Kong, China initially set up the Hong Kong, China Dollar to be backed by silver. During much of the 1800s, private banks were the source of currency for Hong Kong, China due to the well accepted nature of its local banks. This remained the status quo until the 1930s due to a world silver crisis. Silver prices were fluctuating drastically, causing economic turmoil to countries whose currencies were directly linked to silver.
Hong Kong, China’s government passed the Currency Ordinance of 1935, which took the Hong Kong, China dollar off the silver standard and switched it to being backed by pounds sterling. The system forced the banks to turn in their silver and be issued certificates of indebtedness. This provided a stability tool to evade fluctuations of the economy and a form of debt to manipulate in case of an emergency. For even more stability later in the 1980s, Hong Kong, China switched its dollar to be anchored by the U.S. dollar and still till this day has its Hong Kong, China dollar linked to the U.S. dollar. Due to the banking systems’ stability for much of the region’s history, banking and its currency have remained much the same since the 1800s. Long-lasting banks issuing their own currency made Hong Kong, China’s currency unique.
|The Charted Bank of India, Australia and China, established in London in 1853, founded a branch in Hong Kong, China
in 1859 and began issuing currency in 1862.
The Charted Bank of India, Australia and China was first established in London in 1853 and soon expanded around the world. The bank developed its business by financing trade from Asia to Europe with goods such as indigo, sugar and tea, which were highly sought after in Europe. In 1859, it founded a branch in Hong Kong, China and began issuing currency in 1862. The bank continued to influence Hong Kong, China through the 18th century and into the 19th. As the bank grew, it acquired other banks along the way, finally merging with Standard Bank in 1969, making the Standard Chartered Bank that is the modern institution we recognize today.
The Hong Kong and Shanghai Banking Co. was created by a Scot named Thomas Sutherland in the 1860s. Sutherland modeled HSBC after Scottish banking, which is arguably one of the most stable free banking systems that ever existed. The Scottish foundation’s conservative banking practices led to the stability of the bank and helped it exist for over 150 years. The bank even became the primary bank for the government of Hong Kong, China and China to acquire their debt to help pay for wars and public works. The stability and control over much of China’s debt allowed the Hong Kong and Shanghai Banking Co. to virtually set the foreign exchange rate for China. As the 20th century progressed, HSBC acquired banks along the way and eventually formed the HSBC holdings group, which is the 7th largest bank in the world.
|The Hong Kong and Shanghai Banking Co.'s stability helped it exist for over 150 years and to become the primary
bank for the government of Hong Kong, China and China to acquire their debt to help pay for wars and public works.
The Chartered Mercantile Bank of India, London and China was granted a royal charter to operate in Hong Kong, China in 1857 and immediately began issuing notes. The Suez Canal and telegraph lines had connected the east and Europe, and easier transportation and communication made trade more efficient and lucrative. This led to a boom in bank expansion, leading banks to think they could take on riskier loans. But over speculation in banking caused turmoil in the 1890s. The Mercantile bank struggled at the turn of the century and gave up note-issuing privileges to rebuild itself. It resumed issuing notes in 1912 and continued issuing notes through the 19th century. As the bank rebounded, it eventually was bought by HSBC in 1959. The bank then shortened its name to the Mercantile Bank Ltd. and issued notes until 1974.
The Bank of China was formed in 1912 when the Republic of China came into existence, making it the first state-owned bank in China. The bank soon opened a branch in Hong Kong, China but did not issue notes until much later. The Bank of China did not play an integral role in Hong Kong, China until the 1990s, as Hong Kong, China made its transition away from British control in 1997. As China regained its rights to Hong Kong, China, it wanted a smooth transition because many observers had speculated it would cause unrest and severe economic repercussions. In preparation, China had set up note-issuing privileges for Hong Kong, China through the Bank of China in 1994. The Bank of China did have a late start compared to the other longtime banks but now it is the second largest commercial banking group in Hong Kong, China.
Practical banking practices helped lead to the longevity of Hong Kong, China’s banking sector. The multiple issuers and the changes in control of Hong Kong, China make its currency a tough collection to complete.
The region allows for a vast array of cultures to be displayed through its banknotes and they are well worth the challenge to collect. Check out our registry and compare your collection today.
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