Another recent article on the PMG blog is a two-part piece on the history of Hong Kong banks -Editor
Hong Kong's government passed the Currency Ordinance of 1935, which took the Hong Kong 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 switched its dollar to be anchored by the U.S. dollar and still till this day has its
Hong Kong 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's currency unique.
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 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.
To read the complete article, see:
The History of Hong Kong's Banks and Currency
The Long-lived Banks of Hong Kong — Part II
Wayne Homren, Editor
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