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Hidden Hong Kong: A history of the nascent Hong Kong dollar

By Ngai Yeung 12 August 2020 | Last Updated 17 August 2023

Header images courtesy of the Hong Kong Monetary Authority

Under “one country, two systems,” Hong Kong can retain its capitalist economy and mint its very own currency, the Hong Kong dollar. We use the Hong Kong dollar in countless transactions every day, but have you ever wondered why the former British colony pegs its currency to the US dollar, rather than, say, the British pound sterling?

It’s the small but obvious things that make us reconsider how much we really know about the cash we have at hand. As electronic payment grows common across the city, and more and more shops refuse to accept 10- and 20-cent coins, join us in a look back at the evolution of the nascent Hong Kong dollar and its notes and coinage.

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The size of first five-dollar bill caused it to be nicknamed “Big Blanket.” Photo: Hong Kong Monetary Authority

In the beginning, it was all a mixed bag of coins

When Hong Kong was first ceded to the British in 1841, the sleepy fishing village rapidly grew into a bustling trade port that attracted merchants from all over the world. Without a local currency, a mix of foreign currencies was used instead, among them the Indian rupee, the Spanish dollar, the British pound sterling, and Chinese cash coins.

It wasn’t until 1845 that the first bank opened in Hong Kong. The Oriental Bank began issuing the city’s first banknote, a five-dollar bill so large it had to be folded multiple times before it could fit in people’s wallets, leading to its affectionate nickname of “Big Blanket.”

Banks such as the Bank of China, Standard Chartered, and The Hongkong and Shanghai Banking Corporation would all be established afterwards in the following half-decade; today, all banknotes worth $20 or above are issued by these three major banks, while the Hong Kong government supplies all coins and notes worth $10 or under. If you’ve ever wondered why Hong Kong dollar notes come printed with different illustrations unique to each of the three major banks while coins all carry the same design, now you know.

The first coins issued specifically for Hong Kong. Photo: Hong Kong Monetary Authority

Coins followed soon after the bills, and in 1863, the Royal Mint in London began producing coins for its flourishing colony. These bore the face of Queen Victoria—the reigning monarch then—and included silver 10-cent coins, as well as bronze one-cent and one-mil coins. 

One mil was essentially a thousandth of a dollar, but don’t scoff; back then, it could pay for whole meals, such as a bowl of porridge or wonton noodles. Nevertheless, it’d be beyond worthless nowadays, giving rise to the Cantonese expression “not worth a mil” to describe something as utterly worthless.

Hong Kong coins produced in the design of the Spanish dollar, which was a standard for trade back then. Photo: Hong Kong Monetary Authority

The colonial government then tried its hand at manufacturing coins themselves and established the Hong Kong Mint in 1866, fashioning them after the design of the Spanish dollars. Chinese locals didn’t like how they looked, though, and avoided using the coins, causing the mint to close down just two years later with a whopping loss of $440,000. The machinery was eventually sold to the Japanese, who used them to mass-produce the country’s very first yen coins.

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The first government-issued note. Photo: Hong Kong Monetary Authority

And so, a young currency is born

Near the end of the nineteenth century, the financial world was hit by an international silver crisis as silver rapidly devalued against gold-based currencies. Countries began to reevaluate their currencies, and by 1935, only China and Hong Kong remained on the silver standard. China ditched silver that year, and Hong Kong followed suit in a few months. 

The colonial government issued one-dollar notes and—as expected of a British colony—pegged the Hong Kong dollar to the British pound sterling at a rate of $16 to one pound, officially giving birth to the Hong Kong dollar.

Hong Kong's first five dollar coins are decagonal. Photo: Hong Kong Monetary Authority

Unfortunately, the new dollar only got to circulate for a few years before it was abruptly replaced. During the Second World War, Britain was forced to surrender Hong Kong to be occupied by the Japanese, who mandated the Japanese Military Yen to be the only legal currency in the territory. One yen was declared the equivalent of $4, a far cry from the ratio of today (one yen to $0.07).

After the war, the British government regained full control of the city and began issuing the first two-dollar and five-dollar coins in the 1970s, the latter of which was decagonal. Five-cent coins were also removed from circulation as prices rose, though interestingly enough, government-issued one-cent banknotes didn’t cease to be a legal tender until 1995.

With the forthcoming 1997 handover in mind, the government replaces Queen Elizabeth II with the more neutral image of a bauhinia flower on coins. Photo: Hong Kong Monetary Authority

Finding an anchor in changing tides is challenging

The British weren’t destined to rule over Hong Kong and its finances for perpetuity, however. The 1997 deadline of the 99-year lease of the New Territories was drawing close, prompting London and Beijing to launch into a series of negotiations in the 1980s. 

With all the uncertainty about the city’s future at this point, the Hong Kong dollar—which has since been unpegged from the pound and transformed into a floating currency—dove into a free fall, hitting an all-time low on 24 September 1983. On that day, one US dollar exchanged for $9.6, igniting public panic as citizens rushed to stock up on food; some stores even began quoting their prices in US dollars because of how unreliable the Hong Kong dollar has become.

To stop the situation from spiralling out of control, the government had to act quick, and act well. Following a flurry of discussion, the government revealed its plan just a month later and announced that the Hong Kong dollar will now be pegged to the US dollar at a rate of US$1 to HK$7.8. The move had a trifold effect: It calmed citizens down on a social level, reassured foreign investors on a financial level, and signalled London’s commitment to Hong Kong’s autonomy on a political level in the context of the handover negotiations.

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The Hongkong and Shanghai Banking Corporation (HSBC) celebrates its hundred-and-fiftieth anniversary in 2015 by issuing limited-edition banknotes valued at $150. Photo: Hong Kong Monetary Authority

This linked exchange rate system stabilised the Hong Kong dollar, strengthening investment and trade in the city. It’s been in use ever since. The Hong Kong Monetary Authority also keeps a forex reserve that totals more than US$400 billion and buys US dollars if the local currency is too strong and vice versa to keep the exchange rate steady throughout the years.

As US-China relations sour in recent times, who knows what will be in store for the young Hong Kong dollar? Whatever turn the currency will take, its history is a fair reflection of the city’s multifarious identity. Perhaps now’s a good time to start preserving a piece of that history and collect some of those coins with Queen Elizabeth’s face on it before they vanish from circulation.

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Ngai Yeung


Ngai was born and raised in Hong Kong and is currently studying at university in the United States. You can find her wandering around the city, experimenting with egg recipes and nerding out about the news.