Page 11 - BT Sample

Popular and trustworthy
So why is the HKD so popular in
the market? Certainly it is popular because it is stable, but it is also trustworthy. The HKD is one of the
few currencies in the world that has
a constitutional basis. The status of the HKD as the legal tender for Hong Kong is enshrined in Article 111 of the Basic Law, the mini-constitution for the Hong Kong Special Administrative Region (HKSAR) of the People’s Republic of China (PRC). Article
111 states that the issue of Hong Kong currency must be backed by a hundred percent reserve fund. In fact, the HKD is backed by the Exchange Fund set up in 1935, which has foreign exchange reserves of USD440 billion,
more than twice the sum of the HKD monetary base. Meanwhile, article 112 of the Basic Law states that no foreign exchange control policies shall be applied in the HKSAR and HKD shall be freely convertible. This guarantees the free flow of capital into and out of Hong Kong.
ABOUT THE AUTHOR | 關於作者
Publications Sub-Committee, The Hong Kong Institute of Bankers
香港銀行學會出版事務委員會
/ BANKING TODAY / JULY- AUGUST 2020
Having a stable and trusted currency has augmented the international financial status of Hong Kong. While Hong Kong’s GDP accounts for only about 0.5% of the world’s total, according to the BIS Triennial Central Bank Survey on Foreign Exchange Turnover for the position of April 2019 published
in September 2019, the HKD is the ninth most actively traded currency in the world accounting for 3.5%
of the world foreign exchange turnover. Even more remarkable, the same report indicated that the foreign exchange turnover of all currencies in Hong Kong amounting to USD632 billion equivalent, which is about 10% of the world’s foreign exchange turnover. As a foreign exchange trading centre, Hong Kong is ranked third in the world, after London and New York and
on a par with Singapore. Crucially,
a stable and trustworthy HKD has augmented the value of Hong Kong to Mainland China. Hong Kong is the international financial centre of China, in China, and for China.
11
COVER STORY
封面故事