7 - Hong Kong

Summary

The Bank of England was heavily involved in the management of Hong Kong’s banking and currency arrangements. The shadow that continually hung over both was the prospect of the termination of the lease on the ‘Crown Colony’ in 1997. In the late summer of 1983, a property boom collapsed and brought major financial strain and an exchange rate crisis. The Bank sent experts who backed schemes to create a currency peg, managed by currency board arrangements, with a link to the British pound. That had implications for the positions of the large banks, which issued bank notes. There was also a question about the position of the large Hong Kong banks, and the largest, HSBC, wanted to acquire, or merge with, a UK bank: eventually HSBC took over Midland.