Since the cession of Hong Kong to the British Empire in in 1842, the official currency of Hong Kong was the British Pound. Despite this, it was not well received by the population as the traders were used to the Chinese system of using the weight of silver for their transactions. It was the policy of the British Government to introduce sterling silver coinage to their colonies since 1825 and the Spanish and Mexican eight Reales became legal tender and set at a value of four shillings two pence. The Government eventually concluded that their efforts to introduce the sterling coinage was unsuccessful in overcoming the strong local support of the Spanish silver dollar. The British Government made the decision, as it had also done in Canada, that it could not displace the local currency and the Royal Mint in London commenced the issue of special subsidiary coinage to run alongside the local dollar currency.
The first Hong Kong currency was established in 1864 by the fifth Governor of Hong Kong, Sir Hercules Robinson and the Hong Kong Mint was established on 7th May, 1866 in order to provide a steady supply of silver dollars. The new coins were not well received by traders or residents and the mint was closed in 1868 and sold to the Japanese Mint in Osaka at a loss of 300 per cent on the initial investment. The Hong Kong mint had also accumulated huge losses on the production of the silver coins. The following years saw thousands of Chinese migrants settling in Hong Kong.
The international silver crisis in 1873 devalued silver against gold-based currencies and this started to affect the China coast and by 1895 there were so many Mexican dollars in circulation that the authorities in both the Straits Settlements and Hong Kong asked the British Government to step up the supply of silver coins. Legislation was passed and British trade dollars were minted in Calcutta and Bombay for currency in Hong Kong and the Straits Settelements.
It was not until 1st July, 1898, that China leased the New Territories along with another 235 islands, including Kowloon, to Britain for a period of 99 years.
In 1941, the Battle of Hong Kong was fought and lost which gave way to the Japanese occupation until 1946. This saw the population drop dramatically but the economy picked up in the 1950’s with the influx of factories in the textile market.
The lease for British Hong Kong expired in July 1997 and the colony was duly handed back to the Chinese authorities after 150 years of British reign. Hong Kong coinage would no longer bear the Queens effigy and a Bauhinia flower designed by Joseph Yam was chosen to be the future obverse design.