While gold is the precious metal generally associated the world over with Chinese communities, silver has also played a long and - for the most part - honourable role in the Chinese economy. China remained on the silver standard until 1935 and its paper currency was backed by deposits of the metal held in the Nationalist capital, Nanking.

The country was finally forced off this long-established guarantee system by massive speculative buying and stockpiling of silver bullion by United States financial interests during the Great Depression. China's economic restructuring (which, given internal problems with an ongoing Communist insurrection and rising military tensions with Japan, could not have come at a worse time) was assisted by the Hongkong and Shanghai Banking Corporation.

Banks are still known in Chinese as " ngan hong" - silver companies - having evolved from currency exchange and remittance shops. Remittance agents were important in overseas Chinese communities, as migrant workers' earnings were a main source of income for impoverished ancestral villages. Reliability and trust were important, and the best remittance agents often developed extensive international credit and deposit networks. Mexican silver dollars minted in Acapulco and transported across the Pacific as part of the Manila galleon trade were perennially popular due to the guaranteed purity of the coin's metal content. Many ended up in circulation in China via remittance brokers.

Exchange shops have enjoyed a long history, both in China and - from the 19th century - among the overseas diaspora. From these relatively humble beginnings, the Chinese-style "native banking" industry developed. Native banks - as opposed to those that operated on a Western services model - combined the functions of pawnshop, bill and bullion broker, deposit-taker and short-term lender, usually at high interest rates.

The first native bank to operate along Western banking lines was the Bank of East Asia (BEA). Established by the Fung, Kan and Li families in 1919, BEA eventually became Hong Kong's best-known home-grown financial institution. The founding families had a public falling out after the war, which affected bank's operations for a while. Contemporary control remains in the hands of the Li family; BEA chairman David Li Kwok-po represented the banking constituency in the Legislative Council for many years. Other family members are prominent elsewhere in local public life - Li's younger brother, former secretary for education and manpower Arthur Li Kwok-cheung, is an executive councillor.

Other family-owned native banks that eventually transformed into modern financial institutions run on (more or less) conventional Western lines include Wing Lung Bank and Liu Chong Hing Bank. Native lenders suffered greatly during a disastrous run on banks in the 1960s. The Ming Tak Bank was the first to go under, forced out by a disastrous run on deposits in 1965. As typically happens in Hong Kong, the herd mentality prevails at times of perceived crisis. Several banks had no real liquidity problems until an unsustainable, rumour-fuelled run on their deposits took its toll.

Hang Seng Bank was taken over by the Hongkong and Shanghai Banking Corporation in 1965, in a controversial bailout move. This was done despite serious reservations by then-chairman Sir Jake Saunders. Saunders was concerned that Hang Seng Bank's close ties to the Macau gold trade might eventually lead overseas regulators to uncover clandestine mainland links. This was a serious concern, as the US had a closely enforced embargo on China trade and the Americans might have retaliated against existing HSBC interests in the US.

These fears eventually proved groundless, and the Hang Seng Bank became one of HSBC's greatest local assets.