CIRCULATION of Hong Kong dollar banknotes outside Hong Kong did not pose a problem for the monetary system, the Acting Secretary for Financial Services, Tam Wing-pong, said. In a written reply to banking representative David Li Kwok-po, Mr Tam said there was a substantial pool of Hong Kong dollar notes circulating outside the territory, principally in southern China and Macau. The amount was estimated to be between 15 and 30 per cent of the total amount of currency in circulation, or between $10 billion to $20 billion out of a total of $69 billion. But he said that was not a problem because the issue of banknotes was fully backed by US dollars placed with the Exchange Fund. Even in the highly unlikely event that a large quantity of banknotes was returned to Hong Kong, the Exchange Fund would not have any problem in coming up with the US dollars to redeem the notes, he said.
