HONG KONG, GOVERNMENT, 1 cent, no date (1945), Face: George VI, Back: blank, P321, Unc

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Hong Kong was acquired by Britain as a spoil of the First Opium War. A 99 year lease was obtained in 1898. Japan occupied it 1941-45. China got it back in 1997. The British regime was quite free market. The currency needs were mostly handled by private banks issuing their own paper money.

Aside from China, other governments started using circulating “banknotes” starting in the 17th century AD. The practice became general in the 19th century. In the 20th century value of paper money in circulation far surpassed the value of coinage. In the 21st century paper money is fading and credit transactions are growing.

Paper money, meaning the promise of a government to pay a set amount, and the paper promise allowed to circulate at will, was probably first used in China in the 12th century AD. At that time the merchants and governments of Europe were just writing letters to each other about what they owed.