ABSTRACT
On 1 July 1997, the Chinese government resumed sovereignty over Hong Kong after 100 years under British rule. The Asian Financial Crisis (AFC) erupted only a few hours after the handover ceremonies were completed and the last British Governor of Hong Kong, Chris Patten, together with his family, had sailed out of the harbour. The Chinese government not only had to deal with the impact of the crisis on Guangdong’s financial institutions, but also the impact of the crisis on Hong Kong, the ‘shop at the front’ of Guangdong province. Hong Kong’s exchange rate regime was a key element in the way in which it was affected by the AFC. The stock market and property market collapse placed heavy pressure on Hong Kong banks. By early September 1998, the Hong Kong government had warded off the immediate speculative threat to the currency.
