Historical Sketch

The Portuguese had established smaller settlements after Jorge Alvares first arrived in China in 1513. In 1557, they acquired the Macau territory in the south for permanent lease, which was transformed into a cession after the Opium Wars. Macau became a Portuguese colony, which was converted into an overseas province in 1961 and an overseas territory in 1975. In the run-up to the planned return of neighboring Hong Kong to China in 1997, a “synchronized” solution was also sought for Macau. It was returned to China in 1999 and, like Hong Kong, now forms a Chinese Special Administrative Region.

Monetary History Overview

Already before the establishment of the colonial rule in 1887, the Spanish Dollar had entered Macau through foreign trade and became widely used in both payments and trade with China. In 1902, the Portuguese Overseas Bank began operations in Macau, and three years later was granted the right to issue of paper money. The 1906 banknotes were denominated in Macau Pataca, a commonly used name of the Spanish Dollar, originating from Arabic. The Portuguese currency reform of 1911 was not applied to Macau. Initially the Macau Pataca was equal to the Timorese Pataca, both being based on the Spanish Dollar. In the 1930s, when China abandoned the silver standard, both currencies repegged to the Portuguese Escudo at the different values. The peg to the Portuguese currency was adapted from time to time in order to keep the ratio against the Hong Kong Dollar stable. In 1971, the Macau got pegged to the US Dollar, but repegged to the Portuguese Escudo already in 1973. As Portugal began depreciating its currency in the mid-1970s, Macau widened the fluctuation margin against the Escudo to keep the stable ratio against the Hong Kong Dollar, and finally repegged in April 1977. Initially, the ratio was slightly adjusted several times until it got fixed in 1983. In 1980, the Macau Currency Institute of began operations, later to become the Macau Monetary Authority. It acts as a supervisory instance, money issuance is still done through commercial banks. In 1995, the Bank of China obtained the second license to issue paper money beside the Overseas Bank. Macau's return to Chinese sovereignty as a Special Administrative Region of the People's Republic in 1999 did not alter the currency system.

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