If you look more closely at the dollar bill, you will find a further inscription which states “This note is legal tender for all debt, public and private”. This imposes an obligation to accept the note in the settlement of contracts and highlights the fact that money derives its value - whether imposed by a legal tender requirement or not - from the willingness of other economic agents to accept it to settle transactions. Each agent will only accept money, if he can be confident that it will in turn be accepted BIS Review 96/2000  2  by other agents in future transactions. Thus money is a social achievement as has long been recognised by economists for example by Menger. Money is a question of trust, its use requires trust and it reflects trust. This is especially true in the case of fiat money, i.e. the use of printed paper - which has no intrinsic worth - as a medium of exchange and as a store of value. Yet even commodity money requires trust and a well-founded expectation that it will be accepted for a wide range of transactions. Milton Friedman, in his book Money Mischief (1992), reports the well-known story of the monetary system of a small island in Micronesia which at the end of the 19th century used stone wheels as a medium of exchange and as a store of wealth.
The Hong Kong-based company that operates our container port facilities is expanding its operations into the newly modernising ports of the mainland. In new sectors, such as internet services, Hong Kong companies have been among the first to grasp the opportunities on the mainland. The outlook for Hong Kong investment on the mainland is one of both sectoral and geographical diversification: from the mainly manufacturing activities that grew up in the Pearl River Delta in the 1980s, to a variety of activities spread over a much larger region. And, like the establishment of the Special Economic Zones close to Hong Kong nearly a quarter of a century ago, China’s entry into the WTO will underline the truism that the more China opens to the world, the more Hong Kong benefits. The implications for banking and financial service Physical trade and the less visible trade in services require a financial infrastructure in the same way that new buildings need plumbing and electrical wiring. We expect that the “creation effect” of WTO entry will result in a surge in banking business on the mainland. There are two main elements in this process. The first is the greater demand for banking services, resulting from the growth induced by the effects of WTO accession. The second is the financial deepening, stimulated by more rapid financial liberalisation, greater banking competition, and product innovation induced by the terms of WTO accession.