This paper studies the circulation of Hong Kong dollars in the Chinese Mainland. It first estimates the amount of Hong Kong dollars circulating in southern China in the last fifteen years. The regression analysis indicates that the growth rate of Hong Kongs foreign direct investment in China and...

Since the Chinese government launched the economic reform and “open door” policies in late 1978, investment between Hong Kong and Mainland China has increased remarkably. In fact, Hong Kong has been the Mainland’s dominant supplier of FDI. Income distribution in Hong Kong was affected when...