SECRET
Devaluation
capable of taking the strain of a series of small deficits.
41. Hong Kong is one of the major holders of sterling; the
devaluation of the pound last year caused them substantial
losses on their sterling balances and severely strained our
relations with the Colony. When devaluation occurred the
Hong Kong Government for a few days maintained parity with sterling and then revalued by 10%. The final result was a
devaluation in terms of the U.S. dollar of 5.7%.
devaluation by Hong Kong by the same margin as sterling would
have meant an almost equivalent rise in the cost of living there because of the Colony's heavy dependence on imports, particularly of food.
A
42. As a result of the recent Basle facility and as part of
a general scheme to give overseas sterling area countries a reasonable degree of protection for their official sterling holdings, Her Majesty's Government has now agreed to guarantee the value in terms of the U.S. dollar of 90% of the official Hong Kong sterling reserves in return for the maintenance of Hong Kong's reserves in sterling.
S
SOCIAL SERVICES
43. As mentioned in paragraph 8, the great post-war increase in Hong Kong's population (largely by immigration from China) has involved a formidable programme of expansion in the social services housing, health services, education, water supplies, Although massive advances have been made in these fields in the last twenty years, a great deal remains to be done and there are some formidable problems (not confined to financial considerations) involved. A separate note on the social services can be supplied if and when required.
etc.
Hong Kong Department 25 September, 1968