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4. On the assumption that the action to be taken would
be limited to blocking in the first instance the natural
course would be to use the Section 2 powers, which would
be effective for this purpose. Full exchange control,
using the Exchange Control Act, could be imposed later.
5. The position of Hong Kong is unusual in that a
Section 2 Order is already in existence. It has been
the backing since 1950 of arrangements designed to isolate
so far as possible the Hong Kong free market from residents
of the rest of the Sterling Area. It would require no
more than a change of administrative practice to exercise a
complete control over the asscts of residents of Hong Kong.
No additional legal instrument would be necessary.
Instructions could be issued to the banks within 24 hours;
indeed, in an emergency, an interim Notice could be
distributed very quickly to the major banks in the City
and followed by a general Notice to be distributed through-
out the banking system.
6. In the situation envisaged, many Hong Kong residents,
especially the richer ones, would probably escape to other
countries. Many would no doubt have sterling assets, but
Since some would otherwise be without means of support, it
would be necessary to establish quickly a scheme for
limited releases from the blocked funds and arrangements for
registering and
/dealing with claims.
7. Other former Hong Kong residents will have only
Hong Kong dollars in cash or in deposit with Hong Kong banks, and of which there are probably no records in the U.K. The Hong Kong dollar is a sterling-backed currency (one reason why it is widely held) but there is as a formal banking matter no obligation to give value otherwise than in Hong Kong dollars for deposits or notes denominated in Hong Kong dollars: thus Hong Kong dollar notes or claims
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