CONFIDENTIAL
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are likely to encounter some opposition, there is
sure to be debate on the resolution before the
Legislative Council; the details of the guarantee
are just the matters to which the Opposi tion will
give a thorough airing.
The political risk which ie as totally
unacceptable to H&M.G.asi
to the Hong Kong
Government lieor not in the fact that the Hong Kong
Government- must give a guarantee, but in tre demand
that the guarantee should be encoreeable against its
bondor assets and that
4.
If the Hong Kong Government are to guarantee a
loan, it would be perfectly normal and excite no
comment for the Hong Kong Government to give a
guarantee secured against its general assets and
revenues. The political risk which is as totally
unacceptable to H.M.G. as it is to the Hong Kong
Government lies not in the fact that the Hong Kong
Government must give a guarantee but in the demand
that the guarantee should be enforceable against its
London assets and that these assets should be adequately
maintained for the purpose. The implication that
would immediately be read into this requirement is
that H.M.G. reckons that the Colony's only worthwhile
assets are those which are held in London. The
impact of this on confidence in and outside Hong Kong
would be shattering; the whole purpose of the exercise
15. We therefore
would be lost.
CONFIDENTI AL
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