NOTHING TO BE WRITTEN IN THIS MARGIN
W(B)L 51-7406
CONFIDENTIAL
suspicious of its purpose).
But more
important, the Hong Kong authorities have only
undertaken not to take into official reserves non-
resident deposits by banks outside Hong Kon;
deposits by private non-residents, it is said,
cannot be identified, nor can the ir sterling
Counterparts (There are also problems arising
እኔ
from the effectives of the checks and controls
which do exist.)
7. In these circumstances the only control
which we can exercise over the Hong Kong Govern-
ment is through the statutory limit on their
کیا
poers to borrow for the Exchange Fund.
These are fixed by the Hong Kong Exchange Fund
Ordnance which under Royal Instructions cannot
be amended without HMG's approval.
8.
After the conclusion of the Sterlin g
Agreements Hong Kong asked for permission to
increase the borrowing limits of the Exchange
Fund. This was agreed and after a further
request the limit was again raised to its axIK
present ceiling of HK$3,000 million (about
£200 million). Hong Kong also asked for
permission to make further amendments by resolution of Legislative Council to avoid the
delays involved in the normal legislative
procedures. No decision has been reached on
this request but it is unlikely to be agreed for
the two reasons that such a loss of control
would be constitutionally unacceptable and also
because in the absence of any other form of
control the extentxofxKMGÅsxìiab±±±±ɣxund¤R
Treasury would be unable to limit the extent of
/HMG's