6/6/2
21 January, 1969
16
Import Deposit Scheme
Thank you for your letter of 13 January, asking for statistical information about the impact of the scheme on Hong Kong's reserves.
2. I have spoken to Patterson, who is in charge of Exchange Control here, and he tells me that what informa- tion is available in Hong Kong has already been sent to the Bank of England, and suggests you contact Henry Turner there. Nevertheless he is ringing his contacts in the two local leading banks and getting their estimates and will give me an up to date figure in a day or two.
3. The peculiar difficulty in Hong Kong is that there is no central bank. The commercial banks each have their own reserves in London and it is from these that they are financing loans to cover the needs of importers of Hong Kong goods. Some of the commercial banks - notably the Americans will not hold sterling for fear of another devaluation. For commercial reasons, however, they must keep up with their competitors in the banking world here, and so they are resorting to the Eurosterling market even though they are losing about 2% on the deal.
If
4. In such circumstances I do not think you are going to get more than an informed guess of the amounts involved in Hong Kong. If you want something more accurate then you will have to get the Hong Kong Government instructed to demand the statistics from the local commercial banks. you feel your needs warrant such a course, which would arouse some opposition here, then no doubt you will wish to act through Bunny Carter in the Hong Kong Department in the F.C.0. to whom I am copying this letter for information,
T. J. O'Brien, Esq., Financial Policy &
Aid Department,
Foreign and Commonwealth
Office, London, S.W.1.
(M.P.V. Hannam)
Principal Trade Commissioner