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SECURITY CLASSIFICATION
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Confidential.
CONFIDENTIAL
DRAFT
BRIEF
Type 1 +
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вою
pa
STERLING
1.
Telephone No. & Ext.
Department
HKI OD
Floating of sterling has created special problems
for Hong Kong.
2. Firstly this has given Hong Kong a direct loss estimated
over
at some £50 million on the value of her sterling reserves
(of some £800 million)
following
-
coming on top of a loss of some
arises
£20 million/devaluation in 1967. This loss is largely
Trous
due to the fact that Hong Kong has no central bank and
the Hong Kong Government had to reguarantee the com-
mercial bank's large sterling holdings in terms of the
Hong Kong dollar.
13.
Secondly because of Hong Kong's extreme dependence
on external trade and as her principal export market is
the US the Hong Kong Government with Treasury authority
has had to peg the Hong Kong dollar temporarily to the
US dollar.
14.
starling.
As a result of these factors the Hong Kong Govern-
ment has pleaded for special consideration (and in par-
ticular compensation for their losses) on the basis of
their position as a large holder of sterling and because
of their traditional and constitutional links with
5 The Governor met Treasury officials early in
September and the Financial Secretary came over before
the CFM to have prior talks with Treasury officials.
Treasury expressed sympathy but explained they had to
/look at
CONFIDENTIAL
(883363) Dd. 896639 1,000M 8/71 SL.S.