SECRET
Background Note
HONG KONG AND THE STERLING AGREEMENTS
1.
Hong Kong's anxiety about what was to happen when the
Sterling Agreements expire on 24 September culminated, in the
absence of any firm indications from HMG about the future, in the
suggestion that the Governor and Financial Secretary should see the
Chancellor. In the latter's absence on leave, arrangements were made
for them to be received by the only available Treasury Minister,
Mr Nott, on 9 August. The Governor has minuted separately to the
Secretary of State reporting on this discussion, which in his view
was unsatisfactory.
They hold a large
At the moment
While Hong Kong has a special
2. Hong Kong's concern is fully understood.
proportion, 88.7%, of their reserves in sterling.
they hold about £661m in sterling.
preoccupation because its Minimum Sterling Proportion (MSP) is so
very much higher than that of other large sterling holders (none of
which hold over 65%), the uncertainty which so deeply concerns them
is common to all the 50 or 60 Sterling Agreement signatories.
the Chancellor has not yet formulated the proposals he will make to
signatories generally, there is at present no useful guidance which
can be given to any of them. There is as yet no sign that the
sterling holders are as deeply anxious as Hong Kong has shown herself
to be.
Since
3. When he received the Governor, Mr Nott could therefore only
repeat, with some slight elaboration of the situation, what was
already known to Hong Kong, that is that what was to happen when the
/Sterling
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