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Meanwhile they could only await the September message, and if that
was not to their liking, they considered there were two courses open
to them. The first was to enjoy total freedom in the management of
their reserves; the second was to agree with HMG a programme for
entail.
gradual diversification of a certain proportion of their reserves
(probably about £240m of bank and government sterling); linked with
a guarantee by HMG to compensate them for any losses which this might
They claimed that they were "totally indifferent" as to
which of their two alternatives were followed. In practice, there
would probably not be much difference between these alternatives,
since a rapid diversification would hardly be in Hong Kong's interests.
The Treasury could not, of course, comment in any detail on the
Hong Kong plan for gradual diversification nor on a guarantee but
they noted the suggestion "with interest".
6.
There is certainly no prospect of hastening the general decision
about what is to follow the existing Sterling Agreements when the Prime
Minister and the Chancellor have decided not to take a decision until
early September. Nor would the circumstances of Hong Kong justify
trying to argue that a decision which affects the whole UK economy and
the sterling holdings of 50 to 60 Sterling Agreement signatories,
should be tailored to suit Hong Kong's particular interests. The
decision must clearly be taken in the light of UK interests. No
immediate action is, therefore, called for.
5:
However, once the Chancellor's promised September message is
issued and Hong Kong has said whether they are satisfied with it or
not, we should then attempt to ensure that any alternative put forward
by Hong Kong is considered as speedily and reasonably as possible by
the Treasury.
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