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can be no certainty that an offer on these lines by the UK now would have the effect we want.
The arguments for and against an immediate offer of a special arrangement
11.
The arguments for making some special offer would be, on the one hand, that the Governor judges it to be necessary; and that he has no power to compel the commercial banks to stay in sterling. And on the other, that the UK cannot afford in the coming months to take either on the rate (or on the reserves if the rate has to be supported pro tanto) diversification. from Hong Kong of the order of, say, £200 to £350 million.
12.
But there are many counter-arguments:
Hong Kong is in no worse a position fundamentally than any other signatory;
the difficulty with the banks is partly the Hong Kong Government's own making. We have tried to persuade them to make a start with the issue of Hong Kong Government paper for the banks to put their assets in;
it is intolerable that a Colony, a close member of the family, should contemplate and threaten steps so clearly against the interests of the UK and sterling;
the potential criticism from the Executive and Legislative Councils may not be soundly based. Hong Kong has done better to be in sterling than in US dollars, given two US dollar devaluations and high UK interest rates. Any accounting losses have not dented the economy's great
strength;
the Hong Kong Government should strive to put the UK's case to the Colony, as well as the. Colony's case to the UK;
while it might be possible, after a general arrangement had been offered to all signatories, to contemplate special modification of this for Hong Kong, on the grounds that it is a dependency, it would be very damaging in the circumstances in which we now find ourselves to make her any offor in advance of a more general approach. None