SUGGESTED SPEAKING NOTE
We are grateful to you and the Financial Secretary for coming. The Chancellor of the Exchequer is on holiday and cannot be
contacted.
We are certainly aware of the difficulties of the Hong Kong Government, but perhaps you would like to speak about them.
After the Governor has given his views, a reply might be made on
the following lines.
We appreciate the difficulties and the talks have been useful.
We can explain in confidence the present position of HMG's thinking. It is likely that a recommendation will be put to the Chancellor on his return for an offer to extend the guarantee, but the Chancellor will proably wish to discuss this with the Prime Minister, and there is no certainty that this course will
be followed. We realise that this is not much comfort to the
Governor.
The general currency situation is uncertain and the outlook can change from week to week.
All the sterling agreements expire on 24 September and there are risks of diversification from that date.
The Hong Kong authorities should not however assume that diversi-
Jity
fication is necessary in their best interests. The commercial banks should not assume that HMG has decided to let the agreements lapse.
Leanwhile (whatever the commercial banks do) it would be quite wrong for the Hong Kong Government to take any step towards] diversification at least before the expiry date.
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