SECRET
1.8.73
MR.MCMAHON 0/R
اسه
Copies to:
Note handed out of dry meeking an spurt of you
the abe (12)
3
Have
The Chief Cashier
Mr.Fenton o/r
Mr.Hallett
Mr.Payton o/r Mr. Ewbank Mr, Barber Mr.Rackham Mr.Kirby o/r Group 3E
Hong Kong A Special Sterling Guaraktes férangement
You wished to have a meeting (since arranged for 12.30 p.m. on Thursday, 2nd August) to discuss the possibility of offering soma
snaciaj guarant
to Hong. KWANE•
I attach a draft note on the subject which is to form the
basis for a discussion at the Treasury at 3.00 p.m. on Friday,
3rd August. In view of the complexity of the matter and the proximity
of the Treasury meoting I have already circulated copies in Whitehall
with the warning that the views expressed aro porsonal.
I fear the note de very loag partly because it deals with
difficult territory and partly because I have thought it necessary to
cover past developments in order to focus on the difficulties which
the arrangements in force in Hong Kong hitherto have created for the
Govemment there.
I do not come down in favour of, or against, a special
arrangement, which would not be justified merely becauso Hong Kong is a Colony, but pose the question whether, with potentially very volatile sterling reservos of about £660 mn., of which around half could well be
diversified, we should seek to neutralise a sum of that order of
magnitudo. A view on that needs to be taken in the general sterling
contoxt.
As to the nature of a possible quarantee I reject the resuscitation, of the 1968 Hong Kong dollar bond arrangement in favour