SECRET
Flag A
Flag B
Mr Wilford
Private Secretary
STERLING AGREEMENTS AND HONG KONG
Secreting or State.
12. Crosson Miss Kaths
Mr. Goodfellow,
Telegram to issue Morutt 11/17
1. Our Sterling Agreements with Hong Kong, and a number of
other countries, require them to hold a minimum percentage
of their reserves (MSP) in sterling. Hong Kong have asked us
(Hong Kong telegram No 728) whether, in present circumstances,
they can breach this requirement. Subsequently they have told
12/7
फार
us (Hong Kong telegram No 741) that they have now done so (but
only slightly).
147
Pla
2. The Treasury are very unwilling to agree. This is a most
favoured nation (mfn) agreement and the other countries with
Sterling Agreements would be entitled to demand the same
treatment. Hong Kong's purpose is to prop up the US dollar,
with which the Hong Kong dollar is formally linked, but we
doubt if this is wise in view of the worldwide weakness of the
US dollar; and sterling itself is not in such good condition
abandonment of the MSP that we can lightly agree to the reduction of sterling
balanees at this moment.
3. Against this there is the fact that the Treasury are
considering terminating the Sterling Agreements altogether in
September. We are dealing with this question separately but
it is relevant for present purposes that, if Hong Kong are
going to be told in two months' time that they are free to
/get
SECRET