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in the US and the £/$ rate (now £1 $2.57 approx.) may be
expected to continue to reflect the uncertainties on the
American political and economic scenes in the immediate future.
3. If therefore for the purposes of this paper we take it
that Hong Kong is treated no less favourably than other large
holders of sterling, a major contentious issue is automatically
removed.
4.
Nonetheless, the Hong Kong Government does have unique
difficulties mainly arising from the fact that there is no
central bank in the territory and no local money market.
This
has led to the present situation where Hong Kong's official
reserves are made up more or less equally of Government money
and the commercial banks' sterling.
5.
If the Agreements are not to be renewed, there is likely
to be a strong initial reaction from Hong Kong. This
supposition is based on Hong Kong's previous requests for
renewal of the Agreements and on her natural dislike of a large
unprotected sterling position. Mr Haddon-Cave has said that
the Hong Kong Government regard a new Agreement as the best
solution since they could continue to enjoy the advantages
of investing at good rates of interest in the London
gilt-edged market without risk- a combination of benefits which
is not generally available and which constitutes one of the
drawbacks of the Agreements in their present form from the UK's
point of view. Nonetheless, there are grounds for supposing
that the Hong Kong Government may not be as adverse to the
ending of the Agreements as they might at first seem.
To
/examine
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