MR. STUART
22
(21)
Sir Duncan Watson
CONFIDENTIAL
HKK 5/1
HONG KONG: STERLING AGREEMENT
Mr Crowson Goodfella 13/3
Your minute on this subject to Mr Wilford of 8 March.
14/2
2
14/15
I don't think that there would be much dispute in Whitehall on the proposition that it would be in Hong Kong's interest to move towards some form of monetary authority, and indeed eventually to a Central Bank. My understanding is that ideas of this sort have, however, not commended themselves to the Hong Kong Government; and in particular have not commended themselves to successive Financial Secretaries. At bottom, I think that their opposition is based on two arguments. First, that whatever the supposed defects of the present system, it works. Hong Kong grows and flourishes, and a high degree of confidence in the resiliance and strength of the economy has been maintained in what might seem unpromising circumstances. There is no point in change for the sake of change, least of all in Hong Kong. Second that, especially in Hong Kong, a low economic profile of the Government is welcomed by the businessmen, traders and bankers who make the economy tick. Moves towards greater interventionism, or towards institutions which would provide a basis for intervention, would be regarded with suspicion and distaste. (I well recall, for example, Sir J Cowperthwaite's explanation of why it was very dangerous to collect balance of payments statistics in Hong Kong. Those who would be required to provide would be suspicious of the motives behind the collection
· of figures. But even worse, the existence of figures would generate a class of busy-bodies who would wish to do something to make the figures other than what they would be.)
And
figures
•
2. Neither of these arguments is negligible. although Mr Haddon Cave is a good deal more open-minded than Sir J Cowperthwaite, I am sure that he feels the need to be convinced that the potential benefits to Hong Kong of such a move into uncharted waters are real and substantial. He is clearly not convinced yet. Moreover, he has not yet been able to overcome a suspicion that any UK advocacy of a change in Hong Kong's monetary arrangements is based upon some advantage that would accrue to the UK rather than to Hong Kong.
CONFIDENTIAL
13.