S.W. Payton,Esq.
Bank of Eng;lund,
Threadnoodle Street,
LONDON, EC2R 8AH.
SECRET
RECEIVER I
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D. Goodfelly 2
3 January, 1973
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KEP.
HONG KONG
You will have sean copy of Keeble's letter of 2nd January to me, covering a letter from the Governor of Hong Kong to Sir Denis 206 Greenhill about the question of Hong Kong Government paper and
Pred the underlying problem of Hong Kong banic holdingo.
2. Two obvious comments occurred to mo on reading the Governor's letter. First, situations such as a speculative movement in favour of the yen cannot be resolved by any kind of guarantee arrangemont
they are a matter for normal which we would regard as feasible: exchange control operations, to the oxtent that these can be made effective. Secondly, my understanding was that the proposition that Hong Kong Government paper should be issued was designed by us As a response to the notion frequently represented to us by Haddon-Cave and others that the Ilong Kong banks, whose basic liabilities are expressed in Hong Kong dollars, want an opportunity
This to safeguard their asset values in Hong Kong dollars also. point seems not to occur in the Governor's letter at all.
3. It seems to me that Keeble's suggestion of a talk between us is sensible. Do you think it would be useful for you to propare a note in advance of the discussion, which could be a kind of annotated agenda. I think it might help, if you can spare the timo. In any case, perhaps you could let me know when you would find it convenient to meet, and I will arrange a discussion. that it may well be two or three weeks before we are ready to wond a considered reply to the Governor. Keeble, to whom I am copying this letter, may like to send an interim reply if he has not already done so.
I gueco
4/1
(J.G.LITTLER)
1. Copy to Min Moliend