SOUTH
CHINA MORNING POST
73
AUG 24th
Free HK of
sterling shackles-
economists
-ON
MAGKAY No. 51 15 OCT 1975
TAKES //
#
A group of finance experts last night called on the British Government to take the shackles off Hongkong's economy.
The monetary "chains" are the regulations which fix the proportion of the Colony's reserves held in sterling at a huge 89 per cent stifling opportunities for diversifying Hongkong's reserves into other. stronger, currencies.
The Colony's holdings are left vulnerable to international financial attacks on the weak British pound.
Last night the Hongkong Economic Association said: “The time has come for Hongkong to have full control over its own economic affairs - including its sterling reserves."
The Association's stand, in a statement by its executive committee, comes at a time of the imminent expiry of the Basle sterling balances agreement which guaranteed the value of Hongkong's reserves.
The Governor, Sir Murray MacLehose, the Financial Secretary, Mr Philip Haddon Cave and the Accountant General, Mr Douglas Blye, recently had a monetary “summit” with top Treasury officials in London on the subject.
Despite the Colony's repeated requests for early action, the British Government so far has not offered any "reasonable" proposal for renewing the guarantee, says the Economic Association.
The Association points out that Hongkong's currency backing is almost entirely in sterling (in June 1972, our sterling reserves in London topped £900 million, the largest reserve cache of any nation.)
Sterling's instability caused heavy losses to Hongkong. amounting to between HK$1,300 and $1,400 million since 1967, says the statement.
It adds: "We strongly urge the Hongkong Government to take a firm stand in negotiating with Britain on the matter of sterling reserves. The Government should be guided by the supreme interests of the Hongkong people, who are the rightful owners of the reserves."
The Economic Association suggests that to avoid future losses our external reserves “must be further diversified.”
"At present," it says. "the sterling proportion of our reserves fixed at 89 per cent in 1971 is excessively high compared to 36. per cent for Malaysia and Singapore.
There is no reason why Hongkong should continue to receive discriminatory treatment -- at the very least, we should be given the same extent of diversification as Malaysia and Singapore.”
The Government finance officials here largely agree. They Vaniti drawing of the sterling proportions to allow an armeurt for trade purposes in the currencies the Cylony normally trades in sterling and the U.S. dollar - with the balance in the world's "strong" currencies such as the deutschmark, the Swiss franc and the yen.
-
This sort of arrangement would lead to an overall balance situation where the Colony, hit by the devaluation of one currency could reap the benefits of the automatic revaluation of others hedging the risk, instead of putting all the eggs in one sterling basket." as one highly placed Government source here described it last night.
J
This was the sort of formula laid before London at the recent summit talks in the attempts to bring about a lessening of the Hongkong sterling reserve percentage.
Last night an official here said: “We gave our ideas on how we would like to diversify and were given a hearing - but the British expressed no views on what their proposals were.'
""
"We consider Hongkong is in a very special position because no other territory has minimum sterling reserve proportion of 89 per cent - most others are much lower."
London is anxious to avoid a major switch of Hongkong reserves because of the intense pressure on sterling such a selling wave would cause Hongkong holds something like HK$8,750 million in sterling and British gilt edged securities.
The British Treasury is expected to announce its proposals on sterling guarantees in three weeks time.
It guaranteed that if sterling dropped 10 per cent for 30 consecutive days below the 1968 U.S. dollar parity of $2.40, compensation would be paid. The agreement was made obsolete by America's 1971 devaluation; which raised dollar parityso $2.60.