66)
SECRET
balances after 24 September.
(62) 4.
Sam D
B. R
67
66
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A
The Hong Kong Government are in a difficult position (as
most recently reported in Hong Kong telegram numbers 817, 849,
854 and 857). The Governor is under heavy local pressure to
diversify Hong Kong's sterling reserves (at May 1973 estimated
at £658 million of which £354 m. is held by the Government and
£304 m. by the commercial banks)
•
5. In telegram number 854 Hong Kong have said they will be
obliged to start selling forward with a view to diversifying.
The eventual target would be to have 50% of the Government's
reserves in sterling. If they were able to achieve this
the Hong Kong authorities say the sum involved would be in the
order of £200 m. The banks would do the same for a "rather
smaller amount".
6. The Governor accordingly asked for himself and Mr Haddon-Cave
to see the Chancellor. The latter is on holiday but an
appointment has been made with the Senior Treasury Minister
available, Mr John Nott, and with Mr Mitchell, the Second
Permanent Secretary, at the Treasury on Thursday afternoon
9 August. Sir E Norris may also attend. The Hong Kong
Financial Secretary, Accountant General and the Exchange
Controller will also have discussions with senior Treasury and
Bank officials on 10 August. FCO officials will be present.
7. As the initiative for the meeting has come from the
Governor, Mr Nott intends to listen to the former's views.
The brief and speaking notes for the Minister prepared by
is
Treasury officials are attached for Mr Royle's background
information. These have been passed to FCO officials on a
/personal
SECRET 2.