Extract from
'The Guardian'
Wednesday, 14 Nov 173
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wednesday, 14 November 1973
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Yellow streak
READERS MAY not be aware of one key strand of opinion in the Cabinet's debate' on' how to react to this latest and most desperate financial crisis. The Foreign and Com- monwealth Office had to have its say, largely because of the astonishing contribution made by Hongkong to Britain's financial reserves. It is not widely known although it should bo that Hongkong now holds more than £800 millions in sterling balances. The Financial Secretary of Hongkong, Philip Haddon- Cave, has already expressed to the FCO and Treasury his extreme, displeasure at the way in which Britain decided unilaterally to extend the sterling guarantees last Sep- tember-which virtually forced Hongkong's money to continue to bolster sterling or to see the value of their hold- ing plummet catastrophically..
Even so, Hongkong has threatened to switch its money out of sterling, which would either force a massive drop in the pound's exchange rate or force Britain to spend about one third of her 1 reserves to redeem the Hong-!- kong money. Effectively, Hongkong holds the future of sterling in its own riot- prone, corruption-prone and Peking-prone hands.
Two further factors to note, The French will raise this delicate, matter of Hongkong” money at the next Heath- Pompidou meeting on Friday with special reference to the Basle facility and sterling's eventual incorporation into the EEC exchange rate
policy. Also of importance is the role of Sir William Kes- wick, a director of the Bank of England until March of this year, સ director also of 1 Matheson & Co. and of British Petroleum., Jardine Matheson is the great Hong- kong trading company which was able to buy Reunion, Britain's tenth biggest pro- perty company, simply by printing more shares for the Hongkong Exchange.
It is virtually run by the Keswick family. Sir William's ' familiarity with,, (a), the energy crisis through BP, (b) Ilongkong's needs through Matheson and his brothers' directorships in the Hong. kong and Shanghai Banking Corporation and (c) with the
Bank of England's own prob-
leps, have not been without their effect
on: yesterday's panic measures. It all puts a new light on that curious, recommendation of the Franks Committee on Official Secrets that information on sterling balances should also come under the draconian restrictions of that appalling Act. Moreover, there will be a special emergency meeting of the Hongkong group of MPs at the House of Commons this evening at 6 pmn. No doubt these gentlemen, } learned in the remarkable cus- toms of that colony, will have their own contribution to the worried debate in Whitehall.
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