NO DISTRIBUTION
One only
17. Nd AKIOD. PS/M. Royle
1973m
Mr Wilford
Mr Youde
Sr. D. Watson
Mr Marshall,
192
18°
00 FCO
GPS 420
CYPHER/CAT A
FM HONG KONG Ø50905Z
SECRET
HKK 5 li
НКК
TO IMMEDIATE FCO TELNO 1134 OF 5 OCTOBERM
1.
M.1.P.T.
Dr
Cro
outson
Goodfellows ond
The
to
and PJA
A
FOLLOWING PERSONAL FOR SIR DUNCAN WATSON FROM MACLEHOSE.
1. AS YOU WILL HAVE SEEN FROM THE EX. CO. PAPER ON OUR STERLING BALANCES (A COPY IS BEING SENT TO YOU BY A BAG LEAVING TOMORROW) HADDON-CAVE'S AND MY RECOMMENDATION WAS THAT WE SHOULD NOT PARTICI- PATE IN THE GUARANTEE BUT, INSTEAD, GIVE H.M.G. AN ASSURANCE THAT WE HAD NO INTENTION FOR THE TIME BEING OF SWITCHING THE HONG KONG GOVERNMENT'S STERLING HOLDING. WHILE THIS WOULD HAVE GIVEN THE TREASURY A LARGE MEASURE OF THE STABILITY WHICH THEY SEEK THROUGH THE GUARANTEE PROPOSAL, IT WOULD NOT HAVE BOUND US QUITE SO TIGHTLY, AND IN PARTICULAR WOULD HAVE GIVEN US MORE LIBERTY OF ACTION IN RESPECT OF SUCCESSOR ARRANGEMENTS AND ANY ARRANGEMENT EVENTUALLY REACHED TO RECONCILE THE THE STERLING BALANCES WITH INTERNATIONAL MONETARY REFORM. THE MAIN DIFFICULTY WOULD LIE IN PRESENTING EITHER HONG KONG'S NON-PARTICIPATION OR THE ASSURANCE WE HAD GIVEN H.M.G. IN A WAY THAT DID NOT UPSET EITHER THE STERLING MARKET OR THE HONG KONG PUBLIC OR BOTH.
2. IF THIS DIFFICULTY COULD BE OVERCOME, AND IN SPITE OF ANY IDEAS TO THE CONTRARY IN WHITEHALL, I CAN ASSURE YOU THAT THE MONG