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7
XCS(73)9
G.
"It is understood that in principle Hong Kong will participate in the arrangements. The basis on which the guarantee will apply in Hong Kong's very special circum- stances will be established in consultation with H.M. when the 24th September reserve figures are available. In principle Hong Kong will adhere to the existing M.S. P. but in the event of a period of adjustment being needed to restore that level it would not reasonably be withheld",
Analysis of Hong Kong's Position
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That is to say, the British side offered to give Hong Kong more time than the five weeks provided for in the Declaration (see paragraph 3(b) and (c) above) to get the M.S. P. right. In common with many other agreement countries, Hong Kong's M.S.P. was fractionally below the required 89% at 24th September for it is impossible to keep it exactly right all the time in view of daily transactions and shifts in gilt edged prices. But, as pointed out by the Financial Secretary to them, the formula simply does not take account of the realities of the situation, having regard to the fact that the banks have been selling their sterling positions forward for some time now in response to our being unable to tell them what arrangements were proposed for covering those positions after 24th September.
18
These realities are best explained by the following
three statements, viz:
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