RECOVED IN
REGISTRY No. 51
OCT 1973
HICKS/
Mr Stuart
(10)
SECRET & PERSONAL
#7
么
HONG KONG STERLING AGREEMENT
Thank you for sending me a copy of the Governor's letter to you of 26 September. It is somewhat Delphic. But one way of reading it, and one which seems to me to have some plausibility, is that the Hong Kong Government are close to taking the view that they are not going to qualify for the guarantee, even given the sort of grace period for qualification which was proposed to Mr Haddon-Cave in Dar. For if the Dar formula had seemed to offer a way out which might be acceptable to ExCo, the Governor would surely have phrased his letter differently.
2. As you know, I have had my doubts on whether the Dar formula would run. For it would involve getting back to the present MSP;
turn would be very likely to involve purchases of
and this in sterling.
If these implications remain as unpalatable to Hong Kong as we have been given to understand, then it could be that the Governor's last sentence could be read as an indication that they propose to revert to their earlier proposal for some sort of phased reduction in sterling holdings.
3. But all this is speculation:
we shall see the ExCo paper
soon enough. I hope that it shows that my rather gloomy fore- bodings are wide of the mark.
1 October 1973
C.C.
Sir D Watson Mr Youde Mr Marshall Mr Cambridge
SECRET & PERSONAL
BILL
D G Holland