HK and Britain Adding up the Assets
'NOW
OW tell me, gentlemen, what is Hong Kong really worth to Britain?' queried Col. John Tilney, MP. A good question providing ample food for thought. In recent meetings between the Chamber and visiting Members of Parliament, the subject of Hong Kong and its value and relation to the United Kingdom has been raised and discussed with much interest and animation. It becomes apparent that there has been. surprisingly little published informa- tion and statistics, official or otherwise, on the value of Hong Kong as a British Colony, her potential and im- portance as such, or alternatively, the advantages and benefits she may enjoy in an arrangement often regard- ed as anachronistic.
It was in this context that the Chamber decided to carry out some research into the situation. A back- ground paper was prepared and the Chamber Council discussed the subject under the specific headings of: Hong Kong's position vis-a-vis the UK with regard to reserve holdings which are predominantly held in London; the advantages of Hong Kong to UK companies; usefulness in the marine and and aviation fields; and Hong Kong's value to UK as an export market.
The emphasis was very much on quantifiable factors and for the pur- poses of this paper, intangibles and non-economic factors were overlooked. Furthermore, the following summary should be regarded only as an interim report. It was agreed that follow-up
work should be undertaken before the full picture emerges.
One of the most important links between Hong Kong and UK is financial - the link between the Hong Kong Dollar and Sterling. Hong Kong became a member of the Sterling Area in 1941 and until June 26, 1972, when the Sterling Area in its traditional form was liquidated, the reserves of the Hong Kong Government and the greater part of the reserves of Hong Kong's banking system were kept in London. Basle Arrangement
Following the devaluation of sterling in 1967, UK offered all members of the Sterling Area, including Hong Kong, a free guarantee in terms of US$ value
value of all officially held Sterling, in excess of 10 per cent of each country's total official external reserves. In return, they were obliged to maintain a minimum proportion of their reserves in sterling (for Hong Kong, this was 99 per cent, later reduced to 89 per cent). Under the so-called Basle Arrangement, Hong Kong reserves were thus guaranteed to September 1973 against any devaluation of the pound in terms of the US$ from the then par value of US$2.40 £1. For Hong Kong, 'official reserves' includes the major part of the sterling reserves held by Hong Kong banks. Compared with other territories, Hong Kong's sterling reserve holding (in excess of £900 million as of June 1972) was and still remains the largest single holding forming consistently well over
one
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