CONFIDENTIAL
15. But at the end of the day our political and economic
interests run in parallel. Both economies have a vital stake
in continued growth. In the current difficulties facing the
world trading community this identity of concern transcends
the complexities in our relations.
HONG KONG/CHINA QUESTIONS
16. These are covered in the briefs for Peking. It will be
necessary to decide after the Peking visit what can be said in
Hong Kong on these issues.
BILATERAL ISSUES:
DEFENSIVE POINTS
STERLING (Brief no. 3)
17. The present extended guarantee agreement which the Hong
Kong Government have now accepted for their own holdings of
sterling protects their reserves at about US #242. Given
the current level of sterling and interest rates in London,
this guarantee is valuable to them, though the point cannot
be made much of, since it implies lack of confidence in
sterling's prospects over the next months.
18.
Possible Criticisms: The UK have controlled Hong Kong's
reserves in the interests of sterling and an ailing British
economy. The Treasury's failure to consult with Hong Kong
about possible successor arrangements well in advance of the
expiry of the old agreement in September was discourteous and
damaging to Hong Kong.
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/19.