CONFIDENTIAL
part of that surplus is deployed internally, the same sort of process is at work in a more indirect way.
17. All in all, I confess to some slight unease about both the relationships of the Government with the Hong Kong, Bank, and about the relationships between the Hong Kong Bank and the rest of the financial system in Hong Kong. Here again, the point is I think that the nature of these relationships may set limits to what can be attempted by way of monetary management in Hong Kong; and they may also set limits to the techniques which are feasible..
18.
What conclusions am I led to on the basis of a brief and partial exposure to monetary management and institutions in Hong Kong? Essentially, but very tentatively, they are:
(i) that an extension of monetary management is possibly
inevitable, and probably desirable;
(ii)
(iii)
(iv)
that such an extension will probably involve the use of techniques of monetary management which are not at present available;
that existing modes of monetary management will probably need to be at least adapted to permit (i) and (ii); some institutional change will be involved;
that it will be difficult, and perhaps impossible, to seek to impose any changes which might be implied by (i), (ii) and (iii) from outside Hong Kong.
19. How, then, can we help? I find myself coming round to the view that the best contribution we could make is to seek to improve the calibre of men working in this field within the Hong Kong Government. For, if I may say so, the Financial Secretary has an obstinate streak but he does not have a closed mind. He is indeed, very willing to listen to those(there are not many in the Hong Kong Government) he is able to respect for their technical knowledge and intellectual ability.
/But
SI
8 CONFIDENTIAL
A