CONFIDENTIAL
MMF 393/1
Reference
R+2
من
Mr Janvrin (HK & 10 Dept K245)
J
20
FABIAN TRACT - 'HONG KONG : BRITAIN'S RESPONSIBILITY'.
2.
You asked comments,, the particular as well as the general.
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Coming from the former Deputy Director of the Hong Kong University Extra- Mural Studies Department, the paper is rather disappointing, though it is cer- tainly couched in moderate and, for the most part, responsible language. Its principal failing is that, although it puts forward an unexceptional case for social reform (but perhaps playing down a little just what strides were made in the 1960's and just what the local administration now has in the pipeline), it almost totally ignores or dismisses as unimportant the associated economic issues. It may well be that powerful business interests are successfully able to frustrate the aspirations of the working population, but such evidence as is cited is hardly conclusive and certainly has no analytical foundation (economic, political, sociological or otherwise). This is an important criticism, for the policy recom- mendations stem largely from the conclusion which it is intended should be drawn from the discussion that the internal, power structure must be modified.. The author dips frequently into the 'Industrial Colony' publications (to which he himself contributed a chapter on industrial relations), yet he draws nothing at all from the chapter on economic policy (by Nicholas Owen) even though much of the material there could have been brought into play in support of his apparent conviction that the economic case for caution is over-stated. In short, this is not an academic paper, but an appeal to readers' emotions; nonetheless, it deserves to be treated as a serious attempt to put across a point of view widely and sin- cerely held both within Hong Kong and outside.
3. On points of detail:
1. Page 5: I am not sure that in 1958 Hong Kong formally did virtually become independent of Whitehall surveillance over its internal expenditure, though that seems to be how it has worked out in practice: 'The Secretary of State has now (1958) informed me (the Governor) that in view of the good standing, financial and administrative, of the Colony, he will further relax his control ... [but] he wishes to extend the principle of demi-official consultation which is already in use, and I have agreed that the Financial Secretary will keep the Finance Department of the Colonial Office regularly and fully informed about this Govern- ment's financial policy and about the way this policy works out in practice. The Financial Secretary will take account of the views of the financial advisers of the Secretary of State in advising the Government on policy.' (Legislative Council Proceedings).
2. Page 5: It is not the case that the banks made a quick break out of ster- ling in September 1963 and that the UK Government was furious. The banks' post- June 1972 sterling accruals ceased to come under the protection of the Exchange Fund Guarantee Scheme as a result of the sterling flotation and it was made clear that any UK sterling guarantees after the expiration of the 1958 Basle Agreement would apply to Hong Kong government. holdings only. It was known that the banks would wish to diversify out of sterling as soon as possible and in fact they sold heavily on the forward market in the run-up to September 1973.
3. Page 6: The reasons for the Hongkong Bank's acquisition of Hutchison International are set out in my minute to Mr O'Keeffe of 8 August 1975 (your ref. HKK 5/9) which puts matters in a rather different perspective.
4. Page 6: At the height of the stock exchange boom, daily turnover is reported to have exceeded that for all Western European stock markets put together. The Hang Seng Index of Share Prices stood at 1775 points, compared with about 360 now, and hardly represents a basis for taking a realistic view of Jardine's capi- talisation.
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CODE 18-77
CONFIDENTIAL