Mr Hoare, HKGD
Reference.....
SECRET
PA
HkK040/5227/8
27A45
I
32)
we have
Noted
HONG KONG STUDY: CURRENCY AND FINANCE
1.
î
AF27/8.
I have only three substantial points on the revised paper with the Hong Kong additions shown in manuscript.
2. First, in para 2 'necessary' begs the question of whether HMG is in fact content with existing powers and measures. This is the point I discussed in my minute of 21 July to Mr Clift. I think that this should either be amended to say 'all the central banking functions judged necessary by HKG' or 'but certain central bank- ing functions', or else we should ask the Bank of England specifi- cally whether they are prepared to endorse Hong Kong's proposed text.
"
3. Second, the addition to para 15 seems to me to undermine the notion of no effective change in responsibilities and powers under- lying section B(i). What appears on the coinage may only be a symbolic matter. I am less sure about the question of the Treasury's (and the Secretary of State's) responsibilities and powers in rela- tion to the coinage, less still in relation to the Exchange Fund. These powers are surely a particular expression of the responsibility of HMG for Hong Kong. To alter this relationship might be con- sidered to represent a significant shift from the present 'British Administration', and seems to conflict with the last sentence of para 1.
Moreover, it is not consistent with the first sentence of para 17, which assumes that such a shift does not occur. I would prefer to omit or weaken the second sentence of para 15 and the manuscript addition, unless others judge that the changes these sentences describe would not in practice put HMG in an untenable (not, as in para 17 'untanable') position.
4. Third, I wonder whether part C really belongs to this paper, except to the extent that it has budgetary consequences for HMG. So too, presumably, do changes discussed in other papers (eg Air Services). Should it not be incorporated into another paper (eg dealing with relations with the Hong Kong Civil Service, Defence, Diplomatic representation etc)? The same remarks apply, to some extent, to para 12. Alternatively, should all the issues having financial consequences for HMG be consolidated into a section of this paper.
CODE
18-77
SECRET
/5.