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GR 750
SECRET
DESKBY 0708OOZ
SECRET!
FM HONG KONG 070240Z OCT 83
TO IMMEDIATE FCO
TELEGRAM NUMBER 1489 OF 7 OCTOBER
HKK 100/7
2 TOP COPY
FOR CLAFT (HONG KONG DEPARTMENT) FROM BREMRIDGE.
# WOULD BE GRATEFUL IF YOU COULD PASS THIS TELEGRAM TO THE GOVERNOR BEFORE HIS MEETING WITH THE CHANCELLOR. IT HAS BEEN
SEEN BY SIR PHILIP.
2. THE HONG KONG DOLLAR EXCHANGE RATE REMAINS UNCOMFORTABLE BUT RELATIVELY STATIC WITH 9.62/67 BEING QUOTED THIS MORNING.
Len
See
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3. EYES REMAIN DIRECTED ON THE GOVERNMENT, AND THE IMPATIENTLY
AWANTED ANNOUNCEMENT OF MONETARY REFORM MEASURES IN THE SHAPE OF A PERSUASIVE PACKAGE WHICH WILL BE EFFECTIVE AN IMPACT AND
WITH MINIMUM DOWNSIDE RISK.
4. WE ARE AGREED THAT A HIGH PRIOR NTY MUST BE TO SUPPORT THE
HONG KONG DOLLAR BECAUSE, THOUGH HTS FALL RESULTS FROM LACK
OF POLITICAL CONFIDENCE, THERE CAN EQUALLY BE NO CONFIDENCE
WITHOUT A RELATIVELY STABLE DOLLAR.
5. WE ARE GRATEFUL TO THE BANK OF ENGLAND AND THE TREASURY FOR
SENDING US AT SHORT NOTICE THE ABLE GOODHART AND PERETZ.
THE ESSENTIAL ELEMENTS OF THEIR ADVISE ON THE CURRENT ISSUES
FACING US FOLLOWS IN MIFT. THE DECISION IS OF COURSE ONE FOR HKG.
OUR VISITORS WERE UNDER INSTRUCTIONS NOT TO MAKE ANY FINAL HARD
RECOMMENDATION BUT TO LEAVE THE DECISION TO US. NEVERTHELESS,
IN THEIR VHEW THE SCHEME EARLIER DISCUSSED WITH YOU IS APPROPRIATE
FOR HONG KONG TO ADOPT. THEY BELIEVE THAT THERE IS NO SENSIBLE
ALTERNATIVE IN PRESENT CIRCUMSTANCES DESPITE A RISK OF HOPEFULLY
TEMPORARILY INCREASED INTEREST RATES WHICH COULD HIT MANY HIGHLY GEARED COMPANIES, AND THAT THE OTHER DOWNSIDE RISKS ARE
ACCEPTABLE.
6. SUBJECT TO YOUR OWN CONSENT, AFTER YOU HAVE STUDIED THE PAPERS ON YOUR RETURN, IT IS OUR PRESENT INTENTION TO MAKE RECOMMENDATIONS
ON THE BASIS OUTLINED BY GOODHART TO EXECUTIVE COUNCIL TO BE
CONSIDERED A.M. WEDNESDAY 12 OCTOBER. SUBJECT TO THEIR ADVICE
AND YOUR AGREEMENT, THE NECESSARY ANNOUNCEMENT WOULD BE MADE
ON THURSDAY EVENING 13 OCTOBER. THIS IS SUITABLE TIMING BECAUSE
14 OCTOBER IS A BANK HOLIDAY AND THE RESPITE WILL ALLOW TIME
FOR READJUSTMENT EN BANKING AND FOREIGN EXCHANGE CIRCLES HERE.
IF THE HONG KONG DOLLAR RUNS AWAY WE MAY NEED TO ADVANCE THIS
PROGRAMME.
SECRET
17.