SECRET
12. The possibility of a link with sterling was mentioned, but the arguments against are strong:-
(a) The US is already a second currency in the Colony. A sterling link would both be less natural, and tend to make the scheme harder for the population to understand
and accept.
(b)
There may be a political aspect vis-a-vis the negotiations with the Chinese.
(c)
Since most HK residents probably want to hold US s rather than sterling (reflecting in part the direction and denomination of their trade) it could tend to put dowaward pressure on sterling.
Timing
After we had explained
There are
13. We met the Governor on 4 October. our technical appreciation of the scheme to him it sounded very much as if he had decided to go ahead. But he was clear he could not proceed on a matter of this kind without first consulting his Executive Council, which could not be until their return from London next week. Meanwhile a paper for the Executive Council is being prepared for the Governor's return on Monday. strong operational and market reasons for making changes of this kind over public holidays and weekends. There is also a good deal of necessary contingency planning and preparation to be done before the Hong Kong Government is ready for a properly prepared launch. So exchange markets permitting, there is a good reason for delaying an announcement until late on Thursday 13 October, just before a long weekend starting with a Hong Kong public holiday on 14 October.
HM TREASURY
6 October, 1983
DL C PERETZ