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2 0 OCT 1983
04
ERY
INDEX
jandon Taken
FM HONG KONG 280735Z SEP 83
TO IMMEDIATE FCO
1425
TELEGRAM NUMBER 1425 OF 28 SEPTEMBER
FOLLOWING STRICTLY PERSONAL FOR GIFFARD FROM GOVERNOR:
YOUR TELNO 979: FUTURE OF HONG KONG.
1. MY COMMENTS ON THE POINTS RAISED IN YOUR PARA 2 ARE AS FOLLOWS:-
(A) 4 AGREE THAT THE CAUSES ARE PRIMARILY POLITICAL.
(B) WE ARE NOT PLANNING TO REMOVE INTEREST WITHHOLDING TAX, AT LEAST AT PRESENT. SUCH A MOVE IS NOW WIDELY REGARDED HERE AS IRRELEVANT AND ITS REMOVAL WOULD SIMPLY GIVE THE LEFT WING PRESS AN OPPORTUNITY TO CROW.
(C) * AGREE THAT EXCHANGE CONTROL IS OUT.
(D) WE ARE LIKELY TO ANNOUNCE A DECISION TO DENOMMATE CERTIFICATES OF MADEBTEDNESS IN U.S. DOLLARS IN THE NEXT DAY
OR SO.
(E) .# DO NOT THINK WE SHOULD RULE OUT FURTHER STUDY OF PEGGING THE HONG KONG ON POLITICAL GROUNDS BUT IT WOULD NOT BE POSSIBLE TO PEG TO U.S. DOLLARS. GIVEN THE FINANCIAL RISKS WHICH WE MIGHT FACE, WE WOULD NOW SEE VALUE IN A CONTINGENCY STUDY OF THE TECHNICAL REASHBILITY AND FINANCIAL AND ECONOMIC HMPLICATIONS OF OUR PEGGING THE HONG KONG DOLLAR TO STERLING. THIS WOULD NEED TO BE DONE ON
A VERY STRICT NEED TO KNOW BASIS IN LONDON (AND WITHOUT CONSULTATION WITH ANYONE LIKELY TO BRING NEWS OF T BACK TO HONG KONG). GIVEN THE POSSIBLE POSITION AFTER THE NEXT ROUND OF TALKS THE SOONER SUCH A STUDY CAN BE DONE THE BETTER.
YOUDE
LIMITED
HD/HKD
PS
Ps/MR LUCE PS/PUS MR GIFFARD MR EVANS MR DONALD
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