DD 26160OZ UKMIS NEW YORK
GRS488
DEDI P
SECRET
DESKBY 261600Z
FM FCO 261500Z SEP 83
SECRET/DED IP
HKK
10017
RECEIVED IN Asband Ma
2 0 OCT 1983
DESK OFFICER
INDEX
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IMMEDIATE UKMIS NEW YORK
TELEGRAM NUMBER 507 OF 26 SEPTEMBER
FOR PRIVATE SECRETARY
FOLLOWING FROM GIFFARD
1.
FOLLOWING IS TEXT OF UKDEL/IMF/IBRD WASHINGTON TELEGRAM NUMBER 327 OF 25 SEPTEMBER TO FCO REPEATED TO OTTAWA (FOR PRIME MINISTER'S PARTY).
BEGINS:
PERSONAL FOR MIDDLETON (TREASURY)
HONG KONG
BUT
THE CHANCELLOR OF THE EXCHEQUER TELEPHONED HADDON-CAVE TODAY FOR AN UP-TO-DATE BRIEFING ON THE HONG KONG DOLLAR. 2. HADDON-CAVE SAID HE WAS VERY PLEASED TO HAVE THE OPPORTUNITY TO TALK TO THE CHANCELLOR ON THE PRESENT STATE OF PAY. THE CAUSE OF THE PRESSURE WAS ENTIRELY POLITICAL. THE ECONOMIC FUNDAMENTALS IN HONG KONG WERE EXCELLENT. 6 PERCENT GROWTH HAD BEEN ACHIEVED THIS YEAR. THE MARKET ON SATURDAY HAD BEEN VERY THIN. IT HAD BEEN ALL ONE WAY, WITH SELLERS AND NO BUYERS. 3. HADDON-CAVE EXPLAINED THAT THE DIFFICULTY WAS LARGELY A FLIGHT INTO US DOLLARS. RESIDENT ACCOUNT HOLDERS WERE CONVERTING INTO US DOLLARS, BUT THERE WAS NO CAPITAL FLOW OUT OF HONG KONG. THERE WAS ALSO A LEADS AND LAGS EFFECT WITH EXPORTERS DELAYING REPATRIATION OF US DOLLAR EARNINGS. THE FUNDAMENTAL REASON WAS NOT LACK OF CONFIDENCE IN THE HONG KONG ECONOMY NOR IN THE INTENTIONS OF THE BRITISH GOVERNMENT. IT REFLECTED CONCERN OVER THE PROSPECTS FOR AN AGREEMENT GIVEN THE PRESENT CHINESE
ATTITUDE.
4. THE HONG KONG GOVERNMENT, HADDON-CAVE SAID, WERE
1
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