ME 3AAN
HONG KONG DOLLAR FINANCE
CONFIDENTIAL
BACKGROUND (No points to make, but subject may be raised by Mr.
Adams, British Trade Commission)
We have been in touch with the DTI and ECGD on a number of occasions
recently to support requests for Hong Kong dollar finance in cases where British contractors and suppliers have been bidding for major project work in Hong Kong. The concession is not always given by the Treasury (it is necessary for the ECGD to refer to the Treasury on each occasion for specific approval). The Treasury maintain that it should only be granted if a Hong Kong dollar finance package is offered by foreign competitors, and are generally reluctant to accept evidence of this. Even when this stipulation is met
borrowers are invariably required to pay a higher interest than the
market consensus rate, in order to protect ECGD should the Hong Kong dollar interest rate move upwards. There has been some criticism of the UK position among businessmen in Hong Kong, principally on
the grounds that HMG should be showing confidence in the Hong Kong
dollar.
The OECD "common line" on credit finance, agreed in 1982, states
that when deferred credit is offered by companies tendering for
project work, fixed rate finance may be offered in standard
currencies, including sterling, US dollars and the yen (ie not Hong
There are clean indications Kong dollars). that the financial packages being offered by our
competitors for major contract projects including the Tuen Mun railway do not conform to the OECD line, not only in the offer of Hong Kong Dollar Finance but also rates of interest, credit periods
and in the case of the Japanese the inclusion of an aid element. These breaches suggest that the maintenance of the ECGD/Treasury policy may soon no longer be realistic and may lead to a loss of project business for UK companies. BTC Hong Kong are concerned
about this.
CONFIDENTIAL