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MDLIAN 2833
AGREEMENT SIMILAR TO THAT WHICH WE HAVE WITH HSBC. BUT THEY WERE CONCERNED THAT THE AGGRESSIVE PURCHASES OF US DOLLARS BY THEM MIGHT BE MISINTERPRETED AS IMPRUDENT BEHAVIOR. THEY WERE NOT PREPARED TO TAKE THIS RISK.
5. THE NEXT OBVIOUS CANDIDATE IS THE BANK OF CHINA. THERE WOULD BE CLEAR BENEFITS IN THE BANK OF CHINA BEING INVOLVED IN OPERATIONS A IMED AT STABLIZING THE VALUE OF THE HONG KONG DOLLAR.
6. THERE IS A REMOTE POSSIBILITY THAT THE BANK OF CHINA MAY TRY TO EXACT A PRICE FOR AGREEING TO THIS. THEY MAY FOR EXAMPLE SEEK AN ASSURANCE THAT THEY WOULD BE INFORMED IN ADVANCE IF THE EXCHANGE RATE WAS EVER CHANGED, OR ASK THAT SOMEONE FROM THE BANK SHOULD BE MADE A MEMBER OF THE EXCHANGE FUND ADVISORY COMMITTEE. OUR RESPONSE WOULD BE THAT WE HAVE NO INTENTION OF CHANGING THE RATE, AS THE ENTERING INTO AN INDEMNITY AGREEMENT WITH THEM WOULD CONFIRM. ON MEMBERSHIP OF THE EXCHANGE FUND ADVISORY COMMITTEE, OUR ANSWER WOULD BE THAT THIS IS SOMETHING WE MIGHT BE PREPARED TO CONSIDER AT A LATER DATE AND THAT THEIR PRESENT WILLINGNESS TO GET INVOLVED IN MAINTAINING EXCHANGE RATE STABILITY IN HONG KONG, COULD BE A HELPFUL FACTOR TO TAKE INTO ACCOUNT WHEN IT CAME TO SUCH CONSIDERATION.
7. GRATEFU FOR COMMENTS. IF YOU SEE NO OBJECTION, WE PROPOSE THAT
(DEPUTY SECRETARY FOR MONETARY AFFAIRS) SHOULD APPROACH BANK OF
CHINA'S GENERAL MANAGER IN HONG KONG (ZHANG XUEYAO) AND DISCUSS THE
MATTER WITH HIM. IF THE NEGOTIATIONS DO NOT GO AS PLANNED IT WOULD
NOT BE TOO DIFFICULT FOR US TO PUT THE MATTER ON HOLD.
WILSON
YYYY
ΜΑΙΝ
LIMITED
HKD
E CONOMIC ADV
PS
31
ADDITIONAL
2
DISTRIBUTION
33
PS/LORD GLENARTHUR
PS/PUS
MR GILLMORE
MR MCLAREN
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