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нис 182 12
DATÉ
11/20
91
M V Stone
ва
364
Hong Kong Department
28 December 1990
LU PING'S COMMENTS ON THE AIRPORT PROJECT
1.
You asked for a note pulling together what Lu Ping has been saying on the PADS project and why and how damaging his comments have been.
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2. We have three specific telegrams which I am aware of from Hong Kong on this, Hong Kong telnos 3693 amd 3721, and UKREP JLG telno 495. We also have a telegram summarising the press coverage on the airport controversy Hong Kong telno 3753. In addition, I attach for the file record photocopies of the Hong Kong English press for the period 11 - 19 December which record and comment on Lu Ping's statements.
3. Lu Ping's comments and their impact may be summarised as below.
(a) PADS may affect the status of the Hong Kong Dollar
4. Lu is quoted as saying "We do not want them (HKG) to use the surplus. It might affect the status of Hong Kong currency. We are much more worried than you.". He also stated that the value of the Hong Kong currency might drop if the Foreign Reserve Fund was used. On the next day, Wednesday 12 December, Lu continued on the same theme and clearly suggested that the Hong Kong Government were not revealing the full truth of the costs of the project to the public. Lu said "as long as we draw from the Reserve, the total amount of the Exchange Fund would certainly drop. The Hong Kong Dollar will be weakened. Legally the Government as a matter of course can use the Reserve. But it will lead to a drop in the value of the Hong Kong Dollar."
5. The prime damage that these statements have caused is to sow confusion in the minds of the Hong Kong public as to exactly what the Hong Kong Government is up to and whether they are indeed intent on using the Exchange Fund to fund the PADS project. It could also be an effort to try to elicit a statement from the Hong Kong Government on the net worth of the exchange fund so that this becomes public knowledge and eliminates the risk of the British Government managing to acquire the fund before 1997.
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The facts are that the great majority of the Reserves are placed with the Exchange Fund for management purposes only: they are not an integral part of the Fund. If there were no
EELAKC
CONFIDENTIAL