-2-
31
END
The settlement of terms is, however, a matter for
bargaining between the Hong Kong Government and the Hong Kong
and Shanghai Bank locally and the question whether the
Government can succeed in getting better terms is one on which
Caine can no doubt advise better than we can.
It certainly seems that there can be no harm in waiting
to see how things settle down. It is generally understood to
be the policy of H.M. Government to keep interest rates down
and it should be able to do so. Meanwhile the Bank might, as
you point out, reduce the rate of 3% which they offer on
deposits for a year but that is less important than an
improvement in the terms of a loan for an average of 12 years.
With reference to the terms of a local issue, you have
no doubt referred to the correspondence of 1934, when the first
3% issue was made at 99 by arrangement with the Chartered Bank and the P. & 0. Bank (without having to pay any commission)
after the Manager of the Hong Kong and Shanghai Bank had at
first said that 4% was the lowest possible. But it is only
fair to add that the price of War Loan in July 1934 was about
104.
Yours sincerely,
ceramon