CO129-583-16 Loans for public works 30-1-1940 - 15-7-1940 — Page 29

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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