CO129-605-4 Government loans 12-7-1946 - 6-1-1948 — Page 6

To Jones

(Freas)

6 21/8/460

Seen. I do not disagree with the substance of the action proposed, but I wonder whether it is necessary to include the second sentence of paragraph 2 in the telegram to Hong Kong. I should think it might cause a certain amount of perturbation and in any case it should surely not be included in a telegram which is neither confidential nor secret. I am a little inclined myself to think that the Bank of England are over-estimating the effect of Hong Kong's present situation on its credit. More- over, the last sentence of the paragraph is surely a little inconsistent with the first paragraph. I would suggest, therefore, that it would be better to run the two together by adding to the first paragraph "or will in due course be reimbursed from other sources if it should not be possible for any reason to issue a loan in London. The third paragraph, renumbered 2 would then begin "Last part of this assurance would involve possible use of U.K. funds...."

One other comment is that in so far as political uncertainties may affect Hong Kong's credit, it is, of course, the policy of H.M.G. which determines the degree of political uncertainty and this is worth bearing in mind as a possible argument to reinforce the case for some kind of Treasury assistance foraising a loan. It is also a factor to bear in mind in more general discussions of Hong Kong's financial position. The Treasury have always insisted that the Far Eastern territories should exhaust their borrowing power before asking for other assistance. If they now tell us that the borrowing power of these territories is small, it naturally brings nearer the stage when exchequer assistance will be needed.

29.8.46.

Mr. Emanuel

Please see Mr. James' letter and the Tor draft of the reply which I propose to send him, together with the revised draft of the telegram. Would you please let me have any comments as soon as possible. Perhaps you will also clear it as necessary with Mr. Williams and Mr. Caine. I should like to get my letter off to Mr. James to-day.

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