54225/4/47
Dear Serpell,
Colonial Office,
Downing Street,
8.7.1.
9th August, 1947.
Ans'd. (63)
72
58
with reference to Hong Kong telegram No.1152
of the 16th July regarding the proposed loan,
I enclose a draft of, our reply in the terms of which I trust you will agree.
It seems that a normal loan issue is not likely to be very successful locally, and we consider therefore that part of the loan should be floated as a tap issue, to which the local banks and the public could subscribe; and part as a premium bond issue which might appeal to the local Chinese investor.
If the full 8150 millions could not be obtained in the above manner, we would see no objection to a reasonable amount of the Axchange Fund assets being invested in the loan. $300 million of those assots are in respect of H.K. notes held in China and a large proportion of the total issue in London by Chinese, chiefly against depreciation of their own currency. By investing part of the assets of the Fund in the proposed loan, we are indirectly making the Chinese subscribe thereto, as the 0.AG. points out in paragraph 2 of his telegram No.1152. However if the premium bond proves to be successful, the question of investing the Exchange Fund assets may not arise.
I am sending a copy of this letter and draft to Hicks, who will perhaps say whether he sees any
D.R. SERPELL, ESQ., 0.B.E.
objection
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