TWARD TELEGRAM
Code
FROM HONG KONG (0.A.G.)
TO 3. OF S. COLONIES.
D. 16th July, 1947. R. 16th
12.45 hrs.
No.1152
53.
JUL
#1947
I II
DX WX
INI
IA TR
WEGENED
REĢISTRY
IN
Your telegram No.953.
Loang⭑
I am in some doubt regarding the suggestion that whilst provision in the Bill should be limited to $100,000,000, an announcement should be made that a further loan is anticipated later. I am afraid that it could not be stated - that the figures in the Bill would suffice to meet the immediately foreseen liabilities. Unofficial Members know that they are likely to exceed that figure, and the Government would be pressed to state the amount and terms of any further loan which would be necessary in the immediate future. If they could only reply in vague terms, this would be bound to affect the Lasue adversely. Morse agrees with this view.
2. I therefore strongly urge that my suggestion in regard to borrowing from the Exchange Fund should be further considered. I do not think that, in the peculiar circumstances of Hong Kong, such a move could be regarded as inflationary so long as any borrowing is strictly limited. The recent increase in the note issue is not related to the loan. It results entirely from the fact that Hong Kong dollar notes are being bought in China as a commodity, as a fence against currency depreciation. Over $300,000,000 of our note issue is circalating in China, so to borrow from Exchange Fund is really equivalent to floating a loan in South China, In your telegram No.813 of 2nd September, 1946 (Treasury to Evans), the hope was expressed that it might be possible to
/attract
56.
95
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