XN000022-1972-08-02 — Page 3

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Wednesday, August 2, 1972

HONG KONG'S STERLING RESERVES

The Financial Secretary, the Hon. C.P. Haddon-Cave, said today he

hoped a further and conclusive round of talks between the Hong Kong and British

Government would be held very soon either in Hong Kong or in London regarding

the situation created by the floating of sterling.

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He was speaking in the Legislative Council in reply to the Hon. P.C.

Woo who had asked for a statement from the Government on Hong Kong's Sterling

Guarantee Agreement with the United Kingdom.

Mr. Haddon-Cave said that during the four-day discussions here last

month, the Government and two British officials from London discussed and exchanged

ideas on all aspects of the situation created by the floating of sterling.

"These exchanges could naturally not be expected to lead at that stage

to firm conclusions for both sides had to listen and then reflect, but we

have kept in touch with London since the British officials departed," he said.

In exchanges with London, he said, the Government had emphasised

most strongly that Hong Kong's position as a large holder of sterling balances

as well as her traditional links with sterling deserved special consideration,

The Financial Secretary described the future of the Hong Kong dollar

and the security of the exchange value of Hong Kong's external reserves as

"complicated and delicate questions," but he assured the Council that the

Government was very conscious of the fundamental importance of arriving at

the right answers to these questions.

He said the floating of sterling and the subsequent establishment

of a temporary link between the Hong Kong dollar and the U.S. dollar had

created two difficulties for Hong Kong in relation to her Sterling Guarantee

Agreement with the United Kingdom.

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