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Wednesday, December 13, 1972

the U.S. dollar. We had in mind a new agreement to replace the present

agreement and to run through perhaps to 1975, At that time we expected

the discussions to be resumed at an early date. but some other sterling

area countries were not willing to commit themselves to a renegotiation

of the Agreements and the British Government, for its part, was not

willing to negotiate with some countries only. We regarded this situation

as entirely unsatisfactory from our point of view and kept up a telegraphic

correspondence with London stressing the need for an early resumption of

the July talks. As part of this process I called on Treasury officials

in London in September. I said that, provided the terma were right we

were willing to enter into another agreement for a period of, say, three

years; and that, while we understood that there might be good reasons why

other countries did not wish to commit themselves at that stage, their

positions were different to Hong Kong's and their needs likewise. For

instance, the minimum proportions of their external reserves (their

M.S. Ps.) which have to be kept in sterling are much lower than Hong Kong's

89%

-

So we kept on representing to the British Government that, if the

Sterling Guarantee Agreements could not be re-negotiated before the spring

of next year so that all concerned would know where they stood then at least

the British Government should recognize that we were placed and through

no fault of our own – in a peculiarly difficult position. Both the Hong

Kong Government and the banks faced the possibility of having a large

unprotected sterling position at the expiry of the present Agreement

/on

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