TNAG-0042-FCO40-78-Future-Sovereignty-of-Hong-Kong-Defence-Review-Working-Party-1967 — Page 157

Rin Lawrance

Cabinet Offic

TOP SECRET

565

15th August, 1967

67/€

Hong Kon

I am enclosing a note on immediate action necessary on financial and economic metters in the context of a forced evacuation of Hong Kong. This has been prepared in consultation with the Bank of England and the Board of Trade and in accordance with the remit to the Treasury in K(67)2.

2. Stanley Wright discussed with you the handling of this paper and accor ingly I am sending it to you (and together with copies of this letter to Hall at the Commonwealth Office, Haslam at the Bank of England and Morris at the Board of Trade) so that in due course it can be linked up with the parallel exercise which the Commonwealth Office are doing.

3. There are I think four points which I should draw to your attentioni-

(1)

(2)

(3)

although

we have (in paragraph 3) drawn attention to the problems that could arise on the hypothesis of continued disturbances but not evacuation; this was not strictly within the remit we regard it as important, and I understand that you agreed that it would be useful for us to include it;

the judgment about confidence in sterling in the third and fourth sentences of paragraph 9 holds true only in the context of a forced evacuation;

the separate exercise referred to in paragraph 6 is in fact the parallel study being done by the Commonwealth Office (an Wright agreed with them in the person of Carter that it would be appropriate to take up the problem of movable assets in that study);

(4) while we have indicated other problems which would

subsequently have to be dealt with, we have limited ourselves to prescribing specific action on the immediate problem of treatment of the sterling balances in the context of an evacuation (this I think is consistent with the spirit of the Secretary of State for Defence's letter to the Commonwealth Secretary of 1st August).

P. Rogers, Esq., CB., Cabinet Office.

CMG.,

(A. Mackay)