COPY FOR RECISTRATION
1967
18
CONFIDENTIAL
INWARD TELEGRAM
TO THE COMMONWEALTH OFFICE (The Secretary of State)
FROM HONG KONG (Sir D. Trench)
Cypher
D. 6th April, 1967.
6th
11
11.40 hrs.
Ro
CONFIDENTIAL No. 435
Following telegram of 6th April from B.T.C. Hong Kong.
Addressed to Export Credits Guarantee Dept. London
Repeated
No.54
"
Board of Trade (Commonwealth Office please
pass to both)
2.
For Elliott from Hannam.
My immediately preceding telegram.
Discussion opened with Clague and Marden saying
that they would never give a several (?general intended) guarantee nor did they think the Hongshai Bank or the Colonial Government would do so.
3.
Marden as chairman then asked me whether under your proposals the guarantors would have to cover the political risk. I said yes.
The Board then agreed that it would be impossible to give Gostains the contract if the guarantors were expected to repay E.C.G.D. in the event of the Chinese taking over the Colony. Such a condition would mean in effect that the guarantors would still be liable to E.C.G.D. even after the Chinese had driven them out from their Hong Kong-based businesses. I ventured a personal opinion that you would be willing to negotiate on the question of political risk providing the phrase meant Chinese takeover and nothing more.
40
I then quoted selectively from paragraphs 10 to 12 of Cotterill's memorandum of 22nd March to the Treasury. I emphasised that in my opinion you felt the main stumbling block lay in your being asked in effect to participate in the equity finance.
5.
This enabled Clague and Marden (who both argued sympathetically) throughout as opposed to the slight hostility of Kadoorie and Lee) to propose that the commercial risk be taken out of your underwriting the loan, by means of the founder shareholders guaranteeing (pro rata to their share holdings) to make up the difference between the tunnel receipts (which you will receive under the lien) and the amounts due to you.
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