TNAG-0123-FCO40-159-Future-of-Hong-Kong-1971 — Page 107

VOL SECRET

Treasury (Steel's letter of 21 January)

References are to paragraphs in the Report:-

✓

Faragraph 7:

Paragraph 8: {

Amendment accepted. Delete "comparatively modest

Amendment accepted. Delete third and fourth

sentences and substitute -

In

"It is in our interest that Hong Kong's

reserves should continue to be held in sterling

and for the years immediately ahead this has been ensured in the sterling agreement. view, however, of Hong Kong's special position as a trading and entrepot centre special arrangements permitting a free market in U.S. dollars have been made."

Paragraph 77: (1) Tense changes accepted. Substitute "could

not" for "cannot" and "should" for "shall" in

(2)

the first line of the last sentence.

We are reluctant to omit the words (at the end

of this paragraph) " ́nd which are in any case equivalent to only one and a half times China's annual earnings of foreign exchange

through Hong Kong.

This evaluation of the

worth to China of Hong Kong's sterling assets is relevant to their use as a bargaining

counter.

Conclusions (a)✓ Amendment accepted. Substitute "see

(c)

maintained" for "retain" in last sentence.

Amendment accepted. Delete first two sentences and substitute: "Eut Hong Kong could become a major liability if, as expected, its economy begins to run down towards the end of the lease or as a result

of Chinese pressures.

#

(w)

Amendment accepted, but we would prefer it in the following form Insert "as it well may"

after "run down" in last sentence.

Recommendation (3) Amendment accepted in revised form. To be

& nsistent with Copelusion (Roy,11€ ©łne

$

as well may" after TOT BLOKEN

() above, insert

last line

Own