TNAG-0171-FCO40-207-Effect-of-UK-s-economic-measures-on-exports-from-Hong-Kong-1969 — Page 95

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eligible for the sterling guarantee. Hong Kong is thus

in an excellent position to minimise the effects on her

trade of the Import Deposit Scheme. Being in the

sterling area she will presumably continue to be so.

But there may be means within reach of the Treasury to

prevent this form of overseas financing which it might

become desirable to use if the Import Deposit Scheme is

in due course found not to be reducing the volume of

imports.

3.

It is understood that the Hong Kong Shanghai Bank

has been considering a scheme whereby the Commercial

banks in Hong Kong should together raise the funds to pay

import deposits in block instalments in respect of exports

from the Colony in transit to the United Kingdom. We

have advised the Hong Kong Government Office (off the

record) to advise the Bank against these scheme but it

is possible that Mr. Saunders will wish to resurrect it.

Our objection is not that block financing of deposits

would be, so far as we know, an evasion of the scheme

(it would probably be permissible whatever the

administrative problems), but the more Hong Kong and

other countries exporting to the United Kingdom are able

to negative the effects the Import Deposit Scheme has on

their trade with this country, the likelier it could

become that the Treasury will have to prevent, or at

least reduce the flow of overseas finance for this

purpose. The less publ city given at this stage to

overseas financing of deposits the better from the stand

point of Hong Kong.

4. The difficulty in handling the subject derives from

the fact that we cannot give Mr. Saunders a frank

explanation of the situation.

Indeed if it became

apparent (as it is not at present) that overseas financing

of deposits was contrary to H.M.G's interest and against

/the purpose

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