TNAG-0329-FCO40-365-Briefs-for-UK-officials--visits-to-Hong-Kong-1972 — Page 38

3. In his speech winding up the debate the

Financial Secretary referred to Mr Lee's "thoughtful

and timely speech" and said that "As I hope to be

holding discussions in London shortly on the

management and security and future of our

aterling assets, I would prefer to say no more

at this stage except that I have taken careful

note of the various points made".

4.

In his letter to Mr Marshall Mr Haddon-Cave

said that he wished to discuss

5.

"(a) with the Bank of England and the

Crown Agents various questions connected

with the management of our funds and

investments;

(b) hopefully with the Treasury and the

Bank of England:

(1) the utilisation of the 10%

diversification facility now available

to us under the Guarantee Arrangement;

(ii) the actual meaning, implementation

and practical value of the

Arrangement in present circumstances;

(iii) the future of the Arrangement and

of the sterling balances (including

present thinking on the implications

for the Sterling Area of the UK's

entry into the Common Market)."

The present position is that Hong Kong enjoys

a considerable degree of financial devolution and is

free to invest its reserves either in Hong Kong

or London. The Hong Kong Exchange Fund Ordinance

which provides for the establishment of a fund to be

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