(885363) Dd. 896639 1,000M 8/71 SLS.
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aver Cromon
SECURITY CLASSIFICATION
Top Secret.
Secret.
Confidential.
Restricted. Unclassified.
PRIVACY MARKING
.In Confidence
DRAFT BRIEF
To:-
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lquae
STERLING
1.
for Hong Kong.
壓
Type 1 +
From
Telephone No. & Ext.
Department
HKIOD
Floating of sterling has created special problems
Carronethe
Cont
2. Pisstly this has given Hong Kong a direct loss estimated
L
arites
at some £50 million on the value of her sterling reserve
(of some £800 million) coming on top of a loss of some
following £20 million/devaluation in 1967. This loss is largely
due to the fact that Hong Kong has no central bank; end the Hong Kong Government had to (reguarantee the com- mercial banks large sterling holdings in terms of the Hong Kong dollar, whilst her Starking Agreement with the UK quaranted her own starting holdings at the rate 7 to 1 to US$2.40
13.
Secondly because of Hong Kong's extreme dependence
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benwe
on external trade, and as her principal export market is
the US, the Hong Kong Government with Treasury authori!.
had to has had to peg the Hong Kong dollar temporarily to the US dollar. There was a craquantial toss in Hong Kong dollar terms in vafans of the quarantes I'ven to the banks, in frohorow & hu 14. As a result of these factors the Hong Kong Govern- ment has pleaded for special consideration (and in par-
ticular compensation for their losses) on the basis of
their position as a large holder of sterling and because
of their traditional and constitutional links with
starting
150 The Governor met Treasury officials early in
September and the Financial Secretary came over before the CFM to have prior talks with Treasury officials.
Treasury expressed sympathy but explained they had to
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