CONFIDENTIAL
Instructions, the Colony is administered by the Governor with the
assistance of Executive and Legislative Councils. There is no
elected element on these bodies, all the members of which are either
Government Officials or Unofficial Members nominated by the Governor.
The attitude of the Chinese Government precludes any progress towards
self-government.
Current Issues
Commercial Problems
4.
The development of Hong Kong as a major manufacturing entity
means that her interests and those of the United Kingdom are increasingly
in conflict. Hong Kong for some years has limited her exports of
cotton goods to this country. Earlier this year we had to ask her to
restrict exports of polyester cottons. Eventually agreement was
reached, but not without difficulty and some legacy of rancour. The
possibility of requests for further restraints, eg on knitwear and
cutlery, cannot be ruled out.
Sterling
5. The Hong Kong Government calculate that they have lost about
£70 £80 million as a direct consequence of the floating of the
pound; they also lost some £20 m at devaluation in 1967.
6. In common with other members of the Overseas Sterling Area,
Hong Kong's sterling reserves are covered by a Sterling Guarantee
Agreement. In addition, the Hong Kong Government have an agreement
with certain banks in Hong Kong guaranteeing the Hong Kong dollar value
of sterling belonging to the banks, which is held as part of the
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CONFIDENTIAL
/Hong Kong
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