TNAG-0369-FCO40-415-Visit-of-Edward-Heath--UK-Prime-Minister--to-Hong-Kong--12-1-1974 — Page 145

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NOTHING TO BE WRITTEN IN THIS MARGIN

(cj

to reassure opinion in Hong Kong that

there has been no change in HIG's attitude

on Hong Kong/China questions;

(a) to set the record straight on bilateral

issues.

There is no need to be defensive.

We have done much for Hong Kong.

PATTERN OF MEETINGS

5. The visit itself will meet first objective (a).

The speech at the City Hall will provide means of

the

achieving Second (b). Meetings with Executive and

h

Legislative Councils and the press conference will

provide a means of meeting (c) and (d).

BILATERAL ISSUES

6.

Sterling Hong Kong's sterling balances were

guaranteed in US terms by HMG, as were those of other

members of the sterling area. Under a separate

arrangement the Hong Kong Government guaranteed the

Hong Kong value of the sterling balances of the Hong

Kong banks. This proved costly to them as the value

of the Hong Kong went up when that of sterling and

the US went down. These guarantees expired last

September.

banks

The guarantee to the business was allowed

to lapse. An interim arrangement with the Hong Kong

Government has recently been agree which takes full

account of Hong Kong's problems, including their need for a lower Minimum Sterling Proportion(MSP).

Possible Criticisms: It may be suggested that

HMG used Hong Kong's balances to strengthen sterling, "he

do not take Hong Kong's interests sufficiently into

account.

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