TNAG-0374-FCO40-420-Discussions-with-Sir-Murray-MacLehose--Governor-of-Hong-Kong-1973 — Page 171

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tactless, independent way which does not dispose the Treasury

towards the confidential "give-and-take" kindof exchange

which ideally should occur on the affairs of an important

dependent territory.

3.

I think there is nothing more we can do on this front

on Hong Kong's behalf until the Ministerial decision on the

future of the Agreements is taken. That stage should have

been reached by the time Sir Murray MacLehose comes into the

Office for talks on 11-14 September, and we can take matters

with him from there. If the decision is something that

Hong Kong can live with, all well and good. If not, so long

as Hong Kong and the Hong Kong banks were free to handle the

question of their own reserves in whatever way they pleased

there would be no disposition on Hong Kong's part to complain.

But if, as seems very likely, the Treasury sought to impose

unilateral restraints on the Hong Kong Government's ability

to diversify out of sterling or they were required to exercise

curbs on the Bankers' ability to do so, one can forecast

an explosion. If the Governor were instructed by you to

use his reserve powers to achieve this the resignation of

Unofficials would be virtually certain and the effect

calamitous. As we see it, what is essential is that the

final outcome should secure Hong Kong's acquiescence.

4.

And it is here that other current issues need to be

taken into account, having regard to the perennial suspicion

in Hong Kong that HMG is likely in the last resort always to

regard British interests as paramount and let Hong Kong down.

On nationality, we have in effect told the Governor that HMG

propose, for domestic reasons that are regarded as overriding,

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/to take