LUNG
SECRET
KONG GOVERNMENT STERLING
11. Freedom of diversification would give Hong Kong even greater
autonomy than she at present enjoys.
might be welcome.
To this extent the move
It will however place greater responsibility
on the Financial Secretary and may well be unpalatable to him. lle will no longer be able to blame HMG for an adverse effect on the value of Hong Kong's reserves whether they remain in
sterling or not. Hong Kong has traditionally wanted both to have its cake and eat it so that we are likely to face continuing opposition in this quarter. As the message from the Chancellor to the Sterling Agreement Signatories will issue in July, this may create problems in respect of the award of the Mass Rapid Transit System contract which should be decided about the same
time.
SUMMARY
12.
Whilst the Hong Kong Government can be expected to react adversely to the news at first, there are grounds for supposing
It will add to her that it will not be altogether unwelcome.
financial independence and international stature, and could enable her to bring to an end her guarantee scheme with the
We should be very banks which has become a heavy liability. willing to advise over the setting up of a local money market
In return HMG might to absorb the commercial banks' sterling.
be asked to agree to some form of interim bilateral arrangement for a limited period pending the establishment of such a market.
5. SECRET
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Mr. Crowson (HKIOD)
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