TNAG-0379-FCO40-425-Sterling-assets-and-balance-of-payments-of-Hong-Kong-1973 — Page 11

SECRET

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The FCO feel that the Governor's personal position

would be eased if he could be told in confidence that officials

intend to recommend a unilateral guarantee. But this goes very far, in the absence of the Chancellor's authority, and in any might not do much good, since it would have to be completely silent on the level of the guarantee in mind, which officials have not yet agreed a view.

CRSE

18.

on

But something similar might be achieved if, as an alternative, the Governor and Financial Secretary were drawn. on the kind of arrangements they would like to see. This would be relevant in itself, but should also be helpful tactically, since it would enable the UK side at least to indicate in the course of the discussion that the continuation of a useful guarantee for a period after 24 September was not excluded from consideration in London, whether by officials or Ministers. In the present difficult position, vis-a-vis Hong Kong, it seems permics able to go this far.

19.

The opportunity should be taken of saying that whatever happens about the Sterling Agreements, Hong Kong would be well advised to consider more institutionalised arrangements in the field of domestic monetary policy.

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