TNAG-0379-FCO40-425-Sterling-assets-and-balance-of-payments-of-Hong-Kong-1973 — Page 115

IMMEDIATE

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TO IMMEDIATE GOVERNOR HONG KONG TELNO 700 OF 17/7/73.

YOUR TEL N0778: STERLING AGREEMENT

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1. WE CAN APPRECIATE YOUR WISH TO BE AS FORTHCOMING AS POSSIBLE IN THE REPLY, HOWEVER, OUR PRINCIPAL DIFFICULTY WITH PARA 1 OF THE DRAFT REPLY IN YOUR TEL NO 775 RELATES TO ITS TONE RATHER THAN ITS SUBSTANCE, WHICH, AS YOU SAY IN YOUR TELEGRAM UNDER REFERENCE CONTAINS NOTHING NEW. WE SHOULD THEREFORE PREFER THE FINANCIAL . SECRETARY TO ADOPT A LESS NEGATIVE TONE IN MAKING THE POINTS AND

IN REFERRING TO THE ARRANGEMENTS DESCRIBED IN IT, PERHAPS BY AMENDING LINES 4 ET SEQ (AFTER QUOTE ANXIETIES UNQUOTE) TO READ AS FOLLOWS: QUOTE OUR STERLING RESERVES ARE STILL SUBSTANTIAL

DESPITE THE FACT THAT OUR TOTAL EXTERNAL RESERVES HAVE FALLEN

FROM THE VERY HIGH LEVEL REACHED IN MID-1972. WE HAVE, HOWEVER,

BEEN ABLE TO BENEFIT FROM THE ARRANGEMENT NEGOTIATED AT THE END

OF LAST YEAR FOR THE WITHDRAWAL OF PART OF BANK-OWNED STERLING

FROM THE STERLING GUARANTEE. WE HAVE ALSO DIVERSIFIED INTO FOREIGN

CURRENCY ASSETS UP TO THE FULL 11 PER CENT PERMITTED, UNQUOTE

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