TNAG-0379-FCO40-425-Sterling-assets-and-balance-of-payments-of-Hong-Kong-1973 — Page 253

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CONFIDENTIAL

of the reserves. The Tercentage loss is equal to the percentage fall of Sterling in relation to the Hong Kong dollar which, at yesterday's rate, is equal to approximately 6.4%, Given that the Sterling assets of the banking system equal approximately £472 million (the latest figure we have, which is for 24 October 1972), the Hong Kong authori- ties have therefore lost around £30.2 million. However, we do not have an exact figure since the banks may have diversified out of Sterling since that date.

7. Finally, although it is technically correct to say that this loss is their own responsibility, the decisions reached by Hong Kong, in July 1972 and February 1973, regarding their exchange rate were base primarily on consideration of the effects on their trade. Any result- ing effect on the Government's guarantee to the banks was rightly looke on as a subsidiary matter.

20 February 1973

W. E. Franklin

Copy to:

Mr Holland

Sir Duncan Watson

Mr Crowson/Goodfellow

Mr Lewty

:

CONFIDENTIAL

WE Franklin Economists Dept

G 71A/G Ext 389