TNAG-0380-FCO40-426-Sterling-assets-and-balance-of-payments-of-Hong-Kong-1973 — Page 157

FINANCIAL TIMES

cutting dated

22 AUG 1973

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Hong Kong’s

reserves

openly and publicly from British policy, il is time Britain recognised that economically and financially Hong Kong has its own needs and interests which differ radically from those of the mother courtry.

Hong Kong, I might add, is losing Commonwealth preference on its trade following Britain's admission to the Common Market. It has had to accept British restrictions and quotas on its exports of textiles. For many years it has operated economically as an independent entity and it would be a gross Sir- refer to the article by injustice now if London were to Philip Bowring (August 16) on attempt to wild the big stick the wave of "nationalism"

over the future of the sterling sweeping Hong Kong over the reserves. question of obtaining suitable Let it not be thought that guarantees from Britain for its Hong Kong is threatening UDI sterling reserves. Mr. Bowring for obvious political reasons says the Hong Kong Government this is not on, and Hong Kong is doing nothing to discourage continues to value the British the display of emotion. It is hard connection. It indeed recognises to understand why it should. that it has built up its reserves The reserves represent an over the years on high British accumulation of taxpayers' interest rates and in spite of the revenue derived from a succes sharp losses it has suffered in sion of budget surpluses over the value of these reserves due many years. Hong Kong's policy to devaluation and floating, of surplus budgeting has not met Hong Kong will continue to hold with general approval in the a large part of its reserves in, colony. In recent years parti- sterling if for no other reason cularly some critics feel Ilong than that there are not too many, Kong should be spending more alternatives. on social services but the fact

Hong Kong, however, must have remains that although Hong the right to spread its reserves Fong is to-day making fair pro- *gress in its social development the Government has considered

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it desirable 10 accumulate reserves overseas as an insur ance against the rainy days that we who live in Hong Kong recognise as an 11 too real possibility.

as it thinks fit. A reasonable time table can be worked out to ensure that this is done prudently and with the best in- terests of all sterling holders in mind.

Robin Hutcheon, Editor, South China Morning Post.

A large, proportion of these c/o 24 Sedelscombe Road, S.W.5.

reserves toweover represent

funds deposited by the leading banks in Hong Kong as a Laxing, for the bank notes which they 'issue.

While one may argue bver the necessity of such large reserves the fact remains that this; prudent and responsible policy has helped to encourage wide- spread confidence in Hong Kong's economic and financial: 'standing both at home and

abroad.

Hong Kong to-day holds a far higher proportion of its reserves in the UK. than

any other country and in view of sterling's chronic instability there is a widespread feeling that adequate guarantees must be given to pro- tect these.reserves or that per- mission must be granted to enable Hong Kong to diversify to a far greater extent than the 11 per cent. so far permitted under the sterling guarantee gree, ¿ments.

Failure to accede to this demand by Britain can only harder the suspicion that the Hong Kong authorities are little better than puppets on a string manipulated by London.

And while constitutionally! Hong Kong's civil service may, have limited scope to diverge

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