TNAG-0380-FCO40-426-Sterling-assets-and-balance-of-payments-of-Hong-Kong-1973 — Page 220

The Minister of State pointed to the need for HMG to take a

global approach to the problem of sterling agreements. The Chancellor had promised to send a second message to the 60 signatories of the agreements, and it was impossible for HMG now to make a special arrangement for Hong Kong in advance of this message.

Moreover, he was unable to understand why Hong Kong, alone of the 60 countries and currency boards involved, saw such desperate urgency in the position.

In answer, Sir Murray pointed to the size of the Hong Kong sterling balances. Mr Haddon-Cave said that the sterling agreements so far had not benefitted Hong Kong. They had

lost £100 million since 1968. This loss was measured in

terms of the Hong Kong dollar because unlike most other sterling balances, Hong Kong held sterling against local liabilities. The Minister of State asked whether Mr Haddon-

Cave thought the loss would have been any the less if Hong

Kong held other currencies. He pointed to the high interest rates which Hong Kong had received on its sterling assets and

to the two recent devaluations of the dollar. Mr Haddon-Cave

was unable to answer this question. However, he underlined what Sir Murray had said about the urgency of the position. Hong Kong had asked for consultations 15 months ago. He asked whether, if there were to be no negotiations leading to a new agreement, HMG was concerned about the Hong Kong sterling balances. Hong Kong regarded it as vital to move to a more balanced position but would be prepared to phase

this over a period assuming that the costs of the transition

were a charge on HMG. The Hong Kong Government were under

severe pressure from the banks and also under severe political

pressure.

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