TNAG-0380-FCO40-426-Sterling-assets-and-balance-of-payments-of-Hong-Kong-1973 — Page 222

SECRET

In answer to a question from Mr Haddon-Cave, the Minister of State said that it was certainly possible to devise a guarantee scheme which would operate while sterling was floating.

Sir Murray repeated that the Hong Kong Government needed to

know what were HMG's plans for the future. The Minister of State repeated that it was impossible to say since decisions had not yet been taken. Sir Murray then said that since the Minister of State could say nothing helpful he and Mr Haddon-Cave should not have been invited. The Minister of State pointed to the telegrams from Hong Kong which had been taken as requesting a meeting, in default of which the Hong Kong Government would advise the banks to sell forward. It was agreed that Mr Haddon- Cave would agree with Mrs Hedley-Miller the terms of what he might say on his return to Hong Kong. It was pointed out that this meeting had been publicised in the press and nothing should be said which would exacerbate the problems. Mr Haddon-Cave denied any involvement in the leaks to the press.

The Minister of State told Sir Murray that it would be most important to dissuade the banks, by all means that the Hong Kong Government commanded, from selling sterling forward in the period leading up to the Chancellor's message. Sir Murray, while commenting that what the Hong Kong Government knew of HMG's intentions might not be sufficient for the purpose, appeared to accept this. Mr Haddon-Cave pointed out the political difficulties but the Minister of State reaffirmed that a firm

line should be taken with the banks. Major selling of sterling forward should be prevented at all costs.

Distribution:

Mr Bailey

Mr IP Wilson

Mr Maughan

Mr Fogarty

Mr Barratt

Mr Owen

Mrs Hedley-Miller

Mr Middleton

Sir Eric Norris - FCO

DIANA SEAMMEN

10 August 1973