TNAG-0380-FCO40-426-Sterling-assets-and-balance-of-payments-of-Hong-Kong-1973 — Page 238

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of the other signatories can be particularly happy with present uncertainties about the post-September 24 regime. (And the 'Colony' argument works only in one direction: the UK is not apparently permitted to use its undoubted legal powers to coerce the Governor);

it may be true that the commercial banks cannot be forced or readily induced to stay in sterling, but it is not clear that any special arrangements would be certain to keep them in. So the Governor might still have to use persuasion;

if Ministers were to decide to give a unilateral guarantee of a current rate, this would be an easier course for Hong Kong than a special arrangement on the lines suggeste in paragraph 9 above.

Conclusion and Recommendation

13. In spite of the risks of diversification, the arguments are overwhelmingly against a special offer to Hong Kong in advance and approval for such an offer as the basis for the talks this week is not sought. Instead it is recommended that the line with the Governor and Financial Secretary should be

as follows.

14.

Since the Governor feels his problems are not understood, he should be allowed to let off steam.

15. But he should be told that all signatories are in the same boat at any rate as far as Government sterling is concerned. We have been disturbed and shocked by the intention to diversify. He could not expect HMG to acquiesce in this. The Chancellor has promised a second message. (Note that this is rather roundabout language, which avoids saying what the Governor "should" do or refrain from Aoing!

Is it really

16. By the same token, we had expected that he would have used his influence to persuade the banks to wait. the case that they cannot wait a further fcw weeks? /