TNAG-0380-FCO40-426-Sterling-assets-and-balance-of-payments-of-Hong-Kong-1973 — Page 244

79

(Handed to

MISS SEAMMEN

to que personally by day)

SECRET

Mr. Crowson

PA.

cc Mr Maughan Mr Fogarty Mr Owen

Mrs Hedley-Miller Mr St Clair

Mrs Gilmore

HONG KONG

10 cum

I should perhaps underline some points in the brief submitted by Mrs Hedley-Miller for the Minister of State's meeting on Thursday, 9 August, with the Governor of Hong Kong and his Financial Secretary.

T

2.

We always knew that the special position of Hong Kong (paras. 5-6) would call for treatment in some way different from that given to others with whom there are sterling agreements. But if we can possibly avoid it, we do not want to prejudice the general arrangement by a special one for Hong Kong at this stage.

3. Clearly Sir Murray MacLehose and Mr Haddon-Cave are in some difficulty. The rein on which this Colony is run has become so loose over the years that they (and we) have to rely on persuasion and inducement rather than direction. What is less excusable is that the Governor seems to treat the interests of the UK as entirely secondary to those of his own subjects on this the recent telegrams (attached) are very revealing. The personal message to the Foreign and Commonwealth Secretary in Hong Kong telegram No. 854 gives the ultimatum that if the Governor does not receive concrete proposals more or less at once, his Government will be "obliged to start selling Sterling forward with a view to diversifying." We must remind him that this diversification of £200m (plus

a "rather smaller amount" by the commercial banks) vill lead to a fall in the sterling rate we are trying so anxiously to defend or to a pro tanto loss of our reserves if we support.

SECRET