TNAG-0380-FCO40-426-Sterling-assets-and-balance-of-payments-of-Hong-Kong-1973 — Page 9

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Also, despite the sterling reserves guarantee agreement lasts for five years,

it is agreed that should either side feel the need, both sides have the responsibility to amend it after the first three years. We understand that the HK Gout has reiterated the request to amend the agreement for a number of times, but the requist was repeatedly regented

snubbed by the British

Govt.

reserves account

a

As HK's sterbing

for sizable portion of UK's total foreign reserves, the pound sterling may be in great straits if HR retrieves the sterling reserves all at one time. HK, after ali, does have the moral obligation to help Britain in this respect.

mind

Besides, we must also bear in mind

: that HK will suffer too if the pound-sterl

mose-dives in the international to

Furthermore, the extension

though basically

a

of

the

money market. agreement,

"freeze" still helps to a certain extent to head off direct possible losses.

Last but not least, any defiant and impetuous demand for Britain's concession may lit set off

Tons on

a series of adverse repercuss-

our economy.

We suggest that

In view of the above reasons, we-

suggest that we could accept the six-month

extension on condition that we are given better and more effective quarantee.

One of the conditions should be a

further reduction of the rate

of

HK's

pes

cent

sterling reserves by at least ten within the six months must be allowed.

After that period, it is hoped that our reserves could be completely indepent ent. Or at least acceptable plans mist be worked out to let us reduce our portion of sterling reserves gradually.