TNAG-0381-FCO40-427-Sterling-assets-and-balance-of-payments-of-Hong-Kong-1973 — Page 102

Page 2 EDITORIALS, FEATURES

South China Morning Post

SATURDAY, OCTOBER 13, 1973

No bluffing on the reserves

However one views the British political scene today whether it is Mr Heath's fragile patchwork of controls in Phase III of the prices and incomes policy or Mr Harold Wilson's reckless plunge out of the Common Market and into the loving arms of nationalisation the economic prospects remain inescapably bleak.

For all the drum beating rhetoric by politicians that Britain is on the verge of a great breakthrough into an era of growth, stability and security the tide has not turned and the somewhat tarnished silver lining on the still threatening clouds gets no brighter.

It is, of course, everyone's hope that Mr Heath manages to pull off a miracle and put an ailing Britain back on to its feet.

But time is running out and the prospects of a Liberal balance of power or a Labour victory at the next general election only add to the dismay with which Britain's long-term prospects are viewed.

Little wonder that Hongkong is reluctant to keep its reserves so heavily committed to sterling and why it needs an acceptable alternative to the offer of an extension of the British guarantees for another six months.

As we have already noted there is little hope of a new world monetary system emerging by next July the straw which London seems to be clutching at to help case the difficulties of the pound.

D

Nor is the pound likely to make its way into the European "snake" in the near future.

In Wednesday's S.C.M. Post Business News we reprinted from the Guardian, a leading British newspaper, an article written by Martin Woollacott in which he describes Hongkong's talk of rejection of the British offer as a "bluff which London has predictably seen through."

London might wish to believe it is bluff but if it feels that the colony is ready to sit waiting indefinitely and with infinite patience for the pound to respond to another round of pinch-and- poke ministrations by the politicians, it would be seriously misjudging the temper of Hongkong.

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The Government here is aware that it is the custodian of official funds and revenues remitted. to London as well as deposits and reserves of the banks in short, partly our savings and partly funds we have in safe-keeping for others and it must decide the best way of safeguarding them both to ensure the stability and growth of our economy and preserve the 'standard of living of the people.

While Hongkong is conscious of the need not to undermine the pound by taking hasty or ill- considered action, it is even more acutely conscious that it does not have adequate protection for its 89 per cent UK reserves in the event of a new onslaught on the pound.

Let it not be forgotten that we have been on the losing end of sterling devaluations to the tune of $150 million since 1967.We cannot afford to lose more.

It is for this reason that Hongkong cannot accept the British offer and vigorously supports the stand that the Financial Secretary, Mr Philip Haddon-Cave, has taken in defence of our reserves and the financial well-being of the colony.