TNAG-0381-FCO40-427-Sterling-assets-and-balance-of-payments-of-Hong-Kong-1973 — Page 103

SECRET

NKK

11,

Foreign and Commonwealth

London S.W.1

194)

18/x

1 Crayson

Goodfellow to xe and P/A A 18/10

12 October 1973

PERSONAL

RT:

198

His Excellency

Sir Murray MacLehose KCMG MBE

The Governor

HONG KONG

N

RECEIVED REGISTRY Nc. 61

19 OCT1/3

HKK 5/1

1.

171

STERLINER

You may like to know how things stand with the Treasury on the proposition in your telegram No 1117. They have hoisted this proposal very much on board at official level and are not unattracted by it. We have stuck to the line that this ought to be treated as a technical proposal, resulting logically from the withdrawal of the banks and not involving special "concessions" which they might have difficulty in explaining away to the other sterling holders. This seems to us the most telling argument, since it is true; and, although they are still examining it nervously from every angle, I am not unhopeful that the Treasury will accept it. The next opportunity to consider it will arise at a meeting on the 17th.

2.

First in

I

This approach has two corollaries. talking to the Treasury we have not laid the main emphasis on the political need to reach an agreement with Hong Kong. We have sought to keep the discussion focused on a "technical adjustment Second, Treasury thinking is inevitably concerned about what they think you will say about an agreement if it is reached. They are afraid of difficulties with Australia and Ireland if Hong Kong were to abandon the "technical" theme and claim a victory. recognize the restraint inherent in paragraph 5 and 6 of your telegram 1133. But I think (though I have no present Treasury sanction for suggesting this) that if at the end of the day your proposal is agreed, it may be necessary to ask you to take a more straight-forward and to some extent less cautious line to the effect that you have accepted the Chancellor's proposal, which means that existing arrangements will continue subject only (by agreement with HMG) to a technical adjustment of the overall MSP resulting from the exclusion of the banks.

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