TNAG-0381-FCO40-427-Sterling-assets-and-balance-of-payments-of-Hong-Kong-1973 — Page 166

IMMEDIATE

SECRET AND PERSONAL

IN

RAGE. No.31

12

*

UCT 1973

188

HKKS),

JPLA

Sir Duncan Watson

HONG KONG AND STERLING

1. I am somewhat concerned about how matters are developing

on Hong Kong and Sterling.

!

2. I had some talk yesterday with the Minister of Statr

at the Treasury at and after a lunch at the Mexican Frbassy.

Mr Nott's line was that we would have to make a "sordid

financial calculation", ic we would have to weigh the dis-

on the other advantages of letting Hong Kong go on the one hard and/the

disadvantages of making a concession to Hong Kong which might

have repercussions with other Sterling Agreement countries

leading to concessions to them as well. Mr Nott spoke

favourable about Sir Murray MacLehose but was clearly less

than enchanted with Mr Haddon Cave, whom he blamed for the

furore which had gone on in llong Kong, a furore which increases

the danger of leaks about any deal with Hong Kong leading to

demands for concessions from other Sterling Agreement countries.

3. I told Mr Nott that we were very conscious indeed of the

totality of the sterling problem and the necessity of looking

at the position as regards Hong Kong in relation to it. I

reminded him, however, that there were complicated political

considerations. He agreed. He spoke highly of the Secretary

of State's minute (I have not seen this in final form). He

was, he said, disposed to "help" Sir Murray MacLchose. But

obviously he had to be guided to a certain extent by what Treasury officials recommended. I emphasised to him at the

end of our conversation that the presentational problems

involved in any deal with Hong Kong should be relatively easy

to handle.

14. Our

SECRET AND PERSONAL

-1-

}