TNAG-0381-FCO40-427-Sterling-assets-and-balance-of-payments-of-Hong-Kong-1973 — Page 17

us reasonable that you should similarly accept the consequences

of these arrangements.

While the terms of the unilateral

Declaration, taken in conjunction with your statutory basis

of the valuation, may require purchases if a new book valuation

reflects a fall in the price of securities, they may,

symmetrically, permit sales if the price of securities rises.

We would see some difficulty in any other approach and hope

Mess this. that in the circumstances you will not seek one.

So We hope that the modification described in paragraph 3-

ADOVE NOW crables Hong Kong to participate in the arrangement- ofthero anaugomento On presentational aspects, it is most important that news should not reach other participants in the guarantee arrange-

ment in a way that causes them to think that Hong Kong has been

We know that singled out for specially favourable treatment.

and hope Have

will 6. you beable to

impross the print on

one Kecutive

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you appreciate this The best outcome would of course be that there should be no publicity, but if or when questions come up

we suggest that the line to take is that discussions between

HMG and the Hong Kong authorities have produced a result that is satisfactory to both sides, and that Hong Kong is

participating in the arrangement and enjoys the guarantee in

respect of official sterling holdings.

7. The response to questions about the position of the

commercial banks might be that the previous Agreements with

Hong Kong were entirely special in extending to commercial bank

holdings. The exclusion of the commercial banks in the new

arrangement brings the position of Hong Kong into line with

that of other holders and reflects the fact that commercial bank

sterling holdings are no longer judged to be sufficient to

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