THE GUARDIAN
A f f = ~
E
Set-to over Hongkong's London reserves
From MARTIN WOOLLACOTT, Hongkong, September 30
THE hullaballoo here over Hongkong's £750 millions of
advised that the Basle Agree the same time the Hongkong country and turn Hongkong into reserves in London has now
ment, more or less unchanged, Government continued its nine- a major financial centre. reached the point where local should run on for another six newspapers are talking wildly month. It is this "offer of rejecting" existing financial arrangements with Britain, and where educated Chinese, on meeting an Englishman for the first time, ask him aggrievedly
Why is Britain stealing our
44
money?
"
:
What seems to have happened is that the Hongkong Govern ment and Mr Philip Haddon.
which has caused such fury in the colony. The motives of those concerned are not easy to read, but they seem to relate far more in the end to the fact that longkong has little political outlet for its growing parti cularism than to any real in- justices in the way London has handled the reserves.
teenth-century policy of bal- Figures are hard to come by anced budgets, indeed salting but the truth seems to be that away a surplus on budge: year the end of the sterling area did by year. Reserves went from not provide Hongkong with the £390 millions in 1967 to over anticipated opportunity-or at £950 millions now,
least, no great advantage was The money was held in derived. The Hongkong Govern- London, where it was guaran- ment, for political reasons, has teed against sterling devalua- to keep the bulk of its own tion (and later against a reserves in London, while the downward float) in terms of a banks have to stay solidly in pound US dollar parity $2.40. sterling because China, for a variety of reasons, does most of guarantee from the its trading in that currency. On
of
her
reserves
Hongkong Government and financial establishment, con- scious of this help to Britain and suffering numerous vague discontents, began to agitate for a new deal. The position of the Government seems to be that Britain must be convinced that Hongkong is a special case, holding as she does some 90 per cent of her reserves in London, and that she must therefore be allowed to diversify a larger proportion against the day when Britain might reduce her protective arrangements to a minimum.
More generally, the Hongkong Government wants Britain to solidly commit herself to look strong currencies--yen, marks after the colony in the coming and the like-is more difficult monetary revolution-and from than it sounds. They are in that point of view the problem short supply, as well as bearing with the current offer is not poor rates of interest. Finally, that it is the old agreement,
diversification out rapid
of but that it only lasts six months. sterling would undermine the The banks, on the other hand, pound, devaluing the remaining want the most advantageous combination of protection for As a result, money from all situation
denying, of their London holdings with over the region began to flow with the end of the sterling course, that Hongkong, as the freedom to diversify as well- in. The affluent of East and area in mid-1972 for after that second largest holder of sterling an arrangement that South-east Asi
saw Hongkong time the guarantees covered (Australia is the biggest) has they could shelter their money as a place where their wealth only the funds held in London helped in a major way to hold in London when appropriate and would be safe from coups, prior to that date. Any new up he pound over the last few move it out when most profit- expropriations, inflations, and money was on its own but, of years. The funds pouring into able, which would be a great wars, in their own countries. At course, the banks did not have Hongkong from all over the Far system-for them,
to keep it in London. A provi- East, as well as those generated All this has led to the bizarre sion that was greeted at the by the colony itself, were situation in which people are time as a great new opportunity straight
reinvested in talking
of ' rejecting' for Hongkong. Now they could London, counterbalancing the arrangement which is vital to juggle at least some of their outflow there.
their economy, a bluff which money around the world's Thus, as the end of the Basle London has, predictably, seen currencies just like a real Agreement approached, the through.
**
Cave, the colony's secretary, The colony's reserves prob. The banks themselves had a decided quite delilerately to lems go back really only to seond make the reserves into a pub- 1967 when the successful Bringkong Government in terms top of these positive factors, it lie" issue a few months ago. tish response to the Cultural of the Hongkong dollar, and is also true that moving into Journalists were called in and Revolution riots, and the clear thus, as it turned out, they were given "leaks" to the effect that indications from Peking that it protected against drops in the Hongkong planned to take a had no intention of foreclosing value of the US dollar as well very tough line with Britain in on Hongkong in the near future, as of sterling. re-negotiating the Basle Agree combined to produce an image ment. In the event-as might of "security" which Hongkong have been anticipated-Britain had not possessed before, in uninterested in а new spite of its economic growth in aeement on the reasonable the early sixties. grounds that the international monetary situation is too con- fused to allow of new long term arrangements at this time. Instead, both before and dur- ing the recent meeting of Com- monwealth Finance Ministers in Dar-es-Salaam, Britain simply
нико
REGİSTRY Nə.51
RECOVED IN OCT 1973
It was, as one banker con- ceded, "an enviable situation for private money protected against fluctuations in the value of both reserve currencies. The changed somewhat
reserves,
There is no
away
very
64
means
an
= 1 OCT 1973
cutting dated
19
in Fever sing
Goodfallon
Mr. Car
Mr. Croupinz
버스
M. Start To see pt.
No comments yet.
Private notes are available after approval.