TNAG-0381-FCO40-427-Sterling-assets-and-balance-of-payments-of-Hong-Kong-1973 — Page 223

és rift wi London

CHINA MAIL

10-9-73

widems

By Jack Spackman, Financial Editor

THERE appears to be a serious rift developing between Financial Secretary Philip Haddon Cave and : British Treasury officials over protection for Hongk-

kong's $ 10,000 million reserves.

Mr Haddon-Cave denies there has been any breakdown in his dialogue with the Treasury.

"We have only just started," he said on his return from London where he had talks on the Mass Transit Scheme.

Yet, everything points to Mr Haddon-Cave having again been snubbed by the officials who ultimately will decide the fate of Hongkong's sterling reserves.

He was in London for 10 days but did not receive an invitation to visit the Treasury for further talks on the reserves.

"I made it clear to the Treasury that I was ready and willing to come and talk if they wanted me,' he said on his return to Hongkong.

Other statements he made indicate that relations between Hongkong and Britain are severely strained by the five-year Basid Sterling Reserves Guarantee Agreement signed in 1968.

He refuses to accept an extension of the existing agreement "unless our obligations are less limited and our rights more worthwhile".

The existing agreement has a re-negotiation clause and Hongkong has had little, if any, chance to negotiate.

Time in which to re-negotiate the agreement is desperately short, he said.

Deadline is midnight on September 24 - only two weeks from

now.

Britain last week announced it is extending the agreement by six months under slightly changed conditions.

Backed

Other countries with sterling agreements appear to have accepted Britain's unilateral move.

But Mr Haddon-Cave has made clear he regards the agreciment as bilateral one that must be negotiated by both parties.

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The serious state of Britain's economic position is reflected by the plea it has made to the world's top banks for more money to. help it meet its obligations to Hongkong and other countries with reserves in sterling.

RECEIVED IN REGISTRY No. 51

- 8 OCT 1973

IHRRS

A report from Basle, i Switzerland, today said the request for extended credit facilities to back guarantees against sterling reserve losses has been made to the Western Central Bankers.

The banks, which are backed by the governments of the 10 richest non-communist nations and Switzerland, are expecte to provide the extra funds.

But the amount Britain has asked for is still not known.

However, the chronic state of Britain's economy is of little consolation to Hongkong which is faced with further serious losses from its reserves because of the weakness of sterling.

"We cannot afford to sustain the kind of foreign exchange

losses of the past five years,"

Mr Haddon Cave said, after he dehimed