TNAG-0381-FCO40-427-Sterling-assets-and-balance-of-payments-of-Hong-Kong-1973 — Page 256

1. MR WALKER

2. MRS HEDLEY-MILLER

HONG KONG

STERLING AGREEMENT

SECRET

cc Mr Payton (B/E)

Mr Holland (FCO) Mr Cambridge (FCO)

113 SEP 1073

17

MF9/393/1

This minute is intended to form a brief for the meeting arranged between Mrs Hedley-Miller and the Governor of Hong Kong at 10.30 am on Friday 14 September. It also suggests a line that may be taken in discussions with Mr Haddon-Cave in the corridors of the CFM meeting in Dar-es-Salaam.

2. There is a growing volume of evidence that feeling in Hong We have had Kong over the sterling agreements is running high. a series of reports of severe press criticism, as well as protests by members of the Legislative Council and other organisations. There can be no doubt that the Governor has a very difficult poli- tical task at preset and feels that he must be able to convince the inhabitants of Hong Kong that the foreign exchange reserves are being prudently managed in the interest of the Colony.

3. The sterling agreement is of course only part of a total complex relationship between Hong Kong and the UK which must be looked at as a whole. However, we should recognise the very genuine internal political difficulties with which the Hong Kong administration is faced.

4. The Hong Kong Government reaction to the Chancellor's proposals

It should be noted that are set out in telegrams No.1030 and 1036.

the first of these was sent before Hong Kong had received the full

text.

5.

Basically the Hong Kong authorities repeat two demands which they have made earlier:-

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