TNAG-0381-FCO40-427-Sterling-assets-and-balance-of-payments-of-Hong-Kong-1973 — Page 91

securities.

We would see difficulty in any other approach, and

trust that in the circumstances you will not seek one.

4. The modification described in para 2 above should now enable

Hong Kong to participate in the arrangement. There would seem to

be no merit in seeking out 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. 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 commerical bank

holdings. The exclusion of the commercial banks in the new

arrangement merely 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 warrant

their inclusion. The level of Hong Kong's MSP has not been disclosed

in the past and we suggest that it should not be disclosed now.

it could be indicated, in response to questions, that the terms for

compliance in the arrangement by Hong Kong do take account of the

fact that the commercial banks are no longer included.

But

5.

We would be grateful to have confirmation of Hong Kong's

intention to participate on the basis outlined above.

Please let

us know of any other presentational points that occur to you.