TNAG-0381-FCO40-427-Sterling-assets-and-balance-of-payments-of-Hong-Kong-1973 — Page 92

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(198

Flag A

HKKSHI

Mr Guest

" (192) 193 197

(194

HONG KONG & STERLING

vertaken Pla

1. Mr Royle asked for a suggestion for a reply to

15/11

Sir Murray MacLehose's private letter. I attach a draft.

The alternative square brackets are because the Treasury

recommendation is now with the Chancellor. His answer is

expected this week. The appropriate phrase will depend on

the timing of Mr Royle's letter.

2. I have not copied the draft or cleared it, but it follows

(194) the same line as Sir D Watson has already taken (his letter

of 12 October para 3). The draft of that letter was agreed

with Mr Marshall.

3.

The origin of Sir D Watson's letter was a personal Flag B (102 telegram from the Governor (Hong Kong telegram No 1134).

This came at a time when we were already pressing the Treasury

to accept Hong Kong's official proposal for a lower MSP for

the interim period up to March 1974. We were therefore worried

about what to do with it. However, Sir Murray MacLehose

Flag C (193 confirmed on enquiry (Hong Kong telegram No 1136) that the

alternative suggestion of freedom was his own personal one

and not for official action.

4. He is of course the expert on probable reactions inside

Hong Kong, with or without a guarantee. But I think he is

wrong in his assessment of the likely result of freedom on

Anglo/Hong Kong relations. He perhaps underestimates the

/depth

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