TNAG-0382-FCO40-428-Sterling-assets-and-balance-of-payments-of-Hong-Kong-1974 — Page 100

GPS 550

CURTIUUNTAU

IMMEDIATE

CYPHER/CAT A

FM HONG KONG 140910Z

[ORWELL]

CONFIDENTIAL

hile

247

18 DEL MAS

HKK 5%,

PA

TO IMMEDIATE FCO TELNO 1448 OF 14 DECEMBER, 1973.

STERLING GUARANTEE.

IS

R.G.

239

123 YOUR TELEGRAM 1271.

R&F

7

WE PROPOSE TO ISSUE THE FOLLOWING STATEMENT TO THE NEWS MEDIA AT 1100 HOURS ON SATURDAY, 15 DECEMBER.

QUOTE A GOVERNMENT SPOKESMAN ANNOUNCED TODAY THAT THE BRITISH AND HONG KONG GOVERNMENTS HAVE NOW REACHED AN UNDERSTANDING UNDER. WHICH HONG KONG WILL PARTICIPATE IN ARRANGEMENTS FOR THE GUARANTEE OF ITS STERLING BALANCES DURING THE SIX MONTHS ENDING 31 MARCH 1974.

QUOTE COMMENTING ON THIS ANNOUNCEMENT THE FINANCIAL SECRETARY (MR C.P. HADDON-CAVE) SAID THAT THE AGREEMENT WAS IN RESPECT OF OFFICIAL STERLING HOLDINGS AND WAS SATISFACTORY TO BOTH SIDES. IT WAS THE RESULT OF DETAILED DISCUSSIONS EXTENDING OVER SOME MONTHS. THESE DISCUSSIONS WERE CONCERNED WITH THE APPLICATION TO HONG KONG OF THE UNILATERAL OFFER MADE BY THE BRITISH GOVERNMENT IN SEPTEMBER LAST TO GUARANTEE ELIGIBLE STERLING BALANCES AT A RATE OF UNITED STATES DOLLARS 2.4213 TO THE POUND STERLING 1 FOR A PERIOD FROM 25 SEPTEMBER 1973 TO 31 MARCH 1974.

QUOTE THE PRESENT GUARANTEE, MR HADDON-CAVE ADDED, WILL BE CONFINED TO OFFICIAL, 1.E. GOVERNMENT'S, HOLDINGS OF STERLING. THE COVERAGE OF THE PREVIOUS FIVE YEAR STERLING GUARANTEE AGREEMENT WAS EXCEPTIONAL IN THAT IT ENABLED THE HONG KONG GOVERNMENT TO BRING THE STERLING HOLDINGS OF LOCAL BANKS UNDER THE UMBRELLA OF THE AGREEMENT. THE EXCLUSION OF THE BANKS FROM THE NEW ARRANGEMENT BRINGS THE POSITION OF HONG KONG INTO LINE WITH THAT OF OTHER STERLING HOLDERS AND REFLECTS THE FACT THAT THE STERLING HOLDINGS OF LOCAL BANKS ARE NO LONGER JUDGED TO BE SUFFICIENT TO WARRANT THEIR INCLUSION UNQUOTE.

2. TO ASSIST AA FEW

TRUSTWORTHY EDITORS TO WRITE INFORMED

COMMENTARY, WE PROPOSE TO BRIEF THEM ALONG THE FOLLOWING LINES:

CONFIDENTIAL

/ (A)