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CONFIDENTIAL

Miss Pestell

Mr Cambridge

Reference

MF 9/393/1

STERLING GUARANTEE: HONG KONG

1. I attach a copy of Mr Barratt's note on his recent visit to Hong Kong, which I have obtained from the Treasury, since Mr Barratt himself did not circulate it to the FCO.*

2. The concept of a "gentlemen's agreement" with Hong Kong fills me with some dismay. In the first place, I had always assumed that

a "gentlemen's agreement" was one made informally and with no exact terms; in other words an agreement that one would act in a certain spirit, rather than in such and such a detailed way. Paragraph 8 of Mr Barratt's telegram suggests that he has something much more binding in mind. Indeed, what he seems to be envisaging is explicit commitment by Hong Kong to act in a way that would not be detrimental to HMG, without any corresponding benefit such as a guarantee. HoweverMr Haddon-Cave would appear not to have found the proposition quite as unattractive as it seems to me.

3. Finally can we trust the Treasury or the Hong Kong Government, if not to behave like gentlemen, at least not to behave in such a way that each will think the other is an absolute cad!

Mhasty

D I Lewty

Financial Relations Dept

29 November 1973

cc

Mr Holland

Mr Stuart HKIOD Mr Aust

Legal Advisers