TNAG-0382-FCO40-428-Sterling-assets-and-balance-of-payments-of-Hong-Kong-1974 — Page 133

RS HEDLEY-MILLER

LETITS

to me

STERLING GUARANTEE: HONG KONG

/ti

сс

243

Sir Douglas Allen

Mr Mitchell

Mr Fogarty Hrs Boothroyd Mr Volker

Mr Payton (B/E)

S

MF 9/393/1

The following notes are based on several talks in Hong Kong between 19th and 23rd November with Hr Haddon-Cave; one with the Governor; and one with h Blye, the Accountant General (who filled in some of the local background).

2. I found on arrival that He Haddon-Cave had roughed out the first draft of a telegram to London about the post-March situation. It included a statement of H ng Kong's desire to see the sterling element of the Government's foreign exchange holdings run down to about 50% (or "about £150-200m"). As to any future guarantee, Hong Kong's first thought was that a single currency, for example the dollar, was not very attractive, and that a guarantee based on a basket of currencies would best meet the situation.

3. I started by inquiring about the rationale of the 50% figure. I recognised this figure as one which Mr Haddon-Cave had wanted at an earlier stage in respect of all Hong Kong's holdings. But the position had changed radically since the banks had diversified and more than half the colony's total foreign exchange holdings were now in non-sterling currencies". Why did Mr Haddon-Cave conside 50% to be the appropriate figure for the Government's own holdings?

G

The figures at 26 September according to Mr Haddon-Cave were:

Government

Banks

£

313

50

363

non-£

84

340

424

Between March and September 1973 the Banks appear to have diversified the extent of shot 8250m,