TNAG-0382-FCO40-428-Sterling-assets-and-balance-of-payments-of-Hong-Kong-1974 — Page 141

FRICKITY

CYPHER/CAT A GFS 350

FM FCO 291955Z

SECRET

ORWELL

DESKBY 306208Z

DECRET

226

(FF 9/393/D IN

REGI

V

No. 1

5 DEC 1973

PA

HKK 5/1

sti

TO PRIORITY GOVERNOR HONG KONG TEĹNO 1226 OF 29 NOVEMBER 1973

YOUR, TEL NO 1361: STERLING GUARANTEE

3x1

230

1. ON THE BASIS OF YOUR TEL NO 1133 TAKEN IN CONJUNCTION WITH

PARAS 5 AND 16 OF YOUR TEL. NO 1117, AND PARAS 1 AND 2 OF YOUR TEL

NO 1215 WE HAD ASSUMED THAT YOU WERE CONTENT TO CONTINUE WITH THE

CONVENTIONAL BOOK VALUATION BASIS. THIS WAS ACCEPTABLE TO US SINCE

IT 13 BASED ON CR 236 AND WE WERE PREPARED TO REGARD IT AS EQUIVALENT TO STATUTORY FOR THE PURPOSES OF PARA 6(3)(B) OF THE DECLARATION. 2. HOWEVER, IN THE SPECIAL CIRCUMSTANCES THAT YOU HAVE DESCRIBED, WE ARE WILLING TO AGREE THAT THE CALCULATION OF HONG KONG'S

MINIMUM STERLING HOLDING UNDER PARA 3 OF THE DECLARATION CAN BE

EASED ON CURRENT MARKET VALUE ON EACH REPORTING DATE. WE ARE THUS

PREPARED TO TAKE AS STARTING POINT THE STERLING FIGURE FOR 26 SEPTEMBER OF C313 MILLION, AND TO AGREE TO TREAT THE REFERENCES IN PARA 3 OF THE DECLARATION TO MSP FIXED FOR THE PURPOSES OF THE

STERLING AGREEMENTS AS REFERENCES TO A MSP OF 73%.

3. ACCEPTANCE OF CURRENT MARKET VALUE FOR THE CALCULATION OF MINIMUM STERLING HOLDING MEANS OF COURSE THAT THIS BASIS WOULD BE

USED IN THE CALCULATION OF ANY IMPLEMENTATION PAYMENT AND INDEED

FOR ALL PURPOSES OF THE DECLARATION.

4. WE ALSO DRAW ATTENTION TO PARA 5 OF OUR TEL NO 1133 WHICH APPLIES

MUTATIS MUTANDIS WITH THE MODIFIED VALUATION BASIS. THIS MEANS THAT THERE MAY BE CIRCUMSTANCES, EVEN ON THE MARKET VALUATION BASIS, IN WHICH STERLING PURCHASES ARE REQUIRED CONSISTENTLY WITH THE TERMS OF THE DECLARATION. WE INTERPRET PARA 2 OF YOUR TEL NO

1351 AS INDICATING THAT YOU ACCEPT THIS, BUT WOULD BE GRATEFUL FOR

CONFIRMATION THAT THERE IS NO MISUNDERSTANDING ON THIS POINT.

5. WE HAVE FELT ABLE TO ACCEPT THIS SWITCH TO MARKET VALUATION

AND A LOWER MSP CORRESPONDING TO THAT BASIS, IN THE LIGHT OF YOUR

SPECIAL DIFFICULTIES IN THIS MATTER, WHICH WE RECOGNISE. BUT IT

IS. MOST UNLIKELY THAT OTHER HOLDERS WOULD SEE THIS MODIFICATION IN

THE SAME LIGHT, AND IT IS THEREFORE ESSENTIAL THAT IT SHOULD NOT BE

Chien de Befę (Kendall)

SECKET

/PUBLICISED.