TNAG-0382-FCO40-428-Sterling-assets-and-balance-of-payments-of-Hong-Kong-1974 — Page 155

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DRAFT TELEGRAM TO GOVERNOR HONG KONG

Your telegram 1361. Sterling Guarantee.

We are ready to accept that Hong Kong's minimum sterling holding

should be calculated on a market basis. You will no doubt sent

all advices on that basis. Any implementation payment will also

of course be calculated on the basis of market valuation of your

holdings.

As a special gesture, we are also prepared to accept that your minimum sterling proportion should be 78%, that is the figure corresponding to your actual holdings on 26 September based on

It is however most important that you should

market valuation.

not reveal that the MSP has been revised to take account of the

change in the basis of valuation between the present arrangement

and the former agreement. In explaining that a new MSP has been

decided upon to replace the former MSP of 89%, you should keep to

the line set out in paragraph 7 of our telegram 1133 namely that Hong Kong's participation is based on the reserve position at the expiry of the former agreement but with adjustments made to take

account of the non-participation of the banks in the new arrange-

ments.

w/227;