TNAG-0382-FCO40-428-Sterling-assets-and-balance-of-payments-of-Hong-Kong-1974 — Page 52

Hongkong Senday Post-Heale gréement

16/12/73. on sterling

reserves

now

THE British and Hongkong Governments have reached an understanding under which Hongkong will participate in arrangements for the guarantee of its sterling balances during the six months ending March 31,

1974.

A Hongkong Government spokesman announced this vesterday.

Commenting on this 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 some months.

over

These discussions were concerned with the application to Hongkong of the unilateral offer made by the British Government in September last to guarantee cligible sterling balances at 'a rate of United States dollars 2.4213 to one pound sterling for a period from September 25, 1973 to March 31, 1974.

The present guarantee, Mr Haddon-Cave added, will be confined to official, i.e. Government's. holdings of sterling.

The coverage of the previous five-year sterling guarantee agreement was exceptional in that the Hongkong Government brought 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 Hongkong 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.

6- SUNDAY POST-HERALD, DECEMBER 16, 1973

Sunday Post-Herald Gained: a short breathing space

The agreement on Hongkong`s sterling reserves announced yesterday will be welcomed if only for the short spell of security it continues to give us - 115 days in all.

Overshadowing yesterday's agreement is the future of sterling itself and the very grave situation in Britain as the Government wrestles with an energy crisis of increasingly serious proportions, growing balance of trade problems, intractable inflation and a highly damaging showdown with the unions.

·

The more pertinent question is what if anything the British Government will be able to offer sterling holders in March?

The pound is already down to $2.3050 and was being quoted in local foreign exchange shops yesterday at $11.20 to $11.80 compared with the quoted buying and selling rates of $11.55 and $11.75.

It would be carrying optimism too far to imagine that the Government of Mr Edward Heath will have been able to solve his far more alarming domestic crisis before March even if the Middle East oil shortage cases.

And the long-term question mark hanging over Britain today is whether any measures taken by the Heath or indeed any other British Government can effectively tackle inflation when key unions are determined to pursue their wage claims at whatever cost to the economy and regardless of the consequences to the country.

It is this situation that is sapping sterling's 'value.

In turn it throws open the question of whether Britain can retain its authority as one of the leading pillars of Europe when it has so clearly demonstrated its inability to resolve basic conflicts within its own society.

There is talk of mounting an international rescue operation for sterling, a worthy aim indeed, but grandiose external solutions are less important than essential internal remedies. It must be wondered how much longer Britain can maintain the luxury of permitting militant union defiance to subvert the declared and publicly supported policies of the Government.

For what exists in Britain today is not the golden age of democracy but frankly an advanced stage of anarchy.