IMMEDIATE
CYPHER/CAT A
GPS 300
FM HONG KONG 1810302
CONFIDENTIAL
CONFIDENTIAL
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TO IMMEDIATE FCO TELNO 1474 OF 18 DECEMBER INFO IMMEDIATE HONG KONG GOVERNMENT OFFICE LONDON (FCO PLEASE PASS).
FOR BARRATT (TREASURY) FROM HADDON-CAVE.
20 JECHIS
[4KK 5/1
WITH REFERENCE TO THE ARTICLE IN THE BUSINESS SECTION OF THE 244 SUNDAY TIMES OF 16 DECEMBER, WE SUGGEST THAT THE HONG KONG
DAY COMMISSIONER IN LONDON SHOULD SEND A LETTER TO THE EDITOR ALONG THE FOLLOWING LINES, PROVIDED YOU THINK IT WOULD BE HELPFUL, VIZ:
QUOTE IN THE BUSINESS SECTION OF YOUR EDITION OF 16 DECEMBER, YOU CARRIED A MOST INACCURATE REPORT CONCERNING THE WAY IN WHICH HONG KONG HAS MANAGED ITS STERLING BALANCES. AT NO TIME, IN THE PAST OR IN THE PRESENT, HAS HONG KONG POSED QUOTE A STARTLING AND UNEXPECTED THREAT TO THE POUND UNQUOTE.
NEITHER THE HONG KONG GOVERNMENT NOR THE COMMERCIAL BANKS HAVE BEEN MAJOR SELLERS OF STERLING DURING THE PAST FEW WEEKS AND NEITHER THE GOVERNMENT NOR THE BANKS, THEREFORE, HAVE BEEN RESPONSIBLE IN ANY WAY FOR THE RECENT DECLINE IN THE EXCHANGE VALUE OF STERLING. AND, NOW THAT THE GOVERNMENT'S BALANCES ARE COVERED BY THE SIX-MONTH GUARANTEE ARRANGEMENT, THERE IS NO QUESTION OF SALES BY THE GOVERNMENT IN THE WEEKS AHEAD.
ANY SIGNIFICANT CONTRACTS FOR FORWARD SALES BY THE BANKS WOULD HAVE BEEN ENTERED INTO SOME MONTHS AGO WHEN THE FUTURE OF THE GUARANTEE ARRANGEMENTS WAS UNCERTAIN AND WHEN THE RATE FOR STERLING STOOD WELL ABOVE UNITED STATES DOLLARS 2.4213.
IT IS TRUE THAT THE HONG KONG GOVERNMENT HAS BEEN ENGAGED IN DISCUSSIONS WITH H.M. TREASURY OVER THE MANAGEMENT AND SECURITY OF THE COLONY'S STERLING BALANCES FOR SOME TIME, BUT THESE DISCUSSIONS HAVE BEEN CONDUCTED IN A FRANK AND FRIENDLY
ATMOSPHERE UNQUOTE.
MACLEHOSE
FILES
HKIOD
FRD
ECONOMISTS D
FINANCE D
GIPD
NEWS D
SIR D WATSON
MR YOUDE
MR WILFORD
COPIES TO
TREASURY
MR FR BARRATT HONG KONG GOVT OFFICE.
CONFIDENTIAL
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