TNAG-0425-FCO40-471-Construction-of-an-underground-railway-system-in-Hong-Kong-1973 — Page 59

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CONFIDENTIAL

expressed in Yen might not imply an element of escalation despite its seeming fixity? If past performance is any

guide, the Yen's exchange rate over the period of years

covered by the contract might very well harden.

!

Secondly, I am sure you will have recognised that if the

Hong Kong Government were to give a guarantee of repay-

ment as the Japanese bid anticipates the UK Government

would be obliged publicly to state that the UK Govern-

ment's credit was not thereby committed. Reactions to

such a declaration in Hong Kong are for you but I fear

that in the UK there could well be a hostile reaction both

in Parliament and the press if it became known that the

Hong Kong Government's concession on the question of the

guarantee had enabled the Japanese to win the contract.

I am sure I can rely on you to see to it that these

points are given their full weight when the Hong Kong

Governmentdecides how the bids are to be handled.

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