TNAG-0448-FCO40-513-Sterling-assets-and-balance-of-payments-of-Hong-Kong-1974 — Page 127

I recognise of course that the amounts of sterling

at stake were marginal in relation to your total

holdings. But, correspondingly, the modified basis

of settlement that has been described (and to which

I will revert below) was not designed to differ more

than marginally from the basis that would apply if the

declaration had been 100 per cent fulfilled throughout.

We would of course have queried your interpretation

earlier had we been aware of it. But I really do not

find any clue to this in Blye's letter of 11 February.

At an earlier stage, we certainly took para. 2 of your

telno 1316 of 27 November (which refers to topping up

at the end of November to maintain your position at 313)

to be entirely consistent with the relevant provisions.

All this being said, however, there are two points in

our recent telegrams which I now think should be put

differently. First, for the purpose of determining

eligible balances on the modified basis of settlement

that we have described, I think it would be more appropriate (and consistent with what we do for the September 24th position) for the end-February holdings

to be valued at end-February prices and for your

subsequent topping-up purchases in respect of the

end-February shortfall to be valued at cost, rather than

for the sum of these (together with interest accruals)

to be valued at end-March prices.

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