CONFIDENTIAL
fall of sterling, is likely to result in a substantial payment from
the UK to Hong Kong. This has led to a change of mind by the
Governor and Mr Haddon-Cave, the Financial Secretary, who
previously thought that it would be better to leave Hong Kong with
freedom of action and no sterling guarantee. They now see the value
of the guarantee, particularly when the Hong Kong Government are to
a very large extent locked into sterling by the fall in the value
of gilt-edged stocks. Mr Haddon-Cave has suggested a short period
extension of the existing guarantee arrangements
reversal of his former opinion.
Stock Exchange
7.
a remarkable
In his paragraph 10 the Governor rightly comments on the
ability of Hong Kong investors to absorb a drop in the Stock Market
from 1700 points to 500 and below. This is a tribute, perhaps, to
the gambling instincts of the Chinese. But a noticeable point inside
Hong Kong is the extent to which the large Hong Kong houses, some
of whom, as the Governor has said, have made a killing, have
managed to shift the odium onto the UK. It is very widely believed
in Hong Kong that the collapse was caused by clever UK financiers
who have creamed off the savings of the Hong Kong man in the street.
Relations with China
8.
The Governor's account omits, perhaps for reasons of
classification, any reference to the Hong Kong Government's
interest in the question of a Representative. The passage could be
read as implying that Hong Kong, by increasing unofficial contacts,
have made the best of the refusal by HMG, for its own reasons, to
receive an official Chinese representative.
would, of course, be misleading.
This interpretation
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