CONFIDENTIAL
LORD GORONWY-ROBERTS' VISIT TO
HONG KONG: STERLING
The Chancellor of the Exchequer announced in his November Budget Speech that the sterling guarantees would lapse with expiry of the existing guarantee arrangement on 31 December.* This has so far (2 January) attracted little recent attention in the financial press, and far and away the best outcome would be for the expiry of guarantees to pass as a non-event. There has been and should be no UK initiative that would draw any attention to it.
2.
The topicality of the subject should have receded by mid- January. But against the possibility that any questions do come up, Lord Goronwy-Roberts is advised to draw on the attached Q and A briefing that has been sent to posts (and to the Governor of Hong Kong) to enable them to defuse as far as possible any local interest that is shown in the subject.
3.
The Hong Kong Government have indicated that, with the expiry of the former guarantee, Hong Kong will undertake some diversification of its sterling holdings. But this is no cause for surprise, is not unexpected and all the signs are that any such operation will be carried out gradually over a longish period and in close co-operation with the Bank of England. There is no outstanding problem or need for any initiative in this area, where relations with
A Hong Kong are as close and as good as they have ever been. Treasury official will have been in Hong Kong for a general exchange of views just before Lord Goronwy-Roberts arrives.
Unlike the sterling agreement and the six-months arrangement which expired in March 1974, this latest guarantee arrangement did not have to be implemented.
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