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Sir D Watson
De Wat
SIR MICHAEL PALLISER:
1.
TOP SECRET AND PERSONAL
VISIT TO HONG KONG
10
The O'Kaffe
Mr. Maudsley
Sales hig
I attach the exchange of correspondence with the Governor. Hong Kong, on the representations by the NEC which you wished to show the PUS designate next week. As I explained, the security rules required these papers to be entered but I arranged with the Head of our Registry that they could be called for only by yourself, Mr Male and myself; and that he keeps them in his special security
press between times.
2.
I also attach the correspondence about Hong Kong's economic and financial problems which bear on many of the issues raised in the briefs I submitted yesterday for Sir Michael's visit to Hong Kong. The essential paper, I believe, is Mr Holland's account which he submitted to Mr Royle on 2 November 1973; but if you would like a summary of the exchanges, I will prepare one. The correspondence seems to have petered out late last year with the Governor's letter of 2 December but you should know that Mr Dart of the Economists Dept. has sent me a minute recently explaining his anxieties over the liquidity of the Hong Kong banking system. This is rather too technical for general use. The essential burden is that, in the absence of a central monetary authority, the inflow of speculative capital is causing the Hong Kong dollar to appreciate to a point at which the economy will, in all probability, be unable to take full advantage of the up-swing in world trade when it comes. The inflow also threatens to upset the stability of the banking system. This indicates to me that, while Mr Haddon-Cave seems to have modified his old-fashioned approach to fiscal matters somewhat (e.g. by resorting this year to deficit financing), he is still by no means aware of the risks involved in the policy of non-intervention.
23 September 1975
Thak
Ju.
ум
Mili
PL O'Keeffe
Hong Kong & Indian Ocean Dept.
Johewed In 17. Pallise
;
Today
the permal comes with the Govern and abor
N gave him the backgrund to the Commie & fummok problem.
TOP SECRET AND PERSONAL
Dorman Liration
3579
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