TNAG-0548-FCO40-643-Ministerial-briefs-for-meetings-with-Hong-Kong-press-1976 — Page 17

LORD GORONWY-ROBERTS'S MEETING WITH MR KEVIN SINCLAIR OF THE SOUTH CHINA POST - 10 DECEMBER 1975

BRIEF NO.

HONG KONG'S STERLING RESERVES

Line to Take

1. HMG would naturally like to see Hong Kong holding a significant proportion of its reserves in sterling.

2. Nevertheless, although Hong Kong is a dependent territory the Colonial Authorities in practice enjoy a large degree of financial

autonomy. They are under no constraint to hold their external reserves in sterling and are free to convert their existing sterling holdings into other currencies.

Background

In September officials in Hong Kong were quoted as having said that:-

(i) About 40% of financial reserves were in August held in

sterling; and

(ii) While the Hong Kong Government was shifting its holdings

of gilts from longer dated into shorter dated stocks, a further sustained fall in the sterling proportion of external assets was likely to be a slow process;

(iii) The structure of the sterling balances has changed and

Hong Kong is no longer one of the major official holders.