TNAG-0623-FCO40-771-Hong-Kong-Government-investments-in-South-African-stocks-1977 — Page 20

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23 MAR 2777

Reference......

Original: HKK.090/?.

Mr Hayes

HKK 1021,

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HKK 102/1

CC:

Mr Stewart (HKD)

Information

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HONG KONG

1.

I feel you should know in view of my limited time resources, that I have the following major peices of work outstanding on Hong Kong:

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Minister of State (Lord Goronwy -Roberts) and Parliamentary Secretary (Mr Luard have asked what the economic advantage in to the UK of maintaining the present constitutional position in Hong Kong. This is a major task involving C50, Bank, DOT and ourselves.

The Minister of State has asked for a report of moves out of sterling by Hong Kong's reserves. Again, no minor task, involving Bank, Treasury and ourselves.

Mr Cortazzi requires a full appraisal of the recent Hong Kong Budget for the next meeting of his Standing Committee (this is the main FCO policy body on Hong Kong).

For the Standing Committee we are scheduled to assess the report of their Inland Revenue Review Committee, which has made major proposals for tax reform.

On the investment front Mr Cortazzi has asked for further information on the investment of Hong Kong's reserves in South Africa; we also know Hong Kong are considering a move to acquire the Government's supra-majority shareholding in British Petroleum.

2. Because Hong Kong is FCO's prime concern and in view of the delicacy of UK/Hong Kong relations (and Parliamentary interest) little of this can be passed outside. But it does demonstrate to my mind the case for some additional

resources.

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21 March 19771

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Adrian Smith

Senior Economic Adviser

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