TNAG-0742-FCO40-946-Relations-between-China-and-Hong-Kong-1978 — Page 153

布政司署

CONFIDENTIAL

主港下亞畢道

HKK

China :: kk173/1

RE WE

本署檔號 OUR Re

Thi Copy for:

2 1 JUL 1978

* YOUR Reformation only / Action on

Para(s)

RJT McLaren Esq

DEX OFFICER

FL.

INDE

PA

N

Hong Kong & General Department

IF CO

2 1 JUL 1978

安

GOVERNMENT SECRETARIAT

LOWER ALBERT ROAD

HONG KONG

14 July, 1978

BANK OF CHINA INVESTMENTS IN HONG KONG.....

PA

Nolas

Actio

•

Iain Orr wrote on 44 July to Bill Quantrill about the Bank of China's indirect involvement with the Mass Transit Railway (MTR) property development. There has recently been a further development in the Bank's relationship with the MTR which also has wider implications.

2.

Some time in June the Bank of China suggested to the Financial Director of the MTR, through an inter- mediary, that they would be prepared to offer loan/ overdraft facilities to the MTR. At a direct meeting between the MTR and the Bank it became apparent that what the Bank had in mind was overdraft facilities only and that the sum involved was relatively small - HK$5 million.

3.

As you will know, the MTR is a Government established corporation, directed to run its affairs on a commercial basis but with two Government officials on the Board. Faced with their first approach from a Communist bank, the Managing Director of the MTR asked if the Government had any objection to the Corporation going ahead. In discussing this we decided that, although we could see strong objections to the MTR becoming in any way dependent on the Communist banks, we did not see any problem about relatively small amounts of finance which could, if necessary, be repaid from elsewhere. Indeed we could see positive political advantage in the Bank of China for the first time taking a direct part in a Government sponsored and major development project. The Secretary for Monetary Affairs, who is one of the officers on the Board, was told to adopt an attitude of benevolent neutrality when the matter was discussed.

4.

In the event, the MTR Board agreed to accept the Bank of China offer. At the same time they are pointing out gently to the Bank that they do not normally deal in

/contd...

CONFIDENTIAL