TNAG-1168-FCO40-1448-Future-of-Hong-Kong-1982 — Page 31

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PERSONAL

TELELETTER

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FROM R D CLIFT, HONG KONG AND GENERAL DEPARTMENT

FILE REFERENCE HKK040/1 DATED 16 MARCH 1982

FOLLOWING PERSONAL FOR: R J T MCLAREN ESQ, POLITICAL ADVISER,

GOVERNMENT SECRETARIAT, HONG KONG

See (130)

FUTURE OF HONG KONG AND FINANCIAL IMPLICATIONS

162A

1. IN ADVANCE OF CHRISTOPHER MALLABY'S STOPOVER IN HONG KONG ON

21 MARCH, I AM LETTING YOU KNOW THAT HE IS LIKELY TO RAISE THE

QUESTION OF THE FINANCIAL IMPLICATIONS OF THE LOSS OF BUSINESS CONFIDENCE IN HONG KONG AS 1997 APPROACHES. PLANNING STAFF, WHO HAVE SEEN OUR SUBMISSIONS ON THIS SUBJECT, ACCEPT THAT PUBLIC CONCERN ABOUT THE END OF THE LEASE COULD WELL LEAD TO A SLIDE IN CONFIDENCE. HOWEVER NOTING THE RELATIVE STRENGTH OF THE HONG KONG ECONOMY THEY QUESTION WHETHER SUCH A SLIDE NEED BE

UNCONTROLLABLE AND HAVE ASKED WHETHER THERE COULD NOT BE SOME

FORM OF FINANCIAL CONTINGENCY PLANNING WHICH WOULD REASSURE INTERNATIONAL FINANCIAL CIRCLES AND MIGHT STOP OR AT ANY RATE

SLOW DOWN A SLIDE.

2. IN THIS CONNECTION THEY HAVE POINTED TO THE LACK OF A

CENTRAL BANK IN HONG KONG. THEY ARGUE THAT WHILE THE HONGKONG

AND SHANGHAI BANK WAS WILLING TO ASSUME THE ROLE OF LENDER OF

LAST RESORT IN THE FINANCIAL CRISIS OF 1965 IT MIGHT BE LESS

LIKELY TO DO THIS TODAY IN VIEW OF THE INCREASED SCALE OF HONG

KONG'S FINANCIAL ACTIVITIES AS WELL AS THE APPROACH OF 1997.

THEY ASK WHETHER THIS MIGHT LEAD TO DIFFICULTIES IN THE BANKING

SYSTEM WHICH WOULD EXACERBATE THE PROBLEMS CAUSED BY A SLIDE IN

CONFIDENCE.

3. I FULLY REALISE THAT THE WHOLE QUESTION OF HONG KONG'S

FINANCIAL MECHANISIM IS UNDER CONTINUOUS STUDY AND HAS IMPLI-

CATIONS BOTH FOR DOMESTIC CONFIDENCE IN THE TERRITORY AND FOR

ATTITUDES TOWARDS HONG KONG BY OUTSIDE INVESTORS AND OTHERS.

PARTICULAR I REALISE THAT DOUBTS ABOUT THE HONGKONG AND SHANGHAI

IN

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