TNAG-1332-FCO40-1762-Future-of-Hong-Kong-White-Paper-on-the-Joint-Declaration-1984 — Page 31

GRS 250

SECRET

FUTURE EGRET

DESKBY 15120OZ

SECRET

FM HONG KONG 15105OZ SEP 84

TO IMMEDIATE F C 0

Micic and So

RECEIVED IN REGİSTRY-

17 SEP 1984

DESK OFFICER

INDEX

TELEGRAM NUMBER 2853 OF 15 SEPTEMBER

INFO IMMEDIATE PEKING

MY TELNO. 2833 AND YOUR TELNO. 1818 : FUTURE EGRET.

PART 3 OF THE WHITE PAPER.

1. FOLLOWING IS THE DRAFT TEXT OF THE SECTION OF THE

WHITE PAPER ON THE MONETARY SYSTEM.

PA

REGISTRY

Action Taken

onade | mala

где

पर्याप

So

BEGINS:

}

MONETARY SYSTEM

(SECTION VII OF ANNEX 1)

A FREELY CONVERTIBLE CURRENCY AND THE RIGHT TO MANAGE THE

EXCHANGE FUND, WHICH PROVIDES THE BACKING FOR THE NOTE ISSUE

AND IS USED TO REGULATE THE EXCHANGE VALUE OF THE CURRENCY, ARE

THE ESSENTIAL ELEMENTS OF HONG KONG'S MONETARY SYSTEM.

THIS SECTION OF THE ANNEX CLEARLY STIPULATES THAT THESE

ESSENTIAL ELEMENTS SHALL BE MAINTAINED. THIS MEANS, FOR

EXAMPLE THAT THE GOVERNMENT OF THE SAR WILL BE FREE TO DECIDE

FOR ITSELF IN WHAT CURRENCIES OR COMBINATIONS OF CURRENCIES,

THE EXCHANGE FUND ASSETS WILL BE HELD.

2. IT IS A FEATURE OF THE SYSTEM IN HONG KONG THAT THERE IS

IS NON CENTRAL BANK. THE FUNCTIONS F A CENTRAL BANK ARE ESSENTIALLY

DIVIDED BETWEEN THE GOVERNMENT (WHICH INCLUDES THE MANAGEMENT OF THE EXCHANGE FUND) AND THE NOTE-ISSUING BANKS (WHICH ARE NOT

OWNED OR CONTROLLED BY THE GOVERNMENT). THIS SYSTEM HAS SERVED

HONG KONG WELL, AND AGAIN THE ANNEX PROVIDES FOR ITS MAINTENANCE.

3. THE CHANGES TO THE DESIGNS OF BANK NOTES AND COINS PROVIDED

FOR IN THIS SECTION ARE A LOGICAL CONSEQUENCE OF THE

FACT THAT HONG KONG WILL BECOME A SPECIAL ADMINISTRATIVE REGION

OF THE PEOPLE'S REPUBLIC OF CHINA ON 1 JULY 1997.

YOUDE

LIMITED

HD/HKD HD/FED

MR BOYD

SECRET

COPIES TO:

SIR P CRADOCK (2)

MR BICKFORD, LEGAL ADVISERS MR FITFOOT,

SIR E YOUDE, K195A