TNAG-1487-FCO40-2044-Hong-Kong-banking-Banking-Bill-1986-1986 — Page 10

CONFIDENTIAL

YESTERDAY.

CHINA ALREADY HAD A CENTRAL BANK AND SETTING UP ANOTHER ONE

IN HONG KONG WOULD BE POINTLESS AS HONG KONG'S SOVEREIGNTY

WOULD REVERT TO CHINA, HE SAID.

SIR MICHAEL WAS SPEAKING TO REPORTERS ON THE ISLAND EASTERN

CORRIDOR WHILE TAKING PART IN THE WALK-FOR-MILLIONS.

ASKED IF NOW WAS AN APPROPRIATE TIME FOR HONG KONG TO CONSIDER

HAVING A CENTRAL BANK, SIR MICHAEL SAID HE DID NOT FAVOUR THE

IDEA. ''I DON'T REALLY SEE HOW A CENTRAL BANK IN HONG KONG

WOULD WORK'' HE SAID.

''AFTER 1997, HONG KONG WILL BE A SPECIAL ADMINISTRATIVE

REGION, A PART OF CHINA WHICH ALREADY HAS A CENTRAL BANK AND

YOU CAN'T HAVE TWO CENTRAL BANKS IN ONE PLACE'', SAID THE

OUTGOING CHAIRMAN.

THOUGH THE SINO-BRITISH JOINT DECLARATION DID NOT STIPULATE

THAT THE FUTURE SAR GOVERNMENT SHOULD SURRENDER ITS RIGHT OF REGULATING ITS MONETARY POLICY TO CHINA, SIR MICHAEL REPEATED

THAT ONE CENTRAL BANK IN ONE COUNTRY WOULD BE ENOUGH.

HE SAID HONG KONG WOULD ENJOY A HIGH DEGREE OF AUTONOMY AFTER

RETURNING TO CHINA, BUT IT WOULD STILL BE PART OF THE COUNTRY

AND WOULD NOT BE ENTIRELY AUTONOMOUS.

ASKED IF THE PEOPLE'S BANK, CHINA'S CENTRAL BANK, SHOULD RUN AN OFFICE HERE AFTER 1997 SERVING AS THE TERRITORY'S CENTRAL

BANK, SIR MICHAEL SAID: ** SHOULD BE VERY SURPRISED IF IT DOESN'T HAVE A BRANCH HERE THEN.''

BUT HE SAID HE HAD NO IDEA WHETHER OR WHEN CHINA'S CENTRAL

BANK WOULD START RUNNING AN OFFICE IN HONG KONG.

YOUDE

YYYY

(OCTOBER 6, 1986)

HMLNAN 3468

LIMITED HD / AKD

PS

PS/MR RENTON

PS/PUS MR GILLMORE DR WILSON

-2-

COPIES TO:

MR A. LOCHNIS? BANK OF

A.

MR P. KENT

ENGLAND

SIR P. MIDDLETON) H.M.

MR C. W. KELLY

CONFIDENTIAL

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S TREASURY