TNAG-1721-FCO40-2401-Hong-Kong-1987-Review-of-Representative-Government-delegati-1988 — Page 186

ARPADE

CONFIDENTIAL

LORD GLENARTHUR'S MEETING WITH LORD GEDDES

Martinlee

Enami. Ref. fort

Stock Extlage

Closure

Points to Make

Hong Kong Stock Exchange

1. Recent events a setback for Hong Kong as international financial centre. But HKG has acted decisively:

2.

(a)

(b)

HK$ 4 billion support package for HK Futures Exchange; Ian Hay Davison's review of operation of Stock and Futures Exchange will recommend changes needed to restore confidence and protect investors.

Arrest of Ronald Li (ex-Chairman of Stock Exchange) and other members of Stock Exchange Committee by Independent Commission against Corruption another blow. But Stock Exchange acted quickly, under pressure from Hong Kong Government, to appoint new, "clean" Management Sub-committee while investigations are continuing. Exchange is operating smoothly.

Hong Kong Economy

3. Continues to be an impressive success story despite Stock

Most key Exchange crash. 12% growth in 1987, but slowing down.

indicators favourable.

4. Believe HKG have acted effectively to dampen speculation about revaluation of HK$. HKG determined to preserve the HK$/US$ link at existing level. Link has played key role in maintaining confidence and stability.

Confidence/Emigration

Also:

5. Much press emphasis on increasing emigration from Hong Kong. Must be seen in perspective (long tradition of emigration). many well qualified HK Chinese return to HK from abroad.

CONFIDENTIAL