TNAG-1790-FCO40-2550-Hong-Kong-Vietnamese-refugees-resettlement-in-third-countri-1988 — Page 187

}

FILE

14

ROZADG

HKD 243/7

RESTRICTED

HKC 103

103/1

40

TALKS WITH DR GASTON SIGUR, 22 APRIL

HONG KONG DOLLAR/US DOLLAR LINK

Obiectives

(a) To emphasise that the four so-called NICs be treated individually, on their own merits:

(b) to repeat Hong Kong's case for maintaining the Hong Kong/US

dollar link.

Points to make

1. Hong Kong should not be treated on a par with protectionist economies Korea and Taiwan.

2. Hong Kong is a model of what OECD countries, including the US, have been preaching: most open market in the world, zero import tariffs, no import quotas, no export subsidies, strong copyright laws effectively enforced, free flow of currency, open to overseas

investment.

3.

Aware of US concerns on the Hong Kong/US dollar

link.

But:

Hong Kong's overall trade effectively in balance no question of link as deliberate instrument to gain unfair

advantage.

Since introduction in 1983 Hong Kong has taken the rough with the smooth as US dollar has appreciated and depreciated. Overall trade had remained essentially in

balance.

4.

Political aspect: link established in aftermath of 1983 crisis of confidence. Since introduction, has been vital factor in maintaining domestic and international confidence in Hong Kong.

5.

Hong Kong is a small place, and reactions to uncertainty can

· recall 15% fall against US quickly be magnified out of proportion

dollar in two days at a time before link was introduced.

RESTRICTED