TNAG-2256-FCO40-3240-Hong-Kong-Port-and-Airport-Development-Strategy-(PADS)-gene-1991 — Page 43

SECRET

303

11653

MDHOAN 0266

THEN HMG HAS ANY OBLIGATION TO COMPENSATE THE PRC OR THE

SARG.

4. IN THIS CONNECTION, WE SHALL ALSO NEED TO CONSIDER IN WHAT TERMS THE SECRETARY OF STATE MAY NEED TO SPEAK ABOUT THE PACKAGE

IN HIS TALKS IN PEKING: A WARM WELCOME TO THE AGREEMENT AND

CONFIDENCE IN THE FUTURE HEALTH OF THE HONG KONG ECONOMY MIGHT

BE MOST APPROPRIATE.

5.

MY SECOND POINT CONCERNS SUBSTANCE. IS IT YOUR INTENTION TO VOUCHSAFE TO THE CHINESE THE ARRANGEMENTS SET OUT IN PARAGRAPH 10 OF YOUR FIRST TUR? IF SO, WILL THIS NOT GIVE THE CHINESE A PERPETUAL RIGHT OF VETO OVER YOUR HANDLING OF THE ECONOMY IF EVER THE RESERVES LOOKED LIKE DIPPING BELOW THE AGREED FIGURE? AN ASSURANCE ABOUT THE LEVEL AT WHICH THEY WOULD STAND IN 1997 AT LEAST PROVIDES THE HKG WITH SOME FLEXIBILITY OVER HOW MUCH TO REVEAL TO THE CHINESE IF BAD YEARS PRECEDE GOOD

ONES IN THE YEARS UP TO 1997. TO OFFER AN ASSURANCE OF AN

ANNUAL SET-ASIDE SEEMS LIKELY TO LEAD TO REQUESTS FOR ANNUAL

DISCUSSION OF THE STATE OF HONG KONG'S RESERVES. IS THAT YOUR INTENTION?

6.

COULD YOU CLARIFY WHAT YOU MEAN BY EARMARKING

HKD 14 BILLION FOR INVESTMENT IN THE EXCHANGE FUND EACH YEAR? YOU SAY THAT THIS SUM WILL NOT BE SUPPLEMENTED BY THE ACCRUED INTEREST. ARE YOU SAYING ALSO THAT IT WILL NOT BE ALLOWED TO GROW IN REAL TERMS IN LINE WITH INFLATION?

7.

FINALLY, TWO POINTS ON PARAGRAPH 8 OF YOUR FIRST TUR.

AND IS IT YOUR EXPECTATION THAT THERE COULD BY 1997 BE SUBSTANTIAL AMOUNTS OF UNPAID-OFF BORROWING BY PUBLIC BODIES GUARANTEED BY HKG (YOUR PARAGRAPH 8A) WHICH WOULD EXCEED THE

HKD 10 BILLION NOTED IN PARAGRAPH 7?.

Redacted Under FOI

Exemption Sec 27(1)(a)(c)(d)

HURD

YYYY