TNAG-2270-FCO40-3269-Hong-Kong-Her-Majesty-s-Overseas-Civil-Service-(HMOCS)-poli-1991 — Page 26

CONFIDENTIAL

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24

December 1991

Mrs Sandra Brown

HM Treasury

HKB 233/1

Desi Colas,

HONG KONG: HMOCS PENSIONS

Foreign & Commonwealth

Office

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London SW1A 2AH

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1. I undertook to get back to you after Christmas with some thoughts on the way forward following our meeting here on 20 December.

2.

I understand that the Treasury have asked for a copy of the note of this meeting: I enclose a draft, which aims to summarise the main points only. As I said at the meeting, I am keen that we should keep up the momentum generated by your useful visit to Hong Kong. I propose that we take forward

work as follows:

you kindly undertook to do further work quickly on the hypothecation option. To help in this, the Governor has now agreed that you should make contact direct with HKG's consultant, who is Richard Margolis at Smith New Court. I understand he will be in London on 21 January and would be happy to meet you then. The Governor proposes to send Keith Shipley from Hong Kong to join that discussion (an earlier timing would obviously be more convenient if it could be arranged). In the meantime, I enclose a copy of an interim report from Margolis, which may help in your initial discussions with the Bank of England.

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we in the FCO will give some thought to how the capitalisation option might be put to the Chinese, and what the pros and cons of doing so would be. I firmly believe that it would be dangerous to try to sound out the Chinese- even in an informal way without a clear and agreed view on how we intend to proceed: in other words, we should only make such an approach to the Chinese if a political decision is taken here to go for the capitalisation option;

I will discuss the position with the Governor if I get a chance when I make a brief stopover in Hong Kong with Lord Caithness on 7 January;

we should use the Governor's visit to the UK on 22-23 January as the deadline for producing an options paper. suggest that the FCO take the lead in drafting a paper, clearing with you and the ODA. This might take the form

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BUGADR

CONFIDENTIAL