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3. In these circumstances I think that we should
concentrate at the meeting on 29 April on the question of what HKG can do to reassure the Hong Kong civil service generally about the security of their pensions.
seem to me to be two points to pursue:
There
(a) Private sector schemes: HM Treasury, in the light of their discussions with Barings, will be surprised by the
bald assertion in Hong Kong telno 1139 that HKG had not found any financial institution that is willing to pay money now in exchange for pension receivables over a period of say 10 years or to offer an exchange rate hedging mechanism to civil servants on special group terms. We shall need some chapter and verse if we are to convince them that HKG have looked seriously at these options and have not just dismissed them as a distraction from their objective of screwing money out of HMG. Mr K Y Yeung (Secretary for Treasury) indicated to Mr Burns, Mr Broadbent and me that he thought something could be worked out with Citibank and the American Insurance Group (AIG).
(b) Public sector scheme: The only runner here seems to be that mentioned in para 6 of the telegram, ie a partial funding. This would draw, in a limited way, on the Chinese proposal that HK$15 billion should be set aside from the reserves to provide a fund which would give Hong Kong civil servants a sense of security about their pensions. Our previous arguments with the Chinese (that HKG could not afford to set aside any sum of reserves for this purpose,
and that to do would make no economic sense) no longer carry
much weight.
4.
I understand that the Secretary for the Civil Service has argued strongly for a modest partial funding scheme but that the Financial Secretary has very strongly resisted it.
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CONFIDENTIAL
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