TNAG-2467-FCO40-3591-Economic-situation-in-Hong-Kong-1992 — Page 12

83.g mg.ip/december/4.16

HM Treasury

Paul Gray

Under Secretary

Nigel Whitney Esq

Hong Kong Department Foreign Office

REC

Parliament Street London SWIP 3AG Telephone 071-270 4460

WW 4000 file

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- 7 JAN 1992

CONFIDENTIAL

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22/42

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60.

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16 December 1992

Dea Myd.

ASSESSMENT OF HONG KONG ECONOMIC AND FINANCIAL POSITION

to

I was most grateful to you and Chris Elston (Bank) for coming our meeting on Monday when we considered some of the threats that might develop should there be a serious weakening in confidence in Hong Kong as a result of the present dispute with the Chinese.

We agreed there were a number of issues which could usefully be considered further. You agreed to explore, in conjunction with the HKG, the possible implications if substantial foreign funds were to be pulled out of the HK stock market, and the impact on HK banks and financial institutions were there to be a significant fall in asset prices. You also mentioned that Mr Goodlad was planning a meeting with senior representatives of UK and UK-linked companies with strong HK interests; we agreed that, in the light of that meeting, we could take stock of whether further analysis was possible of major individual corporate exposures to HK and China.

Chris Elston kindly agreed to liaise within the Bank about the potential exposures of individual banks and also the extent to which problems in Hong Kong might place further stress on the position of the Japanese banking system.

I should like to hold a further meeting early in the New Year to take stock of the position and to consider possible further

action.

I am sending copies of this letter to Chris Elston (Bank), and to John Gieve, Peter Sedgwick and Paul McIntyre here.

You

PRC GRAY

Switchboard 071-270 3000

Fax 071-270 5653

Telex 9413704