TNAG-2471-FCO40-3595-Confidential-talks-between-the-UK-and-China-regarding-financ-1992 — Page 114

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monetary and fiscal management implications of the Land

Fund;

А

The chirere

/

have now

19 Feb in

proposed

Pelcing.

C

B

(d) we should put to Hong Kong the Bank of England's

and Treasury's views on their proposed new liquidity adjustment facility;

(e) and we should agree the other elements in their

approach to the meeting, while reminding them that we are not committed to allowing the Bank of China to issue Hong

Kong bank-notes before 1997.

I submit a draft telegram.

Background and Argument

3. The first regular meeting in the resumed Hong

Kong/Peking confidential financial dialogue took place smoothly last November (Mr Cox's submission of 22 November 1991). The Financial Secretary also had good discussions in Peking in November. Hong Kong propose to maintain the momentum by arranging another meeting during February; we

wait to hear whether the Chinese can manage the dates

proposed.

4.

Hong Kong wish to raise five items at this next meeting.

We have consulted the Bank of England and Treasury, who have

no comment on three of these items: new bank-note designs;

an update on the Hong Kong monetary situation; and possible opening of technical discussions on issue of bank-notes by the Bank of China. I think we can therefore give the green light for discussion on these points, though on the last point we should remind Hong Kong of the line Ministers approved last November: our approach is sympathetic and

technical discussions of the costs and obligations are fine,

but we have given no commitment to allow note-issue before

NC2ABD/2

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