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higher than it is and that fluctuations in the balance could cause public anxiety (particularly as the fiscal reserves deposited with the Exchange Fund will be falling towards the agreed HK$25 bn floor as 1997 approaches).
8. The Bank of England see no problem with publication as proposed. The Treasury point out that one could imagine circumstances in which precipitate publication of a large decline in the reserves could exacerbate a difficult situation in the markets, if for example the link with the US dollar were to come under pressure. They conclude however that they would not oppose publication in the form and with the frequency suggested by the Hong Kong authorities.
9. Economic Advisers broadly agree. They note that at the last meeting the Chinese indicated their concern that the dwindling present reserves would affect the Exchange Fund. We could argue that publication now would avoid surprises in 1997 (which they feared), but their reaction would be relevant. There would be some logic in avoiding final decisions. 10. Chinese Views. Hong Kong have already privately told Chinese officials the size of the Exchange Fund. Lu Ping told the Financial Secretary in November that he favoured publication of the Exchange Fund figures. But it is right to consult them again before the Financial Secretary makes any announcement. It will be important to convince them of the financial and monetary mangagement reasons for making this change, rather than to emphasise the public accountability point. (They would be suspicious of any reduction in the executive's powers relative to LegCo, particularly if the implication is that we cannot rely on post-1997 Financial Secretaries to show the probity of their predecessors since 1945). Unless the Chinese immediately welcome the proposal, I think it would be better not to rush
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