TNAG-2471-FCO40-3595-Confidential-talks-between-the-UK-and-China-regarding-financ-1992 — Page 166

mg1.ph/McInt92/10.1.14

HM Treasury

RESTRICTED

Nigel Cox Esq

Foreign & Commonwealth Office

Hong Kong Department Whitehall

SW1A 2AF

MU!

Parliament Street

London SWIP 3AG Telephone 071-270 4699

in Stone Hurs 101 for action pie

in

1311

R&R

pls

10 January 1992

mi

Dear Nigel,

HONG KONG GOVERNMENT BOND ISSUES

Thank you for your letter of 3 January enclosing a copy of the Information Memorandum issued by the Hong Kong authorities concerning their bond programme.

I share your interpretation of the Information Memorandum, in that it does not appear to involve any potential liability on HMG (though I have not seen the Loans Ordinance to which you also refer). However, I would prefer to rely on legal advice about this. In particular, I should want to be quite clear about the meaning of paragraph 6 in the Memorandum which states that:

"The Bonds and all the interest and charges thereon will be charged on the general revenues and assets of Hong Kong ..."

This appears to be the key statement setting out the basis on which interest and capital repayments will be made.

I hope you will be able to arrange for your legal advisers to give us their view.

In your letter, you say that the bonds being issued have only a 2- 3 year maturity and therefore have no post 1997 significance or any relation to the net borrowing limit of HK$5 billion outstanding in 1997. However, presumably if the borrowing programme continued into 1994, the 1997 position would begin to be affected.

Your. དི །

RESTRICTED

J P MCINTYRE

Switchboard 071-270 3000

Fax 071-270 5653

Telex 9413704