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FM HONG KONG
TO IMMEDIATE FCO
TELNO 124
OF 151025Z JANUARY 92
INFO IMMEDIATE PEKING, UKREP JLG HONG KONG
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CONFIDENTIAL DIALOGUE ON FINANCIAL MATTERS:
THE CHINESE
NEXT MEETING WITH
FOLLOWING THE MEETING HELD IN NOVEMBER, WE HAVE IDENTIFIED A NUMBER OF ISSUES WHICH WE WOULD LIKE TO RAISE WITH THE CHINESE SOON.
2.
THESE ARE:
(A) NEW DESIGN FOR BANK NOTES - HSBC HAS PRODUCED THE NEW
DESIGNS OF ITS BANK NOTES. NEW DESIGNS OF STANDARD CHARTERED'S
BANK NOTES WILL ALSO BE AVAILABLE BY THE END OF THIS MONTH. WE WILL THEN BE READY TO CONSULT THE CHINESE AS AGREED AT THE LAST
MEETING. WE WOULD ALSO DISCUSS FURTHER THE IDEA OF REPLACING THE
10 DOLLAR NOTE BY A COIN.
(B) QUARTERLY UPDATE ON THE MONETARY SITUATION IN HONG KONG
WE PROMISED AT THE LAST MEETING TO PROVIDE THE CHINESE WITH A BRIEF PAPER ON A QUARTERLY BASIS (PARA 15 OF MY TELNO 3659). WE
HAVE IN MIND GIVING THEM THE QUARTERLY PAPER PREPARED FOR THE EXCHANGE FUND ADVISORY COMMITTEE (EFAC) ON MONETARY OPERATIONS UNDERTAKEN BY THE OFFICE OF THE EXCHANGE FUND. THE PAPER, WHICH IS BASICALLY A FACTUAL SUMMARY OF MARKET DEVELOPMENTS IN THE PREVIOUS QUARTER, CAN EASILY BE ADAPTED FOR HANDING OVER TO THE CHINESE.
(C) LIQUIDITY ADJUSTMENT FACILITY WE WILL BE CONSULTING THE EFAC ON 24 JANUARY ON A PROPOSAL TO INTRODUCE A LIQUIDITY ADJUSTMENT FACILITY (LAF) IN HONG KONG. THE PROPOSAL IS DESIGNED TO CLARIFY THE ''LENDER OF THE LAST RESORT'' POLICY AND FORMALISE
THE EXISTING ARRANGEMENTS FOR THE PROVISION OF LATE LIQUIDITY ASSISTANCE TO BANKS BY THE EXCHANGE FUND. LAF, IF IMPLEMENTED, WOULD ALSO GIVE GREATER FLEXIBILITY TO MONETARY OPERATIONS, ALLOWING US TO INFLUENCE THE PRICE OF INTERBANK LIQUIDITY MORE DIRECTLY. SUBJECT TO THE ENDORSEMENT OF THE EFAC, WE WILL CONSULT THE HONG KONG ASSOCIATION OF BANKS SHORTLY. IT WOULD SEEM PRUDENT
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