SECRET
FM HONG KONG
TO IMMEDIATE FCO
TELNO 534
OF 240903Z FEBRUARY 92
SECRET
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INFO IMMEDIATE PEKING, UKREP JLG HONG KONG
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105133 MDHIAN 4208
FCO: PERSONAL FOR RICKETTS, HKD
PEKING: PERSONAL FOR AMBASSADOR UKREP JLG PERSONAL FOR GALSWORTHY
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YRTELNO 272: CONFIDENTIAL FINANCIAL DIALOGUE: DISCLOSURE OF INFORMATION ON EXCHANGE FUND
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1. THERE ARE NO OVERRIDING REASONS WHY THE DISCLOSURE HAS TO BE MADE IN THE BUDGET SPEECH, ALTHOUGH IT REMAINS OUR WISH TO DO IT SOONER RATHER THAN LATER. THERE IS ON-GOING PUBLIC PRESSURE FOR GREATER TRANSPARENCY OF THE FUND AND THERE IS A DISTINCT POSSIBILITY THAT THE NEWLY CONSTITUTED LEGCO, IN PARTICULAR THE LIBERALS, MAY SOON FOCUS ON THIS ISSUE. MOREOVER, WE ARE ALSO MINDFUL OF THE RISK THAT HKG'S DECISION ON DISCLOSURE, ALREADY KNOWN TO THE EXCHANGE FUND ADVISORY COMMITTEE AND THE CHINESE, MAY LEAK AND PROMPT CERTAIN POLITICAL OPPORTUNISTS TO PUBLICLY REVIVE THE DEMAND FOR DISCLOSURE AND CLAIM THE CREDIT FOR FORCING HKG 'CONCESSION'. THE LONGER WE DELAY THE ANNOUNCEMENT THE
GREATER IS THE RISK.
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2. PRESENTATIONALLY IT IS HIGHLY UNDESIRABLE FOR HKG'S DECISION TO DISCLOSE TO BE BE SEEN AS A PASSIVE MOVE YIELDING TO RISING PUBLIC PRESSURE. WE SHOULD INSTEAD PROJECT THIS AS A HKG INITIATIVE TO ASSURE THE PUBLIC AND THE INTERNATIONAL FINANCIAL COMMUNITY OF THE TRUE FINANCIAL STRENGTH OF HONG KONG AND OUR CONFIDENCE IN EFFECTIVE MONETARY MANAGEMENT WITHOUT THE VEIL OF SECRECY OVER THE SIZE OF THE FUND.
3. THAT SAID, WE AGREE ENTIRELY ON THE NEED TO AVOID SOURING THE ATMOSPHERE OF THE DIALOGUE, AND ARE CONTENT TO DEFER THE ANNOUNCEMENT AS REQUESTED BY THE CHINESE. THEY NEED HOWEVER TO BE URGED TO COMPLETE THEIR 'PREPARATION' WITHIN TWO MONTHS AND IN THE MEANTIME KEEP THE MATTER STRICTLY CONFIDENTIAL.
4. SUBJECT TO YOUR AND PEKING'S VIEWS, WE PROPOSE TO TELL THE CHINESE THROUGH CHEN KE-QIANG (DIRECTOR, ECONOMIC DEPARTMENT,
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