TNAG-2515-FCO40-3669-Future-of-Hong-Kong-International-Rights-and-Obligations-Sub-1992 — Page 6

RESTRICTED

135124

MDLIAN 9901

RESTRICTED

FM UKDEL IMF/IBRD WASHINGTON

TO PRIORITY FCO

TELNO 405

OF 0423OOZ DECEMBER 1992

AND TO PRIORITY ODA, HM TREASURY, BANK OF ENGLAND,

AND TO PRIORITY HONG KONG, UKREP JLG HONG KONG, PEKING

FCO FOR TEBBIT

(ERD) ODA FOR POWER (IFID), HM TREASURY FOR PICKERING (AND FOR PERETZ), BANK OF ENGLAND FOR BULLOCH

RE OUR TELNO 369

WORLD BANK BORROWING IN HONG KONG

1.

WORLD BANK MANAGEMENT HAVE REJECTED OUR REQUEST THAT

IBRD SHOULD BE PREPARED TO ISSUE BONDS IN HONG KONG WITH A

MATURITY AFTER 1997.

2.

SUCH

STERN (MANAGING DIRECTOR) CONTINUES TO ARGUE THAT

ISSUES WOULD CONFLICT WITH THE BANK'S RULE THAT IT

DOES NOT BORROW FROM A MEMBER WHICH IS BORROWING FROM THE

BANK. STERN ACKNOWLEDGES THAT HONG KONG MAY BE VIEWED

INDEPENDENTLY OF CHINA IN RESPECT OF MONETARY AND EXCHANGE

ARRANGEMENTS BUT ARGUES THAT WHAT MATTERS IS THAT THE BANK

IS REQUIRED TO OBTAIN THE APPROVAL OF THE MEMBER LN WHOSE MARKETS IT IS BORROWING (I.E. CHINA AFTER 1997).

3.

OUR APPROACH TO BANK MANAGEMENT WAS FULLY SUPPORTED

BY A NOTE FROM WANG (EXECUTIVE DIRECTOR FOR CHINA).

COPY OF STERN'S NOTE BY FAX TO FCO (TEBBIT), ODA (POWER) AND HONG KONG (CHAN). WE HAVE GIVEN A COPY TO WANG.

STANTON

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