SECRET:
LANDSMAN
COMMERCIAL IN CONFIDENCE
B
(iv) Briefing the Chinese
6.
If we were to repeat the successful 1990 operation, we would need a series of linked presentations to the Chinese:
(v)
7.
Mr Purves himself would present the proposals to Chinese central bankers, whom he thinks would be sympathetic, and to Lu Ping.
in parallel, Hong Kong's Financial Secretary would write to Lu Ping, giving reassurances eg HSBC to remain in Hong Kong, to continue its present financial role, etc; and perhaps indicating HKG agreement that any alternative for hsbc would be bad for Hong Kong (though the Bank of England may see difficulties with this).
the Ambassador in Peking would make clear that HMG were fully involved and considered that the proposals were in Hong Kong's best interests.
Consequences of the Proposal being blocked
A study prepared by Treasury, Bank of England and FCO officials brings out that a great deal would depend on how a decision not to proceed was presented. If the markets learned that the UK had turned it down, there could be very significant political and eventually financial implications for the UK.
(vi)
8.
Recent Developments
On 27 February the Governor told Mr Purves that pending further Bank of England consideration and discussion of the proposal, we strongly urged him not to go public on it and not to open discussions with the Chinese about it on 2 March as he had proposed.
9.
Mr Purves nonetheless decided that he must make an oral indicative bid for Quarterdeck on 2 March, and decided to maintain his appointment with Lu Ping and the People's Bank of China in Peking that day. He took action accordingly, telling the Chinese that a bid was under consideration but no decision had yet been taken. The Chinese were grateful for the briefing, gave no immediate negative reaction but commented, as on past occasions, that the HSBC was important to Hong Kong and that he should not do anything which would disturb confidence in Hong Kong. Lu Ping said that whatever HSBC did about a bid was a commercial matter. Mr Purves confirmed that Bank of England approval would be necessary.
10.
If the bid goes ahead, HSBC will first give the Chinese a fuller briefing.
11. Mr Purves expected Sailmaker to make an indicative bid for Quarterdeck on 2 March: but the scene is fast moving.
FIQABP
SECRET: LANDSMAN COMMERCIAL IN CONFIDENCE
SECRET: LANDSMAN
COMMERCIAL IN CONFIDENCE
12.
HSBC are having further discussions with the Bank of England today, to be continued by Mr Purves tomorrow.
13. The HSBC Board are due to meet on 10 March to consider whether to make a formal offer on 13 March (when the Quarterdeck Board meets) or a few days later. He has said that they would do this only if both the Bank of England had consented and the Galley) Board had given its approval. The Governor does not expect the 10 March discussion to leak in Hong Kong (unless the Bank of England have already decided to block the bid) but warns that a Board member may divulge it to the Chinese, who could in turn leak it. A leak from one of the three banks' advisers is also possible.
FIQABP
SECRET:
LANDSMAN
COMMERCIAL IN CONFIDENCE
No comments yet.
Private notes are available after approval.