TNAG-2754-FCO40-3971-Business-matters-in-Hong-Kong-acquisition-of-Midland-Bank-by-1993 — Page 6

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FROM:

PF Ricketts

Hong Kong Department

4/11

L6 DEL 1993

DATE:

3 November 1993

CC:

Mr Fry, FED

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Mr Tebbitt, ERD

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42

MEETING BETWEEN THE CHANCELLOR AND SIR WILLIAM PURVES:

21 OCTOBER 1993

A

1.

You asked for advice on Sir William Purves' allegation

that the Chinese authorities have discriminated against the

Hong Kong and Shanghai Banking Corporation (HSBC) as a result

of Sir William's membership of ExCo and the Bank's move to

London. We have checked discreetly with Hong Kong.

2.

This allegation has come as something of a surprise.

Neither we nor Hong Kong have heard anything to suggest that

HSBC's problems with China, if any, have arisen from Sir William's membership of ExCo. Indeed, the Chinese are more likely to have given Sir William some credit for not giving

full support to the Governor's constitutional package (he has

not hidden his doubts about the Governor's approach).

3.

If there is discrimination, it is much more likely to be

as a result of HSBC's decision to move its mind and management

to London as part of the takeover of Midland. This was a commercial decision taken in the full knowledge that it could

damage HSBC's standing in China. In fact, the Chinese reaction has been much more mild than we (and HSBC) dared to

hope at the time.

hum3.11/MIN/NJH