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Britain as Hong Kong should avoid any action which might have consequences detrimental to the pound over the next few months or, indeed, couple of years, In the present climate small actions were having disproportionate effects and if Hong Kong were to go : ahead with the diversification of their reserves, this could have
serious repercussions for sterling. A voluntary moratorium on
diversification by the Hong Kong Government was required. Sir Denys Roberts said that Elthough the Hong Kong Government had not been putting their reserves in London since the end of the Sterling Guarantee arrangements in 1974 they had not been withdrawing money from London either. As Hong Kong's reserves had increased this obviously meant that the proportion of their total reserves in London was decreasing. Lord Goronwy-Roberts said that the Hong Kong "overnment should also be looking for ways not just of maintaining the actual value of sterling reserves but of maintaining the proportion of reserves by value
at the same level.
10. Lord Goronwy-Roberts concluded by emphasising that, if the Hong Kong Government were seen to be taking action in the fields dealt with in the Planning Paper and were seen to be taking á positive approach towards sterling, he thought that there would be quite a different attitude amongst Hong Kong's critics in the United Kingdom. The programmes outlined in the Planning Paper, which he thought should take the form of announceable targets, represented the minimum likely to be acceptable. It was only on that basis that he could continue with his present advice to the Secretary of State.
11. In conclusion, Lord Goronwy-Roberts spoke with war.
appreciation of the Governor's achievements and asked Sir Denys to convey his best regards to him.
SECRET
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