FO371-24687 — Page 63

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TELE RAM TO THE COVERNOR, HONG KONG.

SECRET.

1.

Your telegram No. 77.

17

(No.322).

Following for Rogers from Treasury •

Our 287 para.2 means that under the new arrangements

American banks will quote and doal in official sterling only.

There will be no recognised market for free sterling in to York

and no more free sterling will be credited to Americen account.

2. Paragraph 3 means that as botween the U.S.A.(and

dependencies) and the Sterling Area all transactions will be in

official sterling convertible at official rates or in dollars

obtained from the London Control.

3. Your 77 paragraph 1 apcunos that Chinese holdings of

sterling will be dealt with on the same terms as official sterling

and that Chinese trade conducted on a sterling basis will enjoy

the same advantages as trade between the Sterling Arca and the

U.S.A. This is not do.

4. Sterling received by China and Hongkong from trade and

services rendered to the Empire will be unsaleable to Anorica

direct. It will be free sterling which will not be able to get

on to the New York market but which may be exchangeable in

Shanghai for U.S. dollara provided from official or private

Chinese holdings.

5. The rice in New York quotation for free otorlin io due to

U.S. banks and merchants attempting to cover outstanding

commitments in free sterling before the market dries up. Your

trading position with U.3.A. will depend to some extent upon

whether you continue to link the Chinese dollar to sterling or

try to control it through the U.S. dollar, using your own dollar

resources for this purpose.

6. Please reconsider urgently your conclusions and

expectations or ask for still further explanations if necessary.

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