CONFIDENTIAL
- 2.
Inevitably, also, there are some instances where one airline or
the other thinks that in dealing with some other country the
bargaining leverage in a particular situation ought to be used
to its advatage.
5
From time to time particular issues arise where it is difficult
to strike a balance between these various interests. There is
however considerable goodwill on both sides and there are no
differences between us at present.
6 By far the most important topic in this field, at present,
is the Air Services Agreement with the People's Republic of China
which provides for a route through Hong hong to Teking (see Brief
for the visit to Peking). There has been very close co-operation
between the colony and Whitehall both during the negotiations that
led up to the initialling of the Agreement and during the sub-
sequent difficulties over its signature. Our resistance to the
Chinese pressure to put restrictions on the Taiwanese airline
(China Air Lines) stems entirely from our wish to avoid putling
at risk Cathay Pacific's eamings on the lucrative route between
Hong Kong and Taipei. We have judged it essential to protect this
Hong Kong interest, even if this leads to an indefinite delay in
the establishment of a British Airways service to Peking.
7
The airport at Kai Tak is a source of justifiable local pride.
It is extremely busy and efficiently run and shows a comfortable
profit. In 1956 the UK made an interest-free loan of £3 million
towards an extension of the runway. Since then further improve-
mentsboth to the airport and to the air navigation system have
been financed by the Government of Hong Kong. From time to time,
CONFIDENTIAL