CONFIDENTIAL
THAT OPTION B AND OPTION C ARE PREFERABLE FROM THE CHINESE NT OF VIEW TO OPTION A. BUT THE ONLY REASON FOR GOING FOR OPTION C AT THIS STAGE WOULD BE AN EXPECTATION THAT WE WOULD BE MORE LIKELY TO GAIN THE POINT IN PARA 1 ABOVE IF WE WERE TO CONCLUDE A DEAL WHICH WAS CONFINED TO THE TRUNK ROUTE AND WHICH LEFT THE REGIONAL ROUTES TO BE DEALT WITH AT SOME SUBSEQUENT DATE.
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AS TO THIS, ALL PREVIOUS EXPERIENCE IN THESE MATTERS DEMONST- RATES THA ONCE THE CHINESE HAVE TAKEN A FIRM POSITION THEY ARE VIRTUALLY IMPOSSIBLE TO MOVE. THE IMPLIED THREAT TO THE CANTON SERVICE (PARA 3 OF YOUR TELNO.390) IS AN EMPTY ONE, SINCE THE CHINESE KNOW THAT WE ARE NO LESS INTERESTED IN TITS CONTINUATION THAN THEY ARE AND THAT THEY COULD ALWAYS FALL BACK ON A CHARTER OPERATION IF THEY WISHED. THERE IS THEREFORE NO REALISTIC PROSPECT THAT IF WE CANNOT SHIFT THE CHINESE FROM THEIR POSITION NOW WE SHALL BE ABLE TO DO SO IN THE FORESEEABLE FUTURE. THIS WOULD LEAVE HONG KONG IN THE UNCOMFORTABLE SITUATION THAT APART FROM THE CANTON SERVICE AND ANY CHARTERS OR PSEUDO-CHARTERS THAT CAAC MAY CHOSE TO OPERATE, THERE WOULD BE NO REPEAT NO- REGULAR SERVICES BETWEEN HONG KONG AND POINTS IN THE PRC. THE CONSEQUENCES OF THIS FOR HONG KONG WERE INDICATED IN PARA 3 OF MY TELNO.553 AND ELSEWHERE. THE FILIPIFOS, AND NOW SINGAPORE, WILL WORK HARD TO BY-PASS HONG KONG. PAL ARE ALREADY PLANNING CHEAP FLIGHTS TO MANILA FROM PEKING: WHILE EVEN MEMBERS OF THIS TEAM FIND IT MORE CONVENIENT TO TRAVEL VIA TOKYO THAN VIA CANTON. THE WIDER INTERESTS OF HONG KONG IN PROMOTING COMMERCIAL AND TRANS-- PORT LINKS WITH CHINA THEREFORE NEED TO BE GIVEN FULL WEIGHT.
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6. MOREOVER, IF WE WERE TO REJECT THE DEAL NOW AVAILABLE WE ARE LIABLE TO FIND THAT OUR BARGAINING POSITION IS WORSE. THE CHINESE MAY THEN WELL REFUSE TO ACCEPT THE PRINCIPLE OF A HONG KONG BASED OPERATOR ENTERING THE ROUTE BETWEEN HONG KONG AND PEKING, WHICH LU WAS SO RELUCTANT TO CONCEDE IN THE FIRST PLACE.
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WE WONDER WHETHER IN THE LIGHT OF THIS YOU WOULD CARE TO RECONSIDER THE INSTRUCTIONS IN PARA 3 OF YOUR TELNO.399 ?
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18. THE
CONFIDENTT AL