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6.
Because of Chinese susceptibility about sovereignty, the
ASA does not mention Hong Kong at all. Services between Hong
Kong and China are operated under a second Confidential Memorandum
of Understanding which extends the provisions of the ASA to such
services 'without prejudice to the position of either Government
with regard to the status of Hong Kong'. As a result of the
disadvantageous terms of this Confidential Memorandum of
Understanding CAAC now operate over 50 services a week from
Peking, Shanghai and 6 other Chinese cities whilst CPA have 3
services to Shanghai only. With well over 90% of passengers
to China originating in Hong Kong and enormous potential for
growth the Department of Trade are currently engaged on a very
difficult negotiation to improve CPA's share of this market,
as well as the economic viability of BA's service.
7. The Chinese attitude is also that since Hong Kong is
part of China, they do not acknowledge the UK's right to any
share of Hong Kong/China traffic but will concede a small share
grudgingly. Consistent with this they have questioned the UK's
right to a monopoly of the traffic on the London-Hong Kong
cabotage route, but they have not in practice contested it and
have not questioned our right to determine landing rights for
third countries at Hong Kong.
8. Hong Kong's present airport (Kai Tak) is among the World's
top 20 for international traffic (8 million passengers per annum)
and with rapid growth taking place it is expected to reach
maximum capacity on its present site in Kowloon by about the
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