CONFIDENTIAL
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3
In our experience the Chinese are tenacious and
obstinate but in the last resort realistic negotiators.
They never give anything away until they are quite sure
we mean to insist on it, but in the end they will settle
for what they judge to be the best terms available.
I am
sure it pays to be very firm with them.
4 The present negotiations are supposed to be a wide-
ranging review of the provisional air services arrangements
which were negotiated in 1979, but the most immediate
issue will be the services to be operated after 31 March
next year, when the present interim arrangements,
negotiated last March and currently being extended, for
the winter season, run out. Traffic between Hong Kong
and mainland China has been growing rapidly and we shall
want to provide adequate capacity, to be shared on a
reasonable basis by the airlines of the UK and China, for
services on the two major routes from Hong Kong to Shanghai
and to Peking.
5 As matters stand now, the Chinese have refused to
accept our designation of Cathay Pacific to operate
services to Shanghai because the 1979 Memorandum of
Understanding says that such services are to be operated
by an airline "which has its base in Hong Kong" and
"which does not operate services between London and Hong
Kong". At the time Cathey were not disqualified by this
clause, but they are now. Nevertheless, they have been
PROACTIVATTAVAL „O LAMBAR
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