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CONFIDENTIAL
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NOTE OF A MEETING TO DISCUSS AIR SERVICES BETWEEN CHINA AND HONG KONG AT GOVERNMENT HOUSE ON 21 JULY 1982 AT 9.30
2/8
Present
HE The Governor
Sir Edward Youde)
Mr Bremridge
Mr Jeaffreson Mr Keep
Mr Margolis
Mr Gibson
Financial Secretary)
PUSS (Mr Sproat)
Mr Stevens CAIR 1
Secretary for Economic Services)
Director Civil Aviation)
Political Adviser)
Assistant Secretary,
Economic Services)
The purpose of the meeting was to discuss air services with China and in particular, whether the UK should give notice of termination of the current Confidential Memorandum of Understanding (CMU) governing air services between China and Hong Kong because of the way the Chinese airline CAAC was taking advantage of its terms to establish a virtual monopoly of services between Hong Kong and all points in China.
The Governor said that an increase in services between Hong Kong and China, and a more equitable allocation, were matters of great interest to the Hong Kong Government. However, Hong Kong believed that to give notice of termination of the CMU at this time would be ill-advised, because of the political sensitivity of Hong Kong - Chinese relations at a time when the future of the territory after 1997 was in the news daily. Moreover, Hong Kong were not confident that CAAC would back down and concede a fairer distribution of services between the two nations' airlines if a confrontation did occur. The Governor and the Financial Secretary both emphasised that Hong Kong had consented with great reluctance to the 1979 agreement, which had been accepted only because the overriding political imperative at the time had been to achieve an Air Services Agreement and with it a trunk route for BA. Now that services between Hong Kong and China had been established, the political consequences of a threat to stop them which we would have to be prepared to pursue to the end if CAAC refused to be moved would be graver now than it would have been to insist on a more equitable deal before the agreement was reached in the first place. Hong Kong's ultimate weapon in a dispute which now had implications which went far beyond civil aviation questions would be to prohibit access to CAAC: setting aside the practicability of such a move (which was questionable), this would run counter to the wishes of Hong Kong people, whose principal concern was to secure more and better services to China. The Executive Council had considered the matter and agreed that it would prefer to