2
The Chinese leadership wished therefore, inter alia, to ensure that the aviation annexe of the J.D. was implemented in so far as Cathay Pacific was concerned in the interests of the stability of Hong Kong; and by implication were willing to curb ambitions within CAAC for PRC national airlines and/or Hong Kong compatriots to set up rival Hong Kong operations with SAR traffic rights in their hands. They undertook to show their good faith in this by authorising PRC investment via CITIC, CNAC, CTS, etc. in Swire Group companies in Hong Kong; and by encouraging Swire joint ventures, in particular with CITIC.
4.
(a)
(b)
(c)
(d)
From the Swire side, it was broadly accepted that:-
We would continue to demonstrate confidence and invest in Hong Kong, so long as we felt that the Joint Declaration was being implemented;
we had no plans to move the domicile of Swire Pacific or CPA away from Hong Kong;
we would continue to develop CPA as Hong Kong's flag carrier, and would not 'get out from under', e.g. by merging with another overseas airline such as (a possibility at that time) British Caledonian;
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we would welcome PRC investment in the equity of our companies, but this would have to be at full market rate.
We also assured the PRC leadership that CPA's preference for Rolls-Royce engines was based solely on merit and price, and that the airline's past and potential expenditure of some £1 bn. plus on R-R engines was not some kind of U.K. British "rip-off" as they tended to believe.
5.
The Chinese have kept their word, the key examples being:-
(a) Joint venture agreement with CITIC approved.
(b) Their progressively increased shareholding in CPA, to a total of
22.5% spread between CITIC, CNAC and CTS, and with a current total market value of some £500 mn.
(c)
(a)
The arrangements over Dragonair whereby Swire Group have 51% control, plus an agreement to manage the airline for 15 years.
Investment in Modern Terminals Ltd., Hongkong Air Cargo Terminal Ltd., and joint ventures with Hongkong Aircraft Engineering Co. Ltd. and many other Swire Group companies.
The PRC leadership consider (c) in particular to have been an extraordinary gesture of goodwill, again in the interests of the 'prosperity and stability' of Hong Kong, in that they agreed that a British-controlled airline (i.e. Dragonair) could operate scheduled services from H.K. into no less than 12 Chinese cities on routes which au fond they consider to be cabotage.
6.
Peking are therefore highly critical that, in the present Hong Kong row, Swires have given firm indications of public support for the Governor's stance and proposals.