SECRET
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Mr. R.E. Radford
You asked in your loose minute of 12/11 for the comments of Communications Department on the appropriate sections (III and XIV) of the Hong Kong memorandum about possible difficulties with the Chinese Communist regime. I will, if I may, deal with the points raised in the memorandum seriatim.
III(a).
This problem is under urgent consideration with the Foreign Office and turns largely on the two questions of recognition and of how far the Americans are going to press us to apply the agreed satellite policy in the case of Communist China. We have so far taken the line that since trade with China is the lifeblood of Hong Kong's commercial existence we must press for the re-opening of communications as early as possible and for our special position in Hong Kong to be re-emphasised with the Americans. If however it is finally decided that full satellite policy must be adopted towards the Chinese Communist regime, it may still be possible to open up some limited reciprocal commu- nications since that policy agrees to the operation of satellite air services in reciprocity for basic services into satellite territory which are deemed vital. The present services between London and Prague and between London and Warsaw are examples of this. We would hope to insist on reciprocity for any services which the Communists wished to operate.
III(b).
The Chinese Embassy have now asked for all C.N.A.C. and C.A.T.C. assets in Hong Kong to be frozen and we have asked for the Governor's views on the legality and practicability of such a step in our telegram No. 1594. It appears from the memorandum that the Governor does not see any difficulty in freezing these assets. The reduction of C.N.A.C.'s rights and facilities mentioned in this paragraph has we hope been largely complete d and it is our understanding that so far as buildings and workshop areas, etc. are concerned, C.N.A.C. are on the same footing as other air operating companies in Hong Kong, though it may be as well to confirm this as a suitable opportunity arises in the continuance of the present telegraphic correspondence.
III(c).
We would agree with the conclusions of this sub-paragraph.
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/III(a).
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