CO537-4841 — Page 39

September 1948.

There were two Chinese air operators both

One called CNAC, which was a company

based at Shanghai.

incorporated under Chinese Law and the other called CATC, which

was merely a department of the Chinese Government.

In the

case of CNAC 80% of shores owned by Chinese Government, 20%

Pan-American Airways.

January, 1949. The aircraft of both these Chinese air operators

were allowed to come to Hongkong. CNAC in particular occupied

much valuable accommodation at the small airfield there.

June 1949. R.A.F. at Hongkong were reinforced. CNAC wers

asked to move out to make room for R.A.. (incidentally Hongkong

Government did not want a lot of Communist Chinese employees

there). Hongkong's request to get CNAC to move out was

bitterly resisted particularly by one, Alison, an American

operating manager of CNAC. Hongkong Government requisitioned

half of the accommodation occupied by CNAC who then found

referred to additional accommodation in Bailey's Yard. This was reported

by Hongkong in Telegram No. 79. At the same time hints

were made by Hongkong authorities to the Americena of the risks

of leaving the aircraft in Hongkong having regard to the

fact that the Communists might some time or other become the

recognized Government of China. At that time Americans

replied that they were only interested in operating aircraft

in China. They hoped to operate them under a Communist régime.

They were "Vicars of Bray." Nevertheless it is clear that

Chenault saw the writing on the wall in connection with

another aircraft entity called CAT because they moved clean

out of China more than six months ago.

November, 1949. Two Chinese indivuals who were the Managing

Director of CNAC and CATC defeated to the Communists and

went to Peking. This caused a split amongst the employees

of the two air operators in Hongkong, majority siding with

People's Government but a part with the Nationalists. There

was no approach to the Hongkong Government but the Nationalist

part went to solicitors in Hongkong and briefed counsel. At

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