CO537-4847 — Page 36

SECRET

III.

Likely Communist action

and policies.

a) Communists may wish to

continue to operate all the air services into and out of Hong Kong which Chinese Nationalist civil air lines have been allowed to operate. At same time they may refuse to allow Bri ti sh air lines to operate into China.

(b) The Communists are

likely to make a deter- mined bid for all the assets, movable and immovable of C.N.A.C. This may include con- siderable assets of C.N.A.C. in Hong Kong (which is owned 80% by the Ministry of Communications of the Chinese Govt.).

CIVIL AVIATION.

Action by Hong Kong.

Hong Kong should insist upon recipro- city from the start. If the new Communist regime declares that it accepts the inter- national obligations of the previous KMT Govt., they will fall heirs to the Sino- British Air Agreement. If however they denounce all previous agreements it will be necessary to make permission for Chinese airlines to operate into Hong Kong contingent upon reciprocal agreement.. Ultimately an overall air agreement between H.M.G. and the Communist regime may be necessary.

It may however be felt that for a short period Communist air services should be permitted to operate on a skeleton basis to Hong Kong from China in order to provide airmail facilities, and possibly bag facilities for diplomatic mail, evon though no reciprocity is accorded to British air lines. This should only be agreed to under pressure, and will be do- pondent upon whether II..G. and the British Imbassy in China fool that it is necessary in order to provide some contact with China. The Communists should be informed clearly that permission to operate is provisional and liable to cancellation at any moment 'so long as there is no reciprocity.

C.N.A.C. with its 'planes, personnel, and installations in the Colony may change sides overnight and wish to continue opera- ting services. Should this happen the Director of Civil Aviation should at once make it clear that no services can be operated without reciprocal facilities being first accorded to British air lines.

The question of C.N.A.C. material assets at Kai Tak has already been con- sidered and steps are underway to reduce C.N.A.C.'s rights and facilities in order to put C.N.A.C. on the same basis as other foreign air lines. The danger of giving C.N.A.C. extensive rights and hold- ings at Kai Tak airfield is evident, and the Communists would wish to take over wholesale any privileges and installations which C.N.A.C. have been allowed to enjoy. They might thus get into an initial favourable position right in the midst of Kai Tak from which it would be embarrass- ing to dislodge them.

The position regarding other Chine se air lines should also be borne in mind. Their assets and installations, if any, should be frozen or immobilised until the general situation regarding civil avia- tion with Communist China has been clari- fied.

(c) The Communists.