TNAG-0369-FCO40-415-Visit-of-Edward-Heath--UK-Prime-Minister--to-Hong-Kong--12-1-1974 — Page 129

CONFIDENTIAL

2

-

Inevitably, also, there are some instances where one airline or

the other thinks that in dealing with some other country the

bargaining leverage in a particular situation ought to be used

to its advantage.

5 From time to time particular issues arise where it is difficult

to strike a balance between these various interests. There is

however considerable goodwill on both sides and there are no

differences between us at present.

6 By far the most important topic in this field, at present,

is the Air Services Agreement with the People's Republic of China

which provides for a route through Hong kong to Peking (see Brief

for the visit to Peking). There has been very close co-operation

between the colony and Whitehall both during the negotiations that

led up to the initialling of the Agreement and during the sub-

sequent difficulties over its signature. Our resistance to the

Chinese pressure to put restrictions on the Taiwanese airline

(China Air Lines) stems entirely from our wish to avoid putting

at risk Cathay Pacific's eamings on the lucrative route between

Hong Kong and Taipei. We have judged it essential to protect this

Hong Kong interest, even if this leads to an indefinite delay in

the establishment of a British Airways service to reking.

7

The airport at Kai Tak is a source of justifiable local pride.

It is extremely busy and efficiently run and shows a comfortable

profit. In 1956 the UK made an interest-free loan of £3 million

towards an extension of the runway. Since then further improve-

mentsboth to the airport and to the air navigation system have

been financed by the Government of Hong Kong. From time to time,

CONFIDENTIAL