TNAG-1176-FCO40-1478-Air-services-between-the-UK--China-and-Hong-Kong-1982 — Page 25

and could call our bluff, in which case we could be

left with no memorandum at all and in a position where Chinese 'face' over Hong Kong's status was at stake. My conclusion is therefore that any threat of withdrawal

from the 1979 confidential Memorandum of Understanding involves a risk which would not be justified in the

circumstances.

3.

There does, however, in any case seem to be

scope for successful negotiation on the lines of the

second option you mention. The demand for air movements

between Hong Kong and China is expanding. I see no reason

why we should not argue strongly that it should be filled

on a balanced basis between British and Chinese carriers.

In taking this line we should make it clear to the

Chinese that we would not agree to any increase in flights

by Chinese carriers if there was no increase for

British carriers. There is, I believe, some reason to

think that this approach might work: the Chinese agreement

to an early meeting represents a sudden shift in their

ground which may indicate that they are looking for

something from us. If this proves to be the case, it

should be possible to exploit the situation to the

benefit of our airlines.

Foreign and Commonwealth Office

3 December 1982

CONFIDENTIAL

لا

(FRANCIS PYM)