TNAG-1176-FCO40-1478-Air-services-between-the-UK--China-and-Hong-Kong-1982 — Page 42

CONFIDENTIAL

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3

In our experience the Chinese are tenacious and

obstinate but in the last resort realistic negotiators.

They never give anything away until they are quite sure

we mean to insist on it, but in the end they will settle

for what they judge to be the best terms available.

I am

sure it pays to be very firm with them.

4 The present negotiations are supposed to be a wide-

ranging review of the provisional air services arrangements

which were negotiated in 1979, but the most immediate

issue will be the services to be operated after 31 March

next year, when the present interim arrangements,

negotiated last March and currently being extended, for

the winter season, run out. Traffic between Hong Kong

and mainland China has been growing rapidly and we shall

want to provide adequate capacity, to be shared on a

reasonable basis by the airlines of the UK and China, for

services on the two major routes from Hong Kong to Shanghai

and to Peking.

5 As matters stand now, the Chinese have refused to

accept our designation of Cathay Pacific to operate

services to Shanghai because the 1979 Memorandum of

Understanding says that such services are to be operated

by an airline "which has its base in Hong Kong" and

"which does not operate services between London and Hong

Kong". At the time Cathey were not disqualified by this

clause, but they are now. Nevertheless, they have been

PROACTIVATTAVAL „O LAMBAR

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