Aircraft
And Then There Were Two
China's aircraft market, widely seen as providing the fastest sales growth for aerospace manufacturers over the next 20 years, now has only two major players, following the purchase of McDonnell Douglas by Boeing this week. The newly combined firm will now face-off against Airbus Industrie for Chinese market control. China is expected to purchase as many as 1300 planes in the next 20 years. Boeing currently holds about a 70% market share in China, compared to Airbus's 15%, but the European consortium is expected to expand in China following a recent $1.7 billion deal to manufacture planes in Shanghai. Boeing may even find McDonnell Douglas something of a liability, as MD has invested large amounts of money and technology into joint production ventures, even though production and sales goals have never been met. In addition, some analysts expect that with only two players in the market, Chinese officials will send more orders to Airbus, in order to maintain balanced competition in the market.
Asian Wall Street Journal (HK), 12/17/96
Boeing Takes Most of 1996's Aircraft Orders
Last year, American and European aircraft manufacturers delivered 31 passenger planes to China. There are also 40 more orders on the books. Last years deliveries consisted of 21 from Boeing, seven from Airbus and three from McDonnell Douglas Corporation which recently announced that it would be acquired by Boeing. Orders for next year include 30 A-320 aircraft and three A-340 long-haul aircraft from Airbus. The remaining orders are three 747-400 jumbos from Boeing and eight 158 seaters from McDonnell Douglas. China intends to purchase 240 aircraft between now and 2000.
South China Morning Post (Hong Kong), 01/04/97
China to Boost Investment in Civil Aviation
A national conference in China was told on Tuesday that investment in civil aviation infrastructure and renovation projects will be increased, reaching a historic record of $1.42 billion. Minister of the Civil Aviation Administration of China, Chen Guangyi, revealed that the infrastructure projects, mostly airports, will draw $960 million, while technological renovation projects will take in $456 million. He said that these funds did not include another budgeted $157 million loan for purchasing aircraft and $795 million to be raised by local areas to build airports. The priorities will be given to the construction of 21 infrastructure projects, including the expansion project of the Beijing Capital International Airport. Chen mentioned that priority will also be given to five technological renovation projects, which includes the upgrading of a national ticket-order system. Aside from infrastructure, Chen said that 38 planes will be added this year to meet increasing demand for aviation handing capacity. The civil aviation sector has maintained an average annual growth rate of 16.3 percent, according to Chen.
CBNet (PRC), 01/29/97
China's Trade Statistics for 1996
The General Customs Administration recently released figures showing that China's import and export value totaled $289.9 billion in 1996, a 3.2 percent rise over 1995. Exports totaled $151.07 billion and imports totaled $138.83 billion, an increase of 1.5 percent and 5.1 percent respectively over 1995. There was a $12.24 billion trade surplus. Last year, China imported $61.4 billion worth of machinery and electric parts, up 3.6 percent and accounting for 44 percent of total imports. Items of note over $1 billion were textile machinery, metal processing machines, plastic and rubber processing machines, integrated circuits, aircraft, automatic data processing equipment, automobile parts, transport and loading equipment. Japan, the United States, Hong Kong and the EEC remained the country's largest trading partners. Sino-Japanese trade was recorded at $60.1 billion, up 4.5 percent, $30.9 of which was Chinese exports and 29.2 percent, imports. China recorded Sino-U.S. trade at $42.8 billion, an increase of 4.9 percent; 26.7 billion being exports from China and $16.1 billion worth of imports into China from the U.S. (According to the way it is calculated in China).
China Economic News (PRC), 02/03/97
Chinese Perspective of Trade Surplus With the U.S.
As Sino-U.S bilateral trade increased 4.9 percent to 42.84 billion last year, China maintained a $10.54 billion trade surplus with the U.S. A recently released customs report announced that foreign funded enterprises accounted for 50.6 percent of China's exports and 43.9 percent of imports from the United States. Fertilizer and aircraft topped the list of imports from the U.S. last year in terms of worth. In 1996, China spent $1.01 billion, or 61.1 percent more than 1995 to purchase airplanes. Imports of fertilizer were down 14.8 percent from the year earlier period. Other major imports were raw cotton, plastics, paper, cardboard and wheat. (U.S. Department of Commerce statistics differed from China's by announcing a $39.5 billion trade deficit to China's figure of $10.54 billion; the discrepancy comes from differing opinions about exports through third countries such as Hong Kong).
China Daily (PRC), 02/28/97
Trade Slowed Between China and U.S. in 1996
According to Chinese statistics released by Customs, Sino-U.S. trade reached $42.84 billion last year. The U.S. became China's second largest trading partner and China registered a $10.54 billion surplus (USDOC figures report a $39.5 billion surplus). However, growth between the trading partners slowed last year with a mere 4.9 percent increase over 1995. China's imports from the U.S. were valued at $16.15 billion a rise of 0.2 percent. China's major exports to the U.S. were clothing and accessories, shoes and toys. The main imports to China from the U.S. were chemical fertilizer, aircraft, raw cotton, raw plastic materials, measurement devices, testing and analysis and supplementary instrumentation, paper, cardboard and wheat.
China News Agency (PRC), 02/28/97
Airbus Makes Bid for 100 Planes
A source in the aircraft industry said that Airbus Industrie has put in a bid to sell 100 narrow-body aircraft to China, estimated to be worth about $5 billion. Although Airbus has put in a bid, it does not expect to get the entire order, which will probably be split with U.S. rivals Boeing and McDonnell Douglas, said the source. As traffic get more heavy at Chinese airports, many regional Chinese companies are appealing for new aircraft. However, plane purchases are centralized and there are now negotiations "between the center and the periphery." A decision to purchase Airbus is not expected before May when French President Jacques Chirac makes an official visit to China, as an announcement at that time would be a highly symbolic gesture. At the same time, U.S. Vice President Al Gore plans to visit late this month where diplomatic efforts have also been made for multi-billion dollar contracts. Boeing forecasts that China and Hong Kong will purchase 1,900 passenger aircraft over then next 20 years. This many aircraft would have a value of $124 billion.
Reuters (U.K.), 03/04/97
China's Need for Planes Increases
According to an annual report by the China Aviation Industrial Corporation under CAAC, China will need an additional 2,100 planes by the year 2015. As passenger turnover is expected to increase by 11.5 percent a year over the next 20 years about 1,700 large and medium-sized aircraft should be added by then, the report said. Although the annual increase in air transport is lower than 23.4 percent for the last few years, it will be much higher than the world average over the next two decades.
China Economic Information (PRC), 03/15/97
Gore Has Dilemma in Upcoming China Trip
When Al Gore comes to China next week it was conveyed by Chinese officials that he should preside over a $1 billion contract for China to purchase several Boeing 777 aircraft. Although this looked like a great opportunity as well as a way to beat Airbus Industrie, the whole affair has become wrapped up in politics. As the Clinton administration is now caught up in accusations about campaign finance, any deal signed in China will be scrutinized in detail and aides say Gore should stay away from all deal making. "It's the kind of thing that paralyzes the White House these days," said one U.S. official last week. Boeing would very much like to see Gore assist them in the deal but Gore remains noncommittal. Given the present environment in Washington the signs are to steer away from all controversial issues. At this point, no business executives will be traveling with Gore which is a change from Clinton's first term when executives often traveled cabinet members to China and other emerging markets. If the vice president were to get involved in the deal it would be hard to avoid appearing to make mercantilism the center of U.S. policy. Today "commercial diplomacy" is now all but banned in the White House. But most view that government support will still be necessary in the future.
The New York Times (U.S.), 03/19/97
Competition for China's Aircraft Purchases
As soon as Boeing is hoping for renewedbusiness after the Chinese government's long freeze on orders from the United States, Airbus Industrie has begun to drive hard for expanded jetliner sales in China. Last week there was a rare round of high level meetings with Chinese airline and government officials, paving the way for French President Jacques Chirac. According to officials involved, Airbus may be pressing the Chinese to order as many as 75 smaller aircraft and 15-25 if its larger A-340 and A-330 models. Its focus has been on Big Chinese companies with Boeing dominated fleets. The push comes at the same time that Boeing is hoping that China may order as many as 10 Boeing 777 jetliners with a value of $1.5 billion. This order should be confirmed during Al Gore's visit this week. Persistent Sino-U.S. tensions over trade and other issues is believed to have made it difficult for Boeing to land any orders in China recently. Approval for many orders have been held up at various levels of the Chinese government. At the same time Airbus has successfully placed orders. The new planes it has sold are being placed at previously all Boeing carriers like China Southern and Air China.
The Asian Wall Street Journal (U.S.), 03/24/97
China Orders Boeing Jets but Leaves Room for Rival
Market analysts said Tuesday that China made a goodwill gesture to the United States by making orders for several Boeing jets but has also left room for Airbus purchases in a thinly veiled mix of commerce and politics. They said the fact that Boeing sold five 777s to Air China for $685 million showed there was improving Sino-U.S. ties. However, Beijing obviously has held back on purchasing aircraft it really needs in an attempt to squeeze concessions from Washington on several trade issues, they said. A foreign diplomat said "This is a very political game. The Chinese are moving ahead cautiously. The decisions are made by Li Peng himself." Diplomats believe that China will attempt to link new deals to its membership at the WTO. China said it will purchase around 240 more planes by 2000 and most of these have yet to be ordered.
Reuters (U.K.), 03/25/97
Competition Apparent in Aircraft Market
China's decision to purchase five Boeing 777s marks a time when competition for China's aircraft market is becoming more fierce. It was interesting to note that top level people from all the world's three leading aircraft makers were here when the agreement was signed. Ron Woodward, president of Boeing Commercial Airplane Group came for the signing, John F. McDonnell, chairman of McDonnell Douglas was investigating Chinese plants that are participating in the production of MD-90 jetliners and Airbus President and Managing Director Jean Pierson was here the week before the signing to meet with Chinese officials to discuss future cooperation. As China's aircraft market booms, all three manufacturers predict that China will become one of the largest markets in the world sometime within the next twenty years, and hope to be major participants in the process.
China Daily (PRC), 04/01/97
Airbus Hopes to Sell 75 Aircraft to China
Officials in the aircraft industry said that Airbus Industrie hopes to sell about 75 aircraft to China during next month's visit of French President Jacques Chirac. A Western industry official also said that China may take an option on a further 25 airliners. The final number is up to China but there is a chance they will purchase this many because China needs about 150 planes this year to keep up with demand. "They need these planes and they will want to put in their orders rapidly," said an official who declined to be identified. Although China is primarily interested in smaller Airbus planes it could order up to 10 A319s, A320s and A321s, the official said.
Reuters (U.K.), 04/01/97