Longer term, if China’s ban were to persist, it would be very damaging to Boeing and advantageous to Airbus (once it clears its own backlog of orders).
China is the world’s key aviation growth market, accounting for about 20 per cent of the world’s expected demand over the next 20 years. Boeing has forecast China will need about 8500 new planes in that period.
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Before its safety record was blemished, the 737 Max fleet grounded and its production lines temporarily shut down, China accounted for almost 40 per cent of Boeing’s 737 deliveries.
Boeing has/had existing orders from China’s three big domestic carriers – Air China, China Eastern and China Southern – for 179 planes and said last year it expected China would generate about 20 per cent of its sales in the long term.
It’s a key market for Boeing but one in which, due to its self-inflicted problems, it has been gifting market share to Airbus.
While Donald Trump accused China on Tuesday of reneging on the “phase one” trade deal the countries signed in early 2020 to end the first of his trade wars – a deal which saw China commit to buying $US200 billion more US commodities and goods, including aircraft, than it had in pre-tariff 2017 – the ban on Boeing is retaliation for Trump’s 145 per cent tariff on China’s exports.
It’s a move not without risk for China, both near term and in the future.
It has effectively made Airbus a near-monopoly supplier while the ban lasts, but it, too, also has a backlog, totalling more than 8500 orders. There’s no instant replacement for the planes Boeing would have supplied.
China created the state-owned Commercial Aircraft Corp of China (COMAC) in 2008 and has since ploughed tens of billions of dollars into COMAC’s development.Credit: AP
China does have a fledgling domestic aircraft manufacturer, COMAC, and grand ambitions (first made public in the “Made in 2025” national strategic plan unveiled a decade ago) to develop the domestic capabilities to build its own aircraft and compete head on with the global duopoly of Airbus and Boeing.
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That ambition was partially realised in 2023, when COMAC’s C919 narrow-bodied jet, designed to compete with the 737 Max and Airbus’ A320, made its first commercial flight.
COMAC has raised its production rate for the C919 this year from the 30 aircraft it will actually build to an annualised rate of 50 a year. It delivered only 13 planes last year, so is ramping up its production rate significantly to meet orders from, predominantly, China’s major domestic airlines.
COMAC is also developing a long-range wide-bodied plane, the C929, although that’s probably years away from commercial production.
The challenge for COMAC, and China, is that the C919 incorporates many components sourced from the US.
Its engines are built by a joint venture between GE and France’s Safran. Its avionics and electronics, communications and navigation systems – and its wheels and brakes – are produced by Honeywell. Its weather radar comes from Rockwell Collins and its fuel system from Parker. There are other parts that are imported from the US.
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While Beijing has committed considerable funding to the development of a Chinese-built engine and the other components of modern passenger jets, that’s a long-term project.
Meanwhile, the ban on planes and parts from the US will disrupt COMAC’s production, increase its costs (if it can source the parts from the huge stocks of Boeing parts held outside the US) and jeopardise China’s ability to maintain both the COMAC and Boeing planes already operating.
With Trump now urging Beijing to make him an offer on tariffs, saying the ball was now in China’s court (even though he lobbed it there) there is, of course, the possibility that there will be a negotiated end to the US and Chinese tariffs that reduces them to something less than the current levels, which effectively end almost all trade between the countries.
Unless and until China can develop the capabilities to build aircraft with all, or mostly, locally produced components, and COMAC can create the global network of maintenance sites and the inventories needed if it is to compete head-on with Boeing and Airbus, China needs Boeing.
For the moment, the ban gives it leverage. The longer it stays in place, however, the more damaging it will be to China’s carriers and Beijing’s grand global aviation ambitions.
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