Asia-Pacific
Sanctions may clip China-US business ties
By Xin Dingding (China Daily)
Updated: 2010-02-05 10:48
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China's planned sanctions against United States companies involved in the recent arms sale to Taiwan could cloud ties between Chinese businesses and their US partners, say industry insiders and analysts.
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China has reacted swiftly to US President Barack Obama's approval in late January of an arms sales package to Taiwan worth $6.4 billion.
The announcement, along with Obama's scheduled meeting with the Dalai Lama and his sharp criticism of the renminbi, have soured relations between the two nations in recent weeks.
Among the US companies reportedly selling arms or equipment to Taiwan are Boeing, Lockheed Martin, Raytheon and United Technology. So far, two major domestic airlines, Air China and China Southern, have said they will stand with the government.
At present, domestic airlines buy some 150 planes from Boeing and Airbus SAS, based in France, each year. Air China and several other domestic airlines have placed 57 orders for Boeing's 787 dreamliners.
Boeing planes, by June 2009, accounted for 53 percent of China's fleet of 1,383 civil airplanes, according to the company's website.
Approximately 500 planes, or 36 percent of the fleet, are Airbus planes.
Airbus SAS has raised its Asia-Pacific demand forecast by about 4 percent, with carriers in the region buying approximately 8,000 planes worth $1.2 trillion over the next 20 years. China, a rapidly growing market in the airlines industry, is slated to buy a third of those planes.
Feng Fuzhang, an aviation manufacturing analyst with CITIC China Securities, said if Boeing is among the list of sanctioned firms, it will benefit Airbus SAS.
"(Boeing's) products are highly replaceable," he said.
China's jumbo jet producer said its purchases from foreign suppliers would not be affected by the government's planned sanctions against US firms.
Yuan Wenfeng, deputy director of the project management department of Commercial Aircraft Corporation of China Ltd (COMAC), made the remarks during the Singapore Air Show, when asked of the possible impact of the unspecified sanctions, Beijing Business Today reported yesterday.
COMAC is scheduled to nail down suppliers of major parts for the C919, China's first jumbo jet, in the first half of this year. Its scheduled maiden voyage is set in 2014 and deliveries will start in 2016.
The C919 is a single-aisle jetliner designed for short- to medium-range hauls up to 5,555 km.
So far, COMAC has picked CFM International as its only foreign supplier for engines on the C919. CFM is a joint venture that US-based General Electric and France-cased Safran SA both hold a 50-percent share.
Reaction from analysts about the sanctions' impact has been mixed thus far. A researcher in the aviation manufacturing industry, who insisted on anonymity, said China's sanctions will have impact companies in both countries.
"The jumbo jet project needs suppliers from countries that include the US," he said.
But other analysts have maintained that the impact on the C919 project will be limited.
Feng Fuzhang said at present, most parts of the C919 can now rely on domestic manufacturers.
"Besides suppliers from the US, COMAC also has options like suppliers from Europe and even Russia," he said.
To shake off its dependence on foreign suppliers, China is also developing its own engines for the C919.
The domestically developed engine is scheduled for completion by 2016 when the C919 will be delivered for commercial use, said Zhang Jian, general manager with AVIC Commercial Aircraft Engine Co Ltd.
COMAC expects to sell 2,000 C919 jets over 20 years, and by then, China could reduce its reliance on Boeing and Airbus.
COMAC will begin receiving orders for C919 this year, Yuan Wenfeng said.
The letter C in the C919 represents China as well as COMAC. The first numeral "9" implies "forever" in Chinese culture, and 19 means the jet will have 190 seats.
A list of US companies involved in the arms sale has not been revealed and it remains uncertain which companies are possibly involved.
