China To Make Commercial Jets -- In Whose Liftetime?
Much news recently on China's plans to go into commercial jet plane production. Two reasons why I have not posted on this until now. First, I almost never bother posting on what is purportedly going to happen; there is plenty to post about on what is happening. Second, I did not take this news seriously. But that is exactly why I am posting now.
Seems the Wall Street Journal and I think alike. Yesterday's Journal has an article written by Bruce Stanley (out of Hong Kong) and Andrew Batson (in Beijing), entitled, "China's Air Ambitions Face Obstacles: Beijing Hopes to Tap Lucrative Market Dominated by Boeing and Airbus," expressing strong doubts as well:
Some aviation-industry executives argue that marshaling the necessary resources to build serviceable passenger jets is only part of the challenge, with some saying the effort could take longer than China expects. They say that, beyond the significant technical hurdles, China will face challenges when it tries to market its unfamiliar planes to airlines, provide customer support and spare parts for them and secure approval to sell them abroad.
"They put a man into orbit. We know that takes a lot of interlinked technical competences," says Martin Craigs, president of Aerospace Forum Asia, a business group of suppliers to the airline industry in Asia. "But it's not just industrial engineering. It's the finessing of the commercial with the technical and all the huge responsibilities of planning and certificating large commercial aircraft."
There are doubts China will be able to keep up with the new composite aircraft coming out from Boeing and Airbus and because the planes almost certainly will require "Western avionics and engines," there are even doubts regarding China's cost advantage. Most importantly, there are concerns Chinese planes just will not sell:
Selling such planes without a track record or reputation for customer service and support won't be easy. Chinese state-run airlines are semi-independent of the government and may not want to buy them. Foreign buyers could be even harder to find.
"The airlines are not picking a product -- they're getting married to a supplier for a long, long time," said Mr. Craigs, who has worked as a marketing executive for several European aviation companies in China.
We here in Seattle like to joke about our friends over at the "Lazy B," but the reality is that both Boeing and Airbus took a long long time to get where they are and this is not a business known for its shortcuts. China will not be a force in commercial airplanes by 2020 or even 2030. In the meantime though, it might be a clever way to angle for discounts.
What do you think?
Update. Came across the following very thoughtful posts on China's big jetliner plans:
- "Can China Fly?" Silicon Hutong says yes, by starting out selling to the third world. Very insightful post.
- "Can China Compete With Boeing and Airbus?" China Herald suggests China first try getting its mobile phone production down.
- "China to Compete With Boeing and Airbus." Gadling's Traveler Blog says we should expect big Chinese jets in China relatively soon.
- "China Fuels Boeing-Airbus Fight for $300 Billion in Orders." Aero News Blog has a thorough, very clearly written article on China's aviation history and present. Notes that "according to the U.S. Federal Aviation Administration, in the 10 years ended in 2005, there were 0.4 accidents per million takeoffs in the U.S., 0.5 in China, 0.7 in Europe, 2.5 in Latin America and 11.7 in Africa."
Comments (36)
Read through and enter the discussion by using the form at the endventure160 - March 21, 2007 8:14 PM
Actually, Caijing ran an article in their latest issue about this. Among many of their criticisms, they talk how the biggest problem will not be one of technology but how will they build the financial structure to support this project and keep it based on market principals.
We also shouldn't forget that they are planning to build two versions, one for civilian use and the other for military use. So, they already have one customer lined up and thats the PLA whom I'm sure is looking to buy a number of them as they currently rely on outdated russian planes for transport among the PLA.
Also, if this is part of China's grand "innovation" strategy then what we see here is policy making from the top up. Which many have pointed out is misguided. Although our airline industry certainly emerged from the wartime buildup during WWII.
Link to the article: (in Chinese) http://www.caijing.com.cn/industry/other/2007-03-19/17067.shtml
nanheyangrouchuan - March 21, 2007 9:45 PM
The Chinese have enough trouble maintaining the civilian fleet they bought from Airbus and Boeing, and have quite a few problems with their domestic warplanes. This will be interesting and all would be wise to avoid flying on one.
I'm picturing a "Frankenplane" made out of refurbished Boeing and Airbus parts, maybe some stuff bought on the open market from Mitsubishi and Ilyushin as well.
David Li - March 21, 2007 9:54 PM
I see this ends up with China becoming the third shareholder of AirBus in a decade. AirBus is financial trouble and China is the biggest and faster growing customers of commercial airliners. With a "ambition" to build its own, the best solution for AirBus's two biggest shareholders France and German will be to invite China to join AirBus.
Also, in the short terms, it will make sense for Boeing and AirBus to outsource more productions to China just to dilute the resource for China to build its own. Both Boeing and AirBus already have sub-components built in China now. Japan has recently put together a consortium to finance and build sub-components for Boeing. China doesn't have the same level of expertise or financial strength to do the same. However, the "plan" to build its own will create the same effect to gain business from Boeing.
This has been the same strategy used by China in semiconductors to force Intel and AMD's investments, in telecom to get MEN (Moto, Ericsson and Nokia), in software to get Microsoft.
"Fool me once, shame on you; fool me twice, shame on me." How many times the world have to fall for the same Chinese trick? Instead focusing narrowly on whether or not China can do it, the world should look at what China can gain from it. "Shout in the east and strike in the west" is one of the oldest trick in the Chinese book.
nanheyangrouchuan - March 21, 2007 11:24 PM
France and Germany are probably not keen to take orders from China, so Chinese investment may not simply be allowed. Neither Boeing or Airbus is keen on seeing their technology and techniques stolen outright and used to create a Chinese jumbo jet. You won't see the Russians help them either due to territorial disputes over Siberia.
China Law Blog - March 21, 2007 11:49 PM
Venture160
Thanks for checking in and thanks for the link. You are right to note this is top-down innovation, of which I am always highly skeptical. The fact that it is tied in with the military makes me even more skeptical. I would think the military and the airlines are two very different customers.
China Law Blog - March 21, 2007 11:53 PM
Mr. Li --
Exactly re China's plans. Far less sure re the Airbus thing.
China Law Blog - March 21, 2007 11:54 PM
nanheyangrouchuan --
Boeing and Airbus will give more to China, of that I am pretty sure. But you are right that they are not going to give it all.
China Law Blog - March 21, 2007 11:54 PM
nanheyangrouchuan --
I will not fly one in 2020, of that I am certain.
Anonymous - March 22, 2007 1:29 AM
Er....but China ALREADY makes commercial jets.
Guys you have to realise that China is not necessarily after developing a jet that is to be the same as the usual Airbus or Boeing models you're all talking about. As has been pointed out on the "Weifang" thread, China has 70 cities with populations in excess of 5 million. I'm not sure
how many in excess of 1 million - but that'll be huge.
I'm sure that China's (already existing) commercial jet airliner industry will expand into aircraft of 50-100 passengers and they'll keep using Airbus / Boeing for the bigger routes. It's what happens when China produces a decent 50-100 seat aircraft domestically that you'll start to see them get closer to larger jets of the Euro-US ilk.
I can hardly see Airbus selling A300's to China for the Yantai- Weifang route for example. But a 70 seater manufactured in Chongqing ? Oh yes.
Which. Is. Why. The. Chinese. Are. Developing. Their. Existing. Jet. Aircraft. Industry.
Lets get some perspectives in puhleeze...
David Li - March 22, 2007 1:38 AM
There is good article on Bloomberg. China are building for the both Boeing and AirBus already.
"China Fuels Boeing-Airbus Fight for $300 Billion in Orders"
http://www.bloomberg.com/apps/news?pid=20601109&sid=azCUGtGEEpT8&refer=home
By the way, commercial airliners are suspected to create more dangerous green gas in high attitude which cause more global warming according to recent papers. With EU going much more aggressive on carbon tax, AirBus are likely to become much more depending on Chinese market for it's A380s because of its large emission. The recent job cuts in AirBus has already sparked political problems in both France and German. They may not be keen to take order from China but "customers are always right." ;) Plus, both France and German are also aggressively to get arm export ban to China lift.
Also, airliners business are good for China's development strategy. Heavy industries are traditionally in north-east China, electronics in the middle and West China. These are area of focus of China's "Go West" strategy. Pushing airliners factories there can help quite a bit and the airliners business do listen to government.
Duncan - March 22, 2007 2:50 AM
Well, let's hope they do better with commercial jets than with the aircraft they currently produce...
http://www.nomadtours.co.za/article_2006-8-14_4.html
Joseph Wang - March 22, 2007 8:24 AM
Aerospace has never been an industry that has been known for market dynamics.
They are talking about a 150 seater by 2020, which sounds reasonable. It's also likely to be a dual use plane that at least shares infrastructure with military aircraft.
The first planes are likely to be a total mess, but so were the first Japanese cars. If you want a decent plane by 2040, you have to come up with a total mess in 2020. Gotta start somewhere.
Joseph Wang - March 22, 2007 8:31 AM
This might be a useful link
http://en.wikipedia.org/wiki/ACAC_ARJ21
nanheyangrouchuan - March 22, 2007 8:40 AM
A big reason that is not mentioned by China is that no one will sell China military transport aircraft, and only Europe, the US and Russia make large military transports.
Now ask yourself "why won't anyone sell nice, panda bear China some military transports?"
So China is going to go ahead and try to make their own, and any competitive bids that China initiates between Airbus and Boeing will involve enough technology transfer to build their own.
mochen - March 22, 2007 10:24 PM
I agree with your opinion on this article. I think it is too tough for China to build a market for aviations right now. I really think aviation industry is somehow connected to a country's political role around the world. But anyways, I really love your site. I've learned so much by just reading your articles. =)
nanheyangrouchuan - March 23, 2007 8:28 AM
China has lots of trouble making reliable jet engines with sufficient power, thus the need to force technology transfers.
nanheyangrouchuan - March 23, 2007 1:46 PM
Speaking of a lack of quality, the pet food poisonings have been traced to wheat imported from China that was contaminated with rat poison.
David Li - March 23, 2007 5:47 PM
There is one other reason for China to launch a commercial airliner industry at this point. There is a gap of aerospace engineers in the West. The aerospace program enrollments in the West has dropped sharply during the 90s because of the end of Cold War. Defense companies were cutting jobs and inspired the movie Falling Down (http://www.imdb.com/title/tt0106856/ ). USC used to pump out large numbers of aerospace engineers but there were several years with single digital graduation from undergraduates in the 90s.
China's space program was started in the 50s by Qian Xuesen who also built up the aerospace educational institutes around China. Qian was trained in MIT and Caltech/JPL. The Chinese education system has been pumping out aerospace engineers in more constant rate in the past twenty years.
This may be the additional pull force to attract aerospace companies to move productions to China and create a spill over effect for domestic industry development at a time aerospace industry is moving from vertically integrated industry to a horizontally integrated one much like what electronic and computer industries have gone through in the past 20 years.
Jethro Cramp - March 23, 2007 6:16 PM
A few comments above an anonymous poster said:
"China has 70 cities with populations in excess of 5 million. I'm not sure how many in excess of 1 million - but that'll be huge."
There are in fact a 109 cities with over 1 million people in China. I don't have my statistics book for 2006 in front of me, but from memory there are considerably fewer than 70 cities in China with over 5 million people.
China Law Blog - March 23, 2007 8:35 PM
anon --
Those figures re 5 million are way way off. There are only around 50 cities in the entire world that big. I'm sure the number is higher if you include metropolitan areas, but still.
Come on, we all know about China's small plane building. It was even in the WSJ article. But we are talking about competing with Airbus and Boeing here, not Embraer. Boeing scrapped its 717 program and I don't think Airbus has ever sold anything comparable.
China Law Blog - March 23, 2007 8:36 PM
Mr. Li --
Good points.
China Law Blog - March 23, 2007 8:38 PM
Duncan --
And that is why you won't get me on a Chinese airplane for many years to come.
China Law Blog - March 23, 2007 8:39 PM
Mr. Wang --
You are exactly right, both on the initial quality we are likely to see and on the need to start somewhere/sometime.
China Law Blog - March 23, 2007 8:41 PM
Mr. Wang --
GREAT link. Thanks.
China Law Blog - March 23, 2007 8:42 PM
nanheyangrouchuan --
Yes. And your point is?
China Law Blog - March 23, 2007 8:43 PM
Mr. Li --
Interesting theory.
China Law Blog - March 23, 2007 8:44 PM
Mr. Cramp --
You are right. Anon poster pulled those numbers from a previous comment that had them wrong.
David Li - March 25, 2007 10:19 PM
And acquiring American space technologies have just became cheaper and easier. L.A. Times has a story about North Hollywood space junkyard stacked with used space equipments.
http://www.latimes.com/news/science/la-sci-junkyard25mar25,0,2782733,full.story?coll=la-home-headlines
xiao ming - March 26, 2007 12:47 PM
It is the best news I have heard so far in 2007. We are waiting for this to happen for too long. We don't have our own tanker, AWACS plane and so on. We have to import them from Russia. Even KJ2000 has to use IL76 as its platform. We had enough. It is time that we Chinese to take action. It is good for our country and good for our people. Go China!
Robert Luedeman - March 26, 2007 2:05 PM
The recent photos of the ARJ21 fuselage and nose sections are more than passing familiar to anyone who worked at Douglas in Long Beach on the DC9 line. In particular the double bubble fuselage is very recognizable. Perhaps what we've got here is a reverse engineered DC9? Which is not a bad thing, mind you. Everyone's been trying to reinvent the DC9 for the last 20 years.
The more problematic issue is engine development, and although power would not be a problem, noise and efficiency would.
One company that is ripe for some technology transfer is Pratt & Whitney. Keep your eye on them.
China Law Blog - March 27, 2007 2:45 PM
Mr. Li -
Current stuff or old stuff?
China Law Blog - March 27, 2007 2:47 PM
xiao ming --
Thanks for checking in. I agree, but I do think it will take some time for this project to really start bearing fruit.
China Law Blog - March 27, 2007 2:49 PM
Mr. Luedeman --
Thanks for checking in. I think the ARJ21 is based on the DC9, some of the technology for which comes from MD's failed China joint venture.
nanheyangrouchuan - March 27, 2007 9:48 PM
"One company that is ripe for some technology transfer is Pratt & Whitney. Keep your eye on them"
The US and EU would be wise to follow Russia's lead and absolutely refuse to enter into those kinds of, partnerships with China.
China Law Blog - March 28, 2007 7:30 AM
nanheyangrouchuan --
I don't understand/am not familiar with what you are saying about Russia. Please explain.
nanheyangrouchuan - March 28, 2007 5:54 PM
China has been buying Russian jets whole, then bought licenses to make parts of the jets, mostly airframe related stuff. The Chinese wanted the license to make the engines, but the Russians would not sell them that kind of technology, so the Chinese have been trying to reverse engineer some of the engines they already have in existing MiG and Sukhoi jets, the model number is WD-9 I think and is used in the J-10 and J-11 (naval version of the J-10...think about that for a moment). Same for jet fighter sensor arrays and submarine technology.
Hu often declares the need for enhanced Russian/Chinese cooperation in various fields, but he really means military science fields.
Why won't the Russians share this technology? Because of Chinese claims to about 30% of Siberia.
Thankfully, Russia has a new excuse, the Indians won't buy Russian gear if Russia does any R&D JVs with China or sells China any advanced weapons to China that could be exported to Pakistan.