Billions Of Dollars At Stake For Boeing

Chinese Government regulators appear to have been barring domestic air carriers from purchase of Boeing goods, alleged Commerce Secretary Gina Raimondo last week. Chinese airlines want to buy, but their Government is standing in the way, she said in an off-the-cuff comment during a Q&A session. 

If true, they could be flouting earlier 2020 trade agreements with the former Trump administration to maintain a mutually beneficial relationship between the U.S. and China. 

"China has all along firmly upheld the WTO-centered multilateral trading system and does business in accordance with international trading rules. The international community sees very clearly who has been wielding the big stick of sanctions, and politicizing and weaponizing economic issues with ideological prejudice in the past few years.... We hope the US will earnestly respect market economy principles and international trading rules, and work with China to strive for healthy and steady development of China-US trade and economic relations," they claimed. 

Exact details are sparse at the moment, as things tend to be when working with the opaque bureaucracy of Chinese regulators. In contrast to governmental bodies elsewhere, they retain a large measure of power, as demonstrated last January when State carriers retained all orders for China’s domestic jet manufacturer COMAC, but deferred their outstanding orders with foreign companies Airbus and Boeing. The buying decisions for all three are centrally coordinated by China Aviation Supplies Holding Company, an entity intimately connected to the central government. Fortunately for Boeing, at least for the time being, COMAC is a long way from addressing the Chinese airline shortfall, despite party efforts to bolster local production. 

Whatever the details for the hold up are, the brass ring of Chinese market domination lies tantalizingly out of reach, as Boeing forecasters earlier this year revised their predicted market need to 8,700 planes by 2024. Like most aircraft deals, the greatest gains are made in commercial services, maintenance, and support for the fleet over time, an estimated $1.8 trillion in value until 2040.

There is some good news on the horizon, however. Chinese regulators at the Civil Aviation Administration of China (CAAC) recently completed their test flight for the 737 MAX, and industry insiders sound hopeful that full approval will be granted this November. Before the 2019 grounding, Boeing was selling one quarter of the planes it built annually to Chinese buyers. A return to normal would be appreciated by Boeing as it recovers from the MAX boondoggle. 

FMI: www.boeing.com