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Today, the International Aviation & Aerospace Exhibition, Airshow China for short, begins in Zhuhai in southern China. It is the largest aircraft exhibition in the country, and one of this year’s main attractions will be the C919 developed by Chinese manufacturer Comac. We take this as an opportunity to highlight China’s dependence on Western suppliers.
Anyone following the current discussion in Germany might think that only the EU countries are dependent on supplies from China, while the all-powerful China can do everything itself. However, the People’s Republic is far from this state of affairs, as evident by the Prestige aircraft example. Important parts such as the computers, the landing gear or the air pressure system come from Western suppliers; this even applies to the engines. Without parts from Europe, the C919 will not fly. This should also be borne in mind by those who are conducting trade talks with China.
Officials at China’s statistics agency added to generally gloomy economic sentiment at the start of the week: Trade surprisingly contracted in October. What appears to be a minimal decline at first glance turns out to be really bad news for China’s economy on closer inspection.
After all, the poor trade data is also due to decisions made by Xi Jinping. And, as we know, he will be with us for some time. Incidentally, it is no longer just the Chinese who are affected by the new production problems. If you are hoping for an iPhone 14 under the Christmas tree, it could unexpectedly turn into an Easter present.
ABC – Airbus, Boeing, Comac, this is what the new trinity among aircraft manufacturers should look like in the future from the Chinese point of view. A sign that the state-owned Chinese manufacturer only wants to compete with the best in the world. Embraer, Bombardier, Mitsubishi and Tupolev will be left out of the equation. When the annual Airshow China begins in Zhuhai on Tuesday, Comac will therefore be one of the most important exhibitors. Comac’s new C919 medium-haul jet is to be part of the opening display and take off for a daily demonstration flight.
Soon, however, after a long development period, the C919 will no longer be flying only at air shows but also in regular passenger service. Only two licenses are still missing after the aviation supervisory authority CAAC has certified its airworthiness (China.Table reported). In a congratulatory message, the Communist Party called the move a “milestone” and “the fruits of innovation-driven development”.
However, the supposed triumph of Chinese technology has an Achilles’ heel: The C919 depends on Western supplier parts and production licenses for its production. The next round of the trade war could quickly result in a production stop. Technical independence, as the Xi government is striving for, is still many years away, at least in this area. While Germany frets about its dependencies on China, China is no less dependent on functioning trade in many areas.
Although the fuselage, wings and tail of the C919 are made in China, the central flight systems, avionics and engines are manufactured by US or European suppliers. For example, the landing gear system and the air supply system, including the air conditioning system, come from the German company Liebherr.
Liebherr set up a joint venture with the Chinese company Landing-Gear Advanced Manufacturing in Changsha to develop and manufacture the landing gear. US suppliers Collins Aerospace, GE-Aviation and Honeywell Aerospace have also entered into joint ventures with Chinese companies. These then supply the parts to Comac within China.
However, it is precisely in these joint ventures that experts also see a crucial weakness. They are not innovative, says aviation expert Richard Aboulafia of the research house Teal Group. This is due to the joint venture laws in China. These stipulate that technical knowledge must be accessible to Chinese partners. Therefore, they harbor the danger of technology theft for manufacturers of flight systems. According to Aboulafia, Western companies draw the appropriate conclusions from this: They do not bring in their latest technology.
It is already becoming apparent that the success or failure of the airplane will be decided mainly on the Chinese market: How much is the Chinese government willing to intervene in the market to boost the Chinese plane? Vice Premier Liu He said during his congratulatory speech that the “huge domestic market must be well exploited”.
However, the oldest trick in China’s industrial policy manual cannot be applied to the C919: closing off the company’s own market to the competition. What worked brilliantly for Google and Facebook is not possible in this case due to the existing dependencies.
To be sure, it currently looks like Boeing is becoming the target of initial restrictions. After all, China is the only major country worldwide that has not allowed the B737-Max to fly again since its series of crashes. And China Southern recently cut its order of 737-Maxes by 100 aircraft to 78, forcing Boeing to find new buyers for the planes.
According to Aboulafia, while intervention in the market is the only chance for the plane, it is also its biggest problem. “Borders would have to be closed to imports to make it successful, but that would probably mean Western countries destroying this jet by stopping system and technology exports.” However, reinventing the plane as a completely Chinese jet would take many years and cost quite a few billion dollars.
There has already been such a dispute in the history of the C919 two years ago. At that time, the US government considered stopping the engine delivery. They were supposed to come from CFM. CFM is a joint venture between the US company GE Aviation and the French company Safran Aerospace.
At the time, Donald Trump, of all people, had championed the interests of the Chinese side and pushed for the engines to be handed over to Comac. But US-China relations have deteriorated further since then (China.Table reported). If such a decision were to come back on the agenda, and this time it would be to Comac’s disadvantage, it could actually bring production to a standstill.
This overall situation threatens the success story that China’s leadership has envisioned for its own passenger jet. The last time the Europeans succeeded in creating a major aircraft manufacturer was with Airbus in the 1970s. On paper, Comac is on a similarly good track. According to its own website, Comac has 815 orders on its books from 28 different customers. Even the Nigerian Minister for Aviation, Hadi Sirika, expressed interest just in time for the National Congress of the Chinese Communist Party.
But if you read Sirika’s statement carefully, you can get a much better idea of the level of interest: “We haven’t looked at that C919. But if it’s as good as the others then why not” It’s certainly not a big order.
The situation is similar for the other pre-orders. According to the British newspaper Financial Times, most of these are letters of intent or options, as well as purchases from leasing companies that do not yet have direct buyers for the aircraft. Letters of intent, however, are not binding purchase agreements, and options are merely a right of first refusal on a particular aircraft in the production chain. Even Chinese airlines are reluctant. Launch customer China Eastern ordered only four aircraft.
The main reason for the reluctance is the excessively high market price with lower performance than the main competitors, Airbus A-320 Neo and Boeing 737 Max. The C919 can carry the fewest passengers of all three jets and at the same time, has the shortest range.
But it was never Comac’s goal to score in these areas. The winning argument for the C919 was always the price. The C9191 was supposed to be significantly cheaper with similar quality. Initially priced at around $50 million. However, the price has already risen to more than $100 million. By comparison, the A320 Neo and B-737 Max cost $110 and $117 million, respectively. But in return, the buyers not only get aircraft with international flight licenses but also a very well-developed service network at almost all airports worldwide. Jörn Petring/Gregor Koppenburg
Both the Beijing customs authority and Apple had bad news to report on Monday. The US company admitted having problems producing its new iPhones in China just before the crucial Christmas shopping season. And the Beijing statistics authority had to announce the first decline in Chinese exports in more than two years. The two reports are closely related.
Exports fell by 0.3 percent in October compared with the same month a year earlier. Imports also shrank by 0.7 percent. At first glance, that doesn’t sound like much. But it is a drastic turnaround. In September, there was still an increase of 5.7 percent. In addition, exports were well below analysts’ expectations, who had expected an increase of 4.3 percent. China’s foreign trade with the USA fell particularly sharply by 10.4 percent.
China’s trade with Germany also decreased. It fell by 5.7 percent in October. Chinese exports to Germany fell by 10.9 percent. China’s imports from Germany, on the other hand, rose slightly by 0.5 percent. Thus, bilateral trade between China and the Federal Republic of Germany is as follows: China exported goods worth $9.2 billion to Germany in October and imported goods worth $8.6 billion. From Germany’s perspective, this still results in a slight trade deficit of around $600 million. However, it was significantly lower than in October of the previous year, when it had still amounted to $1.7 billion.
Observers cited the general decline in demand from abroad as a reason for the weak data: The global economy is weakening, which is why Chinese companies are no longer able to sell as much to other countries. However, Beijing’s ongoing strict zero-Covid policy is also cited as an important reason for the export malaise.
This brings us back to Apple. The company is behind in the production of its iPhone 14 models because the world’s largest iPhone factory in Zhengzhou, eastern China, has been in a chaotic state due to Covid for weeks. Following a lockdown, tens of thousands of workers have fled the Foxconn site in recent weeks. In the meantime, work has resumed, at least in parts of the factory. However, the remaining Covid restrictions could continue to interrupt the delivery of components to the factory, as Apple announced on Monday.
These are bitter prospects for Apple. The US company traditionally does its biggest business in the Christmas quarters – and even usually displaces Samsung from the top position in the smartphone market. In the Christmas business a year ago, Apple had once again achieved a record with a profit increase of more than 20 percent. The iPhone group thus defied the global component bottlenecks that were slowing down the industry at the time. The iPhone was once again the biggest revenue generator.
However, the current bottlenecks affect both the iPhone 14 Pro and the larger iPhone 14 Pro Max. The models were only launched in September, together with the iPhone 14. This year, Apple equipped the more expensive Pro versions with, among other things, significantly better cameras than the basic models, as well as additional software functions. According to market researchers, they are correspondingly popular. Demand is unbroken, Apple emphasized. For Apple customers, this means mainly one thing: longer waiting times.
And so, the problems at Apple are exemplary for the difficulties of the Chinese economy. The main reason for the poor foreign trade figures may also be the global economic weakness. But if the factories in China had not also had to struggle with recurring lockdowns, the supply chains would probably function more smoothly – and then the overall economic figures would have been at least a little better.
Weak foreign trade is bad news for the Chinese economy. Exports, which were still booming in the year’s first half, were the last important support for the otherwise weak economy. The economy is suffering from a severe real estate crisis, high debt and weak domestic demand, which in turn is due to uncertainties associated with the ongoing Covid measures.
There has just been renewed speculation that Beijing could soon relax its Covid policy at least a little. For some investors, these rumors were enough to drive Chinese share prices up sharply in recent days. Hong Kong’s benchmark Hang Seng index has risen by more than 13 percent since last Monday.
But on Saturday, the Beijing Health Commission clarified in a press conference that there would be no relaxation. A spokesman said that there would be no change in the general policy in the fight against the virus. The situation remains “serious and complex,” he said. That’s also an apt way to describe the state of the Chinese economy. Joern Petring
Every year at this time, cabbages are piled up in the displays and storerooms of Chinese traders. Older people, in particular, stock up by the kilo for the winter. For many, the vegetables evoke memories of the past – of a time that was harder but easier in some respects.
Today, the International Aviation & Aerospace Exhibition, Airshow China for short, begins in Zhuhai in southern China. It is the largest aircraft exhibition in the country, and one of this year’s main attractions will be the C919 developed by Chinese manufacturer Comac. We take this as an opportunity to highlight China’s dependence on Western suppliers.
Anyone following the current discussion in Germany might think that only the EU countries are dependent on supplies from China, while the all-powerful China can do everything itself. However, the People’s Republic is far from this state of affairs, as evident by the Prestige aircraft example. Important parts such as the computers, the landing gear or the air pressure system come from Western suppliers; this even applies to the engines. Without parts from Europe, the C919 will not fly. This should also be borne in mind by those who are conducting trade talks with China.
Officials at China’s statistics agency added to generally gloomy economic sentiment at the start of the week: Trade surprisingly contracted in October. What appears to be a minimal decline at first glance turns out to be really bad news for China’s economy on closer inspection.
After all, the poor trade data is also due to decisions made by Xi Jinping. And, as we know, he will be with us for some time. Incidentally, it is no longer just the Chinese who are affected by the new production problems. If you are hoping for an iPhone 14 under the Christmas tree, it could unexpectedly turn into an Easter present.
ABC – Airbus, Boeing, Comac, this is what the new trinity among aircraft manufacturers should look like in the future from the Chinese point of view. A sign that the state-owned Chinese manufacturer only wants to compete with the best in the world. Embraer, Bombardier, Mitsubishi and Tupolev will be left out of the equation. When the annual Airshow China begins in Zhuhai on Tuesday, Comac will therefore be one of the most important exhibitors. Comac’s new C919 medium-haul jet is to be part of the opening display and take off for a daily demonstration flight.
Soon, however, after a long development period, the C919 will no longer be flying only at air shows but also in regular passenger service. Only two licenses are still missing after the aviation supervisory authority CAAC has certified its airworthiness (China.Table reported). In a congratulatory message, the Communist Party called the move a “milestone” and “the fruits of innovation-driven development”.
However, the supposed triumph of Chinese technology has an Achilles’ heel: The C919 depends on Western supplier parts and production licenses for its production. The next round of the trade war could quickly result in a production stop. Technical independence, as the Xi government is striving for, is still many years away, at least in this area. While Germany frets about its dependencies on China, China is no less dependent on functioning trade in many areas.
Although the fuselage, wings and tail of the C919 are made in China, the central flight systems, avionics and engines are manufactured by US or European suppliers. For example, the landing gear system and the air supply system, including the air conditioning system, come from the German company Liebherr.
Liebherr set up a joint venture with the Chinese company Landing-Gear Advanced Manufacturing in Changsha to develop and manufacture the landing gear. US suppliers Collins Aerospace, GE-Aviation and Honeywell Aerospace have also entered into joint ventures with Chinese companies. These then supply the parts to Comac within China.
However, it is precisely in these joint ventures that experts also see a crucial weakness. They are not innovative, says aviation expert Richard Aboulafia of the research house Teal Group. This is due to the joint venture laws in China. These stipulate that technical knowledge must be accessible to Chinese partners. Therefore, they harbor the danger of technology theft for manufacturers of flight systems. According to Aboulafia, Western companies draw the appropriate conclusions from this: They do not bring in their latest technology.
It is already becoming apparent that the success or failure of the airplane will be decided mainly on the Chinese market: How much is the Chinese government willing to intervene in the market to boost the Chinese plane? Vice Premier Liu He said during his congratulatory speech that the “huge domestic market must be well exploited”.
However, the oldest trick in China’s industrial policy manual cannot be applied to the C919: closing off the company’s own market to the competition. What worked brilliantly for Google and Facebook is not possible in this case due to the existing dependencies.
To be sure, it currently looks like Boeing is becoming the target of initial restrictions. After all, China is the only major country worldwide that has not allowed the B737-Max to fly again since its series of crashes. And China Southern recently cut its order of 737-Maxes by 100 aircraft to 78, forcing Boeing to find new buyers for the planes.
According to Aboulafia, while intervention in the market is the only chance for the plane, it is also its biggest problem. “Borders would have to be closed to imports to make it successful, but that would probably mean Western countries destroying this jet by stopping system and technology exports.” However, reinventing the plane as a completely Chinese jet would take many years and cost quite a few billion dollars.
There has already been such a dispute in the history of the C919 two years ago. At that time, the US government considered stopping the engine delivery. They were supposed to come from CFM. CFM is a joint venture between the US company GE Aviation and the French company Safran Aerospace.
At the time, Donald Trump, of all people, had championed the interests of the Chinese side and pushed for the engines to be handed over to Comac. But US-China relations have deteriorated further since then (China.Table reported). If such a decision were to come back on the agenda, and this time it would be to Comac’s disadvantage, it could actually bring production to a standstill.
This overall situation threatens the success story that China’s leadership has envisioned for its own passenger jet. The last time the Europeans succeeded in creating a major aircraft manufacturer was with Airbus in the 1970s. On paper, Comac is on a similarly good track. According to its own website, Comac has 815 orders on its books from 28 different customers. Even the Nigerian Minister for Aviation, Hadi Sirika, expressed interest just in time for the National Congress of the Chinese Communist Party.
But if you read Sirika’s statement carefully, you can get a much better idea of the level of interest: “We haven’t looked at that C919. But if it’s as good as the others then why not” It’s certainly not a big order.
The situation is similar for the other pre-orders. According to the British newspaper Financial Times, most of these are letters of intent or options, as well as purchases from leasing companies that do not yet have direct buyers for the aircraft. Letters of intent, however, are not binding purchase agreements, and options are merely a right of first refusal on a particular aircraft in the production chain. Even Chinese airlines are reluctant. Launch customer China Eastern ordered only four aircraft.
The main reason for the reluctance is the excessively high market price with lower performance than the main competitors, Airbus A-320 Neo and Boeing 737 Max. The C919 can carry the fewest passengers of all three jets and at the same time, has the shortest range.
But it was never Comac’s goal to score in these areas. The winning argument for the C919 was always the price. The C9191 was supposed to be significantly cheaper with similar quality. Initially priced at around $50 million. However, the price has already risen to more than $100 million. By comparison, the A320 Neo and B-737 Max cost $110 and $117 million, respectively. But in return, the buyers not only get aircraft with international flight licenses but also a very well-developed service network at almost all airports worldwide. Jörn Petring/Gregor Koppenburg
Both the Beijing customs authority and Apple had bad news to report on Monday. The US company admitted having problems producing its new iPhones in China just before the crucial Christmas shopping season. And the Beijing statistics authority had to announce the first decline in Chinese exports in more than two years. The two reports are closely related.
Exports fell by 0.3 percent in October compared with the same month a year earlier. Imports also shrank by 0.7 percent. At first glance, that doesn’t sound like much. But it is a drastic turnaround. In September, there was still an increase of 5.7 percent. In addition, exports were well below analysts’ expectations, who had expected an increase of 4.3 percent. China’s foreign trade with the USA fell particularly sharply by 10.4 percent.
China’s trade with Germany also decreased. It fell by 5.7 percent in October. Chinese exports to Germany fell by 10.9 percent. China’s imports from Germany, on the other hand, rose slightly by 0.5 percent. Thus, bilateral trade between China and the Federal Republic of Germany is as follows: China exported goods worth $9.2 billion to Germany in October and imported goods worth $8.6 billion. From Germany’s perspective, this still results in a slight trade deficit of around $600 million. However, it was significantly lower than in October of the previous year, when it had still amounted to $1.7 billion.
Observers cited the general decline in demand from abroad as a reason for the weak data: The global economy is weakening, which is why Chinese companies are no longer able to sell as much to other countries. However, Beijing’s ongoing strict zero-Covid policy is also cited as an important reason for the export malaise.
This brings us back to Apple. The company is behind in the production of its iPhone 14 models because the world’s largest iPhone factory in Zhengzhou, eastern China, has been in a chaotic state due to Covid for weeks. Following a lockdown, tens of thousands of workers have fled the Foxconn site in recent weeks. In the meantime, work has resumed, at least in parts of the factory. However, the remaining Covid restrictions could continue to interrupt the delivery of components to the factory, as Apple announced on Monday.
These are bitter prospects for Apple. The US company traditionally does its biggest business in the Christmas quarters – and even usually displaces Samsung from the top position in the smartphone market. In the Christmas business a year ago, Apple had once again achieved a record with a profit increase of more than 20 percent. The iPhone group thus defied the global component bottlenecks that were slowing down the industry at the time. The iPhone was once again the biggest revenue generator.
However, the current bottlenecks affect both the iPhone 14 Pro and the larger iPhone 14 Pro Max. The models were only launched in September, together with the iPhone 14. This year, Apple equipped the more expensive Pro versions with, among other things, significantly better cameras than the basic models, as well as additional software functions. According to market researchers, they are correspondingly popular. Demand is unbroken, Apple emphasized. For Apple customers, this means mainly one thing: longer waiting times.
And so, the problems at Apple are exemplary for the difficulties of the Chinese economy. The main reason for the poor foreign trade figures may also be the global economic weakness. But if the factories in China had not also had to struggle with recurring lockdowns, the supply chains would probably function more smoothly – and then the overall economic figures would have been at least a little better.
Weak foreign trade is bad news for the Chinese economy. Exports, which were still booming in the year’s first half, were the last important support for the otherwise weak economy. The economy is suffering from a severe real estate crisis, high debt and weak domestic demand, which in turn is due to uncertainties associated with the ongoing Covid measures.
There has just been renewed speculation that Beijing could soon relax its Covid policy at least a little. For some investors, these rumors were enough to drive Chinese share prices up sharply in recent days. Hong Kong’s benchmark Hang Seng index has risen by more than 13 percent since last Monday.
But on Saturday, the Beijing Health Commission clarified in a press conference that there would be no relaxation. A spokesman said that there would be no change in the general policy in the fight against the virus. The situation remains “serious and complex,” he said. That’s also an apt way to describe the state of the Chinese economy. Joern Petring
Every year at this time, cabbages are piled up in the displays and storerooms of Chinese traders. Older people, in particular, stock up by the kilo for the winter. For many, the vegetables evoke memories of the past – of a time that was harder but easier in some respects.