China To Build Its Own Large Jetliner 332
Hugh Pickens writes "China's domestic airlines will need to buy an estimated 4,330 new aircraft valued at $480 billion over the next two decades to meet demand in commercial aviation. Now the LA Times reports that the Commercial Aircraft Corp. of China expects to begin producing its 156-seat C919 by 2016, competing with the Boeing 737 and Airbus A320. China has staked billions of dollars and national pride on the effort but what may surprise some Americans worried about slipping US competitiveness is that some well-known US companies are aiding China, putting US and European suppliers in a tough spot: Be willing to hand over advanced technology to Chinese firms that could one day be rivals or miss out on what's likely to be the biggest aviation bonanza of the next half a century. 'If they launch a commercial aviation industry, you've got to be part of it,' says Roger Seager, GE Aviation's vice president and general manager for China, whose company has garnered contracts worth about $6 billion for the C919. 'You can't take a pass and come back in 10 years.'"
Re:China can just "borrow" other airliners, no big (Score:3, Interesting)
which was itself a 737, 20 years too late. Boeing are still selling hundreds of 737s every year. Airbus are selling plenty of 320s, many of them to Chinese airlines. There's a market for this sort of aircraft.
There is no innovation here, just borrowing. That's OK though, right?
It's business. It's apparently legal, or not obviously illegal enough for any reprecussions, and it makes money. so yes, that's okay.
Re:What's the adage? (Score:3, Interesting)
Did ya see this?
http://www.youtube.com/watch?v=OTSQozWP-rM [youtube.com]
Re:Isn't it about time for a bit of protectionism? (Score:1, Interesting)
Too late. The people who would benefit from it don't care, because they don't even recognize it as the issue. Nor do they have the power to actually make it happen. The people who have the power to implement it don't want it, because they currently make a ton of money exploiting the trade deficit.
Just accept that this isn't going to happen. Your plan relies on peoples cooperation that you don't have and won't get.
Your best bet is to figure out how to come out of it on top. I hate to say it, but I'm pretty much suggesting that you pledge your loyalty to the enemy king in exchange for some cash, a bit of land, and knighthood.
Re:What's the adage? (Score:5, Interesting)
China has few natural resources?
ITAR is the problem (Score:4, Interesting)
So much of the US aerospace production is classified as "military" [wikipedia.org] that it's a real problem for companies trying to export equipment.
The US regulators should become aware that it was progress, not secrecy, that kept the US ahead of the others during the Cold War. Now that the Soviet Union is no more, military technology does not have the same pressure as before to keep developing new stuff, so they try to keep the same old secrets forever.
Well (Score:4, Interesting)
Over the years I have gradually begun to realize that China developing advanced technology is a good thing for the world as a whole.
First of all, as China has developed their standards of living and the quality of their products has increased enormously. It is true that occasionally they cut the wrong corner and you end up with lead contaminated products. But the overwhelming trend is towards higher and higher quality, like the Japanese economy was in the 1960s.
Second, China is now growing past the point of merely copying (or pirating) other nation's technology and is starting to actually create things that were never seen before. That benefits the U.S. as much as it benefits China.
One concrete example I know of : the smokeless cigarettes that deliver nicotine without the carcinogens were invented by a Chinese scientist. These things are a major advance, and if developed fully could eliminate most deaths from Tobacco usage.
In the long run, everyone in the world will benefit once China converts even a fraction of it's billion person population into scientists, engineers, and artists.
Re:What's the adage? (Score:5, Interesting)
Trent 900's dont worry me, (Score:3, Interesting)
It's the 717 clone [wikipedia.org] coming out of China that does, as well as the notion that HAL (Hindustan Aeronautics LTD, India) might get the same idea.
Now quality in passenger aircraft is a major concern for me and any other frequent traveller. Airbus and Boeing have proven track records and are able to get to the bottom of problems in short order. I don't have that kind of confidence in China, especially as face comes into play. It may become, to the leader du jour that maintaining the Chinese aircraft industry is more important then lives. Never underestimate the kind of stupid things that will be done to maintain face.
Now I've heard that we had the same fears about Japan 40 odd years ago and despite several attempts Japan has not been able to build a domestic aircraft industry of note since WWII and they were a nation who produced very high quality planes in WWII. Even Russia struggles with modern airliners, the only thing that keeps that industry afloat is Aeroflot.
Re:Chinese Control (Score:3, Interesting)
So it was basically a scam to gain access to technology, and the promises of long-term contracts never materialized.
Business is business, even when it turns out that America doesn't have the upper hand. Being Danish, I have grown up on this sort of complaints; but against American companies.
You know, for an American, you whine an awful lot; don't you believe in freedom? The free movement of knowledge can not be limited to only "the good guys", whatever that means - freedom is freedom, and sometimes it hurts. The Chinese have learnt well; and the great teacher was none other than the good ol' US of A.
Re:What's the adage? (Score:5, Interesting)
Except that it doesn't work that way for high tech. China now is an excellent example of this: They really, REALLY tried to make proper military making machine for several decades. Investments were close to trillion levels.
Results? To cover up the failures, they ended up essentially buying russian tech, modding it a bit, and showing it off as your own. The devepment costs needed to make a functional jetliner without the necessary know-how of the entire chain of suppliers is next to impossible, no matter how deep your pockets are. Look at russians themselves - after we raided their supply chain in 90s, essentially buying out and killing off many of their strategic know-how companies, they can't even make a current gen jumbo jet. This from country and bureaus that are known to produce civilian craft that has operated safely and consistently for decades in conditions boeing and airbus have problems making their military craft operate (TU-154 being the main supply workhorse for essentially entire Siberia, taking off and landing in what essentially amounted to nothing but a cleared out field with almost no accidents).
At they at least have a history and know how how to build a new jetliner. And they still can't. For China to do this without West helping is in a realm of impossiblity, unless we're talking 1st gen jetliners, which can't compete with any Airbus or Boeing variants on anything.
In this case, Lenin's quote is dead on. We are literally selling them the rope that they will hang us with. We're selling the supply chain and know how that took us DECADES to get, and would take them DECADES to acquire on their own. Rest is simply hardcore capitalistic bullshit about how we "have to participate now". Which is bullshit because if we don't participate now, they may have something among the lines of boeing 707, or more likely tu-104. Which is commercially pretty much dead on arrival considering the competition available - even russians, in spite of their problems could sell Chinese much better aircraft cheaper. Boeing and Airbus could even better then that.
Essentially this one of the biggest reasons why Marx predicted the fall of too capitalistic system - it is utterly unable to properly regulate itself not to damage itself, and at the same time it tends to try to destroy outside attempts to regulate it - which is what we're seeing with this now. Big companies simply buying out politicians to get permits to essentially sell decades worth of know-how for pennies compared to what it would cost to develop it in the first place.
Re:Gold for salt. (Score:4, Interesting)
I guess that the amount produced by evaporating salt water was tiny compared to mining, and thus commercially inviable.
This might be true, but I find it hard to believe. I grew up in Brazil and some of my earliest memories are seeing windmills like these [flickr.com] pumping seawater into evaporation ponds in the Rio de Janeiro state. [google.com] The amount produced was by no means "tiny" [extremonordeste.com].
Today, the biggest economic competitor to this business is tourism, seafront real estate is becoming too expensive for evaporation ponds, but in the poorer regions in the Brazilian northeast [google.com] this is still a major resource.
Re:ITAR is the problem (Score:5, Interesting)
ITAR can be easy to get around
It's possible to do it, but not easy. Getting ITAR licenses from the US State Department can take years, believe me, I work at this business.
A major marketing argument used today by European and Japanese companies id "ITAR free" [google.com]
Re:Quality control? (Score:3, Interesting)
This probably had to do with something as simple as screw threads.
A Whitworth (55degree)threaded fastener (England) isn't going to go into a B&S(60 degree)(US) threaded hole regardless of quality.
But it didn't stop there. When English, Commonwealth, and US threads all became 60 degree inch based threads, it was still a crapshoot whether a fastener would fit in a hole. It was this way until the Unified Thread standard came to the fore in 1949.
You can imagine how much hell this played with "Lend Lease" equipment.
Take apart an American piece of equipment from WWII, snap/lose/strip an important screw, and you might as well junk it if all you've got is Canadian or English screws kicking around. And since the Unified Thread standard didn't get approved until 1949, this coincides with your WWII timeframe.
So yes, I'll buy the U/S story.
--
BMO
Re:What's the adage? (Score:4, Interesting)
Essentially this one of the biggest reasons why Marx predicted the fall of too capitalistic system - it is utterly unable to properly regulate itself not to damage itself
Um, except that the rise of a third major airliner manufacturer in the world isn't "damage".
Three major economies, each with a major manufacturer of airplanes, in a massive global economy with more people flying than ever before, with competitive airlines (who will be able to buy better cheaper planes, thanks to more competition) offering ever cheaper flight and ever higher economies of scale. Yeah, sounds terrible. What a disaster.
If the two Western airliners remain uncompetitive, then the worst case scenario is we still end up with a world full of airplanes, they'll just be manufactured by someone else instead. From a global perspective, that is not "damage" in any rational sense of the word. If you lose your lunch because you were unable to remain competitive, sure, then it sucks to be you, but 'the system' will not have 'failed' in any rational sense. And if you can't be competitive, you have to ask yourself why that is the case, and up your game.
The overall market is growing in size very fast. A smaller percentage of a much larger market is not a 'failure' of the system.
Having watched Airbus's struggles, launching such a manufacturing capability is not easy. China will encounter struggles along the way, so I wouldn't be too worried that all of a sudden Boeing and Airbus are going to disappear.
Re:What's the adage?Oh PLEASE!!! (Score:2, Interesting)
Just because the Chinese have learned the right way to make money and enhancing their competitiveness, It doesn't give you any right to bitch about it.
More angry that the politicians over the last 30 years have dismantled the system that created this economy over the last 200 years. The Chinese then went and implemented our system.
The system is from Alexander Hamilton’s Report on the Subject of Manufactures (1791). From here [truth-out.org]:
When what's good for business is not what is good for the country, the job of government is to step in and ensure we do what is good for the country. Government has become too enamored of business and has lost its way.
We can win..just let loose the market forces and we will see wonders.
Sounds like a religious statement. I don't subscribe to your religion on that one. Over the last 30 years we have tried that and it hasn't worked. All it has done is shipped jobs overseas, made the richer, pushed the middle class downward, and made the poor poorer. There is data that shows this hasn't worked. Look at the data and stop believing in fairy tales.
There are few patriots in the CxO class. As long as Wall Street is only interested in short term gains, that's all these guys are interested in too. So, we indeed sell the Chinese the rope they will use to hang us. The Darwinian capitalism you are recommending just eats itself.
China's Economic collapse is coming! (Score:4, Interesting)
It is more complicated than the simple knee-jerk reactions I see posted here. China is very productive and has a huge capacity for more productivity. However, China does not produce enough internally to sustain a higher standard of living for their growing population. At this time, they must export in order to create a better standard of living overall. Since they have an absolute competitive advantage in some areas, especially labor-intensive areas, they will export increasingly higher-quality goods to those countries that already have a high standard of living.
However, Chinese government takes the results of the increased productivity and allocates it to "desirable" industries. At this stage of their economic development this allocation works in many areas, but as the number of subsidized industries increases and mis-allocated funding proliferates, the government burden increases and robs the nation of its productive gains. As costs increase, prices go up both internally and externally, and China loses its absolute competitive advantage. Most of China is so far behind economically that there is a built in sink for productive output at this time, but China must trade with other nations in order to continue to prosper. When they can no longer trade competitively with other nations, those industries that emigrated to China will return home.
I remember reading a comic, called "Japan, Inc." many years ago, and I wondered then how Japan could sustain its Economic growth while violating these basic Economic principles. Guess what?: A few years later Japan's growth stalled and the absolute advantage went to places like Taiwan, Korea, Malaysia and the Philippines, and now China. Japan is still trying to recover.
Eventually, in the absence of major wars or worldwide catastrophe, most of the world's economies will be at parity, in which case, the USA will represent about 20-22% of the world consumption and trade. It appears at this time that the last areas to become affluent will be on the African subcontinent.
China cannot be its own best customer forever. Unfortunately, with increasing public debt and the propensity for the USA to try to spend its way to prosperity instead of produce its way to prosperity, the USA may have some real economic collapse that will adversely affect the rest of the world, and spoil the ride for everyone.
Re:What's the adage? (Score:3, Interesting)
China has large quantity of low quality iron ore, but making iron and steel from rich ore imported from Australia and Brazil is cheaper than making from their own.
BTW, in 2005, China produced 420,000,000 ton of iron ore, and US produced 54,329,242 ton of iron ore the same year. What information can you deduce from these numbers?
Re:What's the adage? (Score:1, Interesting)
Re:Isn't it about time for a bit of protectionism? (Score:3, Interesting)
WE the people don't need to lose freedom. Those "nearly human entities with nearly full human rights" need to lose freedom, however. They are merely legal constructs who are on the edge of having "free speech rights?!" It is getting beyond ridiculous. We need to protect ourselves from big business. We know what happens when we let them do what they want. We presently have laws in place and entire governing agencies in place and in operation to prevent the bad things that business will do if allowed. To name a few, the FDA, the FCC, the FAA, the EPA, the Department of Labor and more all exist because of what business would do if they were not regulated.
"We know what happens"? Apparently not. What happens when you take away the rights of business owners is that they, the jobs, and the standard of living move elsewhere. While there are legitimate reasons for regulation, it remains that you can't force me to start a business (especially one without access to capital). You can't force me to hire people. All these TLAs have simply made the conditions ripe for the problems you happen to notice. Big, powerful companies can navigate the absurd forest of regulation far better than small companies can and they don't have to hire US workers in the process. That leads to the real problems such as an estimated real unemployment rate [dailyfinance.com] over 20% in the US. That won't get fixed by obsessing over the power of large businesses.
Go ahead and whine about the bad businesses in the US (and elsewhere in the developed world) while the bad businesses in China eat our future.
Re:What's the adage? (Score:4, Interesting)
Actually, a number of things you mention are precisely because we don't actually have a "free trade" system. The number one driver for offshoring, for example, is the completely anti-free-trade minimum wage laws.
Minimum wage laws being the driver of off-shoring? Really? Minimum wage jobs for the most part don't have enough cost differential to be good candidates for outsourcing, and many of them are service industry jobs that can't be effectively offshored.
The people earning $50/hr+ are where the demand for offshoring is very high, and I don't think you can blame those wages on minimum wage.
Re:What's the adage? (Score:5, Interesting)
What's ironic about that video is that China has actually done more of the exact things that is supposed to bring down the US:
* Stimulus/spending out of recession: China has spent more of their GDP on stimulus spending that the US, and as a result has felt less impact from it. In fact, there is a linear correlation between amount a of GDP a country spent on stimulus and the length of the recession: the more they spent, the shorter the 2009 recession. Most economists acknowledge that if US had spent more, our recession would have been shorter.
* Government take over of health care: Seriously? China has government (actually, Communist) health care. Neither they nor Korea, Japan, Taiwan are about to privatize their national health care system to stay or become competitive with US.
* Government take over of private business: Chinese government owns and subsidizes many key corporations so that the corporation benefit the nation as a whole and not the CEOs and the shareholders.
If one follows the logic of the ad, it would seem that the Chinese state controlled capitalism is much more effective than our form of capitalism, and if our biggest competitor is China, then we should counter with our own similarly designed policies.
But no, this ad was carefully created to instill a feeling of fear and uncertainty, juxtaposition it with fiscal conservative ideas with almost no basis on fact. It is perfect propaganda.
In fact, I believe blaming foreigners for self created domestic problems was the first step in the decline of Greece, Rome, UK....