Boeing, Airbus locked in battle for China market

6th December 2005, Comments 0 comments

WASHINGTON, Dec 5 (AFP) - Airbus said Monday it may set up its first assembly site in China, but the European aircraft maker's US arch-rival Boeing says China-made parts already operate in one-third of its fleet.

WASHINGTON, Dec 5 (AFP) - Airbus said Monday it may set up its first assembly site in China, but the European aircraft maker's US arch-rival Boeing says China-made parts already operate in one-third of its fleet.

Airbus and Boeing are locked in a see-saw battle for sales of their new jets around the world and China has become one of the world's three major aviation markets after Europe and the United States.

In the next two decades, Airbus sees potential sales to China of some 1,600 aircraft, while Boeing, which currently has a 62 percent market share, predicts more than 2,000.

China signed its biggest-ever deal with Airbus on Monday, ordering 150 mid-range planes worth nearly US $10bn at list prices during a visit to Paris by Chinese Premier Wen Jiabao.

The day before, China and Airbus signed a cooperation protocol which foresees the "possibility" of establishing an Airbus assembly plant in China that would turn out single-aisle planes like the A320.

Boeing says its industrial cooperation with China dates back to the mid-1970s and now encompasses several plants that make and assemble components for the 737, 747, 777 and 787 planes.

Boeing lists notably a factory in Shanghai that makes horizontal stabilizers for the medium-range 737, one in Xian making 737 vertical fins and trailing edge ribs for the 747, and another in Shenyang for 737 tail section modules.

In addition, plants in Chengdu, Hafei and Shenyang are all contributing parts for the new 787 "Dreamliner" jet, which Boeing hopes will trump the Airbus A380 superjumbo as the future of long-haul travel.

Boeing plans that with the help of super-efficient suppliers in China, the final assembly of the 787 will take just three days, against about 20 for the 767 which the Dreamliner is set to replace.

Boeing said in June that Chinese aviation firms had agreed to supply it with aircraft components worth an estimated 600 million dollars.

The deal includes an agreement with the Chengdu Aircraft Industrial Group for the production of composite rudders for 787 jets as well as forward entry doors and automatic over-wing exit doors for 737s.

Last month, Boeing signed a four-billion-dollar deal to supply 70 737 aircraft to eight Chinese airlines. In January, Boeing said it was selling 60 787 passenger jets to China for US $7.2bn.

European companies are increasingly willing to transfer their know-how to China in return for big contracts but at the same time are taking care to preserve their technological edge.

"There's a lot of competition to get into the Chinese market to win contracts and at the moment and the transfer of technology is a determining factor," says China expert Françoise Lemoine, a researcher at France's leading international economics institute CEPII.

China has long insisted that foreign companies collaborate with Chinese partners when manufacturing in China, and Beijing is now able to impose special conditions when placing orders because of its extraordinary market power, experts say.

The country has "a strong position, which a lot of other buyers in developing countries do not have," says a member of the French economic delegation in Shanghai.

With the domestic economy growing by more than 10 percent per year and a low-cost and abundant labour force, China is able to make demands of its suppliers that help to close a yawning technological gap between itself and its developed trading partners.

The companies that have refused to play by the rules have suffered through a loss of market share in the world's most populous country, says Lemoine, who cites Japanese car makers as an example.

Japanese car makers "were reticent for a long time because they were fearful that China would develop its own competitive capacity", she says.

While Japanese auto leaders hesitated, German, US and French manufacturers stole a march and have invested billions of euros in the country.

For Lemoine, the key element for European companies working with partners in China is to ensure that "the heart of their technology is always managed in the European side".

The chief executive of Airbus, Gustav Humbert, has played down fears about the loss of commercially vital technology and underlined that close collaboration would be necessary to improve the quality of production in China.

Lemoine also points out that exporting technology is a way of winning contracts in the short-term, but it also helps to create future dependency which is of strategic importance.

"It's about a dependency vis-a-vis the chosen technology. One creates a dependency," Lemoine said.

Copyright AFP

Subject: French news

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