China’s jumbo-sized dreams

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The Chinese were nestled all snug in their beds,
While visions of jumbo jets danced in their heads.

China, not stopping with its forthcoming small-to-medium-size civilian jetliner, is moving forward with its jumbo jet program. Its two state-run and owned aerospace companies, AVIC I and AVIC II, will be restructured. AVIC I (an acronym for China Aviation Industry Corporation) produces larger jets, both civilian and military, and AVIC II focuses on small aircraft and helicopters, both military and civilian. The word is that a new company will be launched by March 2008 to handle the jumbo jet program. The civilian jets will be a twin-aisle, twinjet, 200-300 seat CS2000 (pictured above, and in the vein of the Boeing 787 or Airbus A330) and a single-aisle, 150-200 seat CS2010 (along the lines of a Boeing 757). Eventually, a military-use jumbo jet will be offered (see the illustration below from Xinhua).

AVIC I and II will be reworked to produce parts and equipment for the jumbo jet program, in addition to continuing their own product lines. These developments raise the question of why China is going this direction. The global market for large aircraft is well-served by Boeing and Airbus, both of which produce excellent aircraft without being centrally managed by the state. Furthermore, both Airbus and Boeing compete in an open international market. I’ve written elsewhere that China may attempt to use its emerging network of proto-client states in Africa, Southeast Asia, and Latin America as a market for uncompetitive Chinese products.

More worrisome is China’s insistence on “homegrown” aircraft. Just as the major aircraft producers are developing sophisticated international supply chains and moving toward truly global jets (the B787 is 25 percent foreign-produced, and parts are manufactured all over the United States), China wants to move in the direction of nationalism. They’re not there yet (many components of the ARJ21 are U.S.-made), but China’s jumbo-jet drive illustrates a troubling trend.

China’s determination to produce a large jet (as if that is a sine qua non of superpower status), combined with the fact that the industrial drive is being managed from Beijing, means that China is ignoring the market for the jets which it will produce. Maybe the market will accommodate the Chinese product, but it might not. Famously, Boeing almost went bankrupt in the 1960s producing the eventually successful B747 for an untested widebody market. The state-owned company that will produce the CS2000, CS2010, and larger jets will probably not be exposed to such risk, and the absence of risk may severely distort the market for commercial aircraft.

China’s major aircraft companies to restructure as ‘jumbo’ jet tops agenda [ATW Daily News]
China to establish company to build large jet [Reuters]