SEATTLE — When China President Xi Jinping’s 747 touches down next week at Paine Field, he could have airplane order announcements in his luggage.
Similarly, when he tours the adjacent Boeing Co. Everett plant, the aerospace company could announce plans to build a new 737 delivery center in China.
China is fast becoming the world’s biggest buyer of commercial airplanes and is expected to overtake the U.S. airliner market by 2030, said Randy Tinseth, Boeing Commercial Airplanes’ vice president for marketing.
“The competition is intense, and it’s only going to get more intense,” he said.
En route to a high-profile D.C. visit, Xi will arrive in the Seattle area on Tuesday and tour the Everett plant on Wednesday. On hand will be Boeing Chairman Jim McNerney, President and CEO Dennis Muilenburg and Ray Conner, the president of Renton-based Boeing Commercial Airplanes.
“We’re honored that President Xi will see our factory and meet the Boeing employees who worked to deliver a record 155 airplanes to China last year,” McNerney said in a news release.
So far this year, about a quarter of all Boeing airplane deliveries have been to Chinese airlines.
The country is expected to need 6,330 new airplanes, worth an estimated $950 billion, over the next 30 years, according to Boeing.
Selling in China requires balancing collaboration and competition, Tinseth said.
“They want you to invest. They want you to help develop their industry as you move forward,” Tinseth said Wednesday after a panel discussion about China organized by the Seattle Metropolitan Chamber of Commerce.
Still, high-tech manufacturers such as Boeing have to protect their intellectual property, as they do in any country, he said.
After Airbus opened an A320 final assembly line in Tianjin in 2008, the facility was the target of cyber attacks, according to news reports at the time.
“What China doesn’t steal, they extort,” said Scott Hamilton, an aerospace analyst and owner of Leeham Co. in Issaquah.
Nonetheless, the market opportunities are too big to be ignored, he said. “It’s all about risk and reward.”
There is speculation that Xi will announce a flurry of orders while visiting Boeing, but nothing firm, he said.
China is formally a centrally planned economy, but the country’s commercial airlines still drive airplane orders, said Richard Aboulafia, an aerospace analyst and vice president with Fairfax, Virginia-based Teal Group. “They generally get the jets they want.”
The biggest challenge for airlines and airplane makers is “helping the government of China maintain the illusion that it is in charge of aircraft purchases,” he said.
China generally follows the Agreement on Trade in Civil Aircraft, which prohibits governments from shaking down airplane makers in return for market access, he said.
Beijing is not a signatory to the 23-year-old agreement. It only has observer status.
Still, “they actually respect ATCA,” he said.
Foreign airplane makers have invested heavily in China. In the 1980s, McDonnell Douglas opened a final assembly line for the single-aisle MD-80. Airbus followed with its A320 plant, and this summer it announced plans to open a facility to finish interiors of the twin-aisle A330 in China.
But investing in China does not guarantee sales, Aboulafia said. McDonnell Douglas still had smaller market share than its competitors. And Airbus and Boeing have roughly split the Chinese market since before the European airplane maker announced plans for the A320 plant.
Opening manufacturing facilities in China offers companies useful leverage against unions back home, Aboulafia said. “Having the threat of moving work to China hanging over a labor union’s head is convenient,” even if the threat is a bluff.
Boeing already has several joint ventures in China “because they bring value to us and to our partners,” Tinseth said.
He declined to comment on reports of plans to open a 737 delivery center.
China is not unique in wanting Boeing to invest in its domestic aerospace industry, he said.
The country has its own commercial airplane maker, COMAC, which is developing a regional jet, the ARJ21, and a single-aisle airplane, the C919, which will compete with the Boeing 737 and Airbus A320.
Selling in China still depends on the same fundamentals as in other airplane markets: relationships, patience and investment, Tinseth said.
“Our customers are always going to want more for less,” he said. “We’re going to work to drive cost out of our system.”
Next week, Xi also will visit Microsoft’s main campus in Redmond and Lincoln High School in Tacoma. He will also meet with business and government leaders from across the U.S. and offer the only policy speech of his trip, at a dinner banquet where dignitaries such as former Secretary of State Henry Kissinger will be in attendance.
Gov. Jay Inslee, who visited China in 2013 as part of a trade mission to Asia, invited Xi to Washington in light of the state’s strong economic, academic and cultural ties.
“Over the years, Washington companies have developed strong ties with China, and hundreds of millions of citizens use products from Boeing, Microsoft, Starbucks and other Washington companies on a daily basis,” Inslee said in a Wednesday news release confirming Xi’s visit.
Inslee appointed former Washington state governors Gary Locke and Chris Gregoire to lead a 30-person welcoming committee. A smaller host committee includes Conner, the CEO of Boeing Commercial Airplanes; Satya Nadella, CEO of Microsoft; and Howard Schultz, chairman and CEO of Starbucks Coffee.
China is Washington’s largest trading partner, with more than $29 billion of trade in 2014. Nearly a fourth of Washington exports go to China.
Xi will be the fourth consecutive Chinese leader to visit Seattle — Deng Xiaoping, Jiang Zemin and Hu Jintao before him all came to the region due to the importance of Seattle’s relationship with China. Hu gave a speech in Everett during his 2006 visit.
The Herald Business Journal contributed.
Talk to us
> Give us your news tips.
> Send us a letter to the editor.
> More Herald contact information.
