China’s dream of ruling the skies is problematic

An ambition 16 years in the making was finally realised last weekend when a large, domestically-built, Chinese passenger jet made its much-delayed maiden commercial flight.

The C919 narrow-bodied jet that flew between Shanghai and Beijing was the culmination of a project, first announced in 2007, that directly targets Boeing and Airbus’ domination of the aviation market.

The project is a major plank of China’s high-tech economic and military ambitions and its aim of being technologically independent of the West.Credit: Getty Images

Hundreds of Chinese companies and hundreds of thousands of workers were drafted into the state-directed project and more than $US70 billion ($105 billion) of Chinese government funds were invested in what China sees as a major plank of its high-tech economic and military ambitions and its aim of being technologically independent of the West.

The C919 doesn’t quite deliver on that promise of independence. Its engines, avionics, control systems, brakes, wheels, tyres and landing gear and cabin systems all come from US and European suppliers.

China hopes and plans, however, that over time it will develop the manufacturing capabilities to eventually displace the foreign supplier with homegrown versions.

It has, for instance, already test flown the domestically manufactured CJ-1000A engine that will eventually replace the LEAP engine currently supplied by a joint venture between General Electric and France’s Safran.

The C919 is targeted quite directly at Airbus’ A320s and Boeing’s 737s, although those companies offer multiple variants of their planes and have more capacity and materially better range than the C919. It is, however, being marketed at a cheaper ($US90 million) price-point than, say, Airbus’ A320neo, which has a list price of about $US110 million.

So far there have been over 1000 orders, or expressions of interest, in the C919, predominantly from China’s domestic aviation companies, many of them state-owned or subject to state direction.

With the Shanghai-based Commercial Aircraft Corporation of China (COMAC) that developed the plane hoping to be able to manufacture 150 a year by 2028, if it is a threat to the decades-long dominance of the sector by Boeing and Airbus it’s a very long-term one. Airbus has about 13,000 and Boeing more than 10,000 planes in operation worldwide.

Nevertheless, with estimates that China’s domestic market alone will need about 85,000 new passenger and freight aircraft by the early 2040s, the opportunity for COMAC to grab a substantial share of that growth – it is targeting about a third – is, given the degree of government support it will have, very real. China has a central procurement agency for aircraft and their engines.

Xi Jinping has big dreams for China. Credit: AP

China’s aspirations for the C919 extend to the international market, where its target has been 25 per cent of the global market for narrow-bodied jets.

Whether China can expand its domestic ambitions into the international aviation market is, however, problematic.

The C919 is, at this point, only certified to fly in China. Its plane has yet to be certified by the US, European or UK regulators, which will limit international sales and not just in those jurisdictions.

Longer term it is conceivable that some developing economies in Asia, Africa and South America which China has strong financial relationships with might be potential customers but in the near term the limited production volumes will be absorbed by the domestic demand.

Boeing and Airbus have also spent decades developing the international network of parts and service infrastructure and facilities that their customers rely on. That supply chain isn’t easily or quickly replicable, if indeed it could be replicated economically for a single new aircraft.

They also, of course, offer suites of both narrow-body and wide body planes with high levels of interoperability.

COMAC does have ambitions in the wide-bodied space. It has a joint venture with Russia to develop a wide-bodied plane and has a stated intent of supplying at least 10 per cent of the market within 20 years, although the war in Ukraine and the sanctions on Russia, which include aircraft and their components and technology, might push back the date of the planned inaugural test flight of the CR929 from 2025.

Even as it relates to the C919, there is a question mark over how the US and Europe might respond, now that the plane is flying commercially, competing with Boeing and Airbus and spearheading the development of leading edge and very strategic technologies that have military applications.

The development of the C919 and an aerospace industry were key elements of Xi Jinping’s “Made in China 2025” national strategic plan that set out China’s ambition of dominating the 21st Century technologies that will deliver economic and geopolitical leadership.

The Biden’s administration’s actions in throttling China’s access to advanced semiconductors and broader sanctions on some key Chinese technology companies haven’t, yet, been extended to aircraft components (other than the flow-on effects from the ban of supplies of advanced chips that has been largely supported by Europe).

The threat China poses to each of their flagship aircraft manufacturers, and the myriad high-tech suppliers they support, did, however, help resolve a 17-year trade dispute between the US and Europe two years ago, when they suspended a dispute over government subsidies that had resulted in World Trade Organisation-approved tit-for-tat tariffs totalling $US11.5 billion.

China has a lot of ground to make up on Boeing and Airbus. Credit: AP

A key element of that truce was a commitment to work together to create a level playing field in global aviation and work together to define the conditions of fair competition and the level of state support that was acceptable in the aerospace sector.

The development of the C919 and an aerospace industry were key elements of Xi Jinping’s  “Made in China 2025” national strategic plan that set out China’s ambition of dominating the 21st Century technologies that will deliver economic and geopolitical leadership.

They made it very clear at the time – the US was quite explicit – that the end of the lengthy dispute over their subsidies had been driven by China’s “non-market” practices – its state subsidies, government ownership, central purchasing agencies, forced technology transfers and alleged thefts of intellectual property.

So far, at least, they haven’t acted directly to limit China’s aviation ambitions, perhaps because China is, and will continue to be well into the future, an important market – the key growth market – for Airbus and Boeing.

Aviation technology is fast-moving and the Americans and Europeans may well believe that their companies and the ecosystems they rely on have too much of a technology lead to be caught.

Extending trade sanctions that would directly impact China’s aviation ambitions beyond semiconductors is, however, an obvious option while COMAC remains so dependent on foreign technologies, with the level of state support and intervention in the domestic aviation market providing ample justification if it is needed.

With the US and Europe becoming ever more closely aligned in their attitudes towards China, the appeal of crippling a strategic industry with military applications while it is still in its infancy means that option can’t be ruled out.

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