Boeing in Beijing
The Sino-US trade war seems farcical in the face of US corporates indulging excessively in China’s aircraft manufacturing market
The Sunday, December 16, 2018, news headline "Boeing opens first 737 plant in China amid US-Sino trade war" was interesting. More so because of the choice of four words: "amid US-Sino trade war". Is "trade war" a "game" or mock diatribe to confuse the weak and small being played by/between Washington and Beijing? Indeed, it's difficult to decode or decipher as both countries are intertwined in too many sectors, being mutually-dependant on each other – from consumer goods to computers and communication to civil aviation.
One's inference (not necessarily perception), therefore, leads one to think of the possibility of a tacit understanding between the two, to divide the world into respective zones of influence in accordance to their "enlightened self-interest"; as was done in the past by eight European countries (England, France, Spain, Portugal, Italy, Belgium, Netherlands, Germany) to parcel out virtually the whole continent of Africa in the 19th century. Also comes to mind is the classic but tragic case of broad daylight aggrandisement leading to the three partitions of Poland in the late-18th century; (1772, 1793, 1795) carried out by three European empires including the house of Hohenzollerns of Prussia, Habsburgs of Austria and Romanovs of Russia.
The (reported) present case of Boeing, however, doesn't appear as sensational as its being made out to be, because the reported "Boeing in China" is neither a new nor a novel story. American and European aviation companies "in China" by now is a familiar story, unfolding since the late-20th century. Thus, according to Jane's all the world's aircraft 1991-1992: "Chinese factories carry out sub-contract work on the……….Boeing 737, 747 and 757." However, "emphasis is being placed on the development of new aircraft making use of China's growing technological capability." The inherent meaning of the information furnished by Jane's was loud and clear. That China had gone for joint-venture collaboration for the production of aircraft with a long-term goal: a goal to acquire, possess, upgrade the state-of-art technology of the West, and application thereof at later stages for her indigenous industrial manufacturing base. Indeed, a smart move with a farsighted mission goal.
Thus, way back on July 2, 1980, the 'licence agreement' took place between France and China for manufacturing the AS 365N Dauphin-2 twin-turboshaft helicopter in China. After France, came Sino-US collaboration when the then St Louis-based McDonnell Douglas Corporation announced on January 11, 1984, the signing of a letter of intent with Shanghai Aircraft Manufacturing Factory (SAMF) on the co-production programme for MD-82 jet transports. Details of the programme were confirmed in April 1985, with the announcement of the sale of 26 MD-82s to China, of which 25 were assembled in Shanghai, all for Chinese airlines.
Thereafter, complete major sub-assemblies were supplied by McDonnell Douglas to be assembled at Shanghai. Since then, the Chinese industry has taken a gradually increasing share in manufacturing the remaining aircraft, producing its own landing gear doors, cargo and service doors and aileron supports from aircraft. Interestingly, McDonnell Douglas soon closed shop, when Boeing gobbled it up in the post-Cold War era, in 1997.
Understandably, therefore, the result today is for all to see. China is in the front foot; USA and its western partners are on the back foot. With all-out help from western companies, in the form of full transfer of state-of-the-art technology and tacit connivance as well as full knowledge of the successive ruling class of Europe and USA, Chinese production lines today have an array of aircraft; flying, in-flight development, upgrade, experiment, export and profit.
By referring to only two "live case laws" above, the idea was to make a point – that the drama which is unfolding today pertaining to Sino-American trade war is actually neither war nor war-for-trade. It's a classy deception of/by the two to dominate the geography of global demography. Both, perforce, require each other, occasional (got up) "friction scenario" notwithstanding.
Now, coming to (today's) Boeing move at the time of the Sino-US trade war, make no mistake, it's the corporate will and wish of Wall Street which prevails, and is likely to prevail. Not necessarily only the ranting of US leaders. Leaders of the West, especially the US, seldom dare to go against global financial interest and profitability of American multinational corporations, beyond a point. Obversely, in China's case too, it's state capitalism; created, controlled and commanded by communist czars, who shout through their "state-controlled" media but cannot spoil the apple cart owing to the path Beijing has adopted for its 1.4 billion heads. Beijing today stands as a unique cocktail of "Orient communist Red salute" with that of the "Occident capitalist Royal salute". And, it simply cannot extricate itself out any time soon.
Thus, when US Boeing found that the French and its compatriot companies, like (former) McDonnell Douglas, had already helped lay the foundation of China's aviation technology for the large Beijing market, it had to react, to "act east". All the more, after at least fourteen of Chinese civil airlines placed bulk-orders for the Boeing aircraft. It reached the point justifying the classic cliché: "Perform or perish."
Things happened rather swiftly and furiously. On December 22, 1995, China Airlines was contracted for 13 Boeing 737-800 aircraft, which was followed by a stream of orders placed simultaneously by other companies. Thus, took place on October 30, 1997, multiple orders for US jet aircraft by Air China (98 Boeing 737-800); Xiamen Airlines (15 Boeing 737-700); Shenzhen Airlines (06 Boeing 737-700); Shanghai Air (13 Boeing 700-700); Hainan Air (07 Boeing 737-700). This was followed by Air China Southwest order on June 01, 1998 (03 Boeing 737-800).
Subsequently, more Boeing-Beijing civil aircraft transactions unfolded: Wuhan Air ordered on June 29, 1998 (02 Boeing 737-800); China Southern Air (105 Boeing; 700 series 26 and 800 series 79) on October 02, 2001; China Yunnan (04 Boeing 737-700) on October 30, 2007; Kunming Air (02 Boeing 737-800) on June 30, 2010; Dragon Leasing (10 Boeing 737-800) on December 30, 2013; Heibei Air (01 Boeing 737-800) on December 21, 2013 and Donghai Airlines (04 Boeing 737-800) on December 30, 2013.
In this background, which listed company of Wall Street would resist the temptation of opening shop in Beijing and accessing its state-of-art technology on platter? President Trump knows well that the biggest unemployment creator (if any) in the US is none other than the multinational corporations thereof, and successive US governments are a part of, and party to, this development. There isn't any foreign hand as he would like the world to believe. American corporations do business (as business should be done) for "monetary profit only". Thus, money always spoke in the past, as can be found of British imperialism in India and across the world. Money still speaks, and there is no reason to believe that money will not speak in international relations of the 21st century and beyond. Market and money are an irresistible lure. Hence, Boeing is in Beijing – optics of trade war notwithstanding.
(The author is an alumnus of National Defence College and writer of China in India. The views expressed are strictly personal)