By Trefor Moss
ZHOUSHAN, China-- Boeing Co. opened a new Chinese production
facility, as the American aviation company tries to cater to its
top export market while steering clear of the tensions battering
U.S.-China relations.
At what Boeing calls its "completion and deliver center" here on
an island south of Shanghai, the first finished jet, a 737 MAX,
rolled off the production line Saturday, ready for delivery to Air
China Ltd.
Though a Boeing billboard for the facility at the local airport
proclaims "the future is built here," the center doesn't actually
build planes. Rather it paints and fits the interiors of jets flown
in from Boeing's factory in Renton, WA, ahead of their delivery to
Chinese airlines.
The facility, and its limited remit, illustrate the tightrope
Boeing is walking as Washington and Beijing spar over trade,
including the transfer of technology.
"Boeing's walking a fine line," said Scott Kennedy, an expert on
China's industrial policies at the Center for Strategic and
International Studies, a Washington think tank. Boeing, he said,
must court China to safeguard its market position without risking a
backlash at home, where manufacturers are under pressure to build
more in America and less in China.
Boeing China's president, John Bruns, called the new center in
Zhoushan "a big deal." It will produce 100 jets a year and employ
300 people at full capacity.
"It really demonstrates our commitment to this market," Mr.
Bruns told reporters Saturday ahead of the center's opening
ceremony. That is especially so, given the "challenging time we're
going through," he said, referring to U.S.-China relations.
After threatening and then imposing tariffs on goods that cover
about 60% of their trade, the U.S. and China declared a 90-day
truce this month to create room for negotiations. Even if the two
sides manage to put punitive tariffs in abeyance, harder to resolve
will be many of the Chinese trade practices the U.S. says are
unfair, including the coercive transfer of technology.
China's leadership has set its sights on retooling the country's
manufacturing base to dominate industries of the future, including
aviation. While officials are considering shelving the centerpiece
strategy for that effort, known as Made in China 2025, as a
concession, many powerful bureaucracies and state companies believe
that such an upgrade is critical if China is to become a
superpower.
As the biggest U.S. exporter of all, Boeing's dependence on
China makes it an obvious target in a trade war. One of every four
planes Boeing delivers goes to a Chinese carrier. Over the next two
decades, the company expects China to buy one in six of all
jetliners sold globally--some $1.19 trillion in Chinese orders
Boeing expects to split with European rival Airbus SE.
While Airbus would like to enlarge its share at Boeing's
expense, both companies are struggling to clear yearslong backlogs
of orders. As a result, China can't hammer Boeing without
disrupting its own fast-growing aviation sector. Tellingly, a 5%
tariff China slapped on U.S. aircraft in September exempted
Boeing's large jets.
Boeing is "not immune to the trade war, but it's at the bottom
of the list" of targets, CSIS's Mr. Kennedy said.
In the longer term, China's plan to develop its own jetliners--a
key plank of Made in China 2025--is a risk. China's homegrown C919,
a rival to the 737, is still in testing but deliveries to
state-owned Chinese airlines should start by around 2021. And
aviation companies are under pressure to help China's budding
aviation sector, by providing technology and know-how, in exchange
for market access.
Airbus has responded by operating an actual production line that
builds A320 jets in the northeast city of Tianjin. It is increasing
production there to six aircraft a month, from around four
currently. It also has a local finishing center similar to Boeing's
for wide-body aircraft.
Boeing's new Zhoushan facility is meant to show the company
deserves its market-leading position in China. Mr. Bruns said
Boeing contributes around $1 billion a year to the Chinese economy
by sourcing jetliner parts here and through training programs.
Even so, Boeing still builds exclusively in the U.S. and has no
plans to change that, Mr. Bruns said. While painting and fitting
737s in China frees up capacity in the U.S., he said, it is more
efficient to assemble the jets in a single U.S. location.
Richard Aboulafia, a vice president at Teal Group, a U.S.
aviation intelligence company, said Boeing is doing a good
balancing act in China. Moving local production to China hasn't
enabled Airbus to eclipse Boeing, he said: "A domestic China line
doesn't get you very much," other than risking the transmission of
valuable technology.
Write to Trefor Moss at Trefor.Moss@wsj.com
(END) Dow Jones Newswires
December 15, 2018 07:16 ET (12:16 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
Boeing (NYSE:BA)
Historical Stock Chart
From Apr 2024 to May 2024
Boeing (NYSE:BA)
Historical Stock Chart
From May 2023 to May 2024