Boeing sets 300 plane order, plant with China – report

SHANGHAI, China – US aerospace giant Boeing has reached deals with Chinese firms to sell 300 aircraft and open a completion center in the Asian country, China’s official Xinhua news agency reported, as President Xi Jinping began his first state visit to the United States.

The order, which was not immediately confirmed by Boeing, demonstrates the vital importance of the massive Chinese market despite a growth slowdown in the world’s second largest economy that threatens to cut into the expansion of air travel.

The state-owned Commercial Aircraft Corporation of China (COMAC) also signed an agreement with Boeing on September 22 to set up a “completion center” in China for its narrow-body 737 airliners, Xinhua said, as the US company lifts competition with European rival Airbus, which already has a manufacturing presence.

The Xinhua report, datelined from Seattle where Xi started his trip on Tuesday, gave no immediate details of the models of the planes bought by a group of Chinese companies or the value of the sale.

But it is likely to be one of the biggest orders of recent times.

Xi is due to visit Boeing’s main aeroplane factory in Washington state on Wednesday, September 23, as he looks to highlight the economic importance of China to US firms with the countries’ political relationship beset by tensions.

“China’s rapidly growing aviation market plays a crucial role in our current and future success,” Boeing Chairman Jim McNerney said in a statement issued last week to announce the visit.

Later in his trip, Xi will travel to Washington DC to meet US President Barack Obama at the White House.

China is expected to add 6,330 new aircraft worth $950 billion to its commercial fleet by 2034, Boeing said in August in its annual China Current Market Outlook.

The forecast comes despite current economic pain in China where growth slowed to 7% for both the first and second quarters, weaker than 7.3% for all of 2014 the worst in 24 years.

“The emerging middle class in China is helping to boost demand,” Mohshin Aziz, an analyst at Malayan Banking Bhd. in Kuala Lumpur, told Bloomberg News. “Most of the planes ordered will be for growth, and very few will be for replacement.”

Shift for Boeing

A Boeing factory in China would represent a shift in the US giant’s strategy in the crucial market, where European rival Airbus already has a final assembly operation for medium-range Airbus A-320 aircraft in the northern port city of Tianjin and plans to open a new completion and delivery center for long-haul A-330s.

A report by the Shanghai Securities News on Tuesday said plans for a Boeing facility in the eastern Chinese province of Zhejiang have already been submitted to the central government in Beijing for approval.

Representatives of manufacturer COMAC could not be immediately reached on Wednesday.

But China wants some of the market to go to its own homegrown planes. COMAC is already developing a Chinese narrow-body, the C919, as well as a smaller regional jet, the ARJ21, in commercial hub Shanghai.

The company also plans to develop its own wide-body passenger plane over the next decade in cooperation with a Russian firm, industry officials said.

The Chinese buyers in the aircraft purchase deal include China Aviation Supplies Holding Company, ICBC Financial Leasing Company, and China Development Bank Leasing, Xinhua said.

A spokeswoman for China Development Bank Leasing in Shenzhen confirmed an order for 30 Boeing planes.

ICBC Financial Leasing Co. plans to buy 30 Boeing Next-Generation 737s, according to a newspaper under China’s aviation regulator.

In July, China Eastern Airlines – one of the country’s biggest carriers – agreed to purchase 50 of Boeing’s Next-Generation 737-800s in a deal valued at $4.6 billion based on list prices.

In the US, China’s top state planner also signed an agreement with Boeing on strategic cooperation in the civil aviation industry, Xinhua reported, without giving details.

Open environment

September 23 morning in Seattle, Xi held a mostly closed roundtable meeting with 30 Chinese and US CEOs, listening to and seeking to assuage their concerns over China’s economic slowdown and its tough environment for foreign investors.

“In the long run the fundamentals of the Chinese economy are good,” he told the chiefs of, among others, Amazon, Apple, Disney, Microsoft, and Berkshire Hathaway on the US side, and Tencent, Baidu, and Cosco on the Chinese side.

He noted that China last year became the largest recipient of foreign direct investment, $128.5 billion worth, and that its growing population would need more goods and services, from cars to tourism, including those from US companies.

“China will open up still wider to the outside world: without reform there will be no driving force, without opening up there will be no progress,” he said. “We will continue to build a law-based business environment, an open environment.”

Despite the warm words, Xi faces deep skepticism within the powerful American business industry, from US employees at Boeing now fearing for their jobs to accusations Beijing is not doing nearly enough to protect the intellectual property rights (IPRs) of US companies.

“We will stand firm to protect IPR,” he pledged.

Counting on you

Turning to Chinese companies, Xi said they will invest $1.25 trillion outside the country over the next decade and were already major employers of Americans –including, in a pointed reference, the 100 Chinese companies that have invested in the deeply depressed economy of Detroit.

He called on US business chiefs to help make things easier for Chinese investors and raised a frequent complaint they had about working in the US – US controls on technology exports to rival countries like China.

“Chinese companies also hope to see substantive steps by the US to ease restrictions on exports of civilian high-tech items to China, and create a level-playing field for Chinese investment in the US,” he said, turning the tables on his hosts.

“We count on the US business community to play your positive role and help make this a reality.” – Rappler.com