Another reason why China will not soon overtake Western aerospace

C919.gifScott Hamilton’s story about US questions to the WTO about Chinese aerospace subsidies, published first on our CAO subscription service, and then on his own Leeham site, deserves much more attention than it’s been getting. It hints at one of the most powerful reasons why China’s aerospace industry is not going to match the major Western airframers for many, many years to come.

Putting aside the detail (and I realise many of you won’t want to dothat) despite all the dust-ups at the WTO, Boeing and Airbus havemanaged to live with each other, as have Bombardier and Embraer for along time now and everybody is still doing pretty nicely thank you. Andin all the WTO shenanigans, there has never been any sign of thefull-on sanctions that are the theoretical end-point of that process.One reason being that everybody has subsidised skeletons in theircupboards.

But with China it’s different. First, their skeletons are not incupboards but aggressively dancing around like a voodoo B-movie, andsecond the threat posed by the emergence of China as a serious newplayer is simply too awful for the incumbents to allow without atitanic struggle.

Compare with Russia, where at least the government genuinely wants toget the aerospace industry off its burdened national balance sheet.China has unashamedly built its industry courtesy of the state, and nowwe’re seeing the industry buying or creating airlines to buy its products – initially the ARJ21 and C919.

I don’t know if China has any intention of defending this at the WTO,or even of addressing the question anytime soon. I suspect their viewis that, rather like Europe in the early days of Airbus, it’s decidedthat it’s going to have this industry one way or another and the worldis going to have to live with it. That’s difficult to stop, but it willbe a brave company in Europe, USA, Canada or Brazil for starters whowill launch these Chinese products. Which does leave an awfully smallmarket.

I started saying this a good while ago when I challenged Steve Hazy’s views on the matter, and I’ve not seen anything to change my mind. Plus he’s now got just as many problems as me!

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