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Chinese sanctions seen as possibly affecting US aerospace firms

Newly disclosed Chinese sanctions against US defense companies have raised concern that US aerospace companies United Technologies and Gulfstream could be caught in the crosshairs.

China's foreign ministry spokesperson Geng Shuang said on 12 July that "China will impose sanctions on the US enterprises involved" in a recent $2.2 billion sale of US military equipment to Taiwan.

"The US arms sales to Taiwan constitute a serious violation of international law," Shuang said in a statement. "It also undermines China's sovereignty and national security."

Shuang did not mention details about the threatened sanctions, and the potential scope or impact remain unknown.

China's move follows the US Defense Security Cooperation Agency's 8 July announcement of the deal, which includes sale to Taiwan of a range of military equipment made by Raytheon and General Dynamics.

The equipment includes Raytheon Stinger missiles and General Dynamics Abrams tanks.

The threat of sanctions come as Raytheon, largely a military equipment provider, moves closer to closing a pending merger with Collins Aerospace and Pratt & Whitney – the aerospace units of United Technologies. The companies expect the deal will close in the first half of 2020.

Collins and P&W have significant commercial activities in China, one of the world's largest and fastest-growing aerospace markets.

"My main concern about this threat of sanctions toward these companies is if it would have any effect on the UTC-Raytheon merger," says Michel Merluzeau, director at aerospace consultancy AIR. "If you are UTC, if this transaction goes through, could this have any impact on your access to the Chinese market?"

Neither Collins Aerospace, P&W, UTC nor Raytheon immediately responded to a request for comment.

"If you are UTC, there's a lot at stake in the Chinese market," adds Merluzeau.

Also unknown is the potential impact on business jet maker Gulfstream, a subsidiary of General Dynamics.

Gulfstream also did not respond to a request for comment.

During a media briefing in March, Gulfstream's senior vice-president of worldwide sales Scott Neal stressed the importance of the Chinese market to the company.

"I think there is enormous opportunity in the Asia-Pacific region, especially mainland China," he said. "We were one of the first OEMs to significantly invest in China, in terms of people and planes, and we established a strong market following very early."

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