Aerospace Company Risks - China
While China's secrecy makes it difficult to fully pin down exactly where they stand in terms of their aerospace ambitions, they are growing rapidly on both the civilian and military front, leveraging their state-supported industrial base to compete with the US in the aerospace domain. However, they have not yet caught up on the manufacturing front, and consequently have not yet been able to pivot from importing aerospace vehicles and supplies.
- While it is clear that China has massive aerospace ambitions — for example, the "state-owned China Aerospace Science and Technology Corporation (CASC), for example, currently employs over 170,000 workers, generates approximately $35 million in annual revenue, and currently has its eyes on innovative pursuits such as nuclear space shuttles, micro rockets, and defense technologies" — the government's penchant for secrecy makes it very difficult to judge just how advanced they are.
- China's $70 billion civilian aerospace market, which was dominated by cargo aircraft in 2015, is shifting towards passenger aircraft as it grows at a CAGR of 9.8%, bolstered by "government-provided support for Chinese aircraft manufacturers to research, develop, and build large aircraft."
- However, China's military has the largest share of its aerospace market, with defense aviation combat aircraft dominating, followed by special mission aircraft.
Civilian Aircraft Trends
- China has the fastest-growing aviation market in the world, possibly requiring another "8,090 aircraft over the next 20 years, worth about US$1.3 trillion," as well as a $1.6 trillion aftermarket services sector.
- Boeing VP of Commercial Marketing, Randy Tinseth, says, "An expanding middle class, significant investment in infrastructure, and advanced technologies that make airplanes more capable and efficient, continue to drive tremendous demand for air travel."
China is a Major Importer
- In 2018, US civil aerospace exports amounted to $131 billion, "of which $18.8 billion went to China alone. (For obvious reasons, the US does not sell military technology to China.)" Indeed, civil exports to China are rising even as military aerospace exports around the world are dropping (see figure 1) to the point where civil aerospace exports to China are nearly that of all military exports (figure 2).
Passenger Aircraft Trade Deals
- Notably, China was one of the first countries to ground the Boeing 737 Max 8 airliner after the Ethiopian Airlines crash; this may not have been driven purely by safety concerns, as ForeignPolicy.com notes: "China’s decision to ground the Max, and more recently the threat to cut it from the settlement altogether, gives Beijing more leverage to get a better deal. After all, for Boeing, a China order right now would be a huge endorsement of the Max; having the Max excluded would spread an even darker cloud over what is currently the company’s most important product."
- This is important because China has faced some major hiccups in its attempt to export its home-built aircraft:
- While China is emerging as an aircraft producer, with their first production jetliner, the Comac ARJ-21, being certified by the Civil Aviation Administration of China (CAAC) in 2014, the "has few prospects of entering service outside the country" due to concerns about the CAAC's experience in evaluating aircraft safety, lack of transparency, and control by the Chinese government.
- This led, for example, to half of all the 60 or so exported Xi'an MA-60 civil transport aircraft being withdrawn from use due to "mishaps, fatal crashes, nonairworthiness, or because countries have a perfectly legitimate fear of an unsafe aircraft."
China's Hypersonic Ventures
- In conjunction with the 10th Research Institute, the China Aerospace Science and Industry Corporation (CASIC) is developing the DF-ZF (Dong Feng, or "East Wind"), a hypersonic glide vehicle (HGV) medium-range ballistic missile, as well as the CM-401, "a hypersonic maneuverable ballistic anti-ship missile with the potential to reach Mach 6 speed over an almost 300-kilometer range."
- While the DF-ZF is slower than its American equivalents, according to The National Interest, "it appears much closer to operational status than anything in development in the United States."
- Similarly, the China Academy of Aerospace Aerodynamics (CAAA) is developing the Starry Sky 2, a "hypersonic glider capable of powered flight," reaching a speed of Mach 5.5 while retaining maneuverability at a height of 29 km. The PRC estimates that this project is 3-5 years away from being weaponized.
- The Aviation Industry Corporation of China, Ltd. (AVIC) published an online article in 2015 claiming to have successfully tested "a hypersonic aircraft in the north-east of China." This article has since been deleted, but satellite images of an unidentified UAV at an AVIC hanger and patents for a "high-speed cruising vehicle near space," adding credibility to the rumors.
China's Space Programs
- According to a May 30, 2019, report from the Air Force Research Laboratory and the Defense Innovation Unit, "China is by far the most concerning threat to US dominance in the space technology arena."
- In particular, the report cautions of Chinese "stealth investments," backed by state-sponsored venture capital, in US companies that enable China to "obtain and further exploit US technology or to influence those companies in a direction that serves China’s domestic space priorities."
- Another tactic China uses is to control space supply chains and engage in "predatory pricing of space capabilities."
- For example, CASIC's Kuaizhou-1A solid-propellant launch vehicle is competing head-on with commercial launch systems in the US and elsewhere; the state-subsidized system is offering a highly-discounted rate of $5,000 per kilogram to low-earth orbit, five times less what its non-subsidized competitors can offer.
- On a less-sinister note, China is investing in "space-based solar-power systems for planned proliferated low Earth orbit constellations," and may be in a position to dominate that market.