More foreign companies in China are realizing the deck is stacked against them. And a trade conflict with the US is brewing.
But Boeing, America’s premier aerospace company, is undeterred. It is setting up a ‘finishing plant’ for 737’s near Shanghai this year.
Getting a cut of an estimated $1.1 trillion demand for over 7,000 aircraft in the Chinese market over the next 20 years is alluring for any company.
Jumping into the PRC is, of course, risky – given the Chinese track record for stealing or strong-arming technology, lack of an honest legal system and discrimination against foreign companies – especially successful ones.
But it’s even riskier for Boeing. The PRC sorely wants into the commercial airliner market.
China has done well with military aircraft, and already bought a chunk of America’s general aviation industry and its technology.
But building reliable commercial airliners to compete with Boeing and Airbus is tough. It’s one key industry the Chinese haven’t mastered.
So Boeing’s move into China puts it squarely in the crosshairs of PRC industrial policy – and on Chinese turf.
No doubt Boeing gave the China decision much thought. But it would not be the first company entering the PRC market with high hopes – that didn’t pan out.
The company’s major shareholders might ask (or re-ask) a few questions of Boeing management. The US Government might attend the meeting too – given that Boeing is a major defense contractor.
The first question: It seems the CIA can’t even keep its secrets in China. Can Boeing? Setting up operations in China is giving away home-field advantage – and that matters when technology is in play.
Boeing, of course, knows to protect its technology. But the Chinese Communist Party has an army of hackers – and successful ones. They scoured the US Office of Personnel Management records, looted a major Japanese manufacturing company of its technology, and stole F-35 technology – to name a few successes.
Why is Boeing so sure it’s safe?
Even if Boeing makes it tough for hackers, there’s still human spying – which China excels at – and the PRC has targeted Boeing over the years. This won’t stop and it’s quite possible Boeing’s local employees in China could receive offers they can’t refuse.
Boeing hopefully puts as much effort into protecting technology as it did in creating it.
Next, shareholders might ask if Boeing is creating its own competition?
Boeing may only be providing ‘old’ technology or relatively simple ‘finishing work’. But Chinese industrial and technological advances aren’t always linear. Chinese entities have shown impressive ability to ‘leap over stages’, to use their expression.
What happens when the PRC government suggests that more than just ‘finishing work’ is desired?
How far will Boeing go to accommodate? Will Boeing allow more complex operations in China – and even more technology transfer? It’s unlikely the Chinese will accept just ‘finishing work’ in the long term.
And what happens if Boeing is pressured, as was IBM a couple years ago, to allow review of product source code – “just for security purposes of course.” IBM caved. What’s Boeing’s plan if this demand comes?
What about Boeing’s Chinese joint venture partner?
Besides allowing access to Boeing’s business and information there are always diverging interests. The partner ultimately wants to put Boeing out of business – and the Chinese government does too. Plenty of companies have come to grief via a joint venture. Why is Boeing so confident?
It’s wise to recall the Chinese expression: “You die, I live” – rather than the CCP’s cliché’ ‘win-win’.
And the Chinese government is pushing all foreign firms to allow CCP cells inside their companies – with an implicit role in company management. How will Boeing finesse this – without ‘violating the interests of the State?’
Then there’s CCP capriciousness. The PRC government can always find something Boeing has done – as Marriott hotels recently did – that offends all 1.4 billion Chinese people – or ‘undermines the socialist system.’ What’s Boeing’s plan if this happens?
Or is Boeing thinking ‘China needs us so much,’ or our connections to powerful people are so strong that Boeing will be left alone? All companies believe that, at first.
Remember, business and international politics intertwine in the China market. Boeing has major defense business – and also supplies US allies such as Japan and South Korea.
What’s Boeing’s plan when the PRC government suggests its defense work with Japan is unhelpful for the company’s sales efforts in the PRC? And it can have either one or the other.
Now the US sees the PRC as an adversary – even though China has viewed America that way for years.
How does Boeing balance its commercial interests with its duty as an American company and as a major defense contractor? It’s hard to straddle the fence forever. What’s Boeing’s strategy here? Are there red lines for the company?
The China market is understandably attractive for Boeing. And there may indeed be reasons to set up in China. But it takes discipline. That’s often easier said than done – as enough money can vaporize principles.
In the China market, things have a way of turning out differently than one expects. Ask Motorola, Microsoft, Google, and Apple.
Boeing should ask itself (repeatedly) why its experience will be different.
What should be shocking (and sad) is that the Asian Times allows a article with so many unprovens to see the light of day. I have no ax to grind with this dude——-BUT his Asian Times articles are biased, lacking in facts and very hateful of China and its leadership. I bet years ago when the Chinese train started down the "Global Tracks" Mr Newsham told everyone (he paints himself as a expert on Pacific Rim Asia) don’t worry about China——–all the dumb Communist, Chinks can make is trinkets, toys, and cheap junk———-they will do whatever the powers in the West tell them to do——————-RIGHT!!
The last statement says it all, stay away.
You mean to tell me you are smarter then Boeing? How come you are still selling on the cheap?
Everybody spy on each others, that’s why you’ve the CIA, NSA, GCHQ, MI5, Mossad, etc. After the WW2 the US ship wholesale scientists and technology from Germany and Japan for their rockets, jet engines, submarines, etc. By far the largest network of spies and intelligence gathering in the world is the USA help with its products and networks such as Telecommuncations network, military, satellites, Google, Facebook, Microsoft, Yahoo, Twitter, etc.
US companies have the choice of selling to Chinese or go home. Much of these are allegations without basis. Yes IBM did have some of its applicatin source codes reviewed. It would be stupid for big Chinese firms not to secured access to source codes. For example, big banks that can invest hundreds of millions dollars if not billions on a strategic business critical information systems can be held hostage to extortionate services from the vendor if it has no alternative to self-support or modifications via the relevant source codes.
Brilliant submission my brother, that is a fact. Which country hacks more than the US? That is what he has ignored, not that he does not know it. The US has been boasting of been more powerful than any country on earth, when it comes to tech. How come Russia and China hack and steal them of so-called sensitive information?
Brilliant submission
The author seems to be a lobbist for Airbus. ????
Grant Newsham is so much smarter and loyal than Boeing. Grant knows that everything their government publishes is bogus including growth figures so really their economic size is way overstated which makes US companies’ desire to move there puzzling. They are all traitors! Wait, no, it’s china’s fault, they are going against their free will! The real story which hopefully Grant will publish next is the chinese installed manchurian candidates in all our companies! 😛
Main gift of the Western Civilization to the world is knowledge as a private good. All others considered it a public good to be shared by all.
Sinic, Indic, Islamic Scientists corresponded with each other. Corporate Capitalist West brought jealousy, privatisation. Western scientists bitterly competed – Newton vs Liebnitz and vs Hooke, Bernoulli family infights are legend; they hid their works from each other to claim discovery, but Ibn-Sina and others liberally debated with their contemporaries as knowledge belongs to God and is a public good.
No one before CCW attached his name to a formula – unheard is Zu Chongzhi’s algorithm, Bhaksara’s equation, or Khayyam’s triangle, vs Faraday’s Laws, Poisson’s equation, or Pascal’s triangle. Unwise West has now named units after its own greats – Newton, Ampere, a futility that only accelerates its decline. Short-sighted CCW pride will only lead them to shun future knowledge as NIH (not invented here) now the centre moves to Asia and to Islam.
In 19th century UK tried to withhold technology from America. It failed. Then West tried to prevent the Soviets to get ahead. Failed again. The present attempt of the West to "hide" or "control" its knowledge from Asia is also failing. The concept of a “patent” is patently a CCW idea.
People in the West still believe that they invent and Asia copies ignoring Toynbee theorized civilizations rise only on innovation. In fact Asia conceived ALL new production methods of last 50 years – Total Quality, JIT, Kanban, FMS, Robotics, that reduced production cost to rock bottom increasing prosperity, while the CCW costs did not fall, making the poor poorer and putting CCW on a banana peel.
With open software the West is beginning to realize that to share is a better way to future prosperity. Knowledge is power, and all power belongs to God and through Him to the entire humanity. The CCW for 500 years tried to own it, and lost in the end. You can not fight Nature.
"given the Chinese track record for stealing or strong-arming technology, lack of an honest legal system and discrimination against foreign companies "
Can the author substantiate these allegations with case history? I suspect not.
China leads the world in most sciences and technologies so has no need to steal or strong-arm anyone, since they also have enough money to buy what they need.
Her legal system is the world’s best: the lowest incarceration rate, lowest recidivism, highest public satisfaction. Its Supreme Court even livestreams its hearings and offers critical commentary on them.
As to discrimination against foreign companies, it must be positive discrimination because companies like Boeing invest more and more money in China every year. Why would they do that it they were not getting a fair share of the profits?
Reddy, as in ‘Red’ Indian, who hates rising China and is jealous of China and remembers the licking the Indian Army got back in 1962. Jealousy won’t get you anywhere, my friend. Hard work will.
If not Boeing, another aerospace company will do it. China is the biggest market. Putting a plant there makes a lot of sense. Industrial espionage happens. The company would just have to live with it while still keeping its business still viable. As for the repressive government of China, you wpuld have to gamble sometimes. This is one gamble that if you win, you win bigtime. If you lose, then you must have a viable course of action to minimize damage to the company itself. The things is business is about opportunities and this is one opportunity worth taking the risk.
737 a painting job in china?
The technology behind 737 is already mastered by China, which is evidenced by the C919. Assembling the 737 in China is simply a commercial arrangement, the author politicized the issue out of proportion.
737 is 50+ yr old technology. Boing is just trying to remain competitive with Chinese origin airplanes, e.g C919. It’s better for China’s future that Boeing doesn’t open plants and remain competitive. Just look at the auto industrial in China, foreign companies rules the top 10. American GM sells more cars in China than in America. China should have protected the industry more like every body else, and more importantly make rules to demand cars suitable for China’s conditions: tie space, less polluting. https://en.wikipedia.org/wiki/Automotive_industry_in_China
The answer, to me, is rather simple. If Boeing is not in China, it will go out of business. If Boeing doesnt sell now, its technology will become valueless as China outstrips it in indigenous technology. So Boeing might as well exploit whatever is left in its IPR. The main advantage Boeing has is not in technology but its business links outside China and also the integration into the world airline industry.
The argument of this CIA paid propagandist will sound reasonable if only Airbus and Bombardier didn’t set up the same assembly lines in China or the fact that China already has knowledge on how to build a plane.
This man is with NED, the agency that laid the groundwork for the Ukrainian coup, making possible the deposing of an elected president and the installation of a US client regime.
Timely example of the US bad-mouthing against China.
To your comment, I would add that the US soft power is in decline helplessly because people around the world as well as Americans have seen times after times how hypocritical and warmonger the US is, and how meaningless those words, such as "freedom" and "democracy" out of American politicians’ mouth have become.
What a lousy article! is this an analysis?
Been in China, seen rip off machinery in the Oilfield they copy everything.. badly with poor quality, they followed us around watching evrything we did.. Sensorship was heavy, very limited access to normal Internet web sites..
Joe Wong Theft is not an achievement.
Joe Wong Theft is not an achievement.
Ken Kay The Indians are creative people. They do not need to be thieves to succeed. China will see it’s rise shortlived as western countries pull away and India rises faster through innovation. China has to steal for innovation.
Ken Kay The Indians are creative people. They do not need to be thieves to succeed. China will see it’s rise shortlived as western countries pull away and India rises faster through innovation. China has to steal for innovation.