ARE YOU READY FOR A TRADE WAR? THE C919 WILL WIDEN THE GAP AND HIGHLIGHT THE ISSUE OF THE CHEAP CHINESE CURRENCY

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By TESTCustomwebLP TESTCustomwebLP November 12, 2010 10:11

ARE YOU READY FOR A TRADE WAR? THE C919 WILL WIDEN THE GAP AND HIGHLIGHT THE ISSUE OF THE CHEAP CHINESE CURRENCY

While Airbus and Boeing continue to beat each other with sticks at the WTO over government subsidies, the Chinese, Iranians, Russians and Indians have been working on their own plans. Russia of course has the support of Boeing, Iran has support from various countries but is likely to build aircraft in the first instance for its own domestic market because it cannot buy exports due to UN-backed embargos and the US trade embargo. India’s own ambitions are quite some way off; China on the other hand is a different animal altogether.

Yesterday we ran a story confirming that Chinese aircraft manufacturer, Commercial Aircraft Corporation of China (COMAC) is all set to announce next week its first order for the single aisle 160 seat CFM Leap X powered C919. This is a serious aircraft with serious ambitions that, at the very least, could ensure domestic control of aircraft manufacturing in the gold standard bracket where the A320 family and 737NGs currently reside. Boeing stated back in the summer at Farnborough air show that it thought the C919 to be at the vanguard of the Chinese march to become the third player in the global aircraft market. Airbus’s Tom Enders said last month that he thought the C919 to be a big threat and one of the driving forces behind the need for a re-engined A320.

So as Boeing and Airbus executives reach for the stiff drinks cabinet one more time they will no doubt ponder the facts. The reality here is that the US and EU cannot compete with China on price. The Chinese yuan has and is being kept deliberately low, so low that China is able to export with impunity while the US and EU find their goods far too expensive to penetrate the Chinese market. The Fed in the US has and is doing everything it can, yesterday it once again started to print money in a bit to help balance the trade deficit with China, amongst other things, but it is likely that on the Chinese front this will fail unless China takes action. The US President and EU leaders have all spoken to the Chinese government about the issue but as yet there seems to be no movement from Beijing and as such China continues to pull money in from across the globe as its exports flourish. Aircraft though are an eye opener, however. Their value ensures that they make headlines in balance of trade reports and so it could well be that in the long term China’s aircraft manufacturing growth could help to force the Chinese government to take action.

It could be that a large batch of orders for the C919 could start a full trade war between the EU/US and China, which will make the current WTO dispute look even more stupid than it has up to this point. Keep an eye on this story as it runs but be very sure about one thing, CFM are the big winners in all of this.

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By TESTCustomwebLP TESTCustomwebLP November 12, 2010 10:11
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