You will be redirected to the page you want to view in  seconds.

Asia Top 100: Will China's Aviation Industry Steal US Thunder?

Jul. 21, 2013 - 04:22PM   |  
By WENDELL MINNICK   |   Comments
  • Filed Under

CompanyRankCountryDefense Revenue
Mitsubishi Heavy Industries33Japan$2.91 billion
Hindustan Aeronautics37India$2.62 billion
NEC44Japan$1.97 billion
ST Engineering47Singapore$1.89 billion
Kawasaki Heavy Industries51Japan$1.79 billion
Mitsubishi Electric53Japan$1.50 billion
DeNA Co54Japan$1.48 billion
Samsung Techwin65So. Korea$990.00 million
Bharat Electronics69India$956.90 million
LIG Nex177So. Korea$856.89 million


TAIPEI — There are fears in the US, both real and imagined, that China is going to supplant America as the leader in the global aviation industry, just as Japan pinched the automobile market from the US during the 1970s.

These fears include complaints that US aviation companies are moving manufacturing to China, teaching Chinese companies how to make better aircraft and allowing Chinese companies to buy US aviation firms.

No Chinese company is the focus of more anger and alarm than the Aviation Industry Corporation of China (AVIC). AVIC is an ultra-large state-owned enterprise that manufactures commercial and military aircraft.

In 2012, it operated 10 business units and about 200 subsidiaries employing about 450,000 people. AVIC’s defense businesses comprise five core companies: Chengdu Aircraft, Shenyang Aircraft, Hongdu Aviation, Xian Aircraft and Changhe/Hafei Aviation.

Western companies such as Airbus, Boeing, Cessna Aircraft, Embraer, General Electric and Sikorsky are heavily involved in commercial deals with AVIC and, in many cases, are moving jobs and dual-use technology to China.

Over the past several years, AVIC has bought smaller Western companies involved in a variety of manufacturing fields, such as Cirrus Industries, Continental Motors, Deltamarin Shipbuilding, Epic Aircraft and Nexteer Automotive.

Despite AVIC’s efforts to improve its image as a reliable aircraft manufacturer, the company struggles with quality control and a reputation for copying Russian aircraft without consent from Moscow. And although AVIC has recently unveiled two new stealth fighters and its first aircraft carrier-borne fighter, the J-15 Flying Shark, some analysts do not see a broad market for its commercial or military aircraft.

Roger Cliff, a nonresident senior fellow at the Project 2049 Institute, said, “anyone who thinks they are or will soon become major competitors to Lockheed Martin, Boeing, Dassault, et al., is smoking dope. Who would buy their stuff?”

Europe, Japan, South Korea, Russia and the US are not going to buy Chinese weapons. Some former Soviet republics might be interested, but Moscow “will exert maximum leverage to prevent that from happening,” he said.

India is not going to buy from China due to its military support for Pakistan, so that leaves the developing world, such as Africa, Iran and Pakistan, he said.

“The problem here, aside from the small size of the market, is that these countries [except, perhaps, Iran], have lots of other choices,” said Cliff, who co-wrote the book, “Ready for Takeoff: China’s Advancing Aerospace Industry.”

“A country like Brazil, for example, if it wished to buy a modern but not-too-expensive fighter jet, could buy F-16s or F/A-18s from the United States, Rafales from France, MiG-31s from Russia, Gripens from Sweden or J-10s from China.”

China is shut out of the big markets, he said, and has lots of competition in the smaller markets.

Michael Raska, a research fellow in the Military Transformation Program at the S. Rajaratnam School of International Studies, Singapore, said AVIC is in a much stronger position today than a year or two ago.

Recently, “its revenues have continued to soar, its product areas to broaden, its reforms to deepen and its commercial partnerships to expand.”

Raska said AVIC’s business performance has improved since 2005. In 2012, AVIC reported its turnover grew 14 percent to $47.7 billion and its profits rose 5 percent to $20.6 billion.

In 2011, AVIC achieved double-digit growth in both revenue and net earnings. Revenue increased 20 percent to $39.6 billion and net earnings increased over 15 percent to $1.89 billion.

AVIC’s total revenues exceeded those of some Western aviation companies, including BAE Systems, Lockheed Martin and Northrop Grumman, he said, although it did not surpass EADS or Boeing, whose sales reached $68.4 billion and $68.7 billion, respectively.

The value of AVIC’s total assets at the end of that year exceeded $80 billion, and between 2008 and 2011, AVIC recorded a 20 percent compound annual growth rate, Raska said.

However, despite AVIC’s history of violating intellectual property rights, Raska said the company may want to evolve into a global leader that operates within standard business parameters.

This could change how AVIC operates, he said, which “may, in some respects, grow more conservative than disruptive.”

More In Features

Start your day with a roundup of top defense news.

More Headlines



Login to This Week's Digital Edition

Subscribe for Print or Digital delivery today!

Exclusive Events Coverage

In-depth news and multimedia coverage of industry trade shows and conferences.



Defensenews TV

  • Sign-up to receive weekly email updates about Vago's guests and the topics they will discuss.