Dear Fellow President Xi Washington Visit Commemorative Souvenir Shoppers,
A common question I’ve been getting lately: “Have your views on China’s jetliner industry changed?” For many years, in articles, letters (here and here, among many), and government testimony (here and here) I have criticized COMAC’s direction and doubted China’s civil aero prospects. But much has changed with China over the past year or two, so I understand why I’m being asked to revisit this issue.
By the end of this note, I will answer this question. First, economic and strategic context.
The economic backdrop has shifted massively. The extent of China’s industrial and consumer product successes – broadly termed China Shock 2.0 – continues to surprise. Its manufactured products, along with its telecoms and AI capabilities, have improved markedly, along with its technological and industrial base. Many long questioned whether China’s car industry would ever gain traction on export markets; EVs have proved to be tremendous catalysts for their industry’s growth. Chinese car exports have quadrupled over the past four years, most stunningly to European markets (Rhodium Group has a superb analysis here).
It’s not all sunshine. China has serious industrial overcapacity and profitability issues, and a softening domestic market, but there’s no denying their steady rise as an exporter of high value products. So, why not airplanes too?
The strategic backdrop has also shifted massively. President Xi’s visit to Washington this month, with President Trump’s red carpet hospitality, reflected a set of painful new realities. One of them is that China’s threatened rare earths embargo – enacted after the US’s incompetent tariff implementation last April – is now a much bigger problem. The US expended much of its missiles inventory against Iran, and these need to be urgently replaced – with plentiful rare earth imports. Yet the best the US could get out of this visit was a two-month extension of the current uneasy rare earths embargo truce, until early next year.
Meanwhile, the Trump administration’s shabby treatment of the US’s Asian allies (and its friends everywhere) has created a very different strategic picture, another painful new reality for the US particularly with China. Unilateral reviews by the US of defense programs with allies, US troop withdrawals from Asia, the end of US strategic ambiguity with Taiwan, the curtailing of military exercises in South Korea, and of course heavy US tariffs on its allies all mean a serious diminishment of US hard and soft power in the region.
The US pivot AWAY from Asia, therefore, has freed up space for China to assert itself, and that might include jetliner sales. Jetliners are often linked to diplomacy and government export initiatives. Given the decidedly unequal optics and realities of Xi’s Washington visit, it’s a wonder the US didn’t sign for 200 C919s instead of China signing for Boeings. Last May’s 200 jet Boeing sale to China, predictably, remains in limbo.
These big economic and strategic changes can be mutually reinforcing. It’s unlikely that Chinese EVs would have entered the Canadian market if Canada didn’t turn to China as a trading partner after the administration maliciously decided to make Canada enemy #1.
In short, China has played its political and economic cards brilliantly, and the US has given them a massive diplomatic and commercial opening, particularly in Asia. Let’s get to the big question. Have I changed my views on COMAC? No. Here’s five reasons why:
1. This is a B2B (or in COMAC’s case, Government 2B) market; China does best with B2C. Selling to consumers is easier than selling to businesses, particularly highly cost-sensitive businesses like airlines. If you sell a slightly inferior car at a lower price, consumers will appreciate the value. If you sell a slightly inferior jet (the C909/919 are very definitely inferior to their Airbus/Boeing/Embraer analogues), airlines will want nothing to do with it; the higher operating costs will wipe out their thin profit margins. The ratio of capital costs to operating costs is very different between B2C and B2B.
2. China’s (and Asia’s) economic miracle is built on volume, which jetliners don’t offer. Consumer electronics, semiconductors, cars, textiles, all feature high production rates, so producers quickly move up the learning curve. The jetliner industry by comparison involves very small numbers and very shallow learning curves, and a very different set of supply chain management and other skill. This likely explains why COMAC is having a terrible time actually building jets; it planned on 75 C919s in 2025 and built 15; 2026 looks even worse somehow.
3. The PRC doesn’t yet know what COMAC is for. Or at least they haven’t made it clear. Do they want it to be like Embraer, a global exporter making use of the best systems and components available around the world? Or do they want it to be a hedge against autarky, creating aircraft that give China a purely national air transport capability, with totally localized systems and components?
4. National vertical integration is a loser move. The plan, per the previous question, is to make the C919 a hedge against autarky. The C929 might (or might not) be different, but the plan now is to re-do the C919 with in-country components, even the engines. Is it realistic for China to develop completely domestic engines that are at the GE/PW/RR level (even those companies don’t build completely domestic engines)? The only country to mandate that its jets (and engines) be completely made in-country was the USSR. Retro spoiler alert: it didn’t go well.
5. Product support remains a huge question. As my colleague Kevin Michaels has pointed out for years, developing and building a jet are two of three of the table’s three legs; global support and world-class dispatch reliability is the third leg. COMAC hasn’t done this yet, and it will be very expensive and time-consuming. Until then, exports aren’t likely.
So, I’m still not a COMAC believer. But perhaps my answer should be slightly different. Have I changed my views? No. But everything else has changed, and I now feel the need to explain why my views on COMAC haven’t changed…yet.
Yours, ‘Til Air Koryo Serves Dulles With A C929,
Richard Aboulafia