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Nonetheless, by their very nature, joint ventures offer a poten-tial mechanism for evading U.S. export controls, and although the majority of joint ventures between Western aerospace corporations and Chinese entities to date have been in civilian areas with limited mili-tary relevance, the possibility clearly exists for technology transfers of a more military character. The Chinese certainly appear highly conscious of the military implications of various ventures. Thus, while projects of a predominantly civilian nature are generally handled on commer-cial terms, those of more significant dual-use value are conducted with greater attentiveness to China’s security objectives. For example, for its Z-15/EC-175 medium utility helicopter project with Eurocopter, China is currently working on replacing the aircraft’s original Pratt & Whitney engine with a domestically produced model jointly developed with Safran Turbomeca, reportedly as a hedge against possible U.S. sanctions once the helicopter enters PLA service (Morris, 2010).
In addition, the technology level of Western aerospace joint ven-tures in China has increased steadily over time. China has arguably taken a new approach with its ARJ21 regional jet and C919 airliner projects. While both programs involve significant outsourcing to U.S. and EU suppliers for advanced components such as engines and avi-onics, a condition for being selected as a supplier is often that a joint venture with a local partner be set up and local production facilities be established (Mecham and Anselmo, 2010). These new ventures may bring with them significantly newer technologies.
Although Western aerospace companies are generally tight-lipped about the details of their China strategies, and the specific contents of commercial agreements are rarely divulged, a correlation between major aircraft sales and local subcontracting clearly exists, suggest-ing that offset arrangements are indeed a major consideration in many deals. In this regard, the competition between Boeing and Airbus is the most visible and instructive. In 1995, Boeing held a commanding lead over Airbus in the Chinese market, accounting for roughly 60 percent of the Chinese commercial fleet and more than 80 percent of all new orders (“China and Boeing Partnership Delivering Value,” 1995), while Airbus held a mere 7 percent market share with only 29 planes sold (“Airbus in China,” 2010). By 2010, however, Airbus’s market share had risen to over 43 percent, while Boeing’s share had fallen to roughly 55 percent (World Aerospace Database). In media interviews, industry experts rarely discuss the role of offsets in the competition between Boeing and Airbus, pointing instead to factors such as the lack of Chi-nese cultural and linguistic expertise at senior levels of Boeing man-agement, Boeing’s sometimes short-sighted preoccupation with cost control, Boeing’s perceived complacency in customer relations, and even the entry-visa difficulties experienced by Chinese airline execu-tives after the 9/11 attacks. For its part, Boeing management dismisses the Chinese complaints as routine disagreements between buyers and sellers and attributes Airbus’s success to its strategy of “flooding the market with surplus production at discount prices” (Heim, 2005).
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Ready for Takeoff China’s Advancing Aerospace Industry(28)
