Deteriorating relations between Beijing and Washington have constrained US exports of aircraft to China, analysts said, with decoupling set to cause a further decline in aviation trade in the future.
China and the United States have been locked into a bitter trade battle since 2018 and the two countries are competing intensely in technology and defence, as well as for international influence.
"I do not see decoupling happening in the short term due to the close link between China and the rest of the world. But in the long term, decoupling is a trend that will continue," said Henry Gao, an associate professor of law at Singapore Management University, and a long-time researcher of international trade issues.
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In 2022, US exports of aircraft, engines and parts to China, its largest export market, were worth US$5.53 billion, a small rise from US$4.71 billion in 2021, but less than a third of the record US$18.22 billion shipped in 2018, according to data from the United Nations COMTRADE Database.
The US-based Peterson Institute of International Economics (PIIE) attributed the plunge of US aviation exports to China, once a big buyer of Boeing jets, to "geopolitical differences".
"Out of dependency concerns, China may be especially hesitant to buy Boeing products, after observing how Western countries imposed sanctions on exports of aircraft parts and services to Russian commercial airline fleets, following Russia's invasion of Ukraine in February 2022," said PIIE in a report last month.
Stephen Olson, a senior research fellow at the Hinrich Foundation and a former trade negotiator with the Office of the US Trade Representative, said that the decline in trade could be a case of interests diverging when it comes to civilian aircraft.
"China has prioritised the development of a domestic competitor and China's home-grown C919 appears capable of favourably competing with Boeing's workhorse aircraft such as the 737. As the C919 comes online, demand for Boeing jets is likely to decline further," said Oslon.
China has invested heavily into the development of its narrow body passenger jet, which is designed to compete with Boeing's 737 and Airbus' A320.
After more than 14 years of development, the C919 received certification last year and is expected to go into commercial operation early this year. However, key components, including its engine, are still imported, many of which are from US manufacturers.
Boeing's sales in China have tumbled since 2018. Its 737 MAX only returned to service in January after being grounded in the country for nearly four years following two deadly crashes in Indonesia and Ethiopia.
In January, Dave Calhoun, chief executive of Boeing, voiced hopes in an interview with Bloomberg that a coming visit to China by US Secretary of State Antony Blinken would lead eventually to "robust" plane orders.
However, Blinken subsequently postponed his visit to Beijing after a suspected Chinese spy balloon was tracked flying across the US in what Washington called a "clear violation" of its sovereignty.
Other US business executives in aviation have argued a loss of access to the Chinese market would mean a reduction in US manufacturing output, falling revenues for the firms involved, and thus American job losses and reduced research and development spending.
US Trade Representative Katherine Tai told Bloomberg in October that Boeing is a "very important stakeholder", but the company on its own does not determine US trade policy.
Olson said while Tai's comments did not point to a total decoupling, they signalled the days in which companies essentially had carte blanche to export, transfer, or partner with Chinese entities on the development of sensitive technologies is probably coming to an end.
"The administration feels that we are in a fundamentally different era now, and strategic considerations, especially surrounding China's access to US technology, will play a greater role in US trade policy," Olson said.
"The net result could be greater restrictions on the ability of companies with sophisticated technologies like Boeing to do business in China."
The US will continue to keep a close eye on technology trade and investment with China and potentially further ratchet-up its restrictions, Olson said.
"It is possible, if not likely, that Boeing's heyday in China has passed," he said.
Wan Xiangdong, the chief pilot at aviation regulator the Civil Aviation Administration of China, said at an airline safety event last month that "China-US civil aviation cooperation is an important part of China-US relations" and that the two countries have "extensive cooperation in aircraft and airborne equipment manufacturing, pilot training, air traffic management as well as emission reduction".
"Facing the changing situation, strengthening cooperation is the only solution. Civil aviation industries in China and the United States should strengthen exchanges and cooperation on the basis of equality and respect," Wan was quoted as saying by state media.
Gao said it would be difficult for the US to manage economic relations with China while stepping up export controls.
"That would require a delicate balance which I am not sure is possible under the current political environment," Gao said.
"But the US could learn from the EU's approach, especially the recent call to de-risk rather than decouple from China by EU Commission President Ursula von der Leyen."
Ahead of her three-day visit to China with French President Emmanuel Macron, which starts on Wednesday, Von der Leyen said it was not viable to decouple from China, but it was critical to focus on reducing the risks posed to Europe.
Economically, the European Union needed to "rebalance" the relationship and reduce its reliance on China, she said.
Wary of growing restrictions on its access to US technology, China has been focusing on increasing its manufacturing capability to reduce reliance on imports.
Former World Bank vice-president Justin Lin Yifu, who is now a professor at Peking University, said China's economic prowess, investment in the digital economy, industry chains and the size of its market are among the advantages in innovation, despite struggling in some areas of advanced manufacturing.
Beijing will mobilise resources, talent and funding in targeted areas to achieve breakthroughs, Lin said in a speech last month.
"Although there are costs, it is not a dead end. We not only have the opportunity to overcome the challenges, but may even create a new path," Lin said.
This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2023 South China Morning Post Publishers Ltd. All rights reserved.
Copyright (c) 2023. South China Morning Post Publishers Ltd. All rights reserved.
