January 27, 2023

When the ruling Communist Party of China released its 14th Five-Year Plan in 2021, its main objective was “self-reliance in science and technology as a strategic foundation for national development”.

But a year later, experts say the ongoing wait for delivery of the single-aisle C919, China’s first passenger jet, is a reminder that the country’s civil aviation industry is lagging “decades” behind the West, remaining heavily reliant on Western suppliers.

“The jury is out on whether China can develop an internationally recognized and successful aerospace industry,” said Sash Tusa, an aerospace and defense analyst at Agency Partners.

The C919 was supposed to arrive at the end of last year. No delivery date has been set, although the first test flight of an aircraft to be delivered was completed in May. The aircraft is being developed by the Commercial Aircraft Corporation of China (Comac), a state-sponsored group originating from the Chinese military.

China will be the largest air travel market in the world, according to the Center for Aviation, with 248 operational airports.

It is now one of the two main markets for the two global aviation giants Boeing and Airbus. Boeing predicts that one in five commercial aircraft ordered between 2021 and 2040 are destined for customers in China.

At the beginning of this month, Airbus announced a deal with four Chinese airlines for 292 single-aisle A320 aircraft, worth $37 billion in ticket value. But according to Jim Harris, who leads the aerospace and defense practice at Bain & Company, Comac will end China’s Boeing-Airbus duopoly for large commercial aircraft before 2040.

Bar chart of share of traffic by region (%) indicating China's aviation market will overtake the US

“The Chinese government is willing to invest tens of billions of dollars to achieve this strategic outcome, and China offers a large domestic market in which Beijing can place orders for Comac, even if the C919 is less competitive than Western alternatives,” he says.

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Analysts estimate that the development of the C919 was supported by between $50 billion and $72 billion in state aid, compared to the $22 billion Airbus received for the A320 and other models, according to the World Trade Organization.

Comac has so far received 815 orders from 28 parties for Rmb 500 billion ($74 billion) according to its website, almost all from Chinese domestic airlines such as China Eastern Airlines and Shenzhen Airlines.

The group aims to control one-third of the Chinese domestic market for large aircraft by 2035. A 2018 Airbus report predicts that the Chinese domestic market will need 7,400 additional aircraft by 2037.

However, for the global market, industry insiders say the 168-seat C919 is not as competitive as it is less fuel efficient than Boeing and Airbus jets and it will struggle to draw international buyers away from the two groups.

Airbus says that while it expects “some” of China’s domestic demand to be met by C919s, Comac internationally does not have the infrastructure and investments to threaten the Airbus-Boeing duopoly.

To achieve wider market success, Comac needs an international sales organization and an established customer support network. Indeed, it took Airbus about 40 years to keep up with American manufacturers,” the company said.

The C919 also shows how far China is developing a completely proprietary aviation supply chain, exposing it to geopolitical risks. It relies on Western companies to manufacture the most complex parts, including the engine, which is the product of a joint venture between US GE and French Safran.

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This means that although the aircraft and many of its parts are manufactured by Chinese assembly lines, the company relies on intellectual property and after-sales services from Western companies.

Tusa says Beijing learned a lesson about what would happen if relations with the west deteriorated by witnessing sanctions that crippled the Russian aviation industry by withdrawing Western expertise and supplies of spare parts.

“To take a C919 and turn it into a China-only aircraft would require a redesign, testing every single certificate, the engines being the most important. I’ll see you in the late 2030s,” he says.

Comac has already been pressured by the tensions between the US and China. It was placed on a Trump administration’s watch list in 2021 for its alleged military ties, though the Biden administration removed it months later.

Geopolitical tensions surrounding China are also a concern for Western suppliers. Harris of Bain warns that they will have to “walk a fine line between capitalizing on growth opportunities in the Chinese market and engaging a future competitor”.