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Why China Buys Boeing

Aug. 05, 2021 1:20 PM ETThe Boeing Company (BA)EADSF161 Comments


  • Boeing 737 MAX is on its way to China to support recertification effort.
  • Recertification of the Boeing 737 MAX in China will allow the company to boost production.
  • China also has interest in recertification of the MAX as part of a longer-term trajectory.
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Boeing Test Flights Continue For MAX Planes Before Shipment To Customers
Stephen Brashear/Getty Images News

In a previous report, I had a look at the importance of access to the Chinese aircraft market for Boeing (NYSE:BA). What I concluded, and will be further supported in future analyses, is that for Boeing


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This article was written by

Dhierin Bechai profile picture

Dhierin-Perkash Bechai is an aerospace, defense and airline analyst.

Dhierin runs the investing group The Aerospace Forum, whose goal is to discover investment opportunities in the aerospace, defense and airline industry. With a background in aerospace engineering, he provides analysis of a complex industry with significant growth prospects, and offers context to developments as they occur, describing how they might affect investment theses. His investing ideas are driven by data informed analysis. The investing group also provides direct access to data analytics monitors. Learn more.

Analyst’s Disclosure: I/we have a beneficial long position in the shares of BA, EADSF either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (161)

Here’s a reference, Wall Street Journal Editorial, July, 9 th, 2021. Not direct China connection but states potential prices. Can ‘t find the reference to Chinese buyer, but will keep looking.
10 Aug. 2021
Dhierin, I saw Boeing sent a 737 Max to China last week. If China were to recertify, do you have a feel for the timeline on this announcement? I suppose that is the billion dollar question.
Epistertrophy how exactly is the Biden administration standing up to China Our allies are all too willing to do business with China. And selling Hunter Biden’s painting to a Chinese “ businessman” for 500k doesn’t meet the smell test.
@Old Wizard President President Biden is building a coalition with our allies to counter China. Capitalism and business is by definition competitive. Hopefully this will make it more difficult for the Chinese government to cheat and play businesses from different nations against each other with unreasonable and arbitrary regulations

Stop spreading misinformation. No such sale of art occurred by his son to any Chinese citizen. Hunter Biden's paintings are planned to go to auction in the Fall. The buyers will be anonymous to avoid the possibility of influence peddling.
ransim7222 profile picture
@epistrophy How do you know that such a sale did not occur? Are you by chance privy to who buys his novice art? If so, prove it and give us their names, or admit you are spreading your own misinformation.
@ransim7222 Like I said, none of his paintings have been sold yet. The auction is planned for October. Insisting otherwise is spreading a defamatory lie.
Booban profile picture
"One could of course say that Boeing is actively supporting China's aspiration to compete with Boeing and Airbus one day and that is true, but by ignoring the sales potential in China completely Boeing will lose out more while the threat from China as a competitor does not become less."

Yeah, same story, China playing off the greed of western companies to give them cutting edge capabilities to compete and destroy them in the future.

The only thing that is saving western aviation industry is that the jet engine makers aren't this stupid and have no need to co operate with the Chinese. And probably the govt. is stopping them.
jamyl jim nograles profile picture
China is excellent in business. American B 737 may lose its luster due to political conundrum.
Ben Gee profile picture
@jamyl jim nograles America is shooting itself in the foot.
ransim7222 profile picture
@jamyl jim nograles
They probably are just following the guidance of Fearless Leader.
Very good article. Boeing has been fined for selling a plane to China which contained a transistor for direction finding. They also got fined for selling a 20 year old machine with permission from the US and then discovered that they violated the terms of sale.
Let them work on the finishing center. You probably will not get a complete tour. It has toxic chemicals. Try standing in a paint room. You will not want to stay there long due to the paint vapor.
China sends their best engineers to the US for phd's. They usually stay here. I've met many of them in college.
ransim7222 profile picture
@Fred Banks "FBI arrests five in alleged ‘Operation Fox Hunt’ plot to stalk and pressure citizens to return to China"

@ransim7222 As a retired Boeing employee, we have to be aware of espionage, from friend or foe.
@Fred Banks Waiting FOR China answer ON CERTIFICATION!! Don't trust those a-hole!! What's really happening. Like China aviation experts have better understanding of what happen with 737.
@jteamaz Chinese purchases of American debt aren't a favor to the U.S. They're a side-effect of the lop-sided trade imbalance between the two countries. China needs to invest their surplus dollars somewhere and sending them back here is their only option. It's also in their interest to ensure that the dollar isn't devalued, since they hold so much U.S. debt. It's a highly dysfunctional co-dependence.

China is playing a zero-sum game. Make no mistake, China intends to harm the U.S. at its first opportunity. There is no "win-win" scenario here. Technology transfer to China was a huge mistake for which Western countries will be paying dearly. The U.S. has been played for fools for decades. The Biden administration seems to be facing up to this reality. Our strength is in unity with Western democracies to stand up to intellectual property theft, forced-technology transfer, and other free-trade violations by a hostile authoritarian government. No more so-called "completion centers" and "joint ventures."

Without U.S. investment and technology, China would be economically on par with North Korea, if not more impoverished.
ransim7222 profile picture
So, once again we are confronted with the knowledge that no one in the business world reads any history at all. Boeing and Airbus are assisting China in becoming their replacement. For what possible reason, other than increased profits now? Look at the similar assistance given to Hitlers' Germany, and Imperial Japan, and the USSR during their early days, and how did that work out? This displays a complete lack of future planning and prudence on the part of all of them, Boeing, Airbus and the like.
US companies who sell and manufacture in China need a game plan to keep steps ahead through their R&D. Also they need to keep those advances away from Chinese hackers. Whether Boeing does these steps effectively is the issue.
Doc 224899 profile picture
...or, China will just copy the renovated 737MAX and rob the tech (they'd never do that, would they?)

Their air superiority fighter is a clone of the F35. They don't even try to hide it.


@Doc 224899 This is America's own fault ... Americans want cheap crap so China has exploded as a result. Also, don't bite the hand that feeds you, China buys a LOT of American debt. If not for them we would be bankrupt about now. This will not change anytime soon.
@jteamaz Japan buys the most American debt.
Ben Gee profile picture
@Doc 224899 China has enough problems on its own without owning any part of the US.
The US can have its own problems.
taplinger profile picture
@Dhierin Bechai - Great article, I wish you had talked some about the current administration's continuing China tariffs. Xi expected Biden to drop them when he took office and he didn't. Some say that had he dropped the tariffs then the MAX would have been in the air over China the day the FAA recertified it.

What does China gain by stretching out the recertification process indefinitely?
@taplinger anything that causes America to lose its competitiveness you can count on China to pursue it. Whatever they can steal they will. The delayed recertification is all political. The world has woken up to China’s modus operandi. Yes, it’s a huge market but dealing with the CCP and it’s one-sided commerce laws you are basically selling yourself to the devil and will eventually come back to haunt you. On that note, I will never fly on a COMAC made aircraft.
@ryguy1 cannot agree more !
@taplinger China would loose jobs at the finishing center.
Manufacturing commercial jets is a long product-cycle business, so it will take COMAC a long time to have a competitive product. This is very different than telecom equipment -- where one learns from failures quickly and one can relaunch a new product the next year with improvements.
@value investor 5 when it comes to telecom equipment, China mostly learns by stealing and reverse engineering.
Ben Gee profile picture
@value investor 5 20 years is a short time for China. China has plans up to and beyond 2060 and 2078.
@ryguy1 I thought this was common knowledge
Why do anything for China. Keep even the minimal jobs in America. Well need them since our Southern border is wide open.
Ben Gee profile picture
@montauk77 Who is doing anything for China? Certainly not the US.
When Trump stop selling commuter chips to China, Japan make a killing selling computer chips making equipment to China.
If the US think Japan is on its side, the US is fooling itself.
While US is not selling high tech equipment/products to China, Germany made a high tech trading agreement with China.
Who is the biggest fool?
@Ben Gee this is why you need a plan with the rest of the world and keep other countries in check.
If not, will never work.
@Ben Gee Nobody on our side. The world vs USA.
"Why China Buys Boeing"? The answer is simple, they want to do reverse engineering.
emcsqard profile picture

"The answer is simple, they want to do reverse engineering."

All they need then is one plane. China is a huge country geographically, with a population of at least 1.4 billion people. They need planes and Airbus is sold out for some time to come. Where else are they going to go?
Dhierin Bechai profile picture
@MAGA2050 Unlikely to be case, for reverse engineering they already got hundreds of aircraft that they could yank the tech from.... it's all about setting up that system and learning from it.
@Dhierin Bechai DB, this is the counterintuitive part you mentioned, which I wasn't appreciating before reading this article. I understand, you learn by doing. On this note, do you think China will eventually require Boeing to manufacture planes in China (i.e., go beyond its completion center)?
The points in this articles show why It will badly hurt China's airspace aspirations if it to stall recertification of BA 747 MAX.
Because they're cheap after all the mess?
05 Aug. 2021
Great article, Dhierin. Keep them coming. I foresee a day when COMAC and Boeing form a much larger JV much like GM, VW, and others have done in the automotive industry. You cannot just walk away from the largest aircraft market in the world, now and far into the future.
China is the modern day enemy, doing business with them is such a illogical business move ( as the world has been doing for 30 years now)
Will we ever learn?
emcsqard profile picture

“Keep your friends close; keep your enemies closer.”
~Sun Tzu (who BTW was a Chinese general)
First we (eagerly) sell them the rope, then we teach them how to tie the noose.
“All of these are positives” for Boeing. You missed one: China’s massive trade surplus with the USA means a massive amount of USD to dispose of as the Fed’s infinite dollar printing debases the currency. If China wants to trade its paper fiat dollars for real assets, buying jet airplanes from Boeing is a good way to do it.
Dhierin Bechai profile picture
@Comityguy Indeed. Should have mentioned it, but that argument is part of the political/trade piece that is part of this series.
@Comityguy Sorry, take a finance and banking course. The fed cannot print infinite money. They have controls on the money supply to keep the economy balanced. The fed only sets interest rates on how much they lend to Banks. This is called the fed funds rate.
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