TAKING OFF

Boeing’s new plant in China just delivered its first plane

More to come.
More to come.
Image: Reuters/Thomas Peter
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Boeing, America’s largest exporter, delivered its first plane finished in China this weekend. Built for Air China, the 737 Max was completed and delivered on Saturday at a new facility in Zhoushan, outside of Shanghai.

Many more will follow. With its burgeoning middle class, China is expected to need about 7,700 commercial planes over the next two decades—representing $1.2 trillion in potential sales, according to Bloomberg (paywall). China’s airlines are already the biggest buyers of 737s, which are Boeing’s largest source of profit. China will soon be the world’s biggest airplane market.

The Zhoushan facility is a joint venture with state-owned plane maker Commercial Aircraft Corporation of China (Comac), which last year completed the maiden flight of its C919, roughly the same size as a 737.

Work at the facility was limited to the plane’s interior, including installing seats and other cabin equipment. More responsibilities will be added over time, such as painting the exterior, but the center is primarily meant for completion and delivery, with the main manufacturing remaining in the US.

Guests attend a ceremony marking the 1st delivery of a Boeing 737 Max passenger airplane to Air China at the Boeing Zhoushan completion center in Zhoushan, Zhejiang province, China, December 15, 2018.
A ceremony marking the Zhoushan center’s first 737 Max delivery.
Image: Reuters/Thomas Peter

While yesterday’s delivery was a big step for Boeing—it has no other overseas factories—rival Airbus has been assembling its A320s in China for about a decade, and it recently added a completion and delivery center for A330s at its Tianjin campus, according to Bloomberg.

Beyond competition from Airbus, Boeing faces another challenge in its most promising market: the simmering trade war between the US and China. During his presidential campaign, Donald Trump criticized Boeing’s plan for a China plant, saying it would take jobs away from US. His administration has imposed various tariffs on China, which has responded in kind. The US has also set a hard deadline of March 1 for a trade deal to be worked out, indicating that otherwise tariffs will be raised to 25% from 10% on $200 billion of Chinese goods.

Asked if he feared new tariffs from China should a deal not be reached, Boeing CEO Dennis Muilenburg told CNBC earlier this month that “it’s certainly something we’re keeping a close eye on,” saying his company is “very engaged with governments in both countries.”

Noting China’s need for planes, he added, “Both countries are motivated to find a solution.”

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