The 2017 maiden flight of the first commercial airliner made in China represented an important step toward China’s goal of becoming a world leader in aviation.
But China used questionable methods to acquire the technology and know-how needed to build its passenger plane, known as the C919, according to a recent investigation by the U.S. Trade Representative.
China’s practices in this case, and others, led President Trump in March to recommend tariffs on designated U.S. imports from China.
The Trump administration is “addressing what is a critical area for the aerospace and defense industry, and that is protecting our intellectual property,” Marillyn A. Hewson, president of Lockheed Martin Corporation, said standing alongside Trump at the White House earlier this year. She said intellectual property is “the lifeblood of our companies,” and its theft presents a serious threat to U.S. manufacturers.
China is the world’s largest market for airplanes and airline passengers. Two foreign airplane manufacturers — Boeing from the U.S. and the European Airbus — produce nearly all the planes in China.
To change that, the Chinese government created in 2008 the Commercial Aircraft Corporation of China, a state-owned enterprise that would produce the C919.
Manufacturers from the U.S. and other countries were eager to participate in China’s enormous aviation market, but they soon discovered China attached strict — and many say illegal — conditions to help develop the C919.
“The Chinese attitude toward foreign suppliers is to use them to the extent that is necessary to develop China’s own industry, which includes a raft of policies ranging from subsidies to intellectual property theft to intellectual property extortion,” said Alan Tonelson, a trade expert who advised the Trump campaign before the 2016 election.
Specifically, China coerced companies into giving up their technologies to do business in China, a practice known as “technology transfer.” For example, the Commercial Aircraft Corporation of China:
- Insisted that foreign manufacturers enter into joint ventures with Chinese manufacturers.
- Told companies bidding to supply the C919 that they would find greater success if they set up local production facilities.
- Pushed 16 international suppliers to partner with domestic Chinese companies to develop technologies.
The end result: Chinese managers and employees got to use the technology of U.S. and other foreign partners.
In fact, China admitted that the 16 joint ventures involved in making the C919 “improved the overall level of China’s aerospace R&D [research and development] and manufacturing through technology transfer, diffusion and spillover,” in a 2015 press statement from the Commercial Aircraft Corporation of China.
U.S. Trade Representative Robert Lighthizer said China’s unfair trade practices are a serious challenge to the U.S. and other countries. “The United States is committed to using all available tools to respond to China’s unfair, market-distorting behavior,” he said.