Select Committee on Defence Written Evidence


Public Information on Trade with China

12 JULY 2004

  Primus International, a US firm, has launched a project to manufacture aircraft components, kits and assemblies as part of its strategy to take a share of China's aerospace industry. A factory will be built at a cost of $l0 million but manufactures must now include raw materials imported from the US which are not available locally. Output will be exported to manufacturers of commercial and regional jets in the US, Japan, Brazil, S. Korea and Europe. The strategy is leading to joint ventures with the Chinese aerospace industry that will lead to domestic sales.

  CITIC Offshore Helicopter Co. Ltd. said it has signed a contract with Eurocopter and Hong Kong-based Samwell Aviation Ltd to become strategic partners for the promotion, operation and maintenance of Eurocopter's helicopters in the Chinese market. The deal involves some technology transfer from Eurocopter to CITIC Offshore.

Power Projects

  Also on the civil side, China's Three Gorges Project Group has signed contracts worth Rmb4.54bn ($546m) to purchase twelve new hydropower generating units. Contracts for four units were awarded to Alstom of France, but two domestic companies, Harbin Electric Machinery (HEM) and Dongfang Electric Machinery (DEM), will supply the remaining units.

  To fulfil the contract, HEM and DEM will make use of foreign technology from a technology transfer that began in 1997 when fourteen generators were purchased from foreign companies for the left bank of the project. In that purchase order, the foreign firms agreed to transfer related technology to China for a total of US$18m. According to a country briefing from the Economist Intelligence Unit the company will look for similar cost savings when it builds the four hydropower stations planned for the Jinshajiang River, a tributary of the Yangtze.

26 JULY 2004

CHINA AGREES TECHNOLOGY TRANSFERS FOR ENERGY SECTOR

  ABB will build a 1,100-kilometer-long (682 miles) 3,000-megawatt high-voltage .transmission link under a $390 million contract awarded by China's State Grid Corp. The equipment will partly be manufactured by ABB factories in Sweden and Switzerland though valves, some transformers and gas-insulated switchgear will also be assembled or produced by Chinese partners, the company said. There will also be technology transfer.

  Areva, too, won two co-operation agreements with Chinese power groups. "Areva is very well positioned because we have already built four nuclear sites in co-operation with the Chinese. We have had technology transfers that have functioned well, and we are ready to continue," Areva's CEO, Anne Lauvergeon, said.

25 OCTOBER 2004

BOEING AWARDS CHINA 747 PARTS PRODUCTION CONTRACT

  China's Xi'an Aircraft Industry Company will supply floor beams for Boeing's 747-400 Special Freighter, a programme to convert passenger airplanes into freighters. A Boeing spokesman told CTO that any time the company has a supplier agreement with another company Boeing considers it to be industrial co-operation. To date Boeing has placed about $500m of work in China (since 1972) and expects that to more than double by the end of the decade.

  "It would amount to a relatively small percentage of the aircraft. We have supplier agreements with five or six different organisations within China and a number of sales agreements with airlines. The sales agreements are not part of the industrial co-operation programme," the spokesman said. Parts coming out of China have been installed on about 3,400 global Boeing airplanes, about one third of all passenger aircraft.

  Jim Morris, Vice President of Supplier Management for Boeing Commercial Airplanes, said Xi'an Aircraft is a well-established Boeing supplier partner that currently builds trailing edge ribs for 747 wings and recently celebrated delivery of the 1,000th 737 vertical fin. "China has a significant role working together with Boeing, and this is one more step in increasing and strengthening our partnership," Morris said.

  China Eastern Airlines Co. and Airbus have also signed a contract for the purchase of 20 A330-300 aircraft for fleet replacement and expansion. A training and support centre which represents an $80 million investment by Airbus is fully operational in Beijing. Five Chinese companies are already involved in producing parts for Airbus aircraft.

  A protocol for the development of industrial cooperation between China Aviation Industry Corporation (CATIC) and Airbus has been agreed as well as a cooperation framework agreement on an advanced medium utility helicopter programme between CATIC and Eurocopter.

8 NOVEMBER 2004

AIRBUS BOOSTS IP WITH CHINA

  Airbus has stepped up industrial participation with China by agreeing to sub-contract projects worth $100 million to China Aviation Industry Corporation I (AVIC I). The projects will represent the first industrial participation agreement between Airbus and China on the production of A380 components. Airbus then announced plans to further increase its general procurement from China, raising this to $120 million a year by 2010, double the target for 2007.

  Five Chinese companies are already involved in making parts for Airbus aircraft, namely the Chengdu Aircraft Corporation, Shenyang Aircraft Corporation, Xi'an Aircraft Company, Hong Yuan Aviation Forging and Casting and Guizhou Aviation Industrial Group.

  Airbus will also allocate A330 and A340 forward cargo door projects to Shenyang Aircraft Corporation, which is affiliated with AVIC I.

  Since 1985, the total value of projects subcontracted by Airbus to Chinese manufacturers has exceeded $500 million.

Alstom technology transfer for China:

  Alstom will provide sufficient technology transfer to allow China to build 51 out of 60 locomotives from kits to be supplied under a contract worth more than $l billion. Alstom also won a contract worth some

380 million (US$471 million) to deliver another 12 locomotives and provide technology to build 168 others in China, the company said.

22 NOVEMBER 2004

FRENCH AEROSPACE INDUSTRY STRENGTHENS POSITION IN CHINA

  To consolidate its position further in the Chinese market, Snecma and the Ecole Centrale de Lyon engineering school have signed a training agreement with two Chinese aeronautical engineering schools: the Nanking University of Aeronautics and Astronautics, and the Polytechnic University of the Northwest, in Xi'An. This is in addition to an agreement signed two years ago with the Beijing University of Aeronautics and Astronautics, and the Jiao Tong universities of Xi'An, Chengdu and Shanghai.

  The agreements appear to form part of a wider industrial co-operation policy. Snecma has also signed a research contract with Mrs Chen Haiqiu, Deputy Director of the Science and Technology department at the Beijing University of Aeronautics and Astronautics.

  One out of every two Chinese jetliners is powered by CFM56 engines and China's AVIC I plant manufactures CFM56 parts for Snecma. One out of every three Chinese jetliners is fitted with Messier-Dowty landing gear (a Snecma group company). Messier-Dowty has opened a landing gear parts production facility in Suzhou. Half of all helicopters in China are powered by Turbomeca engines (another Snecma group company). AVIC II is a long-standing Turbomeca partner.

  The Chinese Ministry of Science and Technology and the French Ministry of Research are organizing a joint forum on innovation and research spin-offs. Snecma is taking advantage of this event to strengthen and consolidate its collaboration with China in research and training.

Italy/China:

  Italy's Agusta and the Jiangxi Changhe Aviation Industries Company, an AviChina company, have also signed a joint venture agreement for the sale, production, marketing and local support of the A109 Power helicopter.

27 DECEMBER 2004

EADS OFFERS CHINA A350 WORKSHARE FOR AIRBUS A320 DEAL

  China has agreed to purchase 23 Airbus A320 aircraft valued at about $1.2 billion, with Chinese companies taking 5% of the work on the Airbus A350 programme.

  Airbus will be offering Chinese industry a risk-sharing participation in the design and the manufacture of the A350 programme, said Gustav Humbert, the company's Chief Operating Officer and Executive Vice President Programmes. The A350 will be based on the A330, but will feature new wings and engines, and could compete strongly with Boeing's 7E7 jets.

"The potential collaboration with China on the A350 is immediate. It is a very timely stepping stone to the full risk-sharing participation of at least 10% in a long-term future programme of Airbus," he added. Airbus has also undertaken to transfer to China the technology required for manufacturing the complete wing of the A320 family aircraft, Humbert said.

  The company intends to establish an engineering centre in China. From 2008, more than 200 engineers will have the opportunity to participate in Airbus developments. This will enable China to become a full industrial partner in any future Airbus aircraft developments, a press release said. The A350 programme is subject to the approval from Airbus' shareholders EADS and BAE Systems.

  The Eurocopter division of EADS signed a framework contract with AVIC II in October for the joint development and production of a new multipurpose helicopter that will be available on the world market in 2010. Another contract was signed in Paris last June to set up a production line in Harbin for the EC 120 helicopter. A $30 million investment made by EADS in the aeronautical manufacturer AviChina in October 2003, providing a 5% stake in AviChina, is understood to have opened up the way for reinforced cooperation with AVIC II in the helicopter field.

  "In line with our long-term approach, we are planning to strengthen our presence in China," said CEO Rainer Hertrich. "We are seeking to expand our partnership opportunities in the areas of research, development, sourcing, manufacturing and aftersales-service."

EADS Hertich: No Arms Embargo Link To China A380 Order

  Dow Jones Newswire, Dec 7—China has never hinted at any link between the lifting of the EU's arms embargo and the long-awaited signing of an order for the Airbus (ABI.YY) A380 super jumbo jet, European Aeronautic Defense & Space Co. NV (5730.FR) co-Chief Executive Officer Rainer Hertich said Tuesday. Hertich said even if the embargo were to be lifted, more needs to be done within the EU to harmonize export controls for military-use products. EADS manufactures defense equipment in several EU countries and the different export control regimes continue to be a problem, he said. Even with the arms embargo still in place, EADS aircraft unit Airbus continues to book new orders from China's three major carriers. As its order book swells, Airbus has also been increasing its partnerships with contractors in China, including Chengdu Aircraft Corp., Xi'an Aircraft Co., Hong Yuan Aviation Forging & Casting and Guizhou Aviation Industrial Group. Subcontracting by Airbus in China is expected to rise to $60 million a year by 2007 and eventually $120 million by 2010, from about $30 million a year in 2004. Hertich said eventually it might even be possible for the company to set up a local Airbus China unit to manufacture aircraft as it comes closer to meeting its goal of securing 50% of the country's commercial jet market.

EADS to Target China Market If EU Arms Embargo Lifted

  EU Business, UK, Dec 7—Europe's largest aerospace and defense company EADS said Tuesday it would likely begin talks on potential military deals with Beijing if the European Union lifts a 15-year-old arms embargo on China. "Sure, once it happens, the embargo is lifted, we would get in touch with them (the Ministry of Defence) to try to understand what is their future demand," European Aeronautic Defense and Space Company chief executive Rainer Hertrich told journalists.

  However, it may all depend on how EU governments view the equipment as acknowledged by EADS . . . Hertrich said that even if the embargo was lifted, other restrictions would still be in place on what could or could not be sold to China. Besides the embargo, EADS and European nations, they have their export control regimes and so definitely there will be further limitations," he said.

January 2005



 
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