Boeing hopes Biden-Xi Talks lead to a China reopening
BOEING Co got a glimmer of hope after US President Joe Biden and his Chinese counterpart Xi Jinping called for a cooling of tensions at a face-to-face meeting on Monday (Nov 14).
After a three-hour meeting in Bali, Indonesia, Biden committed to send US Secretary of State Antony Blinken to China for a visit, and the countries pledged to continue talks on a range of issues. While aircraft sales didn’t come up as a topic, any improvement in relations is a welcome sign for Boeing.
It has been three and a half years since a mainland Chinese airline took delivery of a Boeing 737 Max aircraft – a wait brought on by a pair of fatal crashes, a global pandemic and simmering tensions between the world’s two most powerful countries. China used to take a quarter of the cash-cow jets that the US planemaker built each year, and the beleaguered aerospace company could use a lift.
European rival Airbus has a lock on China’s lucrative narrow-body jet market for now – and will until Biden can persuade Xi to let Boeing back in. The Arlington, Virginia-based company is supplying him with a compelling case. Boeing projects Chinese airlines will require 8,485 new passenger and freighter planes valued at US$1.5 trillion over the next two decades, accounting for more than a fifth of global deliveries. Airbus and China’s homegrown manufacturer Comac are unlikely to meet that demand alone.
The question is whether the White House will press Xi on the matter as the countries broaden their diplomatic efforts. Biden’s administration is focused on the shortfall on Beijing’s side in delivering on a 2020 trade deal to buy tens of billions of dollars’ worth of Boeing planes.
But instead of asking for specific concessions for the aircraft maker, the White House views the situation in the broader context of Chinese economic practices that disadvantage many US companies beyond Boeing, a person familiar with the administration’s thinking said. On Monday, Biden raised China’s economic practices with Xi, but didn’t specifically refer to Boeing.
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In private, senior Boeing officials and other aerospace executives have voiced frustrations over the lack of progress on trade. Biden’s foreign policy approach in general hasn’t been as transactional as that of his predecessor, Donald Trump. The current president’s priorities in relations with China include security concerns heightened by the war in Ukraine, tensions over Taiwan and steps to disentangle the world’s two largest economies.
“The priority is going to be stabilizing the political and military standoff, not commercial relations,” Richard Aboulafia, managing director with AeroDynamic Advisory, said of the Biden-Xi meeting.
Still, the first signs of a thaw this week could lead to upside for Boeing. The company isn’t counting on Chinese orders in its plan to restore cash flow, reduce its US$57 billion in debt and emerge from crises that wiped out US$150 billion in market value in the past three years. But they sure wouldn’t hurt.
Boeing shares fell less than 1 per cent just before 10.30 am in New York following Biden’s meeting with Xi. The stock had declined 12 per cent so far this year through Friday’s close.
Jetliners have been a barometer of US-China diplomacy since Richard Nixon first flew to Beijing on a Boeing 707 a half-century ago. Shock-and-awe aircraft orders have been a staple of head-of-state visits over the decades, underscoring China’s growing clout. In fact, Xi unveiled a splashy 300-jet deal worth US$38 billion with his first official tour of the US in 2015.
American presidents get to use such orders as political wins, helping shore up the US trade deficit and create work for hundreds of thousands of people, between Boeing and its suppliers.
China is one of the last nations that hasn’t returned the workhorse 737 Max to commercial service following two fatal crashes in 2018 and 2019. That milestone has slipped repeatedly amid Covid flare-ups and lockdowns. It is a big reason why Boeing twice pared its annual target for 737 deliveries this year to 375 planes, after initially aiming to hand over nearly 500 aircraft. BLOOMBERG
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