Boeing Looks Like Winner In China

Political relations between the U.S. and China are close to a 20-year low. So it would seem obvious that China’s flagship carrier might well favor European jets over U.S. aircraft for its next billion-dollar order.

That doesn’t look to be the case, however, judging by the news Monday from Beijing that Boeing Co. may top Airbus Industrie in the race to win an order from Air China.

Boeing, the single-largest exporter in the United States, appears close to winning an order from that airline worth between $1 billion and $2 billion, including the new 777, according to Monday’s Financial Times newspaper.

“It strongly indicates that Boeing’s presence in the marketplace won’t be compromised by political squabbles between the U.S. and China,” said Nicholas Heymann, an aerospace analyst at Natwest Securities in New York. Still, the question of whether politics will affect commercial decisions is one that executives ask themselves every time a potential contract is on the line.

In France, for example, China’s anger over that country’s sale of Dassault-Aviation Mirage jets to Taiwan in early 1993 dried up orders considerably, costing France an estimated $500 million.

Then in July 1994, after France said it would quit selling to Taiwan, a flood of new Chinese orders appeared.

In the U.S., executives with business in China have complained that the Clinton administration has allowed disputes over Taiwan, human rights and arms sales to damage the climate for investment and trade.

Last month, for example, Germany’s Mercedes-Benz AG reached a preliminary accord with China on a $1 billion joint venture to produce vans and engines in that country, beating out competition from Chrysler Corp., and Ford Motor Co.

Signs of tension between China and the United States continue. The administration is now being pressured by human rights organizations to cancel First Lady Hillary Rodham Clinton’s trip to attend the United Nations’ Fourth World Conference on Women in Beijing early next month.

Some observers, however, said China has been careful not to let politics hurt commerce.

Richard Brecher, director of business services for the U.S. China Business Council in Washington, said relations “are on shaky ground.” But he said “there was never systematic discrimination against American firms.”

If the China order for Boeing pans out, it would be the first major aircraft order to come out of China in about a year, since China quit placing orders to concentrate on improving its air traffic control system.

A $1 billion contract in itself isn’t that huge a deal in the airline business. But any order from China is big business because that market is the fastest-growing worldwide. Airbus, sees demand for 1,275 planes in the market over the next 20 years.

Boeing hasn’t clinched the order. Following the Financial Times article indicating that Airbus’ push to sell A340s to Air China had failed, a Boeing executive in China called the report “premature.”