Checking the Chinese Aviation Acquisition Score Card

[Peter Lewis]

Something to think about:

From Avweb www.avweb.com/eletter/archives/101/3556-full.html?ET=avweb:e3556:219187a:&st=email#228221

"Checking The China Acquisition Score Card

By Paul Bertorelli

As 2016 stumbles to the finish line, it will close with one dubious achievement: A record number of U.S. companies have been bought by foreign investors and leading the charge is China. According to the Committee on Foreign Investment in the U.S., just three years ago, Chinese interests acquired 43 companies. In 2015, the total was 103,according to the Rhodium Group, which tracks such things.

For 2016, China interests invested $40 billion by the first quarter alone, more than twice the total for all of 2015. This week's announcement that China’s Wanfeng Auto Holding Group bought a controlling share in Diamond Aircraft Industries in London, Ontario, makes us recall that the U.S. general aviation industry is dominated by Chinese holdings.

Let’s review: In 2010, China’s AVIC International bought Continental Motors for $186 million; Superior Airparts, a major PMA supplier, was bought later that same year by a Chinese technology group; Cirrus was bought by China’s Aviation Industry General Aircraft in 2011 for $210 million; a private investment consortium including the Meijing Group bought Mooney in 2013 for an undisclosed amount; the bankrupt Thielert Aircraft Engines was bought by Continental Motors and became Chinese-owned in 2013; in May of 2015, Continental scooped up Danbury Aerospace, the parent of Engine Components International, a major PMA
house; in 2012, Glasair Aviation was bought by Fang Tieji, chairman of Hanxing Group Ltd.

This doesn’t count Chinese investment in U.S. aviation companies that aren’t admitting it, nor does it include the major joint ventures such as GE’s partnering with AVIC and Airbus’ manufacturing position in China. Diamond manufactures in China, too. Some deals have gotten away for security and regulatory reasons. China sniffed around Hawker
Beechcraft, for example, but that deal collapsed. So, I’m sure, have lesser deals we haven’t heard about.

What’s one to think of all this? The first thought is this:

<snip>
It’s no stretch to say Chinese investment, palatable or not, has been instrumental in keeping GA manufacturing alive in the U.S. On the commercial side, in September, Boeing said China will buy more than 6800aircraft during the next 20 years. That's more than $1 trillion in business.

And that leads to the full-circle portion of today’s commentary. Remember the mid-1980s when we were all freaking out because the Japanese were buying U.S. real estate? It was quite the panic. Then the bubble burst and the Japanese lost their kimonos. That’s another way of saying just because certain investors see GA as a poor risk, doesn’t mean they’re wrong. The Chinese are buying airplane companies for reasons other than handsome P&Ls.

Our kids will get to see if the long game pays off, if they even care enough about airplanes by then to notice." 

[Dave Homewood]

Wow, that's a real eye opener. What about Cessna and Piper, are they still US-owned?

I had no idea Diamond was a Canadian company, for some reason I was under the impression they were German.

[kiwithrottlejockey]

Chinese money has been propping up the American economy for a long time.

If the likes of Donald Trump think they are going to stop it, they are dreaming.

Just as the 19th century was the British Century and the 20th century ended up being the American Century, the 21st century is gradually turning into the Chinese Century.

The real worry is going to be for countries such as Australia and New Zealand who regard themselves as being allies of America, yet their biggest trading partner is China; who are going to get caught in the middle when America eventually wakes up to the fact they are a slowly declining power, and the inevitable clash between China and America results. It doesn't have to be a military clash either....if Trump slaps the threatened tariff on China (and other countries) and those countries retaliate with a similar tariff on America, a huge trade war will be the most likely result and both Australia and New Zealand will get severely hurt and have to make unpalitable choices.

[Mustang51]

KTJ, I would like to be as certain of winning LOTTO but any trade war with China will degenerate into some military clash. China's position with carriers, their blatant "thumb the nose" to the rest of the world about the South China Sea, their acquisitions as mentioned above everywhere around the world will all come together one day in a single spark. It may not be huge but it shall happen to cause a say, SC Sea conflict and Japan is sitting in the middle of all of this. Some very interesting recent developments in the Philippines may see a former ally changing coats and both running with the hare and hunting with the hounds. Russia's position in all of this is also interesting. Perhaps sitting back and tacitly backing the USA while waiting in the wings again for another chance at the prize themselves.

Whatever happens the next 10 years shall be very interesting............ Thinks Tom Clancy was right !

[Peter Lewis]

Diamond is Austrian.
The Chinese buy-in relates only to the Diamond manufacturing facility they run in Canada, according to the press release.

[Dave Homewood]

It's just a purchase of 60% of the Canadian factory's shares according to Airplane Geeks, so not a total buy out but an injection of funds so their stalled jet project can go ahead apparently.