Why the U.S.-China Aircraft Rivalry Is More Complicated Than It Seems

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The West may appear ready to bring the geopolitical hammer down on China’s aerospace ambition, but there are a lot of corporate interests pushing to make that strike decidedly less deadly.

As of last week, the U.S. and the European Union have agreed to end a 17-year trade feud over planes and to stop providing development incentives that “could harm the other side.” This is somewhat vague, but the backdrop of the accord isn’t: Both parties want to present a united front against China.

The C919, a narrow-body jet produced by Chinese state-owned company Comac, is scheduled to enter service this year. While unable to compete with the

Boeing

737 MAX and the

Airbus

A320neo in international markets, it is a key part of Beijing’s plans to step up advanced manufacturing in the country over the next four years. This ensures that all major Chinese airlines—also government owned—will fly it, even though it likely contravenes World Trade Organization rules. Beijing is pulling other levers too: So far, it hasn’t recertified the MAX.

The U.S. and Europe rightly worry about Comac breaking their plane duopoly, say in 20 years’ time. China has proven it can catch up in myriad industries like cars, trains and digital technology. Last week’s Euro-American agreement calls for joint action against the “non-market practices of third parties,” including China’s practice of inviting in foreign investors only to copy their technology.

Yet the West can in fact already torpedo China’s aircraft industry. It just chooses not to.

The C919 is in many ways a Western plane: Comac’s role in assembling the aircraft’s tube and wings is a relatively simple one, and only accounts for about 25% of costs, as Patriot Industrial Partners consultant Alex Krutz points out. The rest, including avionics, is supplied by U.S. companies such as

Honeywell

and Collins Aerospace, and European ones like Meggitt and Liebherr. The C919’s engine, which is the hardest part of the aircraft to build, is made by a joint venture between

General Electric

and Safran.

Despite some initial doubts, even the Trump administration extended GE’s license to export these engines last year. Likewise, the Department of Defense has blacklisted Comac’s parent for its military ties, but officials have so far always stopped short of dealing a blow to the commercial-plane operation.

The Chinese market is just too appetizing to pass up. Asia-Pacific aviation demand is forecast to expand at twice the rate of the West, which is why Boeing and Airbus have set up shop there. Companies in other sectors have a lot to lose from a direct confrontation: China is the third biggest market for German cars.

The question is whether the short-term profit-seeking of Western companies is planting the seed of their own destruction. After mastering airframes, Beijing will seek to eventually replace the suppliers. Aviage Systems—a partnership between Comac’s parent and GE—is a gateway into avionics, and China has spent years trying to ready a homemade engine alternative for the C919, although its technology will probably be too old when it is ready about a decade from now.

Of course, American and European companies have kept reaping benefits from the Chinese automobile market even after domestic competitors used what they learned from joint ventures to capture half of the market share.

Ultimately, the best way to fight China may be to imitate it. Western firms and policy makers could opt to give each others’ governments space to invest in their own research and supply chains. If Airbus’ rise and the pointless trade battle that followed proves anything, it is that this often leads to a better market for consumers.

Write to Jon Sindreu at jon.sindreu@wsj.com

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