US questions China aviation subsidies

Here is a story we wrote for Commercial Aviation Online October 26:

The US Trade Representative (USTR) has filed a series of questions with the World Trade Organization (WTO) over national, multi-industry state subsidies in China, including the development of the China Aviation Industry Corporation (AVIC) ARJ21 and Commercial Aircraft Corporation of China Ltd. (COMAC) C919, the first serious challenges by China to Western airliners.

The ARJ21 is a 70-90 passenger regional jet essentially based on the Boeing MD-95. The COMAC C919 is a 150-190 passenger aircraft similar to the Airbus A320 and aimed directly at the Airbus family and Boeing’s 737-800/900.

The USTR inquiries, filed 7 October, mark the first time China’s development aerospace industry funding has been questioned. USTR initiated a complaint with the WTO over Airbus funding in 2005.

“China’s continued failure to notify any subsidies administered by sub-central governments, as required by Article 25 of the WTO Agreement on Subsidies and Countervailing Measures (“Subsidies Agreement”), leaves a fundamental gap in China’s obligation to fulfill its transparency commitments in the area of subsidies,” the USTR said in its filing. “China’s only subsidy notification since joining the WTO in 2001 was submitted in 2006 and it did not include a single subsidy program administered by sub-central governments. In prior submissions to this Committee, the United States has explained that it considers subsidies administered by provincial and local authorities in China to be a significant problem in light of the important role these authorities play in implementing industrial policy, including with regard to subsidization.”

The USTR notes that in 2008, China approved the creation of COMAC, a state-owned enterprise, to develop China’s first large commercial aircraft. In 2009, COMAC received $2 billion in government funding for the development of the ARJ21-700 regional jet. The Industrial and Commercial Bank of China (ICBC) said part of its mandate is to help indigenous passenger aircraft programmes.

This year, USTR notes, the state-owned AVIC secured a pledge of up to $25.7 billion in domestic bank loans, including loans from state-owned commercial banks, which will be used to finance the development of helicopters, engines, cargo and passenger aircraft.

CAO posed a series of questions to the USTR to comment for this article and why no similar inquiry has been made about government funding for Bombardier’s CSeries. No response was forthcoming after a week (despite promises).

One comment on “US questions China aviation subsidies

Leave a Reply: Note Reader Comment Rules

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s