China hopes to assuage U.S. politicians' concerns about trade deficits with a series of big deals.
By Associated Press
Published November 13, 2003
WASHINGTON - In a buying spree aimed at easing trade tensions with the United States, China signed contracts worth $1.7-billion Wednesday with Boeing and General Electric to buy 30 Boeing 737 planes for five Chinese airlines. GE will supply the engines.
In a related deal, China also signed contracts with GE's Aircraft Engines division to supply engines for a new regional aircraft China is developing. The engines could be worth as much as $3-billion over 20 years, officials said.
The announcements follow earlier word that Detroit's Big Three automakers have reached trade pacts with China that will allow them to export thousands of vehicles and increase their stakes in a growing automotive market that eventually could become the world's largest.
The multibillion-dollar deals reflect a loosening of import restrictions by the Chinese government as it seeks to blunt growing unhappiness in Congress and the White House over a widening U.S. trade deficit with China. U.S. officials have pressured Beijing to meet market-opening pledges and ease a trade surplus with the United States that hit $103-billion last year.
At the same time, automakers and other manufacturers are trying to increase their presence in China, which this year is expected to pass Germany as the world's third-largest vehicle market behind the United States and Japan. China is the fastest-growing aviation market in the world and expects to open as many as 100 airports over the next decade.
At a signing ceremony Wednesday at the Commerce Department, Commerce Secretary Don Evans called the Boeing and GE deals landmark events in U.S.-China relations.
Evans noted that he met with Chinese Premier Wen Jiabao last month in Beijing, where he warned that China must make a greater effort to honor the market-opening commitments it made to gain entry into the World Trade Organization.
"These latest commercial sales are a sign that China wants to build a stronger trade relationship with the United States," Evans said. He called the contracts a "big victory" for Boeing and GE, as well as the American people "and the good people of China."
Zhang Guobao, vice chairman of China's National Development and Reform Commission, was less upbeat. In remarks he termed "frank," Zhang said the airplane contracts would bring jobs to the United States and help China meet a sharply growing demand in air travel.
But Zhang said the overall trade situation between China and the United States is less than ideal and called on U.S. officials to relax trade restrictions against China that he called "discriminatory and unnecessary."
Zhang complained that the United States had canceled a satellite deal with U.S. manufacturers because of concerns that the technology could be used for intercontinental missiles.
While American consumers benefit from low cost shoes, toys, household electronics and other goods made in China, high end trade between the two countries is still limited, Zhang said.
Evans did not directly address Zhang's remarks, but Tim Hauser, a deputy trade undersecretary for the Commerce Department, said the remarks showed that China is a true friend that can exchange frank remarks.
Under the Boeing deal, five Chinese airlines would receive 30 planes by 2006. Air China would get five planes, Hainan Airlines would get eight; Shandong Airlines seven; Shenzhen Airlines five; and Xiamen Airlines five.
The China deal is Boeing's second-largest commercial order this year. ANA Airline ordered 45 planes earlier this year.
GE envisions a market for 500 ARJ-21 regional jets, a new aircraft now under development and scheduled for flight-testing in 2006.
General Motors Corp., the world's largest automaker, said Wednesday it plans to export thousands of vehicles to China in 2004 and 2005 as part of agreements valued at roughly $1.3-billion.
In one deal, GM will export 4,500 vehicles through its subsidiary, GM China, including Cadillacs and Buicks.
"As vehicle ownership grows in China, the luxury segment is beginning to open up," said GM chairman and chief executive Rick Wagoner. "We believe now is the right time to introduce our Cadillac luxury brand to China."
GM said it also has signed two agreements with its flagship joint venture in China, Shanghai General Motors. As part of the first agreement, valued at $400-million, GM will supply components and assemblies for about 13,000 vehicles, including Cadillacs.
The second deal provides for GM to supply $700-million worth of component kits for the Buick Regal sedan and Pontiac Montana-based Buick GL8 wagon.
In addition, GM has signed pacts with several independent Chinese importers to import about 1,000 complete GM vehicles. The makes and models have yet to be determined. Those deals, along with the 4,500 Cadillacs and Buicks that will be exported through GM China, account for the $200-million balance of GM's plans.
GM estimates China's total passenger vehicle sales will grow 29 percent to 4.4-million this year. That compares with roughly 17-million vehicles expected to be sold in the United States.
GM said it sold 305,000 vehicles in China through October, 40 percent more than the same period last year. GM's Chinese market share is about 8 percent.
Ford Motor Co. spokesman Chris Vinyard said the world's No. 2 automaker plans to use its new import license to send 5,000 vehicles, mostly sport utility vehicles, to China by the end of 2004. Those vehicles will be sold through Ford's growing dealer network in the country.
"We're very pleased to participate and we hope this leads to more exports," Vinyard said.
Last month, Ford announced an expansion of its China operations that will cost up to $1.5-billion and boost car production from 20,000 a year to 150,000.
Ford and its Chinese partner, Changan Automobile Group, plan to expand production at their factory in the western city of Chongqing and build a second car plant and a new engine plant.
DaimlerChrysler AG spokesman Trevor Hale said the German-American automaker's import license allows it to export 4,500 Mercedes-Benz and Chrysler vehicles through 2004. The automaker has had a presence in China since 1983.
DaimlerChrysler and Beijing Automotive Industry Holding Co. in September announced a $1.1-billion deal to start producing Mercedes-Benz sedans in China.
DaimlerChrysler sold more than 8,000 Mercedes sedans imported to China in 2002, and the company expects to sell up to 10,000 units in 2003.
Germany's Volkswagen makes 880,000 vehicles a year in China and recently announced a multibillion-dollar expansion to double that in coming years.
