Boeing’s Crisis Strengthens Beijing’s Hand

In its trade standoff with the United States, China’s Ace could be the 737 Max.

Three Boeing 737 Max 8 planes from Shanghai Airlines parked at Shanghai Hongqiao International Airport on March 11, 2019.
Three Boeing 737 Max 8 planes from Shanghai Airlines parked at Shanghai Hongqiao International Airport on March 11, 2019. (STR/AFP/Getty Images)

The Civil Aviation Administration of China was one of the first national air-safety authorities to ground the Boeing 737 Max 8 jetliner after the devastating recent Ethiopian Airlines crash. But the decision may have been driven by more than just the safety of that aircraft. Beijing may be sensing an opportunity.

In the flurry of news coverage of the crash, one fact about Boeing’s 737 Max has been largely forgotten. The aircraft is on a list of U.S. goods to be purchased as part of a negotiated settlement to the U.S.-China tariff and trade rules standoff.

That means China’s decision to ground the Max, and more recently the threat to cut it from the settlement altogether, gives Beijing more leverage to get a better deal. After all, for Boeing, a China order right now would be a huge endorsement of the Max; having the Max excluded would spread an even darker cloud over what is currently the company’s most important product.

In the days after China’s grounding of the Max, all the other major world agencies followed suit, with Transport Canada and the U.S. Federal Aviation Administration (FAA) coming in last. To some, including one Foreign Policy contributor, this made China a leader in aviation safety.

It’s possible that China’s actions were motivated purely by caution and the interest of public safety. Yet the Civil Aviation Administration of China (CAAC) is basically an arm of the government, with no political independence. Therefore, the CAAC’s move to ground the jet, before there was any compelling evidence to justify its grounding, is best viewed as just another tactic in China’s trade negotiations.

The CAAC has its virtues, but for a safety regulatory agency to be successful, it needs four things: experience, procedures, a good track record, and freedom from political interference. The CAAC is lacking in each of these areas. And the early 737 Max grounding is a reminder of the fourth weakness, which is particularly serious.

First, the CAAC has relatively little experience, for the obvious reason that China is a relatively new market and a very new producer. According to manufacturer data compiled by Teal Group, in 2001, just 3 percent of world jetliner output went to China; last year, it was 23 percent. China had fewer than 1,200 jetliners in 2007; today, it has over 3,500. The CAAC is just beginning to learn how to play in the big leagues.

China is also an emerging aircraft producer, so the CAAC has very little experience certifying domestically built aircraft. The CAAC certified China’s first production jetliner, the Comac ARJ-21, in 2014. Since then, about 10 have been delivered, to one Chinese customer—Chengdu Airlines. The jet has few prospects of entering service outside the country.

Second, there’s not a lot of transparency to the CAAC’s processes. China was certainly well within its rights to ground the Max fleet, but this move wasn’t done on the basis of analysis or data. It was done on a whim, even if it was an understandable whim. The FAA and Transport Canada may have been wrong to delay their Max grounding decisions until data could be interpreted. Nevertheless, they stuck to a process, one that can be scrutinized and followed by other agencies.

Third, the CAAC’s track record is mixed. In terms of domestic aviation safety, China has had remarkable success, and the CAAC should be commended for its part in this achievement. But the case of the Xi’an MA-60, China’s most exported civil transport aircraft, brings CAAC’s objectivity into question. Xi’an, the MA-60’s manufacturer, is a unit of the Aviation Industry Corporation of China (AVIC), which is owned by the state. Of the 60 or so planes that have been exported since 2005, around half have been withdrawn from use, either through mishaps, fatal crashes, nonairworthiness, or because countries have a perfectly legitimate fear of an unsafe aircraft.

The CAAC “may not have conveyed certain MA60 safety information to some importing countries despite bilateral agreements requiring it do so,” according to a Wall Street Journal story. “The CAAC doesn’t always make domestic accident data readily available, a problem for a global industry that depends on such data to hone safety measures, and abroad has played down safety concerns around the MA60.”

In short, the CAAC’s safety record appears highly suspect when it comes to exports, and when it comes to any information that might impact exports. The CAAC’s lenient approach to a remarkably unsafe airplane suggests that it has simply been ordered by other government officials to keep it flying, no matter what. This represents a serious failure on the CAAC’s part, and countries unlucky enough to have experience with this plane will judge them for that.

This leads to the fourth and most important criterion for judging an aviation safety agency: political independence. U.S. President Donald Trump improperly took credit for the FAA’s decision to ground the Max, which didn’t do the agency’s independence any favors, and there is a legitimate debate about whether or not the relationship between the FAA and Boeing is too close.

But such conversations cannot even take place in China. This is not just because of censorship, although the country’s lack of free and open communication doesn’t do aviation safety any favors. Rather, it’s because in China the people who regulate safety and the people who design and build planes are one and the same.

Since the CAAC has no independence whatsoever, it’s entirely reasonable to attribute a political motivation for the decision to ground the Max. It could indeed have been done out of concern for the public good, although the MA-60 story certainly suggests otherwise, but the CAAC is an arm of the Chinese government, which clearly has an agenda.

The first motive is the most straightforward: China’s planned Comac C-919 jetliner, which is in the same class as the 737 Max 8. Anything that weakens sales of the 737 Max, even temporarily, would be seen by the Chinese government as helping the C-919, if only by inflicting reputational damage on a competitor.

The second Chinese motive concerns the current trade talks with the United States. The Chinese government is a very aggressive trade negotiator. Since the CAAC has no independence, it’s reasonable to assume that their actions are part of the government’s negotiating position, and that the grounding will now permit them to get more for their purchase agreement. Even if they forego a 737 Max order in favor of other planes, Beijing’s hand becomes stronger because of this grounding.

Clearly, Boeing, like all the world’s aviation manufacturers, needs to take China and the CAAC very seriously. China is the biggest export market in the world for companies like Boeing and Airbus, and in a few years will account for an estimated 30 percent of all single aisle jetliners built. But market clout does not mean regulatory credibility. And China’s early 737 Max grounding does nothing to move the CAAC toward a position in global aviation safety leadership.

Richard Aboulafia is vice president for analysis at Teal Group. He has advised numerous aerospace companies and writes and edits Teal's World Military and Civil Aircraft Briefing.

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