China has been the biggest manufacturer of commercial goods for a very long time. It has accomplished this market by following a strategy of low-cost production which gave the country the ability to flood any market especially with its mass produced electrical, computer appliances, and clothes.

But China, now the world’s largest economy by some measures, looks to compete globally in the aircraft manufacturing industry. With years of preparation, they have just unveiled their first homemade passenger plane. The C919 will help Chinese aviation challenge the duopoly of Boeing and Airbus.

There are a few reasons it makes perfect sense for the country to manufacture its very own aerial vehicle.

First, despite the global downturn which has affected the Chinese economy, its aviation industry is the second largest on the planet. It’s expected that China will surpass the United States as the world’s biggest before 2024.

It’s still experiencing high growth too. The first quarter of 2015 saw the number of international passengers flying in and out of China sky-rocket to over 7 million boasting a 57% increase from last year’s.

International air travel is not the only area that is rapidly expanding. Growing, but not as fast, is domestic air travel. In fact domestic fliers broke the 100 million mark for the very first time with a growth of 13% in Q1 of 2015.

The Chinese aviation market is expected to continue growing at an annual rate of no less than 10% for the next 20 years. This is five times the predicted growth of the US market.

Second, the establishment of more aircraft factories in the country will draw in more foreign investment (FDI). China has come a long way, even surpassing the US as the world’s top destination for foreign investment.

Looking to further strengthen its place, Chinese officials realized that this move will not just lure investment in airline production. It will also help airports. Investor capital will help improve existing airports and construct new ones all across the nation.

 

Globalizing the Chinese Aviation Market

2008 saw the conception of COMAC (Commercial Aircraft Cooperation of China), China’s very first aircraft manufacturing company.

This marks a milestone in China’s ambitious attempt to change the status quo of the aircraft manufacturing sector. A duopoly of American company Boeing and its European counterpart Airbus run the whole industry now.

However, the journey to successfully unveiling its first aircraft was not without turbulence.

COMAC functions as a state-owned limited liability company. Therefore, it’s not open to foreign direct investment. This hinders foreign direct investment into COMAC itself.

Also, there’s a stigma surrounding products made in China. They have long way to go toward setting up a global reputation that Chinese airplanes are up to standards.

The only airplane on the company’s portfolio hasn’t gotten certified by the major aviation organizations from the United States and European Union. This effective prevents the model from servicing any flights involving the US and EU for now.

It’s not a lost cause though. China still attracts foreign investment into companies which supply parts to COMAC.

Furthermore, certification from both the US and EU is a lengthy process but not impossible. It took Boeing about 200,000 hours, 4,000 of them test flights, to get approval from the Federal Aviation Administration.

 

Introducing China’s C919

China’s first plane, the C919, had its revealing earlier this week.

COMAC held a huge ceremony to unveil the fruits of its many years of labor. China’s civil aviation chief made a speech where he said a great nation must have its own commercial aircraft.

The firm’s goal is to make a dent in and change the current duopoly. It had over 500 orders for the model even before the plane’s first test flight.

COMAC’s entrance into the market has not gone unnoticed by the competition though. The head of Airbus’ strategy and marketing, Marwan Lahoud, publicly acknowledged that COMAC would be a force to be reckoned with.

About Reid Kirchenbauer

Reid Kirchenbauer is the Founder of InvestAsian. He’s an accomplished stock trader and property investor in Thailand, Cambodia, and many other places. He’s been featured in publications such as Forbes, Nomad Capitalist, Property Report, and Seeking Alpha. Download his free investment guide by clicking here.

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