Turbulent times for Airbus in China?
The 21CN Business Herald noted that the country’s economic planner, the National Development and Reform Commission (NDRC) had cancelled orders for Airbus aircraft. These could cost the European firm more than $14 billion in lost sales. “Even if the airline has signed contracts with manufacturers, the aircraft cannot be imported without the approval of the NDRC,” agreed the Nanfang Daily.
Zou Jianjun, a director of the Air Transport Services Institute, said the decision to target Airbus was deliberate. China has the fastest growing aviation market in the world. By cancelling orders, policymakers were showing their “dissatisfaction with the EU carbon trading system”.
The UK’s Guardian newspaper agreed that the “spectre of a trade war looms large”, reporting too that Airbus is now blaming the EU’s proposed tax for falling Chinese orders. It cited the gloomy assessment of Louis Gallois, boss of EADS – the company that owns Airbus – that the Chinese embargo was a “retaliation measure”.
Bloomberg then reported that Airbus still hoped EU officials would be able to negotiate a solution to the crisis, especially as the plane maker had already begun construction on 25 of the aircraft in question.“There is clear evidence of a developing trade conflict that should drive government to take action,” Airbus spokesman Rainer Ohler said. “Aircraft have long lives and when a campaign goes to the competition, recovery can take many, many years. A suspension today can turn into lost orders and lost jobs for years and years.”
China Economic Weekly says the tax will cost Chinese airlines Rmb800 million ($127 million) a year. Given that China-EU trade is worth Rmb3 trillion annually, a full blown “trade war” over the issue might seem an overreaction, but “this is a matter of principle”, the magazine insisted.
China National Radio also slammed the tax as a “selfish act of unilateralism” and argued it was designed more to raise revenue rather than protect the environment.
The Global Times agreed, suggesting that the EU has coveted the “huge profits” of China’s aviation industry since the onset of the European debt crisis. The newspaper added that there was a strange paradox in the EU selling aircraft to Chinese airlines but then taxing them heavily for operating them.
It warned too of the wider financial consequences if fewer Chinese tourists visited Europe as a result.
Peter Liese, a member of the European Parliament, suggested a potential compromise: if China launched its own emissions trading scheme, “we could exempt flights from China to the European Union”.
But Tony Tyler, director general of IATA, wants a ‘global’ solution instead. Tyler notes: “Europe’s unilateral and extra-territorial emissions trading system is clearly not acceptable to non-EU governments.”
The BBC says that delegates from 26 countries have now agreed to oppose the scheme, with the Moscow Times reporting that the Russian government may be one of the first to follow the Chinese and pass legislation that forbids flag carrier Aeroflot from paying the EU tax.
But the EU’s climate chief Connie Hedegaard struck a defiant note in the Financial Times this week: “You can’t threaten a trade war just because you don’t like European legislation.”
Anger over the carbon tax…
© ChinTell Ltd. All rights reserved.
Sponsored by HSBC.
The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.