Daily Management Review

Boeing Opens Its First Foreign Plant In China Despite Trade War


12/16/2018




Boeing Opens Its First Foreign Plant In China Despite Trade War
The largest exporter of the United States has set up its first foreign factory. 
 
Airplane maker and aerospace giant Boeing has officially declared open its first foreign factory in China which is a completion and a delivery center for its 737 planes. The factory is situated in the eastern Chinese port city of Zhoushan and was inaugurated on Saturday.
 
The plant has been set up as a party of joint venture between Boeing and China’s state-run Commercial Aircraft Corp. of China (COMAC) and is situated about 90 miles from Shanghai. The plant would be used for conducting finishing work such as interior and exterior painting and others for all aircraft that the US company would deliver to its Chinese customers. Chinese airlines are amongst the biggest companies for Boeing’s 737 crafts and since 2013, 12 Chinese airlines have placed orders for more than 160 737 Max.
 
The move and the announcement by Boeing has taken many analysts by surprise because many found the current timing not ideal for opening up a plant in China because of the opposition by US president Donald Trump to offshoring of work by US companies and because of the trade war that is ongoing between the US and China and the imposing of tariffs  by both sides on each other’s goods, even though both the parties have agreed to a 90 day truce in the trade war. Trump had been particularly of American companies opening up plants manufacturing units outside of the US in markets with cheap labour and thereby cutting out American jobs. Trump has also been critical of Boeing’s decision to open a plant in China during the presidential election campaigning.
 
Such criticism is however refuted by Boeing as it argues that the manufacturing of all of its places would continue to take place at its factory in Renton, Washington, and it would be only after completion that the planes would be taken to China for final touch-ups. The airplane maker has further argued that such a system would only be applicable for planes that are destined to be delivered to Chinese airlines while the rest would be completed in the US. Between April and June, some 30 jobs were posted by the company for its plant in China. 
 
Boeing has invested about $33 million in the Chinese plant which was started to be built in May of 2017. The announcement of setting up of the factory in China was first announced by Boeing back in 2015 when Chinese president Xi Jinping had visited the Seattle factory of the company and according ot Boeing, this new facility has a capacity of delivering 100 planes a year.
 
There has been a certain amount of swing in the shares of Boeing in the environment of the trade war between US and China but is appears that it has not been affected by the trade war and the tariffs from both sides so far. Earlier in the year, analysts predicted that the current year could be the first for Boeing when it would be able to ramp up revenues of over $100 billion. China accounted for about 13 per cent of the revenues of the company in 2017.
 
(Source:www.qz.com)






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