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China's Flight to Dominance

Becoming the world's first trillion-dollar airline market reflects a number of opportunities and challenges for China, and global aerospace players.

China has always been a bit of a mystery to us here in the U.S.

On one hand, it’s an economy that has seen a 400 percent growth in its GDP over the last 10 years. However, that growth has slowed somewhat in recent years due to labor costs that have increased more than 150 percent during that same stretch.

While rising labor rates have slowed China’s historic economic and production growth – particularly in the industrial sector, it’s also created a growing middle class and opened new markets.

One example of a market forecasting to grow and benefit in extraordinary fashion from a burgeoning Chinese middle class with more discretionary income is air travel.

 In fact, Boeing recently predicted that China could become the first trillion-dollar airline market in the world. It’s projecting that the world's most populous country could add more than 6,800 new aircraft worth over $1 trillion by 2035 in support of a 6.4 percent projected growth rate in annual passenger traffic.

Additionally, this growing middle class likes it some e-commerce – just ask the good people at Alibaba. This has led to the need for more cargo planes in delivering goods throughout the expansive country.

Those benefiting the most from this expanded use of air travel and air freight, and the corresponding increase in planes that will be needed – U.S.-based Boeing and France’s Airbus, each of whom own almost half of the market.

However, as the market size and customer demand grows, both companies are anticipating competition from Chinese rivals supported by the government. In fact, last fall the state-backed Commercial Aircraft Corp. of China rolled out China's first domestically developed passenger plane – and it is a direct competitor to the Boeing and Airbus planes currently in use.

In response, Airbus started construction on a new Chinese production facility last March and Boeing has reportedly submitted plans to the Chinese government for a new factory in the eastern part of the country.

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