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Aeroengine details on pp. 166-67:
The requirements for military and civilian jet engines are somewhat different, but if anything, China’s engine development for airliners lags behind what its military is trying to do. In September, 2011, Gabe Collins and Andrew Erickson of China SignPost released an extremely detailed study of this very question—the title was “A Chinese ‘Heart’ for Large Civilian and Military Aircraft: Strategic and Commercial implications of China’s Campaign to Develop High-Bypass Turbofan Jet Engines”—and the most surprising of its many assertions was that the Chinese aerospace establishment simply wasn’t spending enough money to keep up with developments in the West. GE is investing about $2 billion per year in research and development of new engines; Pratt & Whitney and Rolls-Royce together invest about $3 billion more. By comparison with this annual research total from the companies that already have a large technical lead, the Chinese engine-building entity known as ACAE has budgeted only about $300 million per year through the next Five-Year Plan. Research is cheaper in China, but not by that much. As Collins and Erickson drily observe, “ACAE’s lower investment level many not enable it to catch up and develop a competitive commercial (and military) jet engine construction capability.” And, they go on, “jet engine production involves exceedingly complex supply chains and ACAE will face significant challenges in creating a sufficiently large and flexible supplier base when it becomes capable of producing its own commercial engines.
What happens next, like so much about China, is unknowable. The engine-makers are under constant pressure to shift their production to China, to form joint ventures with local partners, to show that they deserve a place in the Chinese market by making themselves ever more fully Chinese. In 2011, GE announced a deal to share avionics technology with an AVIC subsidiary, on top of a similar engine-making deal. The potential long-term risk to the company and its U.S. production base was evident. “Joint ventures with jet engine market leaders like General Electric (GE) have the potential to give the Chinese aerospace industry a 100 piece puzzle with 90 of the pieces already assembled,” Collins and Erickson said of that deal. In a familiar pattern, destructively different time scales are also in play here. The U.S. corporation can look ahead a quarter or two; its executives operate under pay schemes that encourage them to maximize profits while they can. Their state-guided Chinese business partners have the handicaps but also the advantages of being under less short-term profit pressure. Where might this lead? Collins and Erickson spell it out: “The imperative to prioritize quarterly profits today over long-term profits and strategic concerns may be exacerbated as long-term military spending constraints in Europe, Japan, and now even the U.S. may drive Western aero-engine manufacturers even further into Chinese joint ventures to replace revenue.”
For the report quoted here, see Gabe Collins and Andrew Erickson, “A Chinese ‘Heart’ for Large Civilian and Military Aircraft: Strategic and commercial implications of China’s campaign to develop high-bypass turbofan jet engines,” China SignPost™ (洞察中国), No. 47 (19 September 2011).
For detailed analysis from a companion China SignPost™ Deep Dive report, see Gabe Collins and Andrew Erickson, “Jet Engine Development in China: Indigenous high-performance turbofans are a final step toward fully independent fighter production,” China SignPost™ (洞察中国), No. 39 (26 June 2011).
For updated details concerning aeroengine imports from Russia, see Gabe Collins and Andrew Erickson, “Is China About to Get Its Military Jet Engine Program Off the Ground?” China Real Time Report (中国事实报), Wall Street Journal, 14 May 2012.