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Boeing delivers first 737 from China plant as trade war simmers

The ceremony marking the first delivery from Boeing's completion and delivery centre in Zhoushan, 145km south-east of Shanghai, last Saturday. Photo: Reuters

Boeing has kicked off its industrial foray into China, handing over the first 737 Max completed in the country to Air China as executives looked past simmering trade tension to a US$2.7 trillion (S$3.7 trillion) market opportunity.

The jetliner was the first to be delivered from outside the US by the Chicago-based planemaker, although the aircraft for all intents and purposes bore a "Made in USA" label.

It marked the debut of Boeing's plane completion and delivery centre in Zhoushan, 145km south-east of Shanghai. The completion part of the facility is a joint venture with state-owned planemaker Commercial Aircraft Corporation of China (Comac).

While the plant was set in motion before US President Donald Trump was elected, the ribbon cutting risks being overshadowed by his tit-for-tat on duties with China on products ranging from cars and machinery to pork and soya beans.

A three-month truce announced earlier this month has been under threat since the arrest of Huawei Technologies' chief financial officer Meng Wanzhou in Canada after the US sought her extradition on allegations of violating Iran sanctions.

The Zhoushan facility, with roots on both sides of the Pacific, is emblematic of the balancing act for Boeing in China. The planemaker sold its first 10 jets there in 1972 after President Richard Nixon arrived aboard a Boeing 707.

Chinese workers at the new plant will put the finishing touches on US-built planes flown over from a Seattle-area factory, before delivering them to local customers.

"This is a really exciting point in our history to have something of this scale here," Mr John Bruns, president of Boeing China, said last Saturday. "It really demonstrates our commitment to this market," he said of the Zhoushan facility.

About one of every four jets that Boeing builds is bound for China, while the country's airlines are the biggest buyers of the 737, the manufacturer's largest source of profit.

China is expected to need about 7,700 commercial planes over the next two decades to connect an increasingly mobile middle class.

That represents US$1.2 trillion in potential sales, while Boeing projects the demand for services from maintenance to pilot training could create another US$1.5 trillion market opportunity for Boeing, Airbus and home-grown rivals like Comac.

Boeing eventually plans to put the finishing touches on 100 of its 737 Max planes each year at the new completion centre.

Boeing's commercial stronghold in China is increasingly threatened by Airbus' large industrial investment, as well as the trade warfare stoked by President Trump.

While aerospace has largely been excluded from the wrangling, China has sent subtle reminders that the sector remains at risk.

The nation, at one point, threatened to slap a tariff on older 737 models. More recently, Xiamen Airlines, majority owned by state-run China Southern Airlines and an exclusive operator of Boeing jets for more than 30 years, has struck up talks with Airbus.

Boeing, the largest US exporter, has urged both governments to resolve their trade differences and protect aerospace, which generates about an US$80 billion annual trade surplus for the US.

Meanwhile, China's President Xi Jinping will make a major speech tomorrow to mark the 40th anniversary of China's reform and opening up, state news agency Xinhua reported. He will speak at a conference at the Great Hall of the People from 10am, Xinhua said yesterday.

Former leader Deng Xiaoping initiated China's historic reform and opening up in 1978, followed by a series of capitalist experiments that lifted much of China out of poverty and turned it into an economic powerhouse.

China's trade war with the US is spurring some Chinese entrepreneurs, government advisers and think-tanks to call for faster reforms in the world's second-largest economy and the freeing up of a private sector stifled by state controls.

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