The China Syndrome

In the not-too-distant future, some components of the airplanes you fly on in the U.S. and elsewhere–and eventually, perhaps the aircraft themselves–will come from China. And that could spell trouble.

To understand why, you need some background. For several years, the world’s business jet and component manufacturers have been rushing to make deals to fabricate and/or assemble their products in China. The goal: to take advantage of cheaper labor and grab a slice of a wide-open market. Cessna already makes its smallest airplane, the 162, there and it plans to build jets there as well. Numerous other international manufacturers have deals in place for Chinese companies to make significant portions of their airplanes and helicopters and, in some cases, conduct final assembly.

The Chinese government requires foreign companies to share their technology with Chinese companies as a condition of selling in China. And sharing technology with China today empowers it as a competitor in international markets tomorrow.

Now, if Chinese companies wanted to spend their own R&D in this pursuit, more power to them. But they don’t. The country’s willingness to make aviation knockoffs dates back to the early 1970s when it bought Boeing 707s, reverse-engineered the airplane and made a couple of copies called the YF-10. More recently, we’ve seen replicas of the Russian Su-27 fighter and of various Eurocopter models. The logic behind this behavior is inescapable: Why plow billions of dollars into R&D when you can just steal it?

China simply doesn’t play by the international rules when it comes to patents and trademarks. “They have made possible systematic stealing of intellectual property of American companies,” U.S. Treasury Secretary Timothy Geithner complained last year. From Gucci bags to Ford F150 pickups, the Chinese copy virtually everything, including aircraft. Wonder what a Chinese bizjet will look like? Just check out what’s rolling off the lines in Merignac, Montreal, São José dos Campos and Wichita.

It would be one thing if Chinese copying were limited to 30-year-old products. It’s not. The Chinese now expect the latest technology. Western companies have been more than willing to oblige. GE recently agreed to share the guts of its sophisticated computer system for the recently introduced Boeing 787 for use in China’s new C919 twinjet. If past behavior is any indication, it won’t be long before the Chinese start spinning lookalike copies of Western avionics and aircraft engines, perhaps even counterfeiting them.

That’s problem number one: this will weaken Western aircraft and component makers financially, ultimately impairing their ability to adequately support their products in the field and bring innovative new ones to market.

Bad as this is, though, Chinese copying presents an even bigger problem: most of it isn’t very good. Last year, investigators from the U.S. Government Accountability Office uncovered defects in Chinese counterfeit mission-critical defense electronics that had found their way onto American weapons systems. If bogus Chinese parts can end up on frontline Pentagon aircraft, it’s only a matter time before they migrate onto business jets.

All this is not to say that the Chinese can’t build good components and aircraft at substantial cost savings: One of the best airplanes I ever flew was a CJ-6 Chinese military trainer, and it costs about the same as a new SUV. But quality assurance and intellectual property safeguards must keep pace with China’s aircraft manufacturing business. If the Chinese won’t do that themselves, then it’s the responsibility of the country’s Western partners to monitor compliance. As Chinese components and aircraft inevitably find their way into other parts of the world, your life could depend on it.