Ready for Takeoff This monograph assesses China’s aerospace capabilities and the extent to which China’s participation in commercial aerospace markets and supply chains is contributing to the improvement of those capabilities. It examines China’s commercial aviation manufacturing capabilities, its commercial and military capabilities in space, Chinese government efforts to encourage foreign participation in the development of China’s aerospace industry, China’s Advancing Aerospace Industry transfers of foreign aerospace technology to China, the extent to which U.S. and other foreign aerospace firms depend on supplies from China, and the implications of these issues for U.S. security interests. China’s aerospace industry has advanced at an impressive rate over the past decade, partly due to the increasing participation of its aerospace industry in the global commercial aerospace market and the supply chains of the world’s leading aerospace firms. China’s current ability to meet demand with indigenous aircraft is limited, however, and much of the demand will be filled by imported aircraft. China’s space capabilities have improved rapidly, on the other hand, and it has developed and deployed an increasingly wide range of satellites. China’s growing civilian aerospace capabilities are unquestionably contributing to the development of its military aerospace capabilities, but whether the United States could Ready for Takeoff significantly improve its security through alterations of its policy toward civil aerospace cooperation with China without having a significant negative effect on its own economic interests is unclear. China’s Advancing Aerospace Industry Roger Cliff, Chad J. R. Ohlandt, David Yang Cliff et al. OBJECTIVE ANALYSIS. C O R P O R A T I O N EFFECTIVE SOLUTIONS. $24.00 RAND publications are available at www.rand.org This product is part of the RAND Corporation monograph series. RAND monographs present major research findings that address the challenges R facing the public and private sectors. All RAND monographs undergo rigorous peer review to ensure high standards NATIONAL SECURITY RESEARCH DIVISION for research quality and objectivity. MG-1100-UCESRC Ready for Takeoff China’s Advancing Aerospace Industry Disclaimer: This research report was prepared at the request of the U.S.-China Economic and Security Review Commission to support its deliberations. Posting of the Report to the Commission's website is intended to promote greater public understanding of the issues addressed by the Commission in its ongoing assessment of U.S.-China economic relations and their implications for U.S. security, as mandated by Public Law 106-398 and Public Law 108-7. However, it does not necessarily imply an endorsement by the Commission or any individual Commissioner of the views or conclusions expressed in this commissioned research report. Roger Cliff, Chad J. R. Ohlandt, David Yang Sponsored by the U.S.-China Economic and Security Review Commission NATIONAL SECURITY RESEARCH DIVISION The research described in this report was sponsored by the U.S.-China Economic and Security Review Commission and was conducted within the International Security and Defense Policy Center of the RAND National Security Research Division. Library of Congress Control Number: 2011922033 ISBN: 978-0-8330-5180-6 The RAND Corporation is a nonprofit institution that helps improve policy and decisionmaking through research and analysis. RAND’s publications do not necessarily reflect the opinions of its research clients and sponsors. R® is a registered trademark. Cover photo: A Chinese-made ARJ21 commercial aircraft is parked at the 8th China International Aviation and Aerospace Exhibition (Zhuhai Airshow) in Zhuhai, southern coast of Guangdong province, China, November 15, 2010. (AP Photo/Kin Cheung) © Copyright 2011 RAND Corporation Permission is given to duplicate this document for personal use only, as long as it is unaltered and complete. Copies may not be duplicated for commercial purposes. Unauthorized posting of RAND documents to a non-RAND website is prohibited. RAND documents are protected under copyright law. For information on reprint and linking permissions, please visit the RAND permissions page (http://www.rand.org/publications/ permissions.html). Published 2011 by the RAND Corporation 1776 Main Street, P.O. Box 2138, Santa Monica, CA 90407-2138 1200 South Hayes Street, Arlington, VA 22202-5050 4570 Fifth Avenue, Suite 600, Pittsburgh, PA 15213-2665 RAND URL: http://www.rand.org/ To order RAND documents or to obtain additional information, contact Distribution Services: Telephone: (310) 451-7002; Fax: (310) 451-6915; Email: [email protected] Preface China’s aerospace industry has advanced at an impressive rate over the past decade. While some of this progress can be attributed to rapidly growing governmental support for China’s aerospace sector, China’s aerospace capabilities have also benefited from the increasing partici- pation of its aerospace industry in the global commercial aerospace market and the supply chains of the world’s leading aerospace firms. This monograph assesses China’s aerospace capabilities and the extent to which China’s participation in commercial aerospace markets and supply chains is contributing to the improvement of those capabilities. Specific areas assessed include China’s commercial aviation manufac- turing capabilities, its commercial and military capabilities in space, efforts of the Chinese government to encourage foreign participation in the development of the aerospace industry, transfers of foreign aero- space technology to China, the extent to which U.S. and other for- eign aerospace firms are dependent on supplies from China, and the implications of all of these issues for U.S. security interests. The study should be of interest to business analysts, policymakers, lawmakers, and anyone who wishes to learn about China’s market for commercial aviation, the capabilities of China’s aerospace manufacturing indus- try, the role foreign aerospace firms are playing in the development of China’s aerospace capabilities, and security implications for the United States. This research was sponsored by the U.S-China Economic and Security Review Commission, which was established by Congress in 2000 to monitor and report on the economic and national security iii iv Ready for Takeoff: China’s Advancing Aerospace Industry dimensions of U.S. trade and economic ties with the People’s Republic of China. This research was conducted within the International Security and Defense Policy Center of the RAND Corporation’s National Secu- rity Research Division (NSRD). NSRD conducts research and analysis on defense and national security topics for the U.S. and allied defense, foreign policy, homeland security, and intelligence communities and foundations and other nongovernmental organizations that support defense and national security analysis. For more information on the International Security and Defense Policy Center, see http://www.rand.org/nsrd/about/ISDP.html or con- tact the director (contact information is provided on the web page). Contents Preface ............................................................................. iii Figures ............................................................................. vii Tables .............................................................................. ix Summary .......................................................................... xi Acknowledgments ............................................................... xv Abbreviations ................................................................... xvii Chapter One Introduction ....................................................................... 1 Methodology ....................................................................... 2 Structure of the Report ............................................................ 2 Chapter TwO China’s Commercial Aircraft Market ......................................... 5 Current Conditions ................................................................ 5 Projections of China’s Future Commercial Passenger Aircraft Market ..... 12 Factors Other Than GDP Growth ............................................ 15 Domestic Versus International Traffic ........................................ 21 Chapter Three China’s Current Commercial Aircraft Production ........................ 25 Commercial Passenger Aircraft .................................................. 25 Domestic Designs ............................................................... 25 Foreign Designs ................................................................ 28 Helicopters ........................................................................ 28 Fixed-Wing General Aviation Aircraft .......................................... 32 v vi Ready for Takeoff: China’s Advancing Aerospace Industry Chapter FOur The role of Foreign Firms in the Development of China’s Commercial Aviation Manufacturing Industry ....................... 35 Chinese Government Policies Toward Foreign Aviation Manufacturing Companies ................................................. 37 Joint Ventures and Cooperative R&D Activities ............................. 42 U.S. Companies ................................................................ 44 Non-U.S. Companies .......................................................... 57 Extent to Which China-Based Production Supplies U.S. Aerospace Firms ..........................................................................