China’s jumbo-jet company “might be able to establish a presence in the business over the next 10 to 20 years if they nurture it with government seed cash, and gradually offer shares to the private sector,” Richard L. Aboulafia, an aviation analyst with Teal Group Corp., an aerospace-and-defense consulting firm, told Reuters.

That’s probably a good estimate. But China clearly isn’t deterred by such long time frames. The country reorganized its aviation industry back in 1999, establishing 10 state-owned companies – each with carefully defined mandate, reports GlobalSecurity.org.

Given what’s happened since then, with the creation of, first, a regional jetliner company and, now, a jumbo-jet firm, the language China used at the time to describe the moves now becomes very interesting.

At the time, China split its 550,000-employee Aviation Industry of China (AVIC) into two separate companies: AVIC I and AVIC II. AVIC I was ordered to focus on “large and medium-sized aircraft,” while AVIC II was told to concentrate on “feed aircraft”—just the kind of demarcation you’d want if you were a country looking to assemble an airliner industry.

It takes time for expertise in such areas to develop; China can now reap the benefits of that decision a decade ago, since the country will now rely on that expertise for both the regional and jumbo-jet programs.

And China anticipates another fairly long gestation period for its jumbo-jet program. At the new aircraft company’s recent inauguration – an affair so important that it was attended by China Vice Premier Zhang Dejiang – CACC General Manager Jin Zhuanglong told the state-run Xinhua news agency that “it is too early to set a timetable or make development strategy” because it will take a long time for the company to train talent and do research.”

The executive also used that super-long timetable as a device to publicly downplay any competitive designs China might have on the industry-leading positions of Boeing and Airbus.

“Since large aircraft cannot be made in one or two days, CACC will pose no threat to large jet-makers like Boeing and Airbus,” Jin said. Don’t you believe it.

China, alone, will require 3,400 new airplanes worth about $340 billion over the next 20 years, Boeing projected in its recent market forecast. That works out to sales of about $17 billion annually over the next two decades. About 2,650 of those commercial airplanes will be actual airliners, Airbus projected in a forecast of its own. Up to now, Chinese airlines have been placing huge orders with Boeing and Airbus to modernize their air fleets and close the customer-service gap on their foreign competitors.

And neither of those forecasts factor in other white-hot Asian markets – such as Vietnam – which will also need to outfit their commercial air fleets as their economies make the leap from “emerging” to mainstream.

We’re talking about a huge amount of capital here.

And China clearly wants a piece.

Asian companies have many strengths. But one of the strongest is the patience and long-term vision they’re able to bring to bear on a market. That’s something the “quarter-to-quarter” Wall Street mentality has beaten out of too many once-great U.S. and European firms.

Japan – with the great resolve it’s bringing to the regional airliner market – is a terrific example of what I mean. Japan is packaging together its best corporate brains – Mitsubishi and Toyota – mixing in the strong-but-quiet backing of the government, and turning its team lose on a clearly defined target.

Now China’s doing the same with the jumbo-jet market.

Although I detailed the appetizing statistics of the Boeing and Airbus forecasts for airliner sales in China over the next 20 years, China’s leaders didn’t make this decision recently. They started it in motion back in 1999 when they established those 10 aircraft companies, giving each a carefully defined technology, capability or market objective to pursue. They added several ingredients to their concoction when they launched the regional airliner program a few years back.

And now, by carefully reshuffling their storehouse of accumulated technology, mixing in $2.9 billion in “seed” money, and giving it the clear backing of the central government, China’s leaders have told their aircraft industry to go after the sector’s greatest prize: The jumbo jet market.

Will China succeed? It’s too early to say. To be sure, they won’t be unseating Boeing or Airbus anytime soon. And perhaps never.

There will be benefits, no matter what. The technology this program develops will launch a huge aerospace industry, just as it did in the United States starting back in the 1940s. The spin-off benefits will spawn China’s own Silicon Valley – in several locations. Members of its fast-growing middle class will start finding cool high-tech products that they want to buy – and those products will read “Made in China.” And China’s defense-aerospace business will get a huge boost – as will its fledgling space program, which includes plans for a lunar landing.

There’s one other factor to consider, too. And it’s a big one. China has emerged as the key catalyst for all of Asia. And with the newly established close economic ties with Japan – reported in Money Morning, though almost nowhere else, last week – China is establishing a sphere of economic and political influence that will give it a huge advantage with airline carriers throughout Asia … when and if it’s able to deliver the goods, of course.

This audacious aircraft program announcement is yet another example of China’s resolve to make itself a global superpower. You’ll see this again and again. Watch it carefully, for this resolve will help guarantee that emergence. And if you act, it’ll help guarantee your success as an investor, as well.

Source: China Seeking Superpower Status With Jumbo Jet Deal

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