Let’s discuss Lyn Alden’s thought provoking Tweets on China’s aircraft industry.
Under the Radar
Around the margins, a Chinese-made plane starts reducing import needs, especially if they start reducing its foreign part composition too.— Lyn Alden (@LynAldenContact) June 17, 2023
The next phase, once more mature, would be to export it throughout BRICS+ countries.
Lyn’s Tweet got me thinking about US exports in general.
United States Top 10 Exports
[Petroleum Products] Mineral fuels including oil: US$378.6 billion (18.4% of total exports)
Machinery including computers: $229.6 billion (11.1%)
Electrical machinery, equipment: $197.7 billion (9.6%)
Vehicles: $134.9 billion (6.5%)
Aircraft, spacecraft: $102.8 billion (5%)
Optical, technical, medical apparatus: $99.1 billion (4.8%)
Gems, precious metals: $92.5 billion (4.5%)
Pharmaceuticals: $83.5 billion (4%)
Plastics, plastic articles: $83.3 billion (4%)
Organic chemicals: $51.1 billion (2.5%)
The above list represents 2022, from United States Top 10 Exports
Biden Policy Impact
Biden energy policies would kill #1, and curtail # 9 and #10.
Bidens restrictions on sensitive machinery and chips will reduce #2, #3, #5, and #6 exports to China and Russia.
China itself seeks to curtail #4 and #5. What remains are gems, precious metals, and pharmaceuticals.
I am surprised grain exports are not in the top 10. But as Biden has riled China on a number of fronts, it has increasingly turned to Brazil.
That’s just a shift though. The US will just export elsewhere, but perhaps it creates some friction losses.
Airbus widens its lead over Boeing in China
Meanwhile, please note Boeing’s China Orders Dry Up on US Tensions in Boost for Airbus
Boeing missed out on a 40-plane deal in September, following an even bigger hit in July, when China ordered nearly 300 Airbus aircraft worth about $37 billion at sticker prices. The misses reinforce how simmering US-Sino political tensions continue to complicate the dealmaking landscape for Boeing, which is also still waiting for its 737 Max to fly again in China.
Boeing, which hasn’t signed a major plane deal with China since 2017, took the unusual step of issuing a statement after the July Airbus order was announced.
The above article is from October 2022. Here’s an article from April of 2023.
Airbus announced plans Thursday for a second final-assembly line in China, the latest sign that it has a lock on the key aviation market over rival Boeing.
The announcement came as part of a state visit by French President Emmanuel Macron to China. The signing of the agreement by Airbus CEO Guillaume Faury was witnessed by Chinese President Xi Jinping and by Macron.
It will add another line to the final-assembly facility that Airbus opened in Tianjin, China, in 2008, which has put the final touches on 600 A320 aircraft to date.
Airbus (EADSF) operates four assembly sites around the world but it forecasts that China’s air traffic in particular will grow 5.3% annually over the next 20 years, significantly faster than the world average of 3.6%.
This will lead to a demand for 8,420 passenger and freighter aircraft between now and 2041, representing more than 20% of the world’s total demand for new aircraft, Airbus predicts.
By 2041, if not much earlier, I side with Lyn Alden on aircraft.
However, I don’t expect the BRICs idea will ever amount to much, quickly, if ever.
What About the BRICs?
Almost 20 countries have applied to join BRICS-Russia’s🇷🇺 Deputy Foreign Minister— Going Underground (@GUnderground_TV) June 16, 2023
The list of applicants include:
Weaponizing the US Dollar
It’s easy to understand the BRIC backlash. What Does China Do With a Dollar That’s No Longer Risk Free? Buy Gold?
That’s the question I asked in 2022 and there is still no clear answer.
Michael Pettis commented “As you know, the hard part of reducing the US dollar component of your reserves is figuring out what the alternative should be, and with such high and growing reserves (once you include the indirect reserves at the state-owned banks) that is a very difficult question to resolve.“
Talk is cheap and there is plenty of talk. I see it every day on Twitter.
But Brazil, Russia, India, China and whatever countries have nothing in common. The Yuan does not float, and there is no grounds for any trust in any common currency.
The idea of a gold-backed yuan is laughable. China has capital controls and imprisons anyone who speaks out against its policies, hardly the foundation of a currency that inspires trust.
Brazil’s President Calls for End to US Dollar Trade Dominance, So What?
On April 1, I commented Brazil’s President Calls for End to US Dollar Trade Dominance, So What?
Dollar Weaponization Expands – FDIC Message to Foreign Depositors Is Don’t Trust the US
There is increasing reason to mistrust the dollar. But why anyone should trust a Russia-China sponsored currency.
There is no trust anywhere. If Russia or China offered a gold backed BRIC would you buy that or would you just buy gold?
Trade is Not Between Countries
Importantly, trade is between individuals, not countries.
A Brazilian exporter to China needs the Brazilian Real or US dollars not a BRIC.
The Brazilian government can call for the end of dollar dominance but so what? What is the incentive for a Brazilian soybean exporter to use a BRIC?
Weaponing the dollar was a huge mistake. But the path to when and how that matters is unclear. Why trust any fiat currency?
In Two Years, China More Than Doubles the US on Car Exports, Catches Germany
Meanwhile, please note In Two Years, China More Than Doubles the US on Car Exports, Catches Germany
Expect the same for aircraft. It’s only a matter of time.
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