Airbus doubles its production in China while pressing ahead with new orders

On Thursday, Airbus agreed to build a second assembly line at its factory in China, giving Beijing the green light to move forward with 160 previously announced aircraft orders. The announcement was a stark reminder of how China remains an important market for European firms, even as American manufacturers pull stakes.

The agreement was signed in Beijing by Airbus CEO Guillaume Faury, who was part of an economic delegation accompanying French President Emmanuel Macron and European Union President Ursula von der Leyen on an ambitious state visit with China’s supreme leader Xi Jinping.

Airbus is expanding production of its best-selling A320 single-aisle jet, and boosting sales in China, whose leaders have gone to great lengths recently to try to show the world the country is open for business after doubling down on pandemic lockdowns in the past. year. Under the agreement, the world’s largest aircraft manufacturer will double its A320 production capacity at its Tianjin plant, in the world’s fastest growing aviation market.

And after announcing a major deal last year in which China promised to buy 292 new Airbus planes, worth nearly $40 billion before discounts, the company said the Chinese government on Thursday gave its approval for Airbus to start making 160 of those planes.

The deal “supports positive recovery momentum and booming prospects for the Chinese aviation market,” Fawry said in a statement, adding that the company “has had the honor of remaining as the partner of choice in shaping the future of civil aviation in China.”

Europe has come under pressure from the Biden administration to isolate Beijing by imposing more trade restrictions on sensitive technologies, such as semiconductors that could have military uses. Talk of economic decoupling is rife, and Apple has shifted some production to India and Vietnam, though most of its revenue still comes from Chinese-made products.

Ms. von der Leyen said in a speech before the trip that EU countries need to reduce risks and “rebalance” economic relations with China. But other European leaders, and Mr. Macron in particular, have sought to maintain strong economic ties despite China’s growing assertiveness and support for Russia.

Macron, who arrived in China on Wednesday, has spent the bulk of the visit trying to carve out a privileged role for Europe that avoids confrontation, while also seeking to provide a place for China in ending the war in Ukraine. Macron has accompanied around 50 French business leaders in a bid to maintain trade links.

Although the Airbus deal is more modest than expected, it underscores China’s continued importance as Europe’s major trading partner, an agreement Macron is reluctant to abandon.

China has overtaken the United States as Europe’s largest trading partner. Last year, Beijing was the third largest destination for exports of EU goods and the largest source of imported goods to the bloc. France is the second largest exporter of goods in Europe to China after Germany.

During a quick trip to China last November, the German chancellor, Olaf Scholz, said that Beijing and Berlin must work together amid a “complex and volatile” international situation. He traveled with a large delegation of German companies to send the message that business with China, the world’s second largest economy, must continue.

But many European countries also face a growing trade deficit with China, as Beijing intensifies a long-term drive to achieve self-reliance in science and technology. This has led to government subsidies for manufacturers of many goods that were previously imported, eroding China’s demand for foreign goods.

However, the Chinese market is still important to many European companies. In France, many companies are eager to sign contracts to produce goods and equipment in China as Europe presses ahead with an ambitious, decades-long program to transform itself into a carbon-neutral economy.

Among Mr Macron’s entourage this week were executives from major French companies, including nuclear energy provider Électricité de France, train maker Alstom and global waste handling group Veolia.

In line with Airbus’ sustainability strategy, the company has also signed a memorandum of understanding with the China National Aviation Fuel Group to intensify Sino-European cooperation on the production of common standards for so-called sustainable aviation fuel, which is expected to be used. Increasingly to operate aircraft.

Although China’s rapid economic growth in recent decades has slowed sharply due to the epidemic, the domestic aviation market has been rebounding since the lifting of strict regulations in early December “zero Covid”. Frequent quarantines, especially of intercity travelers, hampered air travel within China for three years.

Airbus said that over the next 20 years, air traffic in China is expected to grow much faster than in the rest of the world, accounting for 20 percent of the demand for new aircraft. However, China has been wary of buying large numbers of imported single-aisle jets.

With massive subsidies, a Shanghai state-owned company, COMAC, has developed a commercial aircraft, the C919, which is almost identical to the Airbus A320 being built in Tianjin. Despite repeated delays, the C919 was on a test flight in preparation for its commercial roll-out with a subsidiary of Shanghai-based China Eastern Airlines.

It remains uncertain whether Europe will bow to Chinese pressure to assemble wide-body jets in China.

Airbus entered the Chinese market nearly 40 years ago, in 1985. The company said that by the end of the first quarter of 2023, Airbus’ fleet in China had grown to more than 2,100 aircraft, accounting for more than half of the market.

Keith Bradshare Contributed reporting from Beijing.