Boeing is trapped between a groundswell of “America-first” manufacturing sentiment at home, and a fiercely competitive environment in China—its largest growth market for commercial jets. How the aerospace juggernaut handles this politically charged opportunity will determine the company’s growth prospects in the years to come.
The aerospace and defense sector is the crown jewel of American trade, accounting for nearly 10 percent of total US exports.  Last year alone, Boeing commercial jet sales generated $65 billion in revenue and employed nearly 60,000 employees.  Though Boeing over time developed a global supply chain, until recently it manufactured all of its commercial jetliners on US soil. This changed, however, in 2015, when Boeing announced plans to open a facility in China to finish and deliver its single-aisle 737 jets, as part of a $38 billion 300-plane order from Chinese companies.  This decision prompted an immediate backlash from then-Republican presidential front-runner Donald Trump, who blasted the aerospace juggernaut for “taking a tremendous number of jobs away from the United States.” 
This criticism belies the fact that Boeing is pursuing a twenty-year $1 trillion commercial jet opportunity in China against the backdrop of a number of policy and competitive challenges. First, in summer 2015 Congress refused to reauthorize the US Export-Import Bank—an FDR-era program that helped American manufacturers export goods by subsidizing financing. At the time, Boeing was the largest beneficiary of this program, as one of the nation’s largest exporters. Second, Boeing felt significant competitive pressure from Airbus, which had opened a manufacturing facility in Tianjin, China in 2008, and already had plans to open a second factory.  Third, and most crucially, China’s State Council—its highest body of state administration—unveiled Made in China 2025, an initiative aimed at transforming ten strategic industries into global leaders. Aerospace was name a top priority. 
China is no stranger to succeeding in engineering-based innovation in advanced industries. In 2008, the Ministry of Railways launched a nationwide effort akin to the Apollo space program to build a new generation of high-speed trains. McKinsey estimates that China has accounted for 86 percent of global growth in the market since then. Success was largely driven by key technology transfers from overseas partners, joint ventures between government-sponsored enterprises and foreign firms, and the heavy use of advanced foreign suppliers. 
Indeed, China has already begun to replicate this playbook in the commercial aerospace industry. In 2008, the State Council created the Commercial Aircraft Corporation of China (Comac)—a State-owned aerospace manufacturer.  Merely nine years later, Comac responded to Boeing’s 737 with its very own C919—a single-aisle commercial jet. The C919 flew its maiden flight in May 2017, and is expected to commence delivery in 2020.  This was largely made possible by tapping into the experience of Airbus and Boeing’s key suppliers, including US-based General Electric and Honeywell.  However, Comac’s ambitions do not stop at single-aisle jetliners. Just two weeks after the C919’s maiden flight, Comac and Russia’s state-sponsored aerospace entity established their very own joint-venture aimed at developing a new twin-aisle airliner to compete with Boeing’s 787 Dreamliner. 
The backlash Boeing faced in 2015, upon announcement of its new factory in China, failed to credit the firm for responding to an increasingly tenuous competitive environment. In actuality, the crucial question to answer is whether opening one factory in China is enough. Interestingly, we can look to China’s miraculous development of its high-speed rail industry for strategic guidance for non-Chinese companies. In 1998, Canadian rail equipment manufacturer, Bombardier, was the last foreign company to tap into China’s railway market. However, it deftly co-founded Bombardier China—a joint venture between Bombardier and China’s China’s rail-related state-owned entity, CRRC.  Though this arrangement entailed technology sharing, and enabled CRRC to now account for 41 percent of the global market for high-speed train deliveries, it enabled Bombardier to tap into the Chinese market more effectively than any other western player.  If Boeing wants to achieve measurable and sustainable success in China, it should look to Bombardier’s strategy for guidance.
At this point, Boeing’s management team must determine whether its current China strategy is sufficient to capture the $1 trillion commercial jet opportunity. Between headwinds from US government policy and fierce competition from Airbus, Comac, and Russian aerospace entities, Boeing must decide whether it ought to forge deeper ties with Comac, or whether taking Bombardier’s approach would be a Pyrrhic victory. Moreover, if Boeing chooses to partner closely with Comac, it must consider the potential political blowback at home from unions and politicians alike.
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