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Boeing Courts China as Partner While Mindful of Future Jet Rival

June 15 (Bloomberg) -- Bloomberg's Steven Engle reports on the battle between Airbus and Boeing for a manufacturing presence in China. (Source: Bloomberg)

Boeing Co. (BA) is walking a delicate line in China between helping nurture a customer’s aerospace capability and preparing for its partner’s emergence as a rival, the planemaker’s regional chief said.

A strategy of collaborating while girding for competition emerged after senior leaders analyzed jet-development programs worldwide, Boeing China President Marc Allen said yesterday. China was identified as the most-formidable foe among a group that included Canada, Russia and Japan, he said.

Boeing’s China ventures have helped build what Allen said is a 53 percent share of the local aviation market, the second- biggest worldwide for new planes behind the U.S. The Asian country is nearing the planned 2016 debut of the C919, its first narrow-body jet, which will compete with Boeing’s 737 in the biggest segment of the global aircraft market.

“A new competitor in the form of the C919 is OK -- it’s actually a good thing, as it will lead us all to run faster and sharpen ourselves,” Allen said in a Bloomberg Television interview in Beijing. “But we also want to be a collaborator, so we have to balance the two.”

Boeing, based in Chicago, is the largest buyer of airplane components and parts in China, he said, with 35 direct suppliers and hundreds of secondary vendors. He declined to give a figure for value of parts purchased.

The company’s China investments include a manufacturing innovation center opening next year with Aviation Industry Corp. of China, the nation’s biggest aerospace company. It plans a joint research center in Beijing to study ways to pare fuel use and emissions, and has spent $21 million to expand a composites production center in Tianjin.

C919 Flight

The 168-seat C919, being developed by AVIC-backed Commercial Aircraft Corp. of China, is scheduled to make its maiden flight in 2014 and enter commercial service in 2016. Meeting the targets would be a step that has eluded Boeing and Airbus SAS in recent years, with the former’s 787 Dreamliner and the latter’s A350 both suffering delays.

One way for Boeing to avoid the danger of giving away too much intellectual property to a nascent competitor is joint development of new products with a Chinese partner rather than using technology the company has honed on its own, Allen said.

“We come in the spirit of co-creation,” he said.

“If we’re going to do things that involve new IP, we’ll do them with our partners so it’s shared IP and something we’ve already made a decision on,” he said. “In that sense we don’t feel that there’s a risk of bringing something into the marketplace that we’re going to lose.

Allen said Boeing has no plans to open an assembly line in China, as Airbus did in 2008 with a mandate to piece together 284 single-aisle planes by mid-2016 for the Chinese market.

McDonnell Douglas, which was purchased by Boeing in 1997, opened an assembly line for its MD80 in China in the early 1990s. That venture was shut down after fewer than 40 planes were built.

“We want to always be ahead of the curve,” Allen said. “Being here with the production facilities we have and the suppliers we have positions us ahead of the curve in what is one of the fastest capability-growth markets in the world.”

--Andrea Rothman and Stephen Engle in Beijing. Editors: Ed Dufner, James Langford

To contact the reporters on this story: Andrea Rothman in Beijing at aerothman@bloomberg.net; Stephen Engle at sengle1@bloomberg.net

To contact the editors responsible for this story: Ed Dufner at edufner@bloomberg.net; Benedikt Kammel at bkammel@bloomberg.net

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