The ‘Year of the Goat’ – China’s critical 2015, and the UK’s industrial approach

As millions (if not billions) of people around the world today celebrate the Chinese New Year of the Goat, the level of focus from the West on China – not just as culturally, but economically – continues to grow.

2015 will be a critical year for China’s economy – as well as its domestic aerospace industry. The planning and discussions over the next 12 months, for the release of the 13th Five Year Plan in 2016, will be vital for China’s future economic development. Alongside this, the country’s flagship civil aerospace programme – the C919 – is currently in final assembly and could see its first flight by the end of the year.

In the wake of these developments in 2015, ADS has today released a report which looks at the issues surrounding China’s new economic objectives, its aviation growth challenges and its strategic approach to building a domestic aerospace industry, all of which will likely affect China’s future growth levels.

For the UK, understanding of these issues is vital – as China is often cited as both an opportunity and threat for many aerospace companies looking to expand into new markets.

Opportunity vs Threat?

The historic approach to the Chinese market from Western companies has been mixed between investing to avoid, supply and win. Each approach is distinct, but each approach signals an appreciation for the necessary threat/ opportunity balance.

The level of opportunity is clear – over 1.3bn air passengers are expected in China by 2034, with 6,000 new commercial aircraft delivered over the next 20 years. But the continued threat to IP, as well as high barriers to entry (cost, cultrual understanding etc) are often cited by reluctant companies.

However, having spoken to a number of UK Aerospace SMEs in particular, the response to the Chinese market was one not of fear and trepidation – but opportunity and enthusiasm. They acknowledge that to be successful, time, effort and money must be invested to demonstrate the notion of long term investment – but the level of future opportunity will outweight these initial high barriers. In addition, whilst IP issues in China do remain and companies should continue to be mindful and cautious, as China develops its own aerospace IP and design, suppliers are in a good position to engage with Chinese customers and work to these designs. By fostering relationships and partnering with China now, both working to and creating new IP, UK companies are much better placed to win future orders on Chinese design work.

Alongside this, the critical approach to adhering to safety certification in the development of China’s Aerospace industry may also help to negate the risks of IP – as products must pass stringent international safety standards in order to be used in a potential Chinese-made aircraft which is developed to become globally competitive.

Why Industrial Strategy is Key

In this context, continued focus and commitment to UK industrial strategy is key. Initaitives such as the Aerospace Technology Institute (ATI) will be vital in ensuring the UK continues to develop its own IP to maintain our strategic position in the global aerospace industry and compete with growing countries like China in the future.

In addition however, a renewed focus on engagement in the Aerospace regulatory environment, as well as encouraging China to invest in the UK (utilising both business and academic links) will help to ensure the UK is well positioned to win and partner with China as it continues to grow its industry, as well as invest in technology and rebalance its economy.

ADS’s report “The China Challenge: The Growth of Aviation and How the UK Can Benefit” can be downloaded here