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Ch_Sp_20131120_1526.doc 1 Author: T. Centro Militare di Studi Strategici Rapporto di Ricerca - STEPI AF-T-01 del T.Col. SEMBENINI ing. Giovanni Report closing date: November 2013 Chinese Aerospace progress in XXI century. Situation, perspectives, criticalities. Never ending race or a process with an epilogue?
Transcript of Centro Militare di Studi Strategici Rapporto di Ricerca ... · Ch_Sp_20131120_1526.doc 1 Author:...
Ch_Sp_20131120_1526.doc 1 Author: T.Col. Giovanni SEMBENINI - Edit: T.Col. Volfango MONACI
Centro Militare di Studi Strategici
Rapporto di Ricerca - STEPI AF-T-01
del T.Col. SEMBENINI ing. Giovanni
Report closing date: November 2013
Chinese Aerospace progress in XXI century.
Situation, perspectives, criticalities.
Never ending race or a process with an epilogue?
Ch_Sp_20131120_1526.doc 1 Author: T.Col. Giovanni SEMBENINI - Edit: T.Col. Volfango MONACI
CONTENTS
SUMMARY page 4
SOMMARIO (Italian Language Summary) page 9
PART I
Introduction page 15
Chapter I-1 - A look at China through different lenses
The latest transition in the making of an evolving country page 19
A market based economy managed by central planning page 24
Technology and innovation page 37
Western versus Eastern aerospace: a concise comparison page 41
CHINESE AEROSPACE PROGRESS IN XXI CENTURY. SITUATION, PERSPECTIVES, CRITICALITIES.
NEVER ENDING RACE OR A PROCESS WITH AN EPILOGUE?
Ch_Sp_20131120_1526.doc 2 Author: T.Col. Giovanni SEMBENINI - Edit: T.Col. Volfango MONACI
PART II
Chapter II-1 - Focus on aviation
Introduction page 45
Commercial market outlook page 46
The Chinese aviation industry development page 49
China’s positioning in the global market page 55
General Aviation page 57
Chapter II-2 - Focus on space
Introduction page 62
Space budgetary considerations page 65
Plans for future missions page 67
International cooperation page 69
A view on China - EU cooperation in space page 72
China’s involvement in the Galileo program page 77
Chapter II-3 - Conclusions
China’s aerospace today and tomorrow page 80
Multiple futures page 84
Appendices page 89
Annexes page 90
NOTE ON Ce.Mi.S.S. AND NOTE ON AUTHOR page 92
NOTA SUL Ce.Mi.S.S. e NOTA SULL' AUTORE page 93
Ch_Sp_20131120_1526.doc 3 Author: T.Col. Giovanni SEMBENINI - Edit: T.Col. Volfango MONACI
Ch_Sp_20131120_1526.doc 4 Author: T.Col. Giovanni SEMBENINI - Edit: T.Col. Volfango MONACI
SUMMARY
In this second decade of the 21st century, many sources consider China as the engine of
the global economy. Its combined growth rate, year over year, far exceeds that of any
other nation. The growth of the economy and the development of industrial apparatus
proceed along with, and is driven by, a strong political will and strategic vision to achieve
the status of first class world power, a natural evolution of its current role of regional super
power. China leading class‟ roadmap to achieve the above goal clearly contains an
overhaul of the military and industrial structure, enhancing its technological capabilities. In
high-sounding declarations, China has stated that it will send a man to the moon and
operate its own space station. However, if we look beyond the simple political statements,
the aerospace sector, as a whole, could serve as a benchmark for the real affordability and
credibility of the Chinese overall development scheme. The main purpose of this report is
to sketch China‟s aerospace system potential and its degree of competiveness on the
world scene. Also, this report aims at estimating if and how the Chinese system could
integrate with the rest of the aerospace world or engage in a harsh competition.
The study has been conducted through the collection and synthesis of information and
data publicly available from open sources. The analysis and assessment has been done
solely relaying on the author‟s knowledge acquired through the above-mentioned sources.
No effort has been made to check the data and information gathered against classified
materials. Initial ideas for scenarios building have been explored but an in-depth scenario
exercise should be carried out as a successive stage.
The overall analysis has been divided into two parts: the first, multifaceted (looking at
political and societal, economical, industrial, technological aspects), was aimed at
depicting, in simple terms, 2013‟s Chinese situation, where aerospace China sinks its
roots. The second part then tackles some specific aspects of both the aviation and the
space components of the Chinese system. The content of official documents has been
used as a substantial contribution throughout the analysis; in a centrally planned state
economy official documents tell where the leadership is taking the country‟s aerospace
system.
CHINESE AEROSPACE PROGRESS IN XXI CENTURY. SITUATION, PERSPECTIVES, CRITICALITIES.
NEVER ENDING RACE OR A PROCESS WITH AN EPILOGUE?
Ch_Sp_20131120_1526.doc 5 Author: T.Col. Giovanni SEMBENINI - Edit: T.Col. Volfango MONACI
China‟s overall aerospace capabilities have evolved significantly over the last few years.
In some specific areas China has actually joined the elite nations and is en route to
achieve more successes. The reasons behind this rapid advancement in the sector can be
grouped in macro areas: a high-level policy for the aerospace sector driven by
international prestige, a wish to move up the production value chain, technology transfer
needs, and the augmentation of military capabilities. Military aerospace advancement
should not be seen as a mere exercise in muscle-flexing, but as a true force multiplier.
Moreover the involvement of foreign companies in joint ventures for the local production or
the development of aerospace capabilities has been used as a mean to acquire
technological know-how and as an enabler to enter foreign markets both for space and for
aviation.
All the forecasts concerning commercial aviation are strongly influenced by China‟s
expected economic growth rate. The development of land transportation infrastructures
could erode market shares, but it is needed to connect major airport hubs. Hence all
forecasts call for a surge in purchases, by the world airlines over the next twenty years
(2015-2035) across the spectrum of large commercial aircraft and regional jets, cargo
aircraft. Two examples are the commercial aircraft currently heralding the indigenous
production in the large aircraft class: the regional jet ARJ21 and the larger C919.
At the time of this writing, the first delivery of the ARJ21 has been pushed back to mid-
2014, hence impacting deliveries of the C919 as well which was slated to begin deliveries
towards the middle of the decade. Both aircraft are still looking for real space on the
market and they will have to prove their records for safety and passenger approval before
gaining market shares, which will take time: Western manufacturers that are in the lead will
still be ahead, for some time. Both aircraft programs have several western suppliers and
they rely on a limited pool of domestic design, development and engineering capability that
has focused on military aircraft programs for many years. The ARJ21 program uses
components from 19 major foreign suppliers; to participate in the programs numerous joint
ventures have been set up; hence technology transfer activities have characterized
China‟s aviation industry over the past few decades. Helicopters, in particular, make a
case for themselves. Right now the demand-supply ratio is almost in balance: China is
already manufacturing or designing various helicopters from light to heavy, so the
domestic production will cover most of the demand for the years to come.
Ch_Sp_20131120_1526.doc 6 Author: T.Col. Giovanni SEMBENINI - Edit: T.Col. Volfango MONACI
Chinese military aircraft technology is not comparable to today's Western levels.
The spearhead of the current military aircraft production, the J-201, will trail behind western
counterparts by about fifteen years. Still there has been a remarkable change from total
reliance on foreign sources to a well-structured national production. Central policies
demonstrate an increased awareness of the importance of owning indigenous high
technology capabilities. Technology for military use has also been transferred from civilian
programs under the dual-use2 label; technology transfer that, according to some sources,
might continue to be achieved via obscure methods.
General Aviation has a tremendous potential for growth in China. Given the country‟s
configuration and sheer dimension, many benefits could be reaped from a healthy and
prosperous General Aviation industry, both at the manufacturing level as well as at the
users end. The main hindrance to this development is the restrictive airspace management
regime, but high operating costs and lack of personnel also play a significant role.
However, new policies from the central government seem to be set in place to release air
control from the Armed Forces. According to projections that take into account the current
economic indicators, given the above-mentioned opening, the number of General Aviation
aircraft could increase by 30 percent per year over the next five to ten years, thus resulting
in an increase from the current, estimated, 1000 to more than 10,000 new aircraft by 2020.
The space industrial infrastructure is basically centred around the two major complexes,
CASIC and CASC. These are still state-owned and they are somehow subsidized.
They have been proved to be very successful and are today technologically sound, even if
not yet at Western levels. China has developed the Long March family3 of launch
vehicles that now have a very positive track record and have demonstrated consistency.
China also has indigenous capabilities to manufacture satellites of many kinds
(electro-optical reconnaissance satellites; position, navigation, and timing satellites; ocean
surveillance satellites; synthetic aperture radar satellites; high capacity communications
satellites).
The legacy evolution shows that performances will increase over the next ten years.
While working at all of the above, China has also joined the space elite: the club, three
nations so far, enjoy autonomous capability for manned spaceflight. Dual-use is a label
that is often put on many space systems. The technology transfer between a commercial
1 http://en.wikipedia.org/wiki/Chengdu_J-20
2 http://en.wikipedia.org/wiki/Dual_use
3 http://en.wikipedia.org/wiki/Long_March_(rocket_family)
Ch_Sp_20131120_1526.doc 7 Author: T.Col. Giovanni SEMBENINI - Edit: T.Col. Volfango MONACI
and a dual-use system is the first move along the slide towards purely military systems.
Hence it is evident how a solid civilian aerospace capability contributes to the development
of military aerospace capabilities. Still, it can be difficult to exactly assess how much of
what comes from civilian international cooperation drives the military improvements.
It is true that the support and cooperation that foreign firms have provided to China have,
to some extent, contributed to the development of China‟s military capabilities.
More than a few indications might be taken into consideration for future actions, but one is
foremost: the increase in China‟s "knowledge" base. China is vast from a geographical as
well as cultural point of view. There is a strong need to achieve better knowledge of the
cultural processes taking place inside China. For example, increased awareness of how
much China relies, more than other countries, on personal knowledge and relationships
might make or break big deals. There is a need to improve the dialogue with the
institutional actors as well as industrial partners and then pursue a higher level of
cooperation both in terms of breadth and scope. Italy is on a good path with a positive
trend on this one; several examples of fora where Italy and China discuss common
projects could be taken as success stories to be replicated.
Is it going to be China versus the rest of the world? Probably not. In today‟s economy,
China depends on the rest of the world as much as vice versa. All over the world, in the
past few years, there have been constant discussions about the "China model". Especially
after the 2008 financial market collapse4 in the West and in the US in particular, the
views have been as if the Chinese suffered no problems: this might be a gross misreading
of a much more complex reality. Furthermore, taken from a scientific perspective, a
"model" is such only if can be replicated and applied elsewhere. China is unique, more so
than the Chinese and the communist party would like it to be. We should somehow free
ourselves from the "China-versus-Western-world" paradigm. New social schemes in China
as well as in the rest of the world tell us it is time to probe further and talk about real
globalization. But this is a start for future discussions.
Part I contains a synthesis and analysis of the information collected and the assessment
of the Chinese aerospace system as it is and what potential for evolution it shows.
Part II contains dedicated analysis of aviation, space and the overall conclusions.
4 http://en.wikipedia.org/wiki/2008_economic_crisis
Ch_Sp_20131120_1526.doc 8 Author: T.Col. Giovanni SEMBENINI - Edit: T.Col. Volfango MONACI
The Appendices contain a compendium of excerpts from key documents, support
material, complementary information, elements useful to get a wider picture of the
aerospace system and a monographic description of China-at-a-glance to get a quick,
concise overview of some key figures and facts and two brief biographical notes about two
key, but not overly known, figures in Chinese aerospace.
The Annexes contain key Chinese official documents to be read as supplementary text for
the reader seeking a first-hand impression of the Chinese official positions and guidance
on aerospace and related issues.
Ch_Sp_20131120_1526.doc 9 Author: T.Col. Giovanni SEMBENINI - Edit: T.Col. Volfango MONACI
SOMMARIO
Molte fonti considerano la Cina del secodo decennio del ventunesimo secolo, il motore
dell'economia globale. Il suo tasso di crescita combinata, anno su anno, supera molto
quello di qualsiasi altra nazione. La crescita dell'economia e lo sviluppo dell‟apparato
industriale procedono insieme, e il tutto è guidato da una forte volontà politica di
raggiungere il rango di potenza mondiale, quale naturale evoluzione del suo ruolo attuale
di superpotenza regionale. Tuttavia, se si guarda al di là delle semplici dichiarazioni
politiche, il settore aerospaziale, nel suo complesso, potrebbe essere utilizzato come
parametro di misura delle reali potenzialità del sistema cinese di sviluppo globale.
Lo scopo principale di questo rapporto di ricerca è di tracciare le potenzialità del sistema
aerospaziale cinese, il suo grado di competitività sulla scena mondiale e stimare il livello di
possibile stato di conflitto o integrabilità del "modello" e delle attese cinesi con la
situazione Occidentale.
Lo studio è stato condotto attraverso la raccolta e la sintesi d‟informazioni e dati da fonti
aperte pubblicamente disponibili. L'analisi e la valutazione sono state fatte basandosi
esclusivamente sulle conoscenze dell'autore acquisite attraverso le fonti di cui sopra.
Non si sono utilizzate informazioni classificate. Sono state sviluppate idee embrionali per
la costruzione di scenari, ma un approfondito esercizio di questo tipo dovrebbe essere
effettuato in una fase successiva.
L'analisi è stata divisa in due parti: la prima, multidisciplinare (aspetti politici, sociali,
economici, industriali, tecnologici), con lo scopo di tratteggiare, in termini semplici, un
quadro generale della situazione in Cina oggi (2013). La seconda parte affronta più in
dettaglio alcuni aspetti specifici dell‟aeronautica e dello spazio nel sistema cinese.
La lettura critica dei documenti ufficiali di settore è stata usata come fondamento
sostanziante di tutta l'analisi, poiché si è ritenuto che in un sistema a pianificazione
centralizzata, i documenti ufficiali di Stato sono “il” metodo per individuare in quale
direzione la classe politica al potere stia indirizzando il sistema aerospaziale del Paese.
IL PROGRESSO AEROSPAZIALE CINESE NEL XII SECOLO. SITUAZIONE, PROSPETTIVE, CRITICITA'.
UNA CORSA SENZA FINE OD UN PROCESSO CON UN EPILOGO ?.
Ch_Sp_20131120_1526.doc 10 Author: T.Col. Giovanni SEMBENINI - Edit: T.Col. Volfango MONACI
Le capacità aerospaziali cinesi si sono evolute in modo significativo negli ultimi anni.
In alcune aree la Cina ha raggiunto l'elite delle nazioni spaziali e si sta spingendo oltre.
Le ragioni di questo rapido progresso nel settore possono essere raggruppate in macro
aree: una politica aerospaziale di alto livello dettata da ragioni di prestigio internazionale;
un desiderio di salire nella catena del valore della produzione; le esigenze di trasferimento
di tecnologia e l'aumento delle capacità militari. In particolare il miglioramento delle
capacità aerospaziali militari non dovrebbe essere visto come una semplice dimostrazione
di forza ma come un vero aumento della potenza militare. Inoltre la partecipazione di
imprese straniere in società congiunte in Cina è stata usata come mezzo per assicurarsi
un flusso entrante di know-how tecnologico e come strumento per accedere ai mercati
esteri, sia per lo spazio che per l'aviazione. Tutte le previsioni riguardanti l'aviazione
commerciale sono fortemente influenzate dal tasso di crescita economica cinese atteso.
Lo sviluppo delle infrastrutture di trasporto terrestri va anche fattorato nell‟analisi, poiché
potrebbe erodere quote di mercato, ma è necessario per collegare i grandi aeroporti.
In generale si prevede un aumento degli acquisti, da parte delle principlai linee aree
mondiali, nel corso dei prossimi venti anni (2015-2035) in tutto lo spettro dei grandi
aeromobili commerciali e aviogetti da trasporto regionale, aeromobili cargo.
Due sono gli aeromobili per trasporto passeggeri di grandi dimensioni in produzione in
Cina oggi: il jet regionale ARJ21 e il wide body C919. Allo stato di chiusura di questo
rapporto la prima consegna dell‟ARJ21 è prevista per metà 2014, impattando così anche
le consegne del C919, inizialmente previste per metà del decennio. Entrambi i velivoli
sono ancora alla ricerca di uno spazio reale sul mercato e dovranno dimostrare i livelli di
sicurezza e l‟approvazione del mercato, prima di guadagnare significative quote
commerciali. Questo consentirà ai produttori occidentali di mantenere il loro significativo
vantaggio ancora per qualche tempo. Entrambi i programmi di aeromobili hanno diversi
sub-fornitori occidentali e si basano su una limitata capacità di progettazione, sviluppo e di
ingegneria nazionale, di derivazione programmi militari. Il programma ARJ21 in particolare
utilizza componenti di 19 fornitori esteri, quasi tutti ingaggiati in joint ventures sul territorio
cinese. La progettazione e produzione di elicotteri, seppure di caratteristiche prestazionali
non ancora a livelli occidentali, è in equilibrio con la domanda interna. I dati disponibili
fanno prevedere che la produzione nazionale coprirà la maggior parte del fabbisogno,da
leggero a pesante, per gli anni a venire.
Ch_Sp_20131120_1526.doc 11 Author: T.Col. Giovanni SEMBENINI - Edit: T.Col. Volfango MONACI
La tecnologia aeronautica militare cinese non è paragonabile ai livelli occidentali di oggi.
La punta di diamante della produzione attuale di aerei militari, il J-205, si posiziona dietro
le controparti occidentali di una decade almeno. Tuttavia, le politiche industriali centrali
denotano una maggiore consapevolezza dell'importanza di possedere capacità indigene di
alto livello tecnologico. Va inoltre notato che la tecnologia per uso militare ha beneficiato di
molta tecnologia civile trasferita sotto l'etichetta di uso duale6.
L‟aviazione generale ha un enorme potenziale di crescita in Cina, soprattutto a causa della
particolare configurazione del paese, sia a livello di produzione che di utenza. L'ostacolo
principale di questo sviluppo è il restrittivo regime di gestione dello spazio aereo, ma
anche i costi operativi e la mancanza di personale giocano un ruolo detrattivo. Tuttavia
nuove politiche del governo centrale sembrano aver iniziato un rilassamento del controllo
dello spazio aereo da parte delle Forze Armate. Le proiezioni più recenti indicano che il
numero di aeromobili dell'aviazione generale potrebbe aumentare del 30 per cento l'anno
per i prossimi cinque/dieci anni, raggiungendo, potenzialmente, i 10.000 aerei entro il
2020.
L'infrastruttura industriale spaziale è essenzialmente incentrata sui due grandi complessi
CASIC e CASC. Questi sono ancora di proprietà dello stato e quindi godono di un sistema
economico finanziario particolarmente vantaggioso. Tuttavia, dal punto di vista tecnico,
stanno dimostrando di avere notevoli capacità, senz‟altro quasi competitive, in alcuni
settori, con gli equivalenti occidentali. La Cina ha sviluppato la famiglia dei lanciatori Lunga
Marcia che hanno raggiunto una notevole affidabilità e consistenza nelle operazioni.
La Cina ha anche capacità indigene per la fabbricazione di satelliti di vario tipo (elettro-
ottici, di posizionamento e navigazione, satelliti meteo, satelliti di sorveglianza dell'oceano,
satelliti radar ad apertura sintetica, satelliti per le comunicazioni ad alta capacità).
L'evoluzione seguita negli ultimi vent‟anni mostra che le prestazioni dovrebbero
decisamente aumentare nei prossimi dieci anni. Nel frattempo la Cina è entrata nel circolo
più esclusivo: quello delle nazioni con capacità autonome per il volo spaziale umano.
Il concetto di uso duale, come già menzionato per il settore aeronautico, è anche per il
settore spaziale, foriero di potenziali transizioni dal civile al militare. Quindi è evidente che
una solida capacità spaziale civile contribuisce allo sviluppo delle capacità militari.
5 http://it.wikipedia.org/wiki/Chengdu_J-20
6 http://it.wikipedia.org/wiki/Dual-use
Ch_Sp_20131120_1526.doc 12 Author: T.Col. Giovanni SEMBENINI - Edit: T.Col. Volfango MONACI
In particolare per quanto riguarda quella parte di tecnologia spaziale che proviene dalla
collaborazione internazionale.
L‟analisi ha consentito di individuare varie aree per azioni future, aumentare la
conoscenza interpersonale è senz‟altro quella più pervasiva. La Cina è un enorme paese,
dal punto di vista geografico, evidentemente, ma soprattutto dal punto di vista culturale.
La stratificazione verticale e orizzontale, geografica, dei processi è tale per cui non si può
parlare di una Cina se non a livello di macro relazioni esteriori. Vi è poi un forte bisogno di
aumentare la nostra conoscenza dei processi culturali in corso in Cina. Per esempio,
aumentare la consapevolezza di quanto la Cina si basi, più di altri paesi, sulla conoscenza
diretta tra le persone e sui rapporti tra di esse, anche nei processi industriali e governativi.
Vi è la necessità di migliorare il dialogo con gli attori istituzionali e partner industriali,
perseguendo un maggiore livello di cooperazione sia in termini di ampiezza che di portata.
L'Italia ha già avviato rilevanti collaborazioni in vari ambiti tecnologici con la Cina, si può
pertanto ritenere che si trovi in una posizione favorevole per costruire raporti privilegiati nel
settore aerospaziale.
Ci sarà uno scontro tra la Cina e il resto del mondo? Probabilmente no. Nell'economia di
oggi, la Cina dipende dal resto del mondo almeno quanto è vero il viceversa. Esiste quindi
un “modello” Cinese? Soprattutto negli ultimi tempi, dopo il crollo dei mercati finanziari7
in occidente e negli Stati Uniti, in particolare, molti autori hanno considerato la Cina come
immune da questi problemi: questo potrebbe essere un travisamento grave di una realtà
molto più complessa. Inoltre, da un punto di vista scientifico, un "modello" è tale solo se
può essere replicato ed applicato altrove. La Cina è unica, probabilmente più ancora di
quanto i cinesi o il Partito Comunista Cinese non vorrebbero che fosse. In ogni caso è
probabilmente scorretto focalizzarsi sul paradigma “Cina contro il mondo occidentale”.
Nuovi schemi sociali in Cina e nel resto del mondo suggeriscono che è giunta l‟ora di
travalicare questo approccio e parlare di vera globalizzazione. Ma questo e' un seme per
future discussioni.
La Parte I, di tipo generale e analitico, contiene l‟analisi del sistema aerospaziale cinese.
La Parte II, specialistica, è funzionale alla comprensione della ricerca.
7 http://it.wikipedia.org/wiki/Crisi_economica_del_2008-2013
Ch_Sp_20131120_1526.doc 13 Author: T.Col. Giovanni SEMBENINI - Edit: T.Col. Volfango MONACI
Le Appendici contengono una descrizione monografica, sintetica, della Cina e alcune
note storiche.
Gli Allegati contengono importanti documenti ufficiali cinesi da leggere come testo
aggiuntivo per il lettore alla ricerca di una impressione di prima mano sulle posizioni
ufficiali cinesi e orientamento sulle aerospaziale e questioni connesse.
Ch_Sp_20131120_1526.doc 14 Author: T.Col. Giovanni SEMBENINI - Edit: T.Col. Volfango MONACI
Part I
Ch_Sp_20131120_1526.doc 15 Author: T.Col. Giovanni SEMBENINI - Edit: T.Col. Volfango MONACI
INTRODUCTION
China today is many things. The observation most commonly found in every report, book
or piece of analysis is the acknowledgment about the extremes that characterize this
country. The country is so huge and diverse, in every possible sense, that any theoretical
construct or possible future can be supported by a reasonable amount of evidence. China
is incredibly backward, and at the same time moving forward, so quickly that it is hard to
make sense of it.
The sheer amount of economic data about the country almost places it in a league of its
own. But several issues, such as an ageing population, environmental degradation,
inequality and corruption, and an opaque business culture stand in the way of China
becoming the new world super power.
Over the last few years, and continuing now, China has lived through intense political
transitions and economic challenges. The country is still firmly ruled by the Chinese
Communist Party (CCP) that has built its legitimacy on continued economic growth.
Growth is a key word in order to understand how control can be exerted on an ever more
restive middle class and a rural population that accounts for more than three/fourths of the
overall population. However, growth will not continue without a price: expansion of social
safety nets and politically difficult reform among other challenges are routinely discussed
in newspapers all over the world.
The central government‟s official documents call for a rebalance of the economy toward
more domestic consumption and less reliance on export-led growth. Infrastructures are
also being somehow reduced, even if they are still used as a means to cope with massive
layoffs from factories suffering from the reduced imports from the West in recent years.
Government services, health care, education and pension reform have been put high on
the priority list of policy makers. China, as many other Asian states, is now looking
seriously at significant welfare measures, such as rural health insurance schemes that
have gone from covering a tiny percentage of the population in 2003 to almost complete
coverage in 2012.
CHINESE AEROSPACE PROGRESS IN XXI CENTURY. SITUATION, PERSPECTIVES, CRITICALITIES.
NEVER ENDING RACE OR A PROCESS WITH AN EPILOGUE?
Ch_Sp_20131120_1526.doc 16 Author: T.Col. Giovanni SEMBENINI - Edit: T.Col. Volfango MONACI
China has traditionally operated under a resource-intensive manufacturing system.
Recently, with an eye to its aerospace manufacturing future, China has begun a move
toward the production of higher value-added goods. Most recently, the 12th Five-Year Plan
(2011–2015) lists aerospace as a symbol and target of China‟s “high-value” ambition.
How can this be achieved through the recent moves is not clear: despite the declarations,
China has not embraced long-promised market reforms and has demonstrated an
increased role of the state in the economy. In response to the global financial crisis8,
there has been a strengthening of the state sector to the benefit of state-owned
companies.
In any case, according to several economic analysts, in every country, there are particular
breeds of industries that can be used as indicators to what extent high-value skills,
technologies and operational competencies are present in a country‟s overall system.
Aerospace is definitely one of these.
China is showing how much it would like to have excellent commercial airplane
manufacturers, space faring systems and a full range of smaller but very lively aerospace
enterprises. China‟s 12th Five-Year Plan, plus a series of other central government
documents, contains clear indications of what should be achieved.
Over the next few years, the country will attempt to replicate aeronautics and space history
that in the rest of the world has taken 100 plus years to achieve: glamorous flight pioneers,
airport and air traffic control networks, jet age for all and the space quest. To catch up with
the rest of the class would have to avoid the pitfalls that have plagued space and
aeronautics in other countries.
Nevertheless, aerospace is a complex world. Space is in a league by itself by all
measures. It is true China has already made huge forward leaps to catch up with the rest
of the pack of world leading aerospace nations.
China is a so-called emerging country, characterized by large areas with an uneven
distribution of terrestrial infrastructure. Hence its space ambitions have, in addition to
traditional motivations of international recognition and national pride, a dimension of
effective contribution to national economic development and more balanced development
of its territory. Autonomous launch capability has also given a definite twist of power, with
specific military implications.
8 http://en.wikipedia.org/wiki/Great_Recession
Ch_Sp_20131120_1526.doc 17 Author: T.Col. Giovanni SEMBENINI - Edit: T.Col. Volfango MONACI
China‟s desire to be present over the entire range of applications as well as scientific
research and exploration, including lunar missions, is evidence of the importance of its
ambitions and of the maturity of its industrial apparatus and research facilities.
Commercial aviation is a very different business. It is influenced by commercial choices,
government choices and choices that imply a deep cultural change. Changes can be
driven by economics interests and that is the way that some of them are done in China
today. In order to succeed and become a reliable, profitable and safe aviation market,
Chinese industries will have to build safe airplanes and manage safe airlines, at much
higher volumes and on tighter schedules than they currently do. All of the above hence
implies shared public and private responsibility for safety, shared military and civilian
control of airspace, international standards applied in a domestic setting, and the balance
between strict by-the-book procedure and individual initiatives.
China is also undergoing a massive, continuing, military modernization process; this
means an increased strength, confidence and ability to advance national interests,
especially in the Asia-Pacific region. An aspect of this behavior has been the pursuing of
territorial claims in the East and South China seas. Such behaviors somehow escalate
regional tensions, giving reasons to other countries to advance and improve their own
defense capabilities and form or strengthen security partnerships.
Recent times have also seen one of the rare changes in the top leadership of the Chinese
Communist Party, which has brought on a new generation of leaders. How will they
manage this important period of transition is a very debated issue in the international
community; debates also fueled by the opacity of Chinese politics, that make it difficult,
once again, to assess how major reforms will be implemented. Still an educated guess can
lead to expect that China‟s state-owned enterprises will continue to operate in the interest
of the party.
As for the military, it is very likely that the People’s Liberation Army9 will remain a
powerful political force, both taking direction from and influencing the CCP10 and Chinese
government leadership. This last point is of particular interest when evaluating the
economic resources made available for industrial and technological growth in the
aerospace sector.
9 http://en.wikipedia.org/wiki/People%27s_Liberation_Army
10 http://en.wikipedia.org/wiki/Chinese_Communist_Party
Ch_Sp_20131120_1526.doc 18 Author: T.Col. Giovanni SEMBENINI - Edit: T.Col. Volfango MONACI
All the indicators show that interdependence is a key word to be born in mind when
planning actions involving China, at any level. Mutual benefits certainly will come more
from cooperation and increased good relationships than confrontation.
No single work could describe the full complexity of the processes going on in today‟s
China, not even if limited to a single, although multi-faceted, subject like aerospace. Tough
decisions have been made during the drafting of this report with respect to what to include
and what not. Hopefully they were wise ones.
Ch_Sp_20131120_1526.doc 19 Author: T.Col. Giovanni SEMBENINI - Edit: T.Col. Volfango MONACI
The latest transition in the making of an evolving country
A new beginning under Mao Zedong11, after World War II, was marked by an autocratic
socialist system that imposed strict controls over everyday life and cost the lives of tens of
millions of people.
Mao's successor Deng Xiaoping12 launched a market-oriented economics in 1978 and,
helped by other leaders, fostered a development that by 2000 quadrupled the output.
Living standards have since improved dramatically as has personal freedom even if
political controls remain tight.
Just about at the closing date of this work a major event has taken stage in China, whose
future can be, barely, seen from the edge of the 18th National Congress of the Communist
Party of China (CPC)13.
Out of the Congress came a seven-member Politburo Standing Committee (PSC) headed
by Xi Jinping14. The PSC is the powerful entity that de facto runs the country. The names
had been known over the internet for months15; still the convolute mechanics of the
selection would leave some uncertainty until the end. One thing emerged for sure: the
confirmation of those thoughts that the future ten years, this is for how long, as of today,
the PSC is expected to live, will most probably see no uprooting or overhauling of the
Chinese system.
11
http://en.wikipedia.org/wiki/Mao_Zedong 12
http://en.wikipedia.org/wiki/Deng_xiaoping 13
Full text of Hu Jintao's report at 18th Party Congress http://news.xinhuanet.com/english/special/18cpcnc/2012-11/17/c_131981259.htm Last visited15/08/2013. 14
http://en.wikipedia.org/wiki/Xi_Jinping 15
Online Reaction to China‟s New Leadership Line-Up: Epic Fail for Potential Reformers- http://www.tealeafnation.com/2012/11/online-reaction-to-chinas-new-leadership-line-up-epic-fail-for-potential-reformers/- Last visited15/08/2013.
A look at China through different lenses I-1
Ch_Sp_20131120_1526.doc 20 Author: T.Col. Giovanni SEMBENINI - Edit: T.Col. Volfango MONACI
One key difference of this transition though has been the change of command, from Xi to
Hu Jintao, at the helm of the Central Military Commission16. The CMC oversees major
national security and military affairs. The reading is that relinquishing control of the key
military role means giving up considerable power and influence.
Notwithstanding the recent, widespread changes in China, the CPC is still very clearly in
power and the somehow opaque17 selection process of the new leadership confirms the
secrecy and exclusivity of the modus operandi of the Party.
The more direct effect of this type of management is the effect of distance from the people
to the government.
Xi's speech was somehow different:
"Our people have great enthusiasm in life," he said.
"They hope for better education, more stable jobs, more satisfactory
income, more reliable social security, medical services with higher
standards, more comfortable living conditions and a more beautiful
environment."
Apparently, at press conference time, Xi Jinping impressed already many listeners as the
way he presented himself and the way he spoke was, if not neither mundane nor
revolutionary, at least a different breed from previous ten years of Hu Jintao. In addition,
many observers noted how he underlined some of the key issues that many western
observers see as the biggest hindrance to China real development: corruption,
remoteness of the leading political class from the general public and burdening formalities
and bureaucracy18.
According to Willy Lam, a history professor at the Chinese University of Hong Kong19,
notwithstanding the positive opening, not much of a change can be expected in the
direction of more freedom and liberalism "By and large, we have a conservative team,"
Lam said following the announcement of the new Standing Committee. "We can expect no
substantial or meaningful movement toward political reform."
16
The Central Military Commission - http://english.gov.cn/2008-03/16/content_921750.htm 17
After months of mystery, China unveils new top leaders - http://edition.cnn.com/2012/11/14/world/asia/china-leadership-transition/index.html
Last visited15/08/2013. 18
Xi leads top leadership to meet press - http://news.xinhuanet.com/english/special/18cpcnc/2012-11/15/c_131975368.htm- Last visited15/08/2013.
19 After months of mystery, China unveils new top leaders -
http://edition.cnn.com/2012/11/14/world/asia/china-leadership-transition/index.html Last visited15/08/2013.
Ch_Sp_20131120_1526.doc 21 Author: T.Col. Giovanni SEMBENINI - Edit: T.Col. Volfango MONACI
The new leaders are likely to be "in favor of staying the course, maintaining political
stability and defusing challenges to the party's authority," he said.
According to some experts, at least the reduction in size, from nine members to seven,
might bring along greater unity and efficiency at the top of the party.
According to Cheng Li, director of research at the John L. Thornton Center at the
Brookings Institution, the new lineup shows that Jiang Zemin20, the 86-year-old former
party chief who preceded Hu, is still very much the mastermind behind the scenes.
The composition of the committee is "not a surprise but a disappointment," he said, adding
that it was dominated by people loyal to Jiang. He said some Chinese people would be
disappointed about the decision not to include Liu Yuanchao and Wang Yang, senior
officials who he described as "strong advocates for political reform."
One last thing that emerged during the Congress to confirm how China is still lagging
behind in some social areas is the reduced political representation of women. Despite one
of Mao's famous quotes was "Women hold up half the sky."21
There is no woman among the new members of the PSC; actually, none has ever been
voted to it since its creation in 1949.
There is only one woman in the wider Politburo, Liu Yandong, who could be tapped for the
elite group, but according to many observers, her age may have been a disadvantage in
her candidacy. Good news is the overall number has risen to two female representatives.
According to the recent Third Survey on Chinese Women's Social Status22 only 2.2% of
working women were in charge of the state offices, party organizations and other
enterprises or institutions.
Will this new Politburo lead China to global hegemony? This is one of the recurrent
western estimation. Will it also become the world‟s largest economy? Arguably so.
However, the missing piece here might be the full transition to real democracy.
In addition, in order to do so the new political class must strike a balance between the
continuous demonstrations of strength done abroad with the shaky pedestal they stand on
at home. China is constantly seeking to demonstrate assertiveness in international
disputes while playing down most of them to avoid direct clashes that would not do any
good to economic progress. Nevertheless, foreign issues are at least as important as
20
http://en.wikipedia.org/wiki/Jiang_Zemin 21
http://femination.wordpress.com/2012/03/07/women-hold-up-half-the-sky/- Last visited15/08/2013. 22
Findings from the Third Survey on Chinese Women‟s Social Status - http://blogs.lse.ac.uk/gender/2011/11/03/findings-from-the-third-survey-on-chinese-womens-social-status/- Last visited15/08/2013.
Ch_Sp_20131120_1526.doc 22 Author: T.Col. Giovanni SEMBENINI - Edit: T.Col. Volfango MONACI
stability at home. The situation is rapidly evolving bringing along some issues that need to
be tackled like the labor force growing older. Therefore, the new political leaders need to
begin thinking and acting, seriously, about economic reforms. Popular discontent on the
rise has somehow made Xi Jinping of the necessity to reduce and simplify the bureaucratic
burden and fight corruption. There is a clearly felt need to rebalance the economy towards
domestic demand, but making more funds available for key sectors might generate more
friction with the managers of huge state-owned enterprises. The rising of average
incomes23 and the development of social media have radically changed the way the
society is evolving and reacting to internal politics. The, traditionally strong, internal
censorship system is having a hard time tracking and cracking on the many hundreds
millions users of blogs and similar tools. In recent times, the government has avoided hard
confrontation by limiting the use of strong management of turmoil and unrest. However,
the awareness that the public is complaining more and more about corruption, heavy-
handed censorship and pollution has not really forced the central government to rethink
the distribution of powers. A metric of these actions will be how the new leaders will carry
the modernization programme promoted by Wen Jiabao forward. There is somehow the
perception that economic growth is seen as a continuous answer to unrest, whereas it is
missing the awareness that prosperity also brings along its own dynamic of change; which
in turn calls for more reforms24. The signs coming from China through open sources do not
show much craving for western type democracy among the ruling class. The Party is very
much in power and closely guards the Nation‟s values and stakes. Maybe not fully aware
that more economic prosperity brings more people into the middle class, a vital force that
demands more transparency in government. However, these factors might make China
stronger on the outside but growing fragile on the inside.
The Jasmine revolution25 of 2011 has proved part of this fragility and has provided
evidence of how many years of opening might be recalled on a short notice.
23
http://databank.worldbank.org/data/views/variableselection/selectvariables.aspx?source=millennium-development-goals#c_u- Last visited15/08/2013.
23 China 2030 Building a Modern, Harmonious, and Creative High-Income Society. The World Bank. 2012.
2012 International Bank for Reconstruction and Development / International Development Association or The World Bank
24 China Abandons the Law, WSJ, March 28, 2011,
http://online.wsj.com/article/SB10001424052748704425804576220102254442640.html Last visited 25/08/2012.
25 China: Jasmine Revolution protests to be held every Sunday. February 23, 2011,
http://www.globalpost.com/dispatch/news/regions/asia-pacific/china/110223/china-jasmine-revolution-protests-sunday- Last visited15/08/2013.
Ch_Sp_20131120_1526.doc 23 Author: T.Col. Giovanni SEMBENINI - Edit: T.Col. Volfango MONACI
Middle class also is not for everybody in China, inequality is on the rise. The population is
growing more aware of these inequalities and beginning to question whether it is possible
to continue to bear unfair salaries and treatment26. Interesting enough the Chinese are
experiencing more tensions about the way some people are getting richer than others than
about the inequality itself. This is tightly coupled with the feelings about the different set of
rules that apply to different people in China27. Apparently, fair dealing is virtually
impossible. The widespread awareness in China is that people get around rules and they
find a way to live with them without necessarily applying them. These types of behaviors
provide one more indicator to show how democracy is evolving in China.
26
One universal measure for inequality is the Gini index (http://data.worldbank.org/indicator/SI.POV.GINI, http://en.wikipedia.org/wiki/Gini_coefficient). It is basically an indicator of how unequal is the distribution of wealth or other commodities among a
population (0 perfect distribution, 100 maximum inequality). The Gini index of China has been growing steadily over the past 40 years. Interesting enough, the USA has the highest Gini index among developed countries - Last visited15/08/2013. http://online.wsj.com/public/resources/documents/info-Unequalchrt0705-15.html, China‟s Inequality Gini Out of the Bottle, September 17, 2012, http://blogs.wsj.com/chinarealtime/2012/09/17/chinas-inequality-gini-out-of-the-bottle/ - Last visited15/08/2013.
27 Tiger Head, Snake Tails. By Jonathan Fen . Simon & Schuster. 2012
Ch_Sp_20131120_1526.doc 24 Author: T.Col. Giovanni SEMBENINI - Edit: T.Col. Volfango MONACI
A market based economy managed by central planning
Starting around 1960, China has undergone a major transformation into an, almost, market
based economy, that has made China, in 2010, the second largest economy in the world,
after the USA.
GDP over Years. (Source: World bank28)
The transformation has been accompanied by a terrific soaring in Gross Domestic Product
(GDP) and widespread growth, that has meant placing Chinese banks and companies in
the top class worldwide and developing an impressive array of infrastructures29. The main
features of this evolution included the ability of, and freedom given to, the local
government to implement gradual reforms. The plan proceeded following both the needs
of the big state-owned firms as well as the liberalization and the development of the private
enterprise. The rapid growth and the structural changes brought along some
28
China 2030 Building a Modern, Harmonious, and Creative High-Income Society. The World Bank. 2012. 2012 International Bank for Reconstruction and Development / International Development Association or The World Bank
29 http://www.bankersalmanac.com/addcon /infobank/bank-rankings.aspx - Last visited15/08/2013.
http://money.cnn.com/magazines/fortune/global500/2011/ - Last visited15/08/2013. http://aapa.files.cms-plus.com/PDFs/WORLD%20PORT%20RANKINGS%202009.pdf Last visited15/08/2013.
Ch_Sp_20131120_1526.doc 25 Author: T.Col. Giovanni SEMBENINI - Edit: T.Col. Volfango MONACI
macroeconomics changes. Hence the implementation of a combination of traditional
monetary and fiscal policies. The local governments have also been brought into a
nationwide competition to attract investment and develop infrastructure, hence improving
business conditions. But these actions were also supported by the removal of local trade
barriers thus creating the best conditions for a domestic market integration.
All graphs above from http://www.trustedsources.co.uk/our-research/china/free_trial
Ch_Sp_20131120_1526.doc 26 Author: T.Col. Giovanni SEMBENINI - Edit: T.Col. Volfango MONACI
The combination of all the actions above makes today‟s China the world‟s largest exporter
and the world‟s largest manufacturer, as shown in the following two graphs.
Export over time. Data as of 2012. Forecast for 2013 on. (Source: World bank30)
Manufacturing GDP over time. (Source: World bank30)
30
China 2030 Building a Modern, Harmonious, and Creative High-Income Society. The World Bank. 2012. 2012 International Bank for Reconstruction and Development / International Development Association or The World Bank
Ch_Sp_20131120_1526.doc 27 Author: T.Col. Giovanni SEMBENINI - Edit: T.Col. Volfango MONACI
Will China be able to sustain these rates over the next years? The answer, given the
current world situation, cannot be given simply looking at China itself, since the most
important emerging economies are shifting the balances around the globe31.
The largest emerging markets will act as new centers of gravity in the global economic
system. However China‟s growth can reasonably be expected to slow down, somehow, at
least due to the demographic change: the size of the labor force available in China is
expected to contract due to the shifting in age structure in the country. One issue that will
also play heavily is the stress that has been put on the environment. Going green will be
necessary but also an opportunity for China, as many sources show32.
In the meantime, China proceeds according to its plans, typical of the centralized
economies. The latest one of interest for the aerospace industry is the 12th Five Years
Plan33, basically a document of industrial policy, stemming from the central government,
aiming to develop and expand seven strategic emerging Chinese industries34.
Among other targets, the 12th Five-Year Plan aims at refocusing China‟s economy on
domestic consumption more than exports and investment, hence rebalancing growth.
One indication of particular interest for the aerospace industry is the will to shift to higher
value-added productions and to increase government support for domestic high-tech
industries. The Plan states very clearly the need to move up the manufacturing value
chain35 as a mean to enhance the national industrial system. So far most of the value for
products, especially consumer electronics, assembled in China was kept elsewhere (USA,
Japan, Germany, etc.). Now there is explicit mention of seven strategic emerging
industries36 that will focus on value of their products: New-generation information
31
China has been placed since 2001 in a group of countries named BRIC (from the initials of the countries‟ names: Brasil, Russia, India, China). See the original paper: Building Better Global Economic BRICs, Goldman Sachs Global Economics Paper No: 66, Jim O‟Neill, 30 November 2001.
32 China 2030 Building a Modern, Harmonious, and Creative High-Income Society. The World Bank. 2012.
2012 International Bank for Reconstruction and Development / International Development Association or The World Bank pag. 229. http://edition.cnn.com/2013/01/19/world/asia/china-florcruz-pollution/index.html - Last visited 25/01/2013.
33 http://cbi.typepad.com/china_direct/2011/05/chinas-twelfth-five-new-plan-the-full-english-
version.html - Last visited15/08/2013. 34
http://en.wikipedia.org/wiki/Five-year_plans_of_the_People%27s_Republic_of_China 35
For an introductory overview of value chain see http://en.wikipedia.org/wiki/Value_chain. The process of moving up the value chain is not as immediate as a plan might induce to think. Even getting exposure, through manufacturing, to a certain type of product (e.g. batteries) does not make the transition to upscale products seamless.
36 For more details see KPMG Advisory (China) Limited, „China‟s 12th Five-Year Plan: Overview‟ http://www.kpmg.com/CN/en/IssuesAndInsights/ArticlesPublications/Publicationseries/5 years plan/Documents/China- 12th- Five-Year-Plan-Overview-201104.pdf (Last visited 02/07/2012).
Ch_Sp_20131120_1526.doc 28 Author: T.Col. Giovanni SEMBENINI - Edit: T.Col. Volfango MONACI
technology, high-end equipment manufacturing, advanced materials, alternative-fuel cars,
energy conservation and environmental protection, alternative energy, and biotechnology.
Aerospace falls directly within the high-end equipment manufacturing and it is linked to
several others. The government is expected to specifically support these industries since
they have the potential to be a source of economic growth and advanced innovation.
The 12th Plan could hence have a direct impact on European37 aerospace firms as well: in
the telecommunications and aerospace sectors, EU companies might gain market shares
by providing support to Chinese efforts to enhance its domestic capacities.
The Plan states some goal that might be beneficial to the trade relationships between
China and the rest of the world, such as rebalancing trades, increasing household
consumptions, industrial upgrading. Unfortunately, in the past, some actions were in direct
contrast to these goals: pursuing higher Chinese export, government subsidies to
disadvantage foreign competitors.
The 12th Plan also touches lightly on the subject of merging capacities38.
Over the past ten years there has been a proliferation of industries and some sectors are
definitely overpopulated, even for China, as shown in the graph below.
Number of companies in China, grouped by key industrial secotrs, over years from 2003 to 201139
37
ECRAN, China, The EU And China‟s Twelfth Five-Year Programme, Robert Ash, Robin Porter, Tim Summers, 2012 www.euecran.eu
38 12
th Five years Plan English version: “Chapter 15: Accelerating the development of production services -
We will deepen the professional division of labour, accelerate innovation in services products and services models, promote the merging of production services and the advanced manufacturing industry, and promote the accelerated development of production services.”
Ch_Sp_20131120_1526.doc 29 Author: T.Col. Giovanni SEMBENINI - Edit: T.Col. Volfango MONACI
The crowding of some industrial sectors has most probably pushed for official, albeit
limited, indication for consolidation. The results of the first year implementation of the 12th
plan are, possibly, what is visible on the right hand side of the same graph.
The trend is substantiated by indications emerging from various Chinese sources40 that
have been calling for consolidation mainly to fix overproduction and to create specific
sectors industrial giants. The advantages of consolidation have also been heralded at
supply chain level by some sources41.
The key sectors currently more likely to pursue consolidation are steel, cement,
shipbuilding, automotive, and aluminum. At the end of the process, these industries would
benefit from reduced fragmentation, manage overcapacity, defuse price wars and achieve
world-competitive status.
Other strategic industries would be electronics, pharmaceuticals, industrialized agriculture,
and rare earths all of which are considered key enterprises that must aim at global
competitiveness.
In the electronics sector, the drive is to foster higher-yielding, branded companies and
move away from an economy centered around low-cost electronics manufacturing, as
mentioned, moving up the value chain.
Recently, two companies have achieved global brand status: telecommunications-
equipment maker Huawei Technologies Co. and personal computer maker Lenovo Group
Ltd. Still, electronics industries are likely to attract the scrutiny of foreign policy makers as
they might be seen as threats to national security, real or assumed42.
One critical sector where Chinese companies still lag well behind foreign competitors is
semiconductors. Semiconductor Manufacturing International Corp., China's largest
chipmaker continues to lag behind both in production capacity by volume as well as in
production technology than foreign competitors.
39
“Consolidation in China What lies ahead” http://www.google.it/url?sa=t&rct=j&q=&esrc=s&source=web&cd=3&ved=0CEAQFjAC&url=http%3A%2F%2Fwww.imap.de%2Ffileadmin%2Fpdf%2Fconsolidation.pdf&ei=5v5iUsWGN6_R4QSh1YCwCA&usg=AFQjCNGf9rvNBz-z2zoizcBc76bHBTCtoA&bvm=bv.54934254,d.bGE – Last visited 24/07/2013.
40 http://news.xinhuanet.com/english2010/china/2011-07/07/c_13971925.htm
http://www.chinadaily.com.cn/business/2012-03/12/content_14810082.htm 41
China 2030 Building a Modern, Harmonious, and Creative High-Income Society. The World Bank. 2012. 2012 International Bank for Reconstruction and Development / International Development Association or The World Bank pag. 229 http://www.worldbank.org/reference/
42 Huawei probed for security, espionage risk, CBS News, October 7, 2012;
http://www.cbsnews.com/8301-18560_162-57527441/huawei-probed-for-security-espionage-risk/ – Last visited 24/07/2013.
Ch_Sp_20131120_1526.doc 30 Author: T.Col. Giovanni SEMBENINI - Edit: T.Col. Volfango MONACI
Rare-earth metals43 as they continue to be the rage of the high tech industry are a case
by themselves. In China there are several mining companies that contributed to a deflation
that took down prices of these elements by nearly 70% last year, despite China controlling
about 95% of the world's output.
It is hard though to assert today how well and fast this consolidation will happen, given the
pitfalls that have paved the way to other high level actions. True is that the conglomerates
would benefit from improved economies of scale and reduced excess capacity, but they
might incur in reduced competition, hence penalizing the private sector.
Also, once again the central plans have to come to terms with local governments that want
to have their own steel factories, or major industries, in their neighborhood, which means
control over jobs and revenues.
All of the above-mentioned activities might have a more or less indirect impact on the
aerospace sector. Semiconductors and rare earths are two typical examples: they both are
key building blocks of avionics and sensors systems that, as usual, might in turn enable
key military technologies creation.
Degree of concentration versus consolidation opportunities plotted for various industrial sectors44
43
http://en.wikipedia.org/wiki/Rare_earths 44
“Consolidation in China What lies ahead” – retrievable at http://www.google.it/url?sa=t&rct=j&q=&esrc=s&source=web&cd=3&ved=0CEAQFjAC&url=http%3A%2F%2Fwww.imap.de%2Ffileadmin%2Fpdf%2Fconsolidation.pdf&ei=5v5iUsWGN6_R4QSh1YCwCA&usg=AFQjCNGf9rvNBz-z2zoizcBc76bHBTCtoA&bvm=bv.54934254,d.bGE –visited 24/07/2013.
Ch_Sp_20131120_1526.doc 31 Author: T.Col. Giovanni SEMBENINI - Edit: T.Col. Volfango MONACI
Still, the aerospace industry, which falls in the broader High Technology category, is rightly
positioned, as seen in the graph, to achieve further consolidation, but picking and choosing
its opportunities without pressure.
The current situation sees the Chinese aviation industrial landscape as dominated by two
large, state-owned organizations45: the Aviation Industry Corporation of China (AVIC) and
the Commercial Aviation Corporation of China Ltd46 (COMAC).
AVIC was founded in 1993 and is China‟s primary aviation design and manufacturing
conglomerate. It also oversees almost all aviation research, development, and
manufacturing in China.
AVIC is subdivided in 10 branches dealing with defense, transport aircraft, aviation
engines, helicopters, avionics, general aviation aircraft, aviation research and
development, flight testing, trade and logistics and asset management.
Through these branches, the company controls over 200 subsidiary firms and 31 research
institutes. Product lines include military and commercial aircraft, engines and airborne
weapon47. AVIC‟s profits have been steadily rising over the past few years and in 2012
was listed 250th in the world in the Global Fortune 50048 ranking.
COMAC was established in May 2008 specifically to „design, develop, manufacture, and
maintain China‟s large commercial aircraft project, the C91949. It is headquartered in
Shanghai and has a number of state-owned stakeholders, such as the State Council‟s
State-Owned Asset Supervision and Administration Commission, the Shanghai municipal
government-owned Shanghai Guosheng (Group) Company Ltd., and the Aviation Industry
Corporation of China50.
According to its website, COMAC currently controls six subsidiary companies and
organizations: the AVIC 1 Commercial Aircraft Corporation Ltd., the Shanghai Aircraft
Design and Research Institute, the Shanghai Aviation Manufacturing Company Ltd., the
45
See part II for a more detailed description of the two conglomerates. 46
The Commercial Aircraft Corporation of China, Ltd., „„A Brief Introduction to the Company.‟‟
http://www.comac.cc/gk/gsjj/ - Last visited 24/07/2013. 47
James Mulvenon and Rebecca Samm Tyroler-Cooper, China‟s Defense Industry on the Path of Reform (Washington, DC: Defense Group Incorporated, October 2009)
48 http://money.cnn.com/magazines/fortune/global500/2012/countries/China.html . Global 500 is an
annual ranking of the world's largest corporations by revenue. Interesting to note that, overall, 73 Chinese company are listed in the Global 500. AVIC is number 31. By comparison USA has 132 entries. Over the past 10 years the USA has lost 25% of the top positions, while China has increased by more than 5 times its presence in the ranking. - Last visited 24/07/2013.
49 The Commercial Aircraft Corporation of China, Ltd., „„A Brief Introduction to the Company.‟‟ http://www.comac.cc/gk/gsjj/ - Last visited 24/07/2013.
50 Mark Stokes, „„Futuregram09–002: China‟s Commercial Aviation Sector Looks to the Future‟‟ (Arlington,
VA: Project 2049 Institute, May 8, 2009), p. 2; Zhou Yan, „„Pudong gets C919 Final Assembly Line,‟‟ China Daily, November 19, 2009, p. 13.
Ch_Sp_20131120_1526.doc 32 Author: T.Col. Giovanni SEMBENINI - Edit: T.Col. Volfango MONACI
Shanghai Aircraft Customer Service Company Ltd., the Industry Corporation Limited, and
the Shanghai Aviation Industrial (Group) Co. Ltd.
In the peculiar control structure of big state owned Chinese conglomerates, there are more
or less direct reporting lines between the AVIC and COMAC and at least three specific
entities dealing with aviation in China:
The Civil Aviation Administration of China (CAAC) deals with policy and strategy for
industry‟s development, air traffic management, safety, security, air service agreements,
aviation standards and certification and Airports. Aviation standards and certifications,
among others, are extremely important for Chinese future commercial success of it liners.
There is a remarkable difference between imposing national products on the internal
market and affirming their presence internationally. This must be done through
technological success but also through the strict adherence to international air standards
to gain certification.
The Ministry of Science and Technology (MOST) cares for policy and strategy for science
and technology, coordinates science and technology conducted at universities and directly
participates in large projects.
The Commission of Science, Technology and Industry for National Defense (COSTIND)
looks after industrial development, large commercial aircraft and joint ventures, produces
the main policy framework for AVIC, manages and controls more or less directly, foreign
cooperation and acquisitions, provides export regulations, manages defense projects
conversion.
From the above reporting lineage, it is clear how, more than anywhere else in the western
aviation world, the Chinese government has a direct impact on the choices made by the
industrial conglomerates. The conglomerates can be a direct extension of the political will
of the elite in power.
The space industrial infrastructure is very similar to the aviation one in its overall shape.
Here too there are two major conglomerates: China Aerospace Science and Technology
Corporation (CASC) and China Aerospace Science and Industry Corporation (CASIC).
The two corporations have gone through a series of reorganization and consolidation,
Ch_Sp_20131120_1526.doc 33 Author: T.Col. Giovanni SEMBENINI - Edit: T.Col. Volfango MONACI
apparently fuelled by a will for loosening the state's control over enterprise operation51 that
would have yielded increased competition and innovation52.
In the current configuration, CASIC is composed of five research institutes, two research
and production bases, six public companies, and more than 580 enterprises and
institutions. It employs about 127,000 people53.
CASIC works mostly in the areas of missile development, aerospace electronics and other
aerospace equipment, especially military related54.
It is interesting to note that CASIC also produces civilian products and provides civilian
services including machinery, electronics, chemicals, communications, computers and
their applications55.
CASC controls over 125 enterprises56 engaged in the research, design, manufacture and
launch of space systems, as well as long-range strategic ballistic missiles and their
components. Since a few years CASC has set up divisions to manufacture inertial
measurement units, telemetry, and missile-related microelectronics.
Through further acquisition CASC has expanded its activities into the operation of
telecommunications satellites57.CASC also works in defense systems, such as vehicle air
defense, ship-to-air missile, surface-to-air, and portable missile weapon systems, as well
as unmanned aerial vehicles (UAVs), precision guided bombs, and guided multiple-launch
rockets.
CASC and CASIC are state-owned enterprises under direct control of the military
structure, thus meaning the industrial policy thoroughly reflects the modernization needs of
the People‟s Liberation Army, as already seen for the aviation sector58.
51
Mark Stokes with Dean Cheng, “China‟s Evolving Space Capabilities: Implications for U.S. Interests,” Project 2049, 26 April 2012, p. 17.
52 Evan Medeiros, Robert Cliff, Keith Crane, and James D. Mulvenon, “A New Direction for China's Defense
Industry,” RAND Corporation, 2005, p. 53. 53
Alanna Krolikowski, “China‟s Civil and Commercial Space Activities and their Implications,” Testimony before the U.S.-China Economic and Security Review Commission, 11 May 2011
54 “China Aerospace and Technology Corporation (CASC),” Jane‟s Space Systems and Industry, 18
October 2010. 55
Evan Medeiros, Robert Cliff, Keith Crane, and James D. Mulvenon, “A New Direction for China's Defense Industry,” RAND Corporation, 2005, p. 64
56 “公司简介 [Company Profile],” China Aerospace Science and Technology Corporation，2011,
www.spacechina.com. 57
Alanna Krolikowski, “China‟s Civil and Commercial Space Activities and their Implications,” Testimony before the U.S.-China Economic and Security Review Commission, 11 May 2011 Alanna Krolikowski, “China‟s Civil and Commercial Space Activities and their Implications,” Testimony before the U.S.-China Economic and Security Review Commission, 11 May 2011
58 Michael Raska, China's defense aviation industry: searching for innovation, October 22, 2012 -
http://www.nationmultimedia.com/opinion/Chinas-defence-aviation-industry-searching-for-inn-30192753.html - Last visited 24/07/2013.
Ch_Sp_20131120_1526.doc 34 Author: T.Col. Giovanni SEMBENINI - Edit: T.Col. Volfango MONACI
The transfer of technologies between the civilian and military side is much more effective
than simple dual use concepts, both from an industrial as well as functional point of view.
Ever since its foundation, China‟s space and missile industry has been running in a league
of its own, as it has been somehow a sole source provider in a captive market. As already
mentioned, recent years have seen the political level trickle down directives aiming at
introducing market-based incentives. Will this approach continue over the next few years?
Hard to tell: the new guiding class will have to stick to this plan but it will take time to
change mentalities. Playing against this change of course is also the recurrent government
subsidies that are cyclically renewed.
In order to give some visual hints, the following graphs show the trend of exports, imports
and trade balance59 of the Chinese aerospace industry as tracked from 1981 to 2011.
By comparison the US trend has been plotted over the same period of time, considering its
aerospace industry for reference.
[Author elaboration based on data from the OECD60 ]
59
A Trade Balance is the difference between the monetary value of exports and imports of a specific country's economic output over a certain period of time. A positive or favorable balance of trade is known as a trade surplus when exports exceed imports. Conversely, a negative or unfavorable balance is referred to as a trade deficit or trade gap. Small trade deficits are not viewed as harmful, but large trade deficits are seen as problematic for a country's domestic economy. However, it all depends on where the country is in its business cycle, how long the deficit or surplus has been ongoing, and the reasons behind it.
Ch_Sp_20131120_1526.doc 35 Author: T.Col. Giovanni SEMBENINI - Edit: T.Col. Volfango MONACI
[Author elaboration based on data from the OECD61 ]
[Author elaboration based on data from the OECD61 ]
60
Organisation for Economic Co-operation and Development – http://Stats.oecd.org. Data retrieved and plotted from Science, Technology and Patents/Science and Technology Indicators/Main Science and Technology Indicators. Data extracted on 19 Oct 2012 22:07 UTC (GMT) from OECD.Stat
61 Organisation for Economic Co-operation and Development – http://Stats.oecd.org. Data retrieved and
plotted from Science, Technology and Patents/Science and Technology Indicators/Main Science and Technology Indicators. Data extracted on 19 Oct 2012 22:07 UTC (GMT)
+
-
Ch_Sp_20131120_1526.doc 36 Author: T.Col. Giovanni SEMBENINI - Edit: T.Col. Volfango MONACI
The first plot shows the aerospace industry total export. The US trend clearly shows the
humps and bumps of the global situation, through major events (like 9/11) financial crisis
and other negative conjunctures. The Chinese plot shows a positive but remarkably slow
trend. Given the historical series and the situation described in at the beginning of this
paragraph, it is unlikely that this trend will go up more steeply on the very short term.
The second plot shows how the import into China in the aerospace sector has been
increasing steadily over the past ten years. Even though with some halts and slowing
down. This is essentially tied to two aspects: the Chinese aerospace industry is evolving
and expanding through joint ventures and sub-supplying62. Hence, more is imported into
China to complete big projects. Also, the internal market is slowly opening up in several
sectors (private aviation, helicopters, components, etc) and such opening allows for more
aerospace products to be imported.
The trade balance, third plot, is essentially negative, given the need for aerial capability63
and the expanding internal market, not yet coped with by the growing Chinese aerospace
industry.
62
See for example http://english.comac.cc/suppliers/t1/index.shtml 63
See also next chapter in this.
Ch_Sp_20131120_1526.doc 37 Author: T.Col. Giovanni SEMBENINI - Edit: T.Col. Volfango MONACI
Technology and innovation
Up until the Great Divergence64 China was outpacing the rest of the world in almost any
area of technology. Then it lagged behind for a few hundred years. Is it coming out again
to become a new technological leader of the modern world? Given the influence of central
government, still very strong, in many areas and the attention it pays to technology
development, it certainly looks like technology is, in the eye of the planners, one of the
building blocks of future China. Along with innovation and science. This was clearly stated
in the 11th Five Year Plan and again in the 12th Year Plan. But the most significant
document to understand this drive is the National Medium- and Long-Term Program for
Science and Technology Development (2006-2020). It is similar to the Plan but more
ample and of longer time span that focuses on various science and technology priorities
like the need for universities to produce specialists in order to overcome „critical shortages‟
of personnel in crucial areas such as biotechnology, new materials, aeronautics and
astronautics, international business, energy and resources, equipment manufacturing and
agricultural science and technology.
The planning is clear, but does this mean that China will actually assume again the role of
technology and innovation power house of the world?
China has some relevant advantages in this race to the top65: China has a robust
manufacturing infrastructure that supports the research activities66; China has an
expanded education system hence a large supply of scientist and engineers; adequate
capital; penetration in the global market and expanding domestic market; entrepreneurial
64
The Great Divergence is a term coined by Samuel Huntington, a US influential conservative political scientist from the XX century. It refers to the process by which the Western world overcame pre-modern growth constraints and emerged during the 19th century becoming the most powerful and wealthy world civilization of the time. It took over completely form Qing China, Mughal India, Tokugawa Japan, and the Ottoman Empire. It is elsewhere described as the European miracle, a term coined by Eric Jones, a British-Australian economist and historian, in 1981. Until then China had enjoyed unity, growth and scientific and technological development much stronger than Europe and the western world. See also Frank, Andre (2001), "Review of The Great Divergence", Journal of Asian Studies (Cambridge University Press) 60 (1): 180–182, doi:10.2307/2659525
65 China 2030 Building a Modern, Harmonious, and Creative High-Income Society. The World Bank. 2012.
2012 International Bank for Reconstruction and Development / International Development Association or The World Bank pag. 184 http://www.worldbank.org/reference/
66 “When Factories Vanish, So Can Innovators,
http://www.nytimes.com/2011/02/13/business/13every.html?_r=0 - Last visited 24/07/2013.
Ch_Sp_20131120_1526.doc 38 Author: T.Col. Giovanni SEMBENINI - Edit: T.Col. Volfango MONACI
culture; a very underdeveloped hence highly potential services sector; an ever growing
urban development.
The following graphs provide a concise visual depiction of some of these concepts.
The first graph is a plot of the Gross Domestic Expenditure on R&D (GERD) as a
percentage of the Gross Domestic Product (GDP) for China , the USA, Japan and the Eu
at 27. It is evident how China is relentlessly increasing its budget at a stepper rate than
any other country. It will soon, most probably, reach the levels in the EU, which, in
absolute terms make it for an impressive amount of funds for R&D.
[Author elaboration based on data from the OECD67 ]
67
Organisation for Economic Co-operation and Development – http://Stats.oecd.org. Data retrieved and plotted from Science, Technology and Patents/Science and Technology Indicators/Main Science and Technology Indicators. Data extracted on 19 Oct 2012 22:07 UTC (GMT)
Ch_Sp_20131120_1526.doc 39 Author: T.Col. Giovanni SEMBENINI - Edit: T.Col. Volfango MONACI
The second graph shows the trend of the growth in the number of researchers.
It is interesting to note how the growth values are sensibly higher than in the EU and in the
US, but the trends are somehow similar, even if the waves are not necessarily in sync. The
higher amplitude fluctuations are possibly connected with the changing of political
guidance in China.
[Author elaboration based on data from the OECD68 ]
To support the technological leap, China has been investing massively in university and
higher education, producing an ever increasing number of graduates and scientific
publications69. China has the will and the resources to pursue aggressively the overtaking
of many universities, bringing its academic institutions up to western standards and
international recognition. And it might be doing so in a shorter time span than expected70.
But one issue needs to be tackled first: the quality of their scientific production.
68
Organisation for Economic Co-operation and Development – http://Stats.oecd.org. Data retrieved and plotted from Science, Technology and Patents/Science and Technology Indicators/Main Science and Technology Indicators. Data extracted on 19 Oct 2012 22:07 UTC (GMT)
69 Adams, Jonathan, Christopher King and Nan Ma. 2009. “China: Research and Collaboration in theNew
Geography of Science.” Thomson Reuters. Italian Trade Commission. 2009. “Market Report on China Biotechnology and Nanotechnology Industries: Market Report”. Shanghai Office: Italian Trade Commission.
70 Richard Levin, “Top of the class”, Foreign Affairs, May-June 2010.
Ch_Sp_20131120_1526.doc 40 Author: T.Col. Giovanni SEMBENINI - Edit: T.Col. Volfango MONACI
As mentioned in a report by the Royal Society71, the overall number of publications from
Chinese universities is now roughly equal to that of American universities, but it looks like
the overall citation index is way lower. This means that most of the scientific papers
produced in China find very low interest in the community, hence are not mentioned, or
cited. The Chinese system forces much more than the western one to publish, but
unfortunately it looks like this push has been more for quantity than for quality.
This widespread issue with appropriating others results in articles and publications72, leads
to one last issue concerning technology: the, sometimes, forced technology transfer that
China still somehow exerts73. This, beside being in violation with international trade
regulations, changes the pace of innovation that China can actually afford or generate.
71 “Knowledge, networks and nations: final report”, the Royal Society, March 28, 2011.
http://royalsociety.org/policy/reports/knowledge-networks-nations/ 72 Gillian Wong, “Rampant cheating hurts China‟s research ambitions”, Associated Press, April 11, 2010. 73 2011 Report To Congress of the U.S. - CHINA Economic and Security Review Commission - U.S.
Government Printing Office Washington November 2011 http://www.uscc.gov
Ch_Sp_20131120_1526.doc 41 Author: T.Col. Giovanni SEMBENINI - Edit: T.Col. Volfango MONACI
Western versus Eastern aerospace: a concise comparison
The following statement is taken from the AVIC web site74:
We are just partner but no competitor. We are committed to develop
aviation industry and pursue business success, to participate in
global aviation industry chain and regional economy development
circle, to create value for customers and fulfill social responsibility,
and, with a new stance and innovative thought, to compose a new
chapter of fast and sound development for our country’s aviation
industry.
Taken at face value such a statement would lead to think that the Chinese manufacturer is
bound to develop a strong cooperation relationship with any other industrial partner that is
willing to get involved75. However, are the processes compatible in terms of timelines,
efforts, funding and more?
The western world aircraft manufacturers have been in business for quite some times now.
Hence, they have developed business models that have also evolved through the years
amd they have gone through consolidation and re-organization, massive layoffs and
relocation of manufacturing activities.
Until about thirty years ago the world airliners market was unequally divided between three
US companies and a European one. Then an age of consolidation and merging76 came
about and the aerospace business saw the creation of mega entities77.Out of the final
round came two big players: Boeing and Airbus. Several are the reasons behind the US
companies merging. According to most authors, the European competition had forced
consolidation and Boeing emerged as being the one making the most competitive aircraft.
74 http://www.avic-intl.cn/avicIntl/home/index.do?cmd=goToChannel&cid=328 Last visited 16/08/2012. 75
As shown, in part II COMAC is already working with many western manufacturers and has signed cooperation agreements with Bombardier. This agreement has been under the focus of aviation expert to understand if it is the symptom of a new way to acquire technology know-how, to break into a duopoly or the first look at a potential acquisition.
76 A survey of the aerospace industry – www.gabbai.com/academic/chapter-2 - Last visited 25/01/2013.
77 Space Industry History – Growth and consolidation - www.dropby.com/ElGrande/spacehistory.com -
Last visited 14/05/2012. Verhovek, Jet Age: The Comet, the 707, and the Race to Shrink the World (New York: Avery, 2010).
Ch_Sp_20131120_1526.doc 42 Author: T.Col. Giovanni SEMBENINI - Edit: T.Col. Volfango MONACI
At this point, the race to conquer the market was between a European and a US company,
reducing, de facto, world competition to sell aircraft to a duopoly78. Interesting enough,
maybe as a reduced scale exercise of consolidation, the world market for smaller
commercial aircraft, has also been going in the direction of two-competitors system: in the
turboprop class of aircraft the game it is now played between Bombardier and ATR79.;
Bombardier is also head on with Embraer for an equal share of the regional jet-class
aircraft market.
The only two big airliners manufacturers in the western world have more in common than it
might look. Looking at the business models of the two it is clearly visible how they have
both moved along a line of disaggregation. In industrial terms, this means that they have
abandoned some specific functions along the value chain. Traditionally the big aircraft
manufacturer would buy major components from lower tier supplier but the design and
engineering would remain at higher level. In addition, all the overall systems integration
would remain centralized. In recent times though, this has been changed due to
economical reasons. So, now, the big companies outsource at maximum extent and have
a very much-reduced engineering capacity at sub assembly level. Most of their work is
done as overall systems integrators and value chain managers. In addition to it there is a
deeper separation between system manufacturer, the companies assembling the plane,
and the makers of components, items that can be of high value and technological content
like engines or guidance systems. As a result, the components makers have become real
drivers in terms of technology innovation.
On the other side of the Great Wall there are AVIC and COMAC. In terms of sheer size
and revenues, there are some differences. Profitability of the Chinese companies are still
low when compared to other western competitors in the same business segments, but true
is they are on the steep part of the learning curve80. In addition, China is proceeding along
its own path that can be slightly different form the western one, as seen in a previous
paragraph. What is seen is a re-aggregation of functions inside the main manufacturer.
COMAC is doing much of the engineering and manufacturing work in house. Where in
house still means different companies, but all subsidiaries of the mother one. Compared to
the western solution, here there is a strongly integrated vertical value chain. Another
reason for differences is the strong Chinese will to go all out, as the AVIC opening
78
Boeing versus Airbus: The Inside Story of the Greatest International Competition in Business (New York: Vintage Books, 2007).
79 ATR is a joint venture between Alenia Aermacchi and EADS.
80 http://money.cnn.com/magazines/fortune/global500/2011/snapshots/11566.html Last visit01/07/2012.
Ch_Sp_20131120_1526.doc 43 Author: T.Col. Giovanni SEMBENINI - Edit: T.Col. Volfango MONACI
statement declares. Chinese manufacturers are pursuing a double objective: while
producing sub-components for the main project, the airliner, they are also developing in-
house capability for high end components to be put on the market for other projects.
Ultimately becoming a component maker with high added value. This is again one aspect
of the innovation process being developed in China. By means of joint ventures they not
only procure high end component for their project, but they also gain know-how. In some
cases these ventures turn to acquisitions as some major components makers have been
bought by Chinese companies. Out of all the high-level components, the engine is the one
giving more worrying to eastern manufacturers. Hence, it is in this area that they have
invested heavily and engaged with prime western companies81.
It is not to be forgotten that all of the above considerations transcend from other elements
such as the difference in ownership: private versus state-owned. In the western countries,
this issue has been quasi-approached with the cases often put up by US companies
complaining about European makers receiving subsidies in various forms that impaired
free competition. In China, this problem has been overcome by state ownership.
Hence the two business models above described must also be confronted with the
different levels of support that can come from the different owners.
It is thus foreseeable that in some case Chinese companies will arrive at competing for
global market shares.
81
Michael Gubisch, “MTU to Work with AVIC on Possible Alternative Engine for C919,” Flight International, September 21, 2011, accessed July 10, 2012, http://www.flightglobal.com/news/articles/mtu-to-work-with-avicon-possible-alternative-engine-for-c919-362359/.
Ch_Sp_20131120_1526.doc 44 Author: T.Col. Giovanni SEMBENINI - Edit: T.Col. Volfango MONACI
Part II
Ch_Sp_20131120_1526.doc 45 Author: T.Col. Giovanni SEMBENINI - Edit: T.Col. Volfango MONACI
Introduction
Chinese aviation has come a long way since the days of its pioneers. The aviation industry
has embarked in a transition that will most probably make it evolve from a technological
imitator to an emerging innovative power. How this will be done it is still unclear, but
reading through the official documents and sorting through commercial brochures it is
likely that it will go in steps: learning from the lower tiers, with support from abroad, all the
way to complete systems integration.
The commercial aircraft industry has some peculiar characteristics like : the horizons for
growth are often long term as the development of aircraft can take several years, the break
even points are often well beyond the first few years of delivery, but once in normal
production revenues can be stable. Competition is fierce everywhere, but given the
conglomeration of aircraft makers in the Western World, the game has been reduced to
two major players. It is not an easy entry industry. Like many other industrial activities,
making aircraft is not something to be learned overnight. In this case the technological
content and the enormous investments needed to start are discouraging even to
government entities. Aircraft making is a global game and the value chain attached to its
products can stretch long and winding, thus making its management very difficult. Overall
the issue of becoming a global aviation player is not whether the Chinese can develop an
airliner, which they are doing anyhow, it is assuring operational performance and reliability
consistently through the years. However, China is evolving its so-called middle class,
which means it can focus on domestic consumption. Millions of people will feel the desire
to improve their conditions and the central government will work on the improvement of
prosperity of their people. All factors that in turn should help drive demand for air travel
Focus on aviation II-1
Ch_Sp_20131120_1526.doc 46 Author: T.Col. Giovanni SEMBENINI - Edit: T.Col. Volfango MONACI
both domestically and internationally. Prosperity brings along an increased demand for
higher end cargo that is more likely transported by air.
Military aircraft development has also improved, even though an overall assessment would
place China‟s indigenous capability between one and two decades behind the western
companies. The main change over the recent years has been the move from a total import
of aircraft military aviation technology to a varied policy of procurement, so that a more
diverse array of strategies can be pursued. As demonstrated from military policies from the
end of last century, there has been a remarkable effort to tackle the high-technology
acquisition problem and an evolution in research and development.
General aviation continues to lag behind, in a country where many recent events have
demonstrated that the particular geographical configuration would definitely benefit from a
more open use of airspace.
Commercial market outlook
Commercial aviation is subject to market rules. It is also sensitive to political agreements
and government actions, but market rules are predominant when decreeing the success or
failure of an airliner. A brief look at the market outlook can provide elements useful to
predict what airliner might fare better and in which market.
Aggregated data are often very expensive and non-aggregated data are difficult to obtain
and very dispersed, especially those regarding China that are somehow hidden and
fragmented. The data shown hereafter come from three sources: Boeing Current Market
Outlook, the Airbus Global Market Forecast82 and the International Air Transport
Association (IATA) Industry Outlook83.
What follows it is hence a synthesis, not exhaustive, meant to give hints on what to look at
when forecasting markets, hence predicting shift in opportunities.
The first set of data tells that at year end 2011, the second largest share of the installed
commercial fleet belonged to China, with 9 percent, after the USA. Given that the orders to
be fulfilled. i.e. the backlog84, also sees China in second place, this will mean that the
Chinese internal market will likely continue to be the second largest in the world. The two
following graphs depict what described above.
82
http://www.airbus.com/company/market/forecast/ - Last visited 27/05/2012. 83
www.iata.org/economics - Last visited 28/05/2012. 84
While backlog generally refers to an accumulation over time of work waiting to be done or orders to be fulfilled, in this case it shows the number of aircraft already on order, to be manufactured.
Ch_Sp_20131120_1526.doc 47 Author: T.Col. Giovanni SEMBENINI - Edit: T.Col. Volfango MONACI
All graphs from Boeing_Current_Market_Outlook_201285
A key issue in the development of a robust aircraft market is the availability of
infrastructure. i.e. airports. In the current situation China already has two airports in both
the cargo and passengers Top Ten categories, as shown above. But in order to maintain
and expand the traffic capacity new airports must be built and old ones upgraded.
China, already expanding its infrastructure network has recently committed to specifically
increase its airport network86.
85
http://www.boeing.com/commercial/cmo/pdf/Boeing_Current_Market_Outlook_2012.pdf - Last visited 24/05/2012.
86 China to build 70 new airports in three years, by David Millward, in Beijing, 11 Jun 2012
http://www.telegraph.co.uk/finance/china-business/9324765/China-to-build-70-new-airports-in-three-years.html
Ch_Sp_20131120_1526.doc 48 Author: T.Col. Giovanni SEMBENINI - Edit: T.Col. Volfango MONACI
One more item to be kept in consideration when examining forecast for air transportation
growth is the expanding high speed rail network in China. It is true that on short distances
the competition between air and rail transportation favors the latter, but given the peculiar
nature of Chinese territory an its vastness, it is unlikely that rail will erode much of the long
distance air traffic87.
All graphs from Boeing_Current_Market_Outlook_201288
As shown in the graphics above, Chinese airline expansion is expected to be remarkably
positive. The market for new airplanes over the next two decades will most likely be
greater than 5000 units.
Any prediction for future growth of traffic, both passengers and cargo, must be based upon
some Gross Domestic Product (GDP) growth assumption.
So overall, the market outlook for China in terms of both regional and long-range aircraft is
very positive. It will of course be influenced by the real GDP growth that will be achieved in
the next few years, but this will be tightly coupled with the global economy.
87
There are many factors influencing the modal shift from air to rail, in markets where plane and train are competing against each other, and often they are regionally specific. Generally speaking the train has an advantage below three hours of transit time. Over eight hours the airplane is considered to be dominant.
88 http://www.boeing.com/commercial/cmo/pdf/Boeing_Current_Market_Outlook_2012.pdf
Last visited 24/05/2012.
Ch_Sp_20131120_1526.doc 49 Author: T.Col. Giovanni SEMBENINI - Edit: T.Col. Volfango MONACI
The Chinese aviation industry development
As of 2012, Chinese aviation industry89 shows several positive indicators: positive profits,
development and production of new generations of advanced aircraft, engagement in
international joint ventures.
This positive situation is the outcome of the implementation actions of some radical
reforms from the 1990‟s. In particular the creation of the two new aviation conglomerates,
Aviation Industries Corp. of China (AVIC) 1 and AVIC 2. Along with this consolidation
came a shift in the research and development culture of the company, an essential asset
for the development of new technologies.
Following the reforms, the state conglomerate reported outstanding financial performance
and a strong surge in innovation activities90. Moreover the product range now being
developed indigenously, spanned from military aircraft to electronic warfare aircraft and
covered almost 90 percent of the types in service as of 2010
The Chinese industry, nonetheless the recovery, still lags behind in some key areas, thus
impairing its capabilities to assure a compete, end-to-end national aircraft development.
One of these areas is the production of high power jet engines91. As of 2012, China is still
not able to go alone, thus relying on external support either for the supplying of whole
engines, as it is the case with the Russian engines for its Chengdu J-10 and Shenyang
J-11 fighter aircraft, or cutting deals with foreign engine-makers, like General Electric ,
Snecma, Rolls Royce Plc and Pratt & Whitney, that have been loath to transfer
technology, thus preventing China to revert to copying foreign technology. It is however to
be noted that new impulse has been given to domestic engine research92 through a
renewed research activity.
An analysis of Chinese industry at structural level shows that not all the old management
approaches have been overcome. There still exist a certain degree of duplication and
balkanization of industrial and research facilities.
89
For a description of the current organisation of the Chinese aviation industry and its main products see Part II Chapter 2
90 Xu Zelong, Jiang Chunyan, & Liu Wenbo “AVIC in 2009 Bucks Trend and Attains Impressive
Achievements”, Zhongguo Hangkong Bao (China Aviation News), 21 January 2010, p1. 91
Gabe Collins and Andrew Erickson, “Jet Engine Development in China: Indigenous Highperformance Turbofans Are a Final Step toward Fully Independent Fighter Production,” China SignPost, no. 39 (June 26, 2011), accessed August 1, 2012, at http://www.chinasignpost.com/wp-content/uploads/ 2011/06/China-SignPost_39_-China-Tactical-Aircraft-Jet-Engine-Deep-Dive_20110626.pdf
92 China Aviation Giant Hopeful Of Aid For Engine Research, Reuters November 09, 2012
http://www.aviationweek.com/Article.aspx?id=/article-xml/awx_11_09_2012_p0-515096.xml# Last visited 01/08/2012.
Ch_Sp_20131120_1526.doc 50 Author: T.Col. Giovanni SEMBENINI - Edit: T.Col. Volfango MONACI
The overall number of large and medium-sized factories and research institutes still is
counted in the 120 to 130 units. They are scattered across the country and often possess
the same manufacturing and research attributes. The most recent consolidation that has
reconsolidated AVIC 1 and 2 to generate the Commercial Aircraft Corporation of China
(COMAC), was also aimed at reducing local protectionism and rivalry, hence increasing
cooperation and coordination among the various facilities, increasing the ability to reap the
benefits of economies of scale and engage in innovation clustering.
One more reason for technical weakness in some areas, especially that of military
technology is the embargo towards the Chinese from Western military aircraft industries
imposed by governments since the Tiananmen Square crackdown in 1989. The lack of
cooperation with the western armaments communities has been partially overcome by a
renewed relationship with Russia93, operated through off-the shelf purchases, offsets and
license production arrangements.
As many other areas, aviation has also been addressed in the high level official plans for
development. In particular the long-term corporate plan devised by AVIC in 2009 that sets
out key priorities to 2017; the 12th Five Year Plan and the National Medium- and Long-
Term Program for Science and Technology Development (2006-2020). This consolidated
and homogeneous set of comprehensive, central policies state the importance of the
aviation industry and provide clear guidance on how to proceed in order to assure
adequate management and innovation infusion. Thank to this guidance, the aviation
industry receives priorities and adequate resources to achieve the results stated therein,
also the plans assure an increased coordination and integration of civilian and military
activities.
A coordinated reading of the plans lets emerge the main goals to be achieved by the state
conglomerates: a long-term plan for building a world-class civilian airliner industry, a
renewed geographical distribution of the plants and facilities and a more strategic
approach to diversification and access to market. The first goal is currently being achieved
through incremental activities. Technologies will be developed gradually as cooperation
with foreign firms allows to mature knowledge with reduced risks. The first two visible
results of this goal are the ARJ21 and the COMAC C919 projects.
93
Stephen J. Blank, “The Dynamics of Russian Weapon Sales to China,” Army War College Strategic Studies Monograph (Carlisle Barracks, PA: U.S. Army War College, March 4, 1997), 5.
Ch_Sp_20131120_1526.doc 51 Author: T.Col. Giovanni SEMBENINI - Edit: T.Col. Volfango MONACI
COMAC ARJ2194
COMAC C91995
94 http://english.comac.cc/products/rj/pi2/index.shtml From the COMAC website: “ARJ21, short for
Advanced Regional Jet for the 21st Century, is a new type of turbofan short/medium range regional jet that is designed and manufactured in China with our own independent intellectual property rights. The range of the standard ARJ21 is 2,225 km, which is mainly for meeting the operation requirements of hub-spoke routes, ie from central cities to neighboring medium and small cities. The maximum takeoff weight of the aircraft is 40,500 kg, the maximum operating altitude 11,900 m, and the maximum range 3,700 km. Two CF34-10A engines are mounted on the rear of the aircraft. There are 78 seats in a dual-class configuration and 90 seats in a full economy class configuration. Its economic life is designed to be 60000 flying hours/20 calendar years.
95
http://english.comac.cc/products/ca/pi/index.shtml From the COMAC web site: "C919 is the short form of trunk liner code for "COMAC919". COMAC is the acronym of the Commercial Aircraft Corporation of China, Ltd. The letter "C" is the first letter of both "COMAC" and "China". It indicates that this trunk liner program is the will of China and her people. It is a short-medium range commercial trunk liner that can claim indigenous intellectual property. Its all-economy class layout entails 168 seats, and the hybrid class layout 156 seats. The basic version is designed to cover a range of 4,075 km, while the enhanced version can stretch to 5,555 km. Such designs may satisfy the operating demands for different routes. Its economic life is designed to be 90,000 flying hours/30 calendar years. “
Ch_Sp_20131120_1526.doc 52 Author: T.Col. Giovanni SEMBENINI - Edit: T.Col. Volfango MONACI
So to confirm the gradual, low risk approach, only 10 percent of the ARJ21 will be
indigenously conceived, while the C919 will go up to 30 percent96. Next step will be the
design of a two aisle wide-body airliner after 2020.
The geographical re-distribution is also well under way. The AVIC and COMAC have been
reviewing and expanding their strategic footprint through diversification and opening up.
One of the reasons behind AVIC reconsolidation has been the will to compete on the
global market with European and US giants (Airbus, Boeing). As a result, AVIC now has
the sheer size to begin showing up at international competition, especially for military
airplanes and enough state backed funds to go around the world on acquisition sprees
(see for example the Cirrus acquisition as described in the next paragraph).
Acquisitions should be carefully planned, since foreign government might rise issues
wherever the companies being pursued have high strategic value or security impact.
One key issue concerning Chinese aviation industry in its relationship with the rest of the
aviation world is the path to innovation being pursued97..
Imitation is one way of innovating that has been practiced in China for many decades.
Chinese efforts in imitating western products have yielded admirable results in several
fields, like consumer electronics, even though such an approach has resulted in
controversies over Intellectual Property Rights.
Soviet designs have been a traditionally abused target of Chinese imitator, from simple
reproduction up to a creative adaptation, such is the case of Jian-7 Interceptor Fighter and
Shenyang J-8II fighters.
Over the years Chinese engineers have grown expert in reverse engineering98.
Once again, Russian designs and hardware have been extensively rev-engineered in
China. The most successful of which is probably the Su-27 Flanker99 fighter-aircraft.
After having acquired license production rights to the Flanker in 1995, Chinese companies
manufactured nearly 100 aircraft between 1998 and 2005.
96
Roger Cliff, Chad J.R. Ohlandt, and David Yang, Ready for Takeoff: China‟s Advancing Aerospace Industry, RAND Document MG-1100 (Santa Monica, CA: RAND Corporation, 2011). http://www.uscc.gov/researchpapers/2011/RAND_Aerospace_Report%5B1%5D.pdf
97 2011 Report to congress of the u.s.-china economic and security review commission - u.s. government
printing office washington 2011 http://www.uscc.gov – Last visited 24/07/2012. 98
Buy, Build, or Steal: China‟s Quest for Advanced Military Aviation Technologies, Phillip C. Saunders and Joshua K. Wiseman, NDU Press December 2011. Available on-line at www.ndu.edu/inss.
99 Andrei Chang, “China Imitates Russian Su-27SK Fighter,” UPI Asia (February 25, 2008), accessed May
28, 2012, at http://www.upiasia.com/Security/2008/02/25/china_imitates_russian_su-27sk_fighter/1740/
Ch_Sp_20131120_1526.doc 53 Author: T.Col. Giovanni SEMBENINI - Edit: T.Col. Volfango MONACI
Jian-7 Interceptor Fighter100
Jian-8 Interceptor Fighter101
This batch of home produced aircraft allowed the engineers to acquire all the knowledge
needed to then reverse engineer the Su-27 that was then called J-11B.
Needless to say this action caused some strains in the Sino-Russian relationship.
What is now being done more and more often is the process of incremental innovation.
It is somehow a form of innovation, as the engineering activities start out with some
already existing model that is imitated. This approach, while producing some remarkable
100
http://sinodefence.com/airforce/fighter/j7.asp - Last visited 23/07/2012. 101
http://sinodefence.com/airforce/fighter/j8.asp - Last visited 23/07/2012.
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results, has a very low technological risk. Incremental innovation is, as of today, the most
pursued engineering process and it is very likely the path that will be most often walked
over the next few years: it is comfortable for most of Chinese engineers, climbing up the
learning curve and pushes the boundary a little bit further at every step. A typical example
of this process is the portfolio of more than 30 versions of the J-7 that were developed or
proposed between the 1960s and the 1990s.
Moving up the innovation evolutionary stair it is clear how the Chinese aviation industry is
now able to do some architectural innovation, especially in the civilian sector. As seen with
the ARJ21 and C919 projects, the architecture has been adapted from pre-existing ones
and then the components supplied by foreign firms.
Modular innovation is an evolution that requires the ability to develop component
technology that can be installed into existing system architecture. This activity is still very
much beyond current chinese capacity since some key systems like avionics, radars, fire-
control systems, and engines produced in China are at least one generation behind the
world most advanced industries. In order to achieve this capacity, China will have to
continue to invest heavily and in a coordinated way in the research and development
functions.
Still far in the distance, at least in the aviation sector, is China‟s ability to perform radical
innovation, a process that requires the ability to push outside the envelope both at new
component technology and architecture. These activities are intimately related to an
overall country architecture from funding, to education, to personnel.
It is reasonable to assume, given the evolution of Chinese aeronautical engineering seen
thus far, that the aviation industry will climb up the staircase of innovation, moving from
being a technological imitator to becoming an emerging innovative powerhouse.
It will not, most probably, reach the ability to successfully conduct modular and radical
innovative activities at least for another decade, but this time estimate is also very much
influenced by the capacity and will to evolve the overall university and education
system102.
102
China‟s Biggest Challenge Is Aerospace, by James Fallows Email Author, http://www.wired.com/magazine/2010/03/ff_tablet_essays/2/ - Last visited 24/05/2012
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China’s positioning in the global market
China has been investing massively in the development of its indigenous aviation
manufacturing capabilities. Right now, its production is not something the two big players,
Airbus and Boeing, should be afraid of, but is this going to change anytime soon?
So far the ARJ21 regional jet project is marching on, but behind schedule, hence hindering
the industrial effort to put out the bigger C919.
Besides the schedule issues, one big test for the Chinese production will be how it
performs in sales beyond the national market. COMAC will most probably begin by selling
to emerging markets or to nations having particular economics agreement with it. If the
airliners will perform well and gain a positive track record for safety, than they might start
selling in more traditional western markets.
But assuming this happens, what will be the landscape the Chinese makers will have to
move in? The technological edge will be hard to overcome in less than a decade.
Competition, especially in the regional jet segment, will also come from Brazil and Canada,
as Embraer and Bombardier have consolidated their knowhow. Japan and Russia also
have aerospace industries that have been manufacturing airplanes for quite some time
now. And in all cases, smaller jets might represent just a first, necessary, step toward the
making of larger airliners.
Given the current economic and environmental situations airlines are more and more
sensitive to fuel consumptions; which in turn is linked to overall performances and engine
consumptions: two areas where China is still lagging behind. Hence unless the big
companies stop evolving, it will be difficult for COMAC to gain significant market shares.
Which in turn will keep the economies of scale low. Of course, the Chinese government
might continue to value the aviation industry as strategic, hence continuing to provide
substantial contributions. This type of financial aid might support the industry during the
first years as it gains experience, hence absorbing the costs while the products reach
higher performances.
Is it possible that Chinese companies leapfrog the big manufacturers, making up for years
of delays in less than a decade? Most probably not. Airbus and Boeing are well ahead of
the learning curve, having had several decades of competition, in an era when there were
more than two manufacturers. Plus, both the two big ones have understood the
importance of bringing in Chinese firms as subcontractors for their final products.
Ch_Sp_20131120_1526.doc 56 Author: T.Col. Giovanni SEMBENINI - Edit: T.Col. Volfango MONACI
Boeing has been pushing especially hard on its supply chain and now heavily relies on
Chinese components.
Given that, as already mentioned, China is the second biggest market for airliners, the
national industries are striving to achieve a certain degree of independence in the
manufacturing of at least a regional jet and one wide body. But everything shows that
Chinese aircraft R&D and engineering capabilities are not yet adequate to compete with
the best in the class. As already mentioned, the COMAC benefits from government
subsidies, but the financial resources needed are still massive, hence forcing more delays.
Anyway, some long lead developmental concepts need to be worked over the years.
It is just not possible to buy an entire aircraft industry knowledge. Unless it is done on a
whole company, doing some niche production. This is the case of Cirrus aviation103.
In this case Chinese decision makers have realized a typical block acquisition of a
company that was a world class innovator in the segment. Cirrus aircraft company was
bought by AVIC subsidiaries with the specific purpose of climbing up the aviation industry
chain so to be better positioned in the international division of labor104. The Chinese
buyers soon after the signing of the deal declared that “If we want to survive in the aircraft
manufacturing industry, we must keep an open mind and have an international vision”105.
One more element to be kept in consideration when estimating how much of the global
market share will China gain, is the collaboration among competitors that is the rule of the
game in the commercial aircraft and engine industry. Why? Because of the high costs of
development, access to markets, and the distribution of the engineering expertise.
In other words, any (see graphs Total Exports in Chapter I-1) aircraft manufactured in
China will continue for many years to depend on components and assemblies
manufactured in the USA.
This type of approach will assure that U.S. companies will continue to be the dominant
suppliers for years to come, regardless of what happens in China.
103
http://cirrusaircraft.com/company/ 104
China Airborne, James Fallows, Random House, 2012. 105
“China‟s aviation industry soars onto the global stage” The Link, March – April 2010, China Europe International Businee School. http://www.ceibs.edu/link/latest/51104.shtml
Ch_Sp_20131120_1526.doc 57 Author: T.Col. Giovanni SEMBENINI - Edit: T.Col. Volfango MONACI
General aviation
General Aviation (GA) is conventionally defined as the ensemble of civil aviation
operations other than passenger air transport services. GA hence normally includes
gliders, powered parachutes, jet planes and helicopters which can be used to carry out
disaster relief flights, search and rescue operations, medical support, agriculture flights,
police aviation, air ambulance, flight training and many more.
The beginning of GA in China dates back to the early 1950‟s. It started out mainly as a
support, or tool, for pest control via insecticide spraying. It was then put on hold, more or
less, during the Cultural Revolution and it was restarted towards the end of it, late 1970‟s
with a renewed interest and need in airplanes to carry out agriculture, forestry, animal
husbandry, fishery, mapping, water conservancy, railway, transportation, posts and
telecommunications, city construction, and environmental protection services.
We have then seen a steady growth since late 1990‟s with an overall volume of general
aviation operations and services. Aircraft numbers and GA flight hours have especially
been growing since 2001. Altogether figures show a growing rate of about 21% since
1996106. Looking at the overall situation and figures, the three main factors for growth of
general aviation have been: demand for aerial work, private sector involvement and civil
aviation development.
Comparison of US and China general Aviation key figures
(Source Friends of China General Aviation http://www.gochinaga.com/)
GA Comparison USA CHINA CHINA 2020 Est.
GA Airports 18,000 57 150+
Licensed Pilots 597,109 8,800 25,000+
GA Aircraft 219,780 650 10,000+
Business Jet Aircraft 9,628 27 1,100+
GA Flight Hours 28,000,000 85,000 700,000
Revenue USD 41B 25M 400M
%GDP .30 .01 .10
Jobs Created 225,000 7,000 55,000
106
Goldman Sachs Investment Research. What Happens When 1bn Chinese Fly? Rep. Goldman Sachs Group, 2012. http://bg.panlv.net/report/6df80e7cc883734f.html
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Still it cannot be stated that today‟s general aviation industry in China is at the same level
as in comparable size and development level countries, because even if the figures show
what is probably the highest growth in the world in this sector (see previous table), general
aviation still accounts for relatively smaller total numbers, both for aircraft and operators.
To give an idea, China‟s current population is over 1.3 billion and it owns less than 1,000
GA aircraft including helicopters, and 217 general purpose airports, whereas the US has
only a fourth of its population, but more than 200,000 GA aircraft and almost 20,000
airports.
Several are the factors that limit the development of a more robust general aviation
industry: airspace issues, availability of critical infrastructures, lack of pilots, mechanics
and officials to care for the overall system.
The Chinese airspace is still practically a military airspace. This means that any movement
must go through military structures with all the limitations that this carries along, such as
flight approval procedures and airspace access overall. General aviation flights are usually
scheduled with a very low priority, hence it might take days, or even weeks, before getting
a clearance. China 's airspace tightly controlled by the People's Liberation Army Air Force,
and access is reserved for official VIP, military and air carrier flights. Approval for GA
flights is cumbersome, subject to many unspecified rules and must be obtained at least 8
days ahead of time107.
Hard on the heels of that, the air force, which largely controls China‟s skies, accepted that
low-altitude airspace could be opened progressively for private use, making helicopters
and small private airplanes more attractive.
Airspace liberalization continues to dominate discussions on growth throughout China.
Although the current Five Year Plan includes plans to liberalize China‟s airspace, timing
and details have not been forthcoming. Most industry experts agree that a meaningful
opening up of China‟s airspace will not take place in the next few years.
Airports open to GA (General Aviation) constitute another limitation. As of today there are
fewer than 150 civil-use airports in China with about 100 more planned to be completed by
2020107.
All of these airports are primarily air-carrier facilities, and access by GA aircraft is subject
to onerous restrictions and limitations.
107
China Airborne, James Fallows, Random House, 2012.
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Looking more in details, we can see that as of today there are about 70 operators
registered with the Civil Aviation Administration of China (CAAC)108, but most of them have
only 2 or 3 aircraft. This means no possibility to achieve scale economies and profitability.
If we add to this the restricted airspace issue we can clearly see how the operators must
work, literally, way around obstacles in their daily operations.
About half of all the aircraft are foreign made; of the remaining most of them are piston
engine aircraft manufactured by the China Aviation Industry Corporation. Maintenance for
the foreign ones can be very complicated and definitely costly. Overall the demand is low.
Estimates put the number of GA aircraft at about 1000 nationwide. Most of them, about
700 aircraft, are involved in agricultural and utility (powerline patrol, etc.) operations.
Flight training accounts for much of the remaining GA (General Aviation) flying, while
business, personal, and sport aviation make up a very small percentage of GA operations
within the country.
But things are in for a major change as China‟s current five-year plan is to promote the
general aviation industry.
Official awareness of the potential benefits of GA is growing. Recently, the CAAC adopted
a body of regulations governing GA operations that is similar to regulations in place in the
USA. There are plans to liberalize GA access to airports and airspace, although the extent
and implementation of such plans remains to be fully apparent.
Manufacture of civil aviation aircraft and components is also rapidly increasing. Several
established aircraft manufacturers, including Boeing, Cessna109, and Diamond110, have or
are building manufacturing facilities in China and Chinese companies are building a new
generation of regional airline aircraft, with larger models in the works.
Nonetheless there is a rapidly growing demand for business and personal aircraft as
China's burgeoning economy and travel needs quickly outpaces its transportation
infrastructure. Businesses and growing upper and middle class are becoming aware of
the benefits of GA as a mode of transportation and the pleasures of GA as a fulfilling
hobby.
108
Booz Allen‟s Report, “Catalyzing Growth in China‟s Regional and General Aviation Sectors,” sponsored by the U.S.‐China Aviation Cooperation Program
109 http://en.wikipedia.org/wiki/Cessna
110 http://en.wikipedia.org/wiki/Diamond_Aircraft_Industries
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China represents a very large frontier of untapped potential for the General Aviation
industry.
It is not in discussion that there has always been an interest in the GA, and business
aviation, but it is only over the past ten years that the Chinese market has finally taken up
a decent share of the overall sales. This can be somehow related to an easing of use of
private airfcraft.
Pilots for GA are somehow in shortage in China and the main reason for this can be
tracked to the relatively high training costs, lack of training facilities, lack of financial
rewards and poorer working conditions compared to the commercial airlines. Overall at
today‟s count there 10 GA pilot training schools with average capacity of 50 pilots per
school year, they are somehow put under pressure and tend to survive short time. Most of
the pilots currently operating in GA are actually aviation enthusiasts or military veterans.
Hence the outlook calls for a significant shortage of GA pilots in China.
More pilots are needed and it takes time.
High operating costs are definitely holding back the development of GA in China.
They affect mainly the overall aircraft cost as foreign made aircraft are loaded with heavy
taxation, the local production is limited and the in service costs (maintenance and repair)
are expensive. As some have experienced firsthand during air shows and events, aviation
gasoline availability is still uneven hence augmenting the costs for refueling111. All airports
open to GA have remarkably high landing fees and, as mentioned, the training of new
pilots is very lengthy, an expensive and not so widespread process.
The operating environment brings along some constraints that have long been removed
elsewhere, like the bureaucracy and safety concerns of operating the airspace and the
airports. So summarizing it can be stated that in order for GA to grow the following should
be worked on: the regulatory environment, the airspace access, the infrastructure system
and the supply system.
General Aviation could definitely bring some remarkable benefits to the whole Chinese
society. A healthy GA sector could contribute to the enhancement of local transportation.
The empty vastness of China as well as its densely populated and congested urban areas
could definitely benefit from helicopter rescue and emergency medical care missions;
agriculture as well as environment and forest monitoring related missions; infrastructure
development missions, such as power line services. All of the above would account for
social benefits, marking another step forward for a great nation. 111
China Airborne, James Fallows, Random House, 2012. Pag. 5 -22
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Going back a few years, just to mention a sad example, the 2000 earthquake in Sichuan
would have been better coped with if the disaster relief system could have relied on a
efficient and expanded network of GA capabilities.
According to a Booz Allen‟s study112, using forecasted flight hours and the number of
aircrafts, the overall system can expect, by 2015, a series of direct economic benefits of
around 5 to 10 million Renminbi113 (official currency of the People‟s Republic of China),
indirect economic benefits of about 130 to 240 kRMB and the creation of employment on
the range of 8000 to about 15000 jobs.
This economic impact is estimated by evaluating revenue, airport services, maintenance,
and aircraft sales. All of the above have been evaluated by taking into account adequate
policy choices and infrastructure development 114.
Meanwhile, China‟s domestic general aviation aircraft makers are also on the move.
Some of them have taken initiatives to gain more market shares in the sector.
Local firms manufacturing GA planes, like Shandong Binao Aircraft Industries, begin to
record a successful sales record, thanks to several factors like maintaining high standards
and quality of products and after sales services. This has been done also through
partnership with foreign firms, Austrian-based Diamond115 Aircraft in this case.
The private aircraft segment, or business and personal transportation, is predicated to
grow the fastest. Therefore, this segment also has the most economic and social benefits
to China‟s economy in the future.
112
General Aviation In China Seizing Growth Opportunities www.booz.com%2Fmedia%2Fuploads%2FGeneral_Aviation_in_China.pdf&ei=AhaxUJiqG4bZ4QSD-YHACw&usg=AFQjCNEX9V3nOv0sPJ66rakosK_JPpJv8A
113 http://en.wikipedia.org/wiki/Renminbi
114 U.S.-China Aviation Cooperation Program http://www.uschinaacp.com/news/170
115 http://en.wikipedia.org/wiki/Diamond_Aircraft_Industries
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Introduction
The first Chinese satellite launch, the DFU CZ1, dates back to April 24, 1970116, since
then, using three spaceports and different models of its Long March launchers, China has
provided nearly 150 launches into low orbit and geostationary orbit. It has put into orbit
primarily national satellites but commercial launches have taken up a fair share of the
launches. China is now in the first group of launching countries with the USA, Russia and
Europe.
China‟s space skills cover a full range of missions demonstrating varying degrees of
complexity (science, exploration, observation, telecommunications, navigation).
Finally, since 2003, China has the ability to send a man in space independently, becoming
the third country, after Russia and the United States, to have this, ever more precious
ability. It launched in July and September 2011 the first elements of its future space
station, nationally developed since China is not part of the International Space Station
group of nations. This has definitely meant raising the bar and enhancing its domestic and
international image, one of skills and achievements.
China also owns satellites built and launched abroad thus revealing a desire to develop
better performing systems than those manufactured by the domestic industry; these last
systems must be launched on non-Chinese vectors given current U.S. restrictions on
technology transfers.
116
http://en.wikipedia.org/wiki/Dong_Fang_Hong_I http://www.astronautix.com/craft/dfh1.htm
Focus on space II-2
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The traditional problematic issue of technology transfers has resulted in China being
sidelined out of many technologic developments, hence forcing the country to develop its
independent capabilities
Even if things have improved since the mid-2000s, the performance of telecommunications
systems and remote sensing are lower than their western counterparts. Hence the interest
of the Chinese space industry in international cooperation and efforts in opening up to the
west.
The restructuring of the two state industrial consortia (CASIC and CASC) and the creation
of commercial interfaces within them have been the key actions to pursue an overall
development.
These industries are positioned in all areas of space technology and if the CASC is
responsible for launchers and spaceflight, CASIC focuses more on microsatellites and
potential military systems.
Further down this evolutionary line, a new space base on Hainan Island is being
developed, reflecting an approach opposite to that of the traditional so-called Third Front
(strategic facilities have been traditionally placed well inland) that had guided the choice of
the first launch sites in the 1960‟s. The reading here is that the guidelines call for more
international integration.
Today's China is pursuing an all out cooperation with the clear objective of multiplying the
possibilities of technology transfers.
However, this type of efforts can pose integration problems and coherence with the
internal organizations, hence the lagging behind that is very tangible in some areas of the
building of competence around some of the technologies being pursued from abroad.
Getting a grasp of the overall Chinese space program might be a daunting task.
A privileged, albeit somehow biased, point of view can be the White Paper on Space (the
last one officially known as China's Space Activities in 2011). This is not an executive
Plan, like the Five Years, but, as many other white papers117, it is described118 as a
document “..to gain a better understanding of the Chinese space industry”. Somehow it is
the only comprehensive, official document to embrace the totality of China‟s space effort.
Furthermore, a comparative analysis of the three White Papers provide overall, basic
information about the Chinese Space agenda. They highlight the fact that China has
117
For a comprehensive view on China‟s White Papers, see http://www.gov.cn/ennglish/links/whitepapers.htm
118 http://www.gov.cn/english/official/2011-12/29/content_2033200.htm#
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achieved important breakthroughs in a relatively short time and can be viewed as a rapidly
rising Space power119. The emphasis in the White Papers is on the civilian aspects of the
Chinese Space programme. This could, in a sense, be regarded as the tip of the iceberg,
focusing on the civilian aspects of the Space agenda while hiding deeper strategic
intentions. China's international alignments and cooperation in the Space arena indicates
that it views Space technology as an instrument to boost its soft power status.
Will China overtake the leading space nations? According to some sources, China is now
engaged in a space race120, especially with the USA. It may be so, but this kind of
reasoning might be flawed, as China is not engaged in a space race, it is pursuing its own
destiny, building it day by day. The race might be on to be fully acknowledged as being
part of the super powers club, and having a robust and effective space program is surely
one sign being part of it121. By the way, as of today China is one of the only two super
powers having autonomous human access to space. And the other one is not the USA.
119
Mr Xi in Space by Morris Jones, Sydney, Australia (SPX) Nov 12, 2012 http://www.spacedaily.com/reports/Mr_Xi_in_Space_999.html
120 Daryl Morini.The Coming U.S.- China Space Race. August 15, 2012. The Diplmat. Retrieved at http://thediplomat.com/china-power/a-u-s-china-space-race-in-the-offing/ Will the U.S. be Overtaken by China In Space?, By Bertrand de Montluc http://www.e-ir.info/2012/08/30/will-the-u-s-be-overtaken-by-china-in-space/ China goes as us slashes budgets - http://www.csmonitor.com/Science/2012/0618/As-NASA-slashes-budgets-China-achieves-orbital-milestone-video
121 Space over Time – Information graphic by Tommy McCall and Mike Orcutt http://www.technologyreview.com/graphiti/425120/space-over-time/
Ch_Sp_20131120_1526.doc 65 Author: T.Col. Giovanni SEMBENINI - Edit: T.Col. Volfango MONACI
Space budgetary considerations
Chinese space budget122 is not exactly transparent. Scanning the bits and pieces of official
data and estimates it is placed anywhere between 0.5 and 2 billion dollars, depending on
the source123 and whether accounting only for the civilian or mixing the civilian and military
ones. Looking at the sheer numbers, it is a fraction of the U.S. budget and about half of the
EU budget, taking into account the maximum values. It is close in value to the Russian
budget, but this last one has been steadily increasing since 2010. The total lack of official
budget estimates poses a recurring problem and it has been read as another piece of
evidence of a total lack of transparency of Chinese authority on a strategic sector.
Anything regarding space is still kept under tight control in China, especially when it comes
to public information, both domestic and international. Space is even more under such
control given the immediate military implications to it. Interesting to remark how the outside
actually better knows the Chinese defense budget. Official figures can of course be equally
inconclusive, so one of the reasons for the lack of official information could be the
inefficient accounting of the annual budget across several organizations and entities.
China still has a very centralized and state planned economy; hence, there is no real need
to plan a budget for the single companies. Each one of them receives the fixed amount of
money from the central government and this happens notwithstanding what the
declarations of the single entities are. In addition, the figures we have from the Chinese
authorities tend to show that the financing is done by programs and may affect men,
equipment, square meters, etc. The frequent remark, made by Chinese officials, that the
budget is not available for reasons of administrative complexity can be fully understood in
this sense.
122
CHINA: Space ambitions boost research cooperation http://www.universityworldnews.com/article.php?story=20120103103345841 What‟s Driving China‟s Space Program? - http://www.airspacemag.com/need-to-know/Whats-Driving-Chinas-Space-Program-161113405.html China says it has spent $6 billion on human spaceflight http://spaceflightnow.com/china/shenzhou9/120626cost/ Will the U.S. be Overtaken by China In Space? - http://www.e-ir.info/2012/08/30/will-the-u-s-be-overtaken-by-china-in-space/
123 Officially released figures put at $6 billion the total spent on the manned space program since 1992; $3 billion were spent for rendezvous and docking missions. Estimates have put the overall civilian-military space budget, probably in the range of 2 B€ a year. It is however not clear how the subdivisions would be made. Dual use evaluation of space activities is still fuzzy in China.
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The evaluation of the Chinese budget should than be attempted basing the estimates on
achieved projects and prices proposed by the marketing functions. Even if they can incur
in a dumping procedure and are not always transparent in their public release, they
nevertheless provide a relative reference element. Hopefully the external pressures, such
as from the World trade organization and international requests for an increased
transparency will make the Chinese government consider better insight into the budget, at
least providing an overall value.
In order to assess the importance of space in Chinese national priorities, its share in Gross
Domestic Product is less than 0.05%, which puts it at the same level as Brazil but also
Japan and Europe.
The budget data should be assembled through a long and delicate work so the official data
can be assumed as a first rough cut; anyway, according to the space community, this
budget should be expected to grow to meet new ambitions centered on particular
applications.
Concerning the manned flight, being the lunar missions still in their feasibility phases, the
budget for the future space station should not rise sharply, since the launches are few and
are staggered over the next years. In addition, a budgetary estimate of ongoing
cooperation in the field of exploration is difficult to achieve, particularly concerning
agreements with Russia on the lunar automatic program.
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Plans for future missions
The new white paper on space124 for the period 2012-2016, emphasizes the continued
effort on the development of application125, science and exploration programs. China has
declared its desire to strengthen its industrial base, accelerate research on critical
technologies and to continue the development of major projects in science and technology,
including human spaceflight, lunar exploration, high-resolution observation system,
navigation and positioning satellites, a new generation of launchers. Application
development and enhancement of the ground segment are also planned. The presentation
of the missions in the prospective part of the report has led to numerous comments on an
accelerated lunar program and sending of men to the moon. In fact the order of
development gives the following priorities: development of a new generation of launchers
Long March126-5, 6 and 7, observation satellites, communications, navigation, science
and technology before the arrival of the short sections dealing with spaceflight and
exploration.
The projects in the field of earth observation are particularly ambitious. The plan calls, first,
for an improvement of the existing capabilities in meteorology, oceanography and earth
sciences as well as the constellation of small satellites for monitoring the environment and
risk prevention. In this perspective, the plan calls for a new generation of geostationary
meteorological satellites, remote sensing satellites with stereoscopic capabilities but also
with radar and electro-optic capabilities.
The plan also contains indications for a major breakthrough in Synthetic Aperture Radar
technologies and gravitational measurements. Once they will be able to have also the real-
time display of data it will be equivalent to US capabilities. The document contains clear
indications to promote the sharing of spatial data and the establishment of multiple
sources of funding, which means the involvement of several civilian government entities,
which will be new users.
Telecommunications including data relay is part of the second tier of projects.
The program here is less detailed as it states the development of all type of capacities in
this field, including satellites for data relay and even mobile communications services.
124
http://news.xinhuanet.com/english/china/2011-12/29/c_131333479_5.htm - Last visited 24/02/2012. 125
Applications are activities that involve the combined use of space-based telecommunications, earth observation and navigation systems.
126 http://en.wikipedia.org/wiki/Long_March_(rocket_family)
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Platforms are also mentioned as it is stated that a new spacecraft bus will be developed; it
will have a higher power budget to cope with the increased requirements.
As far as navigation and positioning is concerned, the Beidou127 program is well
underway.
It is an essential asset for the acquisition of China‟s strategic autonomy, although it is not a
media catcher. China makes no secret of the fact that Beidou is starting out as an
independent regional service, but the next step is the establishment of a complete system
including five geostationary satellites and thirty satellites in lower orbits to be completed by
2020.
The prioritizing of the programs described in the white book should not be misleading:
even if manned spaceflight is the paramount program, getting the bigger share of media
attention all the earth observation, telecommunication and navigation programs have
higher priority.
In addition, they are all in perfect agreement with the declaration, repeated several times,
of the importance of space systems application for the development of the national
economy.
The whole paper contains a constant association between the moon program and the
development of manned spaceflight. It looks like if it was that the moon is somehow a final
justification for the manned flights and the space station.
Under the heading "Deep-space Exploration" there is not much information; moreover it
does not mention human presence aboard. It is centered on the moon and it articulates the
endeavor in three main steps: orbiting, landing and returning. The interpretation here is
that returning means bringing back to Earth a sample of lunar soil. Mission Chang'e 3128 is
hence confirmed and foreseen with the landing of a robot. After the lunar samples return,
foreseen in 2017, the path is open. Nothing is said about a Mars mission, but, according to
different sources, the first Chinese probe to Mars would leave soon, but there is no
confirmation. There might be a special demonstration project dedicated to exploring deep
space and, alike, a mission dedicated to the exploration of planets, asteroids and the solar
system. Lastly, it is worth noticing once again how the focus, throughout the document, is
on space application that is clearly linked with the economic and commercial side of the
space industry.
127
http://en.wikipedia.org/wiki/Beidou_Navigation_Satellite_System 128
http://en.wikipedia.org/wiki/Chang%27e_3
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International cooperation
China has always regarded international space-related interactions as paramount in the
development of its space program. Cooperation129 has always been seen as serving many
purposes: political, scientific, technological, and economic. Focusing on space-related
S&T, as well as the application of space systems, China National Space Administration
(CNSA)130 has formed multilateral and bilateral partnerships with a wide range of
international partners131.
Chinese international cooperation on space activities is traditionally described in the white
paper on space. Apart from it, very little information circulates outside the official network.
Actually, the white paper on space is the only official text intended to inform foreign
observers on the Chinese programs and plans for space activities.
The paper shows a particular emphasis on the Pacific region, recurrent in various Chinese
white papers132.
China affirms its commitment not to pursue a weaponisation of space and ensures fairness
in future uses of space for all the nations of the world. Hence, the emphasis on South-
South cooperation, including regional interest is particularly highlighted, alongside bilateral
cooperation with more developed countries. In addition, there is a repeated affirmation of a
strong will to engage in works between scientific laboratories, companies, international
organizations. Policy principles outlined in the white paper sustain the line of opening
market opportunities both domestic and external. This concept though denotes a certain
level of ambiguity in the concept of cooperation since it leads very clearly to subcontracting
and cooperation on industrial and commercial base.
Assuming the data provided in the white paper on space to be exhaustive, hence including
all the international partnerships, the list shows an impressive number of countries
involved. The Chinese position undoubtedly refers to a desire to show its openness,
contrary to the image that is often given by the West of a closed country and essentially
129
Remarks by H.E. Hu Jintao, President of the People‟s Republic of China at the Eleventh Meeting of the Council of Heads of State of the Shanghai Cooperation Organization, (Astana, June 15, 2011), available at: http://www.fmprc.gov.cn/eng/topics/hjtcxshfh_2011/t833513.htm - Last visited 24/02/2012
130 International Cooperation and Exchanges - http://www.cnsa.gov.cn/n615709/n620683/index.html - Last visited 21/09/2012
131 See also “China‟s Space Activiites in 2011”, http://news.xinhuanet.com/english/china/2011-12/29/c_131333479.htm - Last visited 21/02/2012.
132 White papers of the government - http://www.china.org.cn/e-white/index.htm - Last visited 21/02/2012.
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willing to cooperate only to achieve technology transfer. Sensitive cooperation, because of
their nature, has been omitted from the paper; these are notably activities with countries
under the public scrutiny and currently being labeled as pursuing proliferation or similar
behaviors.
Looking at the structure of the listing of the cooperation, the order of citation might not be
as casual as a first glance might suggest. The cooperation with Russia, given the number
of different joint programs in science and exploration, but also in other areas, comes first.
The aerospace interaction with the former Soviet Union dates back to the late1950‟s when
a military delegation visited Moscow to lay the foundation for a Sino-Russian technical
relationship. Ever since that trip hundreds of Soviet engineers have worked in Chinese
research institutes, Chinese students have studied in the Soviet Union and a consistent
flow of technical designs have gone to China.
It all came to an abrupt end in 1960 and the two nations went separate ways until 1991133
when a new cooperative framework was put in place. Since then agreements have been
signed on cooperative projects, contracts followed and an official protocol for the sharing
of space technology between the two nations forged the bond. A detailed agreement,
signed by CASC and the Russian Space Agency, outlined at least 10 areas of space
cooperation including exchanges in satellite navigation, space surveillance, propulsion,
satellite communications, joint design efforts, materials, intelligence sharing, scientific
personnel exchanges, and space systems testing. Cooperation then spread across many
more areas, including lunar and Mars exploration.
Having signed a Sino-Brazilian agreement, the two nations co-developed the Earth
Resources Satellite program that led to launches in 1999 and 2003. Since then China has
been expanding its space cooperation with other Latin American countries. So far, China
has concluded a contract with Venezuela in 2005 for the production and launch of a
communications satellite, a clear sign of commercial expansion in an area traditionally
aligned with a certain political macro block and a first step in entering the whole Latin
America market.
Following the come into service of the satellite in 2009, Venezuela signed a subsequent
agreement with China in May 2011 to provide launch services for the Venezuela Remote-
133
Victor Larin, Russia and China: New Trends in Bilateral Relations and Political Cooperation https://www.apcss.org%2Fwp-content%2Fuploads%2F2012%2F09%2FChapter14.pdf&ei=KRRjUtCQD-fA0QXy2YGYAw&usg=AFQjCNEyn6oOhTfac02SVdnJ3sWIRcTNjA&bvm=bv.54934254,d.d2k Last visited 24/10/2012
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Sensing Satellite 1 Project on an LM-4B from Jiuquan Space Launch Center. The satellite
was developed by China Academy of Space Technology. Currently China is manufacturing
a communications satellite for Bolivia that is slated for launch on an LM-3B from Xichang.
The cooperation with the United States and NASA is somehow more problematic and
relationships are now in a state of dialogue. An open approach from the US towards China
has more recently prompted the U.S. Congress to raise strong opposition134 towards
almost any type of technical cooperation, even prohibiting official Chinese personnel to
visit any NASA facilities. The legislation recently passed has hence refrained the Chinese
from being more active, but the presence in the list of partners is definitely a sign of
openness, at least from the Chinese side.
The opposition is based mainly on trade grounds, but transfer of technology is still
somehow related to the sanctions imposed to China after the Tiananmen Massacre.
Several separate agreements have been produced until 1999 to regulate bilateral
cooperation in space; they are concerned with export licensing of U.S. satellites, safeguard
of US technology when granting export licenses to US industry for sales of US satellites to
Chinese customers and number of US satellites to be launched on Chinese launch
vehicles.
International Traffic in Arms Regulations (ITAR) have been applied since 1999 due to
export control concerns. This even have de facto impeded the use of Chinese launch
vehicles for many satellites, given the presence of US made parts or components on
almost all of the spacecraft produced around the world nowadays. To date there is no
detailed assessment of technology transfer risks associated with space cooperation.
Chinese authorities are keen on bilateral collaboration and information sharing, but the US
authorities are not convinced of the real motives and goals of the Chinese space program.
Continuous economic, political, and security tensions between the United States and
China have largely halted space cooperation.
Areas of cooperation could include information and data sharing, analysis of environmental
and meteorological data, agreements on space policy and protocol, and joint space
exercises.
134
US-China Space Cooperation: Congress‟ Pointless Lockdown - http://www.chinausfocus.com/peace-security/us-china-space-cooperation-congress%E2%80%99-pointless-lockdown/ 2012 Report to Congress of the U.S.-CHINA Economic and Security Review Commission – Retrievable at http://www.uscc.gov/Annual_Reports/2010-annual-report-congress
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Nigeria, Laos, Indonesia, Thailand and South Africa are the other nations having bought
satellites form China or having some kind of agreements for data sharing or else.
The white paper also lists the Committee on the Peaceful Uses of Outer Space (COPUOS)
Charter on natural disasters, but it has no particular value since it concerns all space
powers. The reading here is that China wants to show how engaged is in a very broad
cooperation, with full representation at the major events and the reality of its more limited
interaction with third countries.
Interesting to note the lack of any mention to Japan and India on a bilateral level.
Therefore, it is difficult to identify priorities in the external cooperation policy of China; it
looks like if it works more on opportunities than on structured dialogue. Saved for the
privileged place given to cooperation with the most prestigious space powers.
A view on China - EU cooperation in space
China being such a complex reality requires to be approached taking into account several
aspects of which the economic, technologic, geopolitical and strategic are some of the
most important. No to mention the opacity of the policy process, which is anyway a
challenge for Chinese as well as for foreigners.
This is necessary because, while there is a common and ancient will to cooperate in
space, in the past various considerations have hindered some of the processes. Besides
the cultural awareness that needs to be developed to take into account the several
aspects involved in setting up cooperation with China, there is a clear need to map
accurately the institutional landscape (military, scientific, diplomatic). In principle, the
Chinese National Space Administration is a governmental body that acts as a window for
cooperation at the international level, so it should be considered as the main actor when
playing Sino-European cooperation. Nevertheless, the Ministry of Science and Technology
also funds research programs and supervises the National Remote Sensing Centre.
The Chinese Academy of Sciences is the leading research entity in China. The Chinese
Launch and Telemetry Centre and the China Manned Space Engineering Office are also
part of the space network of institutions able to cooperate with foreign entities.
Therefore, there is a multitude of institutions, reporting to different political levels, with
different agendas and other issues. Sometimes, looking from outside of the country, there
is the perception that the above-mentioned entities have stovepipe personnel
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developments, so outstanding experts in one area might not have a clear understanding of
the overall organizational architecture.
Still we can easily affirm that the relations have consolidated over the years.
The European Space Agency (ESA) and its Chinese counterparts have carried out small-
scale projects aiming at achieving concrete results, like the data reception opportunities for
Chinese users within the European Remote Sensing (ERS) satellites program.
Among other successful common past projects we can recall the Dragoness135,
Carbones136, Core-climax137 plus several examples of comprehensive sharing of data.
Many grounds for potential cooperation consist of common interests such as earth
observation, the exploration of the universe, space debris.
China had already participated in the Sixth EU Framework Program 6138, fourth thematic
area “Aeronautics and Space” reaching a success rate of about 28 %. Following those
effective cooperation the future lies in the joint European Union - Minister of Sciences of
China “Space Dialogue“139. This activity currently in preparation consists in discussing
together potential topics for cooperation under the Horizon 2020 program. The most
promising topics identified so far are: remote sensing capabilities for climate change,
monitoring, marine environment and air quality monitoring (next call), space weather,
exploration of the Solar System (Moon, Mars, life science and possibly experiments on the
Chinese Space Station.
So far, cooperating on scientific projects and pooling resources have proven cost efficient
and important in building mutual trust. Still, some domains remain too sensitive to allow for
cooperation; among them space technologies, for example, could draw both parties into
transfers and knowledge sharing that in turn would escalate internal clash as well as
endanger relationship with other big space actors.
135
DRAGONESS http://dragon2.esa.int/cgi-bin/confdr09.pl?abstract=511 – The purpose of DRAGONESS was to to make an inventory of Chinese and European capacities of marine monitoring for environment and security including Earth observation data.
136 CARBONES ec.europa.eu/enterprise/policies/space/files/gmes/climate-change-conf-helsinki-june-2011/presentations/gmes_climat_-_carbones_prunet_en.pdf - Its aim is to achieve a high quality 30-year re-analysis of CARBON flux ES and pools over Europe and the globe, providing consistent analysis
137 Core-CLIMAX http://eeas.europa.eu/delegations/china/documents/eu_china/science_tech_environment/presentation_by_dr._reinhard_schulte-braucks.pdf - Purpose of the project was to oordinate with Global Monitoring for Environmnet and Security (GMES) ongoing activities and contribute to the formulation of the GMES climate service theme.
138 Review of the Science and Technology (S&T) Cooperation between the European Community and the Government of the People‟s Republic of China – Retrievable at - ec.europa.eu/research/iscp
139 Joint Press Communiqué of the 14th EU-China Summit, Beijing, 14 February 2012 – Retrievable at eeas.europa.eu/china
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Sensitivities also emerge when mixing political and industrial or economical interests.
These are most probably the reasons that created attrition in the cooperation on the
Galileo140 project, the European Global Navigation Satellite System (GNSS) project.
Galileo, since its inception, was the subject of attention by several non-European
countries, such as China. Moreover, being a public-private consortium, during its first
stage, the project welcomed participations from foreign industries. The European
Commission therefore signed a cooperation agreement with Beijing in 2003, besides
several other countries. Actually many more countries had expressed interest in the
project, including India and Russia, and in 2005 an information center on Galileo was
established in Latin America, near São Paulo, Brazil. In 2005, China agreed to invest in
the project. Brussels welcomed the interest in the system, even though it was seen, at the
time as disruptive of on-going cooperation from the USA. Actually, cooperation with
countries like China was seen with more or less explicit dislike by the US government,
which had been raising issues of access by third countries to sensitive technologies and
sophisticated navigation and positioning services. However, the European vision was of
significant benefits in cooperation agreements that would have strengthened the EU
international position allowing it to act as a key player in science and technology.
The situation more or less limped along until 2007 when the Galileo‟s budget and
institutional functioning were redesigned and the European Commission took on a more
important role in management of the project. Hence all the, already, broiling troubles came
to the surface and the transforming of a commercial/industrial/technological discussion into
a highly political issue and a strategic interest for the EU that made the Chinese
participation in the Galileo project no longer acceptable. The issue was later solved, for the
time being, by the Chinese with the development of their own system, the
Beidou141/Compass. In recent times, the discussion has very much returned on the
technical table since the Beidou and the Galileo‟s security signals frequencies are now
overlapping, with all the security implications that this carries along. Beidou is a regionally
operated global navigation satellite system but the intentions are to extend it to the
international scale with 37 satellites by 2020 under the name COMPASS. The events
reminded that, space being a highly strategic domain, some political questions may be
140
http://en.wikipedia.org/wiki/Galileo_(satellite_navigation) 141
http://en.wikipedia.org/wiki/Beidou_Navigation_Satellite_System
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raised to prevent further cooperation. It also made western observers aware that China
does not recover easily from mishaps, and often reacts in a calculated manner.
However, the current world situation of reducing budgets and more and more scrutiny on
government expenses makes cooperation a way to pursue in order to achieve results
without incurring into transversal slashing of activities. Hence, it is in the light of these
basic considerations that it looks like there is some common ground to pursue increased
cooperation between Europe and China. EU could be better positioned than the US to
strengthen its relationship with China due to a few factors: ITAR142 issues, restrictions put
on NASA to cooperate with China, a sensitive situation due to some on-going
confrontation that hampers stable military cooperation. Also the functional and maturity
distance between the two space programs, especially in areas such as Space Situational
Awareness.
Anyway, there is a common understanding that many important conversations regarding
space security and sustainability were happening without meaningful Chinese
participation. So far no common forum has been set up to tackle the future challenges that
might be coming from microsatellites. There is a widespread and renewed interest for a
class of smaller satellites that can be developed in reasonable time, costing much less that
traditional spacecraft, both to build and to launch but can still allow for decent capabilities
countries that would not be traditionally able to afford a more complex space asset.
This means that many new actors have been stepping in the space arena, also from within
China‟s area of influence.
Space debris removal is another very sensitive issue that would need to be discussed
thoroughly with China. The anti-sat test performed by China in 2007 and the 2009 collision
between an American Iridium and Russian Cosmos satellite are only two examples, well
publicized, of what might happen more often over the next years. Those two major
events143 alone generated an incredible amount of new debris, most of them big enough in
size to definitely reduce many satellites capabilities. Dead satellites, spent rocket stages,
and even loose bolts and wayward astronaut gloves litter the space around Earth,
presenting a hazard to crews and hardware in orbit. Some experts144 predict the debris
population will reach a level at which it could become self-sustaining: debris-on-debris
142
http://en.wikipedia.org/wiki/ITAR 143
Worst Space Debris Events of All Time - http://www.space.com/9708-worst-space-debris-events-time.html - Last visited 24/11/2012.
144 NASA Orbital Debris Program Office - http://orbitaldebris.jsc.nasa.gov/ ESA Space Debris Office - http://www.esa.int/Our_Activities/Operations/Space_Debris/ESA_Space_Debris_Office
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collisions would continue to increase the amount of debris in orbit, even without new
launches. This could quickly lead to a sharp decrease in the ability to sustain the benefits
that space systems provide to the entire world. Discussions with China would hence need
to touch upon the concept of space sustainability that is the ability to provide important
benefits from outer space, which is now threatened. The discussion should also include
orbital crowding as key spots, especially in geosynchronous orbits, are taken while the
overall need for telecommunications from space is ever increasing.
China is looking for partners to offset economic costs of its space venture. It is also going
to use space to apply hard power or soft power. For sure China is not looking for help as it
is extremely sensitive to condescension. Even if in other aerospace ventures it might look
like Chinese companies are trying to lure in foreign firms as substantial sub-contractors to
acquire their knowledge, on the grand level China wants to be treated as equal, not as a
second-tier space power. Chinese are extremely proud of their accomplishments and will
take the long, slow road of developing indigenous capabilities if they need to.
Nevertheless, China is also learning how to treat EU as an equal partner, a task it has
achieved, and surpassed, before.
The dual-use145 of technology is currently being dealt with in a slightly different way in
China as it is being done in Europe, so this might impede commonality of interests and
pursuits. China has its own ideas about the use of space, a perspective that is a function
of its stage in the development of its program. It is currently building capacities both for
security reasons and as a matter of prestige. Still, as mentioned elsewhere, so called dual-
use technologies have been key to the development of the space capabilities at large in
China.
China has a different perspective on the use of space than the other space nations, but it
would be a mistake to assume this thinking as inherent to Chinese culture; it is more a
function of its stage of development as a space actor. China is currently building its space
capabilities, particularly for national security and prestige, whereas other space fairing
nations are more focused on maintaining space capabilities. So engaging in a dialogue
about space sustainability is more like engaging on carbon emission reductions than
specific space discussions: it transcends the simple project.
145
http://en.wikipedia.org/wiki/Dual_use
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China has now gained a considerable experience and has grown a very robust domestic
space program that looks much focused, strategically oriented and definitely set in for the
long run. Since China is now a main actor on the space stage, Sino-European relations in
this matter will likely continue in the coming years.
Europe has the opportunity to strengthen its relationship with China, as other countries are
less able to do. However, to best pursue the cooperation, Europe needs to formulate a
coherent policy towards China in the realm of space, maybe, not less than in other areas
where it is still lacking one.
China’s involvement in the Galileo146 program147
The agreement concerning China‟s access to Galileo was signed in Beijing October 30,
2003. With the signature, China gained access to the status of participating country,
provided a financial contribution of 200 million euro and became a cooperating partner on
various aspects: production, manufacturing, development and marketing of services148.
Back in those days the signature was considered a remarkable step forward in the
direction of a more structured and fruitful cooperation, meaning allowing China to access
European space know-how while allowing European companies to entering the promising
Chinese market for aerospace products (similar to what had happened in other joint
ventures in the commercial aviation sector).
Many interpreted the agreement as a tool for foreign policy that would have allowed
Europe to promote its own space power and give another lever for the diplomatic reaching
an agreement that would put an end to tensions with GPS, supporting the program
international political scene149 . The Chinese involvement raised concern in the United
States, annoyed and concerned about a strategic agreement between its most important
peer competitors. The acquisition of technological capabilities by China, through contracts
for the manufacturing of elements of Galileo, posed further problems since it could result in
146
http://en.wikipedia.org/wiki/Galileo_(satellite_navigation) 147
Adapted from “Le attività spaziali nelle politiche di sicurezza e difesa”, Rosa Rosanelli, Edizioni Nuova Cultura 2011.Nella serie Quaderni IAI, Istituto Affari Internazionali (IAI), Via Angelo Brunetti 9 – I-00186 Roma, www.iai.it.
148 Nicola Casarini, Remaking Global Order. The Evolution of Europe-China Relations and its Implications for East Asia and the United States, Oxford, Oxford University Press, 2009, p. 102
149 Nicolas Peter, “The EU‟s Emergent Space Diplomacy”, p. 105.
Ch_Sp_20131120_1526.doc 78 Author: T.Col. Giovanni SEMBENINI - Edit: T.Col. Volfango MONACI
a substantial strengthening of Chinese military capabilities, particularly with regard to the
guidance systems of ballistic missiles. Even President George Bush, during his visit to
Europe in February 2005, expressed concerns about it. The European Commission
responded giving assurances that the military side of China would not have benefited from
technology transfers from the participation in Galileo. At the time it seemed rather naive,
given the lack of a clear separation between civilian and military space programs in
China150. Furthermore it was established that unless an agreement was reached
unanimously, neither China nor other partners outside the EU would have access to
encrypted signals to be used for security purposes and defense (the so called Public
Regulated Service). It was hence declared that Chinese cooperation on Galileo would not
damage NATO nor the strategic interests of the USA in East Asia151. The Authority for the
Supervision of Satellite Systems Global Navigation (Global Navigation Satellite Systems
(GNSS) Supervisory Authority) was established in July 2004; it would later become the
body responsible for security issues and the management of relations between the
European institutions and individuals. A committee on the security of the system152,
composed by national representatives, would assist the Authority in the eventual adoption
of protective measures to prevent unauthorized use or hostile acts. Third countries,
including China, would have no power in the decisions on the use of the signal in case of a
crisis, they would involve only EU countries. In this way, however, China was to have less
influence on Galileo than Japan and India have on GPS; despite not having paid for the
cooperation with the USA in systems for improvement of the regional signal153.
The European industries were initially enthusiastic about China joining in as they saw
possible openings in a new market; however they also understood that in the long term
there could be a loss of competitive advantages in favor of the Asian power.
The aerospace industry had also reservations about the possibility that controls on U.S.
exports could prevent them from using critical American technologies in Galileo due to
ITAR154 restrictions.
150
Gabriele Garibaldi, “Un dragone nello spazio”, in Limes, n. 5/2004, p. 181. 151
Bastian Giegerich, “Navigating Differences: Transatlantic Negotiations over Galileo”, p. 499. 152
Xavier Pasco, A European Approach to Space Security, p. 14. 153
Taylor Dinerman, “Galileo and the Chinese: One Thing After Another”, in The Space Review, 9 February 2009, http://www.thespacereview.com/article/1307/1 Last visited 23/03/2013.
154 http://en.wikipedia.org/wiki/ITAR
Ch_Sp_20131120_1526.doc 79 Author: T.Col. Giovanni SEMBENINI - Edit: T.Col. Volfango MONACI
In 2006, China's involvement was in doubt: they decided to build their own satellite
navigation system, named Compass or Beidou, very similar to the GPS and Galileo
constellations. The risk at that point was of a superimposition of the Chinese system‟s
military signal with the Public Regulated Service (PRS) signal, and even the military USA
Global Positioning System (GPS) frequency. With this act, China reduced the value of the
signal and moved over to the side of a commercial competitor to Galileo. Also in an
unexpected move announced a signal free for commercial use155. Faced with a situation
reminiscent of what happened to Galileo and GPS, European Commission President
Manuel Barroso wrote to Chinese Prime Minister Wen Jiabao, in July 2009 to highlight the
urgency of finding a solution to an important issue for the security of the EU and its
Member States. No answer came back. The European Parliament expressed concern on
the wide scope of cooperation with China in the Galileo program and asked the
introduction of more safeguards to ensure that China, or other partners, could not transfer
to military applications sensitive technologies used in the program. In 2007, the Economic
and Social Council of the Union noted with bitterness that, despite the importance of the
cooperation agreements to strengthen the international position of Galileo, they should
remain vigilant because the main purpose of some partners is to acquire the knowledge
and the know-how to gain advantage over Europe. But in developing their own technology,
these countries would then come in competition with that of Galileo. Looking back in time,
it seems now plausible to assume that it was for this reason that China decided to sign the
cooperation agreement on Galileo with the European Union in first place.
Unfortunately the Galileo affair is not a good example of Chinese engagement in
international cooperation. It should not be held as a reason for not proceeding to launch in
new ventures. But a more reflexive approach should be born by the EU when evaluating
participation of China on ventures that could have a strong commercial implication.
155
Taylor Dinerman, “Galileo Gets A Chinese Overlay”, in The Space Review, 31 July 2006.
Ch_Sp_20131120_1526.doc 80 Author: T.Col. Giovanni SEMBENINI - Edit: T.Col. Volfango MONACI
China’s aerospace today and Tomorrow
China‟s aerospace capabilities have definitely come a long way from the ancient rockets
and the experimental flying chair that legends tell us about.
Overall the aerospace system has achieved several successes even if the landscape is
uneven and goes from entering the club of space faring nations to a (not yet) successful,
mass produced regional jet. China has massively improved its industrial capabilities
especially over the past decades, but it still is somehow trailing very much behind the
leaders of the aerospace pack.
The future of aerospace in China is encased in the 12th Five Year Plan. Aerospace is
listed as one of the seven major strategic industries to propel the country through the next
growth phase. In a speech for its launch, Wen Jibao156 said:
“We will organize the implementation of industrial innovation and
development projects, including [.] space infrastructure, regional
aircraft and industrialization of general aviation aircraft.” 157
All over China the targets set in the Plan are taken very seriously and there is a diffused
mood of “can do”. The money dedicated to aerospace has increased by 50% since the
previous plan and those will cover new airports, navigation systems and airplanes among
other technologies supporting more missions and applications.
156
http://en.wikipedia.org/wiki/Wen_Jibao 157
China Real Time Report. China NPC 2011: The reports. Wall Stree Journal. 5 march 2011 – http://blogs.wsj.com/chinarealtime/2011/03/05/china-npc-2011-reports-full-text/.
Last visited 25/02/2012
Conclusions II-3
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As for the commercial market, many are the questions and the possible answers 158.
In simple terms the basic question is if China will be an opportunity, a threat, or both.
The questions are actually well posed since China is now a huge and expanding market
with the need for many more planes over the next few years, but it is also a powerhouse of
manufacturing, with almost unlimited resources. Most companies fear that in order to
penetrate the market they will have to give up more than their fair share of knowledge, as
China, often, requires to sign specific deals. In some cases China has demonstrated the
ability to buy companies that would have filled a gap in its industrial portfolio.
A possible script for future dominance by Chinese airliners manufacturers has been drawn
up by Fallows159; so reviewing it can help single out some elements to look for in the future
in order to avoid surprises: step one is the political pressure. Selling big aircraft is as much
a commercial issue as it is political. China has already proved these words when
threatened to cancel Airbus orders if the EU was to enforce anti pollution and carbon
reduction regulations that would have made airlines pay high fees to fly into Europe.
So, sometimes, governments can also impose markets shares in favor of various products.
Shifts of production: means bringing your plant where the market is. Transfer of knowledge
is a key to China‟s improvements in several aerospace technology and engineering areas.
Last step is the setting up of modern production plants at lower cost and high volumes that
would be used as launch pads to reach any market. Plausible, maybe. Possible, why not.
It does not account, once again, other players, like Brazil, India or else. True is that the
internal Chinese market is a big prize, but on the long run? Outsourcing is one thing that
many industries have already paid at a high prize. And in the aviation business Boeing for
sure did. The 787 outsourcing policy made the plane get to the market later than expected
with a severe impact on Boeing in terms of cost and delays.
China is learning now, in a much shorter time, what has taken the rest of the aerospace
advanced world, several decades. It might be treasuring on those lessons learned or it
might be wandering off the beaten path in search of true innovation.
158
China Airborne, James Fallows, Random House, 2012. 159
China Airborne, James Fallows, Random House, 2012.
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Anyway it is fairly comfortable to assume, given China‟s track record, that it will succeed in
getting airborne in the coming decade. Commercial success is a different story given the
gap that still exists between China capabilities and the leaders. Also the leaders will be
advancing at least at the current pace. The ARJ21 regional jet, looking at public data
should be heavier than the similar type aircraft in production, hence making it more
expensive to operate.
Of course it is expected to chew away at foreign competitors on the domestic market.
As for other markets, once again, the political game might change the balance, especially
in countries not so sensible to certifications. Anyway, the plane will be a first step.
The bigger C919 is way behind schedule and apparently in a class of technology that is
comparable to older western jets. Anyway, it will probably follow the same rules of the
market of the ARJ21 and hence benefit, in terms of experience gained, the COMAC.
Overall, it looks like the immediate future is not so dark for western manufacturers.
The development of general aviation is strongly influenced by the opening up of the air
space. But this is an issue that will be dealt with in close circles. It is reasonable to expect
the demand of business jet is to go up given the increasing wealth of many Chinese
entrepreneurs. Owning a plane might become a status symbol after cars and boats.
The internal manufacturing capability is limited but with acquisitions, like the Cirrus deal,
and agreements it might go up. Again, only if the usage of private airplanes becomes less
constrained.
As far as space is concerned, it is reasonable to assume that the development of national
hardware will continue at the current pace. The launchers have reached a remarkable
reliability record of accomplishment. Hence if the new class in development, CZ-5, will
keep to its promises in terms of performances, China will get a boost to higher orbits.
But how is it to compare overall with other nations? Maybe will close the gap, but most
probably it is not the time for the overtake. China is inching its way to the moon because
even for China budgets are not unlimited. In the mean time expectations are to continue
international collaboration and dialogue.
Ch_Sp_20131120_1526.doc 83 Author: T.Col. Giovanni SEMBENINI - Edit: T.Col. Volfango MONACI
One question resonates with anybody analyzing current and future Chinese aerospace
capabilities: what are the security implications for the world order?
Security interests are not an independent variable in the system of world policy, or
multinational game, they are actually very much coupled with business interests so it is
more likely that China will work on that through a mix of military, soft and hard power.
Given the very nature of aerospace technologies and the use that can be done of complex
aerospace systems the term dual-use160 applies very much to most of them. True is that
some specific functions or elementary systems can only found use in the military or in the
civilian side. Also some technologies and application that finally found their use in the
civilian market, like launch system are a direct evolution, and leading the improvements of
purely military systems. So it is undeniable that in China the aerospace system has grown
and evolved as a whole, hence there is no real separation of benefits between the military
and the civilian side. The aerospace capabilities China has developed so far could have
implications for several nations‟ security interests. China geographical position and
territorial claims in the East China Sea and South China Sea would affect several nations
interests in the freedom of navigation and in the security of many nations in the path to the
open seas.
Unilateral restrictions and embargoes161 have shown not to be effective. Foreign policy
will have to bear into account the new aerospace capabilities as well as the Chinese link
onto the world aerospace industrial structure.
In the end, the question is not if China will continue to develop its national aerospace
capacities, the answer is easily yes, given all the elements and the analysis shown in the
previous chapters. The question is how. And the answer strongly depends on many
factors: political, economic, military, etc.
160
http://en.wikipedia.org/wiki/Dual_use 161
http://en.wikipedia.org/wiki/Embargo
Ch_Sp_20131120_1526.doc 84 Author: T.Col. Giovanni SEMBENINI - Edit: T.Col. Volfango MONACI
Multiple futures
Forecasting the future is difficult162, that is why forecasts go wrong. History is full of
examples and anecdotes to support this statement: from IBM outsourcing software for “few
hundred computers” to Microsoft to pre WWI Germany that forecasted UK neutrality to
many more. That does not mean that we should stay away from it, since to some extent all
the actions of every one of us, governments included, are driven by some pictures of the
future. If the pictures we draw upon are wrong, no one could be safe from the outcomes.
So a more systematic analysis of the future can lead to a clearer understanding.
Systematic analysis that should gather knowledge. Knowledge that could in turn be used
to build scenarios, that is alternative futures within a given domain. All of them should be
plausible even if none of them may materialize. Still they somehow limit the range of
alternatives that governments and enterprises should consider in dealing with China on the
subjects of this report. Hence this work hopefully provides some semi-raw material from
which to elaborate plausible scenarios to cope with. Bearing clearly in mind that the reality
of China is so much more complex than any scenario might tell.
And still different views provide different scenarios163:
Michael Lee164 of the Institute of Futurology & WFS Southern Africa proposes a very
straightforward three outcomes future for China: the runaway train future, the juggernaut
future and the xanadu future:
- In the runaway scenario China keeps pursuing its own plans, with incomparable
growth and consumption of resources. But the balance cannot be reached and so
China implodes, devastating its environment and going into social collapse.
- The juggernaut is a repressive future, in which the central power becomes
increasingly authoritarian hence crushing its people, fiercely refusing any
compromise or cooperation with the outside world.
- In the xanadu future, China evolves into a sort of modern time ancient civilization. It
becomes a global power house for science technology, innovation. Hence attracting
travelers and scholars and getting in a strong position for ages to come.
162
What the future holds. Richard N. Cooper and Richard Layard. MIT Press. 2003. 163
China‟s futures: Scenarios for the world‟s fastest growing economy, ecology and society. James A. Ogilvey and Peter Schwartz. 2001. San Francisco: Jossey-Bass.
164 Too big to succeed? – ieee.org/index.php/IEET/more/lee20120903 – Last visited 21/12/2012
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Can we subscribe to these scenarios? May be. But thorough analysis can demolish any
scenarios with minute observations, like in this case that none of the scenarios take into
due account external actions: the world is far more complex even than China is. Any
scenario at this level and at this depth would probably have an unmanageable number of
variables. So building a future scenario for China would possibly need to take into account
enormous amount of data and external interactions.
Part of these scenarios should definitely be the government‟s public diplomacy programs
when dealing with China, in a bilateral as well as multilateral way; this is not something
that any country should (can?) play alone. Operating together in a coordinate matter would
take into account the multiple so-called core interest of China, limiting the potentially
negative impact on the relationships with many nations.
And beyond scenarios? Beyond these are the analysis carried out by authoritative
institutions that provide an insight into what might be the biggest challenges China will face
and what would be the most effective courses to take. These analyses are possible futures
in themselves, as understanding, evaluating and implementing them might shape a
different China, more integrated in the rest of the world. Maybe in some sort of race, most
probably in a balanced strength contest. The World Bank165 has carried out a thorough
study that had the advantage of having been done in cooperation with Chinese
representatives. Hence worked from the inside somehow and possibly being transferred to
the buttons room for, at least, meditation.
Six are the key findings that are passed on as messages for the future of China:
1. Implementation of structural reforms to strengthen the foundations of a market based
economy. This item touches upon the very core of the Chinese system: the
government and its role, the structure of state owned assets like banks and
enterprises. These actions will have to steer the system towards an increased
competition, development of the private sector and a new organization of land, labor
and financial markets. The aerospace sector would have to manage with a different
type of management, maybe redefining the goals and targets to achieve. It could be
165
China 2030 Building a Modern, Harmonious, and Creative High-Income Society. The World Bank. 2012. 2012 International Bank for Reconstruction and Development / International Development Association or The World Bank
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the definite change that achieves a different type of collaboration with western world
aerospace companies, maybe rebalancing the possibility to penetrate different
markets. Evolved labor laws would of course impact directly the cost of their
productions.
2. The second message calls for an acceleration of the pace of innovation. China will
benefit from an open innovation system fostering and nurturing firms to engage in
real process and product innovation. They would benefit from participation in the
external world innovation and research networks. This second message would be in
direct support of the aerospace industry as it would continue to exploit the intellectual
capital of the brightest Chinese minds but amplifying it as they participate in
knowledge networks.
3. The third message is directly targeted to one of the most widely recognized problems
China is facing today: environmental catastrophes, most of them man-made. Even
huge projects like the Three Gorges Dam166 that was supposed to bring growth (the
ever present mantra in China) and improvements in life conditions has been deemed
an environmental disaster167. If China can go green it will increase the level of well
being of its population and steer to sustainable growth.
4. Fourth message is to expand opportunities and promote social security for all. China
has already somehow embarked in this journey168. It will be hard to implement
extensively due to the natural resistance to give up cheap labor and spend on social
nets. The dimension of the country itself does not play in favor of it, but the
implementation of a decent welfare will play to reduce increasing inequalities, which
in turn increase turmoil.
166
http://en.wikipedia.org/wiki/Three_Gorges_Dam 167
China's Three Gorges Dam: An Environmental Catastrophe? March 25, 2008 Scientific American -
Retrieved at http://www.scientificamerican.com/article.cfm?id=chinas-three-gorges-dam-disaster –
Last visited 23/09/2012. 168
Asia‟s next revolution, The economist. 8 September 2012. http://www.economist.com/node/21562195 Last visited 23/11/2012.
Ch_Sp_20131120_1526.doc 87 Author: T.Col. Giovanni SEMBENINI - Edit: T.Col. Volfango MONACI
5. The fifth message is about strengthening the fiscal system. The need is for:
mobilizing additional fiscal resources to meet rising budgetary demand, reallocating
expenditure towards social objectives and ensuring budgetary resources at all
government levels. These actions are necessary to support the overall development
strategy.
6. The last message is to reach out and seek more mutually beneficial relations with the
world. China has joined several international fora, of various kind: it has a permanent
seat in the UN Security Council. It now needs to pursue more integration at financial
level and support the shaping of a common global agenda.
But China is constantly in transformation, domestic issues require more attention from the
central government than ever before. Top political leaders cannot avoid altogether to lend
an ear to public protests against corruption in China. The gap between the wealthy and the
rest of the country is increasingly deep, furthering away more people from the central
government. As a partially related consequence to this, provincial-level authorities are
engaging more and more often in policy development and implementation not fully in line
with the guidelines laid out by the central government. So far, China's leaders have
invested in economic growth means and big infrastructure projects to somehow distract
and provide hope. The new leadership might consider political reforms to definitely tackle
and solve internal problems. The guiding lines for these reforms have somehow been
drawn in the 12th Five Year Plan, with its focus on quality of growth, structural reforms to
harness innovation and economic efficiency, and social inclusion to overcome the rural-
urban divide and the income equality gap.
Ch_Sp_20131120_1526.doc 88 Author: T.Col. Giovanni SEMBENINI - Edit: T.Col. Volfango MONACI
In conclusion, singled out among million others, here are three hints that could be used as
indicators of how much China has stepped into its future169 of true innovation:
1. Average internet speed closing the gap with the west.
2. Globally recognized brand names: China is no longer identified only as an assembly
line of others.
3. Recruiting success people from abroad not just repatriating the successful Chinese
from foreign university but real foreign people that would bring in innovation.
This would definitely be a sign of moving on to the next stage.
What the future holds…..?
Pat Bagley, Copyright 2011 Cagle Cartoons
169
http://www.theatlantic.com/video/categories/series/chinas-rise-series/ - Last visited 23/09/2012
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APPENDICES
The below-listed contents can be found in a separate file:
Ch_Sp_201311_Appendices.pdf (this hyperlink is NOT actionable, in web edition):
Appendix a-1: China Page 1
Appendix a-2: Chinese aviation primer Page 15
Appendix a-3: Chinese Space primer Page 50
Would like to know, also:
China at a glance Page 130
Wong Tsu Page 166
Quian Xuesen Page 174
CHINESE AEROSPACE PROGRESS IN XXI CENTURY. SITUATION, PERSPECTIVES, CRITICALITIES.
NEVER ENDING RACE OR A PROCESS WITH AN EPILOGUE?
Ch_Sp_20131120_1526.doc 90 Author: T.Col. Giovanni SEMBENINI - Edit: T.Col. Volfango MONACI
ANNEXES
The below-listed contents can be found in a separate file:
Ch_Sp_201311_Annexes.pdf (this hyperlink is NOT actionable, in web edition):
Annex A 170- China‟s 12th Five Years Plan Page 3
Annex B 171- Guidelines on national medium- and long-term program
for science and technology development Page 64
Annex C 172- China's National Defense in 2010 Page 118
Annex D173 - White Paper: China‟s Space Activities in 2011 Page 122
170 Source: http://cbi.typepad.com/china_direct/2011/05/chinas-twelfth-five-new-plan-the-full-
english-version.html (last visit 2013 11 19) 171
Source: China Science and Technology Exchange Center 171
(http://www.cstec.org/en/) 172
Source: Information Office of the State Council of the People's Republic of China March 31, 2011,
Beijing http://www.china.org.cn/government/whitepaper/2011-03/31/content_22263720.htm 173 Source: China's Space Activities in 2011 Information Office of the State Council People's Republic of
China December 2011, http://www.gov.cn/english/official/2011-12/29/content_2033200.htm
CHINESE AEROSPACE PROGRESS IN XXI CENTURY. SITUATION, PERSPECTIVES, CRITICALITIES.
NEVER ENDING RACE OR A PROCESS WITH AN EPILOGUE?
Ch_Sp_20131120_1526.doc 91 Author: T.Col. Giovanni SEMBENINI - Edit: T.Col. Volfango MONACI
Acknowledgments
I wish to use a little space at the end of this report to thank a few key people. First of all my
“boss” CAPT (N) Francesco SCIALLA, Head of the R&T Strategy, Planning and Programs
Office at the V Dept of the General Secretariat of Defense and National Armaments
Directorate of the Italian Ministry of Defense, who has allowed me to embark in this
venture and believed that I could do it, somehow against others‟ thinking.
My grateful thoughts go to the prestigious institution of Ce.Mi.S.S., and to LTC Volfango
MONACI in particular, for having accepted my candidature and supported me all along the
way.
Thanks, last but not the least, to my Family for having stood by my side and withstood my
stormy moods all along the drafting of this work, including during holydays and summer
vacations.
Giovanni Sembenini
Ch_Sp_20131120_1526.doc 92 Author: T.Col. Giovanni SEMBENINI - Edit: T.Col. Volfango MONACI
Ce.Mi.S.S.174
The Military Centre for Strategic Studies (Ce.Mi.SS)175 is the body that manages, within
and for the Italian Ministry of Defence, the research on issues of strategic nature.
Founded in 1987 by Decree of the Minister of Defence, the Ce.Mi.SS carries out its work by
availing itself of civilian and military experts, both Italian and foreign, who are left completely
free to express their thoughts on the topics covered.
The content in the studies published thus reflects only the opinion of the researcher and not
of the Italian Ministry of Defence.
About the Author
Giovanni Sembenini176, Lieutenant Colonel Italian Army is the
Section Lead for all the R&T activities within NATO and with
non-EU countries at the General Secretariat of Defense and
National Armaments Directorate, Italian MoD.
He holds a PhD in Aerospace Engineering from the Politecnico
di Torino, Turin, Italy and a MSc in Strategic Studies from the
Università degli Studi di Torino, Turin, Italy.
In his previous positions he has worked on anti aircraft missile systems, space policy,
space programs, international science and technology cooperation. He has done
internships at various international aerospace firms and at NASA MSFC Huntsville
Alabama, USA and has lectured in aerospace systems engineering at Politecnico di Torino
both at undergraduate and graduate level. He has more than 30 publications at
international conferences and journals..
174
http://www.difesa.it/SMD_/CASD/IM/CeMiSS/Pagine/default.aspx 175
http://en.wikipedia.org/wiki/Italian_Military_Centre_for_Strategic_Studies 176
http://it.linkedin.com/pub/giovanni-sembenini/b/491/95b
Ch_Sp_20131120_1526.doc 93 Author: T.Col. Giovanni SEMBENINI - Edit: T.Col. Volfango MONACI
Ce.Mi.S.S.177
Il Centro Militare di Studi Strategici (Ce.Mi.S.S.) e' l'Organismo che gestisce, nell'ambito e
per conto del Ministero della Difesa, la ricerca su temi di carattere strategico.
Costituito nel 1987 con Decreto del Ministro della Difesa, il Ce.Mi.S.S. svolge la propria
opera valendosi si esperti civili e militari, italiani ed esteri, in piena liberta' di espressione di
pensiero.
Quanto contenuto negli studi pubblicati riflette quindi esclusivamente l'opinione del
Ricercatore e non quella del Ministero della Difesa.
Ten. Col. Ing. Giovanni SEMBENINI
Giovanni Sembenini178 è attualmente il Capo Sezione Attività
R&T NATO e paesi extra europei presso il 2° Ufficio, V Reparto
del Segretariato Generale della Difesa / Direzione Nazionale
degli Armamenti. Ha un Dottorato di Ricerca in Ingegneria
Aerospaziale ottenuto con una digressione su metodologie per
la riduzione dei guasti in orbita di satellite ed infrastrutture
abitate mediante sviluppo di modelli di complessità ed analisi di
serie storiche.
Precedentemente ha ricoperto incarichi presso la NATO RTA (ora NATO CSO), SMD IV e
Reggimenti di supporto logistico
177
http://www.difesa.it/SMD_/CASD/IM/CeMiSS/Pagine/default.aspx (ultima visita 2013 Nov 04) 178
http://it.linkedin.com/pub/giovanni-sembenini/b/491/95b
