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Suspicion of Chinese intentions could hurt aviation investments

This picture taken on September 4, 2012 shows an Air China plane preparing to land at Beijing Capital International airport.

Japan said today its exports fell for the fifth straight month, thanks in part to increasing tensions with China. For its part, China says protectionist policies all over the world -- including the U.S. -- are partly to blame for its economic woes.

protectionist attitudes can mean missed opportunity for U.S. companies, and that may already be playing out when it comes to the global aviation industry.

As editorial director of Aviation Consumer magazine, Paul Bertorelli attends a lot of industry shows. He’s noticed something lately. “We’re increasingly going to press conferences that are in Chinese," Bertorelli says.

Chinese companies are on a spending spree, snapping up U.S. aviation companies hit by the financial crisis.

Take, for example, the Minnesota-based Cirrus. China’s largest state-owned aviation company, AVIC, acquired Cirrus and saved it from folding; it did the same with a company in Alabama.

"When we buy companies in the U.S. and invest there, we want to make our contributions to the recovery and development of the U.S. economy," says Li Zuoming, AVIC's chairman.

Even though AVIC kept these companies in the U.S. and restored jobs, Paul Bertorelli says by and large, the aviation industry was suspicious of the deal. And it’s the same the other way around. China’s giving more scrutiny to American firms working in China’s aerospace and telecom sectors.

The growing distrust was evident in the recent presidential campaign."President Obama in the final debate said China is an adversary," says Bill Bishop, an investor in start-ups in Beijing. "So increasingly, you’re going to see a real push-back on areas where the U.S. considers to be sensitive or national security related."

AVIC has been accused of copying American stealth fighter technology to make China’s first generation of stealth fighters. AVIC’s Li Zuoming denies this, but aviation expert Bertorelli says it doesn’t matter; neither of the companies AVIC acquired in the U.S. would provide China with sensitive military technology.

“There’s no point in having this reaction and really being frightened of it. Capital is running around trying to find the best value," says Bertorelli.

And AVIC, with revenues of more than $25 billion, says it’s done investing in the U.S. for the time being. Li Zuoming says he’ll take the company’s money elsewhere.

Rob Schmitz: As editorial director of Aviation consumer magazine, Paul Bertorelli attends a lot of industry shows… and he’s noticed something lately.

Paul Bertorelli: We’re increasingly going to press conferences that are in Chinese.

Chinese companies are on a spending spree, snapping up U.S. aviation companies hit by the financial crisis.

Like the Minnesota-based Cirrus. China’s largest state-owned aviation company, AVIC, acquired Cirrus and saved it from folding. AVIC did the same with a company in Alabama. Li Zuo Ming is chairman of AVIC.

Li Zuoming: When we buy companies in the U.S. and invest there, we want to make our contributions to the recovery and development of the U.S. economy.

But even though AVIC kept these companies in the U.S. and restored jobs, Paul Bertorelli says by and large, the aviation industry was suspicious of the deal. And it’s the same the other way around. China’s giving more scrutiny to American firms working in China’s aerospace and telecom sectors. The growing distrust was evident in the recent presidential campaign, says Bill Bishop, an investor in start-ups in Beijing,

Bill Bishop: President Obama in the final debate said China is an adversary. So increasingly, you’re going to see a real push-back on areas where the US considers to be sensitive or national security related.

AVIC has been accused of copying American stealth fighter technology to make China’s first generation of stealth fighters. AVIC’s Li Zuoming denies this. But aviation expert Paul Bertorelli says it doesn’t matter; neither of the companies AVIC acquired in the U.S. would provide China with sensitive military technology.

Paul Bertorelli: There’s no point in having this reaction and really being frightened of it..capital is running around trying to find the best value.

And AVIC, with revenues of more than $25 billion, says it’s done investing in the U.S. for the time being. Li Zuoming says he’ll take the company’s money elsewhere.

Reporting from Beijing, I’m Rob Schmitz, for Marketplace.

About the author

Rob Schmitz is Marketplace’s China correspondent in Shanghai.

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