China announces entry into jumbo jet manufacturing

March 18, 2006

Chinese Premier Wen Jiabao announced that China will start manufacturing jumbo aircraft (more than 150 passengers) during the next five years. "While China already has the elementary technologies to build a jumbo aircraft, it will look for international cooperation", said Guan Zhidong, a professor with Beijing University of Aeronautics and Astronautics.

What It Means:
The jumbo aircraft project will speed up technology advances in China's aviation industry and related industrial sectors. Boeing predicts that China, with the second largest aviation market after the U.S., will need more than 2,600 new airliners, worth $213 billion, in the next 20 years. About a quarter of Airbus airliner parts and a third of Boeing's parts are currently manufactured in China.

Action Steps:
Don't sell your Boeing or Airbus stocks yet. This is merely an example of why China should not be underestimated. Their advantage so far has been low cost labor, but this shows that they are also looking to be technology leaders as well - and are looking to established companies to learn how.

Source: People's Daily Online website