The China Chickens Come Home


The beauty of unfettered capitalism, especially American capitalism, is that it’s usually good at what it’s supposed to do: efficiently replicating capital in a consumption-driven economic system designed for infinite growth. Nice theory, but before you know it, the Chinese own half of your aviation industry even if investors have soured on what was once thought as The Next Big Thing in aviation: a billion Chinese hearts filled with the unquenchable desire to slip the surly bonds of Hainan. They’d need a lot of Cessnas, the thinking was.

Meanwhile, back on Earth, we’re entering the age of fettering, otherwise known as a head-jerking allergic reaction to globalism. And the aviation industry is caught right in the middle of it. Last week, the Trump administration announced an executive order prohibiting U.S. investors from buying stock in 31 Chinese companies closely linked to the Chinese military. By dint of aviation starting with an A, right at the top of the list are three companies all of us will recognize: Aviation Industry Corporation of China (AVIC), China Aerospace Science and Technology Corp. (CASC) and China Aerospace Science and Industry Corp. (CASIC).

These companies are mongrels only possible in a communist system with capitalist pretensions. AVIC, for instance, is a state-owned umbrella company with about 100 subsidiaries, including China Aviation Industry General Aircraft (CAIGA), which bought Cirrus in 2011. AVIC also owns Continental Aerospace Technologies, nee Continental Motors, nee Teledyne Continental. At least some of the subsidiaries are directly capitalized with stock and AVIC International Holding trades on the Hong Kong exchange. There’s no American equivalent of these business entities but if there were, it would be sort of like buying stock in NASA or the Postal Service.

In the global scheme of things, some of these companies have been good investments, but not lately. AVIC ranks 163rd on the Fortune Global 500, having slipped from 151 a couple of years ago. Full disclosure: I might have owned some AVIC stock seven years ago when Asian funds were hot. But now western funds are doing better and if I ever had AVIC, I don’t now. And anyone who bought AVIC to hold it is down more than 90 percent in five years, which is to say an executive order prohibiting its purchase is like a recall notice for a Yugo. So for the aviation stocks, the EO may be more for geopolitical optics than to strangle the flow of capital to our enemies. That may be less true of the tech companies on the list. In any case, the executive order is anti-competitive, anti-capitalist and, wait for it, necessary.

Which gets us to the morality of capital reproducing itself. Is there any? How about patriotism? Any of that guide investors? I’m gonna guess not much. Still, if AVIC or CASC came up on my horizon as a fund option today and I knew it, I would pass, even if the return was attractive. I agree with the administration that U.S. investors shouldn’t be helping a country that seeks to undercut our own in a zero-sum game of economic and military dominance using unfair trade practices. There are many other options to make money.

The Boeings, LockMarts and Northrop Grummans may have the cozy relationship with the government that Dwight Eisenhower warned us against, but they are not quite divisions of the Defense Department in the way AVIC is of the Chinese government and party apparatus.  

The companies who sold aviation interests to the Chinese—Cirrus, Continental, Diamond—and a host of others, faced similar calculus fully aware of China’s zero-sum approach to competing with the U.S. Might as well throw in Piper, which is owned by Brunei interests, but who lack China’s rapacious business practices. All of these sales were controversial at the time and this space filled with comments critical of them. Yet, all of those sales represent capitalists simply trying to maximize return on their investments, as capitalists have always done. If the U.S. government had intervened to halt these sales, wouldn’t it have been taking a ballpeen hammer to  Adam Smith’s thumb? The sellers would have said so then. Maybe they still would.

Those sales were an example of a major growth engine for the U.S. economy: foreign direct investment. It’s the obverse of the China investment coin. The U.S. by far leads the world in FDI because of, well, that American capitalism I was talking about above. FDI reached a peak of more than $500 billion in 2015 and has been in sharp decline since. China’s FDI barely reached half of the U.S. value and it too is in decline, although recovering modestly recently.

Our understanding of why the Chinese bought these companies is imperfect, but the ostensible driver was to acquire technology, aerospace business acumen and know-how to fulfill the Chinese aspiration to dominate the world’s economy. Like communist countries everywhere, China’s is a planned economy and part of the planning included advancing the aerospace and aviation industries. China realized the quickest way to that goal was to buy existing companies rather to trying to home grow them.

Cirrus was a natural opportunistic target. After initial success, Cirrus ran into trouble after the 2008 downturn. It languished in stasis until AVIC bought it in 2011. For two years and a seemingly endless stream of news stories by us saying not much, no western capital came forward to invest in Cirrus. Why? Because western capitalists want more return than Cirrus, even in a good year, could ever generate. The Chinese long game has a different goal and U.S. aviation companies were more than willing to help them get there if it meant a quick buck. That includes not just companies that sold to Chinese interests, but companies who were expected to have a “China plan” with joint ventures or technology exchanges. American capital’s vision extends typically to the next quarter, not the next decade or even the next year.

The U.S. government has blocked Chinese purchases of some companies because of sensitive technology. None of that applied to Cirrus, of course. There’s nothing edge-of-tech about building composite general aviation airplanes, including a single-engine jet. On the shiny side of DFI, there are jobs at Cirrus that might not exist without AVIC money and an impressive jet—the Vision—that sells well but, likewise, probably wouldn’t have existed without the sale. Either way, jobs or not, American expertise is training its own competition for the next decade, if not sooner.

The administration’s EO would appear to have no meaningful impact on Chinese-owned aviation companies in the U.S. It doesn’t prevent inbound DFI, although escalations in the ongoing trade war might. Mooney, for example, was bought by a non-state Chinese company and after China cracked down on corruption, it became more difficult to get money out of China into U.S. investments. As a result, the investors got disinterested and Mooney is now more or less on its own in the hands of a small American management group, its future clouded.

The bottom line here is that with its planned economy, China has—or had—the advantage of targeted purchases to fulfill a plan that stretches well into the 21st century. The U.S., by its very nature and fundamental beliefs, has resisted government meddling in private enterprise and international trade and in place of even the hint of a coherent industrial policy, we shift policies with each new administration and squabble over the details.

The bedrock of our success has always been the inexorable efficiency of capital finding a way to multiply itself, free of regulation, free of tariffs and with minimal taxation. China has shown it’s uniquely advantaged to slip through the cracks in that system and I wonder if what we’re doing now is too little, too late, albeit in the right direction. But it is disjointed, partly for being unilateral. With a new administration, I would hope to see coherent industrial policy—including for aviation—more forward focused on containing China or at least not being so helpful that a few companies can cash in at the expense of the greater whole.  

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  1. The nuances of international trade are even more contentious than the age-old question of “how is lift created?”

    The exodus of aircraft manufacturers pre-dates the China acquisitions, There WAS a time when the U.S. was the “Airplane maker for the World”. Airliners, military aircraft, commuter airliners, and General Aviation aircraft were primarily made in the USA. What happened?

    Airbus was created by a consortium of foreign governments to directly challenge the U.S. dominance in airliners. Lockheed and Douglas couldn’t compete–only Boeing was strong enough to compete with government funding.

    Military aircraft are often constrained by restrictions on exporting high technology–as well as foreign alliances.

    Commuter airliners became a thing of the past for most of the U.S. market (remember Beech 99s and 1900’s? Merlin IVs? Twin Otters, Skyvans, and Islanders?). About the only “commuter category” airplanes in the U.S. today are old Cessna 402s or Caravans. The U.S. marketplace demanded better–and the FAA adoption of the “equivalent level of safety” with large airliners (along with the loss of “Essential Air Service” subsidies sealed their fate.

    General aviation succumbed to a perfect storm of problems–high interest rates, high fuel costs, high legal costs throughout the industry, greatly increased costs for new aircraft, parts, and accessories–AND fewer pilots, as the WW II generation retired and were not replaced.

    The rest of the world was ready to pick up the slack in the aviation industry–China, India, Europe, and Brazil–aided by government help. Unlike private capital, government doesn’t need to show a profit or return on investment for shareholders–they do it to build an industry, employ people, and to import research and technology.

    Government, instead of helping, became part of the problem. FAA regulation became so onerous that production was moved outside of the U.S. Consider the case of Diamond Aircraft as an example–it was faster and cheaper for Diamond to certify its aircraft in the European Union–then build a plant in Canada and certify them there–THEN bring them into the U.S based on reciprocity agreements. Canada has “certification centres”–where new aircraft and parts can be certified there, THEN certified in the U.S. based on reciprocity. When it came to LSA’s, the FAA certification process became so onerous that the EU standard was adopted for certification–thus the 1320# gross weight limitation–the EU 600 kg. (Is it any WONDER that the vast majority of LSAs have been produced in Europe?)

    Paul’s last paragraph is “dead on” the money–it bears re-reading it. Without changes in capital, ownership, technology exports, regulation, tariffs, and taxation–the U.S. will CONTINUE to cede leadership in the industry. Don’t let it happen AGAIN!

    • As soon as I read the first paragraph, it was clear that the acerbic Bertorelli was the author. I always like his stuff.

      I spent 40 years in medicine and reaped the “benefits” of government control, ditto nearly 40 years of flying in a system that is, as they say, not happy until you are not happy. In both systems the inefficiencies of having government fingers in your pie (and elsewhere) have predictably driven the costs out of sight. In medicine, they prop the whole thing up by bringing in piles of Other People’s Money; in aviation they don’t care so much, so we have the Cuban Car problem: aging machines kept in flying shape by incredible amounts of work, with new machines unaffordable to the average guy. I’m a lucky guy, with two aeroplanes: one 57 years old and one a sprightly 48 – both of which are kept (sometimes) flying only by a work/flight ratio of at least 50:1.

      No, the government is congenitally incapable of doing anything right; if our president is not successful in his bid to stay in office, we’re going to get a fine dose of More Government – right in the shorts. Fasten you seat belts, ladies and gentlemen. We’re going in!

      • BOHICA on Jan 20th, 2021. It’s impact on what we do and enjoy here will ultimately likely be the last nail in the GA coffin no matter what China does … or doesn’t.

        It befuddles me why this Country can’t have five, 10, 25 and longer “plans” for all sorts of things. All we do is react and often over-react to external events.

        • BOHICA – ‘B’e ‘O’ptimistic, ‘H’eart and ‘I’ntelligence is ‘C’oming for ‘A’ll

          This is the new, updated version.

      • So, to recap, because of lack of government involvement (ours), the US aircraft manufacturing industry now is in foreign hands (since foreign governments see a need and opportunity to bolster a national interest, e.g., a thriving civil aviation industry), but because of government involvement (ours), our aircraft manufacturing industry has now fallen behind EU based manufacturers because they can more quickly certify aircraft (I feel I need to point out the EU environment has a lot of government involvement).

        I’m starting to see a trend. If only we could make our government more responsive to the needs of the nation and not just the corporate CEOs.

    • Canada, while presently complaining, and Mexico, while resigned, are being bought out by China as the U.S. is now. This topic was argued here about 10 years ago in anticipation of the Cirrus Chinese acquisition. Coincidentally, the CIA reported on the Chinese Five-Year Plan and its conflict with U.S. military and economic urgencies, but apparently to no avail as the Chinese buyouts continue. Rapacious indeed.

  2. …speaking of rapacious, selfish, unethical, inhumane, irresponsible draft-and-taxdodging capitalist$! Yeah, my widdle feelings DO get hurt when my president (small p) attacks the essence of democracy and avoidably kills thousands of my Countrymen ( big C) by lying about COVID-19 and mocking masks hoping to sustain profits and power.
    Why don’t yours, Phil?
    Actually, your declaring that POTUS and his sycophants suing everyone to overturn the election somehow SUPPORTS “freedoms and CONSTITUTION” answers that question.

  3. China has basically exploited a loop-hole in global free trade, and that loop-hole is exactly this: “American capital’s vision extends typically to the next quarter, not the next decade or even the next year”. That same loop-hole is what allowed the executives at Boeing to get rich while their engineering talent went into poverty (metaphorically speaking), and we got the 737 MAX debacle as a result. And you have to admit, planned economies under Communism does have some advantages. The problem for American Capitalism is that it often needs some big goal to work toward that includes multiple industries in order for it to really shine, and at the moment we don’t really have such a goal.

    By the way, can we all just agree to leave the snarky political comments on Facebook?

    • I couldn’t agree more with Gary B. US Capitalism has a short term focus which often is very beneficial. However, taking the extremely long view I think, “what will the US be remembered for in 500 years?” I think it’s nuclear power and being the first humans off the planet. No capitalist would have tackled these challenges without Government backing.

      • Not sure you are making the point you wish. Nuclear power and Space Flight were both essentially civilian projects that had military purposes. We might be remembered for losing the plot and changing from a country with limited federal government to one with an ever expansive centralized bureaucracy which destroyed the best, most benevolent empire ever created up to its time.

        If we had a leader that could get folks focused on a worthwhile project that would keep us on top rather than move wealth or make us feel good then maybe so. Having another “war” on some social ill, or war for hearts and minds ain’t helping.

        • Thanks for the comments, Eric. Sorry I didn’t clearly make my point. I think capitalism is great but it can’t do everything. Capitalism did the work but the direction and resources to go to space and to develop nuclear energy came from Government not from private investment. I stand by my thought as to what the American epoch will be remembered for 500 years hence. What do you think we’ll be remembered for?

          • Terry,
            I am not being too clear myself. Luckily, only one guy on the page is paid for his writing skill and he’s good at it.

            My point is that you used examples of government doing government. Capitalism cannot do everything and isn’t best at everything, and neither is government. There are often excellent benefits from government. Our problem, as I see it, is that we have government trying to do things best left to capitalism.

            When this happens, it can sometimes have positive effects which get trumpeted. What gets left out is that capitalism may have created better results or maybe not, but you cannot now know. What rarely gets discussed are all the negative externalities of government action. Often they are not fully known or even knowable.

            So I agree that government projects can be good. Not all desired goals are easy for private institutions and businesses to reach given problems of incentives or government interference or risk.

            I just want folks to remember that successful government projects are almost always military or infrastructure oriented. As soon as the politicians and academics start changing word meanings so that “people are our most important infrastructure” or other demagoguery, the result is going to be waste and interference and never ending new bureaucracy.

  4. “…at the moment we don’t really have such a goal.”
    Bread and circus. Such lofty goals. Like a frog in a pot of slowly heating water, we’re doomed.

    • In my teen years, several of us actually tried this experiment. What we found out was that our parents lied to us again. The frog had no intention of staying in the bucket from the start. The only way to keep him in was to use a deep enough bucket so he couldn’t get out or maybe wrap him with duct tape. Anyway it was obvious that he wasn’t going to just sit there quietly while we boiled him.

  5. Note to readers:

    Politics often intersects the world of aviation and in this blog, I have not shied from commenting when appropriate. I encourage and appreciate your comments, but I will ask that you keep them civil, respectful, on point and free of snark. I’m laissez faire on the delete key. But it’s still available.

    Just sayin.’

    • Hi Paul:

      Very concise and insightful article as usual. I’m totally amazed at your willingness to wade in where angels fear to tread. BTW; Isn’t it Northrop Grumman?

      • Agreed, Doug…selective censorship…because PURELY political splurges from devotees of the vindictive dictatorial democracy-disrespecting LiarInChief like this live on: “YARS . November 21, 2020 at 9:50 am. If the Left has its way, we won’t be remembered at all.”
        Acknowledging my bias, I’d restore the non-incendiary at least somewhat topical ones…but this is not my blog and PB has more important work to do. Just ought to be consistent when he DOES referee.

  6. Hats off to the best comment on this thread. I see a majority of people reading this just came from CNN. You are not alone in your thoughts or opinions. And it’s nice to see you didn’t adopt the CNN opinions many have been injected with. Wise O? seriously? The little p killed all your countrymen? Stay away from busy streets…you’re bound to get run over.

  7. I don’t invest in China, ever. Not out of national pride, but out of concern for my own pocket. The country has the ability to nationalize any industry at a moment’s notice, and to control every purchase-and-sale which every one of its companies makes. China is the opposite of free market, and anyone – big or small – who invests is basically just gambling on the whims of the Chinese leaders.

  8. As a Canadian I remember the the B/S Canada was fed to destroy the AVRO ARROW. 16000 jobs migrated south to U.S. aviation’s benefit. Now China’s investment is gaining control of the world. We have a chance to invest in new technology, get behind a company like DeltaHawk.

  9. Paul, I love your work, but please stick to the aviation topics you understand so very well.

    I couldn’t follow the thread of your argument here, and eventually I realized there isn’t one. You complain about foreign investors in US companies (e.g., Cirrus) – and then you complain that foreigners didn’t invest enough in US companies (Mooney). Which is it?

    Basically, you’re just upset about foreign direct investment in aviation. You don’t like it. Maybe you don’t like the Chinese. Maybe you don’t like international trade. If so, cut to the chase and just say so.

    You say Cirrus couldn’t attract western investors because the return on capital would be too low. Today, Cirrus is thriving, and sells a personal jet. Should aviators not be happy for the Chinese capital?

    Mooney got thrown a lifeline from China it couldn’t get anywhere else. It wasn’t enough. Today, the company is about where it would have been without the lifeline; maybe it will survive, maybe not, and it’s back in American hands. But the Chinese capital bought it time. If it survives now, it will have been because of that time. And although Mooney is right back where it was, the US economy got an injection of cash – and the Chinese economy lost one.

    In both cases a bunch of cash came into the US economy, that wouldn’t have otherwise.

    Capitalists create valuable assets – intellectual property, processes, organizations, businesses – and sell them to raise capital with which to go after the “next big thing”. Sometimes the buyers are American; sometimes not. If the Chinese government wants to pay more than anyone else would for those assets, that’s more capital made available to go after the “next big thing” and that’s great!

    Yes, a Chinese enterprise may wind up owning the business, and sometimes it’s an aviation business. Maybe it succeeds, and the original owners may regret selling it – or not (perhaps they didn’t have the capital needed to grow it). Maybe it fails, and the original owners look like geniuses for selling it. That’s business.

    As an aside, the track record of government-led investment is awful. The chances that a government-led entity overpaid for aviation assets is high (so, good for the American sellers!).

    Certainly, there are national security issues to consider when it comes to some technologies. General aviation airplanes are not one of those technologies; the F-35 is, but Mooney doesn’t make those.

    Again, if you just don’t like China, or don’t like international trade, say so. Otherwise, there’s no “there” here.

    (Oh, and to some of the commenters who think American investors are too focused on the next quarter, there’s huge quantities of evidence that’s just not true. Commentators on the stock market talk about nothing but the next quarter; that’s a very different thing. As for countries that “take the long term view” etc., that was something people also used to say about Japan in the 1980s. The thing is, usually someone who is taking a very long term view is doing it because they have a very low cost of capital. Low cost of capital, in turn, means they have few good investment opportunities. Few good investment opportunities means… their home economy is dying – which is what happened to Japan. Remember that, next time you think American capitalists are short-sighted or stupid. American capitalists are world class, and when you bet against them you may be right, but you better have your “big boy” pants on.)

    • Once upon a time, American capitalism was geared toward building enduring entities that built something of value.
      Now, it’s focused almost solely on building ephemeral entities that are attractive enough to sell to someone else.
      Fatal perversion.

      • Sad but true, Yars. That’s similar to the point I was making about Capitalism’s recent obsession with quarterly profits over long-term gains or viability. And I feel like the only way to fix that is to give a broad swath of American industry some large goal to work toward.

        Not to get too political, but something like the “Green new deal” could actually work, in the same way that the moonshot program forced the invention of new technologies and focused existing industries on a new problem. So, it doesn’t have to be green technology; I’m just using that as a possible example of something completely new with the potential to evolve existing industries (green tech doesn’t necessarily mean the end of aviation if we take it as a challenge like going to the moon was: something that seems impossible but isn’t really if we focus on the challenge). But if you don’t like what the green new deal represents, just substitute it with something else for the point I’m trying to make: American Capitalism needs big long-term all-encompassing challenges to really thrive.

    • “please stick to the aviation topics you understand so very well.”

      I shall take your advice deeply to heart and never venture afield again.😀

      • No.
        That would be like staying in the traffic pattern, forever.
        Nothing wrong with a little cross-country action, I say.
        Please keep it coming.

      • Hi Paul,

        Point taken. As I re-read my note, I realize it comes across as an order rather than as a well-intended suggestion. I did not intend to issue a command, as such, and my apologies for coming across that way.

        Nevertheless, I know you’re familiar with the teeth-grinding experience of reading an aviation-related article by a journalist who knows nothing of aviation. You know the sort of thing: “the little airplane, an amateur’s experiment, had departed from an uncontrolled airport without authorization from air traffic control. In fact, the pilot had also failed to file a flight plan with the FAA. It fell into a tailspin after hitting an air pocket that caused its engine to stall,” etc., with a comments section full of people calling for a ban on people conducting dangerous flight experiments out of unsupervised airports.

        That’s not an impression I’d want to leave, if I were a journalist. But, that gives you a feel for what it’s like, reading this article and comments section.

        On the other hand, you and many of your commenters have deep expertise in aviation.

        Just saying!

    • The problem is the demand. The people with the money to have an airplane for travel almost exclusively live too far from a GA airport. Even where this is not true, the path to ownership is not attractive.

      If you want to sell airplanes, you need to sell them to the general public and make getting the license something that is part of your channel to the customer. Forget about designing a better plane. Learn how to get people who can buy one to want one. Then build one that meets their needs.

      Continuously trying to meet the needs of the niche group who go rent dented 172’s with instructors housed in tin shacks will keep getting the same results. You need an experience that people will talk their friends into trying.

  10. The thing about 5-year and 10-year and 25-year plans is they never see coming what happens in year 2. America’s free[ish] market is messy and the government sclerotic by design, and the result is an environment of nimble liberty in which bravely creative men and women create the disruptions that boggle the plans, and then create the adjustments that outdistance the plans. I don’t have a 5- or 10- or 25- year investment plan; I’ll bet on American energy and creativity every day. I’m pretty sure those who do will outperform China.

  11. OK, they (Chinese people) bought the aeroplane engine makers and the leading new GA airplane maker in the USA (USA owners were only too happy to take the cash and hand over the keys).
    The new owners though will shoot themselves in the foot if they, through spite, geo-politics, tariff wars or any other reason shut up shop in the USA and take their toys home with them.
    Because it is a huge country, with lots of empty spaces (usually empty for reasons…) and has lots of rich people in it, GA flying in the USA is bigger than anywhere else in the world.
    So it is unlikely that the taking their toys home with them scenario will work — profit is profit after all. (Note to airplane owners — expect price rises).
    But then it was unlikely that the US would have a president who attacks China and Chinese people in an openly racist way. People get angry when they are mocked. So it could happen.

      • In today’s lingo, if you don’t like anything, anyone, anywhere for any reason under the sun, you’re a racist. No exception. Got it…

  12. Good article as usual, Paul. One thing that was not directly addressed is why China has so much money to throw into investing in (or buying) American companies. Every year, Americans pour several hundred billion dollars into their economy to purchase Chinese made consumer goods – goods that were once made in the USA. As far back as the late 1980s American companies were quietly exporting jobs and manufacturing capacity to China to take advantage of cheap labor. By the mid ’90s, the trickle had become a torrent and jobs were disappearing at an alarming rate. Though that trend has decreased lately, the horses have long since left the barn. China is now the manufacturing center for the whole world, a title we once held. As Paul said, American companies look only to the profit margin for the next fiscal quarter. The Chinese government has had their dominance under plan for over a quarter century. It’s hard to win a ball game when your team only plans for the next play while the opponent has a plan for the whole game. In short, we have given the enemy the money they now use to buy our industries and its technology. Companies like Cirrus and TCM have sold to China because no one in the West was willing to invest in them. Tossing out a few Executive Orders is not going to change much – it is just a feel-good maneuver for the short term (as usual). In the end, not much really changes.

  13. As said earlier, the small airplane industry is the least of our problems with China. I am terrified of what lies ahead with the next administration regarding foreign policy, particularly in regards to China.

    For decades the USA has gone to bed economically (and otherwise) with snakes like China, Saudi Arabia, Russia, etc and they always end up betraying us. Free trade is great but protecting the safety and interests of American citizens needs to come first. This is common sense but lots of well credentialed “smart” people don’t seem to grasp it. Or maybe they don’t care about it.

  14. I am going to lead off with a totally political opinion on the American version of capitalism. It has now become a system that privatized profits but socialized losses.

    The US airlines are the poster child for this. Instead of building a cash cushion for the inevitable downturn, they used the good times to borrow money to buy back stock to juice the quarterly return and exec bonuses. But not to worry American citizens tax dollars were always there to bail them out….

    With respect to Chinese investment in GA, well all I can say is the party is over and the Chinese are pulling out because there is no money to be made. So when the investors that are supposed to have the “long view” are giving up, well that does not bode well for the future of light aircraft production….

    • The damage is done – the PRC is ahead by 30 points with 15 min to go. The People’s Republic of China, the largest economy in the world by PPP since 2014, the second-largest by nominal GDP since 2010, the world’s largest manufacturing economy since 2010, and the second-wealthiest nation in the world, keeps on gobbling up technology R&D free while gaining in military strength. Yep, looks like, IMO, we’re toast!

      • Raf–you are correct. Either we can and should cut off their R&D–or barring that, we will have to hope that China has the same type of inept politicians that has afflicted the U.S. No nation lasts forever–most are brought down through their own faults.

        Perhaps we could create a “reverse pandemic” to export and unleash upon them. Instead of a medical virus, LET THEM COPY our own failures–the Edsel–cheap mass-produced products–synfuels–Solyndra–“war on poverty”–worldwide “peacekeeping missions”–“FREE” government programs–government over-regulation (belay that, China has already TRIED THAT, AND FAILED)–and of particular interest to aviators, the SKYCATCHER–it was produced in China.

        In short–if China had to put up with the over-regulation we have here in the US, they would not be competitive in the world market, either. Ship them a boatload of FAA bureaucrats, and another of CONGRESSCRITTERS–we will have them on their knees in a matter of only a few years!

  15. Interesting and the usual thought provoking blog from Paul B who is not afraid of controversy.

    When the US consumer and Walmart stop buying from China, China implodes economically. They need US consumerism, have gotten used to it, and are addicted to our spending habits. They have bought huge amounts of US credit debt as a result.

    It’s anyone’s guess how long the dollar remains the world’s reserve currency. It’s an equal crapshoot how long the dollar will be accepted by other countries as we smoke our currency printing presses to keep up with our Covid-19 pandemic relief/stimulus packages, ever expanding government programs, lack of domestic manufacturing, and promises made by our past, present (that is really hard to define that right now), and future government promisemeisters. As a result, if China, like anyone else who currently accepts the US dollar, could end up with nothing should our economy and currency comes apart with global credit promises that cannot be kept. So, it make sense if one feels they will end up empty handed in the near future to use US dollars to buy US technology via various company purchases. At least you have something of value currently, even if it is not necessarily profitable, and certainly have something that will be of great value vs a fistful of worthless US dollars when our day of reckoning inevitably comes.

    Secondly, China has a very corrupt internal system led by greed and short term leadership mirroring a lot of backroom deal making that is the normal modus operandi in many large US cities. While US GA companies were preparing how they were going to spend this cash influx provided by China’s supposed desire for the masses to fly little airplanes, local Chinese officials used US GA aviation is the vehicle to obtain manufacturing space that is at a premium, normally impossible to get.

    That is why there are airports with no airplanes, manufacturing buildings put up under the disguise of producing aviation parts, airplanes, and avionics, with airshows as public displays of world aviation promises that will never be kept. Many of the original Cirrus SR20’s that were shipped to China have never been assembled, still in crates. Those airplanes were a vehicle to provide manufacturing space for other Chinese interests other than expanding aviation. This has been the case all over China.

    The greedy Chinese local and regional leadership manipulate US GA aviation for their own interests. At the same time, the Chinese military gets access to US aviation technology and manufacturing processes, while promising to maintain US jobs in Chinese owned companies located all across America’s technological heartland. US execs offer glowing promises of business stability as a result with the US aviation consumer buying the largest portion of Cirrus, Diamond, Continental, and Mooney production. China wins, the local job market wins.

    So far, the largest portions of the GA airplanes are still US made providing the illusion that all is well with these strange bedfellows. As long as that continues to happen, China has constant access to US government officials, local and regional business leadership, with considerable lobbying power with out firing a single shot.

    There is a lot to be learned from Diamond, Cirrus, Continental, Piper, and Mooney that can either used in aviation or other pursuits. And it makes a great smoke screen for other manufacturing endeavors outside of aviation that is ultimately detrimental to the US. What can be learned of the VisionJet makes for a great opportunity for a prototype basis for a COIN fighter for example. Think about a Chinese knock off of AutoLand.

    So, keep selling those US built Cirrus jets, and SR20/22’s, Canadian and Euro built Diamonds, powered with Continental engines made in Alabama, with even a handful of Mooneys now and then when the Chinese need a favor from Texas…mostly paid for by Americans. China indeed has long term goals and making US investments don’t have to make money to be highly profitable for China. But they do need the US consumer to continue, for a time, buying Chinese made products. And while we hear all the sabre rattling from various media talking heads, China and the US has some interesting financial relationships that must continue.

    I still remember all the bladder splatter from all of the world’s experts about Japan owning the US and eventually the world. Likewise, the same warning has now shifted toward the Chinese. They need us just as bad as we need them.

    It’s hard to dismiss that China was ground zero for this current pandemic that has turned the entire world’s economy upside down. But within chaos come all sorts of internal opportunity that is and will be exploited for perceived gain exercised by every global government. Unfortunately, I see no knight in shining armor that will right these global injustices. In the meantime, I will continue to fly while I still have the freedom while dealing with the ever dwindling resources. It offers me the finest therapy to maintain my sanity in a totally screwed up world.

  16. I live in Germany right now, am a pilot with a US license and have worked in the US GA industry for 17 1/2 years (1999-2016). I am very grateful for the time and the opportunities that the US offered to me. Paul’s article is very interesting, as it evaluates an effect of what is going on globally right now. Please forgive me if you think I am off topic and please follow my train of thought to the end. This is about the big picture and the future of all of us and the love for aviation that we all share.
    I like to simplify things by using the mathematical approach to extrapolate equation factors (causes) to limits. With the current lockdowns here in Europe it is obvious that the C is only a means to achieve a certain goal. This goal is to completely ruin the economy to do a “reset” as part of the global reset and with the current Gvmt overhead here in Germany, it is clear that they will simply let all companies run into bankruptcy. They even have suspended the companies from having to file chapter 11, when it is clear that it is over, just to not let the economy and statistics reveal how bad the economy is suffering. That on it’s own is a criminal act by the Gvmt. This is where the global companies or their subsidiaries will come in to buy all the assets. All the rest of the people are already depleted from their resources as many are already right now. Where does this leave us as individuals especially the companies as in the aviation industry?
    I’d like to exemplify the limits with the history of Germany after the second WW.
    After WWII in Germany everything was shattered to ruins. This was an economic reset in just about every way possible. Yet the German people were able to build it up again and become one of the most prosperous economies in Europe. Most of it was created by the hard labor of the people contributing their energy and creativity for the advancement of the community. It all started with a small overhead Gvmt at the beginning. Now it has grown to a self-serving behemoth (the German swamp similar to the US swamp) that does not care about the human rights and is serving interests of whoever stands behind the global companies represented by lobbyists at the Gvmt and their interests to own it ALL and “enslave” all the common people. Think about it.
    The US is in a similar place, except that the current POTUS has, at the beginning of his term, declared exactly what he wants to do and has taken a lot of actions to keep his promise. The US and the POTUS is seemingly standing alone right now. Though in Spirit this is not the case.
    I remember exactly the time, when the current POTUS agreed to run as the next president. From that moment on there was an international MSM “Sh*t-storm that was poured upon him and that has continued to this day. Thanks to alternative media and patriots around the world there is resistance and awakening happening that woke people are working on to spread the word on what is really going on. I remember vividly how my relatives and friends from Germany and Europe were asking me how the US would ever consider him as a president. Hindsight is always 20/20 and now it is clear to me as the Swamp in the US is revealing lots of evidence that is affecting the whole world as well.
    In my view this is very simple. If we the people snooze on this global event, we will all loose everything if the final wealth transfer happens, including GA and all the rights that the US was built upon. In other words “NO MORE GA!” This will affect the whole world and so my prayers are going out to you guys and the current POTUS with the patriots lined up and joined around him. There are still many most likely the majority of the people who are still sleeping and continuously being brainwashed by believing in the MSM.
    Again, I apologize for going off topic to some degree here. I am very grateful for having met many aviators both GA and Military while working in the US. God bless America. You all are part of it as it is part of the world. Thanks for reading.

  17. After re-reading Paul’s blog a few times, including the considerable comments…the word capitalism came up over and over again. It seems the word capitalism has morphed into a definition far removed from it’s original use and incorporation into everyday conversation. Sort of like the word “cool”.

    At one time cool defined a relative temperature. It morphed from street slang of the beatniks into mainstream use which occasionally defines relative temperature but also includes it’s use describing favorable acceptance of a person, place, or thing. Hip used to describe a body part. Now it is additionally used as a description of person, place or thing that is “cool”. I believe that process of language degradation includes the word capitalism.

    Like the words “cool” and “hip”, capitalism means so many different things to so many different people, it is now very hard to define. Since we have freedom to form our own political, moral, and cultural worldviews/opinions, we tend to use capitalism, its pitfalls and highpoints depending largely on our personal definition. So, what is capitalism? I am not sure that I really know what it is anymore.

    In the blog, including some comments intertwine the stock market, which is the driver or basis of most investment opportunities, establishing the resulting profit gained from market investment is the bottom line and final determining factor in all business decisions. We are approaching a stock market record of 30,000. The Dow Jones Industrial Average is an indicator of how 30 large, U.S.-listed companies have traded during a standard trading session. And the Dow seems to be the gold standard for so many to support the word capitalism.

    So, according to many of the commentators, mainstream media, politicians, and most people who have money invested in their 401K’s including the definition of the S&P, our measure of economic success is how well the company is being traded on the stock market. If that is what pure capitalism is about, as a country, the US is a resounding economic success. It does not matter where a product is produced. Nor does it matter who produces it. All that matters is the companies we invest in, produces an ever escalating share price.

    And if one’s 401K is expanding regularly each quarter, who is going to bitch about Cirrus Aircraft being owned by the Chinese military, or complain that Boeing’s quality control needs a revamp? If the 401K is doing well, the S&P is off the charts, pay no attention to the pandemic economic issues, still high national unemployment, aviation companies in stagnation, 400 MAX’s still dormant, domestic airline load factors under 20%, 250,000 and climbing additional dead folks, Covid-19 infection rates off the charts, a disputed election, with a national debt that is so large, we cannot wrap our minds around the ever increasing, incredible numbers. For the S&P is the great and powerful OZ standing behind that curtain currently defined as capitalism.

    So many folks seem to believe all we need is a constant expansion of investment followed with ever higher share prices no matter that our economy is on life support via the currency printing press. Capitalism seems to have morphed into something that has no bearing on the original idea of not only free market trade, supply and demand, but the idea that preserving, encouraging, and training national resources such as a highly skilled, educated labor force working in US companies, located within the boundaries defined as the United States of America. Why?

    Because national economic health is being defined by investment profits in companies no matter where they are located or who owns them, and their true, current economic condition. That is why we have the stock market totally out of phase with the economic realities of our present day economy. Boeing is a better company today than they were two weeks ago because the AD on MAX has been lifted? Seriously? In two weeks their quality control went up? New management, with new ideas, new US workforce, new customers? Nothing has changed but their stock price increased when FAA gave their blessing. That is economic success?

    I believe we really don’t know what capitalism really is. I surely don’t anymore. We want the benefits of investment profits no matter the national cost. As long as the investment leger is expanding, consumerism always expanding, it doesn’t matter where the product is built, nor by whom. Nor does it matter how the greenbacks get into the hands of the consumer. It just matters the consumer remains a consumer. Whatever it takes to the keep the consumer flush enough to be able to spend dollars…no matter where that dollar came from…is all that counts today.

    • Thanks Jim for your assessment or analysis of capitalism. I too think that, what is going on, is something that is not being controlled by the interests of the people. There are opportunities that can lead to a lot of “wealth” in a very short time and it is in most cases not backed by brick and mortar asseets, like when the first .com bubble burst. One thing though serves as a good sniffing tool. If things don’t make sense, follow the money. I think that applies right now in the biggest possible scale – World Wide, which is actually a war on us the people. One could argue that it is the 3rd or some even say the 4th WW.

    • Socialism is about the equitable distribution of scarcity.
      Capitalism is about the creation of abundance.
      The former is about totalitarianism; the latter is about egalitarianism.
      The former denies human nature; the latter embraces it.
      The latter can be perverted. The former IS perversion.

  18. I still like Paul’s article, and appreciate his willingness to wade in. A major part of OUR problem, though, is not learning more from the Chinese. It’s a simple fact, that if we, as citizens, keep ramping up our pay and costs, our industries are in peril. We need to work more, and complain less. Production is important, profit is important, and our employment costs are out of control. Creating drama in the workplace should not be the goal of any employee. We will lose our way of life if we continue.

  19. Big focused investments get a lot of attention, particularly when it seems US investors don’t seem to keep up.

    It wouldn’t hurt to remember people spoke similarly about Japan a couple of decades ago when they were buying up US assets. Big Japanese conglomerates had government support through banking and other preferences, but eventually the wasteful political component of all these investments drove the economy into the ground. No one worries about Japan any more.

    China resembles and surpasses historical Japan in some ways, particularly government meddling in investments where the wasteful political component is even more pronounced. There are entire cities of empty skyscrapers in China, built with ‘government’ loans, threatening to bring down the real estate sector, 25% of China’s economy.

    Governments are big, but not necessarily smart as they couldn’t care less about spending other people’s money. This is true of China, Japan, or our own government. Sooner or later this catches up with them. I wouldn’t look at the situation now and be at all confident about predicting the outcome. Cirrus is the world’s biggest piston aircraft manufacture, but AVIC does not disclose whether or not Cirrus makes money. It may be that China just makes contributions to aircraft purchasers.