China is also a market

I wrote a lot in 2020 about China’s geopolitical aspirations, and the impact of Covid on the global supply chain, but it’s also important to remember that those geopolitical aspirations also impact how the rest of the world deals with China as a market. In the tech field, it’s always been tricky: Google doesn’t play there anymore, Uber had to exit, Microsoft had to share Window’s source code. But it’s still the world’s #2 market, and while a lot of the economy is going tech, it’s still in the “going” phase — most of the world is still dealing with physical goods, and there are lots of industries that will be impacted by China’s global aspirations, and how the rest of the world deals with those aspirations. For example, China is the #2 source of revenue for both Boeing and Airbus, and Boeing recently upgraded its twenty-year forecast for aircraft demand in China to 8,600 new planes. That’s a pretty big market to disappear if we end up rolling back to pre-2004 aircraft-sale restrictions. Lots of industries one doesn’t think about are already doing a ton of business in China, and they’re all on the front line of the growing trade war and geopolitical tussle. And while it’s easy to think that most of the China-US tension was related to Trump, and things will get better, faster under Biden, that’s not so clear. Boeing already has plants in China and is building more. Before loosening of restrictions in 2004, that would have been crazy talk, as aviation was considered a national interest and potential security threat. In the intervening decade and a half, it may have seemed reasonable for Boeing to open China as a market and even put some production there. But in light of China’s move towards more Communist tendencies, as I wrote about last year; and their more recent, direct intervention with Ant group (which I also wrote about last year, but seems to be heating up as they look to curtail Jack Ma’s power and reign in Ant Group (WSJ $)), I think it would be an understatement to say there will be political pressure on Boeing from the US.

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Chris Richardson has strong opinions on just about everything. Just ask.