Page last updated at 16:08 GMT, Monday, 1 February 2010

Chinese warn Boeing over Taiwan

By Rob Young
Business reporter, BBC World Service

Photo of China Daily
This is the first time China has issues such a threat

China has threatened to sanction firms involved in a US-approved $6.4bn (£4bn) weapons deal with Taiwan.

That would include US aerospace giant Boeing, which dominates China's airline market ahead of main rival Airbus.

Boeing subsidiary McDonnell Douglas is delivering missiles worth $37m to Taiwan, the US government has said.

By comparison, one Boeing commercial airliner costs $50m or more. Boeing said it has not had any notice of sanctions and declined to comment.

If there is an embargo, it would hit Boeing very, very badly
Tom Ballantyne, chief correspondent for Orient Aviation Magazine

"This is a government-to-government issue," Boeing China said in a statement.

"We are not in the position to comment or speculate on this matter."

Professor Wu Xinbo, at the Center for American Studies at Shanghai's Fudan University, said "this is the first time the government has issued such an announcement, and I think they are very serious".

Tom Ballantyne, chief correspondent for Orient Aviation Magazine said "it could be horrifying news for Boeing".

"If there is an embargo, it would hit Boeing very, very badly," he said.

Monday's edition of the state-run China Daily newspaper quoted Ye Hailin, an expert at the Chinese Academy of Social Sciences.

He said companies profiting from defence deals with Taiwan would need to pay a price.

"You cannot just make money from both Taiwan and the mainland," said Mr Ye.

China claims sovereignty over Taiwan.

Growing giant

Patriot missiles PAC-3 launchers
China says firms selling military kit to Taiwan must pay a price

China is the fastest-growing aircraft market in the world and one Boeing is hoping to further to benefit from.

"Ten years ago, it was the same size as India," Giovanni Bisignani, the director-general of the airlines organisation IATA said.

"Today, China is double the size. It is really a rising star in aviation."

In September 2009, Boeing forecast China would need 3,770 new airplanes valued at $400 billion over the next 20 years.

At the time Boeing said this would help shape its plans for the future.

But both Boeing and its main rival Airbus have factories in China

China may not be able to punish Boeing without hurting its own airline expansion plans.

Moreover, since the US is China's main export market the country may well be careful before it sets off a trade war that could result in retaliatory tariffs.

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