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Thursday, November 1, 2007

Eye on China: Trusted Partners?

EVERYBODY IN AEROSPACE, IT seems, is enticed by the huge potential market that is China. The complexities of dealing in that market are never far below the surface, however, as events reminded us last month.

In early October, the Kanwa Information Center, which describes itself as a "non-government-run news agency," put out a report that the "mysterious Z-10 combat helicopter that was indigenously developed over a 15-year period" is powered by the PT6C-67C imported from Pratt & Whitney Canada. The center’s director, Andrew Chang, noted that the U.S. has had an embargo against military exports to China since the 1989 attack on protesters in Beijing’s Tiananmen Square and speculated that this case "may make Washington call for a tighter policy, especially regarding NATO countries."

Chang said he had obtained an official Z-10 brochure that listed the -67C as its powerplant.

The Z-10 is a touchy subject for Western helicopter makers, mainly because of government restrictions on military exports and the bad PR that can result from being viewed as a supplier to an authoritarian government with a dim view of human rights. At his press conference at the Paris Air Show in June, new Eurocopter President and CEO Lutz Bertling was asked about involvement in China. The questioning reporter made the mistake of implying that the Z-10 was among Eurocopter’s joint projects with the Asian giant. Bertling was emphatic in denying that.

AgustaWestland has been cited as a possible partner with China on the Z-10 (with some observers pointing to visible similarities between that aircraft and the A129 Mangusta), as has South Africa’s Denel. Denel officials report numerous visits by Chinese military and aerospace officials with many questions about the flight characteristics of Denel’s Rooivalk attack helicopters, including one case in which the visitors expressed interest in buying one. They apparently were denied.

Signs of China’s promise as a rotorcraft market build. The state-owned China Aviation Industry Corp. 2 (AVIC 2) is said to be investing 3 billion yuan ($400 million) in the development and production of civilian helicopters. (Most of that would go toward the 7-9-ton EC175 AVIC 2 is developing with Eurocopter.) The China National Aero-Technology Import and Export Corp. (CATIC) forecasts China will acquire 10,000 military and commercial rotorcraft, valued at $84 billion, through 2020.

An underlying concern for Western manufacturers, however, is that major involvement with Chinese companies on design and development will result in the "migration" of their designs and technology to China.

Eurocopter has largely set that concern aside by embracing China as a partner, leaving its companies to sell domestically while Eurocopter sells to most of the rest of the world. That has worked with the EC120, which was jointly developed by Eurocopter, CATIC’s Harbin Aircraft Manufacturing Corp., and Singapore Technologies Aerospace. Eurocopter in 2004 agreed to open a production line in China in conjunction with CATIC and Hafei Aviation Industry Co. to build the aircraft. Those built there are designated the HC120.

AgustaWestland also has a joint venture production facility in China, as does Sikorsky Aircraft.

Regarding the Z-10, Pratt Canada says it has done nothing wrong. The Canadian unit of U.S. industrial giant United Technologies said China selected it seven years ago to provide engines for a medium helicopter that would have military and civil variants with common dynamics. The PT6C-67C would power the civil aircraft, the company said, while a Chinese-developed engine would power the military ones. The Canadian government approved the sale of 10 engines on those terms, which Pratt Canada said were delivered in 2001 and 2002.

When development of the Chinese engine was delayed, Pratt Canada said, the PT6C was used to support development of the common aircraft. The company said China subsequently changed the program and the Canadian government is re-evaluating it.

Do you have a story to share about China’s helicopter market, or a burning question about it? Let us know at rotorandwing@accessintel.com.

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