G.E. to Share Jet Technology With China in New Joint Venture

This article was reported by David Barboza, Christopher Drew and Steve Lohr and written by Mr. Lohr. As China strives for leadership in the world’s most advanced industries, it sees commercial jetliners — planes that may someday challenge the best from Boeing and Airbus — as a top prize.

And no Western company has been more aggressive in helping China pursue that dream than one of the aviation industry’s biggest suppliers of jet engines and airplane technology, General Electric.

On Friday, during the visit of the Chinese president, Hu Jintao, to the United States, G.E. plans to sign a joint-venture agreement in commercial aviation that shows the tricky risk-and-reward calculations American corporations must increasingly make in their pursuit of lucrative markets in China.

G.E., in the partnership with a state-owned Chinese company, will be sharing its most sophisticated airplane electronics, including some of the same technology used in Boeing’s new state-of-the-art 787 Dreamliner.

For G.E., the pact is a chance to build upon an already well-established business in China, where the company has booming sales of jet engines, mainly to Chinese airlines that are now buying Boeing and Airbus planes. But doing business in China often requires Western multinationals like G.E. to share technology and trade secrets that might eventually enable Chinese companies to beat them at their own game — by making the same products cheaper, if not better.

The other risk is that Western technologies could help China play catch-up in military aviation — a concern underscored last week when the Chinese military demonstrated a prototype of its version of the Pentagon’s stealth fighter, even though the plane could be a decade away from production.

The first customer for the G.E. joint venture will be the Chinese company building a new airliner, the C919, that is meant to be China’s first entry in competition with Boeing and Airbus.

For the most part, Western aviation executives say the Chinese are simply too far behind in both civilian and military airplane technology to cause any real fears anytime soon — although it does put pressure on Boeing and Airbus to continue to innovate and stay technologically ahead of China.

G.E., which said it had briefed the commerce, defense and state departments on details of the deal, acknowledges that pairing up with a Chinese firm is a delicate dance. But because the commercial aircraft market in China is expected to generate sales of more than $400 billion over the next two decades, it is not a party the company is willing to miss.

Eventually, G.E. executives say, China will become a potent player in the commercial jetliner market, and the company wants to be a major supplier to the emerging Chinese producers.

“They are committed for the long term and they have every probability of being successful,” said John G. Rice, vice chairman of G.E. “We can participate in that or sit on the sidelines. We’re not about sitting on the sidelines.”

Mr. Rice also said that the Chinese joint venture partner — the aerospace design and equipment manufacturer Aviation Industry Corporation of China, or Avic — has supplied G.E. with some parts for jet engines for years. And he said he had personally known Avic’s president for a decade.

“This venture is a strategic move that we made after some thought and consideration, with a company we know,” Mr. Rice said. “This isn’t something we were forced into” by the Chinese government.

G.E.’s new joint venture in Shanghai will focus on avionics — the electronics for communications, navigation, cockpit displays and controls. G.E. will be contributing its leading-edge avionics technology — a high-performance core computer system that operates as the avionics brain of Boeing’s new 787 Dreamliner.

The joint venture has a ready customer in the C919’s builder, the Commercial Aircraft Corporation of China, which is also a government-owned enterprise. The plane will be a single-aisle airliner, carrying up to 200 passengers, intended to compete with Boeing 737s and Airbus 320s. Although the Chinese hope to begin deliveries in 2016, analysts say the schedule may well slip.

With or without the C919, the Chinese market for commercial airliners is already huge and growing fast — a big market for G.E. jet engines and other systems, as well as Boeing and Airbus planes. But if the C919 grabs any significant slice of that market, it would represent a new, expanded opportunity for G.E. The company has already been chosen to supply engines for the Chinese plane, through its long-standing partnership with Snecma of France. Though the world’s largest producer of jet engines, G.E. has trailed other suppliers of avionics in overall sales, behind Honeywell, Rockwell Collins and Thales, all of whom competed for the C919 business. www.wdalaw.com