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The Chinese Government Just Launched A Competitor To GE's Most Profitable Division

Summary

As China moves away from low end manufacturing, the Chinese government announced today the creation of the Aero Engine Corp Of China.

Aero Engine Corp with 96,000 employees and $7.5 billion of funding is responsible for building a world class jet engine.

With GE Aviation being GE's second largest business and most profitable divison, a transition by Chinese airlines away from GE towards a domestic offering could result in a large drop.

Img 1: A Chinese Textile Factory

As Chinese factories that once manufactured everything from steel to textiles shut their doors or move to cheaper locations such as Bangladesh, Cambodia, and Vietnam, the Chinese government has looked at ways to move into higher tech manufacturing. Today the Chinese government announced the creation of the Aero Engine Corp of China. Its goal: Build a world class aircraft jet engine. With 96,000 employees and $7.5 billion in capital, it has a goal to create a domestic alternative to foreign aircraft engines such as those made by General Electric (NYSE:GE). Jet engines currently comprise 30% of Chinese imports according to the Stockholm International Peace Research Institute so the Chinese are hoping they can reduce these imports substantially and replace them with a locally made alternative.

Aero Engine Corp Of China

Img 2: A Man Assembles A GE Jet Engine

Over the years China has tried to become self-sufficient in everything from making ball point pens, to drones to commercial aircraft and computer chips. Its consumer drone companies have fared the best so far, with them dominating internationally and so far no western company emerging as a real threat to any of the Chinese consumer drone manufacturers. When it comes to ballpoint pens however, and commercial aircraft China has had many more struggles in manufacturing these and relies on both imported parts for ballpoint pens and imported aircraft...


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