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China Picks European Consortium, Singapore Company to Build Jetliner

July 10, 1996

BEIJING (AP) _ Months of lobbying by the world’s aircraft makers for a share in a multibillion-dollar airline contract with China ended Wednesday with an announcement that shut out U.S. manufacturers.

China said it had picked a consortium including British Aerospace and Aerospatiale of France. Also in the consortium are Alenia of Italy, and Singapore Technology, a weapons maker that has branched out into electronics and other fields.

A report by the official Xinhua news agency didn’t put a price tag on the deal to build 100-seat jetliners for the booming Asian air travel market, but news reports earlier said it was worth $2 billion.

Xinhua quoted a spokesman for state-owned Aviation Industries of China as saying, ``negotiations are under way, and the project is expected to start before the end of the year.″

Boeing, whose planes account for 70 percent of the Western commercial aircraft flown in China, was shut out, as was McDonnell-Douglas.

``We’ve been saying for about a month and a half that Boeing didn’t think China would choose Boeing as a partner″ for the undertaking, Boeing spokeswoman Cindy Smith said in Seattle.

While Boeing is disappointed, she said, ``we are pursuing and evaluating that (100-passenger plane) market with many potential partners.″ Boeing, the world’s biggest commercial jet manufacturer and a lead exporter, does not now make an aircraft that small.

Boeing sent its entire board of directors to Beijing last month in an attempt to win back Chinese goodwill lost in wrangling with Washington over human rights and copyright infringement complaints.

Boeing’s president and chairman met Premier Li Peng on June 24. The next day, the president of Europe’s Airbus Industrie _ of which Aerospatiale is a part-owner _ also met with Li.

The consortium agreed to put the plane’s assembly line in China, the Aviation Industries of China spokesman said. A Chinese-South Korean deal broke down a few weeks ago because of disputes over where to carry out manufacturing and Chinese insistence on reducing the South Korean share.

Aerospace companies were eager to sign a joint venture because of soaring development costs for increasingly sophisticated planes. China was especially attractive because air travel is growing by 20 percent a year.

Boeing says China’s market for aircraft alone could be worth $100 billion over the next 20 years.

The consortium still could face competition from a rival regional jetliner made by South Korea, which says it hasn’t given up on finding other partners.

Boeing and other aircraft makers also are investing heavily in China and signing agreements to transfer technology in an attempt to guarantee a foothold in its booming aircraft market.

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