China heats up $17 billion Airbus deal during Scholz visit

China heats up $17 billion Airbus deal during Scholz visit

BEIJING/PARIS, Nov 4 (Reuters) – China on Friday formally announced existing deals for Airbus. (AIR.PA) The $17 billion jets, which experts described as an attempt to stage a visit by German Chancellor Olaf Scholz, caught the European planemaker and Chinese watchers off guard.

China’s state procurement agency CASC said it signed a bulk contract for 140 Airbus aircraft during Scholz’s one-day visit, including 132 A320 family jets and eight A350 wide-body jets.

However, the timing sparked speculation as an Airbus spokesman said it was covering deals already on its books, including part of the 292 jet deal in July, and an industry source familiar with the matter said the A350 deal had been pushed back to 2019.

“China’s way of doing things is to announce business deals commensurate with the importance of the guest,” said Noah Barkin, editor-in-chief of China research firm Rhodium Group and an expert on German-Chinese relations.

“Germany was not interested in doing this about deals. So the Chinese side seems to have reconfirmed the old deal and announced it on their own.”

CASC did not immediately respond to a request for comment.

The announcement comes as Beijing is widely seen as eager to show concrete gains from the visit, which has sparked As for Germany that Berlin will prioritize economic ties with Beijing over security and strategic issues.

China is Germany’s biggest trading partner, and Scholz decided to take a large business delegation with him, to the dismay of China hawks in the West.

Amid mounting criticism, a German official said no deals would be struck ahead of the visit.

Scholz told reporters in Beijing late Friday that he campaigned for a level playing field for European and Chinese companies during his trip, but did not mention the Airbus deal.

“DIPLOMATIC ANNOUNCEMENTS”

Experts say the discrepancy between the narrative from Beijing and the reaction in Europe underscores the importance of Scholz’s visit in the eyes of the Chinese leadership.

The German chancellor’s one-on-one meeting with Xi marked the end of a three-year period in which Xi met face-to-face with any G7 leader.

The aircraft announcement was also a clear signal to the United States, where Boeing has largely been frozen out of the Chinese market after several years of trade tensions.

China’s Big Three state-owned airlines pledged in July to buy a total of 292 Airbus planes, making it the largest order at the time by Chinese carriers for several years and was a breakthrough for Europe.

Airbus officially sealed the deal in August.

Boeing acknowledged on Wednesday that it may be without the world’s largest import market as it seeks to boost output and meet delivery targets in the wake of the security crisis.

“China has long used jet deals to send diplomatic signals, reward friendship and punish critics,” said a veteran Western observer of China’s aviation industry, who asked not to be named.

Friday’s announcement was for 132 of the 292 single-aisle planes purchased from Airbus earlier this year.

Industry sources say it amounts to a carrot for the remaining orders to receive the same luxury during a subsequent trip by French President Emmanuel Macron. Airbus is partly owned by France and Germany and is a symbol of European economic ties.

Macron’s visit to Beijing for the G20 meeting in Bali in November is being discussed, sources told Reuters, but no official plan has yet been announced.

French and German government sources told Reuters that Macron suggested to Scholz that they go to Beijing together to send a signal of EU unity to Xi and counter what they see as China’s attempts to play one country against another, but Scholz refused.

Additional reporting by Brenda Goh, Andreas Rinke, Sarah Marsh and Michelle Rose; By Tim Heffer; editing by David Evans

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