China – Page 5 – The OM Blog by Heizer, Render, & Munson

Guest Post: China Delivers Belt and Road Project to Reshape Global Trade

Dr. Steven Harrod is Associate Professor in the Department of Management Engineering at Technical University of Denmark.

China is the world’s manufacturing heartbeat, and its“ One Belt, One Road” seeks to maintain that dominant position. China has 1.4 billion people (vs. 327 million in the U.S.) and 9.38 million square kilometers of land (larger than the U.S., and twice as large as the EU). In spite of recent U.S. import tariffs against China, many manufacturers have not “reshored” production because some processed materials and components are simply not available anywhere else in the world.

The Chinese Belt and Road Initiative (BRI) was launched in 2013, and is a comprehensive plan to, by 2049, expand and strengthen international land and maritime transportation connections. The program is criticized by some for its investments in ports and transport infrastructure in other countries, especially if those countries are financially weak.

A significant component of BRI is to expand the use of railways to trade with Europe. Already today, BMW ships one full trainload of car parts to China daily for final assembly. This is a game-changer, because since the opening of China in the 1970s, China trade was synonymous with ocean shipping. A famous HBS case, Sport Obermeyer, demonstrates the supply chain problems that follow from a 30-day transportation link. Rail service today is able to deliver freight containers to Europe in half that time, and forecasts are that traffic in the EU-Asia corridor will quadruple by 2027.

In addition to the faster speed, rail service between China and Asia offers a potentially more sustainable transport service. Even though ocean ships are very fuel efficient, they still run on fossil fuels.. Railways on the other hand can easily be 100% electric. Such a large increase in traffic from China would have a dramatic effect on the EU’s railway network, which is already operating with very heavy traffic. In response, the EU also has an infrastructure development policy for freight, called TEN-T. Together, these two economic powers, China and the EU are taking steps to bring their manufacturing and consumer bases closer, and to grow their mutual trade.

OM in the News: Do We Need a New National Industrial Policy?

Robots assemble a Ford F-150 truck at the Ford Rouge assembly plant in Dearborn, Mich

In 1987, two economists issued a prophetic warning: “If high-tech is to sustain a scale of activity sufficient to matter to the prosperity of our economy…America must control the production of those high-tech products it invents and designs. Production is where the lion’s share of the value added is realized.”

Even as trade tensions with China have deepened, many U.S. leaders continue to believe that offshoring is not only profitable but also sound national economic strategy. Manufacturing in China is cheaper, quicker and more flexible, they argue. With China’s networks of suppliers, engineers and production experts growing larger and more sophisticated, many believe that locating production there is a better bet in terms of quality and efficiency. Instead of manufacturing domestically, the thinking goes, U.S. firms should focus on higher-value work: “innovate here, manufacture there.”

Today many are rightly questioning this perspective. There is a growing recognition that we can no longer afford the outsourcing paradigm. Once manufacturing departs from a country’s shores, engineering and production know-how leave as well, and innovation ultimately follows, writes The Wall Street Journal (Nov. 16-17, 2019). It’s become increasingly clear that “manufacture there” now also means “innovate there.” A 2015 study found that U.S. companies have been moving R&D to China to be closer to production, suppliers and engineering talent—not just to reap lower costs and more dynamic markets. An estimated 50% of overseas-backed R&D centers in China have been established by U.S. companies.

American manufacturers have learned that the applied research and engineering necessary to introduce new products, enhance existing designs and improve production processes are best done near the factories themselves. As more engineering and design work has shifted to China, many U.S. companies have a diminished capability to perform those tasks here. The solution? It’s time for the U.S. to adopt an industrial policy for the century ahead.

Classroom discussion questions:

What should the new industrial policy encompass?
Which theory do you agree with–“innovate here, manufacture there” or “manufacture there, innovate there”?

OM in the News: Apple to Keep Building Mac Pro in U.S. After All

Apple just said it is keeping production of its new Mac Pro in Texas, reversing earlier plans to shift assembly of the computer to China, reports The Wall Street Journal (Sept. 25, 2019). The decision follows the administration’s move last week to grant tariff exemptions on 10 items Apple imports from China. The exclusions for components includes a power supply and a logic board, and the U.S. will refund tariffs already paid.

The tech giant had earlier tapped Taiwanese contractor Quanta Computer to assemble the $6,000 desktop computer outside Shanghai. The high-end computer, which was introduced in 2013, had been assembled in Austin, Texas, and was touted as Apple’s only Made in USA product. Escalating trade tensions over the summer challenged Apple’s plans to make the product in China, where labor and logistics costs are lower than in the U.S. The proposed tariffs could have cut into Apple’s profits or forced it to increase the cost of the Mac Pro.

The parts for which Apple obtained exemptions are critical to the computer’s function. For example, Apple received a tariff waiver on the Mac Pro’s graphics-processing module, which itself incorporates more than 1,600 components and allows images to be rendered on a computer screen. Apple’s decision to reverse course and instead keep the computer’s assembly in Texas is among the most pronounced examples of how tariffs have roiled corporate decision-making.

Apple also said it is on track to fulfill its commitment to invest $350 billion in the U.S. economy by 2023, last year spending more than $60 billion with more than 9,000 domestic suppliers.

Classroom discussion questions:

Where do you think Apple falls in terms of international operations strategies (see Figure 2.9)?
What factors did Apple consider in making this decision?

OM in the News: Garment Makers Returning to Bangladesh

The dollar value of apparel exports from Bangladesh to the U.S. is up 14.5%

The trade war between the U.S. and China has led many fashion brands to shift production to spots across Asia, including to Bangladesh, where safety issues persist years after two horrific workplace accidents killed more than 1,000 workers in 2012-2013. American clothing makers cut back on sourcing from Bangladesh or abandoned the country entirely, after the accidents.

In the aftermath, large U.S. retailers formed the Alliance for Bangladesh Worker Safety, an organization responsible for inspecting Bangladeshi factories that produced Alliance brands goods. The organization recommended improvements for structural, fire and electrical safety, and blacklisted factories that failed to make changes. When the Alliance dissolved in 2018, it said 90% of factory-safety issues had been resolved for factories in its program.

But some industry analysts say that safety and compliance issues persist, including structurally unsound factories and retaliation against employees who join unions. One global audit company has found continued use of child labor in the Bangladesh apparel supply chain, stating that over 80% of factories in South Asia were in need of improvement.

Now new tariffs have gone into effect in that already difficult environment. Since Sept. 1, most Chinese garment imports to the U.S. are subject to 15% tariffs—enough in the apparel industry to make many products uncompetitive. So companies have bulked up sourcing in Bangladesh amid “safer” conditions, and according to The Wall Street Journal (Sept. 6, 2019), at least one major brand that left—Ralph Lauren—has returned.

China remains by far the world’s largest supplier of garments. The shift to South Asia will only come gradually, in part because China’s high-quality infrastructure meant clothes could be shipped quickly from Chinese factories to the U.S.—necessary in the age of fast fashion, when consumers alight on new styles every few weeks.

Classroom discussion questions:

Besides tariffs, what other factors are driving manufacturers out of China?
What are the plusses and minusses of Bangladeshi production?

OM in the News: Protecting the Global Supply Chain

Through government investments and subsidies, as well as intellectual property theft of companies like Idaho’s Micron, China has tried to dominate the $1.5 trillion electronics industry, reports Material Handling & Logistics (July 31, 2019). This, according to the U.S., creates serious, far-reaching threats to the supply chains that support the U.S. government and military. The MICROCHIPS Act, introduced July 30 in the U.S. Senate, creates a “coordinated approach to identify and prevent these efforts and others aimed at undermining or interrupting the timely and secure provision of dual-use technologies vital to national security.”

Chinese companies, according to Senator Mark Warner, which export telecommunication technology equipment into software, hardware, and services used in the U.S., hope to export 5th-generation technology (5G) to the U.S. that could potentially harm and expose both consumer and U.S. military information. “While there is broad recognition of the threats to our supply chain posed by China, we still lack a coordinated strategy to defend ourselves,” said Warner. “As a result, U.S. companies lose billions of dollars to intellectual property theft every year, and counterfeit and compromised electronics in U.S. military, government and critical civilian platforms give China potential backdoors to compromise these systems. We need a national strategy to unify efforts across the government to protect our supply chain and our national security.”

The MICROCHIPS Act addresses China’s practice of four major areas of electronic warfare, including supply chain exploitation through supplying faulty software hardware and components; cyber-physical attacks on U.S. systems; cyber-attacks on computer systems; and bad actors gaining sensitive information.

Classroom discussion questions:

What is the purpose of the MICROCHIPS Act?
What supply chains is the Senate most concerned with?

OM in the News: Apple Wrestles With Conflicts in its Supply Chain

Apple is asking suppliers to study shifting final assembly of some products out of China, as trade tensions prompt the company to consider diversifying its supply chain, reports The Wall Street Journal (June 19, 2019). While any major changes would be difficult and could take time to implement, Apple is looking into the feasibility of shifting 1/3 of the production for some devices to S.E. Asia.

Manufacturers of apparel, footwear and other low-margin items have been moving out of China for years due to rising costs, and tariffs have accelerated that trend. Many tech companies, however, find it more difficult to move. Among China’s chief attractions are well-developed chains of suppliers and reliable infrastructure, much of it built in the past 20 years. A plentiful labor force skilled in precision manufacturing as well as trained engineers and pro-business government policies also make China appealing. And for those companies looking to sell into the large Chinese market, producing in the country is more competitive than importing.

Apple remains deeply rooted in China. About 1/5 of its total sales are recorded there, while on the manufacturing side its supply chain accounts for three million jobs. Foxconn, which assembles iPhones, iPads and Macs, is, however, ready to shift some Apple production to plants elsewhere. It has also put more than $213 million into India recently and is looking to invest in Vietnam.

Outsourcing to China helped solidify Apple as one of the world’s largest and most profitable companies. CEO Tim Cook helped build the company’s sophisticated and efficient supply chain there, relying on Foxconn and others to crank out hundreds of millions of iPhones annually.

International moves won’t come easy. Production equipment and assembly lines would need to be dismantled and packed,. They then must be reinstalled, tested and calibrated, and their output rate adjusted. Software and environmental-control systems would need to be put in place, and line operators, engineers and quality managers must be available and trained.

Classroom discussion questions:

Why isn’t more of Apple’s manufacturing coming to the U.S?
What are the advantages and disadvantages of moving production?

OM in the News: Reshoring Black & Decker Wrenches

Stanley Black & Decker plans to move production of its Craftsman brand wrenches from China back to the U.S., the latest manufacturer looking to use automation to increase domestic output as tariffs raise the cost of imports from overseas. Stanley is investing $90 million to open a plant in Texas that will employ 500 people to make 10 million Craftsman wrenches and 50 million sockets annually. Robots and fast-forging presses will help boost output about 25% above the older forging machinery now used to make these wrenches in China, helping keep production costs at the new plant in line with those in China.

The company’s strategy mirrors moves by other manufacturers in recent years to bring some foreign production back to more automated factories in the U.S., reports The Wall Street Journal (May 16, 2019). Whirlpool is making some KitchenAid appliances in the U.S. again after they were made in China for years. Caterpillar has moved the assembly of excavators and small bulldozers from Japan to new plants in the U.S.

“We’re pushing very hard to manufacture where we sell it,” Stanley’s CEO said. The company moved production of Craftsman products to China years ago to reduce costs after decades of manufacturing in the U.S. (Some Craftsman tools are already assembled at 8 Stanley plants in the U.S.) Craftsman wants 50% of its tools to be made in the U.S. a few years from now, up from 30% today. The firm remains reliant on foreign-made components for motors for its power tools. After the administration recently raised U.S. duties on components imported from China to 25% from 10%, Stanley said its tariff costs on components from China this year will increase more than 60% over 2018 to about $250 million.

Classroom discussion questions:

Discuss the implications of the tariff increases.
Why is the U.S. now able to compete with China?

OM in the News: The High-Tech Chinese Pig Farm

One Chinese firm uses video to capture pig faces because they move a lot.

The new Chinese pig farm: A database of every pig’s face; Voice scans that detect hogs with a cough: Robots that dispense just the right amount of feed. “Chinese companies are pushing facial and voice recognition and other advanced technologies as ways to protect the country’s pigs,” writes The New York Times (Feb. 25, 2019). In this Year of the Pig, many Chinese hogs are dying from a deadly swine disease, threatening the country’s supply of pork, a staple of Chinese dinner tables. China has already culled a million pigs (out of a population of 400 million), set up roadblocks and built fences, to no avail.

There’s a lot at stake. China is the world’s largest pig breeder and its largest pork consumer. The meat is so important that China has its own strategic pork reserve. With 10’s of millions of pig farms, the Chinese government has endorsed technology on the farm. Its most recent 5-year plan calls for increased use of robotics and network technology, saying it wants to promote “intelligent farming.” Officials praised “raising pigs in a smart way” using the A-B-C-Ds: artificial intelligence, blockchain, cloud computing and data technology.

Technology companies say they can help farmers isolate disease carriers, reduce the cost of feed, increase fertility, and reduce unnatural deaths. JD.com’s system uses robots to feed pigs the correct amount of food depending on the animals’ stage of growth. SmartAHC uses A.I. to monitors pigs’ vital statistics, and hooks up sows with wearable monitors that can predict ovulation time.

Chinese are quick to embrace high-tech solutions to just about any problem. A digital revolution has transformed China into a place where nearly anything can be summoned with a smartphone. Facial recognition has been deployed in public bathrooms to dispense toilet paper, in train stations to apprehend criminals, and in housing complexes to open doors.

Classroom discussion questions:
1. Why will this high-tech approach be difficult to implement?

2. What technology is used in American farming?

OM in the News: Retooling China

It isn’t clear how long it will take for the rest of China to follow Dongguan’s example.

Factories in the southern Chinese city of Dongguan once employed what one employee called a “magnificent sea of people.” But rising labor costs and a new generation of Chinese with little interest in toiling in factories forced a new tack, reports The New York Times (July 5, 2018). Now the sea of people is being replaced by a whirring array of boxy machines, each performing work that used to take 15 people. The factory changes suggests that Beijing’s vision of Made in China 2025 — the ambitious state-driven plan to retool China’s industries to compete in areas like automation, microchips and self-driving cars —is coming from the bottom up: from the businesses and cities across China that know they must modernize or perish. Dongguan long relied on making and exporting shoes, toys and electronic parts to the U.S. and Europe.

The average worker’s income rose fourfold over the past decade. Fewer young people wanted to work on dull and stressful assembly lines, preferring service jobs — like waiting tables and delivering e-commerce packages — that let them interact with people or move around. Some factories moved to lower-cost countries or shut down for good. Dongguan’s companies had to do something. They committed to modernizing.

Mentech, a telecom equipment supplier there, once had hundreds of workers winding, packaging and testing magnetic wires, all by hand. Today, the company is desperate for workers. On the side of one factory building it lists the on-the-job benefits it offers: monthly wages with overtime of up to about $1,100, air-conditioned dormitories, and free Wi-Fi.

Today, a factory floor that once needed over 300 workers now needs 100. More than half of the factory has been automated. The workers clustered around the machines will probably be replaced by machines themselves in a year or two. “The biggest trend in manufacturing is that automation is irreversible,” says a Chinese industry expert.

Classroom discussion questions:

In what ways has Chinese manufacturing paralleled the history of manufacturing in the U.S?
Why are Chinese firms having trouble staffing their factories?

OM in the News: The Quest for Rare Earths Leads to Japan

Rare earth mining can be a dirty and ecologically damaging business. Here, a rare-earth metals mine in China.

“Japan has discovered hundreds of years’ worth of rare-earth metal deposits in its waters,” writes The Wall Street Journal (April 12, 2018). Why is this important? It reflects Tokyo’s concern about China’s hegemony over minerals used in batteries, x-rays, TVs, cell phones, electric vehicles, and 100s of other electronic devices.

The deposits were found about 1,150 miles southeast of Tokyo. Extracting them will be costly, but resource-poor Japan is pushing ahead in hopes of getting more control over next-generation technologies and weapon systems. A 965-square-mile seabed contains more than 16 million tons of rare-earth oxides, estimated to hold 780 years’ worth of the global supply of yttrium, 620 years’ worth of europium, 420 years’ worth of terbium and 730 years’ worth of dysprosium.

The U.S. Department of Energy and the E.U. have issued warnings about shortages of rare earths as China’s own consumption of them increases. “This is a game changer for Japan,” said an industry expert. “The race to develop these resources is well under way.”

In 2010, China pushed rare-earth prices up as much as 10 times by cutting its export quota on 17 rare earth elements by 40% from the previous year. It said it wanted to clean up a polluting industry, but the move left Japan and other nations seeking more independence from prices dictated by its neighbor. It is important for countries’ supply chains to secure their own source of resources, given how China controls the prices.

Classroom discussion questions:
1. Why are rare earths important to OM?

2. Where else can supply chain managers turn to procure these critical minerals?

OM in the News: China Is Turning Ethiopia Into a Giant Fashion Factory

“We’ve arrived at a new moment for the global apparel industry,” writes Businessweek (March 5, 2018). Ethiopia, a drought-afflicted, landlocked country of 100 million on the Horn of Africa is transforming itself into the lowest rung on the supply chain that pours out fast fashion and five-for-$12.99 tube socks. Lured by tax incentives, promises of infrastructure investment, and ultracheap labor, countries the Western world once outsourced production to, particularly China and Sri Lanka, are now the middlemen ramping up production here for Guess, Levi’s, H&M, and other labels. These industrialists like Ethiopia because the government wants them as much as they want cheap labor and tax breaks. Since 2014, Ethiopia has opened 4 giant, publicly owned industrial parks; it plans 8 more by 2020.

“The plan is to create a total of 2 million jobs in manufacturing by the end of 2025,” says a government official. “We are an agrarian nation now, but that will change.” The regimented days in factories are unfamiliar to most Ethiopians, though. “They get only 30 minutes for lunch,” one politician says. “Their backs hurt. They are exhausted. Those jobs, they make everyone sick.” Managers, primarily Sri Lankans brought in to impart the efficiencies achieved in their country’s sweatshops, would view this comment as epitomizing one of their main complaints: Ethiopia hasn’t equipped its citizens for the rigors of industry.

Outsourcing to the developing world has allowed Western consumers to ignore or remain oblivious to the environmental damage and working conditions behind the rising sea of inexpensive clothes. PVH, the parent company of Tommy Hilfiger and Calvin Klein, is the sole American manufacturer here. PVH views itself as a “supply chain pioneer,” because it sets out to develop the production capacity it needs and to directly oversee it. “If you believe industrialization is a good thing and raises people up, out of poverty,” says PVH’s Supply Chain Officer, “then the apparel industry has been the trigger in most developing countries.” As to doing business in Ethiopia: “This is no different from China in the late 1980s to 1990s.”

Classroom discussion questions:

What are the advantages and disadvantages of manufacturing in Ethiopia?
What are the main OM issues for a company opening a plant there?

OM in the News: Wal-Mart Cracks the Code for Online Groceries in China

An employee fills electronic orders for the 1-hour delivery platform at a Wal-Mart store in Shanghai

Amazon may have sent a chill through the U.S. supermarket business with its purchase of Whole Foods. But grocers also had better keep an eye on the world’s largest brick-and-mortar retailer—Wal-Mart Stores—for some lessons on the future of online grocery shopping. Wal-Mart has already developed a big online grocery delivery business in China, capable of transporting fresh produce from its shelves to homes within an hour.

To accomplish that feat, it’s created a network of chilled mini-warehouses, used A.I. to tailor inventories, and employed an army of crowdsourced deliverymen to rush meat, fruits, and vegetables to customers’ doorsteps. That could provide it with insight and experience to keep tech upstarts from disrupting it out of one of its core U.S. businesses.

Fresh food is considered the last frontier of Chinese e-commerce. “Wal-Mart’s efforts in China revolve around trying to tap into a smartphone, convenience-craving, population,” writes Businessweek (Dec. 4, 2017).

At the heart of its operation are what it calls “dark stores” that stock 1,500 different products such as bananas, pork ribs, dumplings, and chicken feet. Workers grab printouts of the online orders, zip through the aisles placing items in a bag, and exit the other side, where they hit a button summoning a delivery driver. The drivers are independent contractors with cellphones and scooters. The time from picking up the order printout to hitting that button can’t exceed 10 minutes, or else the 1-hour delivery is in peril.

Shelves are stocked with products based on order patterns for the surrounding area—meaning a store in northern China may have more soup ingredients as winter comes. The company adjusts each store’s online inventory every 4 weeks, and the added information about fresh grocery demand from web orders helps boost the accuracy of Wal-Mart’s product forecasting for offline stores.

Classroom discussion questions:

Is this online operation transferable to the U.S.?
How does this approach differ from typical supermarket shopping?

OM in the News: The World’s Trash Used to Head to China

Since the 1990s, the world has shipped its waste paper, discarded plastic and unwanted metals to China, where they are destined to be used as raw materials to help power the country’s export-driven manufacturing boom. In 2016, China imported about $18 billion worth of what the government calls solid waste.

But China doesn’t want to be the rest of the world’s trash can, writes The New York Times (Dec. 4, 2017). Over the summer, regulators in Beijing started an unusually intense crackdown on what they called “foreign garbage,” citing health and environmental concerns.

As with so much else in the global economy, China’s decision is rippling through a vast supply chain that stretches from big waste companies in Texas to the “cardboard grannies” in Hong Kong that pick through mounds of paper and plastic. Scrap dealers are rushing to find buyers elsewhere in Asia, but the Chinese market is so large that it cannot be easily replaced. “It’s almost like they turned the spigot off overnight,” said the president of Waste Management.

As China revved up its manufacturing machine to power growth over the years, officials were willing to tolerate some of the downside of scrap, namely the pollution of local soil and rivers by low-end recycling practices. But China’s economic might increasingly means that it no longer needs to make such environmental sacrifices.

In the U.S., the new rules mean more garbage could stay at home. While that could be good news for some recyclers, it could also mean more waste in the country’s landfills. Recyclers might also have to upgrade their facilities to handle the waste, leading to higher costs for American municipalities and taxpayers.

Classroom discussion questions:

Why is this an issue for operations managers?
What should U.S. municipalities do the offset the impact?

OM in the News: And China Outsources to— Ethiopia?

Workers on an assembly line at a Huajian International shoe factory in Dongguan.

With many workers in the Haijian International shoe factory in China complaining about excessive hours and seeking higher pay, that company is sending 1,000s of their jobs to Ethiopia. This as Huajian faces scrutiny from labor activists for how it treats workers. The activists’ focus points to changing labor conditions in China as manufacturers try to get more work out of an increasingly expensive labor pool. But deep economic and demographic shifts mean a lot of low-end work — like making shoes — doesn’t offer huge profit in China.

Today, Chinese workers are less cheap and less willing. More young people are going to college and want office jobs. The blue-collar work force is aging. Long workdays in a factory no longer appeal to those older workers, even with the promise of overtime pay. Such tensions are fueling the drive of Huajian to move work to Ethiopia.

“In many respects, China’s economy is maturing,” writes The Wall Street Journal (June 1, 2017). The number of people who turn 18 each year and do not enroll in college — the group that might consider factory work — had plummeted to 10.5 million by 2015 from 18.5 million in 2000. Wages in Dongguan have increased ninefold since the late 1990s. Huajian peaked at 26,000 employees in China in 2006. Staffing is now down to 7,000-8,000 thanks to automation and the shift to Ethiopia. Citing labor costs and the country’s foreign investment push, Huajian is building a sprawling complex of factories on the southern outskirts of Ethiopia’s capital, Addis Ababa. Huajian’s shoe factories there already have 5,000 employees. When finished in 4 years, the Addis Ababa complex will be ringed by a replica of the Great Wall of China.

Classroom discussion questions:

Why leave China?
Why Ethiopia? Why not the US?

OM in the News: The Global Supply Chain for China’s New C919 Jet

More than 1,000 flights took off or landed at Shanghai’s vast airport on May 5, 2017, but one marked the beginning of a new era in the aviation business. After years of delays, the nation’s first modern large jet, the 174 passenger C919, made its maiden flight. The C919 brings its manufacturer, Comac, in head-to-head competition with Boeing’s ubiquitous 737 and Airbus’s A320. China is making its boldest attempt yet to break the stranglehold that these two giants have on the market for big commercial airliners.

“Behind the celebrations of a Made-in-China jet is the reality that Comac was able to build its new plane using a string of Western suppliers,” writes Businessweek (May 8, 2107). At least 15 foreign partners such as GE, Safran, and Honeywell worked on components and systems of the C919. Tapping into the supply chains of Airbus and Boeing allowed Comac to bypass many of the technical challenges of making a modern commercial jet from scratch and built up the company’s expertise for future designs. Companies based outside China supply C919 systems for flight control, power, lighting, cockpit control and much more. The engines and landing gear are also from overseas manufacturers.

China will need over 6,800 aircraft valued at more than $1 trillion through 2035, and 3/4 of them will be single-aisle planes. The country’s largest carrier, China Southern Airlines, had ordered more than $15 billion of new aircraft from Airbus and Boeing since 2015. So the C919 should be a game-changer for China’s aerospace industry.

Classroom discussion questions:

1.What is Boeing doing to respond to the C919 threat?

2.Describe the new jet’s supply chain.