China shops - France sells - US looks on

Chinese Premier Wen Jiabao is busy shopping in France this week and is trying hard to share out the bonanza of helicopters, nuclear power and civil airliners carefully between the US and Europe. However the deals announced so far (It is still only Monday) will crown the short term success of the EADS International policy “Global Industrial Strategy” where they are targeting the Far East markets across their product range.

Alcatel Alenia Space, a company owned by Alcatel and Italy's Finmeccanica has confirmed sale of a telecomms satellite which Wen is due to sign today.

Eurocopter chief Fabrice Bregier has today announced the decision to co-develop with China a 6-ton helicopter for the world market. This will be the twin turbine EC175, which will be co-produced with Chinese manufacturer AVIC II (EADS has 5% of equity). China has been a customer for helicopters developed by Eurocopter and its forerunners since the 1960s, when it purchased Alouette IIIs. The Dauphin was produced under licence in the 1980s and China became an industrial partner on the EC120 in 1992.

Eurocopter will be awarded a contract before year-end, pending South Korean government approval, to help Korea Aerospace Industries (KAI) develop and build 245 army utility helicopters.

Industry sources say KAI has selected Eurocopter over AgustaWestland and Bell Helicopter as its foreign airframe partner for the $8.6 billion Korea Helicopter Programme (KHP) and has already negotiated a contract with the EADS company. However, the selection still must be approved by South Korea’s defence ministry and its president.

This will presumably cut out competition from US makers Bell Helicopter and Sikorsky Aircraft Corp. Europcopter intend to enlarge their manufacturing resources in Malaysia including production of the Tiger military attack helicopter (pic).

Already Wen has signed up with EADS for a monster order for 150 A320 family aircraft capable of seating 107 to 185 passengers , said to be worth US$9.7 Bn. These will go China's three big airlines -- China Southern Airlines Co. Ltd., Air China Ltd. and China Eastern Airlines Corp. Ltd plus smaller carriers Sichuan Airlines, Shenzhen Airlines and Hainan Airlines, (partly owned by George Soros). Simultaneously Airbus will spend six months looking at a local manufacturing project in China. In January China agreed to buy up to 60 of Boeing's new 787 Dreamliner for $7 billion -much of the Boeing 787 tailplane will be made in China.

This exceeds the order Dubya collected for 70 of the 737 – 300/400 Boeing passenger jets whilst in Beijing on November 20th.

Routes to China will represent 5 of the 10 top fastest growing traffic flows and the domestic Chinese market will grow 8.7% compared to 3.2% for the US and 5.2 % for Europe. Over the next ten years, the total market demand in China for aircraft over 100 seats is expected to reach 830 units for a total valueof US$ 76 Bn.

This is the largest single order Airbus has collected since entering the Chinese market two decades ago. Quantas are expected to make a decision in the next week for some US$10 Bn of Airbus wide body jets.Eurocopter has also sold the NH90 against competition of the Sikorsky BlackHawk in 2004 to Australia and New Zealand made the same choice months later.. This was the second export of this helicopter out of Europe; New Zealand also decided in favour of the NH90 a few months later.

EADS, (Who employ 110,000) shares stood at 32.65 Euros at close of business today, up 2.6%. EADS very much relies on exports: 63 % of its 2004 revenues were generated outside its home countries (France, Germany and Spain). This
compares to 60 % for BAe, 39 % for THALES and 28 % for Boeing

China is still in the process of deciding whether to buy French, American or Russian technology to build at least four nuclear reactors.Pittsburgh-based Westinghouse Electric Co., France's Areva and Russia's Atomstroiexport are competing for what is said to be an $8 billion contract. France holds a great deal of influence having been involved through Electricite de France for nearly 20 years in China.

Wen has also signed a 150 Mn Euro contract for a high-speed Shitai railway link

These deals are related to the improvement in political ties as Paris campaigns for the European Union to drop their embargo on arms sales to China imposed after the 1989 Tiananmen Square massacre to crush pro-democracy protests. Prime Minister Villepin has described the ban as an anachronism.

EADS Co-Chief Executive Noel Forgeard denies that there is any link between the aerospace deals and France's position on the arms embargo. He further claims that no military technology would leak to China as a result of the new co-development deal with Eurocopter.

Wen is reported in Le Figaro today saying , “"Sino-French relations are better than ever. Mutual political trust keeps on growing," he said. "Our economic and commercial contacts are expanding ... Cooperation will be benefit both partners."