China’s expansion into the aircraft industry has remained remarkably undetected in the global geopolitical arena. However, this “under the radar” growth has potential implications for the U.S. and the BRICS countries – Brazil, Russia, India, China, and South Africa – that merit serious examination.
Historically, American exports primarily revolved around oil, machinery, computers, and aircraft. Fast forward to 2023, and China’s strategic moves in the aviation industry and Joe Biden’s energy policies hint at a shakeup of the status quo. As noted by Lyn Alden, a well-known investment strategist, Biden’s energy policies are already “killing” many American export industries and severely reducing exports of others, like sensitive machinery and chips, to China and Russia.
Around the margins, a Chinese-made plane starts reducing import needs, especially if they start reducing its foreign part composition too.
The next phase, once more mature, would be to export it throughout BRICS+ countries.
— Lyn Alden (@LynAldenContact) June 17, 2023
China, known for its ambitious ventures, is setting its sights on aircraft production, an industry where the U.S. had previously held significant clout. This focus was made evident by Airbus, the European multinational aerospace corporation, announcing its expansion in China, with an additional assembly line to meet the anticipated demand for 8,420 passenger and freighter aircraft between now and 2041.
This development spells bad news for Boeing, Airbus’ American counterpart, which has suffered from deteriorating U.S.-China relations and has not signed a significant plane deal with China since 2017. It’s not implausible to predict that in due time, China could outpace the U.S. in aircraft exports, akin to its recent strides in car exports.
In the broader scheme of things, this shift in dynamics raises questions about the role of the U.S. dollar in global trade. Recently, BRICS leaders have openly questioned the greenback’s dominance, with Brazil’s President Luiz Inácio Lula da Silva and South Africa’s President Cyril Ramaphosa advocating for a move toward domestic currencies and other alternatives.
U.S. Treasury Secretary Janet Yellen recently defended the dollar’s global status, highlighting the U.S.’s open capital markets and the rule of law as reasons for its continued supremacy. While these arguments have traditionally been valid, the increasing distrust in the dollar and rising powers like China pushing for the international adoption of their currencies suggest that we may be headed for a multipolar financial world.
However, Michael Pettis, Professor of Finance at the Guanghua School of Management, Beijing, noted, “The hard part of reducing the U.S. dollar component of your reserves is figuring out what the alternative should be.” It’s also worth mentioning that BRICS countries lack a common currency, and China’s stringent capital controls hardly inspire global trust.
In this complex landscape, it’s clear that trade is ultimately a matter between individuals, not countries. While BRICS governments might call for an end to dollar dominance, the global market players will decide the future of trade.
