Sep 11 2007

As Chinese planes take off, prices may be coming in for a landing

 

Managing Globalization » Business Blog » International Herald Tribune » Blog Archive » China takes to the skies

and the full article: China hopes a homegrown regional jetliner can challenge Airbus and Boeing – International Herald Tribune

Here’s another great example of a market that is set to experience a serious change in the near future. The oligopolistic market for “regional jets”, long dominated by two firms, is set to see the entrance of a new manufacturer. From whence doth the new bird fly? From the far East, no less…

“After a couple of false starts, the Chinese commercial aircraft industry may finally be getting off the ground. Starting next year, the prosaically named China Aviation Industry Corporation 1 plans to offer a regional jet that will compete directly with the two dominant forces in the market, Canada’s Bombardier and Brazil’s Embraer.”

Without even reading the rest of this article, you should be able to picture what will happen in the market for regional jets once the Chinese planes start rolling off the assembly lines. This article will also prove relevant when we begin studying market structures. What are the effects of a more competitive market for regional jets?

“Consumers in the rest of the world could benefit, though. Moving from two companies to three in a growing market could bring aircraft prices down, and eventually airfares as well – especially if the Chinese company’s costs are lower.”

But what of the widespread concerns that have emerges of late about the quality of products coming out of China?

“…if China has to combat worries about product quality in areas like foods and toys, just imagine the hurdles it will face with a passenger plane. Those benefits could still be many years away, depending on how people perceive the new product. Would you fly on a Chinese-made airplane?”

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About the author:  Jason Welker teaches International Baccalaureate and Advanced Placement Economics at Zurich International School in Switzerland. In addition to publishing various online resources for economics students and teachers, Jason developed the online version of the Economics course for the IB and is has authored two Economics textbooks: Pearson Baccalaureate’s Economics for the IB Diploma and REA’s AP Macroeconomics Crash Course. Jason is a native of the Pacific Northwest of the United States, and is a passionate adventurer, who considers himself a skier / mountain biker who teaches Economics in his free time. He and his wife keep a ski chalet in the mountains of Northern Idaho, which now that they live in the Swiss Alps gets far too little use. Read more posts by this author

5 responses so far

5 Responses to “As Chinese planes take off, prices may be coming in for a landing”

  1. julie.linon 13 Sep 2007 at 8:16 pm

    i think the Chinese finally starting an air craft industry is great, regardless of the costly outputs, by investing in capital goods of the aircraft industry ensures the future benefits for the Chinese people. i dont think people should compare cheap products like toys and food with large industrial projects; first of all not all Chinese-made products has poor quality, there are countless of poor, unqualified factories in china, the cheaper products such as toys could be made from there, and plus, for a project as important as this, i'm sure the Chinese will make extra care to ensure the quality.

  2. Rebecca Sungon 14 Sep 2007 at 1:38 pm

    If there are crashes or accidents with aircrafts, every single one of those will most likely be on the news (radio, tv, newspaper, etc.). So, I doubt that China will make the airplanes the same as their exported toys and pet food. With China's reputation already at stake with the leaded toys and poisonous pet food, why would China want to make it worse by producing faulty airplanes? Won't China want to redeem their reputation, so they can continue to profit from their exports?

  3. Jo Loon 16 Sep 2007 at 4:13 pm

    China's problems with quality control will prevent the aviation industry from being successful unless China quickly finds a solution to improve the quality of the products they make, especially for export. Anything that goes wrong when the planes are in the air will further mock China's inability to deal with this problem, out of the many other bigger problems it has. Foreign companies will back off until China proves itself that they can produce safe and reliable products suitable for the global market.

  4. Danielon 22 Sep 2007 at 7:19 pm

    I couldn't understand some parts of this article , but I guess I just need to check some more resources regarding this, because it sounds interesting.

  5. 679epp.jigsy.comon 06 Jun 2014 at 11:37 am

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