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US arms sales to Taiwan prompts China to sanction Lockheed Martin

Beijing — China will impose unspecified sanctions on Boeing’s defence unit, Lockheed Martin, and Raytheon Technologies after the US state department approved $1.8bn in arms sales to Taiwan last week.   

The sanctions will be imposed “in order to uphold national interests”, Chinese foreign ministry spokesperson Zhao Lijian told reporters on Monday in Beijing. Boeing Defense would be among those sanctioned, he said.

The action follows the state department’s approval last week of $1.8bn in new weapons for Taiwan and submission of the package to the US Congress for a final review. The new arms sale, and an earlier one involving Lockheed F-16 fighters, have taken place amid rising tension between the superpowers ahead of the US election next week.

The new package includes 135 SLAM extended-range land-attack missiles from Boeing, Himars mobile artillery rocket systems from Lockheed, and Raytheon surveillance and reconnaissance sensors to be mounted on aircraft.

Shares of Boeing, down almost 50% this year, slipped 1.5% from Friday’s closing price to $164.85 in premarket New York trading on Monday. Boeing Defense is one of the Chicago-based aerospace manufacturer’s three business units, according to its website. It also makes aircraft such as the 787 Dreamliner and 737 Max that are sold to Chinese airlines.

Boeing emphasised the firm’s 50-year relationship with China in aviation, citing the company’s role in helping the country’s “safe, efficient and profitable aviation system to keep pace with the country’s rapid economic growth” in an e-mailed statement. “It’s been a partnership with long-term benefits and one that Boeing remains committed to.”

Strictly regulated

Lockheed Martin said foreign military sales are government-to-government transactions. It works closely with US authorities and its presence in China is limited.

“We do business with more than 70 nations around the world, and all of our international sales are strictly regulated by the US government,” the Bethesda, Maryland-based defence contractor said.

Representatives from Raytheon were not immediately available for comment outside normal US business hours.

In August, the US and Taiwan completed the sale of 66 new-model F-16 Block 70 aircraft from Lockheed. Zhao condemned it at the time, saying it violates the One China principle, interferes in China’s internal affairs and will have a “major impact” on US-China relations.

In July, China, which considers Taiwan part of its territory and resists any recognition of its de facto independence, had announced sanctions on Lockheed Martin for a previous arms sale to the island.

Taiwan will continue to urge the US to fulfill its security pledge and sell weapons to the Asian country for defence needs, foreign ministry spokesperson Joanne Ou said in a statement.

US arms manufacturers face strict limitations on what kind of business they can do with countries deemed by Washington to be strategic rivals, such as China. Lockheed generated 9.7% of its revenue in the Asia-Pacific region in 2019, according to data compiled by Bloomberg, though that is not broken down by individual countries.

China has previously threatened to sanction US companies, including General Dynamics and Honeywell International, on numerous occasions over arms sales to Taiwan. It also warned it could blacklist FedEx, while Ford Motor’s main joint venture partner in China was fined 162.8- million yuan in 2019, days after the US put a ban on doing business with Huawei Technologies.

While China has often invoked the threat of putting US companies on a blacklist — or list of “unreliable entities” — in response to various actions by US President Donald Trump’s administration over the past year, it has yet to name any, at least publicly.

Delicate time

For Boeing, China’s action comes at a delicate time. The company, reeling from the hit to air travel from the coronavirus pandemic, is trying to get its besieged 737 Max jetliner back into the air after two fatal crashes led to its grounding around the world. China, the first country to ground the plane, also has the world’s biggest 737 Max fleet.

“There are a number of intangibles that could affect recertification of the Max in China and this could potentially add another dimension,” said John Strickland, director of JLS Consulting. “China took the lead in grounding the Max and it is very conscious of its role in aviation safety. There’s also the dimension of the trade tensions with the US, as well as the US presidential election and how that turns out.”

Europe’s top aviation regulator said earlier in October the plane will be safe enough to fly again before the end of 2020. US Federal Aviation Administration chief Steve Dickson flew the Max in September and said the controls were “very comfortable.”

China, which had nearly 100 Max aircraft in operation before the grounding, does not have a clear timetable for allowing it back into the air, Feng Zhenglin, director of the Civil Aviation Administration of China, told reporters in Beijing last week.

Bloomberg

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