Below is the Newsletter circulated at the CAMIC /CAAC Conference in Beijing China 12-13 May 2010 attended by the AFA Delegation. The newsletter features the article titled "ADVERSITY IN AVIATION . . . NEED AN UPLIFT? TRY CHINA!" written by David Dodwell of Strategic Access. 
Download the CAMIC CAAC Beijing Newsletter in PDF format here.
ADVERSITY IN AVIATION . . . NEED AN UPLIFT? TRY CHINA!
For anyone weighed down by the global economic gloom hovering over Europe and the US, there can be no better therapy than the recent China Civil Aviation Development Forum in Beijing.'
Set against Europe's siren calls of recession, austerity and tax increases, all talk in Beijing is of hell-for-leather growth – 100 new airports in the coming decade; thousands of new aircraft purchases and the development of new home-grown aircraft. The smell of an economy awash with government "stimulus" money is pervasive – though here, "stimulus" can persist for years if not decades, given the healthy state of government finances.
The few shadows cast across the conference floor are confined to managing the challenge from new high-speed rail services, losses and subsidies for the country's leading airlines, and frustrations that the air cargo business remains dominated by global behemoths like FedEx, UPS and DHL.
As Li Jiaxiang, CAAC Administrator and vice minister for transport, noted in his opening speech, "room for development is enormous". Passenger numbers nationwide are forecast to grow from 230 million last year to approximately 700 million in 2020 and 1.5 billion in 2030 – still far below the passenger journeys per year that we see in Europe or the US, but a remarkable 16.4% annual growth nevertheless, sustained by a steady shift of people away from the countryside and into cities. From 166 airports today, CAAC forecasts 220 airports by 2020 and 270 by 2030. China's airlines are expected to add 200 aircraft a year to their total fleet between now and 2015, and 240 a year from there to 2020. These are expectations that obviously underpin keen interest from Boeing and Airbus, though each is looking anxiously at China's determined development of the 150-170 seat C919 aircraft, which is due to be in full service by 2016.
In this determinedly buoyant environment, attention to the challenges clouding the horizon was limited. The astonishingly ambitious plan to build 13,000 km of high speed rail across the country in the coming decade was examined only cursorily, even though this is set to have a powerful impact on the shape of China’s future aviation infrastructure. The subtext of every conversation referencing high speed rail was that the country’s infrastructure needs are so vast, that the ambitious air and rail development plans should both be pursued at full speed. No zero sum game here. There was just one clear sideswipe, when Li Jiaxiang noted that if you build 3 kilometres of road, you can link two villages, but if you build 3 kilometres of airport runway, you can link a village with the world. Good point.
While China’s transport planners might be right that burgeoning demand for travel calls for both rail and air investment, there is no doubt that rail development will change the likely future shape of air service demand. This was explicitly addressed by Zhang Dawei, vice governor of Henan, who talked on development plans for Zhengzhou (direct services between Zhengzhou and Xian have been suspended following the launch of high speed services between the two cities). His talk was of development of a “comprehensive transport hub” based on Zhengzhou and underpinned by the province’s 100 million population. At a national level, CAAC appears to be giving careful attention to the impact of high speed rail, with the development of second and third tier hubs beneath the country’s three main international gateways – Beijing, Shanghai and Guangzhou. These developments will need to be watched with care as they take shape, perhaps under the upcoming 12th Five Year Plan, and occur against a backdrop of increasing concern over capacity squeezes at these leading airports. This was well illustrated in presentations from Liu Yanbin, deputy general manager of Beijing’s Capital Airport, and Liu Zijing, president of Guangdong Airport Management, responsible for Guangzhou’s Baiyun hub. Beijing is already the world’s third busiest airport, with over 65 million passengers, while Baiyun, at 40 million, plans a third runway and a second terminal building to enable it to handle 65 million passengers by 2015.
While the engineering and funding challenges of meeting this need are daunting, the mood at the Forum was that they could be addressed. More important, and less tractable, is liberalization of China’s domestic air space, where military control of air space forces increasing numbers of civilian aircraft into narrow and cramped civilian corridors across the country. With the exception of Zhang Baoji, the outspoken head of IATA China-North Asia, none specifically addressed this challenge. But this was more than compensated for by Zhang’s passionate call for air service liberalization, and open skies in China by 2020.
The final unaddressed challenge was of course funding. Only in China could plans involving investments of literally trillions of renminbi (and trillions more if high speed rail, metro systems, city-building, and huge investments in power generating capacity are taken into account) be left untended. The assumption seems to be that these huge sums – awesome though they are – will be found, if not entirely from government, then with a helping hand from private sector fund raising. This assumption may be fair, given the healthy state of Government finances, but as the rest of the world – and Europe in particular – looks forward to a decade of austerity, one can only look on in awe, and not a little envy.
David Dodwell is Chief Executive of Strategic Access Limited. A veteran Financial Times journalist and expert on international business, global trade and economic and political developments, particularly in Hong Kong and China, he founded the company in 2005.
Mr. Dodwell spent 18 years as a Financial Times journalist, mostly in Asia, with a secondment to the China Daily in Beijing. In the decade between leaving the Financial Times and creating Strategic Access, he held three senior positions in Hong Kong combining corporate communications, government relations and public policy research. He was executive director at Golin Harris, a global communications group, director of corporate communications and public affairs of the Jardine Fleming, the Asia-focused merchant bank, and private consultant for the Hong Kong Trade Development Council.
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