US-China relation

• Backdrop

  • during 2019, China-US round-trip direct flights reached over 300 per week

• Recovery from Covid-19

  • Latest: Chinese airlines can boost US flights to 50 per week [https://www.reuters.com/business/aerospace-defense/chinese-passenger-airlines-can-increase-number-us-flights-usdot-2024-02-26/]

• • initial recovery is tepid as capacity needs to be approved by regulators first

  • after China reopened in 2023, flights were set to increase 50% from 16 per week to 24 per week, announced in March 2023 [https://www.reuters.com/business/aerospace-defense/china-us-boost-passenger-airline-flights-usdot-2023-05-03/]

  • In Aug 2023, two sides agreed to double capacity of 48 per week, ramping up to 36 per week on Sep 1, and 48 per week on Oct 29 [https://www.reuters.com/business/aerospace-defense/united-states-china-agree-double-weekly-flights-between-countries-sources-2023-08-11/]

  • Flights would further increase 46% to 70 a week (35 from each side) starting Nov. 9 [https://www.bloomberg.com/news/articles/2023-10-28/us-officials-announce-further-increase-in-flights-with-china]

  • American Airlines, Delta Air Lines and United Airlines received authority from the US Department of Transportation (DOT) to delay by another 90 days the resumption of nearly 100 weekly flights to China, according to regulatory documents released on 5 March [https://www.flightglobal.com/networks/big-three-us-airlines-again-delay-resumption-of-further-china-flights/157267.article]

• Ban/restrictions during Covid-19

  • On Jan 29, 2020, US airlines announced to reduce their mainland China services [https://www.cnbc.com/2020/01/29/coronavirus-american-airlines-reduces-china-service-as-outbreak-grows.html]

  • Two days later (Jan 31, 2020), US airlines announced to halt their mainland China services. [https://www.cnbc.com/2020/01/31/coronavirus-delta-to-suspend-all-china-flights-starting-feb-6.html]

  • On the same day (Jan 31, 2020), US gov announced travel ban for most Chinese or those who had visited mainland China in the past 14 days. [https://www.dorsey.com/newsresources/publications/client-alerts/2020/02/us-announces-china-coronavirus-travel-ban] 

  • A restriction of where to land was added - only a few airports would be allowed to land for those flights carrying persons who have recently traveled from, or were otherwise present within, the People's Republic of China, for flight after Feb 2, 2020. [https://www.federalregister.gov/documents/2020/02/07/2020-02413/notification-of-arrival-restrictions-applicable-to-flights-carrying-persons-who-have-recently]

  • China started to impose 14-day quarantine requirements for inbound travelers in March 2020, but implementations may vary across cities. [https://www.cnbc.com/2020/03/20/travelers-to-china-encounter-changing-coronavirus-quarantine-policies.html] 

  • Things started to recover from hell in June 2020. US-China flight would be 4 per week (2 by US airlines, 2 by China airlines) [https://www.cnbc.com/2020/06/05/us-scraps-plan-to-ban-chinese-airlines-after-beijing-permits-foreign-carriers.html]; it was later revised up to 8 per week (4 by US airlines and 4 by China airlines) on Jun 16, 2020. [https://www.reuters.com/article/us-usa-china-airlines/u-s-china-to-each-allow-four-weekly-flights-for-airlines-delta-to-fly-next-week-idUSKBN23M354/]

  • In August 2020, US-China agreed to increase flight to 16 per weekly (8 by US airlines, 8 by China airlines). [https://www.transportation.gov/briefing-room/us-department-transportation-modifies-order-regarding-chinese-carriers] 

  • On Nov 8 2021, US lifted travel ban from many countries incl. China, but would require proof of vaccination and a recent negative Covid test. [https://www.cnbc.com/2021/11/07/us-to-lift-international-travel-entry-ban-here-are-the-rules.html] 

  • US dropped Covid testing requirement for international travelers in Jun 2022. [https://www.reuters.com/world/us/us-drop-covid-testing-incoming-international-air-travelers-2022-06-10/] 

  • On Dec 26, 2022, China announced to lift quarantine requirement for inbound travelers starting from Jan 9, 2023, after almost 3 years. [https://www.cnbc.com/2022/12/27/china-to-end-quarantine-for-international-travelers.html] 

  • US announced new negative testing requirement for travelers from China on Dec 28, 2022, for all air passengers regardless of nationality and vaccination status. [https://www.cdc.gov/media/releases/2022/p1228-COVID-china.html] 

  • US would lift negative testing requirement for travelers from China, reported in March 2023. [https://www.washingtonpost.com/health/2023/03/07/us-covid-testing-rule-travelers-china/]

  • US would end vaccine requirements for international travelers on May 11, 2023. [https://www.reuters.com/world/us/us-end-covid-19-vaccination-requirements-may-11-white-house-2023-05-01/] 

  • In August 2023, China announced to drop testing requirements for entering China, starting from Aug 30, 2023. [https://www.reuters.com/world/china/china-drop-covid-antigen-test-requirement-inbound-travellers-2023-08-28/] 

• Technical difficulties

  • US need to avoid Russian airspace, which results in longer distance and sometimes refueling [https://www.uscannenbergmedia.com/2023/11/29/us-china-flights-set-to-double-this-winter/] 

• What's next?

◻️ any increase in weekly capacity

• • Latest: AMD hits US roadblock in selling AI chip tailored for China [https://www.reuters.com/technology/amd-hits-us-roadblock-selling-specific-ai-chips-china-bloomberg-reports-2024-03-05/]

• • In July 2022, Congress passed the CHIPS Act of 2022, to boost US semiconductor manufacturing

  • US gov also worked with Netherland to ban EUV & certain DUV export ban to mainland China

  • In Oct 2022, Biden administration imposes limits on semiconductor exports to China [https://www.axios.com/2022/10/07/semiconductor-exports-china-biden-administration]

  • In Oct 2023, Biden administration announces new restrictions on exporting AI chips to China [https://www.axios.com/2023/10/17/biden-export-restrictions-ai-chips-china] / [https://www.csis.org/analysis/updated-october-7-semiconductor-export-controls] / [https://www.wsj.com/tech/u-s-tightens-curbs-on-ai-chip-exports-to-china-widening-rift-with-u-s-businesses-3b9983df]

    •  Advanced chips

      • foregoing interconnect speed—the speed at which chips talk to each other—in exchange for performance density as a parameter; “gray zone” chips requires notification to the US government: chips that fall outside of this technical threshold but contravene the original intention of the rule. This is largely aimed at preventing the proliferation of Nvidia-style A800 and H800 chips, which the company engineered to comply with the rules, along with Intel’s Gaudi2 chips

      • expended geography that subject to licensing requirements

    • Manufacturing equipment: adds several dozen items to the list of controlled equipment, most of which are used for fabricating logic chips under a 16-nanometer threshold

    • Entity List: expanded

• What's next?

◻️ ban on advanced cloud usage?

◻️ chips under licensing agreement, after more advanced chips are developed?

• Latest: March 2024, US to probe if Chinese cars pose national data security risks [https://www.reuters.com/business/autos-transportation/us-says-investigate-national-security-data-risks-chinese-vehicles-2024-02-29/]

• Jan 2024, U.S. Congress has prohibited the Pentagon from procuring batteries produced by six Chinese companies, including CATL and BYD [https://www.trendforce.com/news/2024/01/22/news-six-companies-including-byd-and-catl-are-included-in-the-u-s-procurement-ban-list/]

• IRA

  • US introduced & passed The Inflation Reduction Act (IRA) in Aug 2022 to support domestic production [https://www.reuters.com/world/us/biden-signs-430-billion-climate-healthcare-tax-bill-2022-08-16/] 

  • Conditions to get EV subsidy

    • Starting in 2024, the use of battery components produced by entities from “Foreign Entity of Concern” (FEOC) countries (incl. China) is prohibited. 

    • In 2025, the prohibition extends to the use of key minerals processed or recycled in FEOC countries (incl. China). 

  • In December 2023, there is more specified language on FEOC, and the "25%" threshold [https://www.akingump.com/en/insights/alerts/clean-vehicle-tax-credit-foreign-entity-of-concern-rules-proposed]

• What's next?

◻️ Chinese firms' business in Mexico?

◻️ Will other countries have similar policies for Chinese electric vehicles?

• Backdrop

  • in 2017, Boeing delivered 763 commercial airplanes, among which 202 is to Chinese airlines.

• Boeing 737 Max

  • 737 Max was first delivered to China (Air China) in Nov 2017 before crashes [https://boeing.mediaroom.com/2017-11-03-Boeing-Air-China-Celebrate-Delivery-of-Chinas-First-737-MAX-8]

  • China grounded Boeing 737 on March 11, 2019, after tragic crashes happened in 2018 and 2019

  • China's Boeing 737 Max commercial flights resumed on  Jan. 13, 2023, 3 years after the US which was in Dec 2020.

  • China regulators cleared Boeing 737 Max delivery in Dec 2023. [https://www.cnbc.com/2023/12/20/boeing-wins-key-clearance-from-chinas-aviation-regulator-on-737-max-deliveries-report-says.html]

• Other Boeing aircrafts?

  • According to the press,  Boeing last delivered a leased Dreamliner plane to a Chinese customer in 2021. Chinese airlines stopped taking Dreamliner aircrafts after November 2019 (likely due to covid). [https://www.reuters.com/business/aerospace-defense/boeing-wins-key-clearance-chinas-aviation-regulator-737-max-deliveries-report-2023-12-21/]

  • Latest: China resumed taking Boeing delivery in Dec 2023 after 4 years - a Boeing 787-9 Dreamliner for Juneyao Air (吉祥航空) landed in Shanghai on Dec 22, 2023. [https://pippenguin.com/news/stock-market-news/juneyao-airlines-receives-boeing-787-9-amid-anticipated-resumption-of-deliveries-in-china/]

• China wants its own airplanes

  • C919

    • Maiden flight on 5 May 2017

    • First commercial flight by China Eastern Airlines in Jun 2023 [https://www.aviationtoday.com/2023/06/02/c919-completes-first-commercial-flight/]

    • In Feb 2024, C919 showcased at Singapore Airshow [https://www.aljazeera.com/economy/2024/2/20/chinas-c919-jetliner-gets-international-debut-at-singapore-airshow]

• What's next?

◻️ Boeing 737 Max plane updates?

◻️ new Boeing orders?