GE-China Deal: Economic Opportunity Comes With Risks

Cutting edge aviation technology was passed on to China in a deal between GE and the state owned Aviation Industry Corporation of China. The new technology will allow a plane to take off and land regardless of weather conditions. The Washington Post outlines the economic risks that come along with this joint venture:

Access to the world’s second-largest economy is critical for nearly any global company. Yet this often comes at a cost: the transfer of the very technologies that leading business officials — including GE chief executive Jeffrey Immelt, who heads an Obama administration panel on U.S. jobs and competitiveness — cite as essential to the United States’ economic future. The “synthetic vision” system, for example, could be worth millions of dollars to airlines, which could significantly reduce costs from weather-related delays.

GE, like other companies, must weigh which technologies should be brought to joint ventures with China and how to protect them from being stolen or misused. These decisions face virtually any executive trying to develop a presence in the country — from the most sophisticated technology firms, which worry about software piracy, to old-line industrial equipment makers, which have seen knockoffs of their products pop up soon after making deals with Chinese partners.

Under the agreement with AVIC, GE avionics will be on board a new Chinese commercial airliner that is likely to become a rival to aircraft produced by U.S.-based Boeing and Europe’s Airbus. The potential competition with Boeing, coming at a time when the United States is fighting to maintain its own manufacturing base, has stirred some American criticism.

While some are concerned of jeopardizing intellectual property rights, others are worried of the American jobs that will be sacrificed by moving this project to China. There are still other concerns, ones that that some US Congress members view as pressing enough to call for a National Security Review on the deal. From Defense News:

[Republican Representative Randy] Forbes said he is concerned the technology could end up in China’s new stealth fighter, the J-20, under production by AVIC.

[Republican Representative Frank] Wolf responded with a Nov. 14 letter strongly supporting Forbes’ call for a review and questioning whether GE could protect secrets from an aggressive Chinese espionage effort.

“Given the breadth and scope of this espionage, GE’s assertions that they will be able to fully protect sensitive technology lacks credibility,” he wrote. “Should the GE-AVIC joint venture proceed, there is no question that all the sensitive technology involved will be completely compromised by the PLA [China’s People’s Liberation Army].”

[…] GE defends the agreement.