China Gives Gift of Friendship, but Big-Ticket Orders Help

What do pandas, political prisoners and airplane deals have in common?

They make great gifts.

At least it seems that way in the often opaque world of Chinese diplomacy. The bestowing of endangered species, the release of key dissidents and the purchase of new jetliners have been known to play critical roles in helping Beijing clinch deals and make friends.

After Taiwan opposition leader Lien Chan toured China last month on a historic trip that followed more than 60 years of animosity between the Communists and the Nationalists they defeated in a civil war, Beijing offered to send Lien home with a pair of giant pandas as a symbol of peace. When President Nixon made his groundbreaking trip to Beijing in 1972, he got the same parting gift.

In March, Washington’s decision not to seek a U.N. resolution critical of China’s human rights record coincided with the release of Rebiya Kadeer, a 58-year-old businesswoman sentenced to eight years in a Chinese prison for sending newspaper clippings to her husband in the U.S. Secretary of State Condoleezza Rice visited China a few days later.

The biggest-ticket item in this game of political give-and-take may be airplanes.

During a visit by French Prime Minister Jean-Pierre Raffarin last month, Beijing signed a deal to buy 40 Airbus jets worth $3.2 billion. The most expensive items on the shopping list were the world’s biggest passenger jetliners, the new super-jumbo A380s. Each costs about $250 million. China ordered five.

Airbus is primarily owned by France and Germany, which are the two biggest advocates for the lifting of the European Union’s 16-year-old arms embargo against China. Europe imposed the weapons ban after Beijing’s bloody 1989 crackdown on pro-democracy demonstrators in Tiananmen Square.

Opponents of the embargo face an uphill battle, particularly after Beijing passed a controversial anti-secession law against Taiwan in March. The measure authorizes the mainland to use force against the island, which Beijing considers a rogue province, if it moves to declare independence. Washington is among the biggest critics of advanced weapons sales to China, which it fears could upset the balance of power in the region.

But Beijing has goodies for the Americans too.

Early this year, China announced plans to buy 60 Boeing jets, worth $7.2 billion.

“It’s the economic equivalent of releasing political prisoners before a big decision,” said Richard Baum, director of the Center for Chinese Studies at UCLA. “Whether it works or not is another question.”

In fact, despite these lucrative deals, China faces mounting pressure from the U.S. on several fronts. Most prominent is China’s undervalued currency, blamed for the yawning trade gap between the two countries and the loss of U.S. jobs.

The Boeing purchase takes a small bite out of the U.S. trade deficit and creates some American jobs. But it may not be enough. Some members of Congress are calling for China to revamp its currency or face hefty penalties.

Critics in China have also wondered whether the country really needs all that many new planes. But aircraft manufacturers are quick to point out that air travel is growing so much in the most populous country on Earth that in about two decades China will become the second-largest aircraft market in the world, trailing only the U.S.

“Both Boeing and Airbus have estimated that China needs about 2,000 new aircraft over the next 20 years, at about 100 planes a year,” said Derek Sadubin, general manager at the Center for Asia Pacific Aviation, based in Sydney, Australia. “It’s a pretty spectacular growth rate. Both companies are extremely active in trying to retain market share in China.”

Beijing can use the rivalry to drive a hard bargain.

When Nixon landed in 1972 aboard a Boeing 707, China was just entering the jet age and immediately ordered 10 Boeing aircraft. After the Americans normalized relations with the Chinese in 1979, more orders followed in the 1980s.

But Airbus has been playing catch-up, especially during times of rising U.S.-China tensions over issues such as Tiananmen, Taiwan and trade.

In 1997, Airbus got a big boost with a $1.5-billion order pegged to French President Jacques Chirac’s visit to Beijing.

The tide turned once again later that year, when then-President Jiang Zemin became the first Chinese leader to travel to the U.S. since the Tiananmen crackdown. He brought a $3-billion shopping list for Boeing.