China OKs Pact for Jet With France

China and France signed a preliminary agreement Thursday to study joint development of a 100-seat jet, dealing a blow to U.S. plane makers who were also seeking to team up with the Chinese to build a new plane.

Aerospatiale, an aerospace company owned by the French government, signed the agreement with Aviation Industries of China. A final accord would include South Korean and Singapore companies working with the Chinese, and Aerospatiale partners British Aerospace and Alenia of Italy.

“This represents a useful step forward in what will probably be an important development in world aviation,” said Chris Avery, European aviation analyst at Paribas Capital Markets in London. “The Chinese air market will be the fastest growing worldwide over the next 20 years and beyond.”

The accord comes four years after a rift in diplomatic and commercial relations between China and France, when France agreed to sell 60 Mirage fighter jets to Taiwan. That prompted China to cancel several contracts and dealt a blow to French companies seeking business relationships there.

It also comes one day after China awarded Airbus Industrie, the European consortium that is Boeing Co.’s biggest competitor, a $1.5-billion order for 30 jetliners.

Western plane makers are eager to team up with the Chinese and South Koreans on a new jet, as they feel it would give them a stronger foothold in those markets. While a Western partner will have only a 20% equity stake in the project, its participation would give it an edge in winning orders in Asia.

Air traffic in many Asian markets is growing at 10% or more a year, compared with a 5% rate in the U.S., the world’s largest aviation market.

Paribas’ Avery said the statement of intent signed Thursday couldn’t be taken as a definitive agreement.

“Any development with China would tend to have a political background as well as a commercial one, and it’s always possible that the Chinese political agenda can change,” he said.

Because of that, it’s not entirely clear whether Boeing and McDonnell Douglas Corp. are definitely out of the running for the 100-seat jet project at this point. However, the fact that both Premier Li Peng of China and President Jacques Chirac of France presided over the signing makes clear the preliminary agreement is a significant step.

“We’re disappointed by reports that China has selected Aerospatiale as its Western partner,” said a Boeing spokeswoman, Cindy Smith. She said Boeing would “continue to evaluate our options” in the 100-seat aircraft market.

She said the letter of intent “underscores the need for the U.S. to move beyond the annual debate over most-favored-nation status for China to create a stable, long-term trading relationship.”

U.S.-China relations have been strained in recent weeks by U.S. complaints about software piracy and human-rights violations in China, and Chinese anger over U.S. support for Taiwan.

Don Hanson, a spokesman for McDonnell Douglas’ commercial-aircraft division, said China’s decision “will have no impact on our ongoing business.”

The texts of agreements signed were not made available to the media.

At Aerospatiale, spokeswoman Sophie Roukline called the agreement “significant.” But she said that it isn’t definitive, calling it a step in a process. The Chinese have said in the past they expect a final accord by June, though that deadline had changed many times.

Assuming the Europeans win the firm contract, the project almost certainly would involve British Aerospace and Alenia in addition to Aerospatiale. The three, partners in Aero International Regional, formed an Asian group last year called Aero International Asia.

It is likely the project then would be taken over by Airbus, that company’s chief executive, Jean Pierson, has said. Airbus groups Aerospatiale, British Aerospace, CASA of Spain and Deutsche Aerospace Airbus, a unit of Daimler-Benz.