Go west

Go west

Intel Corp. is building a $200 million plant at Chengdu, a fast-growing city deep in China's interior, and the U.S. semiconductor maker is not alone. Motorola Corp. has a new research center there. Other U.S. companies also are moving in, attracted by the city's educated work force and high-tech development zone.

As their manufacturing spreads inland from China's coast, U.S. companies are taking a keen interest in the next round of U.S.-China aviation negotiations. Those negotiations, which start Nov. 19 in Beijing, are aimed at expanding air service between the two countries. Liberalized air-transport rules would not only produce more flights to and from China's principal gateways - Shanghai, Beijing and Guangzhou - but could allow U.S. carriers to serve interior cities such as Chengdu as well as coastal cities such as Dalian, a port in northeastern China.

Chengdu is more than 1,000 miles from Guangzhou and 1,500 miles from Shanghai, but is attracting investment from companies such as Intel and Motorola. John McKean, an Intel spokesman, said the company isn't relying on the bilateral talks to produce new air service. But, he added, "Of course, we are interested in the outcome."

Although the plants springing up in Chengdu could use Chinese or other non-U.S. carriers, service by a U.S. express carrier would expand shippers' options. FedEx currently flies to Beijing, Shanghai and Shenzhen, while United Parcel Service flies to Shanghai and Beijing. Both companies serve other cities through local partners, and have announced ambitious expansion plans. Rival DHL has a regional joint venture with Air Hong Kong, a Cathay Pacific subsidiary, and plans to invest $200 million in China during the next five years through a separate joint venture with Sinotrans, the country's largest logistics provider.

These expanded services reflect opportunities available to non-Chinese companies under China's commitments to the World Trade Organization as well as Beijing's commitment to foster development in western China.

Chengdu, capital of Sichuan Province, would be a logical candidate for direct flights. So would Chongqing, where Ford Motor Co. announced plans to expand production with its Chinese joint venture partner from 20,000 vehicles annually to 150,000 units. While road, rail and water will be the primary transport modes for imported components, the automaker is likely to use air for some high-tech products.

Dalian is another candidate for new air service. FedEx planned to fly there if the U.S. Department of Transportation had granted it permission to offer service available under the bilateral agreement that took effect April 1, 2002. Instead, the DOT said FedEx could share those rights with other U.S. carriers, including UPS.

Chinese airlines have yet to use all the rights for direct U.S. flights under the existing bilateral agreement and may be reluctant to see expanded service by U.S. carriers. Chinese airports, however, see new U.S. freight service as a way of spurring economic development, said Christopher McNally, an economist and China specialist at the Honolulu-based East-West Center.

The Chinese Civil Aviation Administration, which oversees the nation's aviation industry, is caught in a tug of war between the airports and the three big Chinese airline groups - Beijing-based Air China, Shanghai-based China Eastern and Guangzhou-based China Southern, McNally said. But, he added, "There seems to be a clear intent on the part of the Chinese authorities to allow foreign carriers much more access to interior airports."

Expanded service rights granted to carriers such as Singapore Airlines and Dutch carrier Martinair bode well for other foreign airlines. Singapore Airlines this summer began operating all-cargo flights three times a week from Nanjing and Xiamen to Los Angeles and Chicago.

China's airborne exports to the U.S. in the January-August period totaled almost 300,000 metric tons, up 10 percent from a year earlier and 50 percent above the corresponding months of 2001, according to Global Trade Information Services Inc. of Columbia, S.C. China's airborne imports from the U.S., meanwhile, rose almost 20 percent during the same period, but from a much smaller base, to more than 57,000 metric tons.

"China is the 2,000-pound gorilla in the room but soon it's going to be the 10,000-pound gorilla," said Don Brasher, president of Global Trade Information Services. "It's going to be the biggest development for the rest of our professional lives."