ANDREW DOYLE / SINGAPORE
The Chinese government is coming under increasing pressure from the country's airlines to drop import tariffs of nearly 23% on purchases of regional jets with a structural weight of less than 25t.
The tariffs, calculated on the basis of an aircraft's sticker price, and comprising value-added tax (VAT) of 17% and import tax of nearly 6%, were slapped on Chinese airlines last year. It was an apparent indirect attempt to force foreign manufacturers to place more production contracts with local industry. In addition, Beijing has not approved a raft of regional jet orders already placed by Chinese carriers.
The taxes have made it practically impossible for Bombardier, Embraer and Fairchild Dornier to sell their products in China. Models falling below the 25t threshhold include the CRJ series 200, 700 and 900, Embraer ERJ-135, ERJ-140, ERJ-145 and 170, and Fairchild Dornier 328JET and 728.
"Technically it's a closed market," says one source. Larger Airbus and Boeing airliners attract VAT of only 6% and 1% import tax.
The three regional jet builders are negotiating to place more work with Chinese conglomerates China Aviation Industry (AVIC) I and II in the hope that Beijing will soften its stance. Among the options is granting China rights to assemble 50-seaters under licence.
Meanwhile, some industry observers suggest the tariffs could contravene the "spirit" of World Trade Organisation rules to which China is now a signatory.
Chinese sources say Beijing realises its policy "may have to change, and is internally evaluating how quickly".
Two years ago, the Civil Aviation Administration of China (CAAC) started encouraging airlines to embrace regional jets. However, China Southern and Wuhan Airlines are still awaiting clearance for their ERJ-145 orders, Hainan Airlines wants permission to acquire 21 more 328JETs, and China Eastern has made a deal for CRJs.
Two indigenous Chinese regional jet programmes are under way - AVIC I's ARJ21 70- 90-seat family and AVIC II's 30- 50-seater study. AVIC ll aims to select a foreign partner by March.
Source: Flight International
