The threat of Chinese sanctions against firms from the United States over arms sales to Taiwan may cast a shadow over Gulfstream’s “optimism in the region”, according to a lawyer whose company has advised the business jet giant.
General Dynamics, and its subsidiary Gulfstream Aerospace, as well as Honeywell and Oshkosh Corporation, were named in an article posted on the official WeChat channels of both the People’s Daily and state broadcaster CCTV on Sunday, criticising their involvement in the sale of tanks and missiles to Taiwan.
Last week, despite strong opposition from Beijing, the US State Department approved a US$2.2 billion arms sale to Taiwan, which includes 108 M1A2T Abrams tanks, 250 Stinger missiles and 16 M1070A1 heavy equipment transporters.
The Chinese authority has not announced any details of the potential sanctions, but on Monday Foreign Ministry spokesman Geng Shuang said that “China's government and Chinese companies will not cooperate or have commercial contacts with these US companies”, without naming any specific firms.
The sanctions mentioned have a legal basis, because US’s arms sale to Taiwan has violated the Three Joint Communiqués between the US and China, which is to say, the arms sale do not agree with the one China principle
“The sanctions mentioned by the Foreign Ministry have a legal basis, because the US arms sale to Taiwan has violated the Three Joint Communiqués between the US and China, which is to say, the arms sale do not agree with the one China’ principle,” said Shi Wanlin, a lawyer at Dentons Beijing.
The Three Joint Communiqués are a collection of joint statements made by the governments of the US and China from 1972, 1979 and 1982 that played a crucial role in the establishment of relations between the two countries.
All three addressed the views on the sovereign status of the island of Taiwan, although US President Donald Trump has cast doubt over the documents since taking office in 2017 with previous arms deals and promises of stronger relations with the self-ruled island.
“The Chinese authority will definitely not encourage the super-rich to buy Gulfstream jets,” added Shi. “There won’t be explicit ban on individual purchase, but Chinese businessmen are good at reading the hidden meaning of the government’s words, those who are considering to buy Gulfstream may go to other available options.”
Gulfstream did not respond to repeated inquires from the South China Morning Post for comment.
The Asia-Pacific region is Gulfstream’s largest international market, with the fleet growing by 24 per cent between 2014 and 2018, and specifically by 37 per cent in China, according to the 2018 “Fleet Report” by Asian Sky Group.
To support its growing fleet, Gulfstream has made significant investment in the region having set up an Asia Customer Support Contact Centre near Hong Kong International Airport that includes specialised staff, and a dedicated Beijing Service Centre, which was the first of its kind in China.
In April, the company’s official website said that they “currently have more than 335 aircraft in service in the Asia-Pacific region”, among which nearly 200 are in China.
Another aviation expert, who declined to give his name, said that he does not think that the possible sanctions would affect current Gulfstream owners, and that China would only impose restrictions on future imports.
In comparison to its rivals in the Asia-Pacific market, like the Montreal-based Bombardier, Gulfstream appears to be more popular with China’s super-rich class, including Wanda Group founder Wang Jianlin, Baidu founder Robin Li, JD.com founder Richard Liu, Alibaba founder Jack Ma, and Evergrande Group Real Estate chairman Xu Jiayin, according to the China Daily. Alibaba is the owner of the South China Morning Post.
The average prices for Gulfstream’s latest models, the G650 and G650ER, were around US$50.9 million and US$55.3 million respectively, according to Asian Sky Quarterly.
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