By Geoffrey Smith
Investing.com -- There’s nothing subtle about Chinese diplomacy.
President Xi Jinping has inked a mind-boggling $29 billion deal for Airbus (PA:AIR) aircraft during a state visit to Paris, France, a show of economic power aimed as much at Washington as at Europe.
The order, for 290 single-aisle planes and 10 A350 wide-bodied aircraft, is much larger than the $18 billion order that was floated by French President Emmanuel Macron when he visited China last year.
Airbus’s shares are up 1.7% on the news and only 2% off the all-time high that they hit earlier in March.
The order appears to disturb the balance that China has traditionally kept in buying from the two duopolists of the aviation industry.
The ostensible reason for that is the problem with Boeing’s 737 MAX, in the wake of two fatal crashes in recent months. China was among the first countries to ground the U.S.-made airplane earlier this month, and China’s demand for new aircraft is so huge and so pressing – Airbus estimates it will need an average of a new airliner or freighter every day for the next 20 years – that it can’t afford to wait on Boeing (NYSE:BA).
But there is a clearly visible subtext. China is also at a difficult point of trade talks with the U.S., its largest trading partner, trying hard to push back against what it sees as aggressive U.S. tactics to rebalance relations between the two. China is trying to conciliate the U.S. by committing to increase its imports of American goods, but Bloomberg reported earlier this month that it’s now considering dropping the 737 MAX from its shopping list. In Beijing’s eyes, doling out largesse to Airbus is a useful reminder to Washington of what U.S. business stands to lose by pushing Beijing too hard.
Elsewhere, European markets have opened mixed. At 05:00 AM ET (0900 GMT), the benchmark Euro Stoxx 600 was up 0.36 points, or 0.1% at 374.68. Germany’s Dax index was down 0.4% (with investors continuing to pile out of Bayer (DE:BAYGN) in the wake of last week’s court verdict against it), while the U.K. FTSE 100 was up 0.1%, supported by news from Westminster on Monday evening that makes a ‘no-deal Brexit’ a touch less likely.