The Sky’s the Limit for China’s Economic Growth Through Civil Aviation

China has made tremendous strides in their poverty reduction efforts since the implementation of economic reforms under the “gaige kaifang policy” or “reform and opening up” which began in 1978.  As a result, over the past four decades more than 800 million people have risen above the poverty line (as defined by the World Bank’s current spending standard).  Today, China’s president Xi Jinping has placed a renewed emphasis on poverty reduction with the ambitious goal of eliminating rural poverty in China (impacting about 43 million people) by the year 2020.  This is a lofty and complicated undertaking that, in order to be successful, will need to be supported by the development and sustainability of diverse industry sectors across the country.  Enter commercial aviation. 

China’s mounting economy has enabled the middle class to undergo exponential growth over the past decade.  Economists predict that trend will continue with 76 percent of the urban population reaching the middle class earning bracket ($9,000 – $34,000 USD) by the year 2022.  And, one of the many ways the increasing Chinese middle class population is spending their disposable income is air travel. The International Air Transport Association (IATA) estimates that China will surpass the United States as the world’s largest aviation market by 2022 (recently adjusted from 2024).  The long term effects from China’s increased travel demand will be multifaceted and global. However, one effect that should be of particular interest to China is jobs.  To put the magnitude of possible employment opportunities from civil aviation into perspective, let’s compare data between the U.S. and China.  Geographically, the two countries are roughly the same size, however China has over four times as many people with a population of 1.379 billion to the United States’ 325.7 million (i.e. four times as many people who need jobs).  According to the latest information (2014) from the FAA          “…expenditure related to civil aviation accounted for 5.1 percent of U.S. gross domestic product (GDP), generated $1.6 trillion and supported 10.6 million jobs with $446.8 billion in earnings.”  Meanwhile, according to a 2010 study by Oxford Economics, expenditure related to civil aviation contributes to just 0.8 percent of China’s GDP, generated $50 billion (¥329 billion) and supports 4.8 million jobs.  While commercial aviation isn’t a silver bullet, these numbers demonstrate the industry’s potential to make significant contributions towards the nation’s development, growth and poverty abatement efforts.

So, exactly how will civil aviation create jobs and contribute to Chinese and global economies?  Well, there are many ways, but let’s examine a few.  First up, manufacturing.  China’s magnified demand for air travel means that airlines will need to increase both the number and frequency of certain operational routes.  In a gesture acknowledging the evolution of China’s civil aviation market, the CAAC announced plans in May of 2018 to ease the “One Route, One Airline” policy by the end of the summer.  A relaxing of this policy will enable airlines greater flexibility to expand their operations in the country, which will inevitably lead to the expansion of fleets.  Industry experts are predicting that Chinese airlines will place upwards of ten thousand aircraft orders across all the major manufactures over the next 20 years.  In their 2017-2036 Current Market Outlook Report, Boeing estimates that Chinese commercial airlines will take delivery of 7,240 Boeing aircraft over the next 20 years (including 180 freighters).   While, this is clearly great news for aircraft manufactures and their respective countries, each fulfilled aircraft order also supports a host of suppliers and parts manufacturers from around the world.  Therefore, as the Chinese aviation market grows, so too does the global aviation market.  COMAC alone supports over 10,000 jobs worldwide, and as the new kid on the block, their accomplishments and contributions to the global aviation community have just begun.  

 

 

 

 

 

 

 

 

 

Next up, airports (if you build it, they will come)!  While the manufacture of aircraft will be a sustained and important source of employment in China (and around the world), the greatest opportunity within the civil aviation market for diverse job creation is airports.  It’s worth noting that the economic contribution of each airport varies depending on a number of factors including location, size, routes, and carriers; but the potential is remarkable.  An outstanding example of that potential is the Hartsfield Atlanta Airport (ATL) in Georgia.  According to a factsheet on ATL’s website, the airport currently supports more than 63,000 direct jobs (through airlines, ground transportation, concessionaire, security, federal government, City of Atlanta and Airport tenant employees), and generates a $34.8 billion economic impact for the metro Atlanta region. Furthermore, according to a 2016 ATL Report, the airport supports more than 400,000 indirect jobs (businesses and services that would not exist without the airport) around the metro region, and creates more than $70 billion in annual economic impact to the state.  That’s one airport (granted it has been ranked the busiest airport in the world since 1998, but…wow)! 

Currently, the United States has 503 commercial service airports (according to the FAA) while China has 229 (according to the CAAC).  That number is up by 11 since 2017 and the CAAC projects that by 2020 China will build over 30 additional civil aviation airports to support their increasing appetite for air travel.  As evidenced by the ATL report, each new airport has the potential to be an economic boon to its respective city and province, from the initial jobs related to infrastructure design and construction, to the sustained employment opportunities associated with maintenance, operations and security, and finally the many jobs created by airlines and purveyors of goods and services in and around an airport.  Bottom line, airports mean jobs.  And with the forecast calling for the construction of 30 new airports throughout China over the next two years, the outlook is bright. 

Civil aviation is undeniably a critical component to national and global development.  I believe Philippe Rochat, the Executive Director of ATAG (the Air Transport Action Group), summed it up best when he wrote: “…air transport is now accepted as a fundamental pillar of our global society, as indispensable to our daily lives as medicine and telecommunications, and essential for social progress and economic prosperity.”   So as China advances along the cloud-paved path to economic prosperity, the eyes of civil aviation will be gazing East.