China may sanction arms-selling U.S. companies with multifold options, firms remain silence

By Xinhua writer Yan Hao

BEIJING, Feb. 2 (Xinhua) -- U.S. companies involved in a major arms sale to Taiwan have remained silent or given evasive comments on China's sanction warning, but military and trade experts said on Tuesday that the government holds many options to penalize the arms-selling companies.

Beijing has given an unprecedented sanctions warning to companies involved in the 6.4-billion.U.S.-dollar arms deal, which the Obama administration announced on Friday.

The potential targets of sanctions include U.S. defense contractors Boeing, Sikorsky, Lockheed Martin and Raytheon.

Wang Yukui, vice president of communications of Boeing China Co., Ltd., refused to respond to a flood of public criticism of the company on China's Internet forums.

Instead, he said on Monday in a interview with Xinhua that the arms sale plan was made by U.S. government, which informed his company of the plan after its announcement.

Wang said China had been a very important market for Boeing and the company's local business, mainly civilian aviation, had been doing quite well.

Boeing's U.S. headquarters has not published any direct response to the sanctions warning, but predicted that its operating revenue in 2010 would decline.

Raytheon has no office in Beijing, but has a consultant company in Shanghai dealing training programs for auto makers in China.

Staff with the consultant company refused to comment on the warning, saying the company had informed its U.S. headquarters, but received no response yet.

Lockheed Martin has no office in Beijing, but has a joint venture Beijing Metstar Radar Co. Ltd. Calls to the joint venture went unanswered.

Sikorsky and its parent firm, United Technologies Corp., have more than 40 joint and exclusive ventures in the mainland, dealing civilian aircraft engines, helicopters, air conditioning facilities and elevators.

Calls to Shanghai Sikorsky Aircraft Company remained unanswered till Tuesday and the United Technologies' public relations staff in Beijing failed to give any comment on the sanctions warning, but promised to ask senior staff to reply.

The package submitted by the Pentagon to the U.S. Congress includes Harpoon anti-ship missiles and Patriot anti-missile systems, and it will come into force if the legislature makes no objections in 30 days.

The sale has drawn criticism from China's government, top legislature and millions of Internet users. Beijing has suspended military exchanges with Washington.

"If the U.S. side does not change the arms sale decision, China will turn the sanctions warning into action," predicted Prof. Tan Kaijia, an arms expert with the National Defense University of the People's Liberation Army.

The sanctions would be a drastic countermeasure, which would compel U.S. authorities to weigh the advantages and disadvantages of the arms sale, Tan said.

Tan said all the four companies involved designed and manufactured military and civilian dual-use products and technologies, which played a vital role in the U.S. defense industry.

According to the website of Boeing China, as of June 2009, Boeing products accounted for 53 percent of the total 1,383 civilian aircraft in China. Boeing's major rival, Airbus, accounts for 36 percent.

About 4 percent of Boeing's global revenue comes from the Chinese mainland market.

"China may penalize the companies in terms of market space," said Zhao Jinping, vice director with Research Department of Foreign Economic Relations of the State Council's Development Research Center.

Possible sanctions would include ceasing technology cooperation, delaying or canceling purchase plans for those companies' products as well as limiting their operational scope or even prohibit new businesses in the Chinese mainland, Zhao said.

He said the sanctions would probably affect the joint ventures of those arms-selling companies.

The arms sale plan, which was agreed during the administration of President George W. Bush, was announced soon after President Barack Obama's state visit to China in his first year in office.

Tan said the U.S. announcement revealed the quite pragmatic nature of the U.S. diplomacy, which caters for the nation's interests by all means.

"Those companies are arms dealers, some of them make fortunes by doing business with both sides of the Taiwan Strait. Economic sanctions perhaps is the best way to make them choose between arms sale profit and the Chinese market," he said.