90 Business The EconomistDecember 21st 2019
21the max back in its schedules in April.
The crisis notwithstanding, in Novem-
ber Boeing booked its first firm orders
since the grounding, for 30 planes. More
are sure to follow. Airbus hopes to increase
production of its rival a320 to 65 planes a
month by 2022. Even if passengers are re-
luctant to board the max, airlines clamour-
ing for new planes have little choice but to
continue to buy Boeing.
The company is nonetheless on the
back foot. Plans to develop a new jet to re-
place ageing 757s have been put on hold.
That has left the field to Airbus, whose
a 321 xlrdoes a similar job. In December
United Airlines, a loyal Boeing customer,
ordered 50 of them. Problems with the en-
gine have delayed the first flight of Boeing’s
newest 777xlong-haul airliner until next
year. And despite leading Airbus in long-
haul jets, the American firm trails its rival’s
6,200 a320 orders.
All this has led to speculation that Mr
Muilenburg may not hold on to his job for
long, whether or not the max returns to the
skies in the next few months. Should he go,
a new broom may conclude that it is time to
retire the 737 series, which has been in the
air for over 50 years.
That prospect worries Airbus, which
prefers a straight fight between the max
and a320 for as long as possible. If Boeing
opts to build a more modern plane, Airbus
will have to do so, too—just as Airbus’s
launch in 2010 of the fuel-efficient
a320neo forced Boeing to upgrade its age-
ing 737. Back then Boeing was contemplat-
ing an all-new design that would take six or
seven years to enter service. Fearing a loss
of sales, it chose instead to put a new en-
gine on the 737. That decision eventually
gave rise to its current woes.
A brand new plane would require both
firms to invest billions—and could lock
them into technology that forecast devel-
opments in electric-hybrid short-haul air-
craft may render obsolete in a few years’
time. Airbus would rather not take that
risk. If the max timeline slips again, Boeing
may have no choice but to do so. 7Sales pitch
Boeing , $bnSource:Bloomberg *Quarterly3020100-10
1995 2000 19151005Free cashflow*Revenues*A
t daimler’s annualmeeting in May,
one shareholder captured the mood.
“Don’t replace the Mercedes star with a Chi-
nese dragon,” implored Deka Investment, a
big asset manager, referring to the pur-
chase in 2018 by Geely, a Chinese firm
which also owns Sweden’s Volvo, of a 9.7%
stake in the German car giant. Daimler now
faces the rise of a second dragon. Beijing
Automotive Group (baic) is reportedly
poised to double its holding in Daimler to
almost 10%. This would put it ahead of
Geely as the firm’s biggest shareholder.
If Geely’s manoeuvre was a surprise,
baic’s is not. In July the state-owned com-
pany grabbed 5% of Daimler. Though the
dragon is not yet on the bonnet, it has long
been under it: engines, powertrains and
other parts that go into Daimler’s Mer-
cedes-Benz cars sold in China are made un-
der two joint ventures with baic set up
since 2005. With Chinese car sales down in
2018 and 2019 after years of steady in-
creases, domestic manufacturers are bank-
ing on premium cars for growth. So is
Daimler, whose financial performance has
been less inspiring than that of its cars. Its
share price has nearly halved since 2015.
For baic, the relationship with Daimler
is “of existential importance”, says Robin
Zhu of Bernstein, a research firm. In 2018
sales from Beijing Benz, one of its ventures,
grew by 16% year on year and accounted for
90% of baic’s total revenue. Mr Zhu notes
that baic has long sunks profits from Beij-BERLIN AND SHANGHAI
A fifth of the Mercedes maker may
soon be in Chinese handsDaimlerTwo is traffic
T
iktok, a chinese-ownedshort-video
app no Western teenager can do with-
out these days, stresses its independence
from the authorities in Beijing. Its parent
company, less so. Bytedance, whose $75bn
valuation makes it the world’s biggest un-
listed startup, has just teamed up with
Shanghai Dongfang Newspaper Company,
a state-run publisher. The joint venture, in
which Bytedance holds a 49% stake, will,
among other things, develop technologies
such as artificial intelligence (ai).
It is not Bytedance’s first jive with the
state. Since its founding in 2012 it has
worked with most news organisations in
China, many of them state-run, which it
needs to feed Jinri Toutiao, its news app—
all the more so since the launch two years
ago of “New Era”, a channel that reports
chiefly about government goings-on. In
2018 it hired a former anchor at cctv, Chi-
na’s state television, as vice-president. In
April it signed a strategic partnership with
Beijing Time, a news platform linked to the
Beijing Municipal Party Committee.
Toutiao is periodically chastised—by
the government and users alike—for a
dearth of serious content. The joint ven-
ture is looking to fill that gap. Shanghai
Dongfang owns thePaper, a serious outlet
which does proper investigative work
(even if state censorship can dull its edge).
Nor is Bytedance the only big Chinese
tech firm that works closely with state-
owned enterprises, especially in areas such
as ai that the Communist Party regards as
strategic. In 2016 Baidu, China’s biggest
search engine, agreed to develop technol-
ogy with a state-owned telecoms firm. In
June Jack Ma, the founder of Alibaba, an e-
commerce behemoth, met with sasac, a
government body which oversees state
firms, to discuss tie-ups to promote digital
innovation. Tencent, another internet
giant, has been urged to do the same.
Natural though it may appear in China,
the joint venture comes weeks after Ameri-
ca’s government opened a national-securi-
ty review of TikTok on worries that it gives
Beijing access to data on millions of Ameri-
cans and censors content the regime does
not like. Bytedance insists that data on
non-Chinese users sit on non-Chinese
servers and what Americans are or aren’t
shown is decided in America. It adds that
its new Chinese initiative will “focus on
digital rights of short videos”. Such assur-
ances are unlikely to impress its critics. 7SHANGHAI
The owner of TikTok and a state-run
publisher cut a rugChinese technologyBytedancing with
the state