Joint venture: AVIC GE Civil Avionics System Co., Ltd.

At Datenna, our China experts continuously track and conduct detailed investigations into Sino-EU and Sino-US joint ventures established in China. Through a series of articles in our resource library, we highlight striking joint venture case studies, analysed based on Datenna's in-depth, unique data on China's techno-economic landscape. This article elaborates on the joint venture AVIC GE Civil Avionics System Co., Ltd., set up by US-based GE Aviation and Chinese AVIC Civil Avionics.

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The Joint Venture

In 2011, US-based GE Aviation and Chinese AVIC Civil Avionics announced the signing of an agreement to form a 50/50 joint venture, which was formally established in 2012 and continues to be active. Ties between the Chinese aviation industry and GE Aviation date back to the mid-1980s. The establishment of this joint venture extended that relationship from engines to commercial avionics.

The aim of the joint venture is to develop and market integrated, open architecture avionics systems to the global commercial aerospace industry for new aircraft platforms. This system serves as the central information backbone of an aircraft's networks and electronics, hosting avionics, maintenance, and utility functions.

The US Shareholder: GE Aviation

GE Aviation is a provider of jet engines, components, and integrated systems for commercial and military aircraft, and is part of the General Electric conglomerate — one of the world's largest corporations. In 2020, GE ranked 33rd in the Fortune 500 by gross revenue. GE Aviation manufactures engines under its own umbrella and partners with manufacturers such as France's Safran Aircraft Engines through CFM International, the world's leading supplier of aircraft engines, which held 39% of the global commercial aircraft engine market share as of 2019. GE Aviation itself holds a further 16%.

The Chinese Shareholder and Its Parent Company

AVIC Civil Avionics Co., Ltd. is a Chinese state-owned enterprise founded in 2010, incorporated in Shanghai in January 2011 with a total registered capital of 4.5 billion yuan. It is a subsidiary of AVIC — one of China's 10 key military-industrial conglomerates, directly supervised by the State-owned Assets Supervision and Administration Commission (SASAC) of the State Council, and directly invested in China's National Military-Civil Fusion Industry Investment Fund.

AVIC has more than 100 subsidiaries and over 450,000 employees. With revenues of 461.8 billion yuan ($68.5 billion) in 2021, it is one of the biggest military contractors in the world. AVIC manufactures some of China's leading fighter aircraft including the J-10, J-11, and J-20, and holds a monopoly on military aircraft manufacturing and maintenance. Fitch Ratings describes AVIC as "of high strategic importance to China's national defence and the backbone of the country's military and civilian aviation manufacturing industry."

In December 2020, seven AVIC subsidiaries were added to the US Commerce Department's list of Chinese companies with alleged military ties, subjecting them to licensing requirements for sensitive items under US export control regulations. AVIC was also placed on the US Department of Defence's list of civil entities with ties to the Chinese military in June 2020, making it subject to a US investment ban.

However, joint ventures are not covered by export control or investment screening policies — making it possible for US companies to continue doing business with Chinese entities even in sensitive and strategic sectors. Joint venture entities can therefore be viewed as a mechanism that circumvents existing regulations.

The Aviation Industry as a Strategic Node

Aviation is explicitly listed as one of ten strategic sectors under Made in China 2025, China's initiative to modernise industrial capability and become a global advanced manufacturing leader. The plan involves replacing China's reliance on foreign technology with domestic innovations and creating Chinese companies that can compete globally.

Aviation is also central to China's Military-Civil Fusion (MCF) strategy, which seeks to develop the People's Liberation Army into a "world class military" by 2049 by leveraging capabilities across all sectors of society and the economy. Under MCF, science and technology enterprises are organised to ensure new innovations simultaneously advance economic and military development. Xi Jinping personally oversees its implementation.

China is pursuing MCF not only through domestic R&D but also by acquiring technologies from abroad. Since 2008, AVIC has spent at least $3.3 billion acquiring at least 20 aerospace, automotive, and engineering companies, primarily in the US and Europe, according to the US-China Economic and Security Review Commission. The policy of Military-Civil Fusion ensures that civilian technologies acquired through joint ventures ultimately strengthen China's military industry — a risk that existing investment screening and export control frameworks do not adequately address.