Blacklisted defense conglomerate AVIC retains influence in US aviation industry via Continental Aerospace Technologies

At Datenna, our China experts continuously track and conduct detailed investigations into the acquisitions of European and US firms by Chinese entities. Through a series of articles in our resource library, we highlight striking acquisition case studies, analysed based on Datenna's in-depth, unique data on China's techno-economic landscape. This article elaborates on the acquisition of Continental Aerospace Technologies.

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A High Risk of Chinese State Influence

Datenna's analysis of a company's ultimate beneficial owner can reveal links of seemingly private companies to the Chinese government. Based on these links, Datenna determines the risk of Chinese state influence for all major inbound investments in the EU and US. Our data shows a clear influence of the US investment screening mechanism, which is more mature than that in the EU. Chinese investments to the EU were significantly more likely to involve a high risk of Chinese state influence.

Our data also indicated a significant difference in the degree of Chinese state influence across sectors. In the aviation and aerospace sector, almost half of Chinese acquisitions show a high risk of state influence. Aviation takes a central role in China's ambitions to become a technological superpower, as exemplified by prestige projects like the COMAC C919 aircraft. This case study illustrates the high level of Chinese state influence in Chinese acquisitions of companies in the American aviation industry.

The Acquisition

Continental Aerospace Technologies is a historic company in the American aviation industry, having produced its first aircraft engine as early as 1929. Based at the Brookley Aeroplex in Mobile, Alabama, it manufactures a range of gasoline and Jet-A engines and offers avionics services. Apart from this core business, it also produces air-cooled gasoline engines for several US army tanks — meaning its products have both civilian and military applications.

In 2011, Continental Aerospace Technologies was acquired by AVIC, a Chinese state-owned defence conglomerate, for $186 million. AVIC is a key player in China's national Military-Civil Fusion strategy. The acquisition went through AVIC's subsidiary, Technify Motors. In 2020, AVIC was blacklisted in accordance with Section 1237 of the National Defense Authorization Act, prohibiting American companies and individuals from owning shares in AVIC. Nevertheless, Continental Aerospace Technologies remains owned by AVIC as of November 2022.

Other Acquisitions and Personnel Overlap

AVIC has made further acquisitions in the US through Continental Aerospace Technologies. The company acquired Thielert in 2013, Southern Avionics in 2014, and Danbury Aerospace in 2015. These companies are now all ultimately controlled by AVIC.

The connection between AVIC and the US aviation industry has also deepened in terms of personnel. Top Chinese executive directors of Continental Aerospace Technologies concurrently hold board positions in other AVIC subsidiaries based in China. At the same time, American board members are closely linked to other parts of the US aviation industry — one person, for example, is simultaneously chairman of STS Aviation, which staffs US defence projects.

Connections Often Go Unnoticed

Datenna's research into Chinese investments in the US highlighted the maturity of American investment screening — there are relatively few investments in strategic sectors in recent years as a result. However, acquisitions that occurred in the early 2010s are often still in the hands of Chinese state actors. This case shows that a Chinese defence conglomerate like AVIC can maintain a wide web of influence in the American aviation industry, built up prior to being blacklisted — dynamics that existing investment screening mechanisms do not address.