US designates COMAC, Air China’s parent as military users

The United States Department of Defence (DOD) has added COMAC (Shanghai Pudong), Grand China Air (CN, Haikou), and China National Aviation Holding to its list of Chinese firms sanctioned under the National Defense Authorization Act for their alleged close ties to China’s military and the Communist party. “The Department is determined to highlight and counter the People’s Republic of China’s (PRC) Military-Civil Fusion development strategy, which supports the modernization goals of the People’s Liberation Army (PLA) by ensuring its access to advanced technologies and expertise acquired and developed by even those PRC companies, universities, and research programs that appear to be civilian entities,” the administration said in a statement. The DOD sanctioned China’s state-owned aerospace conglomerate AVIC in its initial tranche in June 2020. While the National Defense Authorization Act does not directly prescribe consequences for the listed companies, in 2020, President Donald Trump issued an executive order banning any US investment in any of the sanctioned companies. The DOD list is separate from the Military End-User (MEU) designation managed by the Department of Commerce. In December, it sanctioned multiple subsidiaries of AVIC, including Harbin Aircraft Manufacturing Corporation, Shaanxi Aircraft Company, and Xian Aircraft Company. However, COMAC was omitted from the list. China’s leading commercial aerospace manufacturer, responsible for the ARJ21-700 and C919 models, is formally independent of AVIC, although it is also wholly state-owned. Chinese government records and stock market filings show Grand China Air is an HNA Group unit and a major shareholder in Hainan Airlines (HU, Haikou), in which it directly holds a 23.08% stake. The company also owns stakes in other HNA Group-affiliated carriers. It is itself 25%-owned by the Hainan Provincial State-Owned Assets Supervision and Management Committee, its largest shareholder (ahead of HNA Group with 23.1%). Operationally, its modest fleet entails three B737-800s deployed on five domestic routes out of Beijing Capital. China National Aviation Holding is the state-owned parent company of Air China (CA, Beijing Capital) and Air Macau (NX, Macau Int’l). Neither of the carriers nor any of Air China’s subsidiaries were added to the list.