A few months ago, the Trump administration with great fanfare announced a tentative deal with China and the tariff wars would be over. For all that heard the news, it was considered a good thing. For companies which buy and sell to the China market, they finally believed there was a sense of stability with the business operations.
According to Karen Freifeld and Alexandra Alper of Reuters, there is a major hip cup to the way forward. In many industries, after the company has made sales, they need to receive a licence from the government to ship the goods they sold. An example is the aircraft industry. One of the profit centers of GE is engine sales, they make the best aircraft engines in the world and have done so for many years. One of the biggest markets for aircraft is China as more and more people travel by plane. In addition, for many years, the US government has supported America companies’ business with China’s budding civil aviation industry.
One of the new aircraft being developed in China is called the COMAC C919. COMAC is short for Commercial Aircraft Corp of China Ltd. The aircraft needs parts including GE engines or the CFM LEAP-1C and flight control systems made by Honeywell International. It should be noted GE’s engine is a joint venture with France’s Safran Aircraft Engines and Honeywell has been receiving licences to do business in China for a decade.
China has an option if the US deny the licence, they could buy aircraft from Airbus rather than Boeing which relies on China for 25% of its aircraft deliveries.
Linking to dividend paying stocks, issues that should be simple are often complicated, but solutions are possible. Companies often work with government and things go smoothly, then governments change and different priorities happen, the term life happens is heard. Diversified revenue streams are important for the company in the event when governments change, the company can maintain the profitability of the company. How diversified are your investments revenue streams?
There are more questions than answers, till the next time – to raising questions.