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Boeing Defense Unit to Be Sanctioned by China Over Taiwan Arms Sales

Boeing’s defense unit along with Lockheed Martin and Raytheon Technologies face sanctions from China following the sale of $1.8 billion in arms to Taiwan.

Boeing’s  (BA) - Get The Boeing Company Report defense unit is facing potential sanctions from China following the U.S. approval of $1.8 billion in arms sales last week to Taiwan.

Boeing Defense, Space & Security, a division of Boeing based in Arlington, Va., that makes military and aerospace products, as well as Lockheed Martin  (LMT) - Get Lockheed Martin Corporation Report and Raytheon Technologies  (RTX) - Get Raytheon Technologies Corporation Report, are facing possible sanctions from the Chinese government over the arms sale. 

The sanctions will be imposed “in order to uphold national interests,” Chinese Foreign Ministry spokesman Zhao Lijian told news media Monday in Beijing. “Boeing Defense” would be among those sanctioned, he said. 

The State Department last week approved $1.8 billion in new weapons for Taiwan and submitted the package to Congress for final review. Boeing Defense is one of Boeing's three main business units.

The submission comes as tensions between the U.S. and China continue to percolate, with President Trump continuing to blame China for the coronavirus pandemic and its global spread.

It also comes two months after the U.S. and Taiwan completed the sale of 66 new model F-16 Block 70 aircraft from Lockheed - a sale Zhao has condemned as a violation of the so-called One China principle.

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The action comes at a particularly tough time for Boeing, which has seen its aviation business decimated by the pandemic as well as the grounding of its 737 MAX jets, two of which crashed in 2019 due to software malfunctions, killing a combined 346 people.

China was the first place to ground the plane, and also has the world’s biggest 737 MAX fleet.

China, which had nearly 100 MAX planes in operation prior to the grounding, doesn’t have a clear timetable for allowing the plane back into the air, Feng Zhenglin, director of the Civil Aviation Administration of China, told reporters in Beijing last week.

Europe’s top aviation regulator earlier this month deemed the plane safe enough to fly again before the end of this year, while U.S. Federal Aviation Administration head Steve Dickson himself flew the MAX in September and said the controls were “very comfortable.”

Shares of Boeing were down 2.69% at $162.85 in trading on Monday, while shares of Raytheon Technologies were down 3.13% at $60.62. Lockheed Martin were down 2.31% at $365.70.