Credit: U.S. Department of Commerce, Creative Commons
Honeywell is a global company that traces its roots back to the invention of the furnace regulator in 1885. Today, its business lines include defense, aviation, chemical production, warehouse automation, and, it hopes, a new face-mask-noise-cancelling-headphone developed with musician Will.i.am.
It also has a major presence in China, a country it first entered in 1935. After China re-established formal relations with the U.S. in 1979, Honeywell began setting up joint ventures with state-owned firms in the early 1990s. Later, it set up wholly-owned subsidiaries in China and hired executives who have grown up in the country.
Its long history in China, and huge scale across multiple sectors, can be seen as a microcosm of multinationals’ evolving presence in China. “At the beginning, in the ’80s and even into the ’90s, the vast, vast majority of foreign investment going into China was in joint ventures,” says Nicholas Lardy, a senior fellow at the Peterson Institute for International Economics (PIIE) in Washington, citing potential obstacles that ranged from forming good relationships with the local government to problems as basic as getting land and running water. “Now virtually everything going into China is in the form of wholly foreign-owned.”
This week, The Wire maps the Fortune 100 company’s ventures in China.
A Period of Change
Honeywell underwent major changes in 2018. It spun out two major lines of business and moved its headquarters from Morris Plains, N.J., to North Carolina.
The company also shifted its focus after Covid-19 began to spread. Its primary business slumped when demand for aviation products declined. That led to a move into personal protective equipment (PPE), such as N-95 masks. Revenue dips in 2019 and 2020 may reflect both pandemic-induced declines and the spinoffs of business units that once generated in billions of dollars in revenue.
Honeywell does more than export goods to China. It has also established dozens of entities in the country. Honeywell, for instance, has at least eight joint ventures in China through Honeywell International and wholly owned subsidiary Honeywell China, according to WireScreen data. Honeywell China has more than 20 subsidiaries registered in China.
“[Joint ventures] are still quite prominent in areas where China has important industrial policy goals and they are trying to promote the further strengthening of domestic Chinese companies and their technological know-how,” says Scott Kennedy, a senior advisor and the Trustee Chair in Chinese Business and Economics at the Center for Strategic and International Studies in Washington. “You see that in the automobile industry, it applies in commercial aircraft, and some other sectors — that happens to be where Honeywell does business.”
A Honeywell representative noted in a statement to The Wire that the company had chosen to set up several joint ventures as “part of [their] China growth strategy.” She added that the majority of their revenues from China come from direct business rather than the joint ventures.
Its joint ventures span chemicals, automation and aviation, but one key project is the C919, the Chinese commercial passenger plane that was developed by Commercial Aircraft Corporation of China, or COMAC.1The Wire has previously written about the challenges that COMAC has encountered with getting the C919 off the ground, one of which is its very international supply chain. Its total contract value for the C919 could be as high as $11.3 billion, according to a 2010 Honeywell press release. Honeywell provides “the auxiliary power system, wheels and brakes, flight control package, and navigation package” for the plane, which is China’s state effort to build home-grown commercial jets. They formerly had a joint venture with China Eastern Airlines that has since become Honeywell’s wholly owned subsidiary.
Other American aviation giants have ties to state-owned Chinese aviation companies. Boeing and GE also have business deals with COMAC and its sister company AVIC. GE, for instance, is supplying engines for COMAC planes, and Boeing produces some its 737 planes through its Zhoushan-based manufacturing center with COMAC.
One outlier in Honeywell’s China presence is its investment in Shanghai-based FLUX Information Technology. Honeywell bought a 25 percent stake in the warehouse management systems company in 2017.
Linking up with SASAC
Honeywell’s ties to large state-owned companies that fall under the control of State-owned Assets Supervision and Administration Commission of the State Council (SASAC) predate SASAC itself.2The commission was formed in 2003. Honeywell signed a $75 million agreement with the state oil giant Sinopec in 1995 to supply components for its oil refineries. Two decades later, the American company struck a deal with China Eastern Airlines to supply avionics products, wheels, and brakes to its Airbus and Boeing aircrafts. Honeywell formed another joint venture with a Sinochem subsidiary in 2019 that is split 50/50, according to WireScreen data, but little is publicly available about what the venture does.
Some of Honeywell’s Chinese partners are now facing scrutiny from U.S. regulators because of their ties to the military or national security interests of the U.S. Honeywell, for instance, has a joint ventures with the AVIC subsidiary, Nanjing Engineering Institute of Aircraft Systems (NEIAS), which was added to the new U.S. Military End User (MEU) List in December. (The MEU list is a new export-restriction list released by the Commerce Department’s Bureau of Industry and Security.)
Below are more details about Honeywell’s partnerships with SASAC firms.
Hannah Reale is a staff writer with The Wire. Previously, she reported for the GBH News Center for Investigative Reporting, The West Side Rag, and her college newspaper, The Wesleyan Argus. @hannahereale
