China is killing Boeing, Part II: As a major Pentagon contractor

Bullets:

The Pentagon and Congress are concerned that Boeing's safety, legal, and financial troubles leave the Defense Department vulnerable in event of the company's bankruptcy.

But while Boeing's poor management and engineering problems are grave in the short term, it is China's decisions to cut off Boeing from key supply chains that will doom the company.

Boeing is the archetypal buyer of "dual-use" technologies and materials from China, which are used in both civilian and military sectors. China has monopolies on heavy rare magnets, and the REM that are required to build them.

These magnets are crucial in avionics systems for passenger jets, but even more so for advanced military systems, hypersonic missiles, and stealth aircraft.

China closed export markets for all these dual-use technologies. Boeing and other Pentagon contractors will be unable to fulfill the multi-billion dollar contracts, now that they've been cut off from China's supply chains.

Report:
Good morning. Boeing’s future in commercial aviation is very much in doubt, especially in the fastest-growing markets in the world. COMAC will take over most of the new markets in the fastest-growing areas of the world, and going forward the market share for Chinese airlines--and for China’s planemaker--will grow, while shrinking at Boeing and Airbus.

Fortunately for Boeing, the company also makes a lot of money building planes for the Pentagon. Unfortunately for Boeing, they need raw materials, electronics, and components from China to build those planes for the Pentagon, and China is cutting them off. “Dual Use” refers to technologies that have applications in both civilian and military sectors, and anything dual use that goes through China is basically dead. In order for companies to import China components or materials that have a dual use purpose, they need to guarantee Chinese regulators that those materials will not be sold to a third party, or otherwise be used in military applications.

That is impossible, basically—if a regulator in China knows he will lose his job if he approves the sale of materials that later show up in a Stealth bomber or hypersonic missile system, the default answer from that guy is going to be hard no. So the markets for these materials are effectively closed.

More explicitly, Boeing itself was placed on China’s export ban list, by name. This means that Boeing, along with a group of 20 other companies, cannot get materials they need to build weapons, from China. And China is where almost all of them come from.

For the rare earths export bans that have already been announced by China, they have deep and wide use in aerospace, and especially in military aerospace. An aerospace company builds planes for passengers. A military aerospace company builds bombers and missiles. So these rare earth export bans from China are a serious problem for companies that build planes of all types, but the dual-use export bans of rare earth metals, and magnets, and components, are an existential threat to military aerospace contractors. Exports of magnets that are necessary for the manufacturing of drones and cars have been stopped at China’s ports. These are also the magnets needed by weapons makers, who build robots, missiles, and spacecraft. This means Boeing, then, along with some others that were specifically singled out by China.

These are the critical inputs for the supply chains of everything we need for the future of warfare. Those chains are shut down. China produces—basically all, may as well say—of the heavy rare earth metals in the world, and 90% of the world’s rare earth magnets, which are much more powerful. Japan and Germany make up most of the remaining 10 percent, but then we run into China, again—Japan and Germany need China for the raw materials to build their magnets, and we should assume that China’s export ban is going to include companies in Japan and Germany that build magnets for anybody building planes and missiles, and that hypothetical regulator who just said no to Boeing is going to give the same answer to a Japanese or Germany company who hopes to build magnets for Boeing.

And in case we’re wondering how much pain this will cause here, in China, it’s none at all. These magnets are insignificant, and are just a tiny share of China’s overall exports. So minimal economic pain in China, with big effects everywhere else. This is an analysis from the Institute for Energy Research, and they have five big takeaways. Number 4 is how we got here, and why there’s no quick fix. We cannot mine anything in the US, we cannot set up the dirty refineries for rare earths in the United States, and we do not manufacture magnets in the United States. As a result, we are wholly dependent on imports for scandium and yttrium, at 100% dependence, and overall we are dependent on China for 70%. So we are decades away from having a supply chain for these raw materials, then the magnets, that Boeing can use in their civilian aircraft, let alone their military planes.

This is a Congressional report from November. The analysts observe here that Boeing has a lot of problems, and Boeing is losing a lot of money. Fatal crashes, safety, legal and financial troubles. The machinists went on strike, then got big pay raises. Then Boeing had to raise $25 billion to build cash. Big problems for Boeing in Space and in Defense, in addition to everything happening in their commercial jets.

Congress and the Pentagon realize that our defense systems are highly dependent on Boeing. In turn, though, Boeing is highly dependent on China. Boeing is the fourth-largest Pentagon contractor, with over $20 billion dollars a year: F-15’s, Apaches and Chinooks, refueling tankers, as well as space. And for every single thing on this list, Boeing is dependent on China to get the parts and materials they need. And China just cut them off.

Here is a big list of Boeing’s aerospace contracts with the Pentagon, and every project on this list depends on a supply chain that runs through China. Most recently, Boeing won the contract for the F47 fighter jet. The Next Generation Air Dominance Future Fighter jet. It has “state-of-the-art stealth technologies”. “There is nothing close to it,”in terms of speed, maneuverability, payload—payload being missiles and bombs. “America’s enemies will never see it coming.”

That part is true. Nobody will see it coming, because it’s not coming. This plane will never be built.

Resources and links:

China Issues New Export Control Regulations: What Businesses Need to Know? https://www.china-briefing.com/news/china-issues-new-export-control-regulations/

China Imposes Export Controls on Rare Earth Minerals https://www.instituteforenergyresearch.org/international-issues/china-imposes-export-controls-on-rare-earth-minerals/

New York Times, China Halts Critical Exports as Trade War Intensifies https://www.nytimes.com/2025/04/13/business/china-rare-earths-exports.html

Semiconductors and National Defense: What Are the Stakes? https://www.csis.org/analysis/semiconductors-and-national-defense-what-are-stakes

Defense Implications of Challenges at Boeing

https://www.congress.gov/crs-product/IN12455

Boeing Wins $8.46 Bln Worth Multiple Defense Department Contracts https://www.nasdaq.com/articles/boeing-wins-846-bln-worth-multiple-defense-department-contracts

What Are the Top Boeing Government Contracts? https://executivegov.com/2022/12/what-are-the-top-boeing-government-contracts/

Boeing wins contract for NGAD fighter jet, dubbed F-47 https://www.defensenews.com/air/2025/03/21/boeing-wins-contract-for-ngad-fighter-jet-dubbed-f-47/

South China Morning Post, Lockheed Martin, Raytheon hit as China slaps dual-use export ban on 28 US defence firms https://www.scmp.com/news/china/military/article/3293156/china-slaps-dual-use-export-ban-28-us-defence-contractors

China's COMAC will be bigger than Boeing and Airbus, combined, by 2040.