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China’s “Surprise” for the F-35

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You may have heard that the J-20, China’s fifth-generation fighter jet, flew its first test flight Tuesday morning. You can put U.S. defense secretary Robert Gates and even China’s own civilian president Hu Jintao on the list of those surprised by its progress. In their meeting later on Tuesday, Mr. Gates asked President Hu about the test flight. He was met with a look of surprise.

Imagine the sinking feeling Mr. Gates must have experienced. Certainly Mr. Hu and the civilian leadership or Politburo Standing Committee must have spent months choreographing the meeting between the two leaders. Everyone remembers their Olympic showcase. Why, then, did Mr. Hu need to get confirmation of the test flight from the People’s Liberation Army (PLA) leadership attending the meeting?

The J-20 test flight was certainly meant by the PLA for the entire world to see. So, too, was their embarrassing snub to President Hu. The relationship between China’s civilian leadership and its military appears to be strained at best, with the PLA flexing its muscles. How the PLA will influence the Politburo elections in 2012 is still unclear. But based on the PLA’s behavior this week, it’s time for Mr. Gates to admit that his calculations were incorrect—he was wrong in advocating the killing of the F-22 program. It’s time to bring it back. Here are 10 key observations about the situation at hand.

1. With the F-22 program canceled, we’re treating the total fleet, capped at 187 jets, as if each jet is a piece of fine China. That has to stop. There’s no way to know the F-22’s true capabilities without pushing it to the limit. Yes, pilots like Major David “Zeke” Skalicky get a lot of airtime by giving demonstrations around the world at air shows, but there’s a big difference between wowing 100,000 people in Dallas or Fort Worth and practicing air-to-air combat in real time.

2. The Obama administration chose to leave the F-22s behind in the recent joint military exercise with South Korea. Maybe the Obama administration doesn’t want anyone (including you) to see how capable the F-22 is, so that the issue of its defunding will quietly go away. I think leaving it behind ruined an opportunity to gain new customers. The F-22 needs to be part of all future exercises.

3. Why are we footing the bill to protect our allies when they pay very little to protect themselves? Selling them what they want—the F-22, not the F-35—will be one proven and profitable way for us to help them arm themselves.

4. Make the F-22 a business. That’s right: sell it to Japan, South Korea, Australia, or any other ally wishing for self-protection. If you want to find out the F-22’s real vulnerabilities and receive feedback give it to a customer.

5. You might ask, “What happens if our allies turn to enemies and want to use our F-22s against us?” My answer is that we can control who has the best technology. We don’t have to export everything.

6. Developing the sixth-generation fighter will be easier if we start from the experience and technical expertise gained from the trial and error of a vibrant F-22 program. Think about Apple’s product mix and how it has evolved from the first-generation iPod to the iPad. Without the iPod, there would be no iPad. The evolution to the sixth-generation fighter will come more easily with the use of existing fifth-generation technology in F-22s in conjunction with the forthcoming F-35s.

7. Yes, the F-22 is expensive. I, too, read the reports putting the cost at $361 million per copy. Yet, right when the program came to fruition, and after we sunk close to $30 billion into research and development, we cancelled it. Any way you cut it, if you make more jets, the cost per plane comes down. I’ve seen the number per copy as low as $130 million if the program were allowed to continue at pre-cut build rates. That’s cheaper than the current $150 million and counting for the F-35.

8. The enormous supply chain for the F-22 spans from coast to coast. The number of parts that go into making one plane is somewhere in the thousands. Initially this was done so it would be more difficult for Congress to cut. So much for that. A centralized approach, guided by the government, would be much more cost-effective.

9. U.S. exports, including exports of fighter jets, improve our trade deficit and protect our business relationship with China. Consider it as insurance. If China bullies its neighbors, what do you think will happen? I don’t see Taiwan being up for the fight. More F-22s in Taiwan and Japan will keep our allies less dependent on us and lower the risk of their joining a united Asian front.

10. China claims its J-20 is for self-protection. I believe it. But if it changes its mind and suddenly becomes an aggressor nation, isn’t it better that we hope for the best and prepare for the worst? I think it is.

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E.J. Smith - Your Survival Guy

Preparing your investments and family for when disaster strikes.
E.J. Smith is the Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH, where he completed course-work in Practical and Defensive Handgun, Conceal Carry Pistol, Shotguns, Precision Scope Rifle and Kidnapping Prevention. E.J. plays a Yamaha Recording Custom drum set with Zilldjian cymbals. His first drum set was a 5-piece Slingerland with Zilldjians. He grew-up worshiping Neil Peart of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West and Paris. Please get in touch with E.J. at ejsmith@youngresearch.com. Sign up here to receive all the best content from Richardcyoung.com each week.

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