China's government has given the go-ahead to plans for the country to design and build passenger planes which can carry more than 150 people.
AVIC unveiled its ARJ-21 regional plane last week
The move, to compete with Airbus and Boeing, was a longer-term priority of China, it said.
China Aviation Industry Corporation (AVIC) has started building a regional plane, the ARJ-21, which will carry between 78 and 105 people.
Boeing welcomed the move, saying it was not surprised by China's ambitions.
"I don't think it's a surprise to anybody that a country as large as China might have ambitions like that," said Scott Carson, head of Boeing's commercial airplanes division.
"What we have to do is to constantly improve what we're doing and keep up with customer demand. We always anticipate potential competitors."
AVIC has yet to set out a timeframe for developing the larger plane - however last week a top official at the state-owned firm said it intended to make the jets by 2020.
Air travel within China is booming as greater wealth makes it an affordable means of travel to more people.
The country is expected to buy 2,230 planes between now and 2025, a development which has led the government to give priority to its plans for domestic firms to get a share of the market.
The State Council said China was committed to an "internationally competitive product".
While drawing on China's own resources, international cooperation would also be sought, the government added.
Airbus is already set to open an assembly line for its A320 family of planes in Tianjin, in the north of the country, with Chinese manufacturers also making parts for both Airbus and Boeing.
Test flights of a Chinese-built mid-size ARJ-21 regional jet will take place next year, while mass production of the plane will begin later this year.
Manufacturers have received 70 orders for the plane so far.