Page last updated at 13:24 GMT, Sunday, 11 May 2008 14:24 UK

Chinese plane business gets wings

Planes prepare to take off from the new Terminal 3 at Beijing International Airport
The number of Chinese people flying is growing quickly

China has launched a new commercial plane maker which it hopes will one day compete with the likes of Boeing and Airbus, state media have reported.

China Commercial Aircraft will aim to develop regional aircraft able to carry more than 150 passengers, Xinhua said.

With $2.7bn (1.4bn) in initial funding, the Shanghai firm is backed by state and regional governments.

China is currently building a 90-seat regional jet but previous efforts at breaking into the market have failed.

Long wait

Beijing is keen to develop large-scale aviation capacity of its own to reduce its reliance on Airbus and Boeing as consumer demand for flying continues to surge in China.

Studies have suggested that demand for new planes from Chinese airlines will increase fivefold over the next 20 years, requiring about 2,650 additional aircraft.

They might be able to establish a presence in the business over the next 10 to 20 years if they nurture it with government cash
Richard Aboulafia, Teal Group

Xinhua quoted Jin Zhuanglong, Commercial Aircraft's general manager, as saying that it would take the firm many years to do the necessary research to begin production.

"According to the history of Airbus and Boeing, the development and success of civil planes cannot be realised by relying on one or two generations," he said.

Analysts said it could take China up to 20 years to become a credible force in commercial aviation and that it would only succeed if it attracted sufficient private investment.

"They might be able to establish a presence in the business over the next 10 to 20 years if they nurture it with government cash and gradually offer shares to the private sector," said Richard Aboulafia, an aviation analyst with Teal Group.

The state-controlled Assets Supervision and Administration Commission is currently the firm's largest investor, holding a 30% stake.

Between them, the Shanghai regional government and China Aviation Corporation (AVIC), which has been spearheading existing aviation projects, hold 25%.

Other investors include state-owned mineral firms such as Chalco, Baoshan and Sinochem.

AVIC is developing the 90-seat ARJ21 jet which is due to begin testing later this year, with its first deliveries expected in 2009.

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