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China Setting Up Commercial Aircraft Company Print  

Сhina setting up its challenger to Airbus and Boeing this month under the name China Commercial Aircraft Co. Ltd., with the company facing an initial task of making up a six-month delay on the ARJ21 regional jet.

The company will encompass businesses from the two current Chinese aircraft conglomerates, Avic 1 and Avic 2, each of which will have a minority stake. But it will get much more of its capital from outside of the industry, from governments and other state companies.

The government will control the company through its own direct shareholding, the largest, and through the state companies that are taking stakes. The Shanghai city government will be the second-largest shareholder.

The capital of the company, 19 billion yuan ($2.7 billion), is much less than the 50 billion to 60 billion yuan development cost of the proposed new airliner that the Communist Party secretary of Shanghai plausibly quoted in January.

The shareholdings are disclosed in the latest official media reports. The central government, probably through its powerful state-assets commission, will contribute 6 billion yuan, then Shanghai 5 billion, the Avic 1 group 4 billion, and the Avic 2 group 1 billion, the same amount coming the metal companies Baosteel and Chinalco and from Sinochem.

It isn't clear why makers of steel, aluminum and chemicals feel they should invest in aircraft production. The fact that three such companies have stepped up to the plate suggests that the central government has drafted them for the task, although Beijing's treasury certainly doesn't lack money.

China's cabinet approved formation of the company in February 2007. The proposed new airliner, whose takeoff weight would exceed 100 metric tons (220,000 lb.), is supposed to fly around 2020.

The ARJ21 was supposed to fly last month but will not now take to the air until September or October, although the Avic 1 division responsible for it says that it will try to fulfill contracts calling for a first delivery date of the third quarter next year.

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