China forms company to make regional and jumbo jets : US Business

BEIJING (Reuters) - China established a company on Sunday to build regional commercial jets, with an eye to eventually reducing the country's reliance on Boeing and Airbus for jumbo jets, official media said on Sunday.

The new company will be capitalized at 19 billion yuan ($2.72 billion), with six billion yuan coming from the state-owned Assets Supervision and Administration Commission, making it the largest stake holder, state television said.

A consortium made up of the municipal government of Shanghai -- where the ARJ21 regional jet is being developed -- and China's two state aircraft makers, AVIC I and AVIC II, will provide another five billion yuan for the project, it said.

The 90-seat ARJ21-700 was unveiled late last year, China's first domestically developed regional jet, which will be test flown later this year and is scheduled to begin deliveries sometime late next year.

AVIC I, parent of Xi'an Aircraft International Corp <000768.SZ>, developed the ARJ21. AVIC II's Hafei Aviation Industry Co <600038.SS> makes the ERJ-145 regional jet in partnership with Brazil's Embraer .

General Electric's aircraft leasing arm said in March that it had signed a preliminary agreement to buy five ARJ21, the first order from a major foreign customer. There are total orders for about 181 ARJ21s, almost all from domestic carriers.

General Electric and Parker Hannifin supply parts for the ARJ21.

But China's long-term goal is to make large passenger jets with more than 150 seats, or freighters capable of handling more than 100 tons of cargo, to give it a presence in the global commercial jet market.

Major state-owned Chinese firms, including the parent groups of Aluminum Corp of China Ltd (Chalco) <601600.SS>, Baoshan Iron & Steel <600019.SS> and state oil trader Sinochem International <600500.SS> will each invest one billion yuan in the company.

AVIC I and AVIC II both supply components to Airbus and Boeing, for the double-decker A380 jumbo jet and the 787 Dreamliner.

Chinese airlines, which Airbus projected need about 2,650 new passenger jets in the next 20 years, have been placing big orders with Boeing and its European rival in recent years to help keep pace with the rapid economic growth.

But many analysts have expressed skepticism about the commercial prospects of a large jet designed and manufactured entirely in China, given the country's limited experience in big aircraft.

($1=6.98 yuan)

(Reporting by Kirby Chien, Editing by Jacqueline Wong)

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