"China to ease foreign investment rules in booming aviation sector"

Wednesday, July 7, 2004

China to ease foreign investment rules in booming aviation sector
by Martin Abbugao
Agence France-Presse


SINGAPORE, (AFP) - China will further ease foreign investment
regulations in its booming aviation industry to help fund a massive
effort to build new airports and expand old facilities, a visiting top
official said Wednesday.

The moves were part of wide-ranging reforms that include
decentralisation of airport management and opening up more airports to
international services, said Yang Guoqing, vice minister of the General
Administration of Civil Aviation of China.

All projects related to air transport, including airports, would be
opened up to foreign investments, Yang told a business forum here,
without giving a time frame.

Current foreign investments in the aviation projects were restricted to
traffic control systems, he said.

Foreigners will also be allowed to buy shares of listed airport
companies, in addition to current regulations allowing them to set up
joint ventures.

Restrictions on foreigners becoming board chairpersons or chief
executives of foreign-funded civil aviation businesses will also be
lifted.

"Generally speaking, China will further reform its investment mechanism
and expand financing channels in absorbing foreign domestic capitals
into the air transport industry," Yang said.

Yang said China needed more than 10 billion yuan (1.25 billion dollars)
a year to finance airport projects, a major factor driving the reforms
allowing more foreign invesment.

"We do feel the shortage of funds for civil aviation construction. We
think the infastructure construction lags behind the civil aviation
development," he said.

The easing of investment rules will be in addition to efforts to
decentralise the management of regional airports to local governments.

At the same time, the government will implement reforms opening up more
airports to international services, and relax rules to allow the
operation of low-cost carriers.

A core component of China's overall plan for its aviation industry is to
develop three airports -- Beijing, Shanghai Pudong and Guangzhou Baiyun
-- into major aviation hubs, and build new facilities or expand existing
airports in the regions.

The Beijing Airport is currently being expanded to meet traffic demand
in 2008, when China will host the Olympics, while Shanghai Pudong is
preparing for its phase two expansion.

The Guangzhou Baiyun airport in the south of the country has been
completed.

Other airports, such as in Wuhan, Chengdu, Kunming, Zhengzhou and
Tianjin, will also be improved, while a host of regional airports will
be built or enhanced.

"While following the trend of world airport development and taking
account of China's realities, we are working on an airport layout that
could meet the demand of China's air transport growth," he said.

China has spent a total 15 billion dollars to build airports and air
traffic control facilities since 1978. Forty-eight new airports were
built and more than 80 others renovated or expanded.

As the world's most populous nation has become wealthier, air passenger
traffic rose from a mere 2.31 million in 1978 to 87.59 million in 2003.

China currently ranks number five in total traffic turnover behind the
United States, Germany, Britain and Japan.

Aviation experts have previously said China will eventually become the
world's second-largest airplane market behind the United States.

They have estimated China will need to add 1,400 large jets by 2022 to
replace redundant planes and cope with increasing demand, costing the
country at least 100 billion dollars if they are all imported.

Apart from Hong Kong and Macau, there are 125 Chinese cities open to air
traffic. China has air links with 72 cities in 32 countries worldwide.


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