TITLE: AVIATION INDUSTRY CORP. I & II SUBJECT COUNTRY(IES): CHINA POST OF ORIGIN: CHINA SERIES: INTERNATIONAL MARKET INSIGHT (IMI) ITA INDUSTRY CODE: AIR DATE OF REPORT (YYMMDD): 991130 DELETION DATE (YYMMDD): 201130 AUTHOR: JILI SUN, COMMERCIAL SPECIALIST APPROVING OFFICER: WILLIAM ZARIT, DEPUTY SENIOR COMMERCIAL OFFICER OFFICER'S TITLE: NUMBER OF PAGES: 4 The following IMI is based on articles in the July 2, 1999 edition of China Aviation News on China Aviation Industry Corporation (AVIC), and interviews with industry experts. SUMMARY: In an effort to become more competitive, China established ten new state-owned aviation corporations, including splitting AVIC (Aviation Industry of China) into AVIC I and II. AVIC I focuses on large- and medium-sized aircraft, while AVIC II gives priority to feeder aircraft and helicopters. AVIC I and II are both cooperators and competitors. BACKGROUND: During the past 10-15 years, international aviation experienced dramatic change. Finding itself lagging behind in this industry, on July 1, 1999 China decided to make strategic changes to address this situation, creating ten new state-run corporations: China Nuclear Industry Group Corporation, China Nuclear Industry Construction Group Corporation, China Aerospace Science and Technology Group Corporation, China Aerospace Machinery and Electronics Group Corporation, China Aviation Industry Corporation I (AVIC I) China Aviation Industry Corporation II (AVIC II), China Ship-Building Industry Group Corporation, China Ship-building Heavy Industry Group Corporation, China Weapons Industry Group Corporation and China Weapons and Equipment Group Corporation. AVIC I AVIC I has 53 large- and medium-sized industrial enterprises, 31 research institutes, 19 specialized companies and institutions respectively engaged in foreign trade, material supply, scientific research and product development. Nearly 240 thousand people are employed in industrial enterprises while 45,000 more employees work in research institutes. Total assets are RMB 34.9 billion. Examples of AVIC I enterprises include Chengdu Aircraft Company, Xian Aircraft Company, Nanchang Aircraft Company, Shenyang Aircraft Company and their National Trade Bureau. Parts for Boeing jetliners and other non-Chinese aircraft are made at these facilities. Y-7 and military aircraft are also under the responsibility of AVIC I. AVIC I & II each hold 50% of CATIC (China National Aero-Technology Import & Export Corporation) shares. AVIC I mainly engages in the development, manufacturing, sales, and after-sales services of military and civil aircraft, engines, airborne equipment, weaponry systems. They also produce non-aviation products. Military products include fighters, fighter-bombers, bombers, transports, trainers and reconnaissance aircraft. Fighters in mass production are F7, F8 and their derivatives. Bombers include the H5 and H6 series. Trainers include the FT6, FT7, and HJ5. Civil aircraft include the Y7 and its derivatives, which are short to medium range transport aircraft. Non-aviation products include more than 3000 different types of products in 8 major categories including industrial gas turbines, automobiles, motorcycles, refrigerating machinery and environmental protection equipment. AVIC I services include aircraft leasing and general aviation services, geotechnical engineering, construction contracting and real estate. AVIC II AVIC II owns 54 large- and medium-sized industrial enterprises and 3 scientific research institutes involved in helicopter, airplane, engine and airborne equipment. They control an additional 22 enterprises, institutes and specialized companies including China Aviation Industry Supply and Marketing Corporation and the 50% ownership with AVIC I of CATIC. They employ 210,000 workers, and control assets of 31.5 billion RMB. AVIC II manages state-owned assets (including land utilization rights) and shares of invested enterprises; investment, financing and other financial business at home and abroad; military and civil aircraft including helicopters, transporters, trainers, and attackers, UAV and related aviation products and airborne equipment. They also produce automobiles, motorcycles and related engines and parts, textile machinery, pharmaceutical equipment, medical apparatus, environmental protection equipment and other non-aviation products. Services include aircraft leasing, general aviation services, engineering development and design, engineering contracting, real estate development, intermediary service and import and export services. RELATIONSHIP: AVIC I AND II are equal economic entities authorized by the state to make investments, operating as a state holding company under the direct supervision of the Central Government. The scope of business for AVIC I and AVIC II look similar, but have a different emphasis. Generally speaking, AVIC I focuses on large- and medium-sized aircraft while AVIC II gives priority to feeder aircraft and helicopters. Contact information for AVIC I and AVIC II is as follows: Ms. Xuan Baishi Division Chief Department of Marketing & International Cooperation China Aviation Industry Corporation I (AVIC I) Tel: (8610)6409-3421 Fax: (8610) 6401-1632 No.67 Jiaonan Street Beijing 100009, PR of China Also: Mr. Liu Gaozhou, Director General, AVIC I Mr. Tang Xiaoping, Director, National Trade Bureau Mr. Shen Xiaoping, Deputy Director, National Trade Bureau Mr. Zhou Xunwu, Deputy Director, National Trade Bureau Mr. Zhou Xiuyang Project Manager Department of International Cooperation and Trade China Aviation Industry Corporation II (AVIC II) Tel: (8610) 6409-4308 Fax: (8610) 6403-2109 No.67 Jiaonan Street Beijing 100712, PR of China Also: Mr. Zhang Yanzhong, Director General, AVIC II The Commercial Section of the U.S. Embassy in Beijing, part of the worldwide network of the U.S. & Foreign Commercial Service, helps U.S. firms export their goods and services to China. To accomplish this mission we conduct a number of services on behalf of the U.S. Department of Commerce (USDOC), including our Gold Key Service, which includes arranging meetings with potential Chinese distributors, agents, or joint venture partners. For information on the Gold Key or other USDOC services, contact the U.S.-based Export Assistance Center nearest you, or contact us at 86/10/6532-6924, fax: 86/10/6532-3297, or email: OBeijing@cs.doc.gov. We are also on the web at www.usembassy-china.org.cn.Source: U. S. Department of Commerce - National Trade Data Bank, March 1, 2000