Airbus May Hit An Air Pocket Over China

Why its plan to build narrowbody planes there could come up short

It looks like a great leap forward for Airbus. The European planemaker is set to announce the site of an assembly plant in China, its first ever outside Europe. The facility, likely to be built near Beijing or Hong Kong, could start rolling out A320 planes by 2008. The plant is part of a major push by Airbus to pull even with Boeing Co. (BA) in China's fast-growing aviation market. Airbus first disclosed plans for the factory last December when it inked a $10 billion deal with China for 150 narrowbody A320s. With China's low labor costs, the promise of free land, and the prospect that Airbus' investment could spark more Chinese orders, the factory seems a smart bet.

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