Photographer: Luke Sharrett/Bloomberg

China to Finalize Plans for $22 Billion Plane-Engine Giant

  • Keen to develop engine to power own planes, including C919
  • Aerospace among key advanced industries identified by China

China plans to merge more than 40 entities working on plane engines into a group with 145 billion yuan ($22 billion) in assets as part of a broader push into advanced industries to propel its economy, people familiar with the proposal said.

The entities have combined assets of about 110 billion yuan, the people said, asking not to be identified because the discussions are private. The Chinese government and companies including Aviation Industry Corp. of China, known as AVIC, will invest an additional 35 billion yuan under the plan, which could be announced as soon as this month, they said.

China is eager to develop its own engine to power its planes, and also is keen to push its economy from labor-intensive work into more sophisticated sectors. The Made in China 2025 blueprint, released last March, cited aerospace as a sector that leaders hope will help make China into an advanced economy along the lines of Japan and Germany.

Shanghai-based Commercial Aircraft Corp. of China, known as Comac, is developing the C919 single-aisle jet, which is expected to make its first test flight this year. CFM International, a joint venture between GE Aviation and a division of France’s Safran SA, will supply a version of its LEAP engine for the initial C919s.

Shares Jump

Shares of Avic Aero-Engine Controls Co. closed up 7.7 percent Tuesday in Shenzhen, while Avic Aviation Engine Corp. ended up 6.7 percent in Shanghai. AviChina Industry & Technology Co. finished up 8.6 percent at HK$5.55 in Hong Kong in its biggest single-day gain since Oct. 2.

The new company will contain almost all assets related to aerospace engines in China, the people said. China’s State-owned Assets Supervision and Administration Commission, the Ministry of Industry and Information Technology, and AVIC didn’t immediately respond to requests for comment by fax and phone.

The plan to merge engine assets, which Bloomberg first reported in October, is part of the government’s efforts to streamline the state-owned sector while creating companies that are globally competitive. The government merged two leading rail-equipment companies last June, and announced a plan in December to reorganize two major shipping groups. China also plans to combine some assets of its three biggest airlines, a person familiar with the proposal said in October.

— With assistance by Clement Tan, and Steven Yang

Before it's here, it's on the Bloomberg Terminal.