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China Eyes Restructuring of State Aviation Firms

China will restructure its two main state aircraft makers, AVIC I and AVIC II, to beef up their global competitiveness, an AVIC II executive and local media said on Thursday.

AVIC I unveiled China's first domestically developed regional aircraft last month, moving closer to Beijing's goal of building even larger passenger jets and challenging the dominance of Boeing and Airbus.

"A restructuring plan will certainly be announced sometime this year," an executive at China Aviation Industry Corp II told Reuters.

While details of the restructuring were still being discussed at the central government level, the reorganization would include a merging of some of the two aviation firms' units with an aim to make them more competitive globally, said the executive.

The China Daily said the restructuring is aimed primarily at pooling resources to build a large commercial aircraft, with one plan envisioning the formation of a new company.

AVIC I, which also makes fighter planes and bombers, launched the regional ARJ21 project in 2000, with an eye on the fast growing domestic aviation market, which will need about 2,650 new passenger jets in the next 20 years according to Airbus, a unit of European aerospace group EADS.

The share price of Xi'an Aircraft International Corp, a unit of AVIC I, has surged about 13.6 percent over the past two days after announcing plans to sell shares and after reports of the restructuring of AVIC I and AVIC II.

Trading in shares of AviChina Industry & Technology, a unit of AVIC II, was suspended on Thursday, the Hong Kong exchange said, but gave no details.

AVIC I and AVIC II supply components for Airbus' and Boeing's latest models, including the double-decker A380 jumbo jet and the 787 Dreamliner. AVIC II unit Hafei Aviation Industry also makes the ERJ-145 regional craft in partnership with Brazil's Embraer.

While the regional ARJ21 aircraft was developed with Chinese technology, some key parts came from foreign partners, including engines from General Electric.

Almost all of the 170 orders for the regional aircraft were from domestic carriers, and analysts say it could take decades before Chinese plane makers acquire the skill and operational experience to challenge Airbus and Boeing.