Chinese state-run aerospace giant Aviation Industries of China (AVIC) is to split itself into two separate companies.

According to the official newspaper China Daily, the organisation has submitted a draft plan to the State Council for final clearance. The proposal would see the formation of two companies, both involved in the production and sale of military and civil aircraft.

AVIC's administrative functions are to be handed over to the State Commission of Science, Technology and Industry for National Defence. This body will not interfere in the new companies' regular business.

According to AVIC president Zhu Yuli, "... the two groups will compete and co-operate", operating independently of one another. The change is likely to follow the model of a similar massive restructuring of China's petroleum and chemical industries, which were split into two vertically-integrated petrochemicals giants last year.

The official report says the goal is to "break up monopolies and foster a fair market economy mechanism", as well as fulfilling the government's commitment to "turn around large loss-making state enterprises by the end of 2000".

AVIC employs 500,000, including 100,000 engineers. Last year it made about 34,000 redundant and transferred 14,000 to non-aerospace businesses. The AVIC group comprises 100 companies, 30 research institutes and seven state-funded laboratories.

The group has targets of 6% industrial output growth and $1.4 billion-worth of foreign trade this year, compared with 7.2% growth and $1.8 billion in foreign trade last year. The lower, 1999, figures take into account the impact of the Asian economic crisis, says AVIC.

The China Daily says the new groups will push for international production subcontracts, and for civil short-haul jet manufacture. Talks continue with Boeing and Airbus on Chinese wing manufacture for the Airbus A320 and Boeing 717. Since the failure of the proposed 100-seat AE31X joint venture with Airbus last year, several AVIC companies have pursued a 70-seater jet proposal, the NRJ.

Source: Flight International