China to target more foreign aviation firms
The Aviation Industry Corporation of China and China Construction Bank International are set to raise capital for a joint investment fund targeting foreign assets related to aviation.
The fund, named AVIC-CCBI Aviation Industry Investment Fund, was set up at the end of 2010 to invest in aviation-related industries beyond the mainland.
It had raised U$100 million in phase one, according to the fund's director and general manager Zhu Yongmin, with most of the money going on shares in five companies.
In July last year, CCBI and AVIC set up another fund, called the China Aviation PE Fund, which targets private-equity investments in aviation or aviation-related businesses on the mainland. It has raised more than 10 billion yuan, more than one billion yuan of which had already been invested in businesses owned by AVIC.
Zhu said overseas expansion was not easy due to its connections with aerospace and national defence, but investment in foreign companies had become more important to counter the obstacles its own aviation sales deals often met abroad.
'We never worried about the investment side of the business because we can offer very competitive prices,' he said. 'Instead, we always encountered political opposition from the United States and Europe when we tried to make deals in the aviation industry in the past.'
China Aviation Industry General Aircraft, a subsidiary of AVIC, signed a deal last month to acquire Minnesota-based Cirrus Industries, the second-largest manufacturer of single-engined general aviation aircraft in the world.
The deal, which marks the first acquisition by a Chinese aviation company in the US and Europe, is expected to be closed in the middle of 2011 once it receives approval from the Chinese and US governments.
Li Lei, aviation analyst with China Jianyin Investment Securities, said: 'There is no doubt that overseas expansion is of strategic importance to China's aviation industry, both in terms of gaining greater international market share and enhancing technology development.'