China’s aerospace giant AVIC taps capital markets for growth

Aviation Industry Corporation of China (AVIC), the country’s dominant aerospace and defence contractor, plans to raise more money in the mainland and Hong Kong stock markets to bankroll future growth and develop its first top-of-the-line jet engine.

Beijing is opening up a sector traditionally shielded from competition and public scrutiny as it taps private-sector funds to help speed up the development of its aviation and defence firms to compete with global giants such as Lockheed Martin Corp.

China is also looking to build its first high-performance engine for its commercial aircraft and fighter jets to end its dependence on Russian and Western manufacturers. AVIC has already set aside about 10 billion yuan (US$1.61 billion) of its own funds for engine research and development over the next three years.

“We hope to partly finance the project with funds raised from the capital market. About how much we want to raise, I would say the more the better,” AVIC Chairman Lin Zuoming told the media on the sidelines of the 18th Communist Party Congress late on Monday, without giving details.

AVIC is also considering injecting its holdings in some mainland-listed units into AviChina Industry & Technology Co Ltd as the state-owned giant makes the Hong Kong-listed subsidiary its key fund-raising platform for its aviation business, Lin said, without identifying the mainland firms.

“There will be more and more stakes to be injected into AviChina as an investment vehicle,” Lin said.
Shares of AviChina jumped nearly 7 per cent in Hong Kong on Tuesday morning, outperforming a 1 per cent fall in the benchmark Hang Seng Index.