Air and Military Manufacturer Reloads for Overseas Investment

Translated by Liu Peng
Corporation, page 26
Original article: [Chinese]

State-owned aviation firm Aviation Industry Corporation of China (AICC), was eying overseas expansion after it had secured a 100 billion yuan (some 14.6 billion US dollars) credit line from the Export-Import Bank of China (EIBC).

Gu Huizhong, the AICC's vice-president told the Economic Observer that these loans would be spent on developing the firm's oversea investment and importing advanced aviation technologies and equipment, as well as exporting civilian aircraft.

Su Zhong, the EIBC's vice president, said the loans would help the AICC catch up in the world aviation industry and become a world-class aviation parts maker and military supplier.

Taking this deal into account, the AICC had secured 336 billion yuan (nearly 49.2 billion US dollars) in credit from 12 domestic banks over the past three months, the EO learned.

In 2008, the AICC's revenues totaled nearly 170 billion yuan (nearly 24.9 billion US dollars), with half coming from military products. Because it is state-owned and its stability in military product income, the AICC was looked highly upon by many domestic banks.

However, if these credit lines were converted into real loans, the AICC would become over-leveraged. By the end of last year, the AICC's had 240 billion yuan (some 35.1 billion US dollars) in debt, with its asset-liability ratio climbing to 70%.

Mr. Gu told EO that the AICC would control the ratio to within 70% in the future. In order to achieve this goal, it was seeking investment from strategic investors and local governments to increased its net assets and lower its leverage ratio.

The AICC, China's most important military aviation weapon and equipment maker, was founded on November 2008 by incorporating China Aviation Industry Corporation I and China Aviation Industry Corporation II, the country's largest aircraft manufacturers.

The AICC was involved in fourteen business lines such as national defense, air transport, air motors, helicopters, automobiles, micro-electronics, and real estate, and had assets worth some 350 billion yuan (some 51.2 billion US dollars).