The Aviation Industry Corporation of China (AVIC) and the Shanghai municipal government have agreed to work together to develop engines for China's large commercial aircraft, it was announced on Wednesday.

Speaking at the ongoing Zhuhai air show, Tan Ruisong, executive vice-president of the AVIC, said the two sides had signed an agreement for the establishment of a strategic cooperation framework.

The firm will be set up in six months with an initial registered capital of 6 billion yuan (US$880 million), he said.

While the exact stock holdings in the company have yet to be decided, AVIC wants to hold a majority share, he said.

Insiders said the joint venture is important to China's large passenger aircraft program, as at present, domestic engines are not competitive enough for use in the 130- to 200-seat commercial aircraft the country wants to put on market during the 13th Five-Year Plan period (2015-20).

The Commercial Aircraft Corporation of China (COMAC), which is in charge of the large passenger aircraft program, said it will seek suppliers through global bidding, which is an international practice already used by industry giants Boeing and Airbus.

But, "developing our own commercial engine has always been an important strategic move," Tan said.

The framework should allow for the development of homegrown commercial engines within 15 years, he said.

The new joint venture firm will be located in Shanghai, where COMAC has its headquarters, AVIC President Lin Zuoming said at Wednesday's signing ceremony.

It has been agreed the engine design center will be located in the Zizhu area of Shanghai's Minhang district, while the engine assembly base will be within the Shanghai Lingang development zone, he said.

The two bases, and other functions associated with the company are likely to attract support industries, such as avionics and materials, to the area, he said.

(China Daily November 6, 2008)