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News Analysis: Private Capital Takes off in Aviation Industry
A well-known Chinese private enterprise, the Junyao Group, was recently approved to buy the Yichang Airport, 30 km away from the Three Gorges Project, being the first such transaction for private capital.

Experts predict that private capital will gradually become the new force of China's aviation industry. Meanwhile the investment system of aviation industry will become more market-oriented.

For a long time, China's aviation industry was considered a special, monopolized and half-military business. After the regrouping of six aviation groups last year, many eager domestic aviation companies hoped to introduce outside strategic investmentin order to learn from advanced management experience and skillful market operation methods, said Feng Fei, an expert with the Development Research Center of the State Council.

Wang Junyao is chairman of the board of the group which opened the first chartered flights among private entrepreneurs in 1991, which was considered a brave act. He made up his mind when grabbing profits from the chartered planes that he would be more involved in aviation industry while still abiding by national regulations.

In 2001, Wang made civil aviation one of the two major aspects of business of his group as well as dairy. In 2002, he set another record by being the first to take the shares of a local airline company with private capital.

Through ten years of hardship, Junyao has now developed into a multiple group, with aviation and dairy as the core business and also covering such areas as hotels and real estate.

Experts said that for a long time, many big projects only belonged to state-owned enterprises. Since 2002, private capital quickened its pace in aviation industry including participating in air route management and taking shares of airports. Junyao was instrumental in speeding up the opening of aviation's door to private companies.

According to Feng, the first approval of private capital for an airport signifies China's private business has become an important force in the nation's economic reform.

The investment of private capital in aviation shows the rapid growth of China's private enterprises and its strong confidence in the industry, said Zhang Tao, an analyst of Huatai Securities.

China's aviation industry, with passenger volume up 12 percent last year, attracted many domestic entrepreneurs and the authoritative prediction that China will rank second in total aviation transportation turnover by 2020.

A common method internationally of breaking an airport monopoly is to introduce an auction system. Feng said the Yichang Airport can be considered as a first trial of such a method, which can promote aviation reform.

According to his prediction, the airport will have two important issues at hand. One is to introduce competitive merchants in the airport and the other is to strengthen government supervision.

Feng believed more and more vital private capital will be injected into aviation industry as the local government hopes to improve infrastructure.

Having waited for quite a while before receiving final approval, Wang said his group's transaction has broken the ice for other private enterprises to enter China's aviation industry.

(Xinhua News Agency February 12, 2003)

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