China will set up a company to build large passenger airplanes, a first step as it seeks to take on Boeing Co. of the U.S. and Airbus SAS of Europe.
Premier Wen Jiabao approved the plan at a Feb. 26 Cabinet meeting in Beijing, according to a statement posted on the central government's Web site Sunday.
"Building a large aircraft is an important strategic decision of the Communist Party and the State Council, and it has been the desire of all Chinese people for many years," the government said in its statement.
The decision by China, the world's fourth-largest economy, may add to the competition between Airbus and Boeing as each battles to be the world's top plane maker. Developing an aircraft for sale internationally can take years or decades because airlines seek proven reliability and safety before purchasing a new model.
"It's probably going to take China a decade to have a viable airplane, and a lot longer than that to have a plane that would sell outside of China," said Nick Cunningham, an analyst at Panmure Gordon & Co. in London.
China may build a 150-seat narrow body plane, similar in size to an Airbus A320 or a Boeing 737, within 20 years, predicted Luo Zhenan, vice secretary-general of the government-run China Aviation Industry Chamber of Commerce, in comments Jan. 30.
It's building part of the 75-to-90-seat ARJ21 regional aircraft, in Yanliang in northwestern Shaanxi province. The plane's first flight is set for March next year, the government-owned China Daily reported yesterday. Many of the plane's parts are American, including its General Electric Co. engines.
The Financial Times earlier reported China's plan to set up a company to build planes.
State-owned China Aviation Industry Corp I, known as AVIC-I, already builds military jets such as the new J-10 fighter and a small commercial plane, the 50-seat MA60, through subsidiaries such as Xi'an Aircraft. It sells the MA60s to local airlines and in developing countries.