China - AviationChina - Aviation

Overview

Aircraft, Spacecraft, and related parts (HS Code 88)            
 

Source: Global Trade Atlas    Unit: $ millions

Having experienced double-digit annual rates for many years, China is the world’s second largest civil aerospace and aviation services markets and one of the world’s fastest growing.  Commercial opportunities in China’s civil aerospace and aviation services markets exist in virtually every subsector including: civil and general aviation aircraft; engines and parts; maintenance, repair and overhaul (MRO); and airport design, equipment and services, among others.

China’s government, which has long considered the development of its aviation system a national priority, has spent $100s of billions to establish airlines, build and upgrade airports, develop domestic manufacturing capabilities, train new pilots, and increase domestic maintenance capacity.  China is the largest foreign market for U.S. aerospace products with U.S. firms exporting $17.7 billion in products to China in 2018, 50% of China’s total aerospace product imports.  In 2018, China's civil aviation transportation turnover reached 121 billion ton-kilometers; passenger traffic for 2018 reached 610 million passengers.

By the end of 2018, China had more than 59 airlines (passenger & cargo) and 3,615 civil aircraft (an increase of 10% over 2017).    According to China’s 13th Five Year Plan, by 2020, China will have more than 4,500 civil aircraft.  China’s top three airlines - Air China, China Southern, and China Eastern - are already among the world’s top 10 carriers by passenger volume.  By the end of 2018, the number of Chinese civil airports grew to 235, and China expects to have more than 260 civil airports by 2020.  37 Chinese airports exceed 10 million passengers annually with Beijing, Shanghai and Guangzhou airports alone accounting for a quarter of total passengers traveling in China.  

Though China is still in the early stages of developing general aviation (GA), there are significant opportunities for U.S. companies in China. In 2017, in a bid to speed development of the sector, the Civil Aviation Administration of China (CAAC) removed 30 GA related rules.  They reduced GA flight plan approvals from one week to one day, increased the number of aircraft maintenance and repair certifications, and eased regulations on UAVs, repair work, and flight paths.  Most importantly, China is looking to deregulate the use of airspace for GA at lower altitude levels.

The expansion of China’s aviation market creates both opportunities and challenges for U.S. companies.  Commercial opportunities in the civil aviation market include tier-one suppliers to Chinese OEMs, niche parts manufacturers, airport design and construction companies, MRO, and GA among others.  However, U.S. companies face strong competition from European companies and increasingly from local Chinese firms as well.  

Leading Sub-Sectors

Aircraft Parts: Manufacture and Repair
According to the U.S. Department of Commerce, China imported $18.875 billion in aircraft in 2018, an increase of 11.6% over 2017.  As a result of the ongoing build-out of China’s fleet, China's aircraft manufacturing and repair industry reached $39 billion in 2017, up 7% from 2016.  China’s aviation services market is expected to overtake the United States as the world’s largest by 2022 and the country is estimated to need over 7,000 commercial aircraft in the next 20 years.  The best short-term opportunity for U.S. aerospace parts companies is in supplying parts for China’s commercial aircraft fleet which is dominated by western aircraft.  With growing capacity utilization, the growth and aging of China’s aircraft fleet, and the domestic production and assembly of aircraft, China’s demand for parts will undoubtably rise with annual growth rates expected to reach 10% in the near future. 

A second opportunity is in supplying parts to China’s emerging aircraft manufacturers.  China is aggressively working to develop a globally competitive aerospace manufacturing industry and a number of U.S. companies are already key partners for the Commercial Aircraft Corporation of China’s (COMAC’s) ARJ21 regional jet and C919 narrow body civil aircraft and the Aviation Industry of China’s (AVIC’s) MA700.  China has several more aircraft in the design phase. There are also opportunities for U.S. companies in China’s fledgling general aviation manufacturing industry.  In the short run, Chinese built aircraft are not yet competitive but strong growth in China's aviation manufacturing sector over the long term is now possible.

China’s domestic aircraft parts and assembly manufacturing sector is growing and developing. In addition to approximately 200 small aircraft parts manufacturers, there are also several regionally-based major manufacturers concentrated in Shanghai, Chengdu, Xi’an, Nanchang, Harbin, Shenyang, and Shijiazhuang. Although large aircraft and engine manufacturers have continued to expand their domestic procurements for long-term development, the most highly technical and sophisticated parts are still imported. For example, over 8,000 Boeing airplanes fly throughout the world with integrated China-built parts and assemblies. China contributes components to all Boeing airplane models currently under production.
 
Airports
As noted above, aviation services in China are growing dramatically and civil aviation airports are experiencing similar growth.   According to the CAAC, in 2018, Chinese airports handled 1,264 billion passengers, up by 10.2% over 2017. Beijing Capital International Airport recorded nearly 100 million passengers in 2017, ranking first nationwide, followed by Shanghai Pudong, Guangzhou Baiyun, Chengdu Shuangliu, Shenzhen Baoan, Kunming Changshui, Xi’an Xianyang, Shanghai Hongqiao, Chongqing Jiangbei and Hangzhou Xiaoshan”.  The following table shows China’s top 10 airports with annual passenger throughput of 10 million or more:
 

(Source: CAAC website)

General Aviation (GA)
According to the Civil Aviation Administration of China (CAAC)’s 13th Five Year Plan (2016 – 2020), China will continue major new airport construction including the Beijing Daxing International Airport which is the largest new airport under construction and commence 44 new airport construction projects, including the Chengdu Tianfu Airport which will be the 2nd largest new airport project in China.  These 44 projects present significant opportunities for U.S. companies to sell equipment and services, including airport design, green construction, energy efficiency equipment, airport security equipment, ground support, terminal related equipment, and daily operations management.
 

In China, airspace is tightly controlled by the Chinese military and the airspace classification system does not treat GA air activities separately. Strict military control over roughly 70% of all Chinese airspace is the largest single factor limiting growth of this industry. As such, GA is still underdeveloped in China . In addition, ongoing government austerity programs make the optics of GA ownership challenging for some potential buyers.

Despite these challenges, China is a growing market for business aircraft, helicopters, and other general aviation aircrafts. Currently, China has 2,503 general aviation aircraft and 202 certified general aviation airports.  China has 436 general aviation companies, more than 3,100 general aviation pilots, and more than 20 flight training schools.  A number of Chinese pilot trainees travel to the Unites States or third countries for flight training as well.

Although the size of the GA fleet, and flight hours are still relatively small, the potential importance of this industry to the Chinese economy in the long term has led aircraft OEMs and Chinese government officials to devote significant resources towards growing general aviation capacity. Chinese government plans call for more than 200 new GA airports by 2020. China has many remote areas where GA can be a cost-effective solution. According to CAAC, Chinese GA OEMs located in Guangdong, Shandong, Hunan, Henan, Hebei, Liaoning, Chongqing, and other provinces have put into operation 17 GA fixed wing and rotary aircraft models. Much like the commercial aircraft sector, China has also invested in a GA industry structure that includes equipment manufacturing, operation, maintenance, airport construction, air traffic control services, and financial services.

The government has committed to gradually opening access to low-altitude airspace and to streamlining the examination, approval, and record-keeping requirements for general aviation flights. A welcome change came in November 2010 when civilian and military authorities issued a joint reform document calling for the partial deregulation of airspace under 4,000 meters with the intermediate step of opening up of airspace below 3,000 meters by 2020. There is currently a three-phase plan to deregulate GA airspace, with a pilot program in Shenyang, Guangzhou, Hainan Island, Changchun, Tangshan, Xi’an, Qingdao, Hangzhou, Ningbo, Kunming, and Chongqing. The plan is currently in the second phase, with airspace under 1,000 meters now accessible to General Aviation aircraft in these pilot locations.

In its 13th Five Year Plan on General Aviation Development, CAAC announced that by 2020, China plans to have more than 5,000 general aviation aircraft and 500 general aviation airports and reach 2 million flight hours.  The plan calls for accelerating the development of the GA sector, delegates the approval of new airports to the provincial governments, and encourages private investment in building airports.

Challenges

While China has allowed access to many U.S. aviation service providers, difficulties remain for U.S. airlines, including access to commercially viable take-off and landing slots, restrictions on all-cargo flight take-off and landing times and co-terminalization, or flying between two Chinese airports by all-cargo flights in China. In addition, China favors domestic airlines when allocating take-off and landing slots. China needs to bring its regulatory regime in line with its commitments to the United States and to increase transparency of the slot allocation process.

The surge in air traffic has significantly increased demand on the country’s large and complex airspace system. Although the system has a world-class safety record and continues to grow in passenger and cargo aircraft operations, it exhibits signs of stress, including persistent delays at airports nationwide and a continuing shortage of slots. These delays and slot shortages are due to the limits placed on the use of China’s national airspace for civil aviation purposes, inefficiencies in airspace operations, capacity management that relies on a command and control structure, and ripple effects from the resulting congested airspace when arriving at or departing from Chinese airports. China needs to undertake systematic efforts to further open its air space and modernize its air traffic management system to reduce inefficiencies and congestion and accommodate future growth.
 

Trade Events 

The 18th Aviation Expo China
Sept. 18-20, 2019• Beijing, China
http://www.beijingaviation.com/
 
The 7th Shanghai International Aerospace Technology and Equipment Exhibition 2019
Nov. 15-17, 2019• Shanghai, China
http://www.airexpochina.com/web/en/  
 
Asian Business Aviation Conference & Exhibition (ABACE)
Apr. 21-23, 2020• Shanghai, China
https://abace.aero/2020/
 
Air Show China 2020
Nov. 10-15, 2020• Zhuhai, China
http://www.airshow.com.cn/
 

Web Resources

Government Authorities
Civil Aviation Administration of China (CAAC)          https://www.caac.gov.cn/en/SY/
Air Traffic Management Bureau:                                    https://www.atmb.net.cn
 
U.S. Commercial Service Contact for Aviation Sector
U.S. Embassy in Beijing
Ida Peng, Senior Commercial Specialist
(86 10) 8531 3947; aiqun.peng@trade.gov
 
U.S. Consulate in Shanghai
Stella Chu, Senior Commercial Specialist
(86 21) 6279 8726; stella.chu@trade.gov
 
U.S. Consulate in Chengdu 
Cui Shiyang(Sonny), Senior Commercial Specialist
(86 28) 8598 6546; cui.shiyang@trade.gov
 
U.S. Consulate in Guangzhou
Roya Xie, Commercial Specialist, 
(86 20) 3814 5000 ext.5807; roya.xie@trade.gov
 
U.S. Consulate in Shenyang 
Dongmei Sun, Commercial Specialist
(86 24) 2322-1198; dongmei.sun@trade.gov
 
U.S. Consulate in Wuhan
Wang Jing, Commercial Specialist
Email:    jing.wang@trade.gov