China sets up $3.25bn aviation fund

The vehicle, which is expected to raise 80% of its capital from the private sector, will help finance new airports, aviation economic zones and other aviation projects.

China has made the most significant step yet to fuel the growth of its emerging aviation industry by launching a CNY20 billion (€2.46 billion; $3.25 billion) fund dedicated to the sector, local media said this week.

The Civil Aviation Investment Fund is designed to help finance new airports, aviation economic zones, budget carriers, freight and general aviation-related projects, according to a post on the China Securities Journal’s website.

The initiative is led by Capital Airports Holding, a wholly-owned subsidiary of the Civil Aviation Administration of China which controls 20 percent of the fund, but the remainder of the capital is expected to come from private investors. These include HNA Group, parent of Hainan Airlines, as well as several fund managers, according to reports.

The fund was established through the Civil Aviation Investment Management Company, an investment firm in which state-owned enterprises have a 35 percent stake and mixed or private entities hold the remainder.

The move is intended to provide further oomph to China’s booming aviation industry, which official statistics say allowed as many as 754 million people to take to the air last year – up nearly 86 percent from 2008.

Sizeable airport projects are in the pipeline, including the ongoing construction of a new hub in the south of Beijing reportedly budgeted at $14 billion. Around 62 Chinese cities have also set up aviation economic zones where aircraft manufacturers like Europe’s Airbus and Brazil’s Embraer have landed alongside equipment suppliers and logistic companies.

The aviation fund is launched at a time when prospects are gradually opening up for private investors in the world’s second-largest economy, with China’s announcement of 80 infrastructure projects to be tendered as public-private partnerships (PPP) last July hailed by industry professionals as unprecedented.