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China hopes to catch up to West in aviation industry

XI'AN, China—The centuries-old farmsteads outside the historic city of Xi'an look nothing like the model community displayed outside Jin Qiansheng's office. Give them time.

Xi'an, better known for the ancient terra cotta warriors found there, is China's aerospace hub. There are 130,000 aerospace workers in Shaanxi province, which includes Xi'an.

In five years, the Xi'an Yanliang National Aviation Hi-Tech Industrial Base could employ 50,000 of these workers in a brand-new facility, handling everything from design and flight testing to final assembly of commercial aircraft.

In 20 years, it could employ 500,000 workers—half in aerospace, half in manufacturing other goods such as automobiles and household appliances. That's the government plan. Jin hopes the new facilities and a low-cost work force will lure foreign companies.

"We would love to work with and learn from a company like Boeing," said Jin, deputy director of the base's administrative committee.

But whether the model city becomes real will depend on how it handles steep challenges.

"Many of our manufacturing procedures are not standard," Jin said. "We could have an energy shortage. Our recordkeeping is not as good. We need to learn more about management."

Evidence of China's rise in low-tech manufacturing is abundant: The country makes two-thirds of the world's shoes and nearly all its toys.

Aircraft is another matter. The country's aviation sector, while employing nearly as many workers as America's, is dramatically less productive.

America's aerospace industry, under stress from global competition, may not have to worry as much about China as the experience of other industries might indicate. For all its growth, China still has far to go to improve its technology and train its work force before it can compete with the West in aircraft.

"I don't know if it's that easy for them to catch up," said David Dixon, Asian sales vice president for Montreal-based Bombardier, which makes Learjets and regional passenger jets.

It's also becoming a destination for airplane parts work. Western companies hope that creating jobs in China will encourage the Chinese to buy their airplanes. China already is a big customer. It's expected to become the world's second-largest aircraft market in the next 20 years, with $213 billion in plane purchases expected, according to the latest Boeing forecast.

Boeing has spent $550 million on Chinese-made parts, dating to the country's opening to foreign investment in the late 1970s. It plans to spend $750 million more in the next five years.

Airbus is pledging that 5 percent of the work on its new A350 jet will go to China.

But that's still a small part of global production, said Richard Aboulafia, an aerospace analyst with the Teal Group in Fairfax, Va. Even with the projected Boeing bump-up, it's less than 1 percent of what Chicago-based Boeing spends globally, he said.

China has a clear advantage over Western countries in labor costs. A blue-collar aerospace worker in Xi'an makes about 80 cents an hour, compared with about $25 an hour for a worker in Wichita, Kan., for example. But that doesn't mean it's ready to take large amounts of work from Westerners, said Wade Cornelius, Boeing's vice president for global strategy and international markets.

Traditional American aerospace bastions such as Seattle, St. Louis, Wichita or Long Beach, Calif., have a decades-long head start in investing in the equipment and physical infrastructure needed to make large commercial aircraft, he said.

But China's importance in some areas of aircraft manufacturing will grow, he added. This summer, Chinese companies won contracts to make the rudder and several other parts of Boeing's new 787 aircraft—a number that fits with Chinese people's traditional association of the number 8 with good luck.

Chinese workers are also assembling a regional jet for Brazilian plane maker Embraer, although its plant had to suspend operations for three days when a toxic chemical spill ran past the plant in the Chinese city of Harbin.

And China is adopting some Western production and management methods, even in the state-owned sector that still dominates Chinese aerospace.

China's first regional jet, the ARJ-21, is expected to take flight in 2008, the year of the Beijing Olympics. The first all-China-designed and -built plane for the private market, the four-seat LE-500 "Little Eagle" trainer aircraft by Shijiazhuang Aircraft Industry near Beijing took flight this year.

The plane is far from becoming a global competitor, and far from a large passenger jet in size or complexity. But Fu Changmin, a technical manager at the plant, said the Eagle is built with American standards in mind—a big shift from when he started out in aviation 10 years ago.

"We now think more about the world market," he said.

What China ultimately becomes is a key question for global aviation and for the prosperity of one of America's last great manufacturing industries.

"We have a huge market that can attract business from the U.S. and Europe," said Jin, the official with the new Xi'an aviation industrial base. "The thing we most need to do at the moment is build."

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(c) 2005, Knight Ridder/Tribune Information Services.

PHOTO (from KRT Photo Service, 202-383-6099): CHINA-AVIATION

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