China Aviation Industry Corp (AVIC) will build a $1.2 billion commercial helicopter plant in the northern port city of Tianjin with the local government to consolidate its diverse businesses. The move will allow the company to make full use of the geographical advantage of Tianjin as a port city, said a spokesman.

Under the agreement, AVIC will inject its helicopter development and manufacturing assets into the new company. These assets include China Helicopter Research and Development Institute, Harbin Aircraft Industry Group, Changhe Aircraft Industries and Baoding Propeller Factory.

AVIC’s deputy general manager, Li Fangyong, said the new company, with registered capital of 8 billion yuan ($1.17 billion), will be 69 percent owned by AVIC and 31 percent by the Tianjin government.

The partners will each invest an extra 4 billion yuan ($580 million) in the company, and AVIC has secured a multibillion-dollar yuan credit line from 10 Chinese banks.
This marks AVIC’s latest move to consolidate its businesses after it was launched last November with the merger of state-owned AVIC I and AVIC II.

Tianjin is building an aviation industry hub with manufacturing as the core business. Airbus has an A320 final assembly line in the city.

According to Xinhua news agency, China will need about 3,000 helicopters over the next 20 years but there are only 124 in use now. It is expected the helicopter market will take off once the government relaxes low-altitude airspace control next year.

“After the merger, AVIC could consolidate all the resources to speed China’s helicopter development,” said Liu Weimin, researcher at the Civil Aviation Management Institute of China.