General aviation has an exciting future, but ground rules are required

Cars and homes used to drive the Chinese economy, but the government has decided that activity in those sectors needs to be curbed. Cities whose roads are bursting with traffic, such as Beijing and Shanghai, have introduced limits on car purchases, and for many of China's automobile makers and sellers the best days are something they see only in their rear-view mirrors.

Economic development goals put forward at the 18th National Congress of the Communist Party of China last month call for annual average growth of more than 7 percent, and the aviation industry is expected to be one of the engines of that growth.

There are two strands to civil aviation: commercial and general, and it is the commercial sector that has soared in China in the past 20 years. In fact China's commercial aviation industry is now the world's second-largest, after that of the United States. But in the next 10 years commercial aviation will reach its cruising altitude and then begin to slow down.

As that is happening, the country's general aviation sector will be ascending.

Last year there were 230,000 general aviation aircraft in the US, accounting for 97 percent of civil aircraft, and the industry brings in $150 billion (114 billion euros) annually and employs 1.3 million people. By contrast, in China there were about 1,150 general aviation aircraft last year.

The minuscule size of the industry in China can be attributed to strict controls on low-altitude airspace and the huge profits to be made in commercial aviation.

With a highly developed commercial aviation sector and a poorly developed general aviation sector, the Civil Aviation Administration of China has formulated a strategy under which both sectors will fly side by side.

Economic and market conditions for general aviation development in China are now ripe. International experience shows that the basic economic condition for a general aviation sector to grow is when a country's GDP per capita reaches $4,000, a mark China surpassed in 2010. That year, the State Council and the Central Military Commission issued a circular on extending changes to rules on the use of the country's low-altitude airspace, a strong policy signal that low-altitude general aviation will be opened up.

General aviation has been listed as a strategic emerging industry in China. The 12th Five-Year Plan on Civil Aviation (2011-15) and guidelines on promoting the civil aviation industry that the State Council issued in July both highlight general aviation. It is also an industry in which local governments can play a key role. Most general-aviation businesses are local, and benefits such as taxes, employment and the development of related industries accrue to local areas.

Consequently, enthusiasm for the general aviation in China has been widespread. Beijing, Yunnan, Guangdong, Chongqing, Xi'an, Shenyang and Zhengzhou all have plans to gain a foothold in the industry. Industrial capital and investment funds have been paying close attention to this emerging field of investment, too.

State-owned capital, private capital and foreign capital are also showing interest, as are big overseas companies. The plane makers Cessna Aircraft of the US and Diamond Aircraft of Austria have begun to make general-aviation aircraft in China.

With all of that, the global general aviation industry is very positive about China.

As signs of recovery have appeared in the world economy, the global general aviation market has continued to flounder. Worldwide, 1,865 general aviation aircraft were delivered last year, down 3.5 percent on 2010. Those figures compare with the peak of 4,276 in 2007. By contrast, general aviation in China continues to soar, with growth of 14.3 percent last year.

The limited number of general aviation aircraft in China leaves plenty of room for imagination. But general aviation is a specialized, policy heavy industry. Yes, strict airspace controls have been a dampener on expansion, but if the industry is to grow, other areas will need attention, too. These include airports, operation and service systems, and industry management policy, and solving problems in these areas will take time.

In fact, it also takes time to build the environment in which general aviation can operate, and to build an industry that investors understand.

The author is associate professor at School of Economics and Management, Beihang University. The views do not necessarily reflect those of China Daily.

(China Daily 12/21/2012 page7)