In Fang's view, it is a global trend for world aircraft manufacturers, primarily Boeing and Airbus, to outsource more manufacturing to China. This will certainly create new business opportunities for aero-chemical suppliers like PPG Aerospace, involving products such as coatings, sealants and windscreen glass.

"As suppliers for Chinese aircraft makers, such as Xi'an, Chengdu and Shanghai Aircraft Industry Companies, we are pleased to see their manufacturing shares in Boeing and Airbus increase," Fang says.

These local companies serve Boeing and Airbus as global original equipment manufacturing (OEM) partners.

"As Chinese OEM firms gain a larger share in the global OEM market, we will witness more business contracts in the future," Fang emphasizes.

Other international developments are expected to facilitate the growth of PPG Aerospace's business. First, more global air fleet maintenance service will be transferred to China.

"It is estimated that airplane maintenance service in North America will shrink by seven per cent annually. It will be shifted to the Asia Pacific area, especially China," Fang says.

Air fleet maintenance currently holds a dominant position in PPG Aerospace's China business, in terms of revenue. In fact, the bulk of PPG Aerospace's revenues in China presently stem from the after-market or maintenance business.

"The after-market business now generates 60 per cent of our income in China. The proportion will be lowered in the future to less than 50 per cent as business from the plane manufacturing sector grows," Fang says.

In addition to OEM production, China is gearing up to further develop its own patented feeder and trunk-line airliners. This is expected to create more business opportunities for PPG Aerospace.

"China's efforts to develop its own aircraft manufacturing capability also turn out to be positive news for us. In fact, the progress China has achieved in this area has benefited us by offering new business opportunities, " Fang says. For example, the ARJ21 jetliner developed by China Aviation Industry Corporation I uses PPG Aerospace products and services.

Last but not least, the reconfiguring of passenger planes into freighters is expected to bring business to PPG Aerospace, according to Fang.

Boeing's market forecast indicates that about 3,000 freighters will be needed globally in the next 20 years. The figure for the Asian Pacific market will be 700 to 800. Most of these freighters will come from reconfigured passenger aircraft.

To further tap the market potential in China, PPG Aerospace has consistently been innovative in new business models. Its business model is to localize its service in a target market without local manufacturing facilities.

Setting-up ASCs is one of the market opportunities. "The establishment of ASCs enables companies to get more accurate demand information and to make better forecast with respect to the specific market," Chen Hong, a visiting professor at Cheung Kong Graduate School of Business and professor of operations at University of British Columbia, Canada, comments.

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