In addition to its restructuring into a public holding company, CATIC is simultaneously targeting exports of its civil airplanes via an independent unit that will expand by going public. The company is seeking strategic investors from overseas and the private sector to invest in the business unit.

Future 'Lockheed Martins'

Unlike many other industries, the defense industry is not as subject to economic cycles. Besides CATIC, other military industrial giants are also expected to conduct a series of restructurings and build themselves into Chinese "Lockheed Martins" using the capital market.

Lin Zouming, president of China Aviation Industry Corporation I (AVIC I), a leading aviation manufacturer, said at the company's year-end summit recently that it plans to list four more of its units in 2007, and following that, is expected to finally to go totally public.

Public companies under the control of AVIC I have seen great buoyancy since then. Shares of Hubei Aviation Precision Machinery Technology Co Ltd, a Hubei province-based public company, rose by 8 percent in February, and Guizhou Liyuan Hydraulic Co Ltd, another listed company under AVIC I, rose by 16 percent last month.

China State Shipbuilding Corporation (CSSC), established in 1999, is the country's conglomerate in shipbuilding, making both naval and civilian products.

CSSC is capable of building various kinds of warships and auxiliary vessels, as well as related equipment for the Chinese Navy.

For civilian ships, CSSC is adept at building many types of modern ships that fully comply with the rules and regulations of any classification society in the world.

On January 29, Hudong Heavy Machinery Co Ltd, a public company under the control of CSSC and China's largest marine diesel engine manufacturer, said that it will issue a total of 400 million new shares to buy a package of assets from its parent company CSSC.

The statement pushed the company' shares to rise to their daily limit in their first five trading days.

China North Industry Group Corporation (CNGC), the largest weapon-manufacturing group in China, develops high- tech weapons for the army, navy and air force, as well branches of other armed forces. Following the policy of combining military and civil production, CNGC is also developing high military technology for civilian use.

1

2

3

(For more biz stories, please visit Industry Updates)