By Tu Lei (chinadaily.com.cn)
Updated: 2007-09-17 16:12

Four domestic banks are applying for permission to set up an aircraft leasing company, and it is expected the plan will be approved soon, the Beijing Times reported citing an unnamed official from one aviation company.

The four banks are Bank of Communications, Industrial and Commercial Bank of China, Minsheng Bank and China Merchants Bank.

"China may approve the application to expand domestic aircraft's leasing market share. The move could help change the unbalanced trade surplus," said the official.

Currently, the aircraft leasing market in China is dominated by foreign-funded firms, although domestic aircraft leasing business doubled in the past ten years.

China will have 2,880 new airplanes over the next 20 years, at a total of about US$300 billion, according to figures from Airbus and Boeing.

The financial leasing market will be more than US$80 billion or 600 billion yuan when 30 percent of aircraft leasing business is finished via financial leasing method.

China, compared with other countries, has few firms dealing in the aircraft leasing business due to higher taxes, said the official.

Domestic airlines should turn in seven to 10 percent of leasing fees as withholding tax.

If a leasing company imports planes, they must pay a 5.04 percent to 22.8 percent imported value added tax.

Five banks were listed in pilot group when the Measures for the Administration of Finance Leasing Companies taken effect on March 1st of this year.A financial leasing company between China Construction Bank and Bank of America has been approved.

The joint venture has a registered capital of 4.5 billion yuan (US$595.24 million). China Construction Bank, investing 3.3795 billion yuan, owns 75.10 percent of the venture.