Domestic and overseas cargo airlines will be allowed set up ventures in China as the country further loosens its control over the air cargo market.

"Our policy is to encourage airlines to run joint ventures (JV) or solely funded ventures as they expand within the air cargo market," said Li Yongqi, deputy director of Planning and Financial Development for the General Administration of Civil Aviation of China (CAAC).

Li told participants at the China Air Cargo Summit 2004, which ends today, that restrictions on imports of cargo aircraft will be relaxed.

The two-day summit, organized by Avail Corp and CAAC, is focusing on developing sustainable growth in China's competitive air cargo industry, with the leaders of the world's major airlines attending.

"Approval procedures for purchasing aircraft will be simplified and rules to approve cargo air routes and flights will be reformed," Li said.

He said CAAC has received applications from US FedEx Express for setting up a solely funded cargo base in Guangzhou, besides, Shenzhen Airlines has also applied to establish a JV cargo airline with Lufthansa Cargo.

"CAAC is undertaking further research into the two projects," Li said, but he did not say when they would be approved.

China put forward the aviation liberalization policy in 2002. It requires the air cargo transport sector to develop in an active, gradual, organized and steadfast way.

More than 2.19 million tons of cargo and mail were handled in China last year, up 8.4 per cent over 2002, putting it among the world's air cargo markets with the most potential.

Of the figure, cargo and mail being sent on international routes totaled 514,000 tons, an increase of 20.9 per cent over 2002.

"However, the cargo volume accounted for a much lower rate to reach only 4.6 per cent of the global market," said Song Qinghua, deputy director of CAAC's International Co-operation Department.

He said the cargo volume is expected to rise to 4.7 million tons by 2010 with an annual growth rate of 10 per cent.

"The air cargo market in China is quite promising, but it needs more aircraft and flights," Song said.

At present, China only has 21 cargo planes, which are expected to increase by three by the end of the year.

"They are still short of meeting the growing demand," Song said.

Local aviation insiders say the policy to expand the air cargo business is part of the nation's strategy to become a civil aviation power.

In the past few years, CAAC has taken a series of measures to stimulate the nation's air cargo business, said Song.

It has set up leading groups with Hainan Province and Shanghai for the further opening up of flight rights.

Song said CAAC has also signed an agreement with Tianjin municipal government to expand its air cargo business.

According to Li Yongqi, CAAC is encouraging local governments to establish air cargo hubs to meet the expansion of cargo transport links.

In addition to Shanghai's bid to turn Pudong Airport into an air hub, CAAC will give priority to the airports in Tianjin, Guangzhou, Shenzhen, Wuhan and Kunming to create cargo hubs.

"Airlines are encouraged to run cargo bases at these airports," Li said.

A CAAC source said Pudong Airport has established a cargo transport zone, which consists of the three cargo stations launched by the airport itself, China Cargo Airlines and Shanghai Airlines.

(China Daily June 8, 2004)