Aircraft-related stocks jumped yesterday after a news report said that China's two state-owned aircraft makers may merge to integrate domestic resources.

Gu Huizhong, vice general manager of China Aviation Industry Corp I, or AVIC I, said government departments, including the Commission of Science, Technology and Industry for National Defense, are drafting plans to merge AVIC I and AVIC II to boost the domestic aviation industry, according to China Business News.

The two companies, which focus on making military and civil aircraft, may set up a joint venture to merge their units which produce civil airliners, the Shanghai-based newspaper said.

"Listed companies controlled by the two companies will benefit from the merger," said Xia Fulu, an analyst at Industrial Securities. He said the merger is the first step to China eventually building big planes. "The merged firm will eventually build big planes."

An official of AVIC I said he was not aware of the merger plan.

AVIC I already builds China's first regional jet ARJ21, which will make its maiden flight next March. The project, costing six billion yuan (US$821 million), is seen as a precursor to China building its own jumbo jets.

Xi'an Aircraft International Co, partly controlled by AVIC I, rose 6.15 percent to close at 38.84 yuan on the Shanghai Stock Exchange and Jiangxi Changhe Automobile Co, partly owned by AVIC II, gained 10 percent to 9.30 yuan.

(Shanghai Daily by Winny Wang January 3, 2008)