The aviation industry distinguishes itself from many other traditional industries for its high dependence on technology and capital. Therefore, innovation and human capital are crucial to the survival of aviation companies.

International experience shows that it takes eight to 10 years and US$2 billion to US$5 billion to develop a new trunk plane, and sales of more than 300 to make a profit. Of all types of trunk planes that have been developed around the world, 75 per cent have yet to reclaim to their R&D investment. Such a high requirement on R&D investment has not only propelled aviation companies in the United States and the European Union to enhance efforts to keep technology secret, but has also discouraged Chinese aviation companies to pursue independent R&D.

According to the above analysis, the domestic aviation industry should neither give up independent R&D to focus on obtaining international subcontracting nor invest heavily in motorcycle or car manufacturing. Chinese aviation companies should diverge from non-aviation civilian production and expedite development of aviation products.

The author is a PhD candidate with the School of Economics and Finance at Xi'an Jiaotong University

(China Daily 11/23/2006 page4)

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