Chinese Aviation Cities: the Obvious, the Unexpected, and the Discrepant

In this blog post, China Aerospace Blog revisits the “What is the Chinese Aviation Industry Like?” article, which dates back to July 2018. While the former was essentially based on the China Civil Aviation Industry Report 2017 by MIIT, this blog post is built on a different set of data detailed below. The focus is also different: we single out the main aeronautical cities in China and analyze the geographic distribution. Spoiler alert: although the top 5 cities will not come as a surprise to most, the investigation puts into the spotlight some unknown yet significant second or third-tier cities, often with a strong specialization in an aircraft subsystem or industry vertical.

For the sake of validation, the figures found are also compared to the latest China Civil Aviation Industry Report 2018 of MIIT, to note the similarities and discrepancies.

As this article is unusually long, I have put together a table of content below, feel free to jump directly to the section of interest:

Part I – Methodology
Part II – A More Macro Outlook: Aeronautical Facilities per Province
Part III – Reducing the Geographic Unit from Province to City Level: Top Aeronautical Cities
Part IV – Unexpected Aeronautical Cities with the Top-30
Part V – Discrepancies with the China Civil Aviation Industry Report, and Conclusion

I – Methodology

While China’s space sector is often shrouded in secrecy and domestic market-oriented, the commercial aviation industry is on the other hand highly internationalized, with a strong presence of foreign companies in China and Chinese players often subcontracting for the former. This implies strong international quality and management requirements for Chinese aeronautical companies, among which are international standards such as AS9xxx, Nadcap, etc. Names of certified companies are available in open literature, and by gathering this data and reducing the scope to companies situated within China, one gets an impressive list of 1200+ companies, on which this analysis will be based on. To be exact, the actual metric is actually the number of certified aeronautical facilities, rather than companies (although as the number of companies with multiple certified facilities are low, “industrial sites/facilities” and “companies” could be used indiscriminately as a rough approximation). A big thanks to Pierre De Wulf from ScrapingBee, who was instrumental in gathering the data.

II – A More Macro Outlook: Aeronautical Facilities per Province

aeronautical facilities per province CABFig. 1 – Aeronautical Facilities per Province

From a macro point of view, Jiangsu is leading by far with 236 aeronautical facilities, followed by Shanghai (154), Shaanxi (153), Guangdong (138), Sichuan (125), and perhaps more surprisingly Liaoning (73) and Beijing (62) slightly trailing behind.

The leading position of Jiangsu is linked to its (comparatively) strongly developed and industrialized economy, the presence of qualified workers and universities, and the proximity to Shanghai, which makes the province attractive for foreign companies. Many multinationals have set up manufacturing facilities in this area, among which are  big names such as General Electric, Honeywell, Safran, Parker or ThyssenKrupp. Local players are also strongly present, including subsidiaries of the large state-conglomerates AVIC and AECC.

The leading positions of Shanghai, Shaanxi and Sichuan are also very predictable results, as they are among the main strongholds of Chinese aircraft manufacturers and the large subsidiaries of the state-owned conglomerates (COMAC, AECC, AVIC XAC, AVIC CAIG, etc.).

Guangdong on the other hand may seem more surprising, as the province is known mainly for aircraft maintenance (companies like GAMECO, ST Engineering, MTU) and the general aviation activities of AVIC in Zhuhai (CAIGA). Yet a solid number of more secondary Chinese players are located here (Donica, Hangxin, …), as well as obscure smaller players that are generally unheard of. Shenzhen concentrates a good 40% of these companies, many of them being second tier or non-aerospace specific companies, consistent with the city’s background as the electronics manufacturing hub of China. It is also worth noting that Airbus set up its China innovation center, ACIC, in Shenzhen in 2019.

III – Reducing The Geographic Unit from Province to City: The Usual Suspects are still Dominating the Top-5

overall figures camembertFigure 2 – Top-5 most represented aeronautical cities

As we reduce the geographic scope to city-level, only 5 cities aggregate more than 5% of the total number of companies. Unsurprisingly, they are the usual suspects: Shanghai, Xi’An, Suzhou, Chengdu and Beijing. These 5 cities put together represent 40% of all aeronautical facilities in China, and reflect the dominating provinces mentioned above (with the exception of Guangdong, because companies are more evenly spread out over the cities of Shenzhen, Guangzhou, Dongguan and Zhuhai, rather than being concentrated in the provincial capital).

top 5 cities column diagramfigures - 1Figure 3 – Top-5 Most Represented Cities in Number of Industrial Facilities

IV – The More Unexpected Cities

After Shanghai, Xi’An, Suzhou, Chengdu and Beijing, the following 25 cities represent another 40% of total aeronautical facilities, while the remaining 102 cities represent the remaining 20%.

figures - 2

Among the cities ranked n°6 to n°30, many of them are also important aeronautical cities which names are known to those familiar with Chinese aviation, often hosting a major subsidiary of AVIC: Shenyang, Harbin, Jingdezhen, Zhuhai, Tianjin, Guiyang. We won’t be going over these cities in the following part (a lot of information is already available). Rather, we will take a bit of time to talk about some of the other cities, which may be perceived as “unexpected”, especially for those unfamiliar with the Chinese aircraft industry. They are the cities of Wuxi, Xiamen, Baoji, Changzhou, Hanzhong, Luoyang, Zhenjiang and Mianyang, discussed below:

Wuxi: one of the leading cities of Jiangsu
One of the richest and most industrialized cities of China, the city of Wuxi ranked first and second in terms of GDP per capita in 2019, respectively in Jiangsu province and on a national scale (second only to Shenzhen). Its fast growing economy is due to the early role it played in the 1980-1990 economic reforms, and its proximity to the other neighboring economic hubs of Shanghai, Suzhou and Nanjing. While 40 aerospace companies/facilities were identified in this blogpost’s research, a significant part were metalwork companies (casting, forging, cutting etc.) with loose links to the industry, as far as their public websites showed. Among the more aviation focused companies are Chinese conglomerate subsidiaries: AECC Control Systems Institute, AVIC Excellence Forging (AVIC subsidiary focused on forging), AVIC Leihua Rockwell Collins Avionics (JV formed by Rockwell Collins and AVIC’s electronics subsidiary Leihua Eletronics Research Institute, to provide Integrated Surveillance Systems (ISS) for the COMAC C919 aircraft). The city has also seen a number of foreign companies establish local entities, likely due to the proximity with Shanghai and the presence of cheaper qualified labor: Bollhoff Fastenings (fasteners), Morgan Advanced Materials (ceramic cores), Techniques Surfaces (surface engineering), and others.

Xiamen: the MRO City
An industrialized coastal city situated in Fujian Province, Xiamen mostly (and rightfully) known as a base for MRO activities, half of the 21 companies identified were linked to maintenance, repair and overhaul activities. Almost all of these MRO activities are driven by one Asian MRO giant, HAECO, which heads the different branches of Taikoo in Xiamen (Landing Gears, Aircraft Engineering, Engine Services, etc). It was found that Sino-foreign JVs and foreign companies (+ Hong-Kong) formed at least 50% of the 21 aeronautical companies found, making Xiamen one of the cities that has attracted the most foreign aeronautical investment with respect to the total number of companies. Some of the big names that have set foot in Xiamen include Goodrich (now Collins Aerospace), Honeywell, Meggitt, Plexus, GE.

Baoji: China’s Titanium Capital
Often nicknamed the “Titanium Valley” or “Titanium Capital” of China, Baoji is the second most-important industrial center of Shaanxi, after its capital Xi’An. A very significant part of Baoji’s economy relies on the production of titanium material (sponges) and its downstream transformation (bars, sheets, etc), and is home to many of the country’s titanium companies, including one of the two largest Chinese titanium producers: Baoji Titanium Industry Co (also called BaoTi). Out of the 17 aeronautical companies found in Baoji, only one was outside of the metal & titanium business: Avic Baocheng Aviation Instruments, an AVIC subsidiary reportedly working on sensors, navigation and in-flight entertainment subsystems.

Titanium is an essential material for the aerospace industry due to its excellent weight-to-strength ratio, enabling aircraft manufacturers to lower weight while maintaining required mechanical properties. Although the aerospace industry is a large consumer of titanium, China’s capabilities regarding aerospace-grade titanium and titanium alloys is lacking, and it is widely acknowledged that much of the titanium used by domestic aerospace manufacturers is imported from foreign providers. It is likely that most of the titanium produced in Baoji is destined to non-aerospace grade applications (which represents >80% of China’s titanium consumption). It is however noteworthy that production of aerospace-grade titanium has been identified as a priority for the Chinese government, due to its importance in China’s booming space program as well as civil and military aviation projects (C919, CR929, AG600, J20, …) [1][2].

Changzhou: another industrial city of Jiangsu Province’s aviation cluster
A comparatively highly developed city of Jiangsu (GDP per capita at roughly 21 000 USD in 2018 [3]), itself one of the economic workhorse provinces and bordering Shanghai, Changzhou is known to have a diversified economy strong in the rail, automotive parts, electronics, construction material, and biomedical industries. 16 companies in our list were marked as having aeronautical activities in Changzhou, mostly in metalwork (moulding, machining, …); a closer look at them however shows that a majority caters mostly for the automotive and industrial sectors, aviation being only a minor business and in some cases a “wishful thought”. Among some of the more aerospace-focused companies in Changzhou include: Praxair Surface Technologies (aerospace-grade coatings), Ranto (minor cabin metallic parts), China Steel Precision Materials (titanium, nickel, steel).

Hanzhong: the homebase the aircraft manufacturer Shaanxi Aircraft Company
Hanzhong is a prefecture-level and one of the largest cities in Shaanxi province, behind the capital Xi’An, and alongside Baoji and Xianyang. Hanzhong is one of those cities that illustrate Shaanxi province’s leading role in China’s aeronautics: despite its relatively moderate size (for a Chinese city –> 3,8 million in 2018), it has a very active aeronautical industry, with 16 companies coming up in this article’s list. Among them, some big names, all linked to state conglomerate AVIC: Shaanxi Aircraft Industry Group (making the different Antonov-derived transport aircraft Y-7, Y-8, etc.; subcontracting work for international players), AVIC LAMC (the landing gear branch of AVIC, which is based in Changsha but has its military landing gear center in Hanzhong), Chang Kong Gear (making gearboxes for aviation but also non-aviation applications). Most of the other companies found were smaller scale, aircraft-part metalwork firms.
Literature in English on Hanzhong is scarce, one notable exception is a short piece by Al Jazeera in 2014 available in [4].

Luoyang: the city of bearings
Formally one of the four imperial capitals of China, Luoyang is today a bustling city in the rather underdeveloped province of Henan, in north-eastern China. With the provincial Zhengzhou, Luoyang concentrates most of the province’s high tech industries. Its aeronautical history goes back to the early days of the People’s Republic of China, during which important new industries were settled there as part of the early state-led five-year plans. 12 companies were found in our list, among which are LYC Bearing Company (set up historically with the aid of Soviet experts in the 1950s, it is the main Chinese bearing manufacturer that caters for the local aerospace industry, and has been seeking to reach provider status with foreign aeronautical players [5]), AVIC Jonhon (AVIC subsidiary specialized in connectors and cables), AVIC Optronics (optronic pods for aircraft/drone/ground systems, aircraft HUDs), and a titanium cluster including Sunrui Titanium Precision Casting (certified and providing parts for example for Chinese aircraft engine manufacturer AECC) and Luoyang Pengqi Industry (titanium and aluminium structural parts).

Zhenjiang: another aerospace cluster of Jiangsu
Zhenjiang is a prefecture-level city in Jiangsu, just next to the aformentioned Changzhou City, albeit being slightly smaller (3,2 million inhabitants in 2018). It is one of the (comparatively) more quiet cities of Jiangsu, less notorious than Nanjing, Wuxi or Suzhou. Yet in the aviation industry it hosts some interesting companies: 10 on our list, among which Fesher Aviation Components (an important subsidiary of AVIC specialized in aircraft interior composites, see a previous article on this company here), Aleris (US company making aluminium roll products), HiWing Materials (CASIC subsidiary making composites and aircraft insulation parts), Sanming Aviation (aircraft lights), Jiangsu Haoran (spray-forming specialist).

Mianyang: one of the leading aerospace centers of Sichuan
Mianyang is the second largest city of Sichuan (after Chengdu), and also one of the top industrial centers of the province. It’s known for its electronics, metallurgy and aerospace industries, and houses some high-rated Chinese universities and laboratories (including China’s Aerodynamics Research and Development Centre). In the aeronautical sector, 11 companies were found within the scope of our research. Among them are metallurgy companies, and most notably Pangang Group Changcheng Special Steel, which provides various steel alloys to engine-manufacturer AECC, Chengdu Aircraft Corp., and parts of the Chinese space program [6][7][8]. Changcheng Special Steel, based in Mianyang, is part of the metallurgy giant Pangang Group, the largest steel manufacturer of western China. Other notable companies are Changhong Battery (subsidiary of electronics giant Changhong Electric Co., makes Ni-Cad & Ag-Zn batteries for the ARJ21 and AG600 according to corporate website), Huafeng Group (advanced cables and connectors for aerospace applications), Jiuzhou Aerocont Technologies (ATC systems for airports), and FTS (also called “FeiTian Tech”, a Beijing-headquartered IFE&C solution provider with a subsidiary in Mianyang).

V – Discrepancies with the China Civil Aviation Industry Report, and Conclusion

Chengdu_Airlines_COMAC_ARJ21-700_XiangfengFig. 4 – A Chinese ARJ 21-700 of Chengdu Airlines (Credits: Wikipedia)

As mentioned previously, China’s Ministry of Industry and Information Technology (MIIT) publishes annually a report on China’s civil aviation industry. The latest edition is from 2018, as the 2019 has not been released yet at the time of writing (the report of year N is usually released during year N+1). For comparative purposes, the main highlights of the report are detailed below, compared to this article’s research, and the discrepancies analyzed.

According to the MIIT’s report in 2018, there were 160 civil aeronautical firms in China, spread over 26 provinces and employing 348 000 people. Mainland Chinese companies represented 148 companies, Hong-Kong/Taiwan/Macau 5 companies, and foreign countries 7 companies. The gross industrial output of the (civil aeronautical) industry was at 274,4 billion CNY (roughly 39,25 billion USD), and value-added output at 65,13 billion CNY (roughly 9,32 billion USD). The leading provinces in terms of value-added output were Guangdong (41,7%), Shaanxi (13,7%) and Fujian (10,3%).

As the reader has likely noticed, the figures of the report differ greatly from our list based on aerospace quality certifications. Here are some ideas which could explain the gap:

Number of companies: 1200+ vs 160: our list identified 1200+ aeronautical facilities, about 7,5 times the number of companies of the MIIT report (160). This is probably due to the fact that our list counted many companies (raw material processing, metalwork, etc) only mildly involved in aerospace and mostly working in the energy, rail, automobile or other industrial sectors. These would not have been counted by MIIT. Also, since the list is built on certified aeronautical industrial sites and not companies, some multi-site companies which have certified multiple factories would have been counted several times. Also, the MIIT limits itself to “civil aeronautics”, probably leaving out companies that are too involved in military aviation.

Presence of foreign companies: Yet, despite our methodology clearly over-reporting the number of firms, one can’t help thinking the MIIT report may have missed an important number of firms. Take the number of foreign firms for instance: 7 foreign civil aeronautical firms, or 12 if we include Hong-Kong/Taiwan/Macau. This seems clearly out of touch in reality, as one can easily think of more than a dozen foreign companies in China off the top of one’s head. While the MIIT’s figures may be counting joint-ventures as Chinese companies, this still does not explain why there are so few foreign companies, as there are also many foreign aeronautical WFOEs in China. The MIIT report does not give any indication of methodology nor what is defined as a “foreign company” or “civil aeronautical “company”.

Unfortunately it was not reasonable to count the representativeness of foreign firms from this blog post’s list due to the sheer amount of work that would have involved (1200+ companies).

The Importance of Chinese provinces sometimes in a different order: the importance of the top ten provinces are literally the same as the one derived from this blog post, although this essentially is suggesting comparing apples and oranges, as the former is based on valued-added output, and the latter on the number of aeronautical facilities. However the absence of Tianjin in the MIIT report is surprising (think Airbus FAL), especially since the report was based on value-added output (!) rather than the number of companies. Also, the over-representation of Guangdong province is also surprising (41,7%!), although this can be explained by the fact that MIIT includes the drone industry in “civil aeronautics”. Guangdong is known for its thriving UAV industry, with many world-class leaders such as DJI or EHang.

Conclusion
One of the main take-aways from this blog post is that the Chinese aeronautical landscape remains larger and more sophisticated than many think. Countless people reduce China’s aviation industry to state conglomerates AVIC, COMAC and AECC, and focus only on the airframer part (ARJ21, C919, MA700, etc), also sometimes calling Chinese commercial aviation programs an “empty shell”, as mentioned in a previous article (Airbus A320, Boeing 737, COMAC C919: where do the suppliers come from?). This blog post shows that the Chinese aviation industry, while still in its early stages, has a number of potential future growing stars, going beyond basic airframe subparts and building value-added aircraft interiors, electronics, avionics, cables, composites, critical mechanical parts.
The divergence between this post and the MIIT report, mostly due to difference in methodology, also suggests that further work is needed to get a more thorough understanding of the Chinese aviation ecosystem. This is also indispensable for international aerospace players to source future innovations and/or detect potential competitors. For further reading, two reports from RAND Corporation are also insightful, available in  [9] and [10].

Glossary
MIIT: Ministry of Industry & Information Technology of China
WFOE: Wholly-Owned Foreign Entreprise
JV: Joint-Venture
AVIC: Aviation Industry Corporation of China
AECC: Aero Engine Corporation of China
FAL: Final Assembly Line

References

[1] Status of Titanium Alloy Industry for Aviation in the World and Development Strategy of Chinese Entreprises, Wang Guofeng, Harbin Institute of Technology, January 2019
[2] Etude de veille sur le marché du titane 2015-2017, Ministère de la Transition Ecologique et Solidiare, December 2017
[3] (江苏省) 2018年常州市国民经济和社会发展统计公报, 常州市统计局, March 2019
[4] The mega-city no one has heard of, Al Jazeera, January 2014
[5] Chinese bearing companies seek aviation business, China Daily USA, June 2015
[6] JCSSC inks steel supply deal with Chengdu Aircraft Industrial, Steel News, August 2013
[7] 中航工业驻长城特钢代表室:扎根山区 服务航空, CANNews, February 2014
[8] Pangang JCSSC won the “Best Quality Award 2018” for AECC Xi’An Aero-Engine Ltd, Ansteel corporate news, March 2019
[9] Chinese Investment in U.S. Aviation, RAND Corporation, 2016
[10] Ready for Takeoff, RAND Corporation, 2011

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