The Civil Aviation Market in China: Organization, Openness and Business Opportunities

China has structured its aviation industry around large state-owned groups, under the supervision of the central government. The main regulatory body, the Civil Aviation Administration of China (CAAC), plays an operational, normative, and strategic role. Historically, the development of civil aviation has been driven by national programs led by the Central Military Commission and the Ministry of Industry and Information Technology (MIIT), via the AVIC Group.

The main state-owned industrial companies in the sector include:

• AVIC (Aviation Industry Corporation of China), for aircraft construction and systems
• COMAC, manufacturer of the C919 and ARJ21 aircraft
• AECC (Aero Engine Corporation of China), manufacturer of aircraft engines.

 

China has also pursued several technological cooperation initiatives with international partners

• France (Airbus): an A320 assembly line in Tianjin, skills transfer agreements
• Russie (Sukhoi): cooperation on engines and airframes
• Ukraine (Motor Sich): joint engine projects, prior to Western restrictions
• Etats-Unis (GE et Honeywell): avionics and engine development based on local joint ventures

 

This model, which combines state support, industrial planning, and targeted openness to international partnerships, forms the foundation of today's Chinese civil aeronautics industry.

 

The McDonnell Douglas Episode in China in the 1980s and 1990s As early as 1985, McDonnell Douglas was one of the first Western aircraft manufacturers to establish a presence in China. It had a joint venture with SAIC (Shanghai Aviation Industrial Corporation) to locally assemble the MD-82 and MD-90 aircraft. The aim was to transfer industrial expertise by installing an assembly line in Shanghai. Despite the production of several aircraft, the collaboration encountered obstacles: administrative delays, rigid state control, American concerns about technology transfer, and finally, disappointing economic results. After its merger with Boeing in 1997, McDonnell Douglas terminated the project. This experience, while still a historical reference, is indicative of the difficulties of international industrial cooperation before China gradually opened its economy following its accession to the WTO in December 2001.

 

The civil aviation sector in China is characterized by centralized regulation and specific technical standards. The CAAC (Civil Aviation Administration of China) consolidates the roles of regulator, certifier, and safety authority. Western models often have these functions separated, with FAA certification in the US and EASA certification in Europe. This unified framework can make the regulatory environment more opaque for foreign companies.

China applies its own standards (including CCAR-129), although efforts to align with international standards such as ICAO certification have been initiated. As in other very different sectors (cosmetics, pharmaceuticals, or hazardous substances), the recognition of foreign certifications remains limited. Much equipment or software must be tested locally.

Since 2022, reforms have aimed to increase the transparency of procedures, partially recognize certain foreign normative standards, and thus accelerate the approval of strategic projects.

Also, similar to Chinese requirements for medical devices certification, for example, the requirements for testing localization and the preference given to domestic suppliers remain strong. It should be remembered that domestic suppliers also include foreign companies established in China that are capable of producing in China and invoicing customers locally. International suppliers, for their part, must adapt their certification processes and rely on local partners.

 

Long in the background, general aviation, including light, leisure, business and work aviation, is gaining in importance in China's national strategy. It meets 3 objectives: relieving commercial traffic congestion, strengthening territorial surveillance and supporting local development.

Since 2016, the CAAC has implemented differentiated airspace management with flight zones below 3,000 meters and dedicated navigation corridors. This framework, combined with the construction of over 400 airfields planned by 2030, is accompanied by simplified certification procedures and relaxed conditions for obtaining pilot licenses.

Today, the sector is structured around several growth segments.

Light aviation, which meets a variety of civil needs. For example, aerial tourism, surveillance of dams or energy infrastructures, cartography, agriculture, fire-fighting or rescue missions in rural areas. It requires adapted aircraft and light helicopters, as well as on-board equipment compatible with Chinese standards, high-performance flight simulators, and specific maintenance and training solutions.

The civil UAV (Unmanned Aerial Vehicle) segment is another pillar of growth. China is already one of the world's leading producers of commercial UAVs a

On-board equipment, certification and training. Chinese players in the aeronautics industry are looking for reliable on-board equipment compatible with CCAR (China Civil Aviation Authority) standards. This is particularly the case for communication, navigation, sensors, flight software and radars. Against a backdrop of increasing local certification, demand for test and certification tools is also growing strongly. The need for engine test benches, simulation software, calibration and inspection equipment, and metrology skills is both new and strong.

In addition, the shortage of qualified human resources is prompting China to step up its partnerships with foreign training organizations. The aim is to create CAAC-certified training centers, facilitate the transfer of teaching methods and develop services in cybersecurity, quality and industrial organization.

To illustrate this dynamic, here are 2 examples of regional initiatives:

• In 2025, Guizhou province is launching a pilot project for a regional light aviation center. It integrates infrastructure, maintenance, training and tourism operations.
  
  
• Other Chinese cities are defining specific investment and manufacturing parks to host subsidiaries of foreign companies active in the manufacture or operation of small aircraft.

For international players, these projects represent concrete opportunities to offer CAAC-certified or EASA/FAA-compatible aircraft, lightweight on-board equipment, simulators, specialized software or high value-added services.

 

Until recently, China's civil aviation industry was protected by restrictions on the entry of foreign investors. Priority was given to state-owned players and sino-foreign JVs under Chinese majority control. Today, as part of a strategy of modernization and technological upgrading, the government has announced, in autumn 2024, a targeted opening up of the sector to certain forms of capital and international cooperation.

 

4.1 Revisions to the Negative Investment List

The new edition of the Negative List for Foreign Investment, published in November 2024, removed several civil aviation activities from the list of prohibited or conditioned sectors. The following are now partially or fully accessible:

• The manufacture of non-sensitive civil aeronautical equipment (on-board equipment, non-strategic components)
• Maintenance and after-sales services for civil aircraft
• Logistics and operation of light aircraft or UAVs in pilot areas
• CAAC-approved training services

Certain conditions apply, however, depending on the type of project or geographical location (Free Trade Zones, pilot cities).

 

4.2 Pilot zones, innovation corridors and regulatory relief

Pilot aeronautical zones have been launched in the provinces of Shanghai, Sichuan, Guangdong, Shaanxi and Tianjin. These zones offer temporary tax exemptions and R&D subsidies, if in cooperation with a Chinese partner.

At the end of 2024, the CAAC stated that it would relax Chinese majority shareholding requirements for certain specialized joint-ventures. The projects concern predictive maintenance technologies, non-sensitive on-board electronics and training simulators and software. The stated aim is to foster an environment conducive to the integration of global standards.

 

 

5. Persistent limits to international cooperation

Malgré l’ouverture partielle opérée depuis novembre 2024, la coopération internationale dans le secteur aéronautique civil chinois reste soumise à de nombreuses restrictions juridiques, stratégiques et technologiques. Ces limites traduisent un arbitrage constant entre souveraineté industrielle, sécurité nationale et intégration partielle aux standards internationaux.

 

5.1 Regulations governing sensitive and dual-use technologies

Many aeronautical equipment and components are considered to have dual use, both civil and military, which severely limits their export or technology transfer to China. These include advanced navigation systems, high-precision sensors, secure communication systems, and certain composite materials or alloys classified as strategic due to their sensitivity. The American, European and Japanese authorities require prior export authorizations, which are often difficult to obtain (or even unobtainable) in the current geopolitical context, marked by growing tensions over critical technologies.

 

5.2 International watch lists and sanctions

 

Several Chinese companies in the aeronautics sector are on US restriction lists (Entity List, Military End User List). In effect, this simply makes it illegal for US companies to do business with them, and complicates collaboration for third-party companies.

Since the start of the trade war between China and the United States in 2018, several US federal agencies have drawn up official lists of Chinese companies considered a risk to US national security. These measures have strongly impacted cooperation in civil aeronautics due to the potentially dual-use nature of many technologies. The main lists are:

• A blacklist (Entity List) managed by the Bureau of Industry and Security (BIS), which reports to the US Bureau of Commerce. It prohibits the export of U.S. products and technologies to listed companies, unless a special license is obtained (official link to this list).
  
  

• Other Federal Register lists include the “Unverified List” for entities whose compliance checks could not be carried out. The Military End User (MEU) List identifies entities linked to the Chinese military or suspected of having military uses. Finally, the NS-CMIC List (Executive Order 13959), lists companies deemed to be linked to the Chinese military, and prohibits American investors from taking part. Click here for a link to the Federal Register's official publications.

For foreign companies, working with Chinese Chinese partners in the aerospace industry means extra vigilance. Companies using components, software or technologies of American origin must ensure that their partners are not on the sanctions lists drawn up by the American authorities.

The main risks for foreign companies :

• Secondary sanctions or refusal of export license if a Chinese partner is listed

• Potential blockage when using technologies subject to export controls (EAR, ITAR)

• Risks associated with unauthorized re-export of technologies to prohibited entities.

A preliminary compliance analysis and regular monitoring of US sanctions lists are strongly recommended prior to any cooperation or know-how transfer project.

 

5.3 Reluctance to transfer know-how

On the Western side, reluctance to transfer strategic know-how remains strong. These include fears of technology capture, the emergence of a competitor backed by the Chinese state, and possible contractual obligations.

Indeed, in certain cases, China requires local registration of Intellectual Property used on its territory. Or the obligation to host certain technical data in Chinese Cloud centers.

 

5.4 Other forms of regulation in different countries

In Europe and other countries, sensitive projects are subject to prior declaration or authorization:

• Business France and the DGE (Direction générale des entreprises) publish recommendations on this subject.
• Projects may be rejected if the technology transfer is deemed risky or contrary to the national interest.

Export restrictions may apply even to low-value but strategic sub-assemblies.

 

6. Examples of cooperation between Chinese and foreign companies

 

7. Examples of Chinese acquisitions and equity investments

8. Business opportunities for international players

China's civil aviation market is gradually opening up. This, combined with rising domestic demand and technological advances, is creating a favorable environment. Foreign companies can export to China, or forge partnerships with local players. Several segments offer strong potential:

 

Areas	Examples of business opportunities
Supply of specialized equipment	Test benches, precision tooling, measuring and metrology equipment for aeronautical production lines.
	High-end interior cabins (seats, entertainment systems, certified LED lighting).
	Composite materials, lightweight structures, innovative fuselage assembly processes.
	Low-power on-board avionics, compliant with Chinese standards (or dual-compatible with EASA or FAA standards).
Software solutions and services digital	Predictive maintenance with connected sensors and data analysis software.
	Digitalization of assembly lines (MES solutions, digital twins).
	Cyber-security for on-board systems and ground-to-aircraft networks..
Training and technical assistance	Certified flight simulators (FFS or FNPT type), in partnership with Chinese schools.
	Training modules for mechanics, engineers and quality inspectors, in line with CAAC / FAA / EASA certifications.
	Assistance with international certification of Chinese products for export, a niche service for specialized expert firms.

 

Partnership with clusters or special zones: Some Chinese Free Trade Zones (FTZs) or aeroparks offer significant advantages. Tax breaks for technical JVs, subsidies for the purchase of foreign equipment, free office space for technological integration projects. These include the Chengdu Tianfu Aerospace Park, dedicated zones in Shanghai and the Nantong Free Trade Zone (Jiangsu), recently opened to foreign investment in maintenance services.

 

 

CONCLUSION AND OPPORTUNITIES, IN BRIEF The Chinese civil aeronautics market is evolving rapidly. This transformation is driven by a desire for technological autonomy, the growth of domestic transport and a partial opening-up to international cooperation. For foreign companies, this is a promising but complex market. They have to respect strict rules, cope with geopolitical tensions and integrate localization requirements. To succeed, you need to understand your organization and priorities. Companies offering useful technologies, strategic know-how or high value-added services can find lasting opportunities here. But this requires a rigorous, well-prepared approach in line with China's objectives.

 

• Advice and support in negotiating projects with private partners and Chinese administrations.
  
  
• Preparation and follow-up of equipment import projects and certification files.
  
  
• Regulatory watch, positioning and competition search reports.
  
  
• Export consulting and missions to find and select distributors or import agents.
  
  
• Foreign investment: drafting of feasibility files, comparison of investment advantages in industrial zones, cities and districts.
  
  
• Registration of foreign-owned companies in China. Obtaining permits, licenses and certificates required to start up or expand targeted activities.
  
  
• Comparison of warehousing and distribution solutions for regulated goods.
  
  
  

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