China Gives More Support To Aviation Sector

January 11, 2009

China has again sought to lift the country's aviation industry, hit hard by the global financial crisis, with the government offering tax exemptions and state banks providing USD$26 billion in loans to the leading plane maker.

China's Ministry of Finance said the State Council, or cabinet, had approved 3 year exemptions for the operational tax on fuel surcharges paid by airlines, retroactive to January 1, 2008.

Those taxes previously paid would be deducted from the companies' future operational tax payments, the ministry said in a notice.

Ten Chinese banks, led by state-owned giants Industrial and Commercial Bank of China and China Construction Bank, signed an agreement last week to offer CNY176 billion yuan (USD$26 billion) in loans to plane maker Aviation Industry Corporation of China, state media reported on Friday.

"The lending is an important step by domestic financial institutions to fight against the global financial crisis and support China's industrial expansion," the official China Securities Journal said.

The official Shanghai Securities News, citing the aviation industry regulator the Civil Aviation Administration of China (CAAC), said the surcharge tax exemption would help Chinese airlines save a combined CNY2.5 billion (USD$366 million) over the three years to December 31, 2010.

It also quoted CAAC as having reported that China's aviation industry suffered a loss of CNY3.95 billion in the first 11 months of 2008 and its airlines made a loss of CNY7.07 billion in the period.

Previously, airlines, including China Eastern and China Southern, had said the government is injecting more than CNY10 billion cash into the companies.

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