"The total assets and profit- making capability of those public companies under the control of the military industry are still small, but increased high-quality asset injection will help those companies to grow rapidly, especially in the next three to five years," China Galaxy Securities says in a recent report.

As a result, manufacturers of rockets, satellites, missiles and aircraft are expected to witness frequent reshuffle and restructuring. Among them, China's aircraft manufacturing and trading industry has been at the forefront of the restructuring trend.

CATIC's flight

China National Aero-Technology Import & Export Corporation (CATIC), the nation's largest aviation industry trading company, says that the company is actively seeking strategic investors.

"The restructuring of shareholders is part of CATIC's plan to finally go public in its entirety," says Tao Ruichang, CATIC assistant president. According to Tao, the headquarters of CATIC will be changed into a holding company with several business units under its control.

"We expect to pick one or two domestic strategic investors by the end of 2007. Leading domestic financial institutions are the company's favorites," Tan tells China Business Weekly.

The entity currently runs four business units. Beside its core business of exporting aviation products, it also exports products in transportation, construction, electric power and high technology and is involved in manufacturing, commerce, retailing and hotels.

The trading giant currently controls three A-share companies based in Shenzhen and three H-share companies based in Hong Kong. TIANMA Micro Electronics Company Ltd in Shenzhen is the main enterprise of CATIC for the manufacturing of liquid crystal displays. CATIC's Shennan Electro Circuit Company Ltd in Shenzhen is a new high-tech enterprise mainly producing multi-tier printed circuit boards.

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