VZCZCXRO0731
PP RUEHCN RUEHGH RUEHVC
DE RUEHSH #0171/01 2501006
ZNY CCCCC ZZH
P 071006Z SEP 07
FM AMCONSUL SHENYANG
TO RUEHC/SECSTATE WASHDC PRIORITY 8179
INFO RUEHOO/CHINA POSTS COLLECTIVE PRIORITY
RUEKJCS/DIA WASHDC PRIORITY 0039
RUEAIIA/CIA WASHDC PRIORITY 0054
RHHJJAA/JICPAC PEARL HARBOR HI PRIORITY 0006
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC PRIORITY 0767
RUEAHLC/HOMELAND SECURITY CENTER WASHINGTON DC PRIORITY

C O N F I D E N T I A L SECTION 01 OF 02 SHENYANG 000171 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: DECL: 09/07/2017 
TAGS: CH EAIR ECON EIND ETRD PGOV PREL
SUBJECT: SHENYANG'S AVIATION ECONOMIC ZONE BRING'S MAJOR 
CHANGE TO CHINA'S COMMERCIAL AIRCRAFT INDUSTRY 
 
REF: A. SHENYANG 00048 
     ¶B. SHENYANG 00050 
 
Classified By: CONSUL GENERAL STEPHEN 
¶B. WICKMAN REASONS 1.4(B) and (D) 
 
¶1. (C) Summary: City officials and business representatives 
confirmed that Shenyang will establish an aviation economic 
zone in the area south of the Hunnan Development Zone and 
north of Taoxian International Airport and that Shenyang 
Aircraft Corporation (SAC) will establish a new company made 
up of commercial components of various operations throughout 
China. The new zone continues the rapid industrialization of 
Shenyang's south side and will have ready access to a planned 
high-tech metals facility, large numbers of technology and 
avionics manufacturers, and expanded testing and maintenance 
facilities.  Meanwhile, a General Electric (GE) partner plans 
to develop more expertise building a GE engine for a regional 
jet.  End Summary. 
 
¶2.  (C) Shenyang City officials participating in the Aviation 
and Aerospace Complete Spare Parts Expo confirmed that 
Shenyang will establish an aviation economic zone in the area 
south of the Hunnan Development Zone and north of Taoxian 
International Airport (see reftels).  Boeing and General 
Electric representatives also confirmed that each company 
will establish a presence in the zone.  At a September 4 
dinner host by the Consul General, Shenyang Aircraft 
Corporation's (SAC) Pang Zhen told the CG that AVIC I was 
establishing a new commercialaircraft manufacturing company 
made up of commercial components of various AVIC operations 
throughout China.  Mr. Pang will serve as President of the 
new company. 
 
¶3.  (C) According to Chen Hongfeng, SAC's Director General 
for Commercial Aircraft Management, the new zone is designed 
to separate China's commercial aircraft industry from its 
military aircraft industry.  This will ease crowding at 
facilities like SAC's existing plant, which houses both 
military and civilian manufacture.  Boeing staff at SAC's 
existing facility had previously told Econoff of increasing 
military demand for space at the current facility.  Chen went 
on to say that the move would make it easier for foreign 
partners to conduct business with SAC and that the new 
location would simplify logistics. 
 
¶4.  (C) GE,s Bi Lequn told Econoff that General Electric, 
which operates three joint ventures in Shenyang together with 
Liming Turbines, was planning to set up a fourth joint 
venture.  While the three existing plants are in Hunnan 
Development Zone, the fourth will be located in the planned 
Aviation Economic Zone.  One noteworthy development is that, 
according to Mr. Bi, the new joint venture will involve some 
actual production by Liming.  In the three other joint 
ventures here (gas turbines, wind turbines, and turbine 
parts), Liming is a passive investor and is not involved in 
production at all. 
 
¶5.  (C) Liming is the lead engine manufacturer for China's 
fighter aircraft.  Plans call for the new joint venture to 
manufacture GE's CF34-10A aircraft engine, which AVIC 1 
Commercial Aircraft of China (ACAC) agreed in November 2004 
to use to power its ARJ21 Regional Jet.  The new company will 
supply engines for these aircraft.  Also according to Mr. Bi, 
Liming will initially manufacture about one percent of the 
final product. Once successful in this process, Liming's 
overall share of production will gradually expand to five 
percent.  The CF-34-10A is a derivative of the TF-34 engine 
used by the U.S. Air Force's A-10 and the U.S. Navy's S-3A. 
In addition to the ARJ21, the CF-34-10A is used on various 
Bombardier and Embraer models. 
 
¶6.  (C) Boeing's manager of operations at SAC said that 
Boeing would eventually be moving to the new zone, along with 
all of SAC's commercial operations.  He said that competition 
for resources between the military side, which produces J8 
and J11 fighters as well as a variety of munitions and spare 
parts, and the commercial side, which manufactures a wide 
variety of parts for Boeing's 737 and is the sole supplier 
for vertical-fin leading-edge and tip-cap assemblies for the 
787, has reached a critical point.  He went on to say that 
the new facility would help to resolve production delays on 
the commercial side caused by military consumption of 
resources at the existing plant.  He had previously told 
Econoff of major increases in military production and 
confirmed recently that military production remains at near 
 
SHENYANG 00000171  002 OF 002 
 
 
capacity. 
 
¶7.  (U) The new Aviation Economic Zone continues the rapid 
industrialization of Shenyang's south side.  Located just 
south of the Hunnan Development Zone, the aviation area will 
have ready access to Foxconn's planned high tech metals 
facility (Reftel B) and large numbers of technology and 
avionics manufacturers.  Planned expansion at Taoxian Airport 
will accommodate testing and maintenance facilities.  The new 
zone should have a synergistic effect with Hunnan's "high 
tech heavy industry" plan. 
WICKMAN