In the township of Yanliang, outside China's ancient city of Xian, near where 2,000-year-old terracotta warriors guard an emperor's tomb and bicycles still outnumber cars, the future of the world's aircraft industry is being made.

At the end of a narrow, pitted road is a modern steel workshop where Chinese tradesmen who earn as little as US$100 a month are building a wing box for an Airbus SAS A320, a 150-passenger airplane.

Nearby, a separate team is working on vertical tail fins for Boeing's similarly sized 737s. The factory, part of a heavily guarded complex of three million square meters of industrial sprawl in which 21,000 people are employed, is owned by Xian Aircraft Industrial (Group), which is also at work on another project: China's latest attempt to build its own passenger plane.

The wing box, which is the main part of the wing minus the flaps and internal electronics, is one of the A320's most sophisticated parts. "For China, going from shirt factories to making Airbus wing boxes is some achievement," says Richard Aboulafia, a director at Teal Group, a Virginia-based aviation consulting firm.

The battle for China's skies between Airbus and Chicago-based Boeing, its archrival, will determine which maker achieves global leadership.

It is now neck and neck. Last year Airbus delivered slightly more planes to the world's airlines: 434 to Boeing's 398. Boeing booked more orders for future delivery: 1,044 to Airbus's 790.

"China is the fastest-growing aircraft market in the world by far," says Neil Sims, a project manager who oversees work at the Xian Aircraft factory for France-based Airbus. "The Chinese have said to us, 'Give us some of your technology, and we guarantee we will purchase some of your aircraft.' We have to get our share of the cake."

So far, Boeing, which entered the Chinese market 13 years ahead of Airbus, in 1972, has far more planes in the air.

As of February, Chinese airlines were flying 560 Boeing planes compared with 319 Airbuses, giving Boeing a 64 percent market share, according to the Ascend database of Airclaims, a London-based consulting company.

But Airbus has been gaining market share in China. The European company has set itself a target of grabbing 50 percent of the planes in service in China by 2013.

Since 2004, Airbus has been getting the majority of China's orders. Of the 649 planes on order by Chinese airlines, 62 percent are Airbuses. Airbus delivered 76 new aircraft to China and received orders for 159 in 2006. Boeing delivered 28 and received orders for 112.

Airbus had been counting on sales in China to boost its fortunes after a delay in its new A380 super jumbo pushed it into a loss last year and sent shares of European Aeronautic Defence and Space, its publicly traded parent, tumbling.

Sales of planes are booming as China's airlines race to keep pace with a surge in domestic air travel. Last year 160 million Chinese took to the skies for leisure and business travel - a 15 percent increase over 2005, according to the General Administration of Civil Aviation of China (CAAC).

To keep pace with the increase, China needs about 3,000 new planes by 2025, costing as much as US$288 billion combined, according to both Airbus and Boeing. Already, the country is the world's second-largest airplane market, after the United States.

The expansion in aviation is just the latest sign of China's growing economic might. Gross domestic product has soared by about 10 percent a year for the past three decades - more than triple the pace of US growth.

Last year China overtook France and Britain to become the world's fourth-largest economy. By the end of this year China could overtake Germany's US$3 trillion economy to rank third, behind the United States and Japan, according to Tao Dong, a Hong Kong-based chief Asia economist for Credit Suisse Group.

With US$1.06 trillion in foreign currency reserves - the most of any country - China has the means to pay for its fleet expansion. The government is spending US$18 billion to build 40 new airports and transform many existing ones by 2010.

"China has managed to compress the equivalent of 40 years of development in North America and Europe into 10 years," says Derek Sadubin, chief operating officer for the Sydney-based Centre for Asia Pacific Aviation. "The whole landscape is shifting."

China has also radically improved its air safety record. In the 1980s, travelers flying in China were five times more likely to be in a plane crash than in the rest of the world, according to Boeing.

China's airline safety record is now on a par with North America's and surpasses that of Europe. According to the US Federal Aviation Administration, in the 10 years ended in 2005, there were 0.4 accidents per million takeoffs in the United States, 0.5 in China and 0.7 in Europe.

"You used to take your life in your hands when you got on a Chinese plane," says Barry Grindrod, Hong Kong-based publisher of Orient Aviation magazine. "Today, it's one of the safest places in the world in which to fly."

One reason is that China phased out the old Russian planes used by its airlines and replaced them with new aircraft. The two market leaders accounted for 100 percent of these new buys.

Both aircraft makers are betting that the more manufacturing, assembly and design work and safety training they provide to China's aviation industry, the more chance they have of dominating that landscape.

They may also be giving birth to a new competitor that will give them a run for their money. "Airbus and Boeing are bartering their jewels for short-term advantage," says Ted Fishman, author of China, Inc.: How the Rise of the Next Superpower Challenges America and the World. "It's going to come back to haunt them."

Mainland officials make no secret of their goal to build a domestic aerospace industry that can compete globally.

"It's only a matter of time before China catches up with US and European plane makers," says Luo Zhenan, vice secretary-general of the government-regulated China Aviation Industry Chamber of Commerce.

"We have got enough talent and money. China's huge air travel market guarantees demand for made-in-China planes, and we can also export to overseas markets."