Chinese aircraft maker AVIC I, charged with building a passenger jet fleet to rival Boeing and Airbus, has set up a finance unit with 1 billion yuan (HK$1.06 billion) registered capital to fund its development.

The unit, formed from finance firms of two AVIC I subsidiaries - Xi'an Aircraft Industry and Guizhou Aviation Industry - will be funded by AVIC I and its 11 subsidiaries, Xinhua News Agency said on April 8.

"We have more or less finished building our financial platform. AVIC I is China's first military industrial enterprise to have both an international leasing unit and a finance unit," Xinhua quoted AVIC I general manager Zou Ming as saying.

State-owned AVIC I, which makes components for Airbus and Boeing, and has experience in civilian jet development and manufacturing, provides China's military with 90 percent of its airborne weapons, Xinhua said.

In March, the State Council approved in principle a plan to develop and build a fleet of large passenger jets.

Industry sources said AVIC I, along with state aircraft maker AVIC II and the Commission of Science, Technology and Industry for National Defense, would help develop the jets.

Last week, AVIC I started production on its 90-seat ARJ21 regional jet, which it hopes to deliver from September 2009.

With its air passenger traffic growing at double-digit rates in recent years, China will need about 2,650 new passenger aircraft over the next 20 years, worth US$289 billion (HK$2.25 trillion), according to Airbus.