China unveils first locally developed regional jet

SHANGHAI (Reuters) - China unveiled its first domestically developed regional aircraft on Friday, moving a step closer to its goal of becoming an aviation giant and challenging the dominance of Boeing (BA.N) and Airbus.

The white 90-seat ARJ21-700 jet with three curved blue stripes on the fuselage, named "Xiang Feng" or "Flying Phoenix", was displayed to a crowd of government dignitaries and industry officials at the assembly plant in Shanghai where it will be produced.

"We are witnessing this unforgettable moment with extreme excitement," Lin Zuoming, general manager of state-owned manufacturer AVIC I, said in a ceremony broadcast live on state television.

"The ARJ21 makes us part of the global aviation industry," Lin said, but added: "It still faces a new journey to become successful financially."

The event was off-limits to most international and local media, except those directly controlled by the government.

AVIC I also announced 100 new orders for the Flying Phoenix from Kunpeng Airlines, a venture between China's Shenzhen Airlines Ltd and U.S.-based Mesa Air Group (MESA.O).

That increased total orders for the jet -- due for its first test flight next spring and delivery from the third quarter of 2009 -- to more than 170, almost entirely from domestic carriers.

Kunpeng Airlines, which started domestic air service in October, currently has three 50-seat Bombardier CRJ-200 jets.

LONG-TERM BET

AVIC I, which also makes fighter planes and bombers, launched the ARJ21 project in 2000, banking on growth in China's aviation market, which will need about 2,650 new passenger jets in the next 20 years according to the latest forecast by Airbus, a unit of European aerospace group EADS (EAD.PA) (EAD.DE).

While the regional aircraft was developed with Chinese technology, some key parts were sourced from foreign partners, including engines from General Electric (GE.N).

The company expects its Flying Phoenix to compete with aircraft from Brazil's Embraer (ERJ.N)(EMBR3.SA) and Canada's Bombardier (BBDb.TO).

Aviation executives have said the regional jet's success could mark an initial step toward implementing a multibillion dollar project to develop large aircraft and wean China's airlines from their reliance on Boeing and Airbus.

Industry sources told Reuters earlier in the year that China's two state aircraft makers, AVIC I and AVIC II, as well as the Commission of Science Technology and Industry for National Defence, would be involved in developing large jets.

AVIC I and AVIC II supply components for Airbus' and Boeing's latest models, including the double-decker A380 jumbo jet and the 787 Dreamliner. AVIC II unit Hafei Aviation Industry Co (600038.SS) also makes the ERJ-145 regional craft in partnership with Brazil's Embraer.

But some analysts have expressed skepticism about the commercial prospects of a large jet designed and manufactured entirely in China, given the country's limited experience in big aircraft.

"This is a long-term bet," said a Beijing-based industry analyst. "China could compete head-to-head with Airbus and Boeing some day, but it would take at least 20 years."

(Reporting by Fang Yan; Additional reporting by Jason Subler in Beijing; Editing by Edmund Klamann)