CHINA EASES AIRPORT INVESTMENTS \ BUT FOREIGN FIRMS WILL STILL BE CAPPED AT 49 PERCENT

CHINA EASES AIRPORT INVESTMENTS \ BUT FOREIGN FIRMS WILL STILL BE CAPPED AT 49 PERCENT

China is easing the rules on overseas participation in its airport sector, but it will continue to limit foreign ownership to 49 percent.

Under a regulation to be released later this year, foreign investors will be allowed to enter more sectors and participate in senior management, said Xia Xinghua, director of restructuring at the Civil Aviation Administration of China.The first airport to test the reforms will be Tianhe in Wuhan, capital of central Hubei province. Mr. Xia told the official Xinhua news agency that a Hong Kong-based enterprise will inject funds and management expertise.

Other sources identified the company as New World Development Co. of Hong Kong, which operates an expressway linking downtown Wuhan to the airport. The company has committed 350 million yuan ($42 million) for an undisclosed minority stake in the airport, they said.

The change in policy is expected to produce a rush of outside interest from U.S. and European companies that run airports or the various services they provide.

A spokesman for BAA PLC, the privatized British airport operator, said it was watching the matter ''with growing interest.''

Lufthansa AG is planning a cargo center at the new airport in Shanghai's Pudong area as a joint venture with a Chinese carrier, probably Shanghai-based China Eastern Airlines.

Air China and Lufthansa formed Beijing Aircraft Maintenance & Engineering Corp., the country's largest aviation joint venture, in 1989.

62 JOINT VENTURES FUNDED

By last June, the civil aviation sector had established 62 jointly funded or cooperative ventures involving contracted foreign investment of some $500 million, government figures show.

Mr. Xia said other measures in the reform include more shareholding companies to run airports and overseas management.

The latter ''provides an opportunity for airports to deepen reform and open wider to the outside world,'' he said.

The government will put its main investment into air traffic management and flight operations, the official said. Borrowing, lending and leasing will be introduced to build and manage terminal areas.

Foreign investment will be encouraged in ground services, terminals, aircraft maintenance and airport hotels.

HOW TO USE FUNDS EFFICIENTLY

Mr. Xia said one unsolved problem is how to use foreign funds efficiently. A new airport - and China is building many while upgrading older ones - can cost over $1 billion.

''The time required to gain returns has depreciated the attraction for overseas investors,'' he said.

The aviation administration's plans call for China to build, expand or upgrade all airports in provincial capitals and municipalities by the year 2000, at a cost of nearly 100 billion yuan ($12 billion). Thirteen airports will be built or expanded this year.

''To get the huge investment, the airport investment system should go on the track of reform,'' Mr. Xia said.

He said airport operations will be transferred from direct management by the airport itself to more commercial entities, including joint ventures. Commercial areas were urged to adopt a competitive mechanism such as leasing, contracting and selling special management rights to promote development.

In addition to foreign investment, CAAC will seek more cash from local authorities that benefit from having an airport.

''It is hard to maintain the demanded growth of the industry with the mere funds from the central government,'' Mr. Xia said.

He said local governments could obtain more management rights if they committed more funds. At present, only a dozen of CAAC's 124 airports involve local government funding.

Aviation a growing sector

China's aviation sector has attracted $15 billion in foreign investment over the past decade. The sector has grown on average 20 percent a year since 1979.

Gaoqi International Airport in Xiamen became the first to use foreign government loans in 1982. Fifteen airports had attracted similar loans totaling $900 million by the end of last year.

Foreign government loans totaling $123 million were used for terminal expansion at Capital Airport in Beijing.

Loans were also used for the installation of a computerized national flight information system.