By Scott Hillis
(Updates with company comment, background)
BEIJING, June 25 (Reuters) - China Aviation Industry Corp II, one of the country's top military firms that makes products from minicars to helicopters, said on Tuesday it plans to list shares in Hong Kong soon.
A listing would make the Beijing-based company, also known as AVIC II, the first of China's sprawling military conglomerates to issue public shares for foreign investment.
The listing plan, first reported in the official China Daily Business Weekly, called for grouping major assets under a new shareholding company that would be created in the next several months, AVIC II spokesman Su Xingshe told Reuters.
"We have such a plan but the listing timing will depend on the market conditions. If we cannot this year, then next year," Su said.
"A new shareholding company to prepare for the IPO will be launched, probably in August or September," Su said.
The State Council, China's cabinet, had already approved the plan, but the amount of money AVIC II would seek to raise and the exact timing of a listing had not been finalized, the Business Weekly said.
"The planned wholesale listing would include all the major business units it controls in the country, with the exception of some core units for military operations that are not suitable for public listing," the paper said.
Assets to be included in the listing would be civilian aviation products as well as the lucrative automobile business, Su said.
HELICOPTERS TO TEXTILE MACHINERY
Details of AVIC II's finances are few, but the company had aimed to post sales of 21 billion yuan ($2.5 billion) in 2001, a rise of 10 percent over the year before, official media have reported.
Although AVIC II's output of helicopters, army transports, and attack aircraft qualified it as a major military supplier, civilian products make up the vast majority of sales, accounting for 17.5 billion yuan in 2000.
And 75 percent of sales came from its automobile businesses, which include minivans, subcompact cars, motorcycles and engines, official media have said.
Spurred on by a government drive to turn around the biggest state-owned firms, the conglomerate's operations have widened to cover real estate development, pharmaceutical equipment and textile machinery, among other things.
AVIC II's Harbin Aircraft Industry unit also builds the EC120 helicopter, a 5-seat craft jointly developed by China, France's Eurocopter and Singapore Technologies Aerospace, an arm of defence firm Singapore Technologies Engineering .
The helicopter was designed for civilian and military uses such as search-and-rescue, tourism and intelligence gathering.
The company was already overhauling its operations to bring them in line with Hong Kong regulatory standards, the Business Weekly quoted the company official familiar with the listing preparations as saying.
NO. 6 DEFENCE FIRM The listing would pave the way for other Chinese military giants to issue shares and raise capital, part of a government plan to overhaul a sector which has been losing money and now faces more competition after China's entry into the World Trade Organisation last December, the paper said.
AVIC II is controlled directly by the government and falls under the wing of the State Commission of Science Technology and Industry for National Defence, which the paper said was the top body in charge of military industries.
The company was created in mid-1999 when authorities split AVIC into two groups as the first step in its quest to turn around the inefficient sector.
AVIC II employed 210,000 people in 81 separate units with assets totalling 31.5 billion yuan ($3.8 billion), the Business Weekly said.
It is China's sixth biggest military conglomerate, just behind AVIC I, which has more of a military focus. (US$1=8.28 yuan)