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The north China city of Tianjin is to be the site of European aircraft manufacturer Airbus's first overseas assembly plant, the Xinhua-run China Securities Journal reported on Wednesday.

Tianjin beat three other Chinese cities Shanghai, Xi'an and Zhuhai in a six-month competition for the Airbus A320 assembly plant, said the newspaper, citing an unnamed project insider.

The source said the plant, with a total investment of seven billion euros, was expected to start production this year and complete its first aircraft at the end of 2008.

The insider said China's National Development and Reform Commission (NDRC) was talking with Airbus on the company's future strategy in China.

Last week, Airbus said an announcement could be made "in about 10 days" on which Chinese city would be the assembly plant to build the medium-range A320.

Three months ago, the firm announced that it would build a plant in China, its first assembly line outside Europe, to assemble the first single-aisle commercial airliners to be entirely produced in China.

Airbus has two assembly lines in Europe: one in Toulouse in France, the other in Hamburg in Germany.

Airbus started its selection for a Chinese plant site with four candidate cities -- Shanghai, Tianjin, Xi'an and Zhuhai -- last December.

The insider said Tianjin had comprehensive advantages in location and transport, which were convenient for exporting components and purchasing manufacturing materials.

Tianjin is home to 39 aviation companies, with more than 2,000 skilled engineers and technicians. Its annual aviation production reached more 2.5 billion yuan (more than US$300 million)

Neighboring the capital, Beijing, Tianjin has been planned by the central government as a key national civil aviation base since 2004, the newspaper said.

Industry observers said Airbus's decision to set up an plant in China was an important step in expanding its global market.

With China emerging as the world's largest aircraft market, the two leading aircraft-makers, Airbus and Boeing, are competing for share.

Airbus statistics show the total number of passenger aircraft in service on the Chinese mainland, Hong Kong and Macao has exceeded 340, making it the largest market for Airbus.

Airbus forecasts that China will buy nearly 600 aircraft in the next five years to meet rising demand.

In the next two decades, the number of Airbus aircraft in China is expected to reach 1,600, including 200 A380s, the world's largest passenger aircraft.

Analysts said the new plant in China would mainly service the Asia-Pacific market, especially China.

The company is working with Chinese manufacturers on building components. Airbus plans to increase its annual expenditure in the Chinese market to US$60 million by 2007, and then to 120 million dollars by 2010.

(Xinhua News Agency June 1, 2006)