The Airbus A320 assembly line in the Tianjin Binhai New Area is expected to start operating in August next year and have an annual capacity of 44 aircraft by 2011, Xinhua news agency said, citing unnamed sources with the project.

Fabrice Bregier, the Airbus chief operating officer, hailed the launch of construction of the plant 110 kilometres (68 miles) east of Beijing as "a major step forward.

"This not only represents a new level of mutually beneficial industrial cooperation between China and Airbus but also demonstrates our long-term commitment to the development of the Chinese civil aviation industry," he said.

"The launch of construction of this final assembly line in China will lead to the commencement of its operations by August 2008 as planned. We will begin to deliver the first aircraft assembled in China in the first half of 2009."

Airbus' commitment to the project reflects the high-stakes battle for dominance in one of the fastest growing and largest aircraft markets in the world where it faces stiff competition from US rival Boeing.

Airbus estimates China will need 2,650 passenger planes from 2006 to 2025 and hopes to garner a major part of that market with the A320, the short-haul workhorse model of its offerings.

China, however, also plans to build large aircraft so that it will not be dependent on Airbus or Boeing and sees the project as a key part of its broader aerospace ambitions.

Airbus will hold a majority 51 percent stake in the Tianjin assembly facility, while the rest will be held by newly formed Tianjin Zhongtian Aviation Industry Investment Co., Xinhua said.

The joint venture contract would not be signed Tuesday, Xinhua said, citing Gu Wei, a public relations worker of Airbus China. He declined to say when the contract would be inked, according to Xinhua.

The joint venture contract for the Airbus A320 final assembly line project has undergone 17 rounds of talks and was originally expected to be signed in May, Xinhua reported.

Reflecting the importance of the project to the Chinese government, State Councilor Tang Jiaxuan, a former foreign minister, was present at Tuesday's ceremony.

"Government leaders from both China and the EU have attached great importance to this project. It provides a win-win result and represents a new achievement of the China-EU strategic partnership," he said.

"I believe the A320 final assembly line project will not only enhance the further development of the aviation industry of both sides but also help promote China-EU economic and trade cooperation."

Total investment is estimated at between eight and 10 billion yuan (between one and 1.3 billion dollars), Xinhua said.

An agreement to build the plant was inked during a visit of French President Jacques Chirac to China last October, with Airbus insisting on a 51 percent stake in the project.

China's National Development and Reform Commission, the national planning agency, approved the plans for the plant in June 2006, but left commercial details to the companies involved.

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