Bombardier, also makers of small passenger jets, will design and construct all aspects of the two kilometre rail system which includes a two year option to provide operation and maintenance services.

"This project denotes the building of our first fully automated and driverless transit system in China, as well as the entry of our APM (Automatic People Mover) products into this dynamic market," Wolfgang Toelsner, Bombardier Transportation chief operating officer, said at press briefing here.

The Montreal-based group, which last year had 15.8 billion dollars in revenues, will also set up a new plant in China this year to manufacture train parts, said Wolfgang, declining to give financial details.

The new plant in China's coastal city of Qingdao will the first time a foreign enterprise sets up a wholly owned operations in China's tightly controlled rail sector.

"We will wholly own the entity and it will possibly start this year," said Toelsner.

Sources close to deal said this would be the first in a series of several airport related rail projects in Chinese cities worth hundreds of millions of dollars for Bombardier.

China has been looking to the world's major suppliers of trains, France, Japan, Germany and Canada to refurbish its dated and overloaded rail network.

Bombardier already operates three joint ventures in China and has about a 450-million-dollar contract in China's Qinghai to Tibet rail project, the world's highest railway expected to begin trial operation in July 2006.

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