The government of China announced China Aviation Industry Corp. I (AVIC I) will acquire Harbin Bearing Group Co. Ltd. (China).

State-run AVIC I was founded in 1999, when the government's massive and chronically underachieving aircraft and aerospace monolith was sliced into ten targeted units. The hope was to make China's aerospace and aviation programs responsive and competitive enough to compete on the world market.

CAIC / AVIC history at GlobalSecurity.org
AVIC I, with more than 50 aerospace and industrial manufacturing divisions, employs well over 200,000 workers. And it includes another 20 companies with 50,000 workers involved in R&D, materials imports and exports, and related businesses.

Where AVIC I focuses on the production of large and medium size aircraft, military aircraft and weapons systems, its sister AVIC II focuses on smaller aircraft and helicopters. AVIC I is somewhat diversified, manufacturing thousands of non-aviation products for the automotive, motorcycle, industrial, and power generation equipment markets.

Harbin Bearing has been a supplier to CAIC and AVIC. The state acquisition of Harbin Bearing, however, has been controversial on several levels.

First, it marks China's increasing government involvement in the control of key manufacturing -- particularly in aircraft and aerospace -- rather than decreasing control as it publicly advocates and committed to when joining the World Trade Organization.

Second, the acquisition has been faulted as not being an open market transaction. Several other bearing manufacturers noted it was carried out in virtual secrecy; no domestic or foreign-owned competitor was allowed to participate.

A person familiar with the situation told eBearing: "Let's be clear this is no open-market, competitive offer situation for Harbin Bearing. It's a government takeover. It shows the international market loud and clear what the communist Chinese will do when they get even a whiff of foreign ownership."

Founded in 1950, Harbin's main factory in Heilongjiang covers 300,000 square meters; the company employs over 13,000 people. Annual production capacity is more than 100 million bearings; virtually all are sold under the company's HRB brand.

Harbin is a vertically integrated manufacturer, producing a wide variety of standard, rail, and aerospace-quality ball and roller bearings, including the rolling elements. Harbin Bearing also manufactures automotive wheel hub assembly units, recently completing a 10,000 square meter addition to provide more floorspace for hub assembly production as Chinese auto manufacturer demand continues to rise.