ICBC's fledgling leasing arm spreads its wings

Encouragingly, the Chinese authorities have been actively promoting the aviation leasing sector in recent years, offering a range of policies in its support.

According to the government strategy to promote aviation leasing industry, issued by the General Office of the State Council in 2013, China expects to be an important aircraft leasing hub by 2030.

It has eased investment restrictions on aviation leasing firms. Value-added tax on the import of aircraft above 25 tons in weight, for instance, was cut from 17 percent to 5 percent, as was the rate for imports by domestic airlines, in a joint move by the Ministry of Finance and the General Administration of Customs and the State Administration of Taxation last year.

Domestic airline demand for leased aircraft has risen fast in recent years, said Tian Hui, a financing expert at the Development Research Center of the State Council, and become an increasingly important component of the country's overall finance sector.

Until the 1990s, Chinese airlines bought their fleets using loans from banks, Tian said, but by the end of 2013, around 900 of the 2,000 commercial airplanes registered in China were leased.

Some major foreign leasing companies have also turned their attention to the rising Chinese market, putting pressure on domestic leasing firms to search for business overseas.

As a latecomer to the international market, ICBC Leasing's business growth has been all the more impressive given it is now competing against some global operators that have been around for many years.

The industry's biggest players remain GE Capital Aviation Services and International Lease Finance Corp, Lin said.

China's current commercial airline fleet is mainly financed by those and other foreign leasing companies, meaning domestic firms can only realistically fund fleet expansions or startups, he said.

Overseas rivals are also a lot more experienced in servicing the entire development cycles of airlines, and at knowing how to react to any downturn in the industry, said Lin.

"ICBC Leasing has only experienced part of the cycle, and we need to adjust our strategies as we develop," he said.

In the West, especially traditional core markets for leasing such as Europe and the United States, it will be very difficult for ICBC Leasing to gain market share, Lin said, meaning its focus until now has been Asia. Its figures show the business is currently split equally at 25 percent each, between Asia Pacific, the Middle East, Europe and China.