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China's Drone Makers Grabbing Investor Interest

Stocks in this article: AVIC

BEIJING (TheStreet) -- Chinese investors expect drones to start sharing the nation's skies with the kites and trained pigeons retirees often fly in parks. 

Tight airspace restrictions enforced nationwide by China's military would have to be seriously modified before drones could be used regularly for urban planning, power line inspections and other tasks that proponents of unmanned aircraft are predicting.

China's airspace is so tightly controlled that helicopters and airliners are seldom seen outside airport zones. Drones are even rarer.

However, a variety of drones for defense and civilian applications have been developed by branches of the giant, state-owned conglomerate Aviation Industry Corp. of China (AVIC), such as its Hongdu Aviation unit, which makes air force fighter and training jets. Stock analyst reports say Hongdu -- which has been building aircraft since 1951 -- is now building a line of advanced military drones.

The government's recent announcement of a 12% hike in defense spending for the coming year has raised profit hopes among drone makers and their investors.

Meanwhile, as part of the government's pledge to fight air pollution, the Minister of Environmental Protection said last week that drones had been dispatched to monitor smokestack emissions in Beijing and two nearby provinces. Each aircraft flies about two hours daily to scan 70 square kilometers for emissions-rule violators.

In a related move, the government's China Meteorological Administration has been testing a drone made by AVIC that can spray smog-fighting chemicals into swathes of sky. The aircraft might be used to improve visibility at airports.

Several companies with drone-related businesses have seen their stock values jump on China's stock exchanges in recent weeks. Among the biggest winner was Shanghai-based Tongji Science and Technology, a conglomerate whose price on the Shanghai Stock Exchange has climbed more than 50% since January. A maker of radio and power transmission towers, Changshu Fengfan Power Equipment, has seen its share price double over the past year on expectations of drone-related business.

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