China will merge its two state aircraft makers to create an industry conglomerate, state media said on Tuesday, as it moves to pool resources to build large aircraft.

The merger of AVIC I and AVIC II has obtained regulatory approval and the new company, named China Aviation Industry Corp, is expected to be established next month, the official Xinhua news agency said, citing industry sources.

It provided no financial details.

China set up a company to develop and build large commercial jets in May as it tries to reduce its reliance on Boeing and Airbus. Both AVIC I and AVIC II have a stake in the firm, capitalised at 19 billion yuan ($2.75 billion).

AVIC I, the developer of the ARJ21 regional jet, is the parent of Xi'an Aircraft International Corp 000768.SZ, and AVIC II's Hafei Aviation Industry Co makes the ERJ-145 regional jet in partnership with Brazil's Embraer.

China unveiled the 90-seat ARJ21-700, its first domestically developed regional jet, in late 2007 and the plane is due for its first test flight later this year.

But China's long-term goal is to make large passenger jets with more than 150 seats or freighters capable of handling more than 100 tonnes of cargo to give it a presence in the global commercial jet market. ($1=6.900 Yuan)