Beijing’s decision to develop a mainline airliner is forcing Airbus to rethink its Chinese industrial strategy and seek ways of working with the huge customer without helping a future competitor. One solution could be direct Airbus production in China, just as the company is establishing a greater presence in the U.S. While the European manufacturer still expects to deepen its business in China, it says the country’s decision to move into the Airbus and Boeing market must change the future relationship.

Ambitious Hainan Airlines owner HNA Group will build up budget subsidiary Lucky Air as a provincial carrier for Yunnan, eyeing the strong tourism of the southwestern Chinese region and threatening already struggling China Eastern. The provincial government will take a minority stake in the new Yunnan Airlines Co. Ltd., which will revive the name of the carrier that the local authorities ran from 1993 until 2002, when they were forced to merge it into China Eastern Airlines.

Airbus is pouring cold water on any suggestion that it might become a partner in China’s project for a large commercial aircraft. “We are interested to learn more [about the project] and we are open to discussions, but of course it is difficult to imagine being both partners and competitors,” Airbus President for China, Laurence Barron, told The DAILY. An apparently mistranslated report by China’s Xinhua news agency wrongly quoted Barron saying that Airbus is negotiating to join the Chinese program.