The General Administration of Civil Aviation of China (CAAC) will encourage private and foreign investment in Chinese airlines, said CAAC vice director Yang Guoqing Friday.

The official spoke at the ceremony marking the debut flight of Okay Airways, China's first privately run airline.

The CAAC approved four other private air companies and one joint-venture in 2004.

He said as China's first private air company, the maiden flight of Okay Airways will be remembered in the history of China's aviation industry.

The CAAC will let market forces determine the allocation of airline resources in China, in addition to its official control, Yang said.

China's aviation industry has grown faster than the economy as a whole, but the civil aviation industry was blocked to private capital for the past half of century. The liberalization of the sector is part of China's effort to promote private economy's development.

To end the state-run monopoly, a regulation was issued by the State Council in February, to permit private capital into the nation's airline sector.

China's aviation industry provided transportation services for 121 million people last year, growing by 38.1 percent over 2003, while it delivered about 2.7 million tons of cargo, up 23.3 percent year-on-year.