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As is the case with all nations, growth in Chinese domestic traf-fic will be completely absorbed by Chinese airlines, but international traffic growth will be split with foreign airlines. Figure 2.12 shows the distribution of international and domestic passenger traffic for Brazil, China, Japan, Germany, and the United States.
Very different patterns are evident in the figure. Germany’s air-lines serve international travel almost exclusively; presumably, most domestic travel in Germany is by rail or automobile. Japanese airlines provide roughly equal international and domestic service, which makes sense, as their island chain stretches more than twice the length of Germany. The United States, being a much larger geographic area, has longer routes and a much lower population density. Although it has a well-developed highway system, it has minimal rail service and essentially no high-speed rail. Thus, U.S. airlines fly two-thirds of their miles on domestic routes and one-third on international routes.
China’s airlines deliver three-fourths of their service on domestic routes. China is a large geographic area similar in size to the United
Figure 2.12 International and Domestic RPK for Five Nations in 2007
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SOURCE:.International.Air.Transport.Association,.2008.
RAND.MG1100-2.12
Passenger-kilometers..own.permillion.of.GDP.(thousands)

States, but its population density is both higher and much more con-centrated, with more than 90 percent of the population living in the eastern half of the country. However, alternative transportation meth-ods, rails and roads, are not as developed as those in Japan, Germany, or the United States, leaving Chinese citizens more dependent on air transport.
China’s continuing development of rails and roads is likely to increase their competitiveness with air transport, which will limit the growth of domestic air transport. On the other hand, given China’s vast expanses, rail travel is unlikely to replace air travel to the same extent that it has in Japan, and increasing per-capita income will likely result in more Chinese citizens traveling both domestically and abroad (especially if the Renminbi is allowed to strengthen). Thus, the net effect is that, in PPP terms, China’s RPK/GNI ratio will likely increase to a level somewhere between those of the United States and Japan; and over the next two decades, China’s air transportation market may continue to grow at a rate somewhat faster than the economy in PPP terms,7 but projections extrapolated from U.S. figures are likely to be overstated. In short, Boeing’s projection appears reasonable, if we assume an average Chinese real growth rate of 7 to 8 percent over the next two decades.
7 Although GDP growth is typically measured in nominal terms, the uncertainty surround-ing China’s future exchange-rate policy makes projections in nominal terms inadvisable.
　
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