BEIJING -- China's civil aviation administration on Tuesday said it has approved the establishment of a regional subsidiary of the country's flag carrier Air China, based in Inner Mongolia autonomous region.

Air China and Inner Mongolia State Assets Operation Co Ltd will initially invest 1 billion yuan ($157 million) for the founding of the Inner Mongolia Co Ltd of Air China.

Air China, which is responsible for 80 percent of the initial funding, is also expected to provide personnel to the new company in its initial stage. The carrier will primarily serve domestic routes using Boeing B737-300s or B737-700s, the civil aviation administration said.

Based in Baita International Airport of Hohhot, capital of Inner Mongolia, the new company is licensed to offer both passenger and cargo businesses.

Air China now has eight regional subsidiaries including Shenzhen Airlines, Shandong Airlines, Tibet Airlines and Dalian Airlines.