China's Push for a More Commercial Space Industry

China’s progress in space exploration and technology has been rattling U.S. defense and NASA experts for years. From the threat of space weapons to the risk of appropriating the moon, China is a force to be reckoned with. However, China’s efforts to foster an innovative, disruptive commercial space industry have so far rendered lukewarm results, and experts think that no SpaceX or Starlink is likely to emerge from the east-Asian superpower any time soon.

In 2023, the government of China invested 14 billion dollars into its space sector, the second largest sum invested by any country, according to Novaspace. That sum, however, amounts to only about a fifth of the U.S. government’s 2023 space expenditure.

But China has a lot to show for its investments. Its Long March rockets launched 60 missions in 2023, lofting into orbit 200 satellites, according to Chinese government reporting. These launches included two crewed missions to China’s Tiangong space station, three new additions to China’s BeiDou satellite navigation fleet and an alleged demonstration internet-beaming satellite believed to be a precursor of China’s planned megaconstellation, Guowang.

The budget, dispensed by the totalitarian state’s National Space Administration, also included preparations for the recently launched Chang'e 6 lunar mission that will attempt to collect samples from the Moon’s south pole and return them to Earth, and work on a prospective China-led moon base to rival the planned U.S.-led settlement.

But despite the successes of its state-run space program, China has been eyeing the meteoric progress of Elon Musk’s SpaceX’s with envy in recent years, looking to emulate the company’s rise to domination in the launch and satellite operations sector.

“Over the last four or five years, there's been a larger trend towards more openness to commercial companies doing bigger things in China,” said Blaine Curcio, space and satcom industry consultant at satellite consultancy firm Novaspace and one of the world’s leading experts on China’s commercial space sector. “I think a lot of that is being driven by the rapid progress of SpaceX and Starlink. They see Starlink every week going into a new country with a new product. Soon there’s not going to be any countries left.”

China, Curcio added, sees the strategic importance of Starlink in the Russia-Ukraine conflict, and wants a similar asset. But the Chinese government is also aware of the limits of its state-run enterprises, which have so far been responsible for delivering the nation’s space program.

“They see that the state-run companies are innovating in their slow state-owned way, so they are getting more interested in the idea of commercial companies becoming an important part of the space sector just as they are in the west,” Curcio said.

China’s ambition to equal the U.S. is a big motivator for the country’s willingness to embrace the commercial way, said Robert Lincoln Hines, an assistant professor in the Sam Nunn School of International Affairs at the Georgia Institute of Technology whose research focuses on China’s security and foreign policy.

“The state wants to make sure that it maintains its competitiveness with the United States and the international market more broadly in space and thinks that having some private capital within the space industry could incentivize innovation, so that it can be more competitive on the international market,” he said.

Commercial Space, on China's Terms

China’s economy has come a long way since the centrally planned era of Mao Zedong. Deng Xiaoping’s economic reforms launched in the late 1970s managed to marry the totalitarian rule of the Communist Party of China with principles of economic competition and open market, transforming the underdeveloped country into a 20th century economic miracle.

China’s space ambitions have risen together with the nation’s technical acumen. State-run launch company, the China Great Wall Industry Corporation began selling commercial launches to friendly nations in the 1980s, but the sector remained under tight state control for nearly four decades.

Until 2014, a handful of state-owned enterprises headed by the China Aerospace Science and Technology Corporation (CASC) and the China Aerospace Science & Industry Corporation Limited (CASIC), oversaw the delivery of China’s space programs. But that year, not long after the arrival of China’s current leader Xi Jinping, a set of reforms outlined in a policy called Document 60 opened the door for private capital and commercial companies to enter the space sector.

“Up until 2014, 100 percent of space activity [in China] was done by the state,” Curcio said. “But even after that, it was not clear for a while if there was going to be any business for these commercial companies. It wasn't clear if they were going to be allowed to access launch sites — it wasn't clear what was going to be allowed to them.”

The government, while wanting to benefit from the kind of fast-paced innovation it observed in the western commercial space sector, wasn’t quite ready to let go of control in these new enterprises, many of which have been merely spin-offs of the major state-controlled behemoths.

“Most of the commercial space companies that were founded toward the beginning still had some pretty strong links to the state,” said Curcio. “It was typically engineers from CASC that would group together to work on a problem like reusable launch vehicles. They could do it with CASC, but because CASC moves very slowly, they would make a commercial company instead.”

CAS Space, majority-owned by the Chinese Academy of Sciences, and CASIC spin-off called ExPace, developing the Kinetica and Kuaizhou rocket families respectively, are examples of such companies.

Reusable Rockets and Megaconstellations

According to China Report ASEAN, a state-run foreign communications platform, more than 430 commercial space enterprises were operating in China at the end of 2022, including 43 operators developing commercial satellite constellations for communications, remote sensing, and navigation.

Between 2015 and 2021, China’s commercial space industry grew at a rate of 22.3 percent per year and is expected to reach the value of 2.3 trillion yuan (about $320 billion) in 2024, the report states.

Although SpaceX and its reusable Falcon 9 first stage are miles ahead, some of the private Chinese rocket makers have made progress.

In July 2019, the Hyperbola-1 micro-launcher made by Beijing-based i-Space became China’s first privately built rocket to reach orbit. The vehicle has conducted only one successful launch since.

In December 2023, the Zhuque-2 medium lift rocket developed by commercial company LandSpace became the first launch vehicle in the world powered by methane and liquid oxygen to have made it to space. Its more powerful sister Zhuque-3, fitted with a reusable first stage, performed a successful vertical landing test in January 2024.

These developments are primarily focused on helping China build up launch capacity to get planned satellites in orbit, rather than giving SpaceX’s Falcon 9 a run for its money in the international market.

“The launch side of things is a big bottleneck,” said Curcio. “If you want to launch 10,000 satellites, you need a lot of rockets, especially if they are not reusable. China has for some time been trying to build out those capabilities.”

Two megaconstellation projects are currently underway in China, but little is known about their progress, said Ian Christensen, director for Private Sector Programs at the Secure World Foundation.

In April 2021, China’s government established a new state-run enterprise called China Satnet with a goal of building the Guawang mega-constellation as China’s response to Starlink. The progress of the project, which envisions a fleet of 13,000 internet-beaming satellites in Low-Earth Orbit, has, however, been slower than expected, according to Christensen.

“They’ve been moving very slow,” Christensen said. “It seems it has not really met the initial objectives.”

Another venture, Shanghai Spacecom Satellite Technology, announced in February that it had raised 6.7 billion yuan ($943 million) for the construction of a LEO megaconstellation of 12,000 satellites. The build-up of the constellation, called G60, is expected to start this year with six rocket launches booked, according to Curcio, that could deliver over 100 test satellites to space.

“G60 has a chance to move more quickly because it’s a bit more of a commercial enterprise,” said Curcio. “They have a lot of government funding from the Shanghai municipal government, but it's still being run more like a commercial company.”

“There are a few of their employees that worked for foreign companies in China for a long time but many of them are just commercial space guys, unlike Satnet, which are mostly men in their 60’s who had worked for the state-owned enterprises for 30 or 40 years,” he adds.

State Control

Hines said that despite the desire to appear commercial, most privately owned space companies in China “have some varying ties to the state” with many receiving most of their funding from the central or provincial governments.

“Because there's still this very close relationship with the state, there's this idea that in periods of time these companies could, depending on the circumstance come under control of the state and be used for different purposes,” Hines said.

Experts believe that many of these companies are part of China’s military-civil fusion strategy that seeks to develop dual use technologies within the commercial sector to be later transferred into the hands of the military.

According to the U.S. Department of State, this strategy is central to the Chinese Communist Party’s plans to turn China’s People’s Liberation Army into “a world-class military by 2049.” To achieve the goal, the Communist Party is reorganizing the Chinese science and technology” sector to ensure that “new innovations simultaneously advance economic and military development.”

“They are streamlining the process through which you get commercial technology into military hands and military technology into commercial hands,” said Hines. “It’s an effort that raises a lot of eyebrows and a lot of criticism of China.”

The suspect connection between China’s military and its tech companies is behind escalated U.S. sanctions that prevent Chinese technology and services from being sold in the U.S. market. These sanctions are most certainly going to extend to the services ultimately offered by China’s fledgling commercial space companies.

National Interests

But the analysts believe that rather than competing with SpaceX in the international market, the purpose of China’s commercial space companies has always been primarily to serve the country’s internal and military needs.

“This is a matter of national interest,” said Christensen. “There is clearly a security, national defense and military utility to Starlink and China is interested in having their own capability to respond to that and reduce the perceived vulnerability.”

Because of the strained relations between the U.S. and China and the general distrust in Chinese technology due to the suspected links to the authoritarian government, Chinese firms are unlikely to serve American customers in the future.

Christensen, however, thinks that some limited cooperation opportunities might open up in Europe. Most importantly, however, China will focus on the developing countries it targets as part of its Belt and Road industry initiative. Introduced in 2013 and sometimes dubbed the New Silk Road, the investment and infrastructure development initiative targets countries in East Asia, Europe, Africa and Latin America to strengthen China’s economic influence in the world.

“The competition [with the U.S.] will be in areas where both the U.S. and China have interests,” said Christensen. “Potentially Africa, other regions of Southeast Asia, these areas might eventually have a choice between a Chinese satellite broadband and Western satellite broadband. Places like Brazil and South Africa that have active cooperation with China might have an interest to engage with them too.”

Hines says that despite the rivalry with SpaceX, many in China are not convinced that commercial space will truly take off in the country. Ambitious projects, such as the development of giant reusable rockets that could compete with SpaceX’s Starship, may not find investors willing to accept the high risk that America’s eccentric billionaires are happy to face.

“The really prominent space companies in the U.S. have in part succeeded because people like Elon Musk are willing to watch $3 billion or 5 billion dollars explode on a launch pad,” said Hines. “That is a stomach for risk that is very uncommon, and the question is whether any of the private entrepreneurs in China are willing to put their capital on the line to the same extent.”

Curcio expects that China will be able to take advantage of the strength of its manufacturing base and, in addition to building its own satellites, to aspire to build spacecraft and small constellations for other nations. Eventually, it could expand its footprint in the space launch sector as well. The Great Wall Industry Corporation currently sells spare capacity on China’s Long March rockets.

“China recently built a satellite integration and test facility in Egypt and there are discussions with other countries,” said Curcio. “Most of these countries won’t be able to justify building their own launch industry and so they are most likely going to be launching with China. Eventually, it might be possible for China to build a launch site abroad.” VS

Tereza Pultarova is a freelance space, science, and technology journalist

Photo credit: A launch at China's Xichang Satellite Launch Center. Xinhua image and Via Satellite illustration