Booming private industry could help China claim dominance in space


“Xi’s goal was that if China was to become a key player in technology, including civil space and aerospace, it was essential to develop a space ecosystem that includes the private sector,” says Namrata Goswami , a geopolitics expert based in Montgomery, Alabama, who has studied China’s space program for many years. “He was drawing inspiration from the US private sector to encourage innovation from a talent pool that extended beyond publicly funded organizations.

As a result, there are now 78 commercial space companies operating in China, according to a Institute for Defense Analysis 2019 report. More than half have been founded since 2014, and the vast majority are focused on satellite manufacturing and launch services.

For example, Galactic Energy, founded in February 2018, is building its Ceres rocket to provide rapid launch service for single payloads, while its Pallas rocket is being built to deploy entire constellations. Rival company i-Space, established in 2016, became the first Chinese trading company to go to space with its Hyperbola-1 in July 2019. It wants to develop reusable first stage boosters that can land vertically, like those from SpaceX. The same goes for LinkSpace (founded in 2014), although it also hopes to use rockets to deliver packages from one place on Earth to another.

Spacety, founded in 2016, wants to fulfill orders from its customers to build and launch its small satellites in just six months. In December, it launched a miniaturized version of a satellite that uses 2D radar images to build 3D reconstructions of land landscapes. Weeks later he published the first images taken by the satellite, Hisea-1, with a resolution of three meters. Spacety wants to launch a constellation of these satellites to provide high quality imagery at low cost.

To a large extent, China follows the same pattern developed by the United States: using government contracts and subsidies to give these companies a foothold. American companies like SpaceX have benefited greatly from NASA contracts that have spent millions to build and test rockets and space vehicles to deliver goods to the International Space Station. With this experience under its belt, SpaceX was able to attract more customers with greater confidence.

Venture capital is another proven avenue. The IDA report estimates that venture capital funding for Chinese space companies was $ 516 million in 2018 – far less than the $ 2.2 billion that U.S. companies raised, but nothing to making fun of an industry that only really started seven years ago. At least 42 companies had no known government funding.

And much of the government support these companies receive is not federal, but provincial. “[These companies] attract high-tech development to these local communities, ”Hines says. “And in return, the local government gives them more autonomy.” While most are headquartered in Beijing, many have facilities in Shenzhen, Chongqing, and other areas that could attract talent from local universities.

There is also an advantage unique to China: manufacturing. “What is the best country to trust for manufacturing needs?” asks James Zheng, CEO of the Luxembourg headquarters of Spacety. “It’s China. It is the manufacturing center of the world. Zheng believes the country is better positioned than any other to take advantage of the space industry’s new need for mass production of satellites and rockets.

To make friends

The most critical strategic reason for nurturing a private space sector is to create opportunities for international collaboration – especially to attract clients who fear being seen as meddling with the Chinese government. (U.S. agencies and government contractors, for example, are not allowed to work with groups funded by the regime.) Document 60 and others released by the Chinese National Development and Reform Commission aimed no not only to promote technological innovation, but also to attract foreign investment and maximize clientele beyond Chinese borders.

“China realizes that there are some things that it cannot achieve on its own,” says Frans von der Dunk, a space policy expert at the University of Nebraska-Lincoln. Chinese companies like LandSpace and MinoSpace have worked to secure funding through foreign investment, thus avoiding reliance on state subsidies. And by avoiding state funding, a business can also avoid an array of restrictions on what it can and cannot do (such as constraints on speaking with the media). Foreign investment also makes it easier to compete globally: you take clients around the world, you launch other countries, and you attract talent from outside of China.

Although China draws inspiration from the United States to develop its private industry, the nature of the Chinese state also means that these new companies face obstacles that their Western rivals do not have to worry about. Although Chinese companies may appear private on paper, they still have to submit to government guidelines and control and accept some level of interference. It can be difficult for them to market to potential foreign clients that they are independent. The distinction between genuinely private companies and those which are more or less state actors is still rather blurred, especially if the government is a frequent client. “It could still lead to a lack of trust from other partners,” Goswami says. It doesn’t help that the government itself is often very careful about what his national program is even doing.

And Hines adds that it’s not always clear just how separate these companies are, for example, from the People’s Liberation Army, given the historical ties between the space and defense sectors. “Some of these things will pose significant obstacles for the commercial space industry as it tries to grow,” he says.

Other challenges

None of these new ventures are profitable yet and it will be some time before they are. “There is no indication that this industry is going to collapse,” Hines says. “But many experts believe many of these companies will go out of business.” Besides the challenge of attracting customers outside of China, many companies are still trying to figure out who exactly their customers should be.

American companies like SpaceX and Blue Origin had billionaire founders willing to burn money to take big risks, overcome big failures, and finally get off the ground. And while a Chinese billionaire entered the industry last year, “There is no Chinese Elon Musk to move these riskier ventures forward,” Hines says. It is also unclear whether Chinese companies, even those backed by wealthy donors, will have this risk appetite.

Zheng says one thing Spacety has offered is exceptional transparency with the customers it develops satellites for – which is still rare for Chinese companies. “A lot of them don’t have any space flight experience,” he says. “They want to see and learn what’s going on, but big companies don’t allow it. We are different. “

Finally, China needs to find a legal framework that can guide the trade sector in more explicit terms and specify what is allowed and what is not. It is the only major space power without specialized space rights. (The US version is Title 51 of the United States Code.) While it is hoped that free enterprise can generate innovation, national governments are still responsible for the space activities carried out by a country’s private companies. There is a need to license and approve these missions, ensuring that governments know what they are committed to.

Despite all this, the Chinese space industry is making progress. These new startups not only adopted American business practices – they also began to embrace American startup culture as a way to foster business relationships and grow. During my video call with Zheng from Spacety, the company’s CEO in Beijing, Yang Feng, briefly came over to say hello, after returning from a party where he had chatted and had a drink with many peers and partners in the world. ‘industry. “It’s part of the way we do business now,” Zheng said. “Innovation is not just a new technology itself, it’s also a new way of doing things.”

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