The Future of the Private Space Industry Is … Communist China

The Future of the Private Space Industry Is … Communist China

Why you should care

Rocket by rocket, payload by payload, communist China is laying the foundations for domination.

With a 90-pound satellite strapped on, the Zhuque-1 shot off from the Jiuquan Satellite Launch Center in Inner Mongolia on Oct. 27 with a historic mission in its sights: becoming China’s first private sector rocket to deliver a payload into orbit. The Zhuque-1 didn’t make it, but Landspace, the firm that owns it, isn’t settling for failure. In fact, it has already devised plans for Zhuque-2, a successor rocket to carry payloads of up to 440 pounds.

That ambition isn’t restricted to Landspace, founded in 2015 at Beijing’s Tsinghua University. Think of the private sector in space, and chances are that SpaceX comes to mind. But rocket by rocket, payload by payload, communist China is laying the foundations for the future domination of the private space industry.

For the moment, China is the fourth-largest market for private aerospace investment behind the U.S., U.K. and France. It has attracted just 3 percent of the world’s total private investment in this sector since 2009, but it’s the fastest-growing market in the world, according to New York–based Space Angels, which offers financial services to the industry. In the first three quarters of 2018, Chinese aerospace companies landed $217 million in investment, only marginally short of the $230 million raised in the country in 2017. The Chinese government opened the aerospace industry to the private sector in 2014, and more than 60 firms already have entered the sector.

We will provide suborbital manned travel services.

Chu Longfei, Linkspace

These private companies are raking in funding. Beijing-based Landspace and Onespace have raised $75 million and $44 million during their respective Series B rounds in 2018. ExPace, a commercial subsidiary of state-owned China Aerospace Science and Industry Corporation (CASIC), raised a $180 million Series A round in late 2017.

They’re also receiving state support, which in the past has often determined whether private industries in China live or die. Soon after legalizing the sector, President Xi Jinping established a national strategy integrating military and civilian space tech to aid the growth of private enterprises and ensure state-owned players benefit from private sector advances.

In September 2018, the government announced a unified national management system of private aerospace companies, deepening that public-private relationship further. The government is also providing crucial access to facilities — and giving these firms business. The Jiuquan launch center, for instance, is state-owned. And the satellite Zhuque-1 was carrying belonged to CCTV, China’s state broadcaster.

“Successful private firms often have strong relationships with government officials and make an effort to be responsive to government demands,” says Albert Park, professor and director of the Institute for Emerging Market Studies at Hong Kong University of Science and Technology.

In some ways, China’s hopes of leading the aerospace industry are a nod to the country’s history. The exact year that the first gunpowder-propelled rockets were developed remains hotly debated, as do their size and other details. The one thing there’s agreement on is where these 13th-century rockets were invented: China.

For more than seven centuries after that, European and then American and Russian scientists drove rocket technology. China began its space program in the 1950s, but it is only in this century that it has taken off. The country is now launching satellites for country after country in Asia, Africa and South America. It plans to set up its own manned space station in orbit by 2022 and send a man to the moon by 2036.

Until 2014, those dreams relied solely on the Chinese government. Now, private enterprises are providing vital propulsion. In May 2018, Onespace became the first Chinese company to successfully carry out a suborbital launch with a rocket built entirely from domestic technology. They plan to launch their own orbital OS-M1 payload rocket at the end of 2018.

Linkspace, another Beijing-based rocket company, plans to launch a vertical take-off, vertical landing rocket by 2020. These suborbital rockets would be reusable. Once they’re ready for commercial use, Linkspace “will provide a launching platform for research institutes and universities,” says Chu Longfei, the firm’s chief technological officer. That’s not all. As the technology matures, says Chu, “we will provide suborbital manned travel services.”

Gettyimages 1060396840

People take pictures of China’s first private carrier rocket, ZQ-1, developed by Landspace, in Jiuquan, Gansu Province of China.

Source Zhang Jian/Getty

These advances are built on a carefully crafted relationship with the government, whose support has often been critical to the success of private industries in China. Without clear-cut policy support from the government, investors who had initially put significant money into China’s private electric vehicle industry lost confidence. China’s state-owned automotive giants have since closed the technological gap and expanded their stronghold to the electric vehicle sector. A similar fate befell China’s aviation industry when government support heavily favored the state-owned Commercial Aircraft Corporation of China (COMAC) during the development of a domestic-built commercial aircraft.

On the other hand, the private robotics and artificial intelligence sectors have thrived under the guidance and policy support of state officials. China expects to be a global leader in both within a decade. The government often provides more subsidies to state-owned firms and large foreign companies than to local ones, says Park. It also “remains difficult for private firms, especially small ones, to get loans from banks,” he says.

The country’s young private space industry still has a long way to go. The leading players are all currently launching companies. That is an important starting point, but to ensure longevity, the sector must diversify, says Chad Anderson, CEO of Space Angels. “The major challenge for China, going forward,” he says, “is in expanding their private activities into the satellite value chain and other market segments that will create the demand for these launch vehicles and enable a sustainable market.”

But China is convinced it’ll get there and anticipates that investing in a fully functioning aerospace industry will more than pay for itself economically, say experts. The tech emerging from this sector could also have military applications, though the government is so far silent on this.

Private sector advances are also helping plug holes in the government’s plans. Linkspace, for instance, will supply smaller payload launches — up to 450-pound microsatellites sent to a 310-mile sun-synchronous orbit, according to Chu — that will complement China’s state-owned space programs developing reusable rockets capable of launching larger payloads into higher orbits.

Individually, none of these firms is likely to emerge as a challenger to SpaceX. But collectively, with Beijing’s support behind them, these firms are slashing the gap between China and its aerospace rivals — and racing to take the lead.

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