How has SpaceX Impacted China’s Space Sector?

How has SpaceX Impacted the Chinese Space Sector?

The year 2020 has been a strange one thus far. While things on earth appear to be moving backwards at an incredible rate, with cities being burned and looted and hospitals overrun with Coronavirus patients, things in space are moving forward at an accelerating rate. The most obvious and public examples of this have come from the United States, where SpaceX has continued to defy all critics, at least in the short-term, by launching more satellites than anyone has ever launched before, and more recently, becoming the first commercial company to launch humans into space. This progress is incredible, and all the more so when we consider that the United States has been partially on lockdown for much of the past several months.

These developments are not taking place in isolation, however, and half the world away, there is an increasingly powerful geopolitical and economic force that has been experiencing its own acceleration of space industry development, and in part likely spurred by our friend Elon Musk and his activities at SpaceX. The force I refer to, of course, is China, and the country with the world’s second-largest space industry has surely seen a rapid 2020 thus far. This begs the question—are these two things related? That is, is the rapid acceleration of SpaceX/Starlink at all linked with the rapid acceleration in China? In my opinion, the answer is yes.

What has SpaceX Been Upto Lately?

Before digging into the impact of SpaceX’s activities in China, it’s helpful to first give an overview of what these activities are, and why they are such a big deal. Full disclosure: I consider myself a cautious skeptic of Elon Musk—he’s an amazingly talented engineer and salesperson, but also has a track record of overpromising and underdelivering on a variety of projects, including the Boring Company and a variety of models of Tesla and related production targets that have never been met.

That being the case, even I have been impressed by SpaceX/Starlink/Musk over the past year. I recall in September 2019 seeing SpaceX CEO Gwynne Shotwell speaking on a panel at a conference. At the time, Shotwell said that SpaceX would aim for 1 Starlink launch of 60 satellites every two weeks in 2020, in an attempt to allow their satellite internet constellation to start serving subscribers in the United States by the end of 2020. Such a claim at the time seemed really, really implausible—60 satellites every two weeks?! I distinctly remember saying that I would believe it when I saw it.

And what do you know, I am seeing it. Here we are ~5 months into the strangest year on record, and while SpaceX has not, strictly speaking, kept up the “every two weeks” launch cadence, they have absolutely exceeded my expectations, having completed 5 launches with the 6^th planned for later this week. These 5 launches have sent 300 satellites into orbit, joining the >100 already in orbit from 2019. While Starlink is still far from being a successful, or even functional business, they can at least stake the claim to have filled my stomach, because god damn, I am pretty sure I just ate my hat.

Separate to Starlink, there are other SpaceX projects happening that you may well have heard of, namely….the recent launch of two American astronauts to the International Space Station (ISS). The launch, completed in late May, was the first American launch of humans into space since the final Space Shuttle mission—STS-135—completed in 2011. At a time when multiple US cities were literally centers of rioting and looting, the launch of American astronauts into space via an American rocket from Cape Canaveral was hugely captivating.

On the whole, 2020 for SpaceX has been a busy one. At a time when the US is facing a variety of major challenges, the company has, to some extent, brought the country together towards what appears to be a bigger goal, a sort of higher calling for all of humanity. It’s an inspiring and interesting time for sure.

So What Does Any of this Have to do with China?

A fair question to ask. Strictly speaking, the launch of hundreds of American satellites and a couple of American astronauts does not have a huge amount of impact on China in the short-term. However, when considered in the context of how decisions in China are made, and what causes reform to occur, the impact could indeed be quite significant.

To better understand, it helps to go back to 2014. At that time, the Chinese space sector was 100% dominated by the state—there were no commercial space companies in China at the beginning of 2014. The space industry was (and largely still is) dominated by state-owned enterprises, namely China Aerospace Science and Technology Corporation (CASC), while institutions such as the China National Space Administration (CNSA) have significantly less scope for awarding commercial contracts than, for example, NASA.

In 2014, this began to change. The Chinese government passed a regulation that allowed for private investment into certain parts of the space sector, such as small launch vehicles, smallsat manufacturing, etc. The timing of this decision was unlikely to be coincidence. In particular, the fact that through most of 2013 and into 2014, SpaceX was rather publicly making big strides in their quest for reusable rocket boosters. As is often the case in China, the assumption is that the prospect of an American rival making vastly faster strides in a strategically important industry was a significant factor in nudging the bureaucracy towards more openness. A similar phenomenon was said to occur in the field of Artificial Intelligence when in 2015-2017, DeepMind’s Alpha Go—a computer designed to play the board game “Go”—played against several of the top players in the world (including top Chinese players), and made them look…amateur at best. Among others, noteworthy computer scientist and VC investor Lee Kai-Fu has written of the impact of Alpha Go’s domination on the mindset of the Chinese leadership towards AI, referring to it as China’s “Sputnik Moment” for artificial intelligence.

Going back to space, more recently we have seen similarly blazing innovation by SpaceX and others, and have started to see similarly big moves on the Chinese side as it relates to privatization, commercialization, and general market orientation of the space industry. Following the accelerated deployment of SpaceX’s Starlink internet constellation, China’s National Development and Reform Commission (NDRC)  announced plans to add satellite internet to their list of “new infrastructures” which are earmarked for increased investment.

There have also been increasingly vocal calls within China by increasingly high-profile investors, most notably Lei Jun of Xiaomi, about the need to open the space industry to more private investment/innovation, while also better-coordinating efforts between the state and commercial companies. Chinese companies have also been circling around the recently-bankrupt OneWeb, with reports mentioning at least 3 Chinese bidders for the company’s assets. Such a sale to a Chinese buyer would give China a better set of frequency rights than anything currently owned by a Chinese constellation, though a sale would likely be complicated by national security concerns in the US, and at a minimum would likely involve a Chinese buyer not taking ownership of the 74 existing satellites, most of which were made in the United States.

The combination of these recent events—Starlink’s acceleration, the first commercial launch of astronauts to space, and various policy decisions by China towards the space industry—are unlikely to be wholly independent of one another. While the Chinese leadership would be loath to say it, I would argue that SpaceX has given China the impetus it needs to allow a bit more risk in the development of their space ambitions. And while it probably goes without saying at this point, one clear side effect of a planned Chinese LEO constellation as a sort of counterbalance to Starlink would surely be a monopoly given to the Chinese constellation in the Chinese market. That is to say, if the Chinese government has not allowed Facebook, Google, Twitter, etc., access to China, it appears quite unlikely that they would allow a US broadband internet provider, and one that plans to lease significant capacity to the US Military at that, to access the Chinese consumer for their internet needs. In short: Starlink’s acceleration in deployment may give them a first-mover advantage in some markets, but it will also likely give rise to a new competitor in others.

Conclusions—Where to Next?

Moving forward, the next few years will be critically important in deciding which companies/countries take the lead in building out a “next generation space infrastructure”. While still highly uncertain in terms of business model, technology, and financing, broadband constellations will have the potential to disrupt many industries and indeed, our way of life more generally. Similarly, having a diverse, dynamic, innovative private space sector working towards huge problems like “how to launch two humans to the ISS?” will likely be an important ingredient in development of broader space ambitions.

That being the case, my personal feeling is that we may not have seen the last of deregulation and policy changes in China. The strategic element of access to space, combined with the strategic element of access to Internet, means that for better or worse, the acceleration of Starlink launches will not lead to Starlink accessing China, but rather towards China speeding up on the development of a domestic competitor.