Space is a frontier that could soon fall to privately funded Chinese start-ups looking for commercial opportunities created by the sky-high costs of the state-run space programme, which one expert describes as “probably the most expensive in the world”.
Visitors to the simple but sleek website of Beijing-based One Space Technology are greeted with the slogan “We create space express”. With its first commercial rocket launch scheduled for 2018, the private aerospace company has vowed to become China’s version of US rocket launch firm SpaceX, with a low-cost launch vehicle that would “make a space journey as convenient as hailing a cab”.
A key investor in One Space was Legend Holdings, the mother company of Lenovo, the world’s largest personal computer maker, which owns a substantial but unspecified share of the company through its venture capital fund Legend Star, One Space’s website says. Other institutional shareholders include the HIT Robot Group at Harbin Institute of Technology, China’s top space technology research university, and internet-based venture capital firms such as Chun Xiao Capital and Land Stone Capital.
Qi Shiyang, a spokesman for Beijing-based Chun Xiao, said its strategic investment in the space sector had been “welcomed and encouraged” by government. The commercial satellite business in China had recently been “fully opened” by the authorities to private companies, he said.
Due to the strong demand for satellites in the industrial and commercial sectors, China’s small and micro satellite market would soon see explosive growth, Qi said. The strong demand for satellites, which far exceeded the existing launch resources, had created a capital market opportunity, he said.
One Space had built up a very strong team of rocket engineers and its chief executive, Shu Chang, was a pragmatic entrepreneur, which was another reason why Chun Xiao had invested in the start-up, Qi added. “In the short-term the launch cost can be reduced to 50 per cent of the ‘national team’, and just one-tenth in the long run – very competitive,” he said.
But Qi also raised a common concern among private investors. Most rocket launch pads in China are controlled by the military and access to such facilities is not easy. One Space chief Shu graduated from Beihang University in 2008 with a major in aircraft design and later worked as an investment fund manager at Legend Holdings.
In an interview with New Seed, an online venture capital service platform in Beijing, Shu said target customers included high-end manufacturing industry, pharmaceutical companies and agriculture and mining businesses that were looking to space for the development of new products, new services and new resources.
“We have strong evidence [of our ability] to become China’s SpaceX,” the website quoted Shu as saying. One Space is developing a three-stage rocket about the height of a seven-floor building at its headquarters in the hi-tech industry zone in Daxing, Beijing. It says the rocket will be able to lift a small satellite weighing up to 700kg into a 600km orbit at “very low cost”.
Several other space start-ups have been funded by private investors in China in the past couple of years, including Shenzhen-based Link Space, which is developing sounding rockets for government and business clients, and Beijing-based Space Vision, which is focused on near-space tourism with the aim of becoming China’s answer to Virgin Galactic.
In 2007, China and Japan each sent an orbiter to the Moon. China’s Chang’e probe cost 1.4 billion yuan and Japans’ Selene 32 billion yen. Adjusted for purchasing power parity at the time, the actual cost of Chang’e was a third higher than the Japanese spacecraft.
“The space programme costs way too much in China,” said Professor Zong Qiugang, a researcher with the Institute of Space Physics and Applied Technology at Peking University. “Considering the relatively low wages of workers and researchers, it is probably the most expensive in the world.”
The costs were mainly driven up by the monopolies of state-owned or military-run companies in the traditional space industry. Without sufficient competition, the productivity and efficiency in the Chinese space industry was low in comparison to its counterparts in other nations, including India.
“The price they charge customers is unreasonably high and the need to cut costs is urgent,” said Zong, who has worked with the US, European, Japanese and Chinese space agencies.
China’s space budget exceeded US$11 billion in 2013, making it the second largest in the world after the United States, according to an estimate by the Organisation for Economic Cooperation and Development (OECD).
With the goal of becoming a new superpower in space, the Chinese government has ambitious plans for a space station and the exploration of Mars, to close the gap with the US and Russia.
But China fashioned its state-run space industry after that of the former Soviet Union. While that centralised structure worked for a poor country with limited resources, it came under increasing challenge from the private sector as the mainland economy grew to become the world’s second largest.
Robin Li Yanhong, the founder and president of Baidu, China’s largest search engine, submitted a proposal to the National People’s Congress in 2014 urging the government to open up the space industry to private investors. Without the participation of private companies, China’s space technology would not be able to compete with that of the US, Europe or Japan, Li said in the proposal.
His efforts bore fruit, with President Xi Jinping telling a meeting of high-ranking military officers last year that the involvement of private businesses in military-related industries would be prioritised as a “national strategy”. “It is a matter of national security and development,” the Communist Party mouthpiece People’ s Daily quoted Xi as saying.
After decades of rapid economic development, China’s private business sector has accumulated enough technological know-how, research talent and financial strength to enter the space business, according to mainland space experts. Some were already important suppliers to the military.
One Space says on its website that it built up a sizable team of high-quality researchers in less than a year. More than a third of its researchers had PhDs and more than 80 per cent of its staff had more than five years of work experience in China’s top space companies and research institutes including China Aerospace Science and Technology Corporation, China Aerospace Science and Industry Corporation, China Aviation Industry and the Chinese Academy of Sciences.
Li Junwei, a rocket expert at Beijing Institute of Technology’s school of aerospace engineering, said private space companies such as One Space had generated a considerable buzz on campus.
“Many people are talking about it and many are interested in participating in this new business,” he said.
Rocket technology had become very mature, with many details available in academic journals, and the government had gradually loosened up numerous regulatory restrictions to encourage private participation, Li said. “In China today it is easier than ever to launch a private rocket, as long as you have the money,” he said.
Professor Wang Bing, from Tsinghua University’s school of aerospace engineering, said the private players would speed up the adoption of new technology in China’s space programme. “Private companies are less risk-averse and more willing to use the latest technology,” he said. “They are also smaller and more flexible, which will help technological innovation.”
But there was no guarantee private investors would make a profit or even get their money back, the experts said. Space exploration was a high-risk business and investors should be prepared for failures in the early stages of projects, Wang said. Similar foreign companies such as SpaceX and Virgin Galactic had all dealt with many crashes.
Shenzhen’s Link Space reported a failed test flight at the end of last year, with the rocket exploding in mid-air just seconds after launch. The satellites launched by private companies also tend to be very small. Such “microsatellites” are cheaper but their functionality and data quality is limited by their relatively short life spans.
“Space is not suitable for private companies aiming for quick cash,” Zong said. “You may wait years or even decades before seeing any return. “But those with patience and strength to stay will find unlimited opportunities.”
