Does Xi's Warning Benefit Space?
"Do all provinces ... have to develop industries in these directions?”
The Financial Times has recently reported, citing a piece in People’s Daily, that Xi Jinping (习近平), President of the People’s Republic of China, has warned local governments and party members against over-investment into artificial intelligence and electric vehicles. According to the report, Xi’s warning was conveyed at the Central Urban Work Conference (中央城市工作会议) in Beijing (北京), where he asked those present:
“When it comes to projects, there are a few things — artificial intelligence, computing power and new energy vehicles. Do all provinces in the country have to develop industries in these directions?”
This warning comes after claimed lax investment into electric vehicles companies, leading to price wars with low profitability, and artificial intelligence, culminating in data centers being built wherever it is most cost-effective (i.e., in desert parts of Xinjiang with abundant space for solar power). Over-investment in the two industries has led to irrational competition and supposedly swallowed up potential for other innovative industries to get further ahead. In addition, Xi was further quoted by the Financial Times as stating:
“We should not only focus on how much GDP has grown and how many major projects have been built, but also on how much debt is owed,” — “We should not let some people pass the buck and leave problems to future generations.”
Meanwhile in Chinese media, the Central Urban Work Conference is reported to have stressed a shift from rapid growth to stable development, with urban development moving from large-scale expansion to one focused on improving the quality and efficiency of existing urban areas. Xi emphasized the need to maintain historical patience, warning against pursuing quick success and instant benefits, while noting that China compressed centuries of industrialization into a few decades.
Furthermore, requirements for urban areas to become innovative, desirable to live in, beautiful, resilient, culturally advanced, and smart were put forward. This represents a continuing pivot from the previous ‘GDP heroism’1 mentality toward people-centered development, with Xi noting that small flaws can overshadow a hundred achievements.
Lastly, it was outlined that urban development should prioritize optimizing the modern urban system, building vibrant cities powered by innovation, creating comfortable and convenient living environments, and promoting green, low-carbon, and aesthetically appealing urban spaces. Xi stressed that implementation must produce tangible results, warning against party members who make boastful promises, hasty decisions, and then abandon responsibility.
Benefits for space?
With Xi’s warning on over-investment into artificial intelligence and electric vehicles, does space stand to gain? In theory, space does.
The critique of local and provincial governments rushing to invest in the same presently trendy sectors could benefit China's space industry by encouraging more strategic, coordinated development rather than duplicative efforts. Some provincial governments, particularly wealthy ones or those dependent on a small variety of industries, will still want to support a provincial champion, but others with less individual total talent available and capital to invest could be concentrated in existing space hubs, like those in Beijing and Shanghai (alongside ones near the Jiuquan, Xichang, Wenchang launch centers), or to establish new ones to focus on a specific industry segment or service.
Directing investment away from electric vehicles and artificial intelligence could also channel investment toward needed space infrastructures, like multi-user testing facilities (for static firings of rocket stages or for vacuum testing satellites), that don't generate headlines with flashy new technology but are essential for long-term capabilities. Emphasis on avoiding a quick success mentality aligns well with space sector development, which inherently requires long-term planning, substantial upfront investment, and patience for returns.
However, potential drawbacks can arise if similar over-investment occurs. China's space industry has benefited from moves for provincial champions with crucial early-stage funding and support provided, which is particularly important for companies looking to go after contracts to launch the country’s mega-constellations. The established Shanghai and Beijing space clusters have grown steadily, partly due to local government support, and some degree of competitive provincial investment could accelerate cost reductions in launches and satellites. That would be a net positive for building planned mega-constellations.
If officials become overly cautious in response to Xi's warning, it might discourage the investment needed to grow China's commercial space sector as the country aims to have a world-leading and innovative space program.
Previously in indirect support of the space sector, President Xi has emphasized bolstering the real economy through high-end manufacturing and technological innovation, a potential boon to commercial space enterprises, after committing to resolutely dismantling obstacles preventing privately-held enterprises from accessing fair competition in the market in a meeting with various enterprises. This was followed by the implementation of the Private Economy Promotion Law in May and an update to commercial space regulations recently, approved July 16th and announced July 21st.
GDP (gross domestic product) heroism refers to the previous development mindset where local officials were primarily evaluated and promoted based on achieving high GDP growth rates, which was key in China's economic boom and poverty alleviation, but eventually led to unsustainable practices such as environmental degradation and prioritizing quantity over quality.