Why China Has a Private Space Sector
And why it is being supported in a socialist state.
Recently, China’s lawmakers at the National People's Congress (中华人民共和国全国人民代表大会) voted to adopt the Private Economy Promotion Law (民营经济促进法), aiming to promote and boost the role of the private sector in the nation’s economy. This law is expected to take effect on May 20th.
In telling some colleagues about the passing of this law in hopes of discussing its potential effects on the space sector, several were confused that China, a socialist country with a communist party, had a thriving private sector. As such, I’ve taken to writing this piece to explain briefly why China has a private sector, along with what the private space sector is expected to do in the Chinese economy, while touching on the Chinese space market.
What is the Private Economy Promotion Law?
First, what is this new law? The Private Economy Promotion Law, passed April 30th, is aimed at propelling economic development, fostering innovation, and boosting employment. Experts expect that the law will provide a fairer, more transparent, and more predictable business environment for private enterprises with areas like fair competition, investment and financing promotion, scientific and technological innovation, regulatory guidance, service support, protection of rights and interests, and legal liabilities covered in the law.
The law underscores the government's long-term commitment to supporting the private sector as a key part of China’s economic growth. In codifying equal treatment for areas such as market access, public resource allocation, and legal protections, it aims to level the playing field between private and state-owned enterprises. Provisions to improve financing access, encourage participation in national strategic initiatives (like mega-constellation deployment in the case of space launch enterprises), and strengthen intellectual property protections are intended to strengthen private businesses, particularly small and medium-sized enterprises, to innovate, expand, and contribute more actively to national development goals, modernization, and economic growth.
Some notable parts of the new law that stand to benefit China’s private space sector are:
Article 11: People's governments at all levels and their relevant departments shall implement the fair competition review system, formulate policies and measures involving the production and operation activities of business entities, which shall be subject to fair competition review, and conduct regular evaluations, promptly clean up and abolish policies and measures that contain content that hinders the national unified market and fair competition, and ensure that private economic organizations participate in market competition fairly
Market supervision and management departments are responsible for accepting reports on policies and measures that violate the fair competition review system and handle them according to law.
Article 15: Anti-monopoly and anti-unfair competition law enforcement agencies shall, in accordance with their duties and powers, prevent and stop monopoly and unfair competition in market economic activities, handle the abuse of administrative power to exclude and restrict competition in accordance with the law, and provide a good market environment for private economic organizations.
Article 16: Support private economic organizations to participate in major national strategies and major projects. Support private economic organizations to invest and start businesses in strategic emerging industries, future industries and other fields, encourage the development of traditional industrial technology transformation and transformation and upgrading, and participate in the investment and construction of modern infrastructure.
Article 27: The state encourages and supports private economic organizations to play an active role in promoting scientific and technological innovation, cultivating new productivity, and building a modern industrial system. Guide private economic organizations to strengthen basic and cutting-edge research, develop key core technologies, common basic technologies, and cutting-edge cross-cutting technologies in accordance with national strategic needs, industry development trends, and world science and technology frontiers, promote the integrated development of scientific and technological innovation and industrial innovation, and give birth to new industries, new models, and new momentum.
Guide non-profit funds to subsidize private economic organizations to carry out basic research, cutting-edge technology research, and social public welfare technology research in accordance with the law.
Article 33: The state shall strengthen the protection of original innovations of private economic organizations and their operators. Strengthen the protection of intellectual property rights of innovative achievements, implement a punitive compensation system for intellectual property infringement, and investigate and punish violations of trademark rights, patent rights, copyrights, trade secrets, counterfeiting and confusion in accordance with the law.
Strengthen regional and departmental cooperation in intellectual property protection, and provide private economic organizations with services such as rapid and coordinated intellectual property protection, multi-party dispute resolution, rights protection assistance, and overseas intellectual property dispute response guidance and risk warning.
Article 39: The state promotes the establishment of a system and mechanism for preventing and controlling corruption at the source in private economic organizations, supports and guides private economic organizations to establish and improve internal audit systems, strengthen the prevention and control of corruption risks, promote private economic organizations to improve their legal and compliant management level, and promptly prevent, discover and control illegal and irregular issues in operations.
Private economic organizations shall strengthen legal education for their staff and create a cultural atmosphere of honesty, integrity, law-abidingness and compliance
If there are any problems with this translation please reach out and correct me. If you wish to read all 78 articles of the law, it is available here.
Article 11 and Article 15 will reduce the monopolization of state-owned enterprises over the space sector and ensure that market competition is fair, along with ensuring that no new monopolies appear. As has already been partly planned with the deployment of various mega-constellations and STAR.VISION’s inclusion on Chang’e 8, Article 16 will see more private enterprise involvement in government development plans of new technologies, systems, or infrastructure. With innovations already underway, via technologies like reusable rockets, Article 27 assists in the development of new technologies and innovations. Article 33 is a strengthening of intellectual property from the private sector, which will lead to more innovation as less direct copying, for fear of legal ramifications, takes place. The anti-corruption Article 39 will allow for enable more competition, as some companies, I’m told, have ended up with more external support from other enterprises1. Other articles of the law will support the sector more generally.
Additionally, the law was passed after a meeting between top government officials, including President Xi Jinping (习近平), and private sector representatives in February, signalling support for the sector prior to its approval.
What is the makeup of China’s Economy?
To understand the space market in China, you need to understand China’s economic model, but defining China’s economy is a puzzle in the West. Is it a Soviet-style command economy? No. Is it a capitalist free market system? No. Is it a Maoist equitable commune utopian model?2 No. Modern China fits none of these economic models. Instead, the Communist Party of China has theorised and practiced a new model, the Socialist Market Economy. The Socialist Market Economy model was introduced by former President Jiang Zemin (江泽民) following former paramount leader Deng Xiaoping’s (邓小平) Reform and Opening Up (改革开放).
Note: In policy documents and statements, China calls the private sector non-public and state-owned enterprises the public sector.
To keep it brief, Deng’s Reform and Opening Up aimed to rapidly modernize China and improve the standard of living for the country’s over one billion citizens. This began in the early 1980s with the Special Economic Zones in Guangdong and Fujian to attract foreign investors, seeking a large amount of cheap labour and land, to build factories3. Alongside bringing financing for modern factories, the necessary knowledge came along too and was taught to locals, as a manager on a local’s wage is far cheaper. By the mid-1980s, Special Economic Zones had expanded to fourteen different cities4. Jiang’s introduction of the Socialist Market Economy was characterised by a partial divestment in state-owned enterprises while retaining a controlling share of them. Some enterprises were wholly moved to non-public hands while underperforming enterprises were allowed to go under5. Both Deng and Jiang, as well as subsequent administrations, kept critical sectors like banking, power, and telecommunications under government control. By the 2000s, the systems tried in the Special Economic Zones and the Socialist Market Economy had been rolled out to the entire country, especially with China’s entry into the World Trade Organization6. Naturally, as a result, private enterprises’ contribution to innovation and economic growth has grown to the majority driver of economic activity it is today.
The Deng and Jiang administrations, as well as subsequent ones, kept in mind early revolutionary and economic strategist Chen Yun’s (陈云) idea of the non-public economy being a birdcage. Chen argued that the bird (market forces) should only be let to fly inside a cage, which stood in for government planning. The bird might escape and cause mayhem without a cage, yet too much control would stifle growth. This analogy reflected China's gradual approach to early economic reforms, which allowed market forces and the non-public sector to thrive while maintaining cautious oversight by the state. The non-public sector still exists within a birdcage, shrinking and expanding as needed.
Today, keeping and tinkering with the Socialist Market Economy, China’s economy has continued into the monolith it is today with a 34.66 trillion United States Dollars GDP when measured in purchasing power parity. The economic monolith that is China will continue to grow as the country aims to fulfill its Common Prosperity (共同富裕) drive, which will see the shrinking of national income inequality, consequently with an enlargement of the country’s population of over 774 million consuming class7. Those consumers are expected to be employed in increasingly high-tech and well-paying jobs.
Additionally, state-owned enterprises can be used to manage markets, with the government directing them to increase activity or investments during periods of slower activity and to stabilize the economy. In overheated sectors like real estate, authorities may instruct state-owned enterprises to follow people-centered goals to prevent bubbles and cool prices, or, in rare instances, take over private enterprises and then direct them like a state-owned enterprise8. This allows the government to exert macroeconomic control without relying solely on monetary policy.
So in the Socialist Market Economy, public ownership coexists with non-public enterprises. Wherein the state controls key sectors to ensure national security, stability, and long-term development. These industries are managed by state-owned enterprises that focus on national priorities rather than profit. Meanwhile, other sectors are open to private and international investment, encouraging innovation and competition. This allows China to maintain control over critical sectors while fostering a dynamic market environment that supports private growth, competition, and sustained economic progress aligned with its Common Prosperity goals.
For those still confused about why the Communist Party of China, ideologically Marxist-Leninist, is spearheading the Socialist Market Economy, President Xi Jinping explained the following in 2017:
“As socialism with Chinese characteristics has entered a new era, the principal contradiction facing Chinese society has evolved. What we now face is the contradiction between unbalanced and inadequate development and the people's ever-growing needs for a better life. China has seen the basic needs of over a billion people met, has basically made it possible for people to live decent lives, and will soon bring the building of a moderately prosperous society to a successful completion. The needs to be met for the people to live better lives are increasingly broad. Not only have their material and cultural needs grown; their demands for democracy, rule of law, fairness and justice, security, and a better environment are increasing. At the same time, China's overall productive forces have significantly improved and in many areas our production capacity leads the world. The more prominent problem is that our development is unbalanced and inadequate. This has become the main constraining factor in meeting the people's increasing needs for a better life.”
“We must recognize that the evolution of the principal contradiction facing Chinese society represents a historic shift that affects the whole landscape and that creates many new demands for the work of the Party and the country. Building on continued efforts to sustain development, we must devote great energy to addressing development's imbalances and inadequacies, and push hard to improve the quality and effect of development. With this, we will be better placed to meet the ever-growing economic, political, cultural, social, and ecological needs of our people, and to promote well-rounded human development and all-round social progress.”
Explained above rather complexly, Xi is saying that the main issue is no longer poverty but unbalanced and inadequate development. As such, China is now shiting toward a more stable and equal development path to make Chinese society more equitable to provide similar opportunities for all citizens in all regions and provinces.
Now, with this section out of the way, we can move on to China’s private space sector.
China’s Private Space Sector
In the fifty years that China has been going to space, non-state actors have only been a part of the effort for the past almost eleven years. In November 2014, the National Development and Reform Commission (中华人民共和国国家发展和改革委员会) issued a document titled Guiding Opinions of the State Council on Innovating Investment and Financing Mechanisms to Encourage Social Investment in Key Areas (国务院关于创新重点领域投融资机制鼓励社会投资的指导意见), commonly shortened to Document 60 due to when it was issued in the year. That document started the opening of the space sector to profit-driven (commercial) actors.
With a strong academic foundation, a vast pool of highly skilled labor, and tens of millions of possible entrepreneurial individuals (thanks to a huge population), the Chinese government had good reason to believe that private enterprises would seize the opportunity as the sector was opened. Over a decade later, the opening has kicked off dozens of commercial space companies doing everything from launch services to providing services from space.
Satellite Market
Production of Chinese spacecraft is currently led by state-owned enterprises, being the China Academy of Spacecraft Technology (中国空间技术研究院) and the Shanghai Academy of Spaceflight Technology (上海航天技术研究院), making everything from low Earth orbit satellites, to geostationary communications spacecraft, to deep space exploration probes. The China Academy of Spacecraft Technology is the country's primary spacecraft manufacturer, developing a wide range of platforms including geostationary communications satellites, meteorology spacecraft, remote sensing systems, navigation satellites, and space exploration probes. Meanwhile, the Shanghai Academy of Spaceflight Technology has expertise in producing satellites for Earth observation and scientific missions, while assisting the China Academy of Spaceflight Technology. Together, the two academies form the backbone of China's national space program, delivering spacecraft across all orbital regimes and mission types. The Institute of Microsatellite Innovation of the Chinese Academy of Sciences (中国科学院微小卫星创新研究院) has also emerged too recently for low Earth orbit scientific satellites.
In the recent decade, private enterprises have entered the market. With companies like Spacety, GalaxySpace, Commsat, and MinoSpace entering satellite manufacturing, producing small and medium-sized satellites for Earth observation and communications, as well as performing technology demonstration missions. Alongside manufacturing satellites, these companies also plan to operate their own satellite constellations, providing services while proving increasingly advanced technology and generating routine revenue.
However, a limitation on the size of satellites from private enterprises stems from both financial and launch constraints. The financial constraints are due to satellites in medium Earth and geostationary orbits requiring systems that have been proven to work for years at a time, while more of the spacecraft’s mass is needed for fuel and propulsion to reach a desired orbit. Both of these can be costly for new enterprises with limited resources and small revenues. These drawbacks are compounded by the limited availability of launch vehicles capable of delivering satellites to higher orbits9. In contrast, low Earth orbit satellites can be quickly moved out of orbit, with little fuel, following failures with an increasing abundance of launch options, as we will discuss in a moment.
Space Services
Space services from satellites today encompass everything from the well-established communication markets that serve users on Earth to new ones like spacecraft life extensions to allow existing space infrastructure to continue to provide needed services. China’s space services operate within this broad range of markets, with state-owned enterprises leading emerging private enterprises.
To begin, China’s satellite communications sector, serving both individuals and businesses, is dominated by state-owned enterprises. China Satcom operates the Chinasat series of geostationary satellites, which provide television, internet, and data transmission services. Major telecom companies like China Telecom and China Unicom are planning to, and do, offer satellite services, through subsidiaries like China Telecom Satellite or by leasing capacity. These providers serve over a billion users, ranging from rural households to enterprises in remote regions. Recently, private firms, like GalaxySpace, are entering the market. But their role in satellite operations remains limited, with access dependent on cooperation with existing entities for market access. Today, the sector remains largely state-controlled due to strategic and security concerns.
Like with communications, the remote sensing and Earth observation sector is led by state-owned enterprises like the China Academy of Space Technology, which operate satellite constellations like the Yaogan series for high-resolution imaging and surveillance, serving both civilian and military needs. Private-state-owned partnerships like Changguang Satellite Technology operate their own fleet of imaging satellites to provide high-resolution imagery for urban planners and farmers. In recent years, private companies such as Spacety, Piesat, and MinoSpace have entered the sector, developing small satellites and contributing imaging capabilities to a growing market. Despite a growing private presence, the sector remains behind state-owned enterprises’ capabilities due to national security priorities and regulatory controls over satellite data and imagery.
To briefly mention it, there are satellite mission extensions and refueling services available, but at a very early stage in operations. With the success of Shijian-21, satellite maneuvering services, that don’t require the customer satellite to be operational, are said to be available. The Shijian-25 mission and its demonstration are still ongoing, but the technology proven during its mission could be made available like those from Shijian-21.
Lastly there are the mega-constellations, with a combined satellite count of over fifty thousand. While, at the time of writing, none of the six have achieved mass market commercialization, broad prospects for potential income exist. In the direct-to-consumer internet market, Qianfan10, GuoWang11, and Honghu-3 are expected to be Chinese alternatives to SpaceX’s Starlink, which has seen massive revenues from a small number of consumers in recent years. Meanwhile, the Geely Future Mobility Constellation and Guodian Gaoke’s Tianqi constellation are focused on serving businesses, utilizing their satellites to provide communication and positioning services with autonomous vehicles within cities and cargo hubs. Finally, the Three-Body Computing Constellation is aiming to serve over satellite operators with high-throughput in-space compute spacecraft. The six constellations, with overlap in services, are targeting several large markets, given the scale of China economically and population-wise, as China has hundreds of commerce ports that have room for increased efficiency, enabled by space. Space-based computing, if deployed at scale, can also improve the operations of other satellite services mentioned earlier.
Launch Market
According to Hello Space (你好太空), China will be able to produce over five thousand satellites per year by the end of 2025, with that number growing to almost seven thousand within a few years. This is, of course, in support of various satellite programs to improve life on Earth as well as planned internet mega-constellations. Naturally, these satellites need a ride into space.
Currently, the majority of Chinese satellites are launched by either the China Academy of Launch Vehicle Technology (中国运载火箭技术研究院) or the Shanghai Academy of Spaceflight Technology, with rockets from both being employed in constellation plans. The two state-owned enterprises have a long record of reliability and safely delivering spacecraft into orbit. But in the last decade, privately-held launch companies have made headway into the market, supported by demand from the previously covered commercial satellite and space service enterprises. But at present, state-owned enterprises still perform the vast majority of China’s launches, as looking through recent launch missions makes evident.
With the opening of the space sector, various launch companies were considering how to make launches affordable while turning a profit, long-term, the answer was reusable launch vehicles, but in the short term, another solution would be needed. To begin bringing in cash without needing to rely on investors for several years, a handful of the new private launch enterprises chose to buy solid rocket motors and develop a handful of systems to make small launch vehicles. Some of these vehicles are Galactic Energy’s Ceres-1, iSpace’s Hyperbola-1, and CAS Space’s Kinetica-1, as well as the China Aerospace Science and Industry Corporation’s commercial launch company ExPace with Kuaizhou-1A and Kuaizhou-11. Thanks to the rockets being based on existing motors, a few dozen launches were performed successfully over a handful of years, with iSpace sadly running into more launch failures than successes12. The various solid-fueled launch vehicles are providing an abundance of launch services for small satellites while competing with one another.
Part of the reason why solid vehicles were pursued over liquid-fueled ones in the initial years of the various private launch companies’ existence was due to a lack of ‘off the shelf’ components that were affordable or technically relevant to reusable launch vehicles. As Jiuzhou Yunjian (九州云箭) was not yet delivering engines and the Academy of Aerospace Liquid Propulsion Technology (航天推进技术研究院; 航天六院) had not unveiled the YF-102 or YF-209 engines, or even put them into mass production. So, to pursue liquid-fueled rockets early on required either immense backing or an additional revenue stream to fund the development of necessary engines. Today, just two privately developed liquid-fueled rockets have reached orbit from China, being Space Pioneers Tianlong-1 and LandSpace’s Zhuque-213, both carrying their first payloads in 2023. This is also a more risky route, represented by the early launch failure of Zhuque-2.
The early financing-based limitations of the sector are today being overcome. As various companies mature their own propulsion systems or opt to buy a mature one, the route of developing a reliable, reusable launch vehicle has become more achievable.
This year and next will see the introduction of several privately developed reusable launch vehicles, including LandSpace’s Zhuque-3, CAS Space’s Kinetica-2, Deep Blue Aerospace’s Nebula-1, Galactic Energy’s Pallas-1, iSpace’s Hyperbola-3, and Space Pioneer’s Tianlong-3, effectively supercharging the capabilities of the private launch enterprises. These rockets will be able to lift anywhere between 2,000 and 21,300 kilograms into Earth orbit. China’s reusable rockets will still be expensive initially, comfortably in the triple-digit millions in Renminbi, before becoming much more affordable as first-stage boosters are reflown, saving on expensive manufacturing costs. Reflying boosters will also allow for an increased launch cadence, which will deliver more satellites to orbit.
Of course, there is also international demand for launch as well. So far, private launch enterprises in China have launched a few satellites, or spacecraft with foreign payloads, from abroad, with CAS Space’s Kinetica-1 being the most recent example, with the launch of Omani Intelligent Remote Sensing Satellite-1.
Private Space’s Future in China
As you have probably realised by now, the private sector still plays a minority role in China's space sector, with state-owned enterprises dominating. This is in part due to how long the state-owned enterprises have been building and operating their various launch vehicles and satellites, along with the proven reliability over the decades. Still, efforts to bring in the forces of private enterprise are underway to bring more economic dynamism and faster innovation into the space sector. Central and provincial government efforts to boost the private space sector have been covered previously:
China Looks to Comprehensively Boost Commercial Space
During the Two Sessions (两会) opening two weeks ago, China’s growing privately-held commercial space sector was cited as an example of high-quality development, innovation, and growth. High-quality development has been repeatedly emphasized since 2023 as key…
The new law, the Private Economy Promotion Law (民营经济促进法), will provide additional legal support and ensure extra competition in the space sector. In a few years, private enterprises and state-owned enterprises will compete, with reusable launch solutions possibly undercutting each other for a while until a new lower-cost normal is found, allowing for a boom in satellites heading into orbit. Like in the rest of the economy, private space enterprises may become the majority driver of the sector, but state-owned enterprises won’t retreat entirely due to national security implications. Should activity in a possible private-dominated market become too volatile, state-owned enterprises would step in as they did with real estate.
To end, I’m aware that the various smaller companies weren't touched on. Sadly, if they were, I would've been writing forever. The many smaller enterprises are doing interesting things in space, but not at a scale large enough for me to mention here.
Similar to when the Jeff Bezos-owned Amazon bought launch contracts from almost every major Western space launch provider, except SpaceX, with the Bezos-owned Blue Origin receiving a twenty-seven launch contract for its then-unproven New Glenn launch vehicle.
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China’s launch vehicles for sending satellites beyond low Earth orbit are the Long March 3B, Long March 3C, and the Long March 7A, with the Long March 8, Long March 8A, Long March 4B, and Long March 4C can send satellites with low masses above low Earth orbit or very small satellites out as far as a lunar transfer orbit.
Qianfan is backed by the government of Shanghai, technically making it a state-owned enterprise that operates commercially.
GuoWang is backed by the central government and is a state-owned enterprise.
In the four failures of iSpace’s Hyperbola-1, the solid motors have not been to blame for any. The most recent one was due to abnormal staging.
LandSpace was working on a solid-fueled launch vehicle similar in capabilities to Hyperbola-1. The rocket, called Zhuque-1, failed on its first and only flight in October 2018.