Red Heaven: China sets its sights on the stars (part 2)
by Jason Szeftel
|Once SpaceX and Blue Origin chose their engine designs, China could offload some of the complex technical decision-making and simply copy them as much as possible, allowing it to advance its industrial capacity in this area confidently and rapidly.|
China's commercial space companies are new and their current rockets are small. In terms of orbital launches they are where SpaceX was around 2010. Nonetheless, their ambitions are large and they are making significant progress. Like other new but less prominent American launch companies, China’s new space companies are reaping the rewards of SpaceX’s pioneering successes. Instead of marching out into the unknown, they are developing advanced but now proven technologies that both engineers and investors understand, greatly easing the technical and capital risks.
All these companies, and China’s in particular, have also been closely scrutinizing SpaceX’s design choices to further accelerate their progress.
One key area is in engine development. Engines are the long pole in rocket development. They establish the overall development timeline and comprise the bulk of the technical and schedule risk for any new rocket. Rockets are designed around their engines. Early engine choices constrain the design flexibility of a rocket and also cap its performance and future upgrade potential.
Engines are also complex products that Chinese aerospace has long struggled to master. One of the biggest risks for the Long March 9 rocket is the large and powerful new kerosene engines it requires. Engine development troubles alone could easily push the first launch of this rocket out by many years. China’s most recent and powerful rocket engine, the YF-100, took more than ten years to design and certify. New modeling and prototyping technologies can accelerate this timeline, but no new technology will prevent China from spending much of the 2020s designing, building, and certifying the new engines for the Long March 9.
This makes designing and developing the right engine essential. Choosing an old, inefficient, or inferior engine architecture is an easy way to hobble a space program.
Reusable rockets have further complicated matters by changing the optimization problem. Expendable rocket engines used to prioritize maximum performance. Now reusable engines emphasize maximum reusability and reliability. This shift has made engine development a dynamic technical space where companies and nations can either leapfrog past their competition or else fall precipitously behind. As a result, the commercial Chinese space sector is heavily focused on engine development. Until 2020 all Chinese commercial rocket launches and engine tests used solid rockets, often designs from state companies. Since then, China’s new commercial companies have focused on developing liquid rockets. Their preferred engine architecture uses liquid oxygen and methane. These are the same propellants used in SpaceX’s Raptor engine, as well as in Blue Origin’s BE-4 engine, the two largest and most advanced rocket engines under development in the United States. Due to its favorable characteristics for reuse, many in the industry see this type of engine, known as a methalox engine, as ideal for the future of commercial spaceflight.
Before the launch industry was opened up to private capital and commercial ventures, there were no Chinese methalox rocket engines under development. But once SpaceX and Blue Origin chose their designs, China could offload some of the complex technical decision-making and simply copy them as much as possible, allowing it to advance its industrial capacity in this area confidently and rapidly. SpaceX still uses a more advanced engine architecture, but China is now at least working with the right propellants. Since future state rockets like the Long March 9 are likely wedded to their current engines, small new private space companies are the best place in China to develop and iterate on promising new engine designs. In fact, so far the key function of Chinese commercial launch companies has been to start development of new liquid rocket engines suitable for use in reusable rockets.
However, the big question for China is whether these new companies, regardless of whether they have cool or innovative new engines, can survive. Space launch is no longer a stagnant market filled with government contractors. It is now filled with many nimble, dynamic, and aggressive private companies. Price competition is fierce and getting fiercer. Launch costs are down to a quarter of what they were a few years ago and new rockets coming online will push it even lower. While rocket launches look impressive, the overall launch market is small, at around $5 billion a year. The sector can only generate large profits for a few, if any, companies. Most money in the $400 billion space sector is made on the payloads brought up to orbit, not on the rockets that take them there.
New American launch companies already see the writing on the wall. Lower launch costs will lead to more launches and a larger market, but no company will grow wealthy launching lots of small rockets with small payloads into orbit. As a result, many American firms are recapitalizing to invest in bigger rockets better suited to the market. The specter of Starship makes this a do-or-die moment for many of them. Even if the launch market expands to serve large satellite constellations, not all of these new launch companies can survive. Starship’s low cost, rapid reusability, and large payload could let SpaceX grab an even larger share of the market than it has today.
All of these market conditions also apply to new Chinese launch companies. These companies will find international commercial launch opportunities limited due to the many cheap and competitive products offered by Western companies. In fact, historically low launch costs, not to mention geopolitical tensions, may even exclude China from the global launch market entirely. On its own China’s domestic launch market cannot support multiple private companies as well as the main state contractors. Together this makes the market prospects for China’s new commercial space sector seem rather bleak.
Or it would be bleak if these were really private companies.
|On its own China’s domestic launch market cannot support multiple private companies as well as the main state contractors.|
While filled with many flashy well-branded companies like OneSpace, LandSpsace, and iSpace, China’s commercial space sector is not as private or commercial as it appears. Some companies are directly owned by CASC and CASIC. Still others may simply be marketing or commercializing technologies owned by the major state space companies. Much about these firms remains murky. What is clear is that they are part of a major ongoing Chinese government initiative called civil-military fusion.
Civil-military fusion is a comprehensive state project intended to integrate powerful new civil and commercial technologies into the Chinese military apparatus. To support this project, China is providing significant implicit and explicit financial support to companies developing advanced technologies with military applications. It is trying to transfer the many rapid innovations seen in the private commercial economy, such as consumer drones, biometrics, miniature satellites, and advanced consumer electronics, to its large and far less nimble military. As always, changes in the Chinese space industry are being driven by military initiatives and priorities. Since advanced rockets are key to virtually all future innovation in space systems, the Chinese government is ready to subsidize rocket companies and provide them with state contracts. However, unlike other viable consumer businesses that also receive state support, there is likely no way for these launch companies to survive without state support.
Nonetheless, China is willing to pay for useful space technologies, whether or not they are being developed by viable companies. All satellite launches in the Chinese launch market already go to Chinese launch companies. Now, some of the market will also be doled out to the new space launch companies. The Chinese government is already planning to issue NASA-style commercial contracts to have them fly cargo to its new space station. Meanwhile, behind the scenes, state money flows into the most promising, and well connected, of these companies. While China is hoping to nurture a new market by funding innovative companies that will eventually serve it, it is mostly focused on creating indigenous technologies it cannot get any other way.
China’s primary problem is the power and influence of China’s traditional space sector. CASIC is a sprawling company with more than 150,000 workers. CASC has 175,000 workers. These enormous state bureaucracies are integrated with the military and subject to direct political control. The tight blend of industry and government in the state space sector makes developing innovative new products, let alone real commercial enterprises, much more challenging than in the United States, where creating new paradigms was already a difficult, even grueling experience for NASA and its private sector partners. In China it is not as simple as issuing different contracts to different companies.
The state simply can’t afford to compromise the technical expertise that it has methodically developed in these organizations over the last 25 years. Their large, competent, and highly skilled work forces are too valuable to undermine. They are China’s hard-won payoff for overcoming its exclusion from the global space community and are what allow the country to try and stand toe-to-toe with the United States. The health of this space labor force is far more important to the government than any small new company marketing unfinished technologies. At the same time, these organizations by themselves are wholly inadequate to match America’s newly accelerated rate of innovation.
China also can’t entirely abandon its main launch vehicles in order to nurture these new companies. None of the new launch vehicles under development in China will be serving major military or scientific payloads any time soon. No commercial Chinese rocket under development is as large or as capable as the state's mainstay Long March rockets, nor are there any credible plans to develop one in the next 5 years. One company called iSpace, officially known as Beijing Interstellar Glory Space Technology Corporation, does have notional plans for a Falcon 9-style rocket in 2024 but this is highly speculative and unlikely. An industry with very long development timelines, and a limited domestic launch market run by large bureaucracies with tight military integration, makes it extremely difficult to support China’s new commercial companies and its large state enterprises at the same time.
Hypothetical political battles over the role and status of these major state enterprises would be much more brutal and involved than the fights within the United States over its new space companies. Dividing contracts between the Chinese state space sector and its nominally commercial space sector would be a bruising process. Add in the limited international commercial market, tough international competition, and a deteriorating geopolitical environment, and it quickly becomes clear that none of these companies can survive on their own. As a result, over time most of these commercial companies will likely be merged and recombined back into China’s existing state organizations. The lines dividing these rockets companies from the military, the government, and China’s major state space enterprises are blurry because they are not meant to last.
|As it has done in many other industries, China is using the threat of domestic and international competition to renovate and improve its industrial system.|
China is not really trying to create a viable commercial space sector. Instead, it is reorganizing its space sector just like it did back in the 1990s. The process this time looks different because China is responding to a different threat at a later phase in its economic development. Its challenge back then was talent and technology. Its challenge this time is the slow speed, immense size, and overall rigidity of its otherwise competent state space enterprise. Nonetheless, while the methods it is using during this reorganization are different the substance remains the same.
As it has done in many other industries, China is using the threat of domestic and international competition to renovate and improve its industrial system. It is fostering independent commercial enterprises to develop new technologies, stimulate initiative within key state companies, and surge new talent and capital into the sector. In these smaller quasi-commercial organizations, workers have an opportunity to innovate away from the stifling culture, procedures, and priorities of the state companies. For now, China’s commercial space companies are working, in effect, like a kind of skunk works for the state sector. In the short term, these separate quasi-private and state space companies are useful, even symbiotic but over the long term the tension between the state and private sectors is unmanageable.
China’s large state space sector, increasing focus on military applications across its economy, and growing crackdown on commercial enterprise all favor the eventual and continued dominance of China’s traditional state enterprises. The most likely path for many of China’s commercial space companies is to be absorbed back into the state space and military apparatus—perhaps with commercial shell companies still visible to the rest of the world—so the government can incorporate their innovations into ongoing state developments as much as possible. A few companies may be subsidized and marketed as the Chinese SpaceX, but they will be pale imitations of the real thing. No country has succeeded in creating a domestic SpaceX and China will fail in this regard as well.
Once that dream is abandoned, China’s effort to transform its hidebound state space industry will start to look more Russian than American.
NASA’s support of commercial space activities, like a lunar lander version of SpaceX’s Starship, may be difficult for other countries to replicate. (credit: SpaceX)
China's space industry is facing challenges similar to what the United States and Russia have seen over the last few decades. Both of these space powers have experienced enormous changes as a result of commercial advances and changing technologies. The basic recurring problem for all of these countries lies in the tricky nature of the space labor market.
Russia’s large space industry has eroded over the last 20 years because its domestic economy cannot support its space sector. While the country pivoted to serving international customers, this barely provided enough revenue to manufacture and maintain old equipment let alone invest in new systems. For decades Russia's many skilled designers and technicians have not been given the opportunity to put their skills to use on new projects. As a result, the country has largely coasted on systems first conceived in the 1980s or earlier. Now the largest and most well-educated cohort of Russia's industrial labor force is retiring and there is no one to replace them, marking a definitive end to Russia's era as a space power.
|Even developing a commercial space sector would not have saved Russia’s space program. In fact, it probably would have hastened its demise.|
Besides systemic corruption and many other problems, the growing errors, mishaps, and failures in the Russian space program are a direct result of the overall decline of its workforce. This is an issue which plagues not just aerospace but all Russian industrial sectors. It is a major reason why the country has not been able to mass produce a single new major weapon system in the last 15 years. As military equipment has become more electronic and digital, Russia falls even further behind: it can produce maybe 5% of the electronics its defense industry needs. As a result, Russia spent the 2010s continually reorganizing and recombining its various defense sectors, including the space industry, into somewhat more useful and stable arrangements of labor and capital. But all this really did was slow the bleeding.
Even developing a commercial space sector would not have saved Russia’s space program. In fact, it probably would have hastened its demise. If a Russian SpaceX had succeeded, it would have meant tens of thousands of lost jobs in the state space sector. The Russian labor market would not have been able to absorb all these job losses. Laid off workers would not have been able to transfer to other companies or industries. There is simply nowhere for them to go. Had Russia’s state space enterprises failed, whole swathes of technical expertise would have vanished along with them, never to return. By keeping the state space sector intact, moribund as it was, Russia could at least keep these high-skilled jobs and expertise around for a few more years.
American officials have long worried about a similar labor disaster occurring in the United States. When the Apollo program wound down many great engineers left the space industry, and a number of unique, almost irreplaceable skill sets disappeared along with them. Unlike in modern Russia, the larger and more dynamic American economy allowed many of these workers to successfully pursue other careers in technical industries. Nonetheless, this was a very trying experience for the American space industry, NASA, and the military. A lot of recent American policy has focused on preventing a similar hollowing out of the industry following the retirement of the Space Shuttle and the inevitable end of the International Space Station program. Both SLS and NASA’s commercial ventures, along with military launch vehicle and satellite contracts, are in part initiatives to keep the American space workforce active and employed.
Many NASA programs are often criticized for being jobs programs. However, it is important to remember that space has traditionally been a strategic sector with an inflexible labor market. Preserving the jobs, skills, and systems in the space industry was thought to be in the national interest, not just in the United States but in every major country, from France to Japan to China. Without a profitable private space industry, the only customer that could keep the crucial space industry solvent and intact was the government. Due to the sector’s military importance, the primary political question has always been exactly how much to invest in the sector and not whether to keep it afloat.
Part of the widespread excitement over commercial space comes from its potential to lower costs, expand markets, and create a more self-sustaining space industry. It is seen as a way to correct some of the industry’s long-standing problems. However, a government that has fully pulled back from the sector would not be able to respond if a downturn in the commercial market threatened to wreck its precious space labor force. As a result, government involvement in the sector is here to stay and will remain the driving force for years to come. Nonetheless, commercialization will lower costs, expand markets, and evolve the relationship between the government and the private sector, particularly in the United States.
Originally, private rockets and spacecraft were only going to be one part of a renewed public effort spearheaded by NASA. Now, however, SpaceX is the dominant company in the industry, one that makes SLS and traditional defense contractors and even NASA look increasingly vestigial. This lets SpaceX animate the public imagination, but it also creates broader consternation in an industry that remains a strategic sector and a national asset. Politicians and industry leaders increasingly fear SpaceX is eating up so much of the market that other major companies will be forced to permanently close up shop. This fear only grows as SpaceX develops Starship and expands into the lucrative satellite sector.
|The real possibility of industry-wide disruption is what prevented a Russian SpaceX from forming and is a major factor hindering any true Chinese SpaceX from forming.|
Widespread industry concerns over lost jobs are not idle. SpaceX is a direct threat to SLS, to all established and potential launch providers, and to many system integrators and component manufacturers across the sector. SpaceX's Falcon 9 was already a tough pill to swallow but Starship will force the industry to evolve in unprecedented and unpredictable ways. It is easy to forget the sheer ambition of SpaceX's Starship project. If it meets its design goals, then most of the rest of the launch industry will immediately be made obsolete.
Even a partially reusable Starship priced like a Falcon 9 would be transformative. No American company has yet matched SpaceX’s old rocket and they are even less prepared to match its new one. As a result, many corporate space divisions are buckling. Billions of dollars in investment and thousands of employee jobs are on the line. The real possibility of industry-wide disruption is what prevented a Russian SpaceX from forming and is a major factor hindering any true Chinese SpaceX from forming.
American industry really started to pay attention to this threat when NASA awarded SpaceX the sole contract for a major part of its new human lunar exploration program. After SpaceX won the Human Landing System (HLS) contract, a competitor on the program, Blue Origin's National Team, immediately filed a protest. In this protest, Blue Origin noted that SpaceX’s industry dominance could throw the entire ecosystem of suppliers and subcontractors into disarray. Vertical integration within SpaceX is simply creating less work for everyone else. This is a big reason why a National Team composed of four major space companies and 200 small and medium sized suppliers in 47 states was created to bid on the NASA contract in the first place. No single company alone could compete with SpaceX.
The dynamic new companies and business opportunities opened up by Starship will somewhat lessen the fallout. It makes many new business models, technical designs, and space systems possible. New jobs will open up. New companies will form. To some admittedly unknown degree, these new jobs will mitigate the broader losses in the industry. However, it will not make up for everything and future jobs are always speculative. Anyone who has interacted with a politician knows it is very tough to sell future jobs at the expense of present jobs. Congress pushes back against NASA at almost every turn to protect jobs in individual districts.
Even worse, Starship not only invalidates the business model of many other space launch companies, it will also force NASA to re-conceptualize its role. Over the last decade commercial space has been slowly transforming NASA and, if Starship succeeds. this transformation will kick into high gear. Starship is so capable that it will probably override all of NASA’s current plans for the exploration of both the Moon and Mars. Selecting Starship as a mere landing system has already made NASA’s Artemis mission architecture appear somewhat farcical. Trying to hitch its old plans and payload designs to this enormously capable rocket will make the agency seem not only behind the curve, but demonstrably bad at capital allocation.
Once 100 to 150 tons of payload can be quickly and cheaply sent into orbit and released through a nine-meter payload fairing, space payloads will no longer be painfully mass and volume constrained. Complex, elaborate, and expensive mechanisms, like the one used to unfurl the $10 billion James Webb Space Telescope, will no longer be necessary. Once rockets like this are cheaply and regularly available, it no longer makes sense to demand perfection. Payloads that used to be bespoke and astronomically expensive should become increasingly cheap, modular, and mass produced, even off-the-shelf. These changes will ultimately revolutionize everything from NASA science missions, development schedules, and industrial designs to the American military’s national security payloads, processes, and system architectures.
Therefore, over the next decade NASA's role will have to be fundamentally reexamined and redefined, just as the American military is currently doing with its new Space Force. However, as with many other players in the industry, the very dynamism of the American space industry is going to make this a rough ride for NASA. The upside of this change will be massive innovation, lowered costs, and new technologies. The downside is a sense—and a reality—of constant, painful upheaval. Over time the creation of a broad, capable space industry, beyond just SpaceX, will likely turn NASA into an agency more focused on grants, high-level design, and industry development and less on operational plans and product development.
Since NASA and Congress are so motivated by fears of job losses and a loss of industry expertise, it is a minor miracle that a commercial space sector ever formed at all. The idea has been kicked around since the 1980s and could easily have stayed just an idea. The fact that it became a reality is a major credit to NASA. The agency started this risky experiment and then gave it the space to grow. Once it took root, the agency continued to lean into a future of commercial space operations, even when it came at the expense of many of its cherished traditions and processes.
|The Chinese space industry, however, employs more than 325,000 people. Just one of China’s large state companies employs as many people as the whole American space sector.|
The shift is already remarkably wide-ranging. NASA is procuring new commercial payloads and transportation services for the Moon, funding commercial space stations in low Earth orbit, and even looking to buy commercial space suits. In the process, NASA is voluntarily making large parts of how it does business obsolete. Nonetheless, it has been willing to do this to evolve with the times and to benefit the broader development of space science and technology. It is a rare, brave, and admirable stance for a large government agency to take.
It is not, however, the stance China's state sector will take. China's equivalent to NASA and its traditional aerospace contractors are all state agencies, which significantly heightens the threat of commercialization and privatization. China's space conglomerates are also much larger and more inefficient. The American space industry employed 150,000 workers in 2021, 75% of whom worked in the private sector. Meanwhile, NASA's workforce is only around 17,000 workers or 10% of the sector.
The Chinese space industry, however, employs more than 325,000 people. Almost all of these workers are in the state sector. Just one of China’s large state companies employs as many people as the whole American space sector. This makes the larger Chinese system much less flexible and potential labor disruptions much more dangerous. Since China prioritizes high employment, it must try and conduct major job-threatening innovation while also keeping everyone employed at its state companies employed—a nearly impossible task.
Expanding the workforce helps. Over the years SpaceX has sparked new interest in aerospace and encouraged many promising engineers to pursue jobs in the industry. In 2019 it became the most attractive company in the United States to engineering students. All of the new workers, as well as capital and firms, flowing into the sector have helped the United States expand its space labor force over the last few years. China’s many recent successes in space have likewise generated an enormous interest in space among the Chinese population.
Like NASA, a big part of CNSA’s role, aside from stimulating a sense of national pride, is to encourage industrious, creative minds to join the Chinese space industry. In this it has been very successful: 55% of CASC’s workforce is 35 or younger and the average age of employees in China's space sector is going down, not up. The Chinese agency’s workforce age structure compares favorably with American commercial companies. It is also much better than NASA, which will have to reconfigure its labor force more than any other American space organization over the coming years. With only 15% of NASA’s workforce under age 35, the agency is now quite literally part of the old guard rather than the vanguard.
Overall, both China and the United States are much better positioned than the rest of the world. Russia no longer educates or inspires young engineers in large numbers. Young Russians with a strong technical education do their best to leave the country. Europe’s fragmented economic and political landscape likewise creates problems. Financing, regulatory compliance, communications, and hiring are all more difficult in Europe than in any other single spacefaring nation. Consolidating new industry talent across its many national borders is a constant challenge.
Europe’s space sector is the result of a tenuous compromise between a few large European countries and a few old aerospace firms. As part of their pact, industrial work is spread across the continent to keep everyone happy. This raises costs and makes vertical integration impossible. Europe’s industrial relationships were always extremely fraught under the best of times, but competition from SpaceX has now exposed them to unprecedented strain. Europe’s space sector is struggling beneath the weight of deteriorating political negotiations and competitive pressures, to the detriment of the continent’s overall space workforce and the competitiveness of space sector.
|For all the problems of state control and direction, China’s state space sector is nonetheless what has allowed China to advance its space capabilities to their current status as the second most impressive on the planet.|
As in China, Europe’s rocket program only really gained steam after the 1986 Challenger disaster opened up the commercial launch market to new rockets. Now, barring another American catastrophe, Europe is returning to its prior role as a minor player in the launch market, a downgrade which could seriously undermine its underlying industrial infrastructure and the compromises which make it possible. Unfortunately, once Europe missed the boat on new reusable launch technologies there was no easy way to steer it back on course. The continent is trying to nurture new American-style commercial space companies while also re-centralizing around a French-led, and almost Chinese-style, push in the state sector. Unfortunately, it is unlikely to succeed in either effort and will likely trip on some very tricky politics in the process.
For all the problems of state control and direction, China’s state space sector is nonetheless what has allowed China to advance its space capabilities to their current status as the second most impressive on the planet. Its space sector is a shining example of what is possible by planned, methodical state-driven investment, which is just the sort of state capitalism the Communist Party increasingly wants to promote. So, rather than abandon this model wholesale, China is instead trying to repeat what it did in the 1990s. It wants to use the 2020s to reconfigure its space sector to better serve the broader defense industry and to better track American technological capabilities. The big difference this time is that even a radically reconfigured state sector would not be enough to keep up with the United States.
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