Is China Moving Into Satellite Applications?

by

At the end of 2011, China published its third space white paper, “China’s Space Activities in 2011.” Its release coincides with the ongoing 12th Five-Year Plan (2011-2015) and provides an indication of likely Chinese space priorities between now and the middle of the decade.

As with the previous white papers, there is little mention of Chinese military space programs. Instead, the report focuses on major objectives and goals, including key satellite programs. It notes several times, for example, that China will develop a high-resolution observation satellite and create a constellation of such satellites for all-weather, 24-hour, multispectral Earth monitoring — in short, a spy satellite system.

One key new goal is development of the satellite applications industry. This is described as an essential step toward other goals such as building China’s “comprehensive national strength,” promoting scientific and technological development, and meeting the demands of Chinese economic development. Chinese decision-makers, like their Western counterparts, appear to have concluded that satellite applications are a lucrative area worth |investment.

The white paper singles out several types of satellite applications as being particularly important: Earth observation, communications, and navigation and positioning. Of these, satellite communications is perhaps the most mature, as the Chinese have actively invested in tele-medicine and remote teaching systems to leverage investments in health and education. Meanwhile, the Beidou/Compass satellite navigation system continues to improve. It went into operation for China in December 2011 with the launch of the 10th satellite. Beidou hopes to compete with the U.S. GPS and European Galileo systems and is currently accessible free of charge.

To improve China’s participation in the satellite applications field, Beijing will need to significantly grow these business areas. The space white paper states that China will “make comprehensive plans and construct space infrastructure; promote public sharing of satellite application resources; foster enterprise clusters, industrial chains and market for satellite applications.” These phrases have cropped up in other Chinese writings, suggesting these efforts have already been codified in the 2012 budget, recently rubber-stamped by the National People’s Congress.

What the white paper does not address is how much emphasis satellite applications will likely enjoy. Recent developments in the satellite communications area, however, suggest it is likely to be a major priority.

In February, WenYunsong, the son of Chinese Premier WenJiabao, was appointed head of China Satellite Communications Corp. (China Satcom), a state-owned enterprise. Any time a princeling (the offspring of a senior military or Chinese Communist Party official) is appointed the head of a company, it suggests high-level |support.

But this appointment occurred even as WenJiabao, along with his boss HuJintao, is preparing to step down at this fall’s Party Congress, giving way to Xi Jinping and company. The appointment of the younger Wen now signals continuity, i.e., the policies laid out in the 2011 white paper will be sustained despite the impending leadership transition. It also underscores the attention senior Chinese leaders give to space and telecommunications policies generally; appointing a princeling to this office was no accident.

Indeed, the decision to appoint the younger Wen to head China Satcom also provides an indication of Chinese industrial policy toward satellite applications in general. Because space is seen as a strategic arena, like petrochemicals and telecommunications, China’s space-industrial complex is wholly state-owned. The appointment suggests satellite applications may be considered as strategic as satellite and launcher manufacturing.

Beijing therefore is likely to create “national champions” in satellite applications, much as it has in other state-dominated industries. HuJintao’s policy of “indigenous innovation,” itself a variation on the longstanding “two bombs, one satellite” program preferring domestic development where possible, will likely be replicated in the area of satellite applications.

In the past, “indigenous innovation” has often meant requiring foreign investors and joint venture partners to establish research and development campuses and institutions in China, in order to help foster domestic research capabilities. Consequently, foreign satellite applications companies such as Garmin or DigitalGlobe probably will be required to base portions of their operations in China, if they wish to have access to Chinese |customers.

Equally important, the combination of “indigenous innovation” and the intention to “foster enterprise clusters [and] industrial chains” suggests that fledgling Chinese satellite applications companies can count upon the full support of the government. Chinese state-owned enterprises usually enjoy preferential access to capital, as Chinese banks (themselves state-owned) are often directed to give them loans regardless of profitability. Thus, satellite applications companies, especially those that are state-owned, are likely to be able to draw upon state funding lines.

For Western companies, China’s decision to push satellite applications presages significant competition in the future. As China orbits an expanding array of systems, Beijing will probably try to insulate the home market from competition, even as it seeks out potential foreign clients.

 

Dean Cheng is a research fellow in the Asian Studies Center at the Heritage Foundation.