Investing in China’s space dream


Wayne Shiong, China Growth Capital, venture capital, China, space, aerospace, spacecraft
Wayne Shiong, partner at China Growth Capital. Photo courtesy of the firm.

By Wayne Shiong, China Growth Capital

On Jan. 3 China marked space history by landing the robotic spacecraft Chang’e-4 on the far side of the moon.

With government support, China’s space industry has made remarkable achievements after 60 years of hard work. And China’s commercial space industry, particularly the commercial launch market, is an investment opportunity with extremely high growth and potential.

The space industry carries humankind’s dream of going into space and exploiting the resources it contains. Space orbits, satellite constellations and communication frequencies have all became scarce resources that spark fierce global competition as well as opportunities for global cooperation.

“China has shown a great advance and a will to collaborate with international partners,” says Bernard Foing, executive director of the European Space Agency‘s International Lunar Exploration Working Group, the BBC reports.

Some 20,000 satellites are expected to be launched worldwide from 2017 to 2025, excluding China. Most are for communications, navigation and remote sensing, and they comprise constellations of microsatellites.

The Wall Street Journal reports that launch revenue will reach $5 billion by 2029. SpaceX has made 18 launches in 2017 and boasted $1.8 billion in revenue. The number of launches and revenue tripled from the figures for 2016.

Currently, fewer than 2,000 satellites are running above our heads. Launching 20,000 satellites would require a large number of rockets. On a national basis, however, fewer than 10 countries and regions (the U.S., Russia, China, Europe, Japan, etc.) have rocket-launch capabilities.

The rocket-launching capacities of the governments are far from meeting the needs of satellite launches in the next decade, creating a huge supply gap.

Venture capital is always looking for investment opportunities where structural changes occur. Structural changes can be driven by the spread of new technologies (for example, the flow economy brought about by the mobile internet) and by improvements in infrastructure (for example, e-commerce created by mature logistics systems).

For China’s commercial space market, this structural change is driven by the following policy changes:

  • In 2014, the China State Council released Document No. 60, “The State Council’s Guidelines on Investment and Financing Mechanism Encouraging Social Investment in Innovation and Key Areas.”
  • On June 22, 2017, President Xi Jinping urged close collaboration “in terms of technology, industry, facilities and talents to ensure that the civilian-military integration in the field of space is at the forefront.”
  • In January 2018, China’s State Administration for Science, Technology and Industry for National Defense issued the Permits for Civil Space Launch Projects.

The above policy changes signal civilian-military integration and put space first. China’s national space-launch site was first made available to private space companies in 2018.

On November 20, 2018, China’s privately owned rocket company, LandSpace, said it had closed a Series B+ round of financing at 300 million yuan ($43 million).

The funding was led by China Growth Capital with Zhongji Investment, 36Kr, Juzhuo Capital and others, bringing the total Landspace raised to over 800 million yuan ($115 million).

China Growth Capital adds that this financing round will be mainly for the R&D of the two flagship products: the 80-ton liquid oxygen methane engine Tianque (TQ-12) and medium-sized liquid launch vehicle Zhuque 2 (ZQ-2) as well as construction of their supporting infrastructures.

The purpose is to create a new commercial aerospace ecosystem consisting of the development, production and testing of the new liquid rockets.

On October 27, 2018, LandSpace, launched the first privately owned space launch vehicle in Chinese space history at Jiuquan Satellite Launch Center. This means the process of private launcher approval is now in place.

Meanwhile, LandSpace was issued the first Chinese civil space launch license and marks the historic access of the model to the national launch mission.

In addition to the qualification licensing, the Chinese government is also actively encouraging the state-owned space institutions to purchase from private enterprise.

The implementation of the civilian-military integration policy has opened the door to military transformation and private participation.

With government backing and technology advancement, the next couple of years will mark China’s golden age for investment in the space age.

Wayne Shiong is a partner at China Growth Capital, an early-stage venture-capital firm with an extended interest in Silicon Valley. Reach Wayne through the contact form at www.chinagrowthcapital.com/En

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