Taikonautica: Back to the 90s
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This week: iSpace raises a pile of cash, China helps out the Ethiopian space program, US officials are on the hunt for academics with ties to China, and we look back at the history of China’s commercial space sector.
Translation
Today’s translation comes from a June article in Huxiu called “Why can't a Chinese private rocket company become a SpaceX?” Now I know, the “where is China’s SpaceX” genre is a bit overdone (and I’ve already indulged in something similar), but in giving us the current status of China’s space sector, Li Ting delves into some great historical episodes that I had to share.
The prehistoric era:
In the 1990s, the first generation of private entrepreneurs and former richest man, Mou Qizhong, saw business opportunities in satellite operations. He established the Nande Commercial Satellite Company in 1992 and planned to launch 60 communication satellites within three years to "cover the earth."
…China Great Wall Industry Corporation was the only company in China that could launch commercial satellites at that time, but its main energy was to market the mature domestic Long March series of rockets and launch international satellite orders. Originally, Mou Qizhong had negotiated with CGWIC, but later because of policy restrictions, he had to ask Russia for help.
On the one hand, he chose Russia because Mou Zhongli had done business reselling airplanes with Russians, and the cost was relatively low compared to the US market –satellite cost was only 1/3 that of the US, and satellite production time was one year shorter than that of the US. But their first satellite "Nande Horizon" failed.
Subsequently, two "heading" satellites were successfully launched, mainly for broadcasting and live TV. Just as Nande was preparing to launch their third satellite, the country stepped up its macro adjustment efforts and money was tightened. Mou Zhongqi had to pay off a 220 million yuan loan early. On the one hand, his debts were pressing, and on the other hand, the satellite business has bottomless expenses; Mou Zhong's capital chain was broken and he was eventually imprisoned.
ITAR and the birth of the current regulatory regime:
Throughout the 1990s, China undertook nearly 7%-9% of the launch missions in the commercial launch market. Seeing the rapid growth of the launch business, a major accident occurred in the Apstar launch project co-operated by Great Wall and Hughes. The US quickly organized a team of experts to investigate and released the "Cox Report" in 1999, claiming that China was stealing American missile technology through commercial launches and posed a threat to American national security.
As a result, China was included in the ITAR (the American regulation on arms trade) list by the United States. Since then, it has been unable to purchase and launch satellites with US aerospace parts and technologies on a global scale. A piece of paper had caused the "national team" to have almost zero orders for international satellite launches. This situation continued until 2005, when China adjusted its strategy and turned to third world countries to provide launch services and export whole-satellite technology and gained a small market share.
Recent newspace companies:
What brought commercial aerospace in front of the public was Hu Zhenyu, the founder of a controversial private rocket company LinkSpace. After the 90s, he founded LinkSpace in 2013 and threatened to build rockets and satellites himself. As a result, he won a small order from the national team along with the attention of investors.
In 2014, he was also a "rocket genius boy" and "representative of entrepreneurs born in the 90s" that the media rushed to report. As a result, one year later, many reports pointed out that he "does not follow the rules," "lied to show off," etc., and public opinion of him quickly fell. For a time, it also affected the financing process of LinkSpace. It was not until 2017 that it received tens of millions of yuan in Series A financing from Changrun Financial Holdings, Feng Lun’s Yufeng Investment, and Pricewaterhouse Coopers.
At the end of last year, Hu Zhenyu stepped down as CEO, and LinkSpace CTO Chu Longfei took the post. All kinds of rumors arose. Some people said that the company was on the verge of disbanding, and employees had left. In an interview with Phoenix, Hu Zhenyu explained that the company’s shakeup was not a requirement of investors or shareholders, but when connecting with new institutions, he does not want to explain the past experience over and over again. After the adjustment, the division of labor had not changed much. He is still responsible for the company's operations and external communications, and the company has now received a new round of financing.
Linkspace has been very quiet lately, and strangely seems to have either recently reposted a year-old video of a 300 meter hop test as though it were a new test.
You can read the full translation here.
Interesting Link
Cox Report and the Threat from China
A contemporary critique of the Cox Report (mentioned above), comes from Joseph Cirincione, then a researcher at the Carnegie Endowment:
Turning to the substance, House Majority Leader Dick Armey summarizes the report for us when he says, "It’s very scary, and basically what it says is the Chinese now have the capability of threatening us with our own nuclear technology."
He gets that information directly from the Report’s overview, which states:
"These thefts of nuclear secrets from our national weapons laboratories enabled the PRC to design, develop and successfully test modern strategic nuclear weapons sooner than would otherwise have been possible."
"The stolen US nuclear secrets give the PRC design information on thermonuclear weapons on a par with our own….the stolen information includes classified information on seven US thermonuclear warheads."
Then, later on p. 60 of Volume I of the report, "The stolen US secrets have helped the PRC fabricate and successfully test modern strategic thermonuclear weapons."
These are dramatic statements. The are also not true, at least according to the combined judgement of all of our national intelligence agencies and an independent review panel led by Adm. David Jeremiah and including Brent Scowcroft. It is understandable that the Cox Committee made mistakes. After all, according to Committee Member John Spratt, they only turned to the matter of Chinese espionage on October 21, and concluded taking testimony on the issue on November 15 and filed their report Jan. 3.
The Committee had spent most of its time in 1998 investigating charges that critical technology was transferred to the PRC by major US corporations while using Chinese rockets to launch American satellites. Many in the Republican leadership had hoped this investigation would lead to impeachment charges against the President. A number of Republican leaders went to the floor of the House and Senate and accused the President of treason for allegedly facilitating this transfer of information. These charges could not be substantiated. The Cox Committee then hurriedly took testimony from only three witnesses on the nuclear weapons security issue: DOE intelligence official Notra Trulock, a CIA analyst, and a Los Alamos employee. The Cox report basically presents the Notra Trulock view of China, unchallenged and unbalanced.
I’m still learning the history of everything that happened in the 90s myself, and I’m by no means an expert on the Cox report, but it sounds to me like the US overreacted for domestic political reasons and ended up tightening restrictions on the Chinese space industry in the late 90s in ways that we’re still feeling today.
Stay tuned because I’d like to do a deep dive into ITAR restrictions at some point soon.
News Roundup
August 19: Rumors emerged that China is going to help Ethiopia to launch its second satellite, a research nanosatellite.
Source: Space in Africa
August 22: China launched the fifth of the government’s Gaofen-9 series of Earth observation satellites on a Long March 2D from Jiuquan. Two additional satellites that were included as secondary payloads were the National University of Defense Technology’s Tiantuo-5 and a PLA remote sensing a communications test satellite.
August 23: Zhengdong Cheng, a professor at Texas A&M, was arrested and charged by the US Justice Department with concealing his ties to Chinese institutions that he maintained while he was working on a project funded by a NASA grant. Apparently it’s been illegal for NASA money to go to anyone simultaneously working for a Chinese institution since 2011. The full affidavit is here.
August 25: iSpace announced a B round of funding, raising $172 million, and reportedly bringing the total amount raised to $276.5 million.
Until next time
My name is Cory Fitz and I write the Taikonautica newsletter. To make you smarter about China’s rapidly evolving space industry, Taikonautica brings you translations of Chinese-language articles, as well as a roundup of links and news.
If you have any questions or comments, feel free to contact me on Twitter at @cory_fitz