New Space and Tech

China’s Answer To Starlink Gets A Call from the Central Government

By Blaine Curcio
April 26, 2023
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China’s Answer To Starlink Gets A Call from the Central Government
Megaconstellation — source: OneWeb

If I may start with a tired, but extremely true pun: covering the Chinese space industry inevitably involves a lot of reading of tea leaves. Speeches and press releases are full of party jargon. The order of speakers at conferences can reveal much about the intentions of the conference organizer. And often, things are just ambiguous. 

With that being said, it’s typically not a good thing when your company gets put under an “examination” (体检) by a team from China’s Central Leading Group for Inspection Work (中央巡视组), a “coordination body set up under the Central Committee of the CCP for the purpose of managing party disciplinary inspections nationwide”. 

And yet, a couple of weeks ago, one of China’s most important space companies was put under investigation by such a committee. In early April, we saw an announcement from the Chinese Government that China Satellite Networks Limited (CSCN), along with China Electronics and Technology Corporation (CETC) and the China Electronics Corporation (CEC) were under investigation by the 14th Inspection Team of the Central Leading Group for Inspection Work. This was one of several inspections announced around the same time, and the political ramifications are not yet fully clear, but given the importance of the companies and projects involved, it should be taken as big news. Before digging into the details of the announcement, let’s briefly clarify these three companies and why they are important. 

CSCN, CETC, and CEC: An Impressive Trio

CSCN, CETC, and CEC are all large state-owned enterprises. CSCN was founded in 2021 with the purpose of developing and deploying China’s low earth orbit megaconstellation, while CETC and CEC are both quite a bit older, and are typically focused on electronics, network equipment, and in the context of space, things like ground networks, radio and optical technology, and secure communications. Combined, the three companies have easily >300,000 employees, and revenues of ~US$100B (though CETC and CEC are the far larger of the three). 

Over the past several years, all three companies, though especially CETC, have been involved in the buildout of China’s “Space-Earth Integrated Information Network 2030 Megaproject” (天地一体化信息网络), a high-level concept that aims to better link China’s expansive terrestrial communications network with its ever-growing space-based communications network. 

At the same time, CSCN has been tasked with deploying China’s LEO broadband constellation. Up until now, we have seen limited progress from CSCN on the constellation front, and from different local sources in China, we understand that the Space-Earth Integrated Information Network is suffering from lack of project centralization—i.e., too many entities involved in too many moving parts, creating a situation whereby no one feels compelled to do anything too risky. 

The Inspection

The inspection of CSCN, CETC, and CEC is part of the so-called “First Round of Inspections of the 20th Central Committee” (二十届中央第一轮巡视) which at their heart seem to have two separate but related objectives: 1) improve Party control over SOEs, and 2) stamp out various excesses at SOEs. In the Chinese Government press release describing the inspections, it is noted that “the inspections are an important part of the Party and the State’s supervision system, and are a strategic institutional arrangement for comprehensively and strictly governing the Party”. 

In the case of the team inspecting CSCN, CETC, and CEC, there are a few specificities. First, at the time of the announcement of the inspection, it was also announced that CSCN would have a new General Manager, namely ZHANG Hongtai. General Manager in the context of Chinese companies is a bit like the day-to-day CEO, working in tandem with the Party Secretary and Chairman (in the case of CSCN, both roles are held by ZHANG Dongchen). The removal of the previous general manager, YANG Baohua, seems to have been relatively benign, in that rather than being unceremoniously removed, YANG was seemingly removed so that he could take up a role at the Chinese Society of Astronautics, and by extension the IAF. Nonetheless, the inspection group announced that there would be a new General Manager of China SatNet, the aforementioned ZHANG Hongtai. ZHANG comes from a career at leading Chinese satellite manufacturer the China Academy of Spaceflight Technology (CAST).  

The second noteworthy aspect of the inspection of CSCN, CETC, and CEC is the language used by the inspection committee. As part of the announcement about the examination, “the 14th inspection team of the Central Committee has entered China SatNet and will work for about 2 and a half months” (中央第十四巡视组于近日进驻中国星网,并将工作2个半月左右). 

Zhang Dongchen CSCN Chairman and Party Secretary, stated that “the Central Commission’s deployment of inspectors into SatNet is not only to check the direction of the strategic goal path, but also to check the political aspects of various tasks….a comprehensive physical examination”. (“党中央部署对中国星网党组开展巡视,既是对战略目标路径从方向上把关校准,也是对各项工作从政治上全面‘体检’)

 Finally, the inspection announcement notes that “The focus of the visit is to report and reflect on violations of political discipline, organizational discipline, integrity discipline, mass discipline, work discipline, and life discipline” (重点是关于违反政治纪律、组织纪律、廉洁纪律、群众纪律、工作纪律和生活纪律等方面的举报和反映), and apparently the investigation team has set up a hotline for employees to call if they want to report such violations. 

In short, a few things remain unclear, namely 1) to what extent are CSCN, CETC, and CEC “uniquely in trouble” in what seems to be a broad-based inspection of SOEs, 2) why CSCN, and 3) what does this all mean moving forward? And this is where the reading of tea leaves can come in handy.

So What Does this All Mean?

Taking a step back from being purely analytical, and taking a step into speculative territory, this might mean a few things. First, I suspect the relative lack of progress by CSCN in deploying a Chinese NGSO constellation, especially coupled given Starlink’s very rapid progress, is not a great look for the powers that be. Starlink has proven itself a very useful piece of technology during the Russian invasion of Ukraine, and while China is surely concerned about countering Starlink in a similar Taiwan scenario, they are also concerned about proactively fielding their own such constellation. Very little/no progress from CSCN thus far in terms of number of satellites launched, number of MoUs signed, and general industrial development is not great. 

Second, the issues might be broader than just the space segment. CETC and CEC are largely responsible for ground segment technology, and their inclusion in the investigation could be an indication that there are perceived issues with the way that these three entities are working together. This would imply that rather than purely an issue surrounding the buildout of, say, a “Chinese version of Starlink” (which is mostly CSCN’s responsibility), this is seen as an issue surrounding the entire space/ground integrated network.

Third, this should be taken as a sign that CSCN has a short leash, and is a politically very strategic project. Having only been founded ~2 years ago, CSCN has had limited time to develop. The implementation of such a comprehensive inspection and change of leadership, so soon after establishment, seems to indicate that time is of the essence: the Central Leading Group for Inspection Work (and the powers that be more generally) is not going to wait and see how things go. 

And What to Expect Next

The inspection of CSCN, CETC, and CEC is planned to last ~2.5 months, i.e. until mid-late June. In a negative outcome scenario, we may see more company leadership changes, penalties levied on the companies, or worse. In a positive scenario, the inspection might go on without a hitch. 

Either way, the inspection is clearly going to bring CSCN, CETC, and CEC more in-line with the Party rhetoric, and in some way, shape, or form, under tighter control of the Party apparatus more generally. Wearing my admittedly speculative hat, it would seem that this is not a great recipe for the type of rapid, fail-fast, take risks innovation that has propelled companies like SpaceX to the forefront of commercial space. 

The Chinese economic and political system clearly functions very differently from the rest of the world, and interpretation thereof involves a fair bit of proverbial tea leaf reading. But in any country, in any language, this type of inspection is rarely a good thing, especially in the short-term. Moving forward, we may see a stronger, more streamlined CSCN, CETC, and CEC emerge. But in the here and now, more likely is a tendency towards groupthink, political gamesmanship, and doing whatever the heck one can to avoid the wrath of the 14th Inspection Team. 

Blaine Curcio

Blaine Curcio is the leading Chinese space industry analyst, having been based in Greater China since 2011, and having been working in the space and satcom sector since 2010. He is founder of Hong Kong-based Orbital Gateway Consulting, a research and consulting firm focused on the Chinese space sector, and is Affiliate Senior Consultant at Euroconsult, a leading space industry consulting firm.