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The startup principle “fail fast, learn faster” has defined the American space industry for much of the 21st century. The U.S. private sector has pushed the technical boundaries in rocket launch, low Earth orbit satellites, imagery analytics, and other areas, and through this innovation has become the driving force behind America’s leadership in space.

But the United States is no longer alone at the vanguard. China has watched and learned from America’s space startups to accelerate its own dynamic commercial space sector. While state-owned enterprises have historically dominated China’s space market, the Chinese Communist Party is increasingly looking to China’s commercial companies to fulfill its ambition to become the world’s preeminent space power — and supporting them with streamlined regulations and investment.

China’s rapidly advancing commercial space industry should be highly concerning to the United States and its allies. As companies on both sides race to launch more satellites, develop better rockets, and build new space infrastructure, the outcome will determine who sets the terms for global connectivity, commerce, and security in the decades ahead. Should the United States fail to respond decisively, China will use space to erode America’s military edge and control the backbone of the global economy.

Staying ahead in this new space competition will require America to double down on its commercial space ecosystem with forward-leaning regulations and expanded pathways to do business with the U.S. government. Given that our roles at Booz Allen involve analyzing, investing in, and partnering with emerging startups, we do have a commercial interest in seeing such changes. Nonetheless, we strongly believe that only by empowering our innovators can America secure its place as the dominant nation in space amidst a rising China.

The Evolution of China’s Space Industry

China’s space industry was conceived in 1958 with Mao Zedong’s “Two Bombs, One Satellite” program, a strategic initiative to indigenously develop nuclear weapons, missiles, and satellites. China viewed these capabilities as critical to ensuring its long-term security against both the United States (which had threatened nuclear strikes against China in 1955 during the First Taiwan Strait Crisis), and the Soviet Union (which China viewed as intentionally keeping it dependent on Soviet technologies). In 1970, China successfully launched its first satellite — DFH-1 (Dong Fang Hong-1, “The East is Red”) — making it the fifth nation to independently launch a satellite and marking the birth of the nation’s space era.

For more than four decades after the launch of DFH-1, China’s space industry maintained an entirely state-run model, with defense enterprises developing launch vehicles and placing dozens of remote sensing and communications satellites into orbit. Despite this progress, by 2010 China remained a second-rate space power far behind the United States. As Beijing watched private American firms become the industry’s innovation leaders, its own bloated enterprises alone seemed unlikely to lead China to supremacy in space. China foresaw this as a major challenge. Then it adapted.

Starting in 2014, China began to deliberately foster its commercial space sector. That year, the State Council released a policy directive to open certain areas of the nation’s space industry — including Earth observation and launch — to private investment. Over the following decade, China passed a host of guidelines to bolster its commercial space companies: in 2015 it called on China’s space industry to “grasp the transformative” innovation from commercial development; in 2019 it provided greater regulatory clarity to commercial launch companies; in 2022 it further opened up procurement and research projects to private companies; in 2023 it designated commercial space as a “strategic emerging industry,” spurring numerous local governments to foster local commercial space sectors; and in 2025 the China National Space Administration began working on a development plan to strengthen China’s commercial space sector from 2026 to 2035. This plan will likely further streamline licensing and permitting for commercial launch and open access to major national test facilities previously restricted to only government projects.

Our own analysis suggests that such policies have catalyzed hundreds of venture capital-backed Chinese space startups across launch, Earth observation, satellite communications, in-orbit servicing, thrusters, semiconductors, and other areas. These commercial companies, inherently dual-use, are at the core of why China is rapidly narrowing the gap with the United States in space.

Impact to Defense, Commerce, and Global Influence

China’s commercial space companies are having outsized impact in three segments in particular: satellite communications (to include internet connectivity), Earth observation, and launch.

In the satellite communications market, Chinese communications satellites will comprise the majority of all Chinese satellites by the end of 2025. Funded by government and private venture capital, five companies — Shanghai Spacecom, China SatNet, Huawei, Honqing Technology, and Geespace — could potentially launch a combined ~54,000 satellites within the next decade to provide internet connectivity from low Earth orbit. This surge in Chinese bandwidth is expected to flood international markets starting this year, capturing billions of users worldwide and expanding the reach of China’s Digital Silk Road as this user base grows.

Shanghai Spacecom — which is developing the 15,000-satellite “Thousand Sails” constellation — has already launched 90 satellites in under a calendar year and plans to launch 648 more by the end of 2025. While Western competitors like SpaceX’s Starlink already operate thousands of satellites servicing well over 100 countries, the important point is that China may significantly close this gap through this decade. In the case of Shanghai Spacecom, it has agreements to provide internet in domestic China, Brazil, Thailand, Malaysia, and Kazakhstan, and is in similar talks with more than two dozen nations, mostly in the Global South.

Chinese control over connectivity in these markets would extend Beijing’s wall of digital censorship and serve as a massive intelligence gathering apparatus for China’s Ministry of State Security. At the same time, it would grant China’s military a robust satellite communications infrastructure to support military operations as it attempts to operate further and further from the shores of mainland China.

In Earth observation, Chinese companies are proliferating low earth orbit with constellations that feature advanced heterogeneous sensors, and increasingly, edge compute capabilities. One such company is Chang Guang Satellite. A late-stage startup spun out of the Chinese Academy of Sciences in 2014, Chang Guang now boasts one of the largest optical remote sensing constellations in the world. As part of its Jilin-1 constellation, Chang Guang has deployed more than 130 multispectral, infrared, video, and hyperspectral satellites. A recent study comparing global remote sensing capabilities found that the company ranked among the top three global providers in revisit rate, video quality, and mid- and long-wave infrared sensing. In addition to its close Chinese military connections, Chang Guang has provided geospatial intelligence to Russia’s Wagner Group and Yemen’s Houthis, the latter of whom has used the intelligence to directly target American warships.

China’s rapid expansion in Earth observation has also resulted in an oversupply of geospatial data, outpacing domestic demand and prompting leading firms to seek international markets. Major players like Chang Guang are attempting to sell their data at cut-rate prices internationally — as low as 10 yuan ($1.40) per square kilometer — to gain market share. As in the satellite communications sector, this influx of cheap, technically capable Chinese geospatial services poses risks to U.S. security by undercutting Western remote sensing startups.

While China has made strides in satellites, the primary constraint to its commercial space industry is its limited rocket launch capacity. Although the pace of launches has steadily increased, with 68 rockets launched last year carrying 270 satellites into orbit, this rate must accelerate dramatically to meet the demands of deploying tens of thousands of satellites. SpaceX, for example, launched more than double the number of rockets in 2024 than did the entire Chinese nation. While state-owned Long March rockets have handled the majority of China’s launches, their scheduling prioritizes government and scientific objectives and their launchpads are restricted for use. This means commercial operators must wait in line or depend on a commercial launch sector that is still maturing in reliability and capacity.

However, dozens of Chinese launch startups are vying to solve this blockage. CAS Space, LandSpace, and several other startups are introducing reusable first stage boosters in new rockets this year, aiming to increase launch cadence and reduce costs. More recently founded startups, such as CosmoLeap and Yushi Space, plan to employ the “chopstick” method of “catching” returning rockets after they deliver satellites to orbit. Infrastructure improvements are also underway, including the opening of China’s first dedicated commercial spaceport on the island province of Hainan, which aims to alleviate some access constraints for commercial launches.

While China’s launch capability trails that of the West for now, it is poised for significant maturation. China’s expanded launch capacity will proliferate access to space for Chinese dual-use satellite companies, allow the Chinese military more “quick turn” tactical launch options in the event of a conflict, and enable the placement of infrastructure to support China’s ambitions to dominate the emerging lunar economy. Moreover, Chinese launch will almost certainly increase the number of satellites in orbit from other hostile and less sophisticated actors, increasing the likelihood of debris-creating collisions detrimental to the space operational environment.

Recommendations and Conclusion

To ensure America’s leadership in space, the U.S. government should actively support U.S. startups and integrate them at scale into missions of national importance. This includes further streamlining space export controls to allow startups to compete in foreign markets, revamping regulations to allow for a faster launch cadence, more closely tracking Chinese commercial technology industries to inform U.S. acquisition, and supporting space startups with major contracting opportunities.

Streamline Export Control Compliance

To ensure U.S. startups can fairly compete against Chinese competitors in international markets, the U.S. government should continue to loosen burdensome export controls on relevant dual-use space products. The U.S. government has already taken significant steps to relax controls, including moving most commercial communications satellites, many types of Earth observation platforms, and tens of thousands of component parts, from the International Traffic in Arms Regulations munitions list to the Commerce Department’s more flexible dual-use regime. More recently, the National Oceanic and Atmospheric Administration scrapped restrictive licenses on U.S. remote sensing satellites operating abroad, and new 2024 rules under the Biden Administration let U.S. companies sell many spacecraft and components license-free to trusted allies.

Building off these successes, U.S. regulators should ensure a streamlined compliance process for startups going forward. This will require both the State and Commerce Departments to more frequently coordinate with industry and adapt their export control lists as space technology rapidly evolves. Moreover, the current U.S. export control system is fragmented across multiple agencies and their disparate systems, processes, and forms. For early-stage companies, understanding and complying with U.S. export rules can prove especially burdensome. As such, the U.S. government should consider building a modern, easy to use digital system to help startups understand and follow export rules. Doing so would allow our innovators to expend less energy on onerous government compliance, and more energy on building innovative products for the United States and its allies.

Streamline Launch and Reentry Regulations

While Beijing is setting clear rules to support China’s commercial launch companies, the Federal Aviation Administration’s regulatory apparatus has unnecessarily slowed down Western launch companies. In an attempt to streamline launch and reentry licensing, the Federal Aviation Administration released a set of regulations in 2021 known as “Part 450.” While well-meaning, Part 450 ballooned into a 53-page rule filled with unclear requirements — including onerous environmental reviews — that has delayed companies from obtaining licenses for launch and reentry. By law, the Federal Aviation Administration must provide licensing determinations within 180 days, a timeline which it says it has met 98% of the time. But this does not account for the lengthy pre-application period — which involves back-and-forth correspondence between the Federal Aviation Administration and a company to ensure the licensing application is successful upon submission. This pre-application period can take several years to complete, according to Wayne Monteith, who led the Federal Aviation Administration’s Office of Commercial Space Transportation from 2019 to 2022.

Shackling private launch innovators gives China a prime opportunity to catch up, an unacceptable risk that must be rectified. In a welcome development, a Federal Aviation Administration committee is currently reviewing Part 450 and plans to update regulations to “foster more clarity, flexibility, efficiency, and innovation.” To keep up with private sector innovation while ensuring safety, the updated rule should offer simpler guidance on how companies can comply, reduce the administrative steps in the pre-application period, and include the pre-application period within the 180-day statutory review clock.

Expand Open-Source Intelligence on China’s Commercial Industries

Legacy intelligence practices of analyzing Chinese military space systems are vital, but they do not give the U.S. government a full picture of Chinese advancements. Department of Defense and intelligence community leaders need a deeper understanding of China’s private sector, from which the Chinese military increasingly procures dual-use space technologies. The U.S. government should more widely adopt commercial open-source intelligence software and data to identify Chinese startups and proactively track them from their earliest stages. Doing so will help the United States understand China’s actual status in key technology areas, while informing the America’s own space investment and acquisition priorities. As much as possible, the U.S. government should also routinely share the latest counterspace threat information with cleared Western space startups to help inform their product development roadmaps. The U.S. Space Force’s initial rollout of Orbital Watch, a platform meant to enhance threat information sharing with the private sector, is a big step in the right direction.

Expand Contract Opportunities for Commercial Startups

The Defense Department should also open more programs of record to commercial solutions to rapidly execute requirements. An important first step should be to identify current and future requirements that can be fulfilled through commercial capabilities. The Defense Innovation Unit has had several successes in bridging the gap between startups and operational end users. This model of actively connecting commercial technology directly with the end user and real mission needs can eliminate the valley of death for important startup capabilities and should be scaled across the Defense Department.

Additionally, many of the opportunities startups could target are out of reach due to lack of facility clearance levels — a determination made by the government that a contractor is eligible for access to classified information. The government should find ways to more actively and rapidly sponsor facility clearance levels to promising startups, ensuring they don’t miss opportunities due to classification requirements. DARPA’s BRIDGES program — a pilot program to connect innovators to the challenging classified problems — is a good example of how this might work.

On the requirements front, the U.S. government should also refrain from overly prescriptive requirements where possible. It should tell companies “where it wants to go” rather than “how to get there.” This outcomes-based approach will align incentives between primes and startups in a way that puts space solutions built and integrated together on a firm-fixed-price basis. Getting commercial startup capabilities on contract can also be rapidly scaled with a further expansion of vehicles such as Other Transaction Authorities and Commercial Solutions Opening. Although each has gained prominence in recent years, an expansion of their use will reduce administrative burdens associated with traditional contractor compliance rules that often slow innovative entrants.

Supporting startups with contracting opportunities can help address gaps in critical mission areas, including satellite communications, Earth observation, space domain awareness, space traffic management, space control, and more. Several Booz Allen Venture portfolio companies could play a role, including: Quindar, whose mission management platform enables the safe and efficient command and control of spacecraft; Albedo, whose very low Earth orbit imaging satellites can provide detailed Earth imaging and non-Earth imaging data; and Starfish Space, which maximizes the value and security of satellites on orbit with its Otter servicing vehicle — a satellite designed for autonomous docking and maneuverability.

As China’s commercial space sector rapidly matures, the United States cannot afford complacency. Sustaining leadership in the new space race will require a renewed commitment to the ingenuity, agility, and risk-taking that define the American startup ecosystem. By fully empowering private space innovators, the United States can outpace China and ensure that the future of space is shaped by American innovation and vision.

Ryan Nelson is a lead associate on Booz Allen’s Tech Scouting and Intelligence team, where he leads research on foreign technology markets. Ryan previously served as a military legislative assistant on Capitol Hill.

Taylor Rhoten is an investor with Booz Allen Ventures, where he invests in early-stage defense and deep tech startups. He is an MBA candidate at the Berkeley Haas School of Business and previously held strategy and market intelligence roles at Viasat and Booz Allen.

Brian MacCarthy is a Booz Allen senior vice president that leads the Booz Allen Ventures and Tech Scouting and Intelligence teams. He has over 20 years of experience in the federal and commercial sectors, spanning software, hardware, cloud, AI, cyber security, and health operations.

Image: Shujianyang via Wikimedia Commons