One of the leading scientists developing China’s first satellite, the Dongfanghong-1 (东方红一号), compared indigenous satellite development to preparing a steamed bread, necessitating many steps from reclaiming wasteland and planting seeds to harvesting and grinding wheat, before eventually baking the delicacy. This analogy illustrating the significant material costs and scientific expertise required to indigenously develop a satellite suggests satellite technology is only accessible to powerful and developed states. Yet, developing countries could reap great benefits from acquiring a first satellite, as space-based technologies can contribute to the advancement of all 17 Sustainable Development Goals. Satellites are therefore in the paradoxical position of representing a powerful tool for development while being highly inaccessible to the countries that need them the most.

Thankfully, just as most consumers do not produce steamed breads on their own, aspiring satellite operators may embrace shortcuts by outsourcing some, or all, of the development efforts. In fact, owning a satellite could be as easy as buying second hand clothes. In March 2023, privately developed satellites costing from RMB 1 million to RMB 30 million (~USD 140k to 4.15 million) appeared on top Chinese e-commerce website Taobao. Space services, especially to foreign public entities, have nevertheless remained a regalian affair. China has been offering services such as launches on its Long March rocket family since 1986.

Since the early 2010s, Beijing has been marketing a new product: a package deal including designing, manufacturing, launching, and operating a satellite, in addition to training clients on satellite operations. China uses the design of the Dongfanghong-4 (hereinafter DFH-4) as the base for designing those satellites.

     The deal primarily targets developing countries that are not established space powers, with both limited indigenous space capacities and limited budgets. In many ways, it is working: developing countries are buying into the deal. Here are three tactics China uses to project its satellites in emerging markets.

#1: China ties satellite sales to broader development

A late-comer to the Market

     Mao Zedong was famously enthusiastic about China’s role for space exploration, exhorting in 1958 “我们也要搞人造卫星” (we also wish to build artificial satellites). Although China was the fifth nation to develop indigenous satellite launch capacities, it entered the international commercial satellite market as a late-comer while U.S. and European firms dominated the satellite market, including for developing countries.

In comparison, China’s first satellite sale dates back to 2004, when the China Great Wall Industry Corporation sold NIGCOMSAT-1, a communication satellite, to Nigeria. Ever since, China’s sales of DFH-4 satellites abroad have a striking similarity: every client except for Belarus was located in Latin America, Africa, or South Asia. All featured on both the IMF’s and the World Bank’s lists for developing economies or least developed countries. This suggests that the DFH-4 is primarily tailored for sales to those countries.

Tying Satellite Sales to China’s Foreign and Development Policy Goals

Another commonality between those countries is the existence of strong ties with China, either through ideological proximity (such as the cases of Laos, Morales’ Bolivia, and Venezuela), political entente (such as Pakistan and Belarus) or, in all cases, the presence of significant other Chinese investments. This is especially the case for satellites sold after 2013 and the establishment of the Belt and Road Initiative (BRI). When Cambodia purchased a DFH-4 satellite, it formally announced the decision on January 11, 2018, during a visit by Premier Li Keqiang focused on Cambodia’s broader participation in the BRI. According to Cambodia’s Ministry of Foreign Affairs, the satellite deal was one of 19 agreements between China and Cambodia signed on that day, with other key projects including a new airport for Phnom Penh.

     Sales of satellites in other countries, such as Sri Lanka’s SupremeSat-1 and SupremeSat-2, follow a similar pattern. SupremeSat-1 lifted off in November 2012, just a fortnight after a pair of visits between the two countries’ defense ministers. In 2012, China was Sri Lanka’s third largest source of foreign direct investment (FDI), though just two years later it had risen to become Sri Lanka’s top provider of FDI. These examples reveal that satellite projects never occur in a vacuum and constitute an extension of broader development initiatives. Pre-existing or simultaneous political and investment partnerships ensure existing bilateral trust and a degree of path dependency.

     China advertises the successfully delivery and operation of LAOSAT-1, another DFH-4 satellite, as an example of beneficial space cooperation within the scope of the BRI. This attachment to the BRI is significant as LAOSAT-1 was ordered in 2010, three years before the unveiling of the BRI. The launching of the BRI in 2013 merely constituted an opportunity to accelerate space cooperation with countries that were already strong candidates, while expanding the range of potential clients to countries that might not previously have been obvious contenders, particularly in Southeast Asia with sales to Thailand and Indonesia.

#2: China tailors the deal to fit developing market needs

     Another factor explaining the success of China’s satellite sales in developing markets is a streamlined process with the China Great Wall Industry Corporation (CGWIC) at its center. Established in the 1980s as a subsidiary of the China Aerospace Science and Technology Corporation, the CGWIC advertises itself as the sole Chinese interlocutor for international commercial space cooperation. As a result, the CGWIC negotiates on behalf of several Chinese entities, selling launch services on a Long March rocket, satellite design, insurance, training, ground segment construction, and any other auxiliary space service in a single bundle. This simplifies negotiations, especially for short-staffed developing space agencies that may not have the resources to entertain negotiations with a half-dozen actors for a single project.

     One key argument the CGWIC leverages to win over clients in developing countries is the freedom of its satellites from U.S.-imposed exports controls, outlined in the U.S.’ International Traffic in Arms Regulation (ITAR). Since 1999, Chinese satellites are banned from using U.S. components, thereby falling out of U.S. sanctions. The CGWIC has advertised DFH-4 satellites as “ITAR-free”, a designation bound to be attractive to countries that are, or may fear becoming, the subject of U.S. sanctions. As satellites have dual-use applications, sanctioned or potentially sanctioned countries between 2012 and the time of writing include China, Venezuela, and Belarus, but also other countries that ordered DFH-4 satellites, such as Sri Lanka, Cambodia, and the Democratic Republic of the Congo.

#3: China advances payments for developing clients  

Pricing Satellites

     Satellites are pricey assets, and China’s DFH-4 satellites sold to the developing world are no exception. SupremeSat-1 costed the Sri Lankan government $215 million, while LAOSAT-1 reportedly costed $259 million, and the price of Bolivia’s Tupac Katari-1 is estimated at around $300 million. These remain more affordable than similarly-sized products from Western producers, a fact the CGWIC repeatedly highlights in its PR strategy. In a statement to the Global Times, the CGWIC designated its products as “low-cost satellite platforms” that improve competitiveness on a global scale, while a separate CGTN report on the CGWIC’s communication satellites extols the satellite’s alleged cost efficiency.

     The supposedly advantageous pricing corroborates the frequently stated theory that South-South Cooperation leads to more mutually advantageous and cost-effective deals than North-South trade. Former Kenyan Permanent Representative to the UN John O. Kakonge highlights that this is particularly true in cases involving technical assistance, wherein satellite sales fall. This vision of mutually beneficial south-south interactions is in line with the win-win cooperation rhetoric that permeates Chinese official discourse.

Financing through Loans

     Notably, practically none of CGWIC’s customers pay those hefty pricetags upfront. According to a report by the Observer Research Foundation, most of the CGWIC’s satellite sales come with a loan from the Export-Import Bank of China (hereinafter China EXIM), with interest rates around 2-3%. The LAOSAT-1 project was entirely funded by a China EXIM loan that Laos aims to repay by 2033. Beijing bankrolled at least $200 million of the $300 million price tag for Nigcomsat-1. In the case of Bolivia’s Tupac Katari-1, the China Development Bank extended a loan for $251 million to help fund the $300 million project, with the Bolivian government to cover the remaining costs. The ease of availability, low interest rates, and relative freedom from conditions of these Chinese loans makes the CGWIC an attractive contractor for developing countries seeking to obtain a satellite on a budget, demonstrating a Chinese understanding for developing countries’ priorities.

Conclusion

     In the competitive satellite market, China has successfully carved out a niche for itself by seeking out developing countries and potentially ITAR-sanctioned states as an underserved segment, tying into Beijing’s broader global development initiatives such as the BRI. By subsidizes purchases, with low prices and integrated financing deals with Chinese development banks for low interest loans.

     China has achieved Mao’s ambitions of building satellites, not only for itself but for the developing world, to whom it is now spreading its space prowess. Satellite sales to developing countries, under the aegis of building a community of shared future for mankind, are arguably an example of win-win South-South cooperation. Future research may however be necessary to edge out how equitable the gains are.

Integrating satellite sales as an arm of the BRI and centralizing all aspects of a complex multi-component product in a single bundle and a single interlocutor, it has facilitated sales to developing countries and placed the CGWIC at an advantage relative to other contractors. Lastly, China’s success in the satellite market for developing states stems from the fact Beijing heavily subsidised both the supply and demand of satellites aimed at the Global South, indicating a drive to establish itself there with little competition.

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