The Chinese space industry is often misunderstood in the West.

And no wonder.

Between the alphabet soup of state-owned enterprises (CASC, CAST, CALT, and CASIC are four different, albeit related companies), the language barrier, and the fact that good information is hard to find, the Chinese market can be maddeningly confusing even for the most seasoned China observers.

One of the biggest gaps between perception and reality is the idea that Chinese aerospace industry is a handful of huge, state-owned companies that do everything.

This could not be further from the truth; the number of private Chinese space companies are growing. Often occupying highly niche market segments, China’s private space ventures are making very real technological breakthroughs (or at the very least, catching up with the West increasingly quickly).

Beijing LandSpace Technology Corporation Limited (LandSpace) is Exhibit A. The privately owned launch vehicle manufacturer founded in 2015 recently completed a 200 million yuan ($35 million) Series B funding round, with this coming around two years after a Series A round of half that amount. All of the company’s funding has come from private (i.e. non-government) sources.

In addition to the recently completed funding round and customer commitments, the company also took an important step on the technology front with the successful test of Phoenix, 10-ton liquid-oxygen/methane rocket engine.

Phoenix represents the first successful testing of a liquid-oxygen/methane rocket engine by a private Chinese space company, and has the potential to help in the commercialization of methane-fueled rockets.

Beyond this, at the first China (International) Commercial Space Symposium held in Harbin in April, LandSpace announced their 70-ton liquid-oxygen/methane rocket engine, TQ-2, and the methane-fueled ZQ-2 rocket. Landspace officials said ZQ-2 will have the capacity to launch a 1,500-kilogram payload into a 500-kilometer sun synchronous orbit, or 3,600 kilograms into a 200-kilometer low Earth orbit. That would make ZQ-2 as much as 10 times more powerful than Electron, the dedicated smallsat launcher that U.S.- and New Zealand-based Rocket Lab sent into orbit for the first time in January.

At this point, LandSpace is the most advanced privately owned launch company in China. This still puts LandSpace far behind China’s big state-owned companies (Phoenix is smaller than the KZ-1A and CZ-11 engines, the smallest models manufactured by CASIC and CASC, respectively). But Landspace is advancing at typically modern Chinese speed (read: fast). According to LandSpace Chief Designer Wang Minghang, “With the Phoenix, we have tackled a series of technical problems in developing a liquid engine. LandSpace will use this as a solid foundation, upon which we will advance our technological capabilities moving forward.”

With this advancement, China becomes the third country in the world (after the United States and Russia) to have a private company capable of independently developing liquid-oxygen/methane engines. While still lagging the capabilities of the world’s most advanced private launch companies and their engines (i.e. SpaceX and its Raptor engine and Blue Origin and its BE-4), LandSpace’s Phoenix represents a big step forward for a space program that is just starting to embrace private enterprise.

Private Enterprise in the Middle Kingdom

LandSpace’s ascension is indicative of a broader trend in China today — the increased proliferation of private space companies. Launch companies alone include LinkSpace, OneSpace, iSpace, LandSpace, and ExPace (though ExPace is largely funded by CASIC and only nominally private).

Among launchers, iSpace launched a suborbital rocket in April from Hainan, and OneSpace launched a suborbital rocket earlier this month. LinkSpace has also finished a vertical take-off, vertical landing test in 2017. While launch companies have recently made the most headlines, other areas of space such as Earth observation, telemetry, tracking and command, and nanosatellites are also progressing in China.

The short history of private space companies in China has seen several companies succeed in various levels of innovation, though their strategy has not always been the same as that of American or European counterparts. LandSpace, for instance, has kept a decidedly low profile, with the company CEO and founder, Roger Zhang Changwu, noting in a recent Financial Times piece that “building this kind of technology is slow going. We do not want to unveil anything until we are absolutely sure it can work successfully.”

While China does not yet have its equivalent of an Elon Musk or Jeff Bezos investing money and passion in vision-driven space companies, billionaires such as Robin Li, the co-founder of Chinese search giant Baidu, have come out in support of industry development. “I hope that the government can give private companies more support, especially in the civilian space segment.,” Li said. “The move will enhance the international competitiveness of China’s aerospace industry.”

This pragmatic view is shared by many: space is a growing industry; China has a small piece of the global market today; and thus China should invest more to become more internationally competitive. Li has since mentioned to the media that he has dreams of seeing a Chinese private space-exploration leader, a Chinese Elon Musk, if you will, to lead a Chinese SpaceX. While Li’s own space ambitions are unclear, his pockets are deep — his stake in Baidu is worth more than $10 billion.

Li’s wishes for private space support from the government were granted in 2014, when the China State Council published its first specific mention of private space industry. It noted that it would strive to “encourage private capital’s participation in China’s construction of civilian space infrastructure.” The support from the government has opened the door to a number of private companies to play in different parts of the market.

The Beginning of a New (Private) Space Race?

As has become increasingly clear over the past few months, one of the likely challenges facing launch providers in the future will be low-cost competition from Chinese companies.

While regulatory barriers remain in force in both China and the United States, both countries are likely to give rise to innovative sector leaders across the increasingly diverse and specialized space industry. U.S. and European companies enjoy market dominance now.

However, as Chinese companies start to provide service to foreign (but non-U.S.) companies, their concepts may become proven, and their products significantly more appealing to value-conscious companies in the rapidly expanding new space industry.

The space race of old was between governments, but we may be on the brink of a 21st century private space race on an international scale.

Tianyi Lan is founder of Ultimate Blue Nebula Co., Ltd., a space consulting company, and is an editor of Satellite World, a Chinese-language satellite news publication. He previously worked for CAST, and is based in Beijing.

Blaine Curcio is founder of Orbital Gateway Consulting LLC, a commercial space and satellite consulting company, and was previously Principal Analyst at Northern Sky Research. He is based in Hong Kong.