China Is Coming for Space
Next Friday, May 15 at 10 a.m. ET, Alice and James will by joined by Kevin Xu, author and founder of Interconnected, a bilingual newsletter exploring the intersections of tech, business, money, geopolitics, and U.S.-China relations. Want early (unedited) access? Weâre livestreaming the conversation on Substack, only for Prof G+ subscribers. Register here. TL;DR Beijingâs space ambitions have more to do than space Chinaâs billionaires are about to face their first wealth tax If robots can fold dim sum, no job is safe In the past five years, China has landed a rover on Mars, completed a space station, and collected samples from the far side of the moon. In 2025 alone, it executed more than 90 orbital launches, a new national record. It has developed a giant robotic arm capable of servicing satellites in orbit, a space telescope with a wider field of view than the Hubble, and reusable rockets to compete with SpaceX. Itâs even building rockets designed to launch from water-based platforms. The commercial space economy is worth roughly $613 billion, with the United States holding about 55% of that market. China sits at around 8% but is growing quickly. Chinese commercial space investment reached approximately $4 billion in 2025, up from $340 million a decade ago. China has emerged as a formidable competitor in space, and its ambitions are only accelerating. Jamesâ Take: The key to understanding China's space program is to ignore space entirely. It's a strategy for dominating Earth. A textbook written for PLA officers, not for public consumption, states that the ability to control Earth by controlling space represents a powerful military incentive, and that the development of space warfare capabilities has become a focal point of the arms race. The Shijian 21 satellite shows exactly what this looks like in practice. It's a Chinese satellite equipped with a grappling arm that maneuvered alongside a defunct Chinese satellite more than 36,000 kilometers above Earth and hurled it into a graveyard orbit. The U.S. military took note immediately: if that arm can do it to a defunct Chinese satellite, it can do it to one of America's roughly 80 spy satellites currently monitoring Chinese territory. In 2023, the Office of the Director of National Intelligence formally warned that China had developed the ability to operate space-based weapons capable of degrading U.S. capabilities in orbit. Aliceâs Take: Chinaâs current space investment is still a fraction of the U.S. total, but the trajectory is what matters. Chinaâs space investment has grown tenfold in a decade, with explicit backing from the five-year plan and language at the March Lianghui designating China as a space superpower. Whatâs also notable is that this ecosystem is increasingly public-private. A private company appears to be supplying the on-orbit robotic arm technology to the Chinese government, not unlike what we see with SpaceX in the U.S. Space was embedded in Chinaâs Belt and Road strategy as far back as 2013. What weâre watching now isnât a sudden sprint; itâs the culmination of a long-run plan. And with the SpaceX IPO expected to be the largest in history, this will become a political flashpoint between Washington and Beijing, not just a technology competition. For the first time in its modern history, China is confronting a massive generational wealth transfer, and almost none of it will be taxed. Chinese citizens with fortunes above $5 million are expected to pass down roughly $2.1 trillion over the next decade. China has no inheritance tax. It has no meaningful property tax. Its fiscal revenues as a share of GDP are among the lowest in the world, at roughly 15%, against an OECD average of around 34%. Land sales, historically a critical revenue source for local governments, fell 15% last year. The broader fiscal deficit is approaching 10% of GDP, a historic high. China has 539 billionaires according to Forbes, with a combined net worth of approximately $2.2 trillion, equivalent to the entire Australian economy. Chinaâs Gini coefficient, the standard measure of income inequality, exceeded 0.46 as of 2021, by the Chinese governmentâs own account. That puts it above the 0.4 threshold associated with high inequality, above the U.S., and well above Germany, France, and Canada, which all sit in the low 30s. A country still governed by a party that calls itself communist is, by its own data, more unequal than most of the capitalist world. Aliceâs Take: This is all coming to a head because the alternatives are running out. Land sales are down, corporate tax revenues are under pressure, and the government doesnât want to touch export tax rebates because it canât afford to hurt Chinese manufacturers. Inheritance tax is low-hanging fiscal fruit. My prediction is theyâll pilot it in specific cities first, then figure out how to split revenues between the central and local governments, where local governments will probably lose again. The one-child policy has concentrated family wealth into single children who know they will inherit everything. That feeds directly into the Tang Ping movement, the notion that lying flat is rational when youâre going to inherit your parentsâ apartment and savings regardless. The whole situation is very ironic. The Communist Party governing one of the worldâs most unequal societies, now scrambling to find a wealth tax before the fiscal situation forces its hand. Jamesâ Take: The deeper puzzle here is why China waited this long. The orthodox economic answer is that China wanted to build a winner-take-a-lot culture as a feature not a bug. But thereâs something stranger going on. China has avoided both a property tax and an inheritance tax for decades despite running a system that theoretically prizes redistribution. My suspicion is thereâs a political explanation we canât fully see from the outside: factional interests, property developers with connections, local governments protecting their land-sale revenues. Whatever the reason, the pressure is real and hard to ignore. Starting May 1 in Guangzhou, teahouses are required to disclose whether their dim sum is handmade or produced by machine. In Hangzhou and Beijing, courts have separately ruled in the past two years that companies cannot fire workers simply because of AI â citing Chinaâs labor contract law and ruling that AI-driven displacement does not constitute the kind of âmajor change in objective circumstancesâ that justifies termination. That legal category was designed for natural disasters. Now itâs being tested against algorithms. This is happening against the backdrop of a rapid expansion of robotics across China. Robots are running half-marathons faster than world record holders. They are dexterous enough to fold dim sum to exact specifications. At an exhibition center in southern Beijing, robots have been designed not as general-purpose machines but as specialists: surgery robots, pharmacy robots, soccer robots, painting robots. Jamesâ Take: I came back from China genuinely worried. Not just about Chinaâs trajectory but also about ours. China is moving into automated manufacturing faster than any other country, and the people I spoke to who werenât in the AI or robotics industry were concerned. The government is trying to respond; itâs proposing a World Artificial Intelligence Cooperation Organization and passing regulations trying to slow the job shock, but I donât think it can hold back the tide. When a technology can do something more efficiently than a human, that is what tends to happen. The dim sum disclosure rule is a small signal. The real question is what happens when this scales to every factory floor in China and then to ours. Aliceâs Take: I take a slightly different view on regulation. China has moved fast and retroactively on crackdowns before: the 2021 tech crackdown, the ed-tech crackdown, and I think unemployment from AI will be political enough to force Beijingâs hand. The government canât afforâŠ
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