Space Race! US-China Rivalry Spurs Investment War

The US is “in a space race with China to go back to the moon”, says chief of NASA Bill Nelson in a BBC interview.

Mr Nelson’s comments can’t help but revive memories of the space race between the US and the Soviet Union that took place during the 1960s and 1970s.

Now, half a century later, both NASA and China are looking to private companies to fund their operations in the hopes that can be the winner of this generation’s space race.

Broader Tensions: U.S. Space Tech Investment

NASA has been employing private companies to do much more of their work, something Mr Nelson cites as being crucial to allow for the huge costs to be shared, and for NASA to draw on “the creativity of entrepreneurs in the private sector”.

He points out that several other companies are benefitting from billions of dollars of government funding. For example, Elon Musk’s SpaceX, which in 2021 was awarded a $3bn (£2.4bn) contract to build a lunar lander and develop the most powerful rocket ever built.

Other private firms are also feeling the benefit of the space race. Earlier this year the agency signed a $3.4bn deal with Jeff Bezos‘ Blue Origin – also to build a lander, but for later moon landings.

The money being spent on US space tech is being done, in part, to try and keep ahead of China amid the broader tensions between the world’s two largest economies.

Concerns Over China’s Space Exploration

The space race has been heating up as technology and innovation in the field have matured. In late August, India became the fourth nation to achieve a soft landing on the Moon and the first to reach the lunar south pole region.

But, evidently, India’s success in the space tech field is of little consequence to the U.S., which continues to watch China’s space program with constant attention.

This is likely because of the broader political tensions between the two nations, but also because China is the only country to have its own space station, it has already brought moon samples back to Earth, and it has plans to reach the polar regions of the lunar surface.

This worries Mr Nelson: “What I’m concerned about is that we find water on the south pole of the moon, China gets there, and China says this is our area. You can’t come here, it’s ours.”

Mr Nelson argues that China’s actions to build artificial islands in order to claim sovereignty over parts of the South China Sea support his concern.

He also points out that China has not signed up to the US-led Artemis Accords, intended as a framework for best practices in space and on the Moon.

Despite this, China says it is committed to the peaceful exploration of space and has previously dismissed US concerns about its space programme as “a smear campaign against China’s normal and reasonable outer space endeavours”.

Nevertheless, the U.S. remains unconvinced. Its suspicions and growing rivalry with China’s space programme have spurred huge investment by Nasa.

In the year to the end of September 2021, the agency says its spending was worth $71.2bn to the US economy – a 10.7% increase on the year before.

While big names like SpaceX might attract the headlines, NASA’s spending reaches much further into the economy.

“A quarter of our spending is going to small businesses,” says Mr Nelson.

That money can accelerate the growth of small firms, particularly start-ups, says Sinead O’Sullivan, a former NASA engineer and now space economist at Harvard Business School.

The government often acts as a first customer to start-up firms and those contracts can allow them to approach private investors and raise even more money, she says.

“A lot of the time we talk about venture capital and private equity, however, governments are equally if not more important,” Ms O’Sullivan says.

The Future Of Space Innovation?


As the race to the moon continues, other operations in the space sector seem to have reached a crescendo. And, they could be a lot more profitable.

In 1957 Russia became the first country to put a satellite in orbit as it fought the original space race with the US. According to the European Space Agency, there are now just over 10,500 satellites orbiting Earth.

However, over the past decade, there has been increasing innovation in the space sphere. But why? Chad Andersen, founder of investment firm Space Capital, credits SpaceX for spurring the industry on.

“The only reason that we’re speaking about space as an investment category today is because of SpaceX,” he says. “A little over 10 years ago, before their first commercial flight, the entire market was really government-dominated.”

Thanks primarily to the two companies One Web and Elon Musk’s Starlink, about half of the satellites now in orbit were launched in the last three years, according to analytics firm BryceTech.

“The space economy is much broader than just rockets and satellite hardware. It is the invisible backbone that powers our global economy,” explains Mr Anderson.

The US investment bank Morgan Stanley has even estimated the global space industry could grow to be worth over $1tn a year by 2040.

So, what does this increased funding and activity spell for future space innovation?

Well, it’s still not economically viable to go to the moon, mine and bring it back to Earth. And we’re not ready to set up a civilization on Mars just yet.

Still, NASA’s Bill Nelson sees possibilities in medical research. He points to useful research into crystal growth conducted on the International Space Station in 2019 by pharmaceutical firm Merck, which helped develop a cancer treatment.

He also says fibre optics might be manufactured more effectively in zero gravity.

“What you will see eventually is a lot of business activity in low Earth orbit.”