China’s Low-Altitude Economy: A High-Stakes Gamble?
As 2024 draws to a close, China’s aspiring push into a “low-altitude economy” is facing increasing scrutiny. this initiative,spearheaded by the National Growth and Reform Commission (NDRC),aims to harness the economic potential of airspace below 1,000 meters. While touted as a “new engine” for growth and a key component of China’s “new productivity,” its future remains uncertain.
The NDRC’s recent establishment of a dedicated Low-Altitude Economy Development Department underscores the government’s commitment. This department will be responsible for crafting and implementing strategies to propel this sector forward. Though, the current contribution of the low-altitude economy to China’s GDP is a mere 0.4%, with projections of only reaching 1.1% by 2030. One expert commented, “The GDP proportion is so pitiful that it is really hard to bear.”
Some analysts view this initiative as a strategic countermove to the West’s “green new deal.” They see it as a nationally-driven effort to establish a new technological and economic frontier. One expert described the low-altitude economy as “new productivity” within a broader strategy, suggesting it’s part of a larger, national-level plan. However, the potential return of Donald Trump to the White House casts a shadow. Trump’s past pledge to “stop the green new deal scam” could significantly impact the viability of China’s long-term plans.
The implications extend beyond China’s borders. The success or failure of this initiative could have critically important ramifications for global economic competition and technological leadership. The United States, such as, is also investing heavily in drone technology and related industries, creating a potential rivalry in this emerging sector. The outcome of this competition could shape the future of air traffic management, logistics, and various other industries.
The low-altitude economy’s future hinges on several factors, including technological advancements, regulatory frameworks, and international cooperation. While China’s commitment is evident, the challenges are considerable. The relatively small current contribution to GDP and the potential impact of shifts in U.S.policy highlight the significant risks involved in this ambitious undertaking.
China’s Low-Altitude Economy Takes Flight: A Booming Market for Drones and Beyond
China’s low-altitude economy, encompassing the airspace below 1,000 meters (and extending to 3,000 meters in certain cases), is experiencing a period of unprecedented growth. this burgeoning sector, centered around drones, unmanned aircraft, and manned aircraft operations, is attracting significant investment and reshaping industries across the country. The market’s potential is enormous, with projections suggesting a market size of $210 billion by 2025 and a staggering $500 billion by 2035.
This rapid expansion is fueled by substantial government backing. According to reports, at least ten Chinese provinces and cities have established industrial funds specifically for the low-altitude economy, totaling over $14 billion. The largest of these funds boasts a staggering $2.8 billion investment.
The involvement of state-owned enterprises (SOEs) is a key driver of this growth. Luo Jun, executive chairman of a prominent alliance focused on this sector, stated that SOEs will play a crucial role in long-term development planning and policy recommendations. This includes navigating complex regulatory landscapes involving airspace management, aircraft certification, low-altitude oversight, and infrastructure development – areas requiring significant coordination, particularly with the Air Force and the National Development and Reform Commission.
The applications of this technology are diverse and rapidly expanding. While consumer drones, particularly those manufactured by DJI, dominate the market, significant progress is being made in industrial applications. These include agricultural pest control, power line inspections, environmental monitoring, and even logistics. However, challenges remain, including the need for improved infrastructure and more streamlined industry policies.
“China’s low-altitude economy has become one of the hottest investment areas this year, with state-owned assets and government investment platforms pouring in significant resources,”
This quote, from a recent report in a leading Chinese publication, highlights the intense interest from both government and private sectors. The potential for job creation and economic stimulus is significant, mirroring similar trends in the U.S. with the burgeoning drone industry and its impact on various sectors.
Song Feng, a partner at Shuimu venture Capital, offered further insight: “DJI drones have established a dominant market share at the consumer level.Mature applications exist in agriculture, power line inspection, and environmental monitoring. Logistics applications are also developing. However, improvements are needed in industry policies and infrastructure. Manned eVTOL (electric vertical takeoff and landing) aircraft are still under development, but applications in tourism and commuting are being explored. Investment will likely focus on leading drone companies in industrial applications.”
The year 2024 marks what many are calling the “first year” of China’s low-altitude economy. The massive influx of state-backed investment and the rapid technological advancements suggest that this sector is poised for continued, significant growth, presenting both opportunities and challenges for businesses and policymakers alike.
China’s Gamble on the Skies: A Low-Altitude Economic Boom or Bust?
China is making a significant push into the burgeoning “low-altitude economy,” a sector encompassing drone delivery, air taxi services, and related infrastructure. State-owned enterprises (SOEs) are pouring billions into this ambitious initiative, raising questions about its long-term viability and potential global implications.
The flurry of activity began late last year. In December 2023 alone, several major SOEs launched initiatives focused on this sector. The Shanghai Low-Altitude Economy Industrial Development Co., Ltd., backed by six major Shanghai SOEs, was established, followed quickly by the Hunan Province Low-Altitude Economy Development Group Co., Ltd. Even China Post Group joined the fray, announcing the creation of its own drone company.
This follows the November 2023 launch of Shenzhen Low-Altitude Industrial Development Service Co., Ltd., marking China’s first local state-owned asset platform dedicated to this emerging field.Most of the SOEs involved are investment firms, indicating a strategic, large-scale commitment to the sector.
The Chinese government views this initiative as crucial for economic growth and technological advancement. As Cui Yijun, director of ZTE Wireless Future Laboratory, stated in a December 28 report in the Shanghai Securities news, ”As a new productivity, the low-altitude economy is both a strategic emerging industry and a future industry, a new engine.”
However, critics argue that this push is driven by more than just economic pragmatism. Some analysts suggest that the initiative aligns with Chinese President xi Jinping’s broader ambitions for technological dominance and competition with the United States. The emphasis on a “new productivity” echoes Xi’s broader economic goals.
The success of this strategy remains uncertain. Previous initiatives focused on what Xi Jinping termed “three new things” – electric vehicles, solar cells, and lithium batteries – have resulted in significant overcapacity and international boycotts. these sectors currently contribute a relatively small percentage to China’s GDP,according to official Chinese data from 2022.
The massive investment in the low-altitude economy raises concerns about potential market distortions and the risk of another overcapacity scenario. The long-term economic viability of this ambitious undertaking remains to be seen, and its impact on global markets will be closely watched.
China’s Economic Engines Sputter: ‘New Three Things’ Fall Short of Expectations
China’s economic growth, once a global powerhouse, is facing headwinds. While the Communist Party of China (CPC) has touted initiatives like the ”New Three Things” (new energy, new materials, and new generation information technology) and the low-altitude economy as key drivers of future growth, analysis reveals a concerning reality: these sectors are significantly underperforming expectations and failing to compensate for weakening domestic demand.
According to Huang Tianlei, a researcher and China program coordinator at the Peterson Institute for International Economics, the Chinese economy’s growth engine relies heavily on domestic investment and consumption. However,he notes, “The ‘New Three Things’ fail to meet these conditions.” Despite the CPC’s repeated emphasis on their contribution, their impact on the overall economy remains limited. “The demand within China is not large, and their contribution to China’s overall economy is not large, and it cannot improve the situation,” Huang explains. Their share of total Chinese exports is surprisingly small, at approximately 4.4% in 2023, based on official CPC data.
Huang further elaborates: ”‘The products produced in these three areas have no way to be digested by domestic demand, so they can only find exports from foreign demand. This actually reflects that China’s domestic demand is relatively weak and has the problem of insufficient demand. This is, I think, the biggest pain point among China’s economic challenges.”
The situation is equally concerning for the much-hyped low-altitude economy. Official CPC data shows that in 2023, this sector’s market size was approximately 500 billion yuan, representing a mere 0.4% of China’s GDP. While the CPC aims to expand this to 2 trillion yuan by 2030, even this ambitious target would only increase its contribution to GDP to a meager 1.1%.
The relatively small contribution of these sectors highlights a larger issue: the weakness of domestic demand in China. This contrasts sharply with the significant role of real estate in the past, which previously accounted for 30%-40% of the economy. Now, its proportion has fallen to a significantly lower 17.36%.
The implications of this economic slowdown extend beyond China’s borders. As a major global trading partner,China’s economic health significantly impacts the global economy.The underperformance of these key sectors raises concerns about the country’s future growth trajectory and its potential impact on global markets.
China’s “Low-Altitude economy”: Hype or Hope?
China’s ambitious push for a “low-altitude economy,” projected to contribute significantly to its GDP by 2030, is raising eyebrows among economists and observers. While the government touts it as a new engine for growth, critics question its practicality and impact on the lives of ordinary citizens.
The official media, such as the Shanghai Securities News, paints a rosy picture. On December 28th, they presented a scenario: “At noon on December 21, Mr. Zhang, who was ‘walking his baby’ in shenzhen Talent Park, opened his mobile phone and ordered a takeaway. Ten minutes later, a drone ‘fell from the sky’ with his meal.” This, they claim, epitomizes the convenience of the low-altitude economy.
Though, this narrative is met with skepticism. One commentator argues, “This can only be one publicity gimmick. Today,when the economy is in recession and unemployment is everywhere,residents are keeping their pockets tight and do not dare to spend money. Taking food out on the road has become a way for many people to make a living. isn’t drone food delivery competing for business with these poor people? The delivery boy couldn’t survive anymore.”
Addressing China’s Economic Pain Points?
The initiative comes at a time when China faces significant economic challenges, including insufficient domestic demand. The government’s substantial investment in the “low-altitude economy,” alongside other initiatives like the “three new things” (referencing new infrastructure, new energy, and new materials), is seen by some as an attempt to preemptively secure future economic dominance. According to Stanford University researcher Xu Chenggang, the CCP’s strategy is to “occupy the future economic track in advance.”
This mirrors a global trend. The green economy has become a symbol of political correctness in the West, with many believing that control over green energy will determine future global power. This logic, applied to China’s low-altitude economy, suggests a similar ambition for technological leadership.
The question remains: Will China’s investment in this sector truly revitalize its economy, or is it a costly gamble with possibly negative consequences for its citizens? The long-term impact on employment and the overall economic landscape remains to be seen.
China’s Green Gamble: A Race Against Time and the West?
China’s Communist Party (CCP) is aggressively pursuing dominance in the green energy sector, investing heavily in what it calls its ”three new things”—solar cells, electric vehicles, and lithium-ion batteries—and a parallel strategy it terms the ”low-altitude economy.” This ambitious plan aims to secure a leading position in the future green economy, a sector Western nations have long championed.
The CCP’s approach relies on its touted “nation-wide system,” leveraging substantial government subsidies and centralized planning to rapidly expand these industries. This strategy, however, raises concerns about its long-term viability and potential economic consequences.
The “low-altitude economy” initiative appears to be a complementary strategy, utilizing the same principles of national mobilization and significant financial investment to preemptively control key sectors of the burgeoning green economy.
This aggressive push comes at a time when the global energy landscape is undergoing a significant shift. During his presidency, Donald trump pledged to dismantle what he called the “Green New Deal scam,” prioritizing increased domestic oil and natural gas production. The United States, already the world’s largest oil producer, has as become the leading exporter of liquefied natural gas (LNG), with exports more than tripling since 2018 and projected to double again by 2030.
“Trump promised during the campaign to ‘end the Green New Deal scam’ and significantly increase the extraction of oil and natural gas in the United States,” a source familiar with the matter stated. This shift in U.S. policy could significantly impact China’s ambitious green energy plans.
if the Trump governance’s policies,or similar approaches from other Western nations,succeed in undermining the global momentum behind the Green New Deal,the CCP’s preemptive investments in its “three new things” and the “low-altitude economy” could prove to be a significant gamble.
Ultimately, the success of China’s strategy hinges on several factors, including the continued global demand for green technologies, the effectiveness of its centralized planning model, and the evolving geopolitical landscape. The CCP’s reliance on deception as a means of governance adds another layer of complexity to this high-stakes endeavor.
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