China trades goods, influence for satellite launches

Excluded from much of the lucrative satellite launching business by technology transfer restrictions, a resource- and influence-hungry China has found its niche: building and launching satellites for developing nations.

In the last three months, China signed deals to build and launch satellites for Pakistan, Laos and Bolivia, said Philip Balaam, Asia regional sales and marketing director for Arianespace, one of the world's few commercial satellite launchers, which is 30% owned by France's EADS.

Earlier this year, China also signed a deal to launch a satellite for Nigeria to replace one it built and launched for the African nation in 2007, but which later ran into technical issues.

China also launched a satellite for Venezuela in 2008, but that, too, may be having problems, Balaam said on Monday.

Neither the Chinese or Venezuelans have confirmed any difficulties with that programme.

China's approach to the satellite business differs from the mainstream in another respect – its use of barter arrangements.

"We think each case is different, but in some cases it looks like an exchange of satellite capacity for raw materials or natural resources, or for political consideration," Balaam said.

"If you look at Venezuela or Bolivia, these are countries that may have difficulty buying their own satellites, so China enables another path to get there."

The approach would be consistent with similar moves by China in recent years, where it provides economic assistance and other less tangible considerations in exchange for political influence and access to resources to feed its industries.

China has been virtually locked out of the more lucrative satellite launch business for money-paying Western companmies by US laws that ban the transfer of sensitive technology to China.

A string of cases drew headlines in the 1990s when Hughes Electronics Corp and Boeing's Satellite Systems were accused of illegally sharing sensitive space technology with China stemming from their involvement in several launches.

The pair later agreed to pay a $32 million civil penalty arising from the allegations.

France-based Arianespace has its order books filled for the next three years and is not too concerned about competition from China, despite recent reports that Beijing may be lobbying the Obama administration to ease some of the restrictions, said Airianespace chairman Jean-Yves Le Gall.

"China's satellite launches are probably about three-quarters the cost," said Le Gall, admitting his figure was an estimate. "It would be a newcomer. But because of the quality of our sevice, we'd continue to be in a good position."

Balaam said the deals signed so far by China had not been put out for public tender.

"It's competition in the margins," he said. "These are nations that may not have come out onto the open market looking for a satellite, but they found one through a deal with China. It's not full-frontal competition, but more a marginal thing."