China, Lawfare, and the Contest for Control of Low Earth Orbit

People’s Liberation Army (PLA) Air Force officers Qiao Liang and Wang Xiangsui Wang argued in their 1999 book, “Unrestricted Warfare,” that to win a war with the United States, China must mass its intelligence, economic, and political resources where U.S. defenses were weakest: its private sector. The book today reads like a plan for the past two decades of non-military warfare waged against the Western private sector by Beijing and its business surrogates.

The U.S. government and its allies have recently shown increasing concern about the broad scope of the China’s intellectual property (IP) theft and critical infrastructure attacks. However, Western businesses remain vulnerable, and even largely unaware of the threats they face. Moreover, democratic governments seem incapable of mounting an effective response. The following case study from the Low Earth Orbit (LEO) satellite industry illustrates both the problem and the difficulty of finding solutions.

Our analysis begins with a summary of LEO satellites’ value and a review of the PRC interest. The study then illustrates the methods that the PRC employs to achieve its stated goals: deception, predatory investment, intimidation, and lawfare. We conclude with recommendations for how democratic governments can help deter and mitigate these kinds of attacks.

Why LEO Satellites?

Commercially, LEO satellites offer affordable, global access to high-capacity internet. Militarily, such satellite provide improved abilities in intelligence, tracking, and warning; communications; navigation; ground support, and command and control. Until recently, the cost and technical constraints required to launch the thousands of small satellites needed for a LEO “mega-constellation” prohibited any serious effort. However, advances in onboard computing and the commoditization of hardware components allow manufacturers to build and launch LEO satellites much more quickly and cheaply, and to operate them more easily than higher orbiting satellites. A LEO mega-constellation is therefore also much more resilient than a higher orbiting, more expensive, more capable, single satellite. Such groupings render current anti-satellite weaponry cost ineffective, because destroying even multiple LEO satellites does not degrade the function of the system.

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PLA interest in the military application of LEO satellites has grown significantly. PLA analysts believe Starlink helped Ukrainian forces maintain communications and direct operations when Russian artillery and rocket attacks destroyed traditional digital infrastructure. The PLA also fears that Taiwan will learn from Ukraine. Moreover, the PLA now believes that it must dominate LEO in order to defeat the United States in any potential future conflict. These conclusions motivated China both to build its own LEO military capability, and to find an effective way to degrade its adversaries’ capabilities.

As a result, China is deploying every resource to catch up and surpass the West.

China’s Playbook: Predatory Investment and a Hostile Takeover

One Chinese effort involves jumping the queue with the U.N.’s International Telecommunications Union (ITU). The ITU is key because it manages and deconflicts spectrum priority and flight paths to prevent satellite interference. Companies and governments could ignore the ITU, but the consequences would be like ignoring air traffic control.

The ITU awards priority of orbital slots and transmission frequencies to the first to file. Because China started its LEO effort later than the West, its filings with the ITU are lower on the priority table. For signatories to the Convention and Constitution of the ITU, which includes China, companies lower in priority are responsible for ensuring that their launches do not interfere with those higher in priority. If all parties involved cooperate, co-existence need not be a huge impediment to those lower on the list. However, an uncooperative operator could tie up other constellation operators in dispute-resolution procedures or force them to turn off their data stream. This appears to be part of the China’s plan.

The center of this effort is in Shanghai. Two of the main players are Shanghai Spacecom Satellite Technologies (SSST) and Shanghai Engineering Center for Microsatellites (SECM). The SSST is a military-connected, majority government-owned company specifically set up to invest in Western satellite projects (the PLA oversees all space activities in China). The SECM is a satellite manufacturer.

The SSST and SECM set their sights on a German/Liechtensteinian company called KLEO AG, which owned three of the highest priority ITU filings. KLEO AG acquired these coveted filings when KLEO, a German telecom company, bought a stake in Trion Space, a small Liechtenstein company that originally acquired the Liechtenstein rights to ITU filings in 2017. They in turn founded KLEO Connect GmbH to exploit those filings. (Hereafter, for simplicity, “KLEO” will refer to “KLEO Connect GmbH”).

KLEO was early to see the value of high priority filings, but not all the technology KLEO needed to reach the LEO constellation’s full potential was fully developed or cost effective. KLEO was small and dependent on outside investors who were uncertain whether KLEO could achieve the projected scale and cost efficiencies. KLEO needed more investment.

China’s government created the SSST to make this kind of investment. Given China’s broad effort in the LEO space, it is easy to see that KLEO’s place in the priority for orbital slots would be of interest. Trion’s ITU filing was one of the highest-priority in the world – higher than that of Starlink, and much higher priority than any Chinese filing. With KLEO in the market for financial backers, China saw an opportunity.

In 2017, the SSST’s representative, Zhou Ji, told KLEO’s founders he was looking for satellite filings to invest in, especially filings with access to the vital Ka frequency band. KLEO’s founders agreed, and so Zhou both helped arrange and took part in an investment by the SSST in KLEO, initially amounting to a 10 percent stake.

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