China's Rocket Service Makes Inroads, Irks U.S.

By ANDY PASZTOR
October 5, 2007; Page A13

China's growing prominence in launching European-built commercial satellites is sparking criticism and even tentative calls for retaliation from some U.S. lawmakers and aerospace-industry officials.

The criticism is focused on the thriving partnership between Thales SA, a French commercial-satellite manufacturer, and China's state-run rocket industry, which aims to become a major launch provider for civilian spacecraft. In addition to questions about competition, the debate has stirred broader U.S. national-security and export-control issues because Thales has a dual role as a subcontractor on certain sensitive Pentagon programs. Critics of the alliance say China could end up with U.S. technology though the relationship.

Thales, which has erected internal firewalls and other safeguards to protect U.S. technology, said it "continues to be fully transparent with U.S. government officials" regarding the company's commercial-space activities world-wide. It said all units doing business with U.S. customers "work closely with government officials to adhere" to U.S. export controls.

China's embassy in Washington declined to comment. In the past, Chinese space officials have emphasized the importance of foreign cooperation but also laid out plans to become a commercial-space superpower partly through launching dozens of domestic satellites on improved boosters.

Working with Beijing, Thales unit Thales Alenia Space is offering small communications satellites that don't include U.S. parts and therefore are exempt from a complex web of U.S. technology-export controls. They are as much as 40% cheaper to assemble, test and launch than rival American models.

The launch portion costs less than $50 million per rocket versus about $100 million for the average U.S. or European rocket launch.

Such low-cost package deals, when other satellite-launch providers are raising prices, have helped China's rocket arm and Thales gain prominent commercial orders, to the concern of Western rivals. Customers include civilian organizations in Indonesia, Nigeria and Venezuela. Since 2006, China has launched or agreed to put into orbit a total of at least six Thales satellites.

China's commercial space-launch ambitions have sparked complaints from U.S. satellite builders Loral Space & Communications Inc. and Orbital Sciences Corp. The Senate Appropriations Committee has asked for a swift Pentagon study assessing Chinese rocket programs and "identifying non-Chinese companies which are contracting to use Chinese launch vehicles." The report language was championed by Sen. Daniel Inouye, the veteran Democrat from Hawaii, who chairs the defense subcommittee. Loral, Orbital and the Pentagon declined to comment.

Rep. Mark Kirk, an Illinois Republican who co-chairs a bipartisan study panel dealing with China, says Beijing is intent on using its nascent space program to strengthen its ties with developing countries that would be customers for the rockets.

While Thales and Beijing are generally selling "stripped-down and slightly less capable systems" than those marketed by U.S. rivals, Rep. Kirk says, a likely result will be improved reliability and capability of next-generation Chinese rockets.

Write to Andy Pasztor at andy.pasztor@wsj.com¹
 
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