[Big read] Air taxis and drones: China’s next big bet

Drones zigzag through the sky, each following its designated route. People commute by air taxi, while others descend from above delivering emergency relief supplies, takeouts and parcels… These scenes, once science fiction, are becoming reality in China.

In February 2024, Chinese company AutoFlight’s electric vertical take-off and landing (eVTOL) aircraft, Prosperity (盛世龙, Shengshi Long), completed its test flight from Shenzhen to Zhuhai in just 20 minutes. Also last year, tech retail company Meituan delivered its fastest order — a cup of hot pear soup — to a landing point at the Badaling Great Wall in just six minutes 37 seconds. 

Chinese media have dubbed 2024 as the “inaugural year of the low-altitude economy”, with many landmark events occurring last year. As a new frontier, the low-altitude economy has become a new growth engine that various Chinese regions are vying for.

China is prioritising the development of its low-altitude economy. This is evidenced by its inclusion in the government work report, a call for its development by the Central Committee of the Communist Party of China and the establishment of a dedicated department led by the National Development and Reform Commission.

The China Low-Altitude Economy Alliance listed the establishment of the low-altitude economy department as a milestone in China’s low-altitude economy in 2024. Academics and industry experts interviewed by Lianhe Zaobao agreed that the department shoulders the “crucial coordinating role” for the low-altitude economy, an “unprecedented” role.

Shen Hong, a research fellow at Peking University’s Institute of New Structural Economics, told Lianhe Zaobao that China’s airspace is primarily controlled by the military, which has been the biggest obstacle to the development of its low-altitude economy.

The establishment of the low-altitude economy department paves the way for coordinating with the military and various functional departments to resolve airspace management issues. The Beijing News’ Beike Economy (贝壳财经) reported that six pilot cities have been tentatively selected for opening airspace below 600 metres: Hefei, Hangzhou, Shenzhen, Suzhou, Chengdu and Chongqing.

Shen analysed that it is necessary for more cities to open their airspace and for the airspaces to become one to truly propel the development of the low-altitude economy. The low-altitude economy department is expected to play a key role in facilitating this.

He explained, “Suppose the airspace above Shenzhen is open, as with the airspace above Guangzhou. Yet, the airspace between Shenzhen and Guangzhou is restricted. Then it becomes meaningless, right?”

Liu Dacheng, executive vice-president of China Industrial Development Institute and PhD superviser at Tsinghua University’s Department of Industrial Engineering, told Lianhe Zaobao that the establishment of the low-altitude economy department by a central ministry, specifically to liaise with the military and define respective management boundaries, is “unprecedented”.

Liu predicted that the military will cede some authority and responsibilities, appropriately releasing low-altitude airspaces to better address airspace restriction issues. He pointed out that while balancing economic development and security is a challenge, the establishment of the low-altitude economy department indicates that the Chinese government remains committed to its market-economy-led development goals.

The low-altitude economy is a comprehensive economic model primarily led by low-altitude flight activities of manned and unmanned civilian aircraft to drive and integrate development across related sectors. Low-altitude airspace generally refers to airspace with a vertical distance of less than 1,000 metres from the ground.

Apart from the aforementioned uses such as air taxis and drone delivery of takeout and relief supplies, the low-altitude economy can also be applied to efficient logistics, aerial surveying and mapping, agricultural and forestry protection, tourism, port management, maritime patrol, and inspection services, among others.

Liu analysed that for China to transition from a manufacturing powerhouse to one that equally emphasises both consumption and production, the logistics industry is an important link. 

He said that, driven by e-commerce and smartphones, the consumer space in remote mountainous areas in the central and western regions has expanded. While small appliances may no longer hold significant appeal for residents of large cities, there is still considerable market demand for them in remote areas.

At the same time, the cost of China’s branch logistics — a supporting chain for the main logistics supply chain — and last-mile logistics is exorbitant. By utilising low-altitude transportation, developed areas can enhance the buffer capacity of time and space to improve the precise matching of supply and demand, thereby effectively reducing systemic logistics costs.

Liu said, “Boosting consumption is currently a top priority, and the country is bound to strengthen the development of the low-altitude economy.”

Liu further analysed that China has a strong capability in drone manufacturing and production, with Chinese drones accounting for 70% of global consumer drones and 50% of industrial drones. China’s advantage in drone manufacturing can be utilised to provide logistics and boost consumption.

According to the 2024 China Low-Altitude Economy Development Research Report released by the China Academy of Information and Communications Technology, the scale of China’s low-altitude economy in 2023 is 505.95 billion RMB, with a growth rate of 33.8%. It is expected that by 2026, the scale of the low-altitude economy will exceed one trillion RMB.

Also, according to an article carried by Securities Daily (证券日报), Luo Jun, executive director of the China Low-Altitude Economy Alliance, assessed that China has entered a golden decade of opportunity in the low-altitude economy. By 2030, the scale of China’s low-altitude economy is expected to surpass three trillion RMB.

In response to an enquiry from Lianhe Zaobao, AutoFlight estimated that as more eVTOLs gradually enter trial operations between 2026 and 2028, the application scenarios for China’s low-altitude economy would expand between 2030 and 2035.

AutoFlight added that the air taxi Prosperity is expected to begin pilot manned flights from Shenzhen to Zhuhai in from 2026 to 2027 after completing airworthiness certification. Once operations scaling commence, the cost of taking an “airborne taxi” will be roughly equivalent to regular ground-based car services, with the expected charge per seat per person ranging from six to over 10 RMB.

Meituan also stated in response to a query from Lianhe Zaobao that China’s booming drone industry provides more efficient delivery solutions for the novel business format that is instant retail. As of December 2024, Meituan Drones have opened 53 routes in cities like Shanghai, Beijing, Shenzhen and Guangzhou, and have completed over 450,000 orders, delivering more than 90,000 types of products to users.

Amid growing enthusiasm for the low-altitude economy, rising flight frequency and new application scenarios, safety concerns have also gained attention.

On 8 December 2024, a large number of drones in a flight performance in Quanzhou, Fujian went out of control and crashed. Four days later, a large fixed-wing drone crashed at the Jingzhou Sports Centre in Hubei.

Caixin reported that the International Digital Economy Academy suggested in its Low Altitude Economy Development White Paper 3.0 Safety and Security Framework that regulatory bodies should implement stratified management when demarcating low-altitude airspace based on the performance characteristics and uses of aircraft. For instance, they should set low altitude ranges for drones and higher altitudes for helicopters and general aviation aircraft. Additionally, clear avoidance rules should be established, such as requiring drones to give way to manned aircraft, to reduce conflicts.

Caixin quoted an executive from a drone company who commented that “just like ground traffic law enforcement has traffic police, the future development of the low-altitude economy could require air traffic policing”.

Wang Liang, co-founder and general manager of Shanghai-based Zhong Niao Fei Intelligent Technology (众鸟飞智能科技), told Lianhe Zaobao that safety and prevention is mainly reliant on route setting and flying within the officially permitted range. Some areas may require coordination with air traffic control departments.

The European Union Chamber of Commerce in China (European Chamber) raised concerns that involution could also hit China’s low-altitude economy, just as it hit China’s electric vehicle industry.

Jens Eskelund, president of the European Chamber, stated in response to Lianhe Zaobao that if industries related to the low-altitude economy are designated as “priority” or “strategic”, they would receive enormous amounts of state support, which would result in many companies rushing in to benefit from subsidies. When the domestic market becomes saturated, China would then focus on exporting excess production, which not only causes distortions in the markets of other countries, but also poses a threat to the domestic industries of other countries.

The European Chamber therefore urged China’s policymakers to work with business — including European companies — to ensure that any state support provided in the low-altitude economy does not ultimately undermine related industries in the long-term or lead to dynamics similar to those witnessed in robotics and battery electric vehicles industries.

Shen observed that “it is very involuted already”, with tens of thousands of relevant businesses in China’s low-altitude economy, which is growing freely. But Shen also pointed out that there are several types of businesses across the industrial chain, ranging from those with relatively lower entry barriers dealing with basic components to firms with higher entry barriers such as involving electronic control systems, finished aircraft and batteries. 

Shen opined that for drones to take to the skies, they must first obtain an airworthiness certificate, which is the most significant certification and is also a high threshold. He added that “this threshold also means that ultimately, there will be limitations on which companies can ‘take flight’; not everyone will be able to fly as they wish”.

This article was first published in Lianhe Zaobao as “中国各地“低空经济”冲破阻力展翅上腾”.

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