Low-Altitude Economy: China's New Race for Low-Altitude Airspace Dominance

The Low-Altitude Economy (LAE) has emerged as a typical representative of new quality productive forces and a strategic emerging industry for China. It is not merely a new economic sector, but a vital engine for promoting high-quality economic development and achieving the national strategic goal of technological self-reliance and self-improvement.

Analysts define the LAE as a comprehensive economic formation whose essence is low-altitude flight activity, whose carrier is the low-altitude aircraft, and whose primary location is low-altitude airspace. This economic formation is driven by the manufacturing of civil low-altitude aircraft and their flight activities, radiating and driving the integrated development of related sectors. It is characterized by spatial three-dimensionality, regional dependence, digital ecology, and industrial integration.

Drone delivering package over cityscape - GettyImages

Strategic Evolution and Domestic Relevance

The LAE concept has completed a process of institutionalization, transitioning from sectoral terminology to a true economic formation. Although its origins date back to 2009 with the goal of developing general aviation, the strategic turning point and official recognition came with the issuance of a key national planning document.

On February 24, 2021, the Central Committee of the Communist Party of China (PCC) and the State Council of the People's Republic of China published the National Comprehensive Three-dimensional Transportation Network Planning Outline. This document represents a high-level strategic policy guiding the development of a comprehensive and fully integrated transportation system in China, with a planning period from 2021 to 2035 and a vision extending to the middle of this century. It is fully aligned with the goals of the 14th Five-Year Plan (2021-2025) and policies aimed at strengthening China's transport power.

The formal inclusion of the Low-Altitude Economy concept in this strategic outline has marked the conceptual shift from 'sectoral term' to 'economic formation'. This move elevated its strategic position, bringing it to the attention of central economic work meetings and government work reports.

The culmination of institutionalization was reached in June 2025, when the revision of the Civil Aviation Law added a chapter on development, explicitly proposing measures for the optimization of low-altitude airspace resources and the construction of service and regulatory platforms. This legislative move ushered in a golden period of rapid growth. In 2024, the scale of China's low-altitude economy reached 670.25 billion Yuan with a growth rate of 32.5%, and it is expected to exceed one trillion Yuan by 2026.

Technology as a Geopolitical and Domestic Bottleneck

Despite the ambitious vision, low-altitude technology is recognized as the key bottleneck constraining economic development. Its essence lies in the integration of five core technologies. These technologies, working synergistically, drive the systemic development of low-altitude industries through a three-fold mechanism: the "radiation effect", the "traction effect", and the "network effect".

The Systemic Nature of Obstacles

The industrial transformation of low-altitude technology is hampered by systemic obstacles that are intrinsically intertwined. These obstacles form a complex constraint system that affects the speed, efficiency, quality, and sustainability of the transition.

1. Obstacle of Technological Maturity and Product Competitiveness. This obstacle manifests as a systemic technological capacity gap. China faces dependence on imports for critical technologies like aero-engines (with dependence reaching 67.08%), in addition to low localization rates for precision components. These deficits indicate vulnerabilities in the supply chain, which could be exploited in geopolitical rivalry, and translate into insufficient product competitiveness.

2. Obstacle of Market Demand and Fragmentation. The diversity of application scenarios leads to significantly different technical requirements, resulting in market fragmentation that prevents the formation of unified standards and the achievement of economies of scale. This market issue leads to low market acceptance and constrains the direction of innovation.

3. Obstacle of the Lagging Regulatory Environment. The traditional regulatory system, based on "strict control," while ensuring safety, can overly inhibit the vitality of innovation. The regulatory lag is evident in the lack of inter-departmental coordination and non-uniform standards, which limits the development space for the sector.

4. Obstacle of the Incomplete Industrial Ecosystem. The construction of physical and digital support infrastructure is relatively lagging and insufficient. This inadequate infrastructure translates into low ecological coordination efficiency that restricts the expansion and safety of low-altitude services.

The Cost-Performance Paradox and Development Stages

In detail, low-altitude technology faces the typical "Cost-Performance" paradox: high-performance technologies often imply high costs, whereas large-scale industrial application requires controllable costs. This paradox originates from the mismatch between technological maturity and market demand.

Currently, the low-altitude economy is in the crucial phase of transitioning from technological exploration to market cultivation. At this stage, technical performance and economic benefits still need significant improvement, having yet to gain a clear advantage over ground-based alternatives, thus limiting large-scale application.

According to some analysts, to resolve the paradox, analysts suggest a multi-stage technology development strategy:

• Initial Stage. When technology cost is high, the government can intervene through government procurement and demonstration applications to provide market space and sustain innovation.

• Maturity Stage. Through large-scale production and technical optimization, the goal is to achieve significant cost reduction.

• Diffusion Stage: Deep industrial application is achieved through standardization and scaling.

The Vision for the Future

To overcome these challenges, China is committed to using the Unified National Market strategy to coordinate efforts nationwide.

• Growth Targets and Synergistic Development. China intends to accelerate growth by further integrating the LAE with cutting-edge technologies like 5G/6G, Edge Computing, Digital Twin, and the Metaverse. The success of pioneering cities like Shenzhen (which manufactures over 70% of the global drone market share and has a drone output value exceeding 90 billion Yuan) demonstrates the potential of this integration and the industrial cluster effect.

• Action Strategy. The future strategy requires cultivating unified market entities, eliminating fragmentation, and stabilizing uniform access standards.

• Technological and Institutional Strengthening: Technological breakthroughs must be reinforced through "Government-Industry-Academia-Research-Application" collaborative innovation mechanisms to overcome bottlenecks and build an internationally competitive technology hub. Concurrently, it is crucial to refine the regulatory framework and strengthen the supporting ecosystem construction.

Geopolitical Comparison: The Chinese Vision vs. The Western Approach

Globally, China's development trajectory presents significant differences compared to that of Western countries, particularly the United States and Europe. Organizations like NASA and SESAR (Single European Sky Air Traffic Management Research) primarily focus on solutions for airspace management. Their efforts revolve around Advanced Air Mobility (AAM), Urban Air Mobility (UAM), and drone airspace systems (U-Space), focusing on defining communication and data standards and addressing the increased risks of collision. Their regulatory framework is generally more mature, with a relatively simple airspace structure.

China, conversely, places greater emphasis on the systemic construction of an economic formation. The LAE serves as a guiding principle for flexibly classifying airspace and enhancing its operational and utilization efficiency. This approach reflects a distinct strategic cognition, highlighting China's unique advantage in the theoretical and practical exploration of the sector and forming a new paradigm with Chinese characteristics. The core difference lies in China using the economic structure as a guiding framework for regulatory and spatial innovation, while the West focuses on the maturation of air traffic management systems to integrate new technologies.

Conclusion

The success of the LAE is vital for China, as it contributes to the construction of a modernized industrial system and supports its major national strategic objectives. Its growth directly depends on the capacity to transform technological innovation into large-scale industrial value, overcoming systemic obstacles with a coordinated national approach.