The Balloon Scientist and His Financier, The Wire China, Feb. 13, 2023.
Unraveling the network of companies behind China’s balloon program.
On an October morning in 2007, Wu Zhe, an aircraft design expert at Beihang University, gave a lecture about the “military value of balloons.” He described why it was an area of key scientific research for China and explained different solutions for powering these unique aircraft. When he concluded, according to a university press release, his “erudite knowledge and brilliant speech” received multiple rounds of applause.
https://public-inspection.federalregister.gov/2023-03193.pdf
Nearly two decades later, Wu and his business partner, a tech investor and executive named Wang Dong, are at the center of a military-linked program that has sent balloons over the U.S. and other nations, setting off a diplomatic crisis in Washington. On February 4, after days of intense media coverage, the U.S. shot down one Chinese balloon off the coast of South Carolina, and has since shot down three more unidentified objects floating in American and Canadian airspace.
On Friday, the U.S. Commerce Department announced that it was leveling sanctions against six Chinese companies involved in the balloon program — which U.S. officials say aims to intercept communications and surveil the ground below, including sensitive military sites.
Records show that Wu and Wang are linked to four of the six sanctioned firms. The two men, according to data from WireScreen, have a complex network of companies involved in balloon and aerospace technologies, some of which are closely affiliated with the Chinese military but are not sanctioned by the U.S. government.
In a statement on Friday about the sanctions, Alan F. Estevez, the under secretary of commerce for industry and security, said that “today’s action makes clear that entities that seek to harm U.S. national security and sovereignty will be cut off from accessing U.S. technologies.” Neither of the two Chinese men, through their companies, responded to requests for comment.
…the U.S. government is always in reactive mode when events like this happen.
Wu seems to be the brains behind the companies developing the high-tech surveillance balloons. A graduate of Harbin Institute of Technology — a university in northeast China that was sanctioned by the U.S. in 2020 due to its military ties — he went on to teach at Beihang University, another military-affiliated and sanctionedinstitution, where he ran the department of aircraft design and applied mechanics. According to his university bios, he was also a member of the science and technology committee of the PLA’s General Armaments Department and a Changjiang Scholar, a government accolade awarded to China’s top academics.
In 2015, however, he began dipping his toes into the private sector. Alongside Deluxe Family, a Shanghai-listed firm with a market cap of $690 million, Wu set up a company called Beijing Nanjiang Aerospace Technology to produce “near-space vehicles,” a term that is often used to describe both high altitude balloons and other balloon-like airships.
Beijing Nanjiang, which is one of the companies sanctioned on Friday, signed a cooperation agreement with Inner Mongolia’s Xilinhot city government to construct an industrial park, where it could conduct near-space research and balloon launches. In October 2015, the company announcedthat it had completed its first test flight of a near-space vehicle called “Dreams Come True Series.” Pictures of the vehicle online show a huge silver, cylindrical balloon.
This joint project with Deluxe Family is where Wu and Wang seem to have started their fruitful collaboration. Wang was a major shareholder of Deluxe Family at the time, and though the firm had been in the real estate business, in 2015 it expanded into high tech fields like space and robotics. Deluxe Family did not respond to requests for comment.
There is limited publicly available information on Wang’s background, but records show that he worked at a string of technology companies before joining Deluxe Family, which went public in 2002. He was just 28 years old at the time of the IPO, according to corporate filings, and he served as the company’s general manager and largest shareholder.1 Wang was also a significant shareholder or executive in at least two other publicly traded firms: China Tianying Inc., a high tech firm affiliated with the Chinese Academy of Sciences, and Cloud Live Technology Group, a restaurant and catering company.2
Although the “Dreams Come True Series” launch seemed to be successful, Deluxe Family’s near-space program floundered in later years. Its subsidiary in Inner Mongolia, where the industrial park was built, got embroiled in a legal dispute with another firm about payment for construction services, and by 2019, the company announcedthat it had abandoned the program altogether.
Source: The Wire China
Wang had sold off his entire stake in Deluxe Family the year before, but according to data from WireScreen,3 he continued working with Wu through at least a dozen other companies, many of which seem to be involved in near space technologies. One such company is Beijing Yige Siman Aviation Technology Company (also known as EMAST), which is one of the six companies the U.S. authorities sanctioned on Friday. The website of the company appears to be down, but a saved version describes support the company receivedfrom military-civil fusion funds — the Chinese government program to enhance military technology — and has announced breakthroughs in near-space vehicles.
While the majority of Wang and Wu’s companies are not blacklisted, three of them were set up alongside Beihang University, the military institution where Wu teaches.4 One of those firms is Dongguan Avic Huaxun Satellite Technology Co., which advertises military applications of airships on an archived version of its website.5
Analysts say that military applications of the balloon which flew over the U.S. could include collecting high definition images of missile silos in Montana, for example, where a Chinese balloon was spotted two weeks ago. And Matthew Turpin, a former China-focused National Security Council official, notes that “the ability to loiter over a target and collect cell phone data within U.S. military bases could allow the PRC to target key military personnel, and their families, in a crisis.”
Much is still unknown about the purpose and scope of China’s balloon program but in recent years, Wang and Wu’s companies have filed numerous patents, some alongside one another, for technologies like “course-adjustable stratospheric balloons” and ultra light solar panels to mount atop airships. Many are filed by Wu himself.
Last week, U.S. officials said that some of the Chinese firms involved in the balloon program posted videos on their websites that advertised balloon flights that appear to have passed over the United States. The Wire was unable to locate these videos — many of the Chinese company websites are now down — but a Chinese media article from 2019 describes an “airship” developed by Wu circumnavigating the globe and flying at around 65,000 feet, about the same height the balloon over the U.S. was flying, according to U.S. officials.
“This is the first time that humans have used an aerodynamically controlled stratospheric airship to fly around the world at an altitude of 20,000 meters,” Wu says in the article.
While Wu is involved in the technology development for these balloons, it’s less clear where Wang’s interest in balloons comes from and what his role is in the program beyond capital investment.
… the ability to loiter over a target and collect cell phone data within U.S. military bases could allow the PRC to target key military personnel, and their families, in a crisis.
Wang has been running listed technology firms for two decades but his business track record is far from perfect. Many Chinese media articles even comment on his confusing choices. While “his tentacles go deep into the capital market,” as one article puts it, the performance of his companies is often “nothing to write home about.” For example, in 2014, Wang bought and sold a 5 percent stake in Cloud Live Technology Group. He appears to have lost a substantial amount in the deal. Meanwhile, Deluxe Family, which he ran and held a major stake in for years, was involved in a financial scandal after an investor in the company, Xu Xiang — who is often called China’s Carl Icahn — was convicted of insider trading in 2016. Also, in 2020, the Shenzhen Stock Exchange delisted a firm called Dongfeng Technology Group, where Wang was the largest shareholder after its share price slumped for a prolonged period.
His decision to invest in military balloons, however, seems to have been a success. And the fact that a seemingly private investor would get involved in PLA-linked projects represents a significant challenge for the U.S. government, says Jeffrey Stoff, a former government official who now runs Center for Research Security and Integrity.
There has been little effort “inside or outside the [U.S.] government to systematically collect, identify and assess PRC military-civil fusion entities, particularly companies that have their own or closely partner with research institutes designated as performing military-civil fusion functions,” he says. “As a result, the U.S. government is always in reactive mode when events like this happen.”
Correction: Because of an editing error, an earlier version of this article stated that Jeffrey Stoff was a government official. He is a former U.S. government official.