China's Reusable Rocket Sector and Capital Market Access: Investment Opportunities in Pre-Profit Space Tech Firms

China's capital market reforms over the past two years have created a fertile ground for pre-profit technology firms, particularly in the high-risk, high-reward reusable rocket sector. The Science and Technology Innovation Board (STAR Market) of the Shanghai Stock Exchange has introduced a "growth tier" for unprofitable but high-potential companies, marked by a "U" designation on their stock symbols. This shift, part of broader regulatory easing under the China Securities Regulatory Commission (CSRC), aims to align capital markets with the nation's strategic push for technological self-reliance. For investors, the question now is whether these reforms can transform speculative bets on space startups into sustainable returns.

Regulatory Tailwinds and Market Access

The CSRC's 2025 resumption of the fifth set of listing rules has expanded IPO eligibility to frontier sectors like commercial aerospace, artificial intelligence, and low-altitude economy. These rules, suspended since 2023, now allow firms to bypass traditional profitability hurdles, prioritizing growth potential and technological innovation. A pilot pre-review program further eases concerns about premature technology disclosure, enabling companies to secure regulatory clarity before public filings.

This regulatory flexibility is critical for reusable rocket firms, which require years of R&D and capital-intensive testing before turning a profit.

The CSRC's Chairman Wu Qing has emphasized enhancing market inclusiveness, signaling a departure from debt-heavy capital-raising models toward equity-driven support for innovation. While critics warn of valuation bubbles, proponents argue that these reforms are necessary to sustain China's global competitiveness in space technology.

LandSpace: A Case Study in Resilience

LandSpace, a leading private aerospace firm, exemplifies the sector's potential and challenges. The company, preparing for a 2026 IPO on the STAR Market, has raised $485 million across 12 funding rounds, including a $179 million secondary market round in April 2025 according to financial data. Its Zhuque-3 reusable rocket, central to its technological roadmap, faced a setback in December 2025 when an abnormal combustion event during a landing test led to failure. Despite this, investors remain optimistic, citing the rocket's successful launch in November 2025 as a pivotal milestone.

LandSpace's valuation, estimated at $2.77 billion by the Hurun Research Institute, reflects confidence in its long-term prospects. The company's registered capital of $49.9 million and recent $900 million investment from the National Manufacturing Transformation and Upgrading Fund underscore its access to state-backed capital according to reports. However, the technical risks inherent in reusable rocketry-such as landing precision and fuel efficiency-remain significant hurdles.

Galactic Energy: Quiet Ambitions and Strategic Funding

Galactic Energy, another key player, has taken a more measured approach. The firm secured $336 million in Series D funding in 2025 to develop its Pallas-1 reusable rocket and next-generation solid launchers. While its R&D spending figures are not publicly disclosed, China's national R&D expenditure growth of 8.7% in 2023 suggests a supportive ecosystem for innovation. Galactic Energy's Ceres-1S rocket achieved a historic sea-based launch in 2023, positioning it as a contender in the race for cost-effective space access according to market analysis.

Unlike LandSpace, Galactic Energy has not yet filed for an IPO, but its funding trajectory indicates strong investor appetite. The company's focus on modular and reusable systems aligns with global trends in reducing launch costs-a market projected to grow at 10% CAGR through 2032.

Risks and Rewards in a High-Stakes Sector

The reusable rocket sector is inherently volatile. Technical failures, as seen with LandSpace's Zhuque-3, can erode investor confidence. Moreover, the CSRC's relaxed profitability standards raise concerns about overvaluation, particularly for firms with unproven revenue models. Yet, the sector's alignment with China's national strategy-targeting a $900 billion space economy by 2029-provides a unique tailwind.

Local governments are also incentivizing growth through technology-innovation centers focused on reusable rockets and smart satellites. This dual support-regulatory and infrastructural-creates a buffer against market downturns, though it does not eliminate operational risks.

Investment Outlook

For investors, the key is balancing optimism with caution. LandSpace's IPO, expected in early 2026, could serve as a bellwether for the sector's public market viability. Its valuation, while ambitious, is justified by its technological lead and state-backed funding. Galactic Energy, meanwhile, offers a more conservative bet, with its diversified funding and incremental progress.

The CSRC's regulatory reforms have lowered barriers to entry, but they also demand rigorous due diligence. Firms with diversified revenue streams, robust R&D pipelines, and clear commercialization timelines are best positioned to thrive. As China's space economy expands, the reusable rocket sector could become a cornerstone of its tech-driven growth-provided companies can navigate the technical and financial challenges ahead.