China’s Low-Altitude Economy Faces Supply Chain Test

China’s low-altitude economy has surged to a 1.5 trillion yuan ($210 billion) full-industry-chain market, but policymakers are now warning that supply chain vulnerabilities could undermine the sector’s long-term sustainability. In an analysis published by Xinhua News, the Economic Daily argues that industrial chain resilience will determine the “endurance” of this emerging economic pillar.

The warning comes as China’s low-altitude economy—encompassing drones, urban air mobility, and other low-altitude applications—enters a critical phase of policy reinforcement and rapid industrial expansion. The sector was written into the Government Work Report for the third consecutive year in 2026 and designated as a “new pillar industry” in the 15th Five-Year Plan.

A Booming Market with Hidden Vulnerabilities

The scale of China’s low-altitude economy is impressive. According to data from the Civil Aviation Administration of China, the country had 3.287 million registered drones by the end of 2025, a year-on-year increase of 51 percent, with annual cumulative flight hours reaching 45.3 million—up nearly 70 percent. The full industry chain market reached 1.5 trillion yuan, and the civil drone sector alone generated 176.1 billion yuan in output value, according to the China Low-Altitude Economy Development Index Report (2026) released at the 9th Digital China Summit in Fuzhou.

Yet beneath this growth lies a structural concern: China’s low-altitude aircraft core components have an overall domestic production rate of less than 30 percent. High-performance aviation motors and electronic control systems carry an external dependency rate exceeding 70 percent—a vulnerability that could become a systemic risk if supply chains are disrupted.

Policy Push for Industrial Chain Resilience

At the Central SOE Low-Altitude Economy Industry Development Special Promotion Meeting in April, the State-owned Assets Supervision and Administration Commission (SASAC) included the low-altitude economy in the central enterprise industry renewal action. The meeting directed state-owned central enterprises to strengthen key core technology breakthroughs, further open application scenarios, and jointly cultivate new low-altitude consumption formats with upstream and downstream industry chain partners, as reported by Xinhua Finance.

SASAC called on state enterprises to “serve as long-term capital, strategic capital, and patient capital” for the development of the low-altitude economy—a signal that the government views this sector as a strategic priority requiring sustained investment rather than short-term speculation.

The Economic Daily analysis warns that China’s low-altitude economy “must not follow the old path of ‘develop first, govern later’; it must insist on developing the industry and strengthening supply chain resilience simultaneously.” The article identifies several key areas requiring attention: flight control systems, aviation power systems, power batteries and management systems, main control chips, and high-precision sensors.

Regional Momentum: From Single Points to Regional Linkage

Across China, the low-altitude economy is moving from single-point experimentation to regional linkage, and from equipment manufacturing to integrated “manufacturing + operations + services” development. The low-altitude economy has now formed a complete industry chain covering core components, equipment manufacturing, logistics distribution, cultural tourism, agricultural plant protection, emergency rescue, and urban governance applications.

Shenzhen has emerged as a leader in scaling low-altitude applications. According to the Shenzhen Special Zone Daily, the city has achieved normalized full-area opening of airspace below 120 meters, covering 75 percent of the city area. It has built 1,284 standardized takeoff and landing points, with nearly 10,000 5G-A base stations forming an air-ground integrated monitoring system. Daily low-altitude flights exceed 2,700 sorties, and the city operates 310 intra-city low-altitude cargo routes plus 8 cross-city routes operated by Fengyi Technology and Meituan.

“Airspace resources are the most core production factor for the low-altitude economy,” said Cheng Tao of the Shenzhen Low-Altitude Economy Industry Association. “The biggest bottleneck for the industry in the past was fragmented available airspace and limited applicable scenarios.”

Wuhu in Anhui Province has taken a different approach, focusing on building a complete aviation industry ecosystem. The city’s low-altitude economy aviation industry base reached 35 billion yuan in output in 2025, up 32.6 percent year-on-year. Nearly 200 large-scale enterprises now operate in the low-altitude industry chain, with 30 key “bottleneck” technologies overcome and 540 industry standards participated in or formulated, according to Anhui Daily via Xinhua.

“Now the ‘Chinese heart,’ ‘Chinese brain,’ and ‘Chinese propeller’ of general aviation can be ‘Made in China’ and ‘Repaired in China’ in Wuhu,” said Tian Manlin, General Manager of CETC Wuhu Diamond Aircraft.

Sichuan is exploring emergency rescue, agricultural and forestry plant protection, and plateau distribution scenarios, reflecting the diverse application landscape emerging across the country.

Addressing Supply Chain Gaps

The Economic Daily analysis outlines a multi-pronged strategy to strengthen the industry’s resilience:

Strengthen coordination: Establish supply chain resilience special topics under the low-altitude economy coordination mechanism, with regular consultation, list-based advancement, and risk warning mechanisms. Major low-altitude industrial park projects should undergo resilience reviews before approval, ongoing tracking during operation, and post-operation evaluation.

Fill chain gaps: Leverage the existing industrial base in new energy vehicles, electronic information, and new materials to accelerate the transformation of mature manufacturing capabilities into aviation-grade product capabilities. Key focus areas include electromagnetic compatibility, complex weather operations, long-duration operation, thermal runaway protection, and software upgrade verification.

Prioritize practical scenarios: Shift from quantity to quality, prioritizing scenarios with stable demand, controllable risk, and clear payment boundaries—such as medical supplies distribution, emergency rescue, and agricultural plant protection. For scenarios with strong public service attributes, government procurement should create stable demand; for market-driven scenarios, clear charging rules, safety responsibilities, and exit mechanisms are needed.

Enhance full-chain risk resistance: Connect national comprehensive supervision service platforms with local low-altitude service platforms to achieve one-window processing for flight plans, one-network sharing of dynamic information, and closed-loop handling of abnormal events. Insurance and financial services should be embedded throughout planning, construction, test verification, scenario operations, and safety supervision.

A Maturing Policy Discussion

This analysis reflects a maturing policy conversation around China’s low-altitude economy. After the initial enthusiasm and rapid growth of 2024-2025, policymakers are now focusing on building sustainable foundations and addressing supply chain vulnerabilities.

Investor Liu Yao, founder of Shanghai Lincarbon Management Consulting, notes that while low-altitude investment has cooled somewhat compared to the peak of 2024-2025, the sector remains attractive due to strong policy support. In an interview with Southern Metropolis Daily, she observed that “the low-altitude economy has good policy direction, and some constraints can be broken through one by one over time.” She draws parallels to China’s new energy vehicle industry, where the country achieved a “curve overtaking” in global competitiveness.

“For the low-altitude economy, I am optimistic in the long term,” Liu said. “The industry is still in its early stages, and there are many opportunities. If you wait several years to enter, you may miss the chance to be in the first tier.”

What to Watch For

As China’s low-altitude economy continues its rapid expansion, several key indicators will determine whether the industry achieves sustainable long-term growth:

• Domestic production rates for core components—particularly flight control systems, aviation motors, and main control chips
• Cross-departmental coordination across manufacturing, airworthiness, airspace, data, operations, and insurance
• Application scenario quality—whether the industry shifts from quantity to value-driven deployments
• Integration of insurance and financial services throughout the industry chain

The low-altitude economy’s trajectory will depend not just on how high it can fly, but on how resilient its industrial foundation proves to be. As the Economic Daily article emphasizes, the industry’s “endurance”—its ability to sustain growth over the long term—will be determined by the strength of its supply chain.