“Futuristic scenarios, such as drones delivering packages, winged taxis for daily commutes, and hobbyist sightseeing helicopters could become a reality in China as the low-altitude economy takes off,” analyst Yi Wu of China Briefing wrote in a recent report. “Such operations could also play critical roles in aerial logistics, emergency medical rescue, and firefighting efforts.”

Beijing is firmly supporting the sector, singling it out in December as a key emerging industry at its annual Central Economic Work Conference.

The size of the sector surpassed 500 billion yuan ($69 billion) last year, up 34% from the year before, according to China’s Ministry of Industry and Information Technology.

The civil drone sector alone saw its market share rise by 32% to 120 billion yuan last year, with industrial drones reaching 77 billion yuan. Uses of these multipurpose crafts include emergency support, energy monitoring, and agricultural and forestry protection. China had 1.11 million registered civilian unmanned aerial vehicles at this time last year, according to the Civil Aviation Administration of China.

Provinces and cities across the country are also jumping into the funding spree. Officials in Sichuan province said they are allocating 200 million yuan to the low-altitude economy. Part of their rollout includes “ultralong-term” local government bonds.

The southern city of Guangzhou, once called the workshop of the world, said it’s creating mechanisms to foster the sector and will invest more than 10 billion yuan by 2027.

Guangzhou is home to two firms that specialize in battery-powered vertical takeoff and landing, or eVTOL, vehicles: Xpeng AeroHT, a subsidiary of EV maker Xpeng

XPEV

0.00%

, and EHang Holdings

EH

-3.17%

. Nasdaq-listed EHang said it has received investment offers from the Middle East and Southeast Asia.

Besides China’s Xpeng and private start-up AutoFlight, competitors include Japan-based SkyDrive, Australia’s Manna Drones, and the United Kingdom’s Urban-Air Port, which focuses on collaborating with players to develop flight infrastructure, according to London-based consultancy GlobalData.

In April, AutoFlight delivered its Prosperity aircraft to a buyer in Japan, marking the first delivery of a civilian ton-class eVTOL aircraft. The company has received Series A funding from European holding company Team Global, whose CEO, Lukasz Gadowski, is the co-chairman of the board at Autoflight.

None of the companies responded to Barron’s requests for comment.

Beijing isn’t just pouring money or offering cheap loans—it’s augmenting airports to facilitate smaller unmanned craft and building infrastructure across the country to support the industry. That includes air-traffic management, meteorological services, communication, and surveillance, officials said.

One worry for investors is the U.S. move to ban certain Chinese drones on national security grounds. Rep. Elise Stefanik’s (R., N.Y.) Countering CCP Drones Act is gaining more support in Congress, with DJI, the Chinese company that is the world’s biggest drone producer, in its crosshairs. DJI drones are ubiquitous in the U.S. DJI said in a statement that it “follows the rules and regulations in the markets it operates in.”

Politics aside, analysts at Beijing-based Cinda Securities said certification and airworthiness—based largely on technical sophistication—will be key to determining which companies succeed and which fail. “If the technological development in these is not as advanced as expected, it will affect the price of eVTOLs,” they wrote in a report.

Investors will need to be patient waiting for this nascent industry to take off.

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