China has revealed its intention to launch a substantial government-supported fund to boost progress in artificial intelligence, quantum computing, hydrogen energy, and additional high-tech industries. This project, known as the «state venture capital guidance fund,» was announced by Zheng Shanjie, the head of the National Development and Reform Commission (NDRC), at a press briefing conducted during China’s yearly legislative sessions.
The fund is anticipated to accumulate close to 1 trillion yuan (around $138 billion) within a span of two decades, gathering investments from municipal governments and private companies. This bold initiative signifies China’s enduring strategy to cement its position as a technology leader amidst increasing global rivalry and trade limitations.
The fund is expected to generate nearly 1 trillion yuan (approximately $138 billion) over the course of 20 years, drawing contributions from local governments and private enterprises. This ambitious plan reflects China’s long-term strategy to secure its technological leadership in the face of growing international competition and trade restrictions.
Advancing innovation amid external pressures
«Efforts to repress and isolate us merely fuel our pursuit of self-sufficient innovation,» Zheng stated, underlining the need for independence in China’s tech industry in response to increasing U.S. limitations on crucial elements such as sophisticated AI chips.
“Attempts to suppress and isolate us only accelerate our drive for independent innovation,” Zheng said, emphasizing the importance of self-reliance in China’s technology sector amid mounting U.S. restrictions on key components like advanced AI chips.
China’s determination to lead in cutting-edge technologies is underscored by the global success of DeepSeek, a Chinese company whose AI language model, R1, has rivaled products from U.S. firms like OpenAI, Google, and Meta. Despite operating with less powerful AI chips due to trade restrictions, DeepSeek managed to develop a cost-efficient and high-performing model, surprising industry observers and reinforcing China’s potential to compete in the global tech landscape.
Chinese Premier Li Keqiang reiterated the government’s emphasis on new technologies in his yearly work report, detailing strategies to back sectors like bio-manufacturing, embodied AI, and 6G technology. The government is also developing new systems to secure sufficient investment for these industries, acknowledging their role in fostering economic expansion and technological autonomy.
Besides focusing on innovation, China is turning its attention towards enhancing domestic consumption as a primary policy objective. Although the recent past has been centered on growth driven by exports, authorities are now concentrating internally to bolster consumer spending and promote a more balanced economic structure. In line with this, Zheng unveiled a «special action plan» aimed at invigorating domestic consumption, which is anticipated to be vital in alleviating external economic challenges.
In addition to prioritizing innovation, China is shifting its attention to boosting domestic consumption as a key policy goal. While recent years have seen an emphasis on export-driven growth, officials are now looking inward to strengthen household spending and foster a more balanced economic model. To that end, Zheng announced plans for a “special action plan” to stimulate domestic consumption, which is expected to play a crucial role in mitigating external economic pressures.
China’s leadership is carefully managing the task of sustaining economic growth while tackling external issues like tariffs and trade restrictions imposed by the U.S. In the previous year, China achieved a record trade surplus close to $1 trillion, predominantly fueled by exports. Nonetheless, consumer spending made up only 39% of GDP in 2023, which is considerably lower than figures in South Korea (49%), Japan (55%), and the United States (68%).
To tackle this disparity, the government has increased its budget deficit to 4% of GDP, reaching the highest point in decades. This decision is part of a comprehensive plan to boost infrastructure investment, aid the ailing housing market, and offer consumer incentives for initiatives like vehicle and electronics trade-ins. Premier Li additionally revealed a rise in the quotas for government bond issuance, allocating a collective sum of 6.2 trillion yuan ($855 billion) for local and central governments.
Involving the private sector and implementing regulatory changes
Private enterprises are anticipated to be crucial in advancing China’s technological innovation efforts. As private firms contribute over 60% to the GDP and account for more than 80% of employment, their participation is vital for the success of the new state venture capital guidance fund. Nonetheless, recent years have seen a decline in confidence in the private sector due to a strict regulatory clampdown on sectors like technology and education.
To restore confidence and promote investment, Chinese President Xi Jinping urged private enterprises to take advantage of the opportunities presented by the government’s innovation agenda. In the previous month, Xi convened a meeting with leading tech executives in Beijing, stressing that it was the “opportune moment” for private companies to demonstrate their capabilities and contribute to national progress.
As a component of these initiatives, a fresh Private Economy Promotion Law is presently under consideration. The planned legislation seeks to tackle major concerns within the business sector, such as safeguarding property rights and encouraging fair play in the market. Yang Decai, a member of the advisory committee to China’s legislature, stated that the law is anticipated to rebuild trust among private enterprises and enhance their contribution to fueling the nation’s economic expansion.
Bolstering local innovation in the face of geopolitical obstacles
Strengthening domestic innovation amid geopolitical challenges
China’s push for technological self-reliance comes at a time of heightened tension with the United States, which has implemented measures to restrict China’s access to advanced technologies. These restrictions have targeted high-value components such as semiconductors and AI chips, which are critical for developing cutting-edge systems. Despite these challenges, Chinese firms like DeepSeek have demonstrated their ability to innovate and compete globally, even with limited resources.
Zheng characterized the achievements of companies such as DeepSeek as evidence of China’s resilience and creativity. He also conveyed his belief that the new high-tech fund would expedite progress in AI, quantum technology, and other essential areas, establishing China as a global leader in innovation.
Prospects for China’s innovation-led future
Outlook for China’s innovation-driven future
China’s state venture capital guidance fund represents a bold step toward achieving technological independence and maintaining economic resilience in the face of external pressures. By fostering collaboration between local governments, private enterprises, and state institutions, the fund aims to create a robust ecosystem for innovation and growth.
As China continues to invest in emerging industries and prioritize domestic consumption, its ability to balance these objectives with the challenges of an uncertain global environment will be critical. The success of initiatives like the new high-tech fund will not only shape China’s economic trajectory but also influence its position as a leader in global technology and innovation.
With a clear focus on self-reliance and a commitment to supporting both public and private sectors, China is charting a path toward a more sustainable and innovation-driven future. As the country navigates the complexities of the modern economic landscape, its determination to overcome obstacles and capitalize on opportunities remains steadfast.
