China Reform Holdings, a key investment arm of the government, has signaled its intention to channel at least 100 billion yuan (US$13.7 billion) into emerging industries considered crucial for the nation’s future. This move is more than just an investment; it’s a strategic pivot that aims to place China at the forefront of global technological innovation, especially as the country faces increased pressure from the United States.

China is clearly looking to eliminate dependence on US-based parts

The proposed fund is already drawing attention from a diverse set of investors, including state-owned enterprises and private sectors, signaling robust confidence in China’s new investment roadmap. This development is expected to culminate in the operational launch of the fund by the end of the year.

AI

While this isn’t China’s first endeavor into supporting its own tech industries—the Big Fund was established back in 2014 to bolster the domestic chip industry—it does indicate a more focused and urgent approach. The push has become increasingly vital as China races to reduce its dependence on foreign technology, particularly from the United States, which has been increasingly restrictive about funding Chinese tech sectors, such as AI, semiconductors, and biotechnology.

In contrast, the U.S government has recently tightened its grip on funding mechanisms through the Chips and Science Act, essentially limiting the expansion capacity for chip manufacturing in “countries of concern” like China. Such restrictions seem to have fueled China’s determination to be self-sufficient and globally competitive in key technological domains.

However, it’s not all smooth sailing. China’s ambitious plans are clouded by issues of waste and corruption, as seen in the previous Big Fund scandal involving its executives. Moreover, Beijing’s initiative to focus state financing on 15 emerging technology sectors shows it’s spreading its bets, but also highlights the potential for overreach.

The Assets Supervision and Administration Commission of the State Council aims to bump up investments from central government-owned enterprises in emerging technologies by 2 percentage points in 2023. Whether these orchestrated moves will lead to success or stumble upon the hurdles of the past remains a question. But one thing is clear: China is steadfast in its resolve to be a global tech leader, and it is willing to invest heavily to make that a reality.

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