Authorities in China have responded to the strained relationship with the United States, and announced a state-backed fund to power AI, tech innovation, as well as emerging industries.

CNN reported that China’s top economic officials have vowed to set up a state-backed fund to support technological innovation, which is to be called the “state venture capital guidance fund”.

The “state venture capital guidance fund” will focus on cutting-edge fields such as AI, quantum technology and hydrogen energy storage, Zheng Shanjie, head of China’s state economic planner, told reporters Thursday on the sidelines of the annual gatherings of China’s national legislature and advisory body.

State venture capital guidance fund

And China’s commitment to this fund was clearly signalled by the size of its potential funding.

CNN reported that Zheng, chairman of the National Development and Reform Commission, said that the fund is expected to attract nearly 1 trillion yuan ($138 billion) in capital over 20 years from local governments and the private sector.

Zheng had reportedly struck a defiant tone at the news conference, hailing China’s rapid development in microchips and AI large language models as well as industrial and humanoid robots.

“Scenes once only seen in science fiction are now becoming reality. We are steadily moving toward the global frontiers of technology and innovation,” Zheng was quoted by CNN as saying. “This proves that the suppression and blockade attempt by certain forces only serve to accelerate our drive for independent innovation,” he added in an apparent reference to the United States.

Chinese leaders reportedly see high-end chips, quantum computing, robotics and AI as critical to powering economic growth and upgrading manufacturing.

China has enjoyed some success of late, as evidenced by the surprise unveiling of DeepSeek’s latest artificial intelligence reasoning model, which is a cheaper alternative to Western AI offerings.

American restrictions

This new fund comes as China faces mounting pressure from American tech restrictions.

This pressure led China to deliver on its promise, and in May 2024 launched its investment fund for the country’s domestic chip industry, valued at 344 billion yuan ($47.5bn, £37bn).

This was part of Beijing’s drive toward semiconductor self-sufficiency from the United States.

US president Donald Trump meanwhile has recently imposed an extra 10 percent tariff on imports from China – in addition to the tariffs already implemented by his predecessor Joe Biden.

In addition, Trump imposed a 25 percent additional tariff on imports from Canada and Mexico, but has repeatedly paused their implementation, resulting in a boycott of American goods in Canada, as well as retaliatory tariffs from Ottawa.

CNN noted that last week China’s Premier Li Qiang pledged to “foster emerging industries and industries of the future” as he delivered the government’s annual work report.

Li reportedly promised to establish a mechanism to increase funding for industries such as bio-manufacturing, quantum technology, embodied AI and 6G technology.