After the artificial intelligence reasoning model, a product of the Chinese company DeepSeek, became popular globally in the current year, the top economic officials of the Asian country promised to form a state-backed fund to support technological innovation.
Last week, Zheng Shanjie, head of China’s state economic planner, told reporters on the sidelines of the annual gatherings of the country’s rubber-stamp national legislature and advisory body, that the state venture capital guidance fund will focus on such advanced areas as machine intelligence, quantum technologies and hydrogen energy storage.
The mentioned fund, which is so far a plan rather than an implemented initiative, is expected to raise about 1 trillion yuan ($138 billion) in capital from local governments and the private sector over 20 years. This is reported by the media with reference to Zheng Shanjie.
Chinese leaders currently have a point of view, according to which high-quality chips, quantum computing, robotics, and artificial intelligence are crucial for powering economic growth and modernization of production. This is an absolutely fair opinion from the point of view of its correlation with reality. In the relevant context, it is worth noting that AI has enormous potential. Artificial intelligence has already demonstrated significant capabilities related to processing huge amounts of information and generating original content. The practice of using machine intelligence as a working tool in various industries is also scaling up. It is possible that over time, artificial intelligence will become a new global means of production which will have a revolutionary effect in terms of impact on the economy. Futurological forecasts also suggest that at a certain stage of evolution, digital intelligence may surpass the human mind in the context of thinking capabilities, including in the framework of cognitive exploration of the surrounding world as a cosmological space of existence. At the same time, the active development of artificial intelligence actualizes the issue of cybersecurity. Scammers also have access to AI tools. To counteract the corresponding threat in the virtual space, personal awareness of users is important. For example, an Internet search query such as how to know if my camera is hacked will allow anyone to get information about signs of unauthorized access to the device.
China is currently facing significant external technological constraints. In this context, it is worth mentioning that the United States and some of its allies have limited shipments of advanced chips and equipment for manufacturing microcircuits of the appropriate category to an Asian country. Against this background, Beijing is increasingly signaling its desire for technological sovereignty, which is a logical strategy under the conditions of intensifying geopolitical tensions, especially noticeable in the context of deteriorating relations between China and the United States.
Zheng Shanjie at a news conference hailed China’s rapid development in areas of microchips and artificial intelligence large language models. In this case, the Asian country’s progress in the industrial and humanoid robot sphere was also mentioned.
Zheng Shanjie stated that scenes that in the past could only be within the realm of science fiction are now becoming reality. He also noted that China is steadily moving towards the global frontiers of technology and innovation. According to him, attempts at suppression and blockade by certain forces only serve to accelerate the Asian country’s desire for independent innovation. With a high degree of probability, the United States was implied in this statement.
The private Chinese company DeepSeek presented R1, a large language model, in January. This virtual product has become a sensation in the global stock markets. In terms of capabilities, R1 can fully compete with GPT-4 from OpenAI, Llama from Meta, and Gemini from Google. At the same time, the brainchild of the Chinese developer provides for the need for less financial costs for the elaborating process in comparison with the corresponding average static indicators typical for the global artificial intelligence industry.
The R1 also came as a surprise to many experts. The corresponding perception is because the United States, explaining its actions for national security reasons, has been trying for several years to limit China’s access to powerful artificial intelligence chips, which, according to Washington’s idea, was to narrow the space of Beijing’s capabilities in AI development. The Asian country has not yet been able to make significant progress in elaborating and manufacturing advanced microcircuits. At the same time, DeepSeek has managed to develop a highly efficient artificial intelligence model using relatively underpowered AI chips.
Last week, Chinese Premier Li Qiang, while delivering the government’s annual work report, pledged to foster emerging industries and the industries of the future. He promised to establish a mechanism to increase funding for areas such as bio-manufacturing, quantum technologies, embodied artificial intelligence, and 6G technology.
Zheng Shanjie stated that after years of prioritizing technological innovation over domestic demand, China’s leaders have begun to show more commitment to strengthening consumption as their main policy task. According to him, the government of the Asian country will soon present a special action plan to stimulate consumption.
Last year, despite the stimulus push announced in September, most of China’s economic growth was driven by exports. Against this background, a record trade surplus of the Asian country was recorded, amounting to just under $1 trillion. At the same time, exports as a driving force for economic growth are likely to lose much of their power soon. This assumption is because the President of the United States, Donald Trump, has doubled tariffs on goods imported from China. Now the mentioned figure is 20%.
Data from the Macquarie Group investment bank shows that household consumption accounted for 39% of China’s gross domestic product (GDP) in 2023. It is worth noting that in South Korea, Japan, and the United States, the corresponding figure is 49%, 55%, and 68%, respectively.
HSBC economists led by Jing Liu wrote in a research note published last week that Beijing is determined to find strength from within amid growing external uncertainty. As part of corresponding efforts, China has already increased its budget deficit to about 4% of GDP. This is the highest level in recent decades and a measure envisaged by the Asian country’s plan to ramp up spending to counter the impact of tariffs from the United States. Most likely, Beijing will not be able to completely avoid the negative consequences of Washington’s tightening trade policy, but there is an opportunity to minimize the effect of this factor.
Also, in China, the quota for issuing government bonds will be increased by more than 25% compared to last year, to 6.2 trillion yuan.
Special bonds issued by local governments will be used to invest in infrastructure and help the struggling housing market. China’s central government will allocate about 300 billion yuan for consumer subsidies as part of a popular car and consumer electronics trade-in program.
Also, in the context of measures to stimulate the economy, Beijing intends to rely on the private sector, including its technology segment. Last month, the President of the People’s Republic of China Xi Jinping hosted the country’s top tech executives. Many experts described this meeting as a positive signal from the perspective of the Chinese technology area.
Private businesses account for more than 60% of China’s GDP and more than 80% of employment. It is worth noting that in the Asian country, many private companies, especially the firms operating in the technology area, are still recovering from the regulatory crackdown that has lasted for more than three years. Now, Beijing, according to the official rhetoric, has decided to adopt a more friendly approach to interacting with the mentioned companies. In a sense, this is a necessary measure against the background of a gradual limitation of the possibilities of external sources of economic growth in the context of ongoing and scaling geopolitical tensions.
