PitchBook noted that China’s latest move to bolster its technological capabilities has arrived in the form of a 1 trillion yuan (approximately $138 billion) high-tech fund, unveiled during the 2025 Two Sessions.
The report from PitchBook added that this state-backed venture capital (VC) initiative targets critical deep-tech sectors—artificial intelligence (AI), semiconductors, quantum computing, and clean energy—underscoring Beijing’s unrelenting pursuit of technological self-sufficiency.
The PitchBook research note also mentioned that as geopolitical tensions simmer and economic challenges mount, this fund is poised to reshape China’s innovation ecosystem.
But the question looms large: will it ignite a surge of private capital investment or tighten the state’s grip, sidelining private players?
PitchBook’s Q1 2025 Analyst Note, Impact of China’s High-Tech Fund, dives into this dynamic, offering a look at the opportunities and risks ahead.
The fund’s scale is enormous, easily dwarfing many global VC initiatives and signaling China’s intent to lead the next wave of technological breakthroughs.
Drawing parallels to the semiconductor-focused National Integrated Circuit Industry Investment Fund, launched in 2014,
The Big Fund, with over $45 billion deployed by 2025, catalyzed significant growth in China’s chipmaking capacity—domestic production now meets 20% of national demand, up from less than 10% a decade ago.
Yet, it also exposed inefficiencies: state-backed firms often prioritized political goals over market viability, leaving some projects mired in scandal or underperformance.
The high-tech fund, with its broader mandate, could follow a similar trajectory, amplifying innovation in strategic sectors while raising questions about execution.
For private VC and private equity (PE) investors, the fund presents a high-potential yet challenging landscape.
PitchBook’s analysis suggests it could act as a catalyst by injecting liquidity into early-stage deep-tech startups, where capital gaps have long persisted.
In 2024, China’s VC deal value in AI and semiconductors fell 15% year-over-year to $12.3 billion, reflecting cautious sentiment amid regulatory uncertainty and U.S. export controls.
The high-tech fund’s resources could potentially bridge this gap, encouraging co-investment from private players eager to leverage state support.
PitchBook notes that firms with strong government ties—such as those backed by regional state-owned enterprises—may see deal flow increase by as much as 25% in targeted sectors over the next two years.
The report also mentioned that the Big Fund’s dominance in semiconductors often left private investors relegated to secondary roles or squeezed out entirely, as state priorities favored scale over profitability.
PitchBook warns that if the high-tech fund adopts a similar approach—centralizing decision-making and favoring state-aligned firms—private capital could face heightened competition for high-quality deals.
In 2024, state-backed entities accounted for 40% of deep-tech investments in China, up from 30% in 2022, a trend that may accelerate.
This shift could stifle the agility and risk-taking that private VC thrives on, particularly in nascent fields like quantum computing.
The fund’s influence extends beyond funding to exit pathways.
PitchBook predicts a potential uptick in domestic IPOs on China’s STAR Market, tailored for tech firms, as the fund seeks to prove its impact.
Yet, with U.S.-China tensions curtailing overseas listings—only three Chinese tech IPOs hit U.S. exchanges in 2024 versus 37 in 2021—capital flows may remain constrained.
The PitchBook report concluded that for private investors, the fund offers a chance to ride a wave of state-driven growth, but success hinges on navigating an increasingly state-centric ecosystem.