A boom in Chinese investment into deep tech investments is getting underway just as the U.S. government appears to be throttling its backing for scientific enterprise.
With the announcement of a venture capital government guidance fund, set up by China’s National Reform and Development Commission at this year’s ‘Two Sessions’ political meetings in March, the PRC is poised to take the lead in a whole host of technologies that rest on leadership in scientific research. The fund’s announced size is a whopping 1 trillion RMB (or $138.1 billion).
Provincial governments, such as the Guangdong Provincial Government late last month , are pushing forward, issuing measures of their own to boost so-called “slow” or “patient” capital flowing into companies that can bring new innovations to market.
This latest push is part of a larger effort in China to wade deeper into deep tech — an area of venture capital that invests in technologies based on scientific advancements such as in AI, biotech, aerospace, material science, and new energy. What distinguishes a deep tech start up is that it will often have a scientist as a co-founder demonstrating these companies are bringing products with high technical standards to bear. These investments could allow China to charge forward in sectors and products that can also rely on scientific discoveries from the physical world — such as biology and physics — in addition to digital technology innovations.
Xi Jinping has been laying the ground for this push for some time. In China, research-intensive technologies are often referred to as “hard” or “deep” tech. Such technologies featured in the 14th Five Year Plan, a high-level document released in 2021, under a section devoted to venture capital-driven initiatives such as the STAR Market, a Shanghai-based stock exchange set up in 2019. During a speech to inaugurate that market, Xi Jinping highlighted its role as central to China’s hard tech push. According to statistics cited in Outlook, a Chinese communist party-publication, more than half of STAR Market listed companies are also involved in import substitution.
Given such early stage companies depend on the ingenuity of researchers it is no surprise that the leadership in Beijing is looking to impress the importance of hard tech successes on China’s scientific community. In his most recent major speech to members of the Chinese Academy of Sciences last year, Xi noted the importance of “slow capital” that will give rise to “hard technologies,” his first ever mention of the term in this forum.
…the U.S. needs to act to ensure that it remains a friendly place for the global scientific talent needed to found and staff deep tech startups. Otherwise they will look to new pots of money elsewhere — in China.
According to an account in the Chinese journal “East China Science and Technology ,” the term “hard technology” is the brainchild of Dr. Mi Lei who, in the wake of the 2008 financial crisis in the U.S., saw an opportunity for China to race ahead of the United States in innovation. Mi, then a researcher at the Xi’an Institute of Optical Mechanics of the Chinese Academy of Sciences, began to think about what areas of technology were particularly critical. In the years following, he published articles on the importance of hard technology.
Fast forward to 2018, when Li Keqiang, then the premier of China, promoted the idea of “hard tech” at a meeting of the National Science and Technology Leading Group. By 2019, Xi himself was emphasizing the strategic importance of early and sustained financial investment in the sector, marking “hard technology” and identified this as a key goal for the STAR Market.
Mi Lei has since set up his own venture capital firm called CAS Star , or Zhongke Chuangxing. Since its first investment in 2013 it has, predictably, focused on identifying China’s next deep tech champions. The firm had an unusually active year in 2024: According to a report in China Venture, a Chinese VC-focused news platform, CAS Star reported 70 investments in deep tech companies in 2024, a high proportion of the just-under 500 investments it has made since the firm’s inception in 2013. Mi Lei’s fund is also riding the AI wave: In 2019, CAS Star participated in an angel round investment into Zhipu AI , which has since grown into one of China’s so-called “Six Little Tigers,” a core group of Chinese AI startups (of which DeepSeek is notably not a member).
However, not all is well in VC land in China. The U.S. and China were running neck and neck in terms of numbers of so-called unicorns — private start-ups valued at over $1 billion — as recently as 2020, with both boasting just under 340, according to a report cited in the 21st Century Herald, a Chinese business-focused publication. Since then, the U.S. has raced ahead while China has begun to flatline. Last year, the U.S. had 838 unicorns while China had merely 510. Europe, meanwhile, has an equal share of global unicorns to that of China.
The leadership in Beijing has taken note. The latest Two Sessions government work report identified the need to raise the number of unicorns, so as to allow “more enterprises to surge ahead in new areas and arenas.”
Since the start of this year, its policy efforts have accelerated. While much media attention has been paid to announcements aimed at boosting domestic AI industries and the private corporate sector more broadly, Beijing’s policy efforts to lift deep tech are deserving of more focus — as these investments will bear fruit in the decades ahead. During the week of the Two Sessions, the State Council issued a 5-point set of measures to boost innovation, the first of which was to help unleash progress in hard technologies. During the Two Sessions, several delegates promoted achievements that China can already boast and how they will help the country move forward. Huang Lianghao, a member of the drafting team of the government work report, said , for instance, that China was making achievements to “enhance [both] hard technology and hard power.”
The connection between technological prowess and the power of a country has, of course, long been recognized in China. With China’s deeptech investments, the seeds of future technologies could be sown there today, rather than in the U.S. or Europe. That is true even if the U.S. currently enjoys a lead in the number of global unicorns based there.
How viable and enduring China’s this push will be remains to be seen. Previous efforts at industrial funds such as semiconductor super funds have had mixed results. On top of that, the ongoing tariff war leaves open the question how the PRC and indeed the United States but also Europe will emerge from this period of economic strain.
Regardless of this uncertainty, the U.S. should invest in innovation programs that have shown to pay. One of the most important programs aimed at helping deep tech companies take off is the Small Business Innovation Research (SBIR) program and its reauthorization is up for renewal this year. The program should be renewed and strengthened. On top, current staffing cuts to various agencies also risks disrupting the administration of the program leaving grant recipients vulnerable at a particularly delicate time in their life cycle. Finally, the U.S. needs to act to ensure that it remains a friendly place for the global scientific talent needed to found and staff deep tech start-ups. Otherwise they will look to new pots of money elsewhere — in China.
This article was originally published by the Wire China on June 22, 2025, here.
