China To Launch Massive New Fund To Fight US In Tech War

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Will Kessler Contributor
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China will soon launch a large new state-backed investment fund to pour capital into the Chinese semiconductor sector in order to compete with the U.S., according to Reuters.

The new fund targeting the Chinese chip industry aims to raise the equivalent of $41 billion as one of three funds launched by the China Integrated Circuit Industry Investment, mirroring similar funds launched in 2014 and 2019, according to Reuters. The U.S. and China have been engaged in a trade war in an effort to gain a technological advantage in the production of advanced semiconductors used in computers and research for sectors like artificial intelligence. (RELATED: EXCLUSIVE: Video Shows Employees At Chinese Firm Behind US Battery Plant Builder Wearing Red Army Outfits, Pledging Life To CCP)

Once launched the fund will still have to raise capital subject to possible changes, but China’s finance ministry is planning to contribute 60 billion of the total 300 billion yuan to the effort, according to Reuters. The previous two funds received financing from state-owned entities like the China Development Bank Capital, the China National Tobacco Corporation and China Telecom.

The previous two funds contributed financing to Semiconductor Manufacturing International Corporation and Hua Hong Semiconductor, the two largest Chinese chip manufacturers, according to Reuters.

The new fund is the latest in actions taken by China in the tech war with the U.S., with it being discovered in August that the country revived a program in 2020 that recruits foreign-trained scientists to help in technological research, particularly for the semiconductor industry.

The Biden administration has put restrictions on the semiconductor industry, such as an October 2022 move to blacklist multiple Chinese companies involved in the chip industry from working with American companies to prevent the copying of sensitive U.S. technology. In August, the Biden administration also restricted U.S. private equity and venture capital firms from directly investing in some Chinese companies in the semiconductor, quantum computing and artificial intelligence sectors.

In August 2022, President Joe Biden signed the CHIPS and Science Act, which included $52 billion in subsidies for domestic semiconductor manufacturers as well as $200 billion for research in science, technology, engineering and research.

Currently, China’s rival Taiwan produces 63% of the world’s semiconductors, with a single firm, the Taiwan Semiconductor Manufacturing Company, accounting for 54% of the total supply of the world’s chips.

Xie Feng, the Chinese ambassador, noted in a July American security conference that China will retaliate against any new restrictions in the semiconductor industry, describing previous actions limiting Chinese access to the American chip industry as “not fair.”

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