China Launches Government Venture Capital Fund for Technology Development
The government of the People’s Republic of China (PRC) is taking steps to “greatly boost [China’s] scientific and technological self-reliance” and “cultivate and enhance the development of emerging and futuristic industries,” as outlined in China’s 15th Five-Year Plan (FYP), which runs from 2026 to 2030.
This is clearly illustrated by their launch of the National Venture Capital Guidance Fund (国家创投引导基金; NVCGF) on 26 December 2025.[1] The central government has allocated CNY 100 billion (approximately USD 14 billion) as seed capital for the fund.[2] Ultimately, by integrating funds from local governments, central state-owned enterprises, financial institutions, and private capital, the NVCGF will form a CNY 1 trillion (approximately USD 144 billion) fund.[3]
As a state-backed venture capital (VC) fund, the NVCGF and therefore, its investment priorities, will reflect and support the Chinese Communist Party leadership’s strategic objectives. As a result, international companies can expect increased opportunities and risks related to key technologies and industries, notably semiconductors, biomedicine, aerospace, and low-altitude economy (drones and eVTOL). The fund will focus on supporting small start-ups—which are expected to receive no less than 70 percent of the fund—involved in developing “hard core technologies.”[4] According to the Chinese government, “hard core technologies” are “important indicators of a country’s core competitiveness”[5] and require long-term R&D inputs and sustained efforts, characterized by high technological thresholds, and which are difficult to “duplicate and copy.” The following are technologies of particular interest to the Chinese government[6]:
- Integrated circuit (i.e., semiconductors)
- Artificial intelligence
- Quantum technology
- Brain-machine interface
- Biomedicine
- Aviation and aerospace
- Low-altitude economy (drones and eVTOL)
- Green energies
Additionally, 6G communications, robotics, new materials, new energy storage, hydrogen energy, and nuclear fusion are related technologies and industries likely to benefit from the NVCGF. PRC officials have reiterated the government’s insistence that the NVCGF will be primarily used to support early-stage developmental technologies and long-term investments (up to 20 years).[7]
Regional Funds
Like other state-backed VC funds in China, the NVCGF has a fund structure that includes regional funds, and currently has three operational regional funds centered on the Beijing-Tianjin-Hebei region, the Yangtze River Delta (Shanghai-Jiangsu-Zhejiang) region, and the Guangdong-Hong Kong-Macau region.[8] Each regional fund has signed letters of intent (LOI) to invest and established direct-investment projects directed at integrated circuits, quantum technology, biomedicine, brain-machine interface, and aviation and aerospace.[9] Each is expected to raise CNY 50 billion (approximately USD 7.2 billion).[10]
All three regional funds have reportedly signed investment LOIs with 49 portfolio funds and 27 direct investment projects, and are expected to establish over 600 portfolio funds in their respective regions to target emerging and future industries.[11]
Regulations Governing State VC Activities
Laws and regulations form the legal basis for PRC policies in areas of interest to the PRC leadership, and the VC sector is no different.
In January 2025, the General Office of the State Council issued its “Guiding Opinions Regarding the Promotion of the High-Quality Development of Government Investment Funds” (国务院办公厅关于促进政府投资基金高质量发展的指导意见).[12] The document refers to government investment funds at the central, provincial, and sub-provincial levels, stipulating that government investment funds are aimed at “major strategies, key areas, and weak links in which the market is unable to fully exercise its function.”
The “Guiding Opinions” also distinguish between two types of government investment funds:
- “Industry investment funds” “lead and drive” activities to support the building of “globally competitive industrial clusters.”
- “Venture capital funds” “support technological innovations” with the goal of “accelerating the achievement of a high level of technological self-reliance.”
China’s government investment funds, whether they support industrial modernization or the development of cutting-edge technologies, must “play an active role” to “serve national strategies, promote industrial upgrades, and facilitate innovations and entrepreneurship,” according to the January 2025 State Council “Guiding Opinions.”
In short, China’s state VC funds, like other government investment funds, are designed to support the CCP leadership’s political objectives through the mobilization of resources toward the development of strategic technologies and key industries.
Opportunities and Risks
International companies involved in technologies and industries targeted by the NVCGF may benefit, particularly if they partner with Chinese entities. However, they should identify and mitigate potential risks before establishing those partnerships, by conducting research into the backgrounds and connections of prospective PRC partners to understand complex ownership structures, setting up internal guardrails to protect company crown jewels, understanding the terms of limited partnerships, and being cautious about requests for sensitive data during due diligence.
International companies can also expect to experience intensified competition from Chinese companies in the global export market. China’s weak domestic consumption, particularly with respect to hi-tech products, will continue to compel Chinese producers to rely on overseas markets. Critical to their strategic planning, International companies are advised to conduct competitive intelligence research to understand their Chinese counterparts’ global footprint.
China is a potentially lucrative destination for Western products based on market size as well as the availability of Chinese talent, knowledge, and a strong supply ecosystem that can deliver on high global standards. In this respect, China continues to present opportunities for international companies,
However, China’s economic structure continues to present risks, such as excessive competition and incentives to disregard rules. Moreover, international companies face Chinese competitors who have an expanding global presence.
In short, PRC government measures, such as the NVCGF, are likely to further complicate the existing China business environment for international companies.
[1] http://www.news.cn/fortune/20251226/be561a7511b04827be8ba488d8406e57/c.html
[2] https://www.ndrc.gov.cn/xwdt/wszb/cytzyd/
[3] https://www.ndrc.gov.cn/xwdt/wszb/cytzyd/
[4] https://www.ndrc.gov.cn/xwdt/wszb/cytzyd/
[5] https://www.ndrc.gov.cn/fggz/fzzlgh/gjfzgh/202112/t20211224_1309286_ext.html
[6] https://www.ndrc.gov.cn/xwdt/wszb/cytzyd/
[7] https://www.ndrc.gov.cn/xwdt/wszb/cytzyd/
[8] https://www.ndrc.gov.cn/xwdt/wszb/cytzyd/
[9] https://www.ndrc.gov.cn/xwdt/xwfb/202512/t20251226_1402664.html
[10] https://www.ndrc.gov.cn/xwdt/wszb/cytzyd/
[11] http://www.news.cn/fortune/20251226/be561a7511b04827be8ba488d8406e57/c.html
[12] https://www.mee.gov.cn/zcwj/gwywj/202501/t20250108_1100235.shtml
