AI Fever Sweeps China’s Political Huddle, Fueling Tech Optimism
In recent years, China’s National People’s Congress has become a more controlled affair, its subdued atmosphere reflecting concerns about domestic stagnation. However, this year’s gathering, which concluded in Beijing, brought a noticeable shift. The event followed a breakthrough in artificial intelligence by the Chinese startup DeepSeek. This, combined with President Xi Jinping’s meeting with business leaders like Jack Ma, has ignited optimism among investors, politicians, and regulators.
Chinese stocks saw their best performance during the week-long event since 2018, with the MSCI China Index climbing 4.3% over the week. Even on Tuesday, when many Asian markets declined, the index posted a modest gain.
Communist Party officials from different provinces vied to promote their regions as the next AI hub. Lawmakers put forward numerous proposals during group discussions open to the media, as well as in closed-door sessions reviewed by Bloomberg News. These proposals covered AI-related education, scaling up technology applications, boosting research, and regulating the social impact of AI.
The event also saw rare policy debates, with one delegate raising concerns about limited access to bank funding for smaller tech firms.
At a recent press briefing, AI was a major topic alongside questions regarding boosting domestic consumption and anxieties over potential US tariff hikes. Wu Qing, chairman of the China Securities Regulatory Commission, noted that “Tech is taking a more prominent role here,” highlighting how DeepSeek has spurred a re-evaluation of Chinese assets and helping to improve the outlook for the stagnant tech sector.
The emergence of DeepSeek, which developed a high-quality AI model at a surprisingly low cost, has drawn investors back to the Hong Kong and mainland stock markets. Local media has also been enthusiastic over a lesser-known startup whose Manus AI agent can supposedly perform complex real-world tasks.
Zheng Shanjie, head of the National Development and Reform Commission, announced a state-backed startup guidance fund of 1 trillion yuan ($138 billion), which sparked further discussion about China’s initiative to develop AI and quantum technology. Yuan Jiajun, the Communist Party chief of Chongqing, described how his city will leverage its high-end manufacturing capacity to excel in connected vehicles, smart equipment, and new materials, integrating “AI+” citywide. Yuan pledged support for the private sector, creating an ecosystem where both large and small to medium-sized companies could thrive.
AI-Driven Regional Competition and Investment
Lawmakers from Shanghai and Guangdong also aim to identify areas where their regions can excel in AI, such as scientific research and industrial applications. Meanwhile, the governments of Beijing and Shenzhen have established funds, totaling 10 billion yuan, to foster AI and robotics development. Guangdong province, where Shenzhen is located, has unveiled subsidies, and Wuhan announced plans to develop AI products in healthcare, education, and law. This enthusiasm mirrors the past surge of interest in solar energy and electric vehicles, where regional governments raced to build capacity, leading to impressive industry leadership for China.
After years marked by economic concerns and a reluctance to take on new ventures, AI offers a new narrative. This phenomenon has also sparked some self-reflection.
Regional Rivalries
The provincial media outlet of Jiangsu ran articles asking why its neighbor, Zhejiang, has become the base for DeepSeek and other leading AI firms. Zhejiang’s tech hub, Hangzhou, is noted for its less restrictive regulatory approach to business.
NPC deputy Zhou Tongyu, vice president of the Shanghai Federation of Industry and Commerce, stated that the government should avoid barriers for private companies regarding new technologies. She also highlighted struggles for small and medium-sized tech companies in securing bank loans and suggested that business-operation data be accepted as a basis for security credit.
State’s Role in Tech
National regulators appear to be adapting and learning from past approaches, as the recent tech guidance fund emphasized the role of the market. According to Tilly Zhang, an analyst at Gavekal Dragonomics, this suggests the state is evolving to become a patient, long-term investor in smaller companies working on challenging technologies. However, she added that the state still prefers large-scale, centralized, and directed methods.
–With assistance from Charlie Zhu and Sangmi Cha.
