China Aggressively Burns Cash While America is Busy with War in Iran
Jakarta, CNBC Indonesia - While the United States is preoccupied with war in the Middle East and pouring money into bolstering its military ammunition, China is aggressively strengthening startup funding through venture capital (VC) funds, projected to set a new record in Q1 2026.
Industry data shows that in just the first two months of this year, new capital commitments to VC funds have already reached 86 billion yuan. This figure surpasses the previous record of 68.9 billion yuan recorded in Q3-2021.
This increase is inseparable from Beijing’s strategy focusing on the technology sector, such as artificial intelligence (AI), robotics, and quantum computing.
Citing Reuters, the majority of funding is now dominated by the state. Of around 1,200 new VC funds formed in the first quarter, nearly all major investors come from the government and state-owned enterprises. This marks a significant shift in China’s startup ecosystem.
“In the Chinese VC industry, the state is advancing while private capital is retreating,” said Abraham Zhang, chairman of China Europe Capital, quoted from Reuters, Thursday (2/4/2026).
February data shows that the top ten investors in the VC sector are all state-backed, with total investments reaching 33 billion yuan, or about half of the month’s total funding.
On the other hand, the Chinese government is also continuing to strengthen the financing system. At the end of 2025, Beijing launched a national VC fund worth billions of dollars to finance strategic technologies such as brain-computer interfaces and quantum technology.
Premier Li Qiang reaffirmed the government’s commitment to doubling investments in this sector, while expanding early-stage funding for startups.
However, some investors warn that state dominance in VC funding could distort capital allocation and trigger valuation bubbles.
“Too much money from the government is unhealthy,” said William Xin, chairman of Spring Mountain Pu Jiang Investment Management.
He further explained that policy biases could direct capital only to certain sectors, thereby increasing the risk of bubbles.