China is betting on bigger tech hubs for growth, but analysts warn of old risks
China is betting on bigger tech hubs for growth, but analysts warn of old risks
Beijing is funnelling resources into scaled-up AI and chip clusters in its next five-year plan but analysts warn that supply-driven expansion could outpace viable market demand.
SHANGHAI: As China begins laying the groundwork for its 15th five-year plan, cities are accelerating efforts to scale up artificial intelligence (AI) and semiconductor hubs - a push that analysts say reflects both strategic intent as well as risks.
From new “AI+” task lists in Wuhan and electric vehicle (EV) and chip clusters in Chongqing to humanoid robots in Shenzhen and AI manufacturing pushes in Shanghai and Zhejiang, local governments are rolling out efforts to transform national priorities into results.
Observers say the real test will be whether these scaled‑up hubs can avoid repeating past mistakes and patterns of overcapacity and building faster than real demand to achieve tech self-reliance.
“(With) every national wave, there’s similar local waves,” said Chen Ling, an associate professor at Johns Hopkins University’s School of Advanced International Studies.
While they all promote AI, semiconductors and EVs, Chen noted that localities had different industrial bases.
“Over the long term they still accumulate some unique characteristics,” she said.
Tilly Zhang, a technology and industrial policy analyst at Gavekal Dragonomics, said the latest push is also about forcing harder choices.
“Competition always fosters pressure, and pressure fosters innovation and hard work - so you still need industrial competition locally but you don’t want too many unqualified players in the same areas,” Zhang said.
WHAT BEIJING’S NEW TECH LANGUAGE SIGNALS
The clearest signal of what Beijing now wants from its AI and tech sectors came from this year’s Two Sessions meetings.
This year’s government work report and the 15th five-year plan have vowed to “drive advances in original innovation and breakthroughs in core technologies in key fields”, as well as to “move faster to achieve greater self‑reliance and strength in science and technology”.
But commentaries about the new plans have shifted emphasis: the goal is to no longer just plug “chokepoints” and survive export controls - but to build what Beijing calls “new quality productive forces” - high‑productivity, tech‑heavy industries that can raise incomes and underpin future growth.
That shift will reframe how success is defined, said Gavekal Dragonomics’ Zhang.
“The previous five‑year plan was more (about) emphasising technologies for national security,” she told CNA.
“But in this new plan, it’s more about stressing how we should use new technologies to generate economic benefits. Not only developing advanced technologies, but also how (they) can optimise entire supply chains to build more successful products.”
That means local governments are now under greater pressure to ensure that flagship projects - from AI to semiconductors - feed into viable industrial chains, Zhang said.
The language might have evolved but policy tools remain largely unchanged.
The plan continues to prioritise supply-side support, including higher research spending and the use of government-guided funds to channel capital into strategic sectors.
AI alone is referenced dozens of times across policy documents, alongside calls for “AI+” applications, large-scale computing infrastructure and open-source ecosystems.
“The emphasis is still on inputs on the supply side,” said Chen. “That has to be matched by demand - and the two may not align.”
That gap is already visible on the ground, experts added, citing how while China has demonstrated rapid advances in areas like AI - turning those gains into sustainable profits remains uneven.
The case of Chinese AI model DeepSeek that drew global attention in 2025, illustrates that challenge, says Chen.
Although its developers highlighted strong cost-efficiency metrics, actual revenues have lagged, with limited commercialisation beyond open-source releases and low-cost APIs.
And analysts said this reflects a broader issue: technological capability does not automatically translate into scalable business models.
“Everyone thinks DeepSeek is so great… but it doesn’t earn that much money,” Chen said. “It cannot be the pillar of industrial or economic growth in China.”
Instead, analysts point to companies more deeply embedded in industrial supply chains - such as chip-equipment makers and AI chip designer Cambricon - as closer to what Beijing is now prioritising: firms that can deliver both technological advances and consistent profitability.
HOW CHINESE CITIES ARE MOVING
To drive that shift, China has drawn a bigger map.
Instead of just naming Beijing, Shanghai and the Guangdong‑Hong Kong‑Macao Greater Bay Area as innovation centres, the new outline also upgrades the full Beijing‑Tianjin‑Hebei region, the Yangtze River Delta and the Greater Bay Area to international science‑and‑technology hubs.
The Chengdu-Chongqing region, along with cities like Wuhan and Xi’an have also been designated as regional innovation centres.
That shift in scale - from single cities to whole economic corridors - is what local governments are now responding to, said analysts.
“(China) is not saying every city should rush to the new sectors again like what they did before - but instead they are naming out those three important clusters,” said Zhang.
“They are saying these three hubs are the new international sci‑tech innovation hubs and in order to support their growth, resources and opportunities should be better allocated instead of (being) evenly spread across the country.”
In Shanghai, Beijing and Shenzhen, the new mandate has already turned into detailed checklists for how to scale AI and related industries.
In Shanghai’s Pudong district, a new 31‑point plan was unveiled on Mar 14 to “bolster innovation and global investment” around AI, advanced manufacturing, autonomous driving and new materials.
Officials said