By Samuel Shen and Kane Wu
SHANGHAI/HONG KONG, April 1 (Reuters) – Fundraising in China’s venture capital (VC) industry is set to rise to a record in the first quarter, data showed, as Beijing doubles down on investments in the technology sector, including in AI and robotics.
In the first two months of 2026, newly committed capital to venture funds totalled 86 billion yuan ($12.51 billion), data from the Asset Management Association of China showed. For the first quarter, VC capital-raising is set to exceed the previous quarterly record of 68.9 billion yuan in the third quarter of 2021. March data will be released later this month.
Nearly all of the top investors among the 1,200 new yuan-denominated VC funds created in the first quarter are government entities or state-owned firms, according to consultancy Zero2IPO. These include China’s social welfare fund, local government guidance funds and investment arms of state banks.
“In China’s VC industry, the state is advancing and private capital is retreating,” said Abraham Zhang, chairman of China Europe Capital, who has been in talks with local governments about funding.
In February, the ten largest VC investors in China were all state-backed entities and committed 33 billion yuan, half the total, data from Zero2IPO showed. China’s National Council for Social Security Fund invested the most, 8 billion yuan in a local government-backed VC fund in Hubei province, and ICBC Financial Asset Investment placed 4 billion yuan with a state-backed fund set up in the Guangdong-Hong Kong-Macao Greater Bay area.
The country’s state economic planner, National Development and Reform Commission, did not respond to Reuters’ request for comment.
The trend of more state-backed VC funding also comes as Chinese lenders are planning to steer more money toward tech- and innovation-oriented firms, highlighting Beijing’s efforts to boost funding access for the country’s tech startups.
China’s focus on tech reflects its need to grapple with an ageing workforce and looming demographic crisis. The country is also battling with the U.S. for supremacy in core technologies and is seeking to expand on the dramatic progress made by Chinese developers of AI models.
Investments in the March quarter included moon exploration startup STAR Path, brain-computer-interface company OYMotion, quantum computing startup Tayi and chipmaker ICY Technology, according to Zero2IPO data.
STATE DOMINANCE
In December, China launched a national venture capital guidance fund aimed at allocating billions of dollars of capital into “key hard technologies” such as quantum technology and brain-computer interfaces.
In early March, Premier Li Qiang vowed to make full use of the national VC fund, and “redouble efforts” to develop angel investment and venture capital investment, a priority also reflected in China’s next five-year economic development plan.
Some investors warn state dominance in VC funding could distort capital allocation and fuel valuation bubbles.
“Too much money coming from the government is not healthy,” said William Xin, chairman of Spring Mountain Pu Jiang Investment Management. Policy bias could funnel capital into a narrow set of favoured sectors creating bubble risk, he added.
($1 = 6.8740 Chinese yuan renminbi)
(Reporting by Samuel Shen and Kane Wu in Hong Kong; Editing by Sumeet Chatterjee and Christian Schmollinger)
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