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Wednesday, April 24, 2024

Beijing's multi-billion deal for Chinese chips

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The special fund to support the sector is further strengthened with $27 billion

Πακτωλoς δισεκατομμυ&rho ων απo το Πεκνο για κινεζικa τσ&iota ?&pi?

The fund that finances China's microprocessor industry was founded in 2014 and has so far raised about $45 billion [REUTERS]


China is preparing to raise at least $27 billion for the third and largest fund it has set up to finance Chinese microprocessor industries to develop strategic technologies, as a standoff with Washington intensifies. According to sources close to Beijing's plans, the third fund, also known as the Grand Fund, will draw most of its funds from local governments, their investment firms and state-owned enterprises. The central government will only partially help.

It will be directly overseen by the technology ministry and is expected to give a big boost to the world's largest microprocessor market, which has already seen success despite its partial dependence on US industries.

Even last year, in order to build a high-tech microprocessor, the Chinese technology companies Huawei Technologies and SMIC, with which it works, had to rely on technologies of American origin. SMIC is an important partner of Huawei Technologies, being its main microprocessor supplier. There have been previous attempts by Washington to persuade its allies such as the Netherlands, Germany, South Korea, and Japan to further limit China's access to advanced microprocessor technology and impose stricter controls on high-tech exports. According to sources with knowledge of the matter, the local authorities of Shanghai and other cities, as well as the investment companies China Chengtong Holdings and State Development and Investment Corp. are among investors expected to pledge billions of yuan each to fund the strategic fund.

The capital of this third fund will come from three to four sources of capital managed by other partners, and the Grand Fund will directly support domestic enterprises. Negotiations to raise the funds are still ongoing and are expected to take months. The fund in question has been established since 2014 and has so far raised about $45 billion to support dozens of companies, including microprocessor makers SMIC and Yangtze Memory Technologies. In its second phase, i.e. from 2019 onwards, the Big Fund controls stakes in 48 local microprocessor industries. Enterprises and industries financed by the Big Fund are in theory like operating under the patronage and protection of Beijing. This kind of thing acts as a business passport, since it opens the doors to other potential investors and thus manages to secure more financial support from other investors as well.

It is, however, a fund that has operated mainly behind the scenes and has away from the eyes of public opinion his investments. Many of his critics have pointed out that he is not accountable to any higher authority in China. It has drawn suspicion since 2022 when it curbed its investments following Beijing's anti-corruption campaign. Chinese officials have at times ordered investigations into the fund in question, finding excessive delays in the development of microprocessors capable of replacing those in Western economies and a lack of progress in the process.

Source: www.kathimerini.com.cy

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