🧠 Food for thought

Implications, context, and why it matters.

Beijing’s tech push is an old strategy with new financial firepower

• The lending shift continues a multi-year state plan for technological self-reliance. It builds on industrial policies that predate the property downturn and the recent pullback in real estate lending 1.
• Earlier steps include the 2015 “Made in China 2025” plan to upgrade manufacturing and the 2017 plan to become a world leader in AI by 2030 1.
• The newer element is the size of central bank support from the People’s Bank of China (China’s central bank). In September 2024, the People’s Bank of China said it would set up a 500 billion yuan swap facility to support the stable development of the stock market. It also said it would cut the reserve requirement ratio (RRR), the share of deposits banks must hold in reserve, by 0.5 percentage point to provide about 1 trillion yuan in long-term liquidity 2.

State-backed lending may trigger global price wars and speed up domestic substitution under sanctions

• A surge of state-subsidized funding could drive overcapacity and price cuts. That would hit overseas rivals in targeted areas such as advanced manufacturing 1.
• China’s solar industry offers a precedent. State-driven expansion led to a glut and bankruptcies, then Chinese firms went on to dominate global supply 1.
• Limits on access to advanced foreign chips can push Chinese tech firms to squeeze more output from older hardware. That pressure may speed domestic substitution under U.S. export controls.
• DeepSeek (a Chinese AI startup) released its AI model, R1, in January 2025 after using older hardware due to U.S. export restrictions. One account put development costs at about $6 million 3.