China unveils $47.5 billion strategy to counter US assault on its semiconductor sector

China has taken a significant step towards achieving self-sufficiency in advanced semiconductor technology with the establishment of its third state-backed investment fund, known as the “Big Fund.” With a registered capital of 344 billion yuan ($47.5 billion), this fund aims to bolster China’s semiconductor industry in the face of increasing US export control measures targeting the sector.

The Chinese finance ministry is the largest investor in the fund, holding a 17% stake with a paid-in capital of 60 billion yuan. China Development Bank Capital follows as the second-largest shareholder, with a 10.5% stake. Additionally, five central Chinese banks have contributed around 6% of the total capital each, including the Industrial and Commercial Bank of China, China Construction Bank, Agricultural Bank of China, Bank of China, and Bank of Communications.

This latest phase of the China Integrated Circuit Industry Investment Fund, officially established on May 24, represents the largest of the three funds launched since 2014. The significant commitment of capital underscores President Xi Jinping’s determination to reduce China’s reliance on foreign semiconductor technology, especially in light of recent US export control measures citing concerns over potential military use of advanced chips.

The Big Fund has already provided financing for two of China’s largest chip foundries, SMIC and Hua Hong Semiconductor. Following the announcement of the new fund, Chinese chip shares experienced a rally, with the CES CN Semiconductor Index gaining over 3%, poised to record its biggest one-day gain in more than a month.

As tensions between China and the US continue to escalate in the tech sector, the establishment of the Big Fund reflects China’s ongoing efforts to strengthen its domestic semiconductor industry and mitigate the impact of US sanctions. The fund is expected to play a crucial role in financing the development of the industry as China pushes for self-sufficiency in advanced chips.