Two blockbuster initial public offerings on the Shanghai stock market in recent weeks have highlighted China's twin intertwined ambitions: to capitalize on investor enthusiasm for homegrown companies in the artificial intelligence boom and to reduce its reliance on U.S. technology and finance.
Both companies - China's leading memory chip maker Changxin Memory and humanoid robot maker Yushu Technology - have chosen to list in Shanghai. Government policies encourage promising technology companies to turn to domestic financial markets rather than rely on state subsidies or foreign capital, which has supported their listings.
This is in stark contrast to years past, when successful Chinese tech startups relied on the power of Silicon Valley and Wall Street.
“The flow of global technology capital is almost a one-way street ‘looking west,’” the Communist Party-controlled Global Times said in an editorial last week, citing the IPOs of Changxin Storage and Yushu Technology in Shanghai as signals of change. "But now the world is shifting from 'looking west' to 'looking east'"
Under the leadership of China's top leader Xi Jinping, Beijing has promoted independent control in a variety of industries, including critical materials and food, in an effort to reduce the leverage that other countries can exert on China. This national strategy is most obvious in the field of science and technology, because the development of artificial intelligence and advanced semiconductors requires massive funds.
The government increasingly wants these funds to come from within China. The unusual popularity of Changxin Storage and Yushu Technology shows that Chinese investors are willing to provide these funds.
The first is Changxin Storage. At the end of last month, its stock price soared 470% on its first day of trading and has since risen further, giving the chipmaker a market value of approximately US$545 billion, surpassing Tencent to become China's most valuable listed company.
Changxin Memory has benefited from artificial intelligence technology's strong demand for high-speed memory chips, which are critical for storing and transmitting massive amounts of data. Changjiang Storage, Changxin’s main domestic competitor, is also preparing to go public.
Then there is Yushu Technology. Its shares began trading in Shanghai on Wednesday and soared 460% on the first day. It once rose by more than 629% during the session, and then fell back.
Yushu Technology is at the more speculative frontier of the artificial intelligence boom. Questions remain about how quickly robots that look and move like humans can form a large-scale commercial market, but videos showing off the skills of Yushu Technology's humanoid robots - such as performing kung fu routines, climbing walls, backflips, racing and boxing - have attracted millions of views online. In China, the company has become a symbol of the country's high-tech ambitions.
These sensational listings show that China is simultaneously promoting independent control of technology and finance.
The Global Times, which often expresses nationalist views, argued that stronger domestic capital markets could provide Chinese technology companies with an alternative to U.S. financing. “When technological autonomy becomes possible,” the newspaper said, “domestic capital markets will have a basis for reasonable pricing for these companies and no longer need to rely on ‘certification’ from overseas exchanges.”
China experts say the increasing emphasis on local capital markets is an evolution of China's industrial policy. Beijing is seeking to rely less on state subsidies, which are often costly and ineffective, and more on investors to decide which companies deserve capital.
Subsidies may work well in mature industries where the product is understood and the technological path is relatively clear. For cutting-edge technologies, subsidies may be less effective.
“On the cutting edge, subsidies work poorly because no one knows which approach will win, and subsidies tend to prop up companies that should otherwise fail,” said Gerald DiPippo, director of the Eurasia Group, a Washington-based research group.
DiPippo said domestic capital markets and investors will increasingly look to China as a "better way to discipline growth technology companies."
The government's role is becoming more like a referee and supporter of China's capital markets. But it still occasionally steps in directly, playing the role of venture capitalist.
Last year, Beijing established a "National Venture Capital Guidance Fund" to work with Chinese investors and ultimately deploy up to $145 billion to invest in companies in high-tech fields such as artificial intelligence and quantum computing.
Shanghai's stock market has long been known for speculative volatility and lengthy and cumbersome listing procedures. In June, the Shanghai Stock Exchange issued guidance to streamline the listing process for Chinese artificial intelligence software companies whose chatbots compete with products from OpenAI, Anthropic and Google.
Chinese start-ups developing these so-called big language models "urgently need support from the capital market," the Shanghai Stock Exchange said.
The first Chinese AI model companies to go public earlier this year - Zhipu AI and MiniMax - were the first to list on the Hong Kong exchange, where many investors consider the Hong Kong market to be more mature and less volatile than Shanghai. However, the government encourages all Chinese AI model developers to secondary list in Shanghai, and both Zhipu AI and MiniMax have expressed such plans.
Beijing not only guides companies toward the domestic market but is also willing to step in to support when the market comes under pressure.
In July, when concerns about excessive spending on AI triggered a global stock market sell-off, Shanghai markets fell. Two state-owned investment funds, China Guoxin Holdings and China Chengtong Holdings, immediately announced purchases of US$9 billion in Chinese stocks and expressed confidence in the market.
This increasingly state-led system is in stark contrast to the past, when U.S. investment funds and venture capital firms flocked to China, attracted by China's growth and encouraged by policymakers in Washington. In the 2010s, U.S. investors were early backers of e-commerce giant Alibaba, TikTok owner ByteDance and ride-hailing company Didi, once dubbed China’s version of Uber.
Now, as Beijing encourages domestic investors to put money into local technology companies, foreign capital is becoming less popular in the game.
Geopolitics has also contributed to this retreat. American companies are increasingly worried about being caught in the middle of the trade and technology dispute between China and the United States. Foreign venture capital investment in China has dropped sharply.
Many companies have downsized or exited China entirely.
Sequoia Capital, for example, spun off its China business two years ago. The resulting company, HSG (Chinese name "Sequoia"), invested in Yushu Technology and holds a 7% stake in the company, currently worth approximately $3.5 billion.
