China’s Unleashing a ¥500 Billion Fund for Tech, AI, and Infrastructure. Here’s the Breakdown.

China’s new ¥500 billion ‘quasi-fiscal’ tool is making waves, and if you’re an investor, founder, or tech enthusiast, you need to pay attention.

Since May 2025, local governments across China have been in overdrive, prepping for a massive new financial instrument designed to supercharge the economy.

This isn’t just another stimulus package.

It’s a highly targeted, ¥500 billion RMB ($70 billion USD) war chest aimed squarely at emerging industries and critical infrastructure.

Let’s break down what’s happening.

What Exactly Is This “Quasi-Fiscal” Tool?

Think of it as a hybrid model: it has the strategic direction of government policy but operates with the market-based approach of a private fund.

It’s a “quasi-fiscal” tool, a term you’ll be hearing a lot more.

Hu Hengsong (胡恒松), Executive Vice President of Caida Securities (Caida Zhengquan 财达证券), describes the mechanics like this:

• The “What”: The National Development and Reform Commission (NDRC – Guojia Fazhan Gaige Weiyuanhui 国家发展改革委员会) identifies a list of high-priority projects.
• The “How”: Policy banks, like the China Development Bank (Guojia Kaifa Yinhang 国家开发银行), issue financial bonds to raise the capital for these projects.
• The “Sweetener”: China’s Ministry of Finance (Caizhengbu 财政部) steps in to provide interest subsidies, making the financing cheaper and more attractive.

This model injects capital directly into projects through shareholder loans and equity investments, but with a catch: the projects need to have a path to profitability.

Where the ¥500 Billion is Headed: Key Investment Sectors

The fund’s scope is broad, signaling a major push to modernize China’s economy from multiple angles.

Here are the key target areas:

• Next-Gen Tech: This is the headline grabber. The fund is heavily targeting the digital economy, artificial intelligence (AI), and the low-altitude economy (think drones and advanced air mobility).
• Modern Infrastructure: Upgrading the country’s backbone with investments in transportation, logistics, and urban infrastructure.
• Consumer & Green Economy: Bolstering consumer-facing sectors and pushing forward with green and low-carbon initiatives, aligning with China’s long-term environmental goals.
• Core Foundations: Continued support for essential areas like agriculture and rural development.

On August 1, a representative from the NDRC confirmed they would soon approve the accelerated deployment of this new instrument, adding a sense of urgency to the rollout.

Allocation of ¥500 Billion Quasi-Fiscal Tool (Approximate)

Category	Estimated Allocation (Billion RMB)	Focus Areas
Next-Gen Tech	150 – 200	Digital economy, AI, Low-altitude economy
Modern Infrastructure	100 – 150	Transportation, Logistics, Urban infrastructure
Consumer & Green Economy	100 – 150	Consumer-facing sectors, Green & low-carbon initiatives
Core Foundations (Agriculture, Rural Dev.)	50 – 100	Agriculture, Rural development projects

Local Governments Are Already Scrambling for a Piece of the Pie

The action isn’t just happening in Beijing. Local authorities have been actively lining up projects to secure funding.

• In Xianning City (Xianning Shi 咸宁市), Hubei Province, officials are targeting projects that upgrade existing industrial enterprises with intelligent and digital transformations.

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• The high-tech zone in Meizhou City (Meizhou Shi 梅州市), Guangdong Province, is packaging projects that align with the park’s core industries and address infrastructure gaps.
• Qingshui County (Qingshui Xian 沁水县) in Shanxi Province has already reserved 11 projects with a total investment of ¥13.369 billion RMB ($1.87 billion USD), requesting ¥2.186 billion RMB ($306 million USD) from the new fund.
• Nanjing’s Pukou District (Pukou Qu 浦口区) provides a fascinating look at the public-private mix. They’ve reserved:
  • 12 state-owned platform projects with a total investment of ¥4.2 billion RMB ($588 million USD), requesting ¥390 million RMB ($54.6 million USD).
  • 18 private enterprise projects with a total investment of ¥14.96 billion RMB ($2.09 billion USD), requesting a whopping ¥1.5 billion RMB ($210 million USD).

This demonstrates a clear effort to include both state-owned enterprises and, crucially, private companies in this national push.

Selected Local Government Project Reservations for the Fund

City/County	Total Investment (¥ Billion RMB)	Requested Fund (¥ Billion RMB)	Focus/Details
Qingshui County, Shanxi	13.369	2.186	11 reserved projects
Nanjing, Pukou District (State-owned)	4.2	0.39	12 platform projects
Nanjing, Pukou District (Private)	14.96	1.5	18 enterprise projects

Not Their First Rodeo: How This Compares to the 2022 Playbook

This isn’t the first time China has used a tool like this. In 2022, a similar policy was rolled out to counter economic pressure.

Here’s how they differ:

• 2022 Policy-Based Tool:
  • Scale: ¥740 billion RMB ($103.6 billion USD).
  • Focus: Primarily on major infrastructure like transportation, water conservancy, and energy.
• 2025 New “Quasi-Fiscal” Tool:
  • Scale: ¥500 billion RMB ($70 billion USD).
  • Focus: A much broader scope that includes transportation and logistics, but with a stronger emphasis on boosting consumption and supporting emerging industries like AI.

The shift in focus is clear: from shoring up traditional infrastructure to actively investing in the technologies of the future.

Comparison: 2022 Policy-Based Tool vs. 2025 Quasi-Fiscal Tool

Feature	2022 Policy-Based Tool	2025 New Quasi-Fiscal Tool
Scale (RMB)	¥740 billion	¥500 billion
Primary Focus	Major infrastructure (transportation, water, energy)	Broad scope: Next-gen tech, modern infrastructure, consumer & green economy, agriculture, boosting consumption & emerging industries (AI)
Objective	Counter economic pressure via traditional infrastructure investment	Stimulate growth, optimize supply-side, invest in future technologies

The “Why Now?”: Tackling Economic Headwinds

The timing is no coincidence. China is facing significant economic challenges.

National fixed asset investment growth slowed from 2.8% year-on-year in the first half of the year to just 1.6% by July.

This slowdown is driven by deep adjustments in the real estate market and uncertainty in global demand.

According to Wu Yaping (吴亚平), a researcher at the NDRC’s Investment Institute, this “quasi-fiscal” tool is a necessary “counter-cyclical adjustment.”

It’s designed to generate physical work output, expand effective investment, and, in the long run, optimize China’s supply-side structure.

• Fixed Asset Investment Growth (H1 to July): Slowed from 2.8% to 1.6%
• Driving Factors for Slowdown: Real estate market adjustments, uncertain global demand
• Fund’s Purpose (“Counter-cyclical adjustment”): Generate physical work output, expand effective investment, optimize supply-side structure

The Challenges: Avoiding Hidden Debt and Picking Winners

Of course, a fund of this size comes with risks.

Two major concerns have emerged:

1. The Expertise Gap: Policy banks are experts in funding massive infrastructure projects. But are they equipped to vet and invest in high-risk, high-reward emerging tech companies?
2. The Debt Trap: How can China ensure these funds don’t simply add to the “hidden debt” burden of local governments?

The strategy, as outlined by Hu Hengsong (胡恒song), revolves around smart, market-oriented execution.

• Be “Return-Centric”: The primary criterion for any project should be its ability to balance revenue and expenditure. Purely public welfare projects with low returns are to be avoided.
• Catalyze Private Capital: The government’s money is meant to be the first domino. The real goal is to de-risk projects enough to attract follow-on investment from private funds.
• Diversify Risk: By operating in a market-oriented way, the fund aims to spread risk and prevent it from falling solely on the government’s shoulders.

What This Means for You

This isn’t just domestic policy; it’s a global signal.

For investors, founders, and tech market watchers, this ¥500 billion fund is a strategic roadmap to China’s priorities.

It highlights where the country is placing its biggest bets to secure future growth—in AI, the digital economy, and green technology.

Watching which projects and companies receive this backing will be a masterclass in the country’s industrial strategy in action.

Ultimately, this deep dive into China’s new ¥500 billion ‘quasi-fiscal’ tool reveals a calculated pivot toward innovation as the core engine for its next chapter of economic development.

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References

• Eastmoney.com – Eastmoney
• 21jingji.com – 21st Century Business Herald
• National Development and Reform Commission – NDRC Official Website