October 5, 2022
China tech veterans to launch ‘domestic replacement’ fund amid US sanctions

Chinese tech giants, including Huawei and former SMIC executives, are planning to launch a “domestic replacement” fund by the end of the year to help build China’s next tech giant and support Washington-sanctioned Chinese companies.

Venture capital firm China Europe Capital aims to raise CNY 5 billion (about Rs 5,399 crore) for the fund, which will invest in start-ups specializing in technologies including semiconductors, 5G and artificial intelligence, said Zhang Jun, the firm’s president and former Told. Vice President at telecommunications equipment maker Huawei.

The fund launch comes amid a government-backed investment boom in China’s technology sector as Beijing competes with Washington in an increasingly acrimonious “tech war”.

Relations between the world’s two largest economies have tumbled in recent months as they brace their heads over the coronavirus pandemic, Hong Kong and trade.

“China and the US are in a great power rivalry that will only end with a knockout,” Zhang told Reuters in an interview.

“It’s not just about a trade war or sanctions. It’s a matter of life and death.”

Huawei, drone maker DJI and video surveillance company Hikvision are among a growing list of Chinese companies approved by the administration of US President Donald Trump.

On Friday, Reuters reported that Washington may blacklist China’s biggest chip maker SMIC, or Semiconductor Manufacturing International.

Zhang sees opportunities in the current crisis, betting on a Sino-US decoupling would foster a self-sustaining domestic tech sector that could one day live without US champions like Qualcomm and Intel.

There is skepticism among analysts, however, about how successful China can be should it be cut off from Western supply chains, as it still has a long way to go to become self-sufficient in technology.

“More and more Chinese companies are being approved by the US, and what we do is to provide them with spare tires…,” said Zhang, to a panel of experts from China’s Ministry of Industry and Information Technology. also sits.

Zhang said the new fund aims to promote Chinese tech champions, capitalizing on the expertise of a management team that also includes SMIC founding member Joseph Xie and former Foxconn executive Li Zhengyu.

Referring to electric car maker BYD, he said, “We expect to get the next Huawei, the next DJI or the next BYD.”

Backed by investment groups including New Margin Capital, CSC Group and Cybernaut, China Europe Capital aims to launch a “domestic replacement” fund in partnership with local governments.

© Thomson Reuters 2020

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