China plans fresh $70 billion chip incentive package to cut export reliance

China on Friday announced that it is awarding an incentive package worth $70 billion to finance its booming domestic chipmaking industry, according to Bloomberg.

Officials involved in the talks are allegedly reviewing proposals that would set aside between 200 billion yuan and 500 billion yuan, or about $28 billion to $70 billion, to back chipmakers. The scale rivals funding tied to Washington’s Chips Act, and the intent is to reduce reliance on foreign suppliers like Nvidia.

Support for domestic players such as Huawei and Cambricon remains on the table even after the Trump administration, now back in the White House, approved sales of higher-end Nvidia products including the H200 for the Chinese market.

Beijing plans subsidies outside existing chip funds

At the top end, the proposal would become the largest state-backed semiconductor incentive program ever planned. It comes as governments across Europe and the Middle East push to secure local chip supply for AI systems and national security uses.

The Chinese package would operate separately from existing funding tools, including the roughly $50 billion Big Fund III, which focuses on equity investments.

The timing is sensitive. China is deploying capital into the world’s biggest semiconductor market during a tense geopolitical period.

President Xi Jinping has committed to building chip capacity using a “whole-nation” approach, calling for resources across government, industry, and finance to be mobilized together. Xi has linked the push to repeated U.S. export controls imposed under three administrations, starting with Donald Trump’s first term.

Semiconductor Manufacturing International, China’s largest contract chipmaker, continues expanding production as Huawei’s main manufacturing partner, despite lacking the advanced tools required for the most cutting-edge chips. At the same time, Moore Threads Technology Co., which designs AI accelerators, has seen its shares climb more than 600% since listing in Shanghai.

Companies have reportedly been urged to avoid Nvidia’s H20, a reduced-performance chip designed to comply with U.S. export rules. Nvidia executives have said the company’s share of China’s AI chip market has dropped to zero.

Beijing has not publicly approved imports of Nvidia’s H200, despite the recent policy shift in Washington.

Economic meeting sets broader policy tone

Beyond chips, China has signaled it will maintain economic support while avoiding a major stimulus expansion next year. An official readout released Thursday after the Central Economic Work Conference said policymakers will “flexibly and efficiently” use interest rate cuts and reserve requirement reductions to keep liquidity sufficient. The same document said officials will keep a “necessary” level of budget deficit and government spending in 2026.

The meeting, attended by senior leaders including Xi Jinping, set priorities for the coming year. Officials said they aim to halt the sharp decline in investment, stabilize the housing market, and address falling birth rates.

The tone reflected confidence after China weathered its trade conflict with the U.S. with help from strong exports to other regions, allowing leaders to stick with a manufacturing-led growth model while nudging consumption.

Chinese property stocks rose, with a Bloomberg gauge of Chinese property shares gaining as much as 1.9%. China Vanke Co. shares rose as much as 5.7% in Hong Kong, while KWG Group Holdings and Sunac China Holdings climbed 5.3%

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