SHANGHAI (Reuters) – Chinese tech veterans, including former executives at Huawei and SMIC, are planning to launch a “domestic replacement” fund by the end of the year to help create China’s next tech giant and support Chinese companies sanctioned by Washington.
Venture capital firm China Europe Capital aims to raise 5 billion yuan ($731.46 million) for the fund which will invest in start-ups specialising in technologies including semiconductor, 5G and artificial intelligence, said Zhang Jun, the firm’s chairman and a former vice president at telecom equipment maker Huawei [HWT.UL].
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 nosedived in recent months as they butt heads over the coronavirus pandemic, Hong Kong and trade.
“China and the U.S. are in a Great Power rivalry that will end only when there’s a knockout,” Zhang told Reuters in an interview.
“It’s not just about trade war, or sanctions. It’s a matter of life and death.”
Huawei, drone producer DJI and video surveillance company Hikvision are among a growing list of Chinese companies sanctioned by U.S. President Donald Trump’s administration.
On Friday, Reuters reported that Washington might blacklist China’s biggest chipmaker SMIC, or Semiconductor Manufacturing International Corp 688981.SS (0981.HK).
Zhang sees opportunities in the current crisis, betting the Sino-U.S. decoupling will foster a self-sufficient home-grown tech sector that can one day live without incumbent U.S. champions such as Qualcomm and Intel.
There is skepticism among analysts, however, over how successful China can be should it get cut off from Western supply chains given it still has a long way to go to become self-sufficient in technology.
“More and more Chinese companies are being sanctioned by the U.S., and what we do, is to provide them with spare tyres … so that those cut off from U.S. supplies can survive, and run, although with a limp,” said Zhang, who also sits on a panel of experts at China’s Ministry of Industry and Information Technology.
The new fund also aims to foster Chinese tech champions, capitalising on the expertise of a management team that also includes Joseph Xie, a founding member of SMIC, and Li Zhengyu, a former executive at Foxconn, Zhang said.
“We hope to find the next Huawei, the next DJI, or the next BYD,” he said, referring to electric car maker BYD Co Ltd.
China Europe Capital is backed by investment groups including New Margin Capital, CSC Group and Cybernaut, and aims to launch the “domestic replacement” fund in partnership with local governments.
($1 = 6.8356 Chinese yuan )
Reporting by Samuel Shen and Josh Horwitz; Editing by Ana Nicolaci da Costa