CXMT, a memory chip manufacturer based in Beijing, China [Reuters]
CXMT, a memory chip manufacturer based in Beijing, China [Reuters]

China has begun leveraging its $28 trillion capital market to challenge the United States in AI, Bloomberg reported Monday.

Bloomberg said China is reshaping how it finances strategic industries at the national level, pointing to last month's listing of CXMT as an early sign of that shift.

CXMT, a Chinese memory chip manufacturer, debuted on the Shanghai Stock Exchange last month and surged more than 500 percent within hours of opening, vaulting past Industrial and Commercial Bank of China to become the largest company by market cap on the Chinese mainland. The listing raised $9.8 billion through its initial public offering.

Regarded as China's best hope for reducing dependence on foreign suppliers and competing with the US in AI, CXMT's performance was seen as extraordinary — even accounting for the frothy valuations that AI-era stocks have attracted.

Beijing engineered the listing at the national level, according to Bloomberg.

Authorities introduced a fast-track preliminary review system for strategic companies, compressing a process that typically takes years into eight months, and provided support for additional fundraising through bond issuance.

When technology stocks sold off sharply last month, regulators intervened with unusual speed to restore confidence — a move also attributed to the goal of supporting CXMT.

Access to capital markets has long been considered one of the great advantages of the US technology industry.

As AI — widely seen as the most capital-intensive sector in the economy — emerges as an indispensable driver of economic growth and military power, China is working to close the gap with the US on capital market access, Bloomberg said.

Chinese technology companies have raised about $217 billion through IPOs and bond markets since 2024, according to Bloomberg data — roughly one-sixth of the $1.4 trillion raised by their US counterparts over the same period.

That gap reflects how heavily China has relied on government subsidies, tax incentives and state investment, with capital markets playing little role as an industrial policy tool.

But as Beijing changes course, Chinese companies stand to tap an enormous pool of funds — including $26 trillion in Chinese household savings.

China has precedent for this kind of approach: in electric vehicles, it combined state support with manufacturing capacity to build a globally dominant industry, led by BYD.

AI, however, presents a harder challenge, as the US has moved to block China's access to cutting-edge chips.

Chris Miller, a professor at Tufts University and author of "Chip War: The Fight for the World's Most Critical Technology," said US companies have seen improved capital access in recent years, though their cost of funding has risen. "If Chinese companies secure a sustained advantage in capital access, they could find themselves in a favorable position," he said.

He added, however, that the poor quality of Chinese AI chips means computing products made in China are still far more expensive than their American equivalents.

Chinese investors are also responding to government policy, shifting money out of real estate and consumer goods and into high-tech stocks such as semiconductors.

This year, the STAR 50 index — weighted toward semiconductor companies — has surged 30 percent and hit a record high in June, while the broader CSI 300 index of the top 300 stocks on the Shanghai and Shenzhen exchanges has gained just 1.4 percent.

Z.AI, Minimax, Moonshot AI and DeepSeek are among the companies preparing to go public.

Chinese technology companies have issued $38 billion in bonds this year, the most since 2025. Over the same period, US technology companies issued $578 billion — about 15 times as much.

Chinese regulators are encouraging banks to lend to technology companies, but banks still prefer mature businesses with stable cash flows over research-and-development-focused startups that are still running losses.

Years of state-led growth policies have also left local governments heavily indebted, limiting the state's capacity to support every industry.

There is also a dilemma: when government fiscal resources flow to companies, less money is available for public services such as schools and hospitals. Tapping private capital markets sidesteps that problem.

China also has the advantage of lower interest rates than the United States.

The average bond issuance rate for major Chinese technology companies this year stands at 1.9 percent — more than 3 percentage points below comparable US firms, the widest gap since 2015.

Policy-driven markets carry their own risks, however.

CXMT commands a significant premium over global peers not because of its fundamentals, but because of policy expectations and scarcity value.

And as with solar panels and electric vehicles in the past, a flood of policy-backed capital into a single sector can lead to overcapacity, margin pressure and cutthroat competition that erodes profitability.

Experts note that capital is a necessary but not sufficient condition for success in AI. Still, China's cost efficiency is an advantage that cannot be ignored.

According to UBS estimates, China's AI model training costs are less than 10 percent of those at global leaders such as OpenAI, and API service prices are less than 20 percent.


mokiya@heraldcorp.com