China’s Science and Tech Board Dominated by Government Investors

China’s recently opened Nasdaq-like trading board dedicated to tech and science companies has seen a massive amount of investment in recent days. However, further research into the investors funding these companies has shown that state-owned investors back much of the top businesses on the board. Out of the top 25 companies listed on the board, 14 of them demonstrate state-funded investment in a big way.

The board was developed to spur innovation in China and allow for funding of useful research. Economically, the companies were expected to aim at developing better local production methods to lower dependence on American components and talent. With the US-China trade war in full swing, China believes that this will offer them an edge in the bargaining process and will help them maintain stability even if the US cuts them off completely.

No Separation of Business and Government

While the country is seeing a renaissance-like emergence of business, especially in the field of technology, it can be a difficult thing to determine where business starts and the government stops. In the world of big tech, it’s even harder, with governmental investors and state-funding bodies putting lots of money into developing net technology.

Tech companies in China expect government involvement in tech investment. However, these government-controlled investors also fund US tech startups – an action that is at the core of the trade talks between the US and China. The US government is not comfortable having Chinese investors funding US companies, especially since the government has a large hand in how the companies doing the funding operate.

The government funding presented to local tech firms in China is becoming essential as the Chinese government cracks down on debt within the country’s financial systems. Smaller tech companies that relied on this source of funding through debt now have no option but to allow government investors to fund their research. The underlying cost of that decision remains to be seen.