Beijing is accelerating spending across the artificial-intelligence supply chain, applying the same state-backed playbook that made the country dominant in electric vehicles and solar power. Since 2014 the National Integrated Circuit Industry Fund has raised almost 700 billion yuan ($96 billion), and in April authorities earmarked a further 600 billion yuan ($8.5 billion) to seed early-stage AI companies. Local governments are offering subsidies, low-cost loans and entire start-up districts such as Hangzhou’s “Dream Town” to attract engineers and data-center projects. The cash is flowing into every layer of the stack—data centres, chips and large language models—aimed at narrowing the technology gap with the United States, which tightened curbs on sales of advanced processors last year. Semiconductor Manufacturing International Corp. is racing to manufacture Huawei-designed AI chips, while Nvidia said Washington has cleared it to ship a China-specific H20 processor under licence. Chinese companies are also relying on open-source software to leapfrog restrictions. Alibaba, DeepSeek, Baidu and Huawei have released large models that are freely available for researchers, contrasting with the closed systems sold by U.S. leaders such as OpenAI and Google. The strategy is giving domestic developers access to cutting-edge tools and, according to analysts, is helping China shrink what was once a multiyear innovation gap to a matter of months. Economists caution that the top-down push has drawbacks, including fragmented investment and technical limits on locally made chips. Still, the scale of state financing and the breadth of industry participation suggest China’s bid to become an AI superpower is gaining momentum despite U.S. efforts to slow its advance.