New energy sector + AI chips + Pharma innovation

Welcome to the third newsletter of the China Tech Observatory (CTO) – our project funded by the German Ministry for Education and Research (BMBF). In this issue, you can read about:

• How China’s progress in science and technology is becoming harder to decipher
• How Beijing nudges the new energy sector towards higher efficiency
• Why Huawei’s progress in AI chip production doesn’t challenge Nvidia’s market dominance
• Why China relies on foreign firms to fund its pharma innovation
• What a Chinese probe into Google reveals about Beijing’s software nationalism

You can read a summary of this issue below. All the regularly updated research and analysis produced by the China Tech Observatory is available on the project website.

Greater secrecy in science and tech makes China’s progress harder to decipher

The Ministry of Science and Technology (MOST), China’s most important state body in the field, has become increasingly opaque. In January, MOST renamed many departments with titles that no longer reflect their function. The “Department of Basic Research,” for example, is now simply “Department I.” Antonia Hmaidi, Senior Analyst at MERICS, says: “The renaming of departments shows the increasing secrecy in China’s science and technology policy making and in its tech breakthroughs – and also the importance of tech for the CCP.” Read more

Beijing pushes for more efficiency in new energy sector

Beijing is shifting its focus from expanding renewable energy capacity to optimizing its efficient use and grid stability, with an emphasis on new energy storage solutions and the marketization of energy prices. Wendy Chang, Analyst at MERICS: “China is taking critical next steps with its new energy sector by exposing it to market pricing, while also stepping up efforts in energy storage to help stabilize solar prices and the grid. Beijing has bet big on EVs, solar, and batteries to drive economic growth. We can expect that the winners emerging after these domestic changes will contribute to solar and energy storage exports going forward.” Read more

Despite Huawei’s progress, Nvidia continues to dominate AI chips market in China

Huawei is ramping up its AI chip production but will be unable to meet the strong demand of China’s booming AI sector any time soon. Chip behemoth Nvidia continues to dominate the Chinese AI chip market, selling one million of its H20 chips in 2024. Antonia Hmaidi: “Nvidia will likely maintain its dominance over China’s AI chip market in the foreseeable future. The demand for AI chips will only increase after legislators reaffirmed support for AI development at the National People’s Congress in March. However, Huawei cannot meet rising demand with its current production capacity due to US and Dutch export controls.” Read more

China advancing in drug discovery but needs foreign firms to get drugs to market

China‘s government wants to push innovation in pharma, but without a domestic market that can pay for expensive innovative drugs, China will remain stuck in early-stage drug discovery. Jeroen Groenewegen-Lau, Head of Program of Science, Technology and Innovation at MERICS, expects: “The current global division of labor will intensify. China will gain ground in early-stage drug discovery, while pharma multinationals will buy the ex-China licenses of the most promising treatments. Although this arrangement benefits multinationals and may lead to better outcomes for patients, it also gradually erodes pharma innovation in Europe.” Read more

Google antitrust probe puts Beijing’s software “nationalism” in the spotlight

A probe into Google’s alleged anticompetitive practices by China’s State Administration of Market Regulation may seem like little more than retaliation for Trump’s tariffs. But Google does have a large presence in China through its mobile operating system. Rebecca Arcesati, Lead Analyst, MERICS, explains: “China’s self-reliance campaign extends beyond semiconductors to also include core software like operating systems. This software nationalism is only poised to deepen. Google was a good target, as US and EU regulators are also scrutinizing its monopolistic practices.” Read more

Profile: Guo Guangcan 郭光灿, one of China’s pioneers in quantum computing

Guo Guangcan, co-founder of China’s leading quantum computer company Origin Quantum, predicts that the era of "quantum-super-intelligence" could begin in just five years. This contrasts with remarks by Nvidia CEO Jensen Huang that practical quantum computing is still 20 years away from “truly being useful.” Guo’s claims are based on his work at Origin Quantum, Beijing’s front runner in quantum computing. Read more

You can find all the regularly updated research and analysis produced by the China Tech Observatory on the project website.