China’s AI Growth Continues Despite U.S. Sanctions
Chinese AI startup Zhipu AI has secured 500 million yuan ($ 69.04 million) in funding from state-owned Huafa Group, reinforcing China’s determination to lead in artificial intelligence. This comes shortly after a separate 1 billion yuan ($ 140 million) funding round earlier this month, emphasizing the country’s growing investment in domestic AI startups despite increasing U.S. restrictions.
Beijing views AI as a critical sector in its technological competition with the U.S., pushing cities and state-backed enterprises to fund promising startups.
New Strategic Investment in Zhipu AI
Huafa Group, a state-owned conglomerate based in Zhuhai, Guangdong, recently announced its investment in Zhipu AI, according to the Zhuhai Special Economic Zone Daily. This move aligns with a broader trend in which Chinese cities actively back AI firms to reduce reliance on foreign technology.
Earlier this month, Hangzhou, home to rival AI startup DeepSeek, contributed to a separate 1 billion yuan funding round through the state-backed Hangzhou City Investment Group Industrial Fund. DeepSeek has been gaining attention for its large language models, which claim to rival Western alternatives while keeping development costs lower.
Zhipu AI’s Market Position and Expansion
Founded in 2019, Zhipu AI is recognized as one of China’s «AI tigers,» a group of leading AI firms shaping the country’s future in artificial intelligence. Over the years, it has attracted major investments from tech giants such as Tencent, Meituan, and Xiaomi. <blockquote>According to business registration platform Qichacha, Zhipu AI was valued at 20 billion yuan ($ 2.76 billion) in a funding round in July 2024, underscoring its strong market position.</blockquote>
With more than 15 funding rounds under its belt, Zhipu AI has demonstrated steady growth and investor confidence. The latest capital injection is expected to accelerate the development of its GLM foundation model, a key component of China’s AI infrastructure.
Technology and Future Development Plans
Zhipu AI’s focus on foundation models, particularly its General Language Model (GLM), places it at the forefront of China’s AI ambitions. The company has positioned its GLM as a competitor to OpenAI’s GPT series, aiming to power various applications across industries.
The new funding will be used to enhance technological innovation and ecosystem development, strengthening China’s ability to advance its AI capabilities independently. The Zhuhai Special Economic Zone Daily reports that this investment will help Zhipu AI refine its models and expand AI-driven applications.
The Impact of U.S. Blacklisting
In January 2025, Zhipu AI and its subsidiaries were added to the U.S. Commerce Department’s export control entity list. This designation prevents the company from acquiring critical U.S. components, including advanced AI chips from companies like NVIDIA.
Washington’s restrictions aim to slow China’s AI advancements, but state-backed investments are ensuring continued growth for companies like Zhipu AI.
Despite these challenges, China is rapidly developing its own semiconductor industry and alternative AI solutions. By securing funding from state-owned enterprises, Zhipu AI and similar firms are working to mitigate the impact of U.S. sanctions.
Conclusion: Zhipu AI’s Growing Role in China’s AI Strategy
Zhipu AI’s ability to secure large-scale funding despite U.S. export restrictions underscores China’s commitment to AI development. With government support, the company is set to expand its technological footprint and strengthen its position in the global AI race.
As tensions between the U.S. and China continue to shape the future of artificial intelligence, Zhipu AI’s trajectory will be closely watched. Whether it can maintain its growth and innovation amid geopolitical challenges remains a critical question for the industry.
