China plans $295B data center buildout to rival U.S. in AI

China is preparing to spend 2 trillion yuan over five years on AI-focused data centers, Bloomberg News reported Tuesday, in its most ambitious push yet to overtake the U.S.businesstimes+1
The plan mandates sourcing at least 80% of technology from domestic suppliers led by Huawei, sidelining Nvidia and AMDbusinesstimes+1
State firms China Mobile and China Telecom would operate most hubs, with a goal of a cohesive national network by 2028.businesstimes

China is preparing to spend approximately 2 trillion yuan ($295 billion) over the next five years to build a nationwide network of AI-focused data centers, Bloomberg News reported on Tuesday, in what would represent Beijing's most ambitious effort yet to challenge the United States in artificial intelligence.businesstimes+1

A State-Driven Blueprint

Key government agencies including the National Development and Reform Commission are drafting a blueprint to erect a network of interconnected computing hubs across the country, according to people familiar with the matter cited by Bloomberg. State-owned firms China Mobile and China Telecom are expected to operate the bulk of the data centers and ensure their connectivity.reuters+2

The plan calls for sourcing at least 80 percent of technology, including AI chips, from domestic suppliers led by Huawei Technologies, effectively sidelining Nvidia and Advanced Micro Devices . The initiative builds on a directive reported last year mandating that new data center projects receiving state funding use only domestically produced AI chips.businesstimes+2

Funding and Scope

The investment will be funded mainly through sovereign debt, including ultra-long-term special government bonds of more than 10 years' tenure, as well as state funds for strategic industries, with bank loans and private capital supplementing the financing. The plan is part of China's broader "Six Networks" infrastructure program announced earlier this year, covering essential systems from water and electricity to computing.businesstimes

Beyond AI facilities, China also plans to integrate the national power grid with the project, which could push the total projected investment to at least 5 trillion yuan, Bloomberg reported. The broad goal is to connect scattered data facilities into a cohesive national network by 2028.businesstimes

Strategic Context

The initiative fits within China's 15th Five-Year Plan covering the period through 2030, which pledged to prioritize data infrastructure construction. However, the plan remains in preliminary discussions and specifics may evolve. China's AI sector is projected to exceed 10 trillion yuan by 2030, according to the head of the National Development and Reform Commission. Huawei has already been ramping up shipments of its 910C AI chip as Chinese companies seek domestic alternatives to restricted American semiconductors.finance.yahoo+3

Sources (14)