China launched three national venture capital funds on Friday, December 26, marking a significant step in the country's push for technology self-reliance. Each fund is expected to exceed 50 billion yuan ($7.10 billion), bringing the total investment capacity to over $21 billion. The initiative represents another major attempt by China to achieve technological independence through strategic capital deployment.

Fund Structure and Investment Parameters

The funds operate under specific investment guidelines designed to support early-stage innovation. Key parameters include:

The funds will function as "angel investors" and share risks associated with the early stage of innovation, providing crucial support to emerging technology companies during their most vulnerable development phases.

Geographic Distribution and Management

The three funds are strategically established across China's most economically significant regions under a joint initiative of the National Development and Reform Commission (NDRC) and the Ministry of Finance (MOF):

• Beijing-Tianjin-Hebei region
• Yangtze River Delta region
• Guangdong-Hong Kong-Macao Greater Bay Area

While professional institutions will manage the investments, NDRC official Bai Jingyu confirmed that the funds will follow the government's policy direction, ensuring alignment with national strategic objectives.

Target Sectors and Investment Pipeline

The funds will prioritize companies operating in sectors designated as "emerging pillar industries":

• Integrated circuits
• New displays
• Advanced materials
• Aerospace
• Low-altitude economy
• Biomedicine

Investments will be rolled out in batches, targeting 49 sub-funds and 27 direct projects already identified on the preliminary list. This structured approach allows for systematic deployment of capital across diverse technology sectors while maintaining strategic focus on areas critical to China's technological advancement goals.

China escalated tensions with Taiwan by announcing comprehensive military exercises around the self-governing island, following its earlier sanctions against US defence companies over Washington's latest arms sales package. The "Justice Mission-2025" exercises represent Beijing's most significant military response since imposing symbolic sanctions on 20 US defence firms and 10 executives.

Military Exercise Escalation

The Chinese military announced that army, navy, air force, and rocket force units would participate in the drills beginning Monday, designed to "test the actual combat capability of theatre troops in joint operations." The exercises include live-fire training in five designated blocks around Taiwan.

"It is a stern warning against 'Taiwan Independence' separatist forces, and it is a legitimate and necessary action to safeguard China's sovereignty and national unity," stated Senior Colonel Shi Yi. The People's Liberation Army advised that "any irrelevant vessel or aircraft is advised not to enter" the designated drill zones.

Comprehensive Sanctions Package

The military exercises follow China's announcement of sanctions against major US defence contractors and senior executives. The measures include asset freezes and comprehensive business restrictions designed to isolate the targeted entities from Chinese operations.

Major companies affected include:

• Boeing's St. Louis operations
• Northrop Grumman Systems Corporation
• L3Harris Maritime Services
• Anduril Industries
• Vantor (formerly Maxar Intelligence)

The individual sanctions specifically target Palmer Luckey, founder of Anduril Industries, and Vantor Chief Executive Officer Dan Smoot, along with eight other senior executives from the sanctioned firms.

Record Arms Deal Triggers Response

Both the sanctions and military exercises stem from the State Department's approval of an arms sales package worth up to $11.00 billion for Taiwan, marking one of the largest ever US weapons deals for the island. The package covers equipment including missiles, drones and artillery systems.

Historical Context and Escalation Pattern

These represent the first significant PLA drills off Taiwan since operations conducted in April, which tested blockade capabilities and included mock strikes against fictitious targets, including ports and energy infrastructure. Since Taiwanese President Lai Ching-te assumed office in May, Beijing has increased military intimidation of the democracy of 23 million people.

China views Taiwan as a breakaway province that must ultimately be brought under its control, by force if necessary, a position Taipei firmly rejects. China vowed to "take effective and strong measures to safeguard national sovereignty" in response to the US arms authorization, demonstrating an escalating pattern of military and economic responses to US-Taiwan cooperation.