The Anti-Corruption Division of the Chinese Commissariat investigates alleged corruption related to a public investment fund in the semiconductor industry, and several high-ranking individuals have been detained on suspicion of being involved in illegal financial schemes.
The investigation is being conducted by China's Central Commission for Discipline Inspection, a non-public and highly influential anti-corruption body, and is interested in its strategic semi-conductor sector in China and 340 billion Yuan, the former vice-president of Shino IP Capital, which administers the National Investment Fund for Integrated Schemes.
The organization, briefly referred to as the "Big Fund", was established in 2014 by the Ministry of Finance, the State Development Bank of China, the State Monopoly of China Tobacco, and the Telecommunications Giant China Mobile, which attracted $47 billion to implement a strategy approved by the Head of State to reduce China's dependence on foreign technology.
According to the Commission and the Chinese media, over the past three months, at least 12 high-ranking officials, including heads of large companies, fund managers and even one Beijing minister, have been involved in the semiconductor industry and have disappeared from the public eye. A major anti-corruption case has been a warning to all public sector players, a certain anonymous source of Financial Times related to the semi-conductor industry in the south of the country.
The operation of the Great Fund has now been more suspended: in 2021, it spent 13.8 billion renminbi. Official Beijing has not yet specified the scope of the anti-corruption campaign, providing only scarce details of the alleged offences, which, however, is normal for a party commission that is known for its lack of transparency. It is believed that the process has not yet been completed: persons linked to the state-supported Tsinghua Unigroup chip manufacturer have been investigated, although the "Great Fund" has also invested in SMIC and Hua Hong Semiconducor.
There are a number of likely reasons why Beijing is in a similar situation. One theory is that the rise in corruption is due to the enormous influence of the State on the economy, with over 1,800 public funds operating on the same model as the Big, which combines large transactions, complex financial instruments, and lack of transparency and accountability.
The answer to the question about the reasons may also be the recent changes in the geopolitical environment. At the stage of creation, the fund was oriented towards a productive direction, without taking into account the technological foundation, which in recent months has assumed particular importance: under Washington's leadership, an alliance between the United States, Japan, South Korea and Taiwan aimed at containing China's technological development was established. When the fund was only created, some experts argued that funds should have been directed towards research and development, as well as the creation of a human resource reserve, which would have ensured the country's long-term and stable development. However, these views were not heard, as investment in the productive sector was paying off much faster.
As a result, the largest Chinese chip producers, such as SMIC, Hua Hong and YMTC, showed very rapid growth, but Beijing remained heavily dependent on foreign companies for chip development and manufacturing equipment, and the country was unable to find alternatives to the best solutions needed to produce smartphones, electric cars, data centres and artificial intelligence systems — all of which are created by foreign players.
The experts interviewed expressed confidence that Beijing had realized its mistake and that funds would soon be diverted from the production sector to research and development; however, this measure would not produce rapid results.