A New Funding Source for China’s High-Tech Ambitions

Research evidence excerpt

A New Funding Source for China’s High-Tech Ambitions

Economics Research

12 July 2026 | 11:56PM HKT

ASIA IN FOCUS

n China’s slowing Q2 growth has increased the need for incremental easing and Lisheng Wang

+852-3966-4004 |

raised market attention on a potentially faster implementation of the RMB800bn lisheng.wang@gs.com

Goldman Sachs (Asia) L.L.C.

“New Policy-Based Financial Instrument” (NPBFI) that was already planned for

this year. In this note, we explain how the NPBFI works and why Chinese

policymakers have increasingly favored this tool in recent years, and assess its

potential impact on GDP.

n The NPBFI is a “quasi-fiscal” policy instrument used in recent years to fund

strategically important investment mainly through policy banks, outside

traditional commercial bank lending channels. By providing low-cost, long-term

capital to supplement the equity tranche of selected projects, the tool aims to

resolve the persistent bottleneck of insufficient equity capital that has

historically hindered certain manufacturing and infrastructure investment.

n Funding has been targeted toward new-economy sectors and economically

stronger provinces. Most NPBFI funding has gone to high-tech manufacturing, AI

infrastructure, strategic supply chains, green transition, urban renewal, and “Six

Networks” projects (including water networks, new-type power grids, computing

power networks, next-generation communication networks, urban underground

pipeline networks, and logistics networks). Around 80% of the 2025 quota was

allocated to 12 “major economic powerhouse” provinces that account for the

majority of China’s R&D spending and GDP.

n The tool reflects policymakers’ dual objective of supporting high-tech

investment while limiting local government debt risks. Compared with local