Reaching the third spot on the list of top 10 countries for technological expertise, China has slowly repositioned itself at the forefront of technological innovation. For several years, the country has designed new avenues and monetary efforts to strengthen its foothold in the tech industry. Among the most noteworthy endeavors is what the CCP calls the "little giant" initiative.
The stratagem finds its roots back in 2005, in an era that saw Hunan province's local government cut incentives for smaller enterprises, later adopted by other local governments and supported by the central government's Ministry of Industry and Information Technology (MIIT).
Flash forward to 2018, when the MIIT began to seriously vamp this endeavor through a sophisticated roadmap that would see nearly 600 small startups, i.e., "little giants," innovate and expand upon the Chinese technology sector. The naming convention was meant not only to allot a sense of purpose and competition but was also viewed as a term of honor for those who were inevitably chosen as part of the "Little Giants" campaign.
It goes far deeper than a feeling of simple cultural significance for these companies. For some, it's also an invisible veil of protection, allowing the startup in question to go relatively unnoticed in terms of regulation and investigation. Even Xi Jinping, China's President, has voiced his own adoration for the little giants initiative, relating how "small and medium-sized enterprises can do great things."
Those enlisted in the little giants' programs typically receive some hefty goodies, like loans and tax cuts. The initiative also allows those under its umbrella to go public far easier via a dedicated stock exchange erected in Beijing just last year. From tech innovation to simplified VC backing, the little giants initiative hopes to broaden technology on a wide array of fronts, from innovation to regulation.
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To be considered, companies must turn in a six-page form that includes all of the main necessities, such as patents, notable achievements, financials, and more. From there, provinces will then choose over 10 companies in the first round of selection, all of whom show "strategically important technologies."
The bet has seemingly paid off. While some of the most prominent names in tech can be equated to large corporate Chinese enterprises, such as Alibaba, Tencent, and TikTok's ByteDance, smaller players like those among these selected little giants are the ones truly innovating and pushing the envelope for China's foothold to grow even more substantial in the tech sector.
Given its unparalleled support, MIIT has upgraded features for this initiative, allotting even more members under a 'priority' tag. These so-called priority little giants, which include only 1,000 startups currently, are a step up and allow these small tech businesses to direct funding from the Chinese central government.
Key categories for the little giants include semiconductors, robotics, quantum computing, and much more. Although the United States still maintains a large portion of might in some of the most important sectors under tech, China is fast approaching if not already decimating US capabilities, specifically when it pertains to lithium-ion battery production, solar panels, social media, commercial drones, telecom network equipment, and smartphone sales.
Much of these takeaways are due largely to how China is reinvigorating its foothold in tech, but it comes with a heavy price. Beijing's own regulatory incentives, burdening big companies like the aforementioned Tencent to limit anti-competitive practices, took strides in ensuring China's tech sector maintained a steady growth alongside its own government aims.
These government-first tech crackdowns led to a myriad of lossed jobs and walkouts, but also amplified the country's position on how tech can be utilized to further its stance within the global ecosystem. Yipin Ng, the founding partner of little giants investor venture fund Yunqi Partners, explains to Bloomberg how China is leveraging "hardcore tech" to bolster its global position:
"What the country is trying to promote is more hardcore technology. In that sense, this is more in line with what they are trying to promote - things that makes China more competitive."
Since 2019 alone, China's MIIT has enlisted a whopping 4,762 little giants, most of which are situated in pharmaceutical and semiconductors industries. By 2025, the CCP vies to have at least 10,000 little giants created through a 10 billion yuan fund, which was backed by the Finance Ministry in January.
Despite its lengthy and praiseworthy roadmap, China still faces ample tech stopgaps. The most important one is obviously China's ever dwindling economy, due to real-estate debt expansion, limited consumer spending, and power shortages. If China can find a way to develop easier and enhanced production for semiconductors, as well as boost its burgeoning electric car industry even more within the next several years, it may well outpace even the US in terms of technological might.
