Financing technological innovation in China: neo-developmental financial statecraft through government guidance funds

This paper examines China’s distinctive approach to financing innovation, contributing to debates on the derisking state, neo-developmentalist alternatives, and economic statecraft. It focuses on the central role of government guidance funds (GGFs)—jointly owned by a wide range of state entities—and their divergence from government-owned venture capital models in the European derisking state and liberal-developmental states like South Korea. By advancing a financial statecraft perspective, the paper identifies four core features that set Chinese GGFs apart: clearly defined sectoral innovation targets; the conversion of fiscal resources and SOE assets into risk capital; and the coordination in funding the objectives of government planning apparatuses and their geographically conditioned investment mandates. These features reflect both structural aspects of China’s political economy and the rapid institutional evolution of its innovation-oriented bureaucracy. The shadow cases from Europe and South Korea underscore the importance of studying the nexus between national varieties of financial statecraft and national policy regimes.