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(Bloomberg) -- China is preparing to spend around 2 trillion yuan ($295 billion) over the next five years on building data centers across the country, fueling Beijing’s ambition to propel the domestic AI sector and surpass the US in a potentially game-changing technology.

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Key government agencies including the National Development and Reform Commission are drafting a blueprint to erect a network of inter-connected computing hubs across the country, people familiar with the matter said. State firms such as China Mobile Ltd. and China Telecom Corp. will operate the bulk of the data centers and ensure they’re connected, one of the people said. The idea is to rely on local suppliers including Huawei Technologies Co. for at least 80% of technology such as AI chips, effectively squeezing out Nvidia Corp. and Advanced Micro Devices Inc., the people said.

The over-arching plan represents Beijing’s most aggressive endeavor yet to lay the foundation for future Chinese AI development. It recalls the undertakings of years past that marshalled resources to support national champions like Huawei, with the aim of replacing US technology. And it’s a key prong of the “Six Networks” program announced earlier this year, covering construction of essential infrastructure spanning water and electricity to computing, one of the people said.

Shares of major Chinese data center service provider GDS Holdings Ltd. rose as much as 12% in pre-market US trading, while Vnet Group Inc. climbed 17% after Bloomberg News’ report.

The data center blueprint remains in early discussions and details could change, the people said, asking not to be named talking about a private matter. But it underscores Beijing’s resolve to drive cutting-edge technologies even as spending elsewhere begins to wither under mounting government debt. The sum will be funded mainly through sovereign debt including ultra-long-term special government bonds — typically of more than 10 years’ tenure — and state funds for investment in strategic industries, the people said. Bank loans and private capital would supplement the financing, they said.

A unified computing network would pool fragmented regional resources and should give enterprises broader access to high-performance computing, according to Charlie Dai, principal analyst at Forrester Research. It would also help speed up AI model iteration and the expansion of agentic and physical AI services across industries, he said. “Elevating it to a national strategy ensures policy alignment, capital mobilization,” he said.

The NDRC and Ministry of Finance, which issues sovereign bonds, didn’t respond to faxed requests for comment. China Mobile and China Telecom representatives also didn’t respond to requests for comment.

The idea of building a nationwide computing network was laid out in China’s latest five-year plan covering the period through 2030, in which Beijing pledged to prioritize the construction of data infrastructure.

The latest investment goal, which hasn’t previously been reported, pales in comparison to the $725 billion that US leaders such as Meta Platforms Inc. and Microsoft Corp. are setting aside for AI this year alone. Chinese data centers in general cost less than in the US because of cheaper labor, component and construction costs, and local government incentives. The 2-trillion yuan also doesn’t include spending by private firms such as Alibaba Group Holding Ltd. and Tencent Holdings Ltd., the people said.

It’s unclear how the envisioned unified data center network would function alongside those private hubs. But the broad goal is to connect those scattered data facilities to a cohesive network by 2028. That in turn furthers China’s objective to push AI adoption across public sectors such as health care, transportation and city management.

In addition to AI facilities, which includes data centers and faster communications infrastructure, China also plans to integrate the power grid with the project, the people said. That could take the total projected investment to at least 5 trillion yuan, the people said.

If it goes ahead, Chinese firms are the likely winners.

Washington has agreed to allow Nvidia to sell its previous-generation H200 AI chips to Chinese customers, a significant easing of measures aimed at restraining China’s AI development. Those components are about a generation behind Nvidia’s cutting-edge Blackwells.

What Bloomberg Intelligence Says

The monetization outlook for China’s AI sector remains challenged, despite an unconfirmed Bloomberg News report that Beijing plans to invest 2 trillion yuan ($295 billion) over the next five years to extend its national data-center network — relying on local AI chip suppliers rather than Nvidia. The infrastructure build-out supports China’s “AI Plus” strategy, which aims to drive economic productivity by proliferating AI across every sector of the economy. The primary beneficiary of the plan is the economy as a whole, rather than private-sector firms including Tencent, Alibaba, Baidu, MiniMax and Zhipu AI, which continue to forgo near-term profit maximization in support of the national rollout. Domestic infrastructure suppliers including Huawei stand to benefit most, with Nvidia unlikely to get a look-in.

- Robert Lea, analyst

Click here for the research.

But shipments of the component have yet to begin, in a sign that Beijing is growing increasingly confident in replacing some AI computing capacity with locally made hardware.

In May, nine types of homegrown AI chips including from Huawei, Alibaba, Shanghai Biren Technology Co. and Moore Threads Technology Co. passed a security review by a Chinese technology-security agency, opening the door to their wider adoption in sectors with higher security requirements.

In addition, enterprises in the finance, manufacturing, health care and logistics sectors will get access to more affordable and flexible AI capacity. Inland provinces are likely to attract more digital-industry investment and talent, according to Dai.

“Every ecosystem player will benefit from it,” he said.

(Updates with data center shares and commentary from the fourth paragraph.)

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