China is offering major technology firms discounted electricity rates to strengthen its domestic artificial intelligence chip industry and reduce dependence on foreign suppliers. The policy, implemented through regional subsidies, is part of Beijing’s broader strategy to accelerate self-sufficiency in high-performance computing.
According to reports, local governments in provinces such as Gansu, Guizhou, and Inner Mongolia are cutting electricity prices by up to half for large-scale data centres tied to homegrown semiconductor development. These regions already enjoy lower industrial power tariffs compared to China’s coastal hubs, making them ideal locations for expanding AI infrastructure.
The move follows restrictions on Chinese firms’ access to advanced U.S.-made chips, including those produced by Nvidia. Companies such as ByteDance, Alibaba, and Tencent have faced increased costs in developing or sourcing domestic alternatives. By easing one of their largest operational expenses, the government aims to improve the competitiveness of local chip designers and computing service providers.
Analysts note that Chinese-made AI chips generally require more power to deliver comparable performance to Western hardware, making energy efficiency a key challenge. The subsidy therefore functions both as an industrial incentive and a cost equaliser, allowing firms to allocate more resources to research, fabrication, and software optimisation.
The initiative highlights how China’s industrial policy is evolving beyond traditional subsidies to focus on long-term infrastructure and cost control. For the global technology sector, it signals an intensifying race in AI hardware, where operational economics and state-backed energy advantages may shape future competitiveness.
