China prepares $295 billion AI data center network with 80% homegrown technology by 2028

China is set to invest 2 trillion yuan ($295 billion) over the next five years to construct a nationwide network of interconnected data centers, primarily operated by state-owned firms like China Mobile and China Telecom. The initiative, led by the National Development and Reform Commission, aims to drive domestic AI development by sourcing at least 80% of technology—including AI chips—from local suppliers such as Huawei, effectively limiting reliance on foreign companies like Nvidia and AMD. The blueprint, still in early discussions, aligns with China’s five-year plan through 2030, prioritizing data infrastructure to enhance high-performance computing and accelerate AI model iterations. Financing will come mainly from sovereign debt, including long-term government bonds, with supplementary support from bank loans and private capital. The network is designed to pool fragmented regional resources, improving access for enterprises and fostering AI adoption in sectors like healthcare, transportation, and smart city management. While the $295 billion investment is significantly lower than the $725 billion allocated by U.S. companies like Meta and Microsoft for AI this year, China’s lower operational costs—due to cheaper labor, components, and construction—could offset the difference. The project also excludes private sector spending by firms such as Alibaba and Tencent, potentially increasing the total investment further. The initiative includes integrating the power grid with the data center network, with total projected costs reaching at least 5 trillion yuan. This move underscores Beijing’s strategy to push AI adoption across public sectors while reducing dependence on foreign technology, despite recent U.S. concessions allowing limited sales of older Nvidia AI chips to China. Analysts suggest the unified network will align policy priorities and mobilize capital, though challenges remain in coordinating the project with existing private data centers. The long-term goal is to create a cohesive infrastructure that supports China’s ambitions in AI, positioning domestic firms as key beneficiaries of the initiative.