The city government of Hefei, capital of Anhui province, has leveraged over CNY220 billion in state-owned capital to drive project investment in emerging industrial clusters. The leading champion of this strategy is Changxin Memory Technologies (CXMT), which is leading China’s self-sufficiency drive in semiconductors. The company is preparing for a massive public offering (IPO) on Shanghai’s Nasdaq-style Star Market. While pre-IPO estimates value the chipmaker at roughly CNY150 billion, market analysts project that once public trading begins, CXMT’s market capitalization could exceed CNY1 trillion, providing the ultimate validation of the “Hefei model”. Formerly dubbed “China’s most aggressive venture capitalist”, Hefei’s city government provided enormous backing for CXMT’s quest to become a top memory chipmaker, helping to make the city a poster child for China’s technological progress.
The rise of Hefei’s tech ecosystem is rooted in an extraordinary tolerance for long-term, capital-intensive bets. When CXMT Founder Zhu Yiming set his sights on the dynamic random-access memory (DRAM) sector in 2016, private investors deemed the sector too risky, balking at the high starting costs and the formidable technical challenges of foreign competitors like South Korea’s Samsung and SK Hynix. Hefei, however, stepped in with conviction. In 2016, the city took an 80% stake in the first phase of a 12-inch memory wafer manufacturing base project that cost CNY150 billion, Anhui’s largest single industrial investment project at the time. During a recent downturn in the DRAM cycle, local government-led capital patiently held the line, refusing to demand quick financial returns. Former Hefei Party Secretary Yu Aihua said the city was not making venture capital bets based on luck, but pursuing industrial investment to “win the future”. The “Hefei model” has transformed the city into a magnet for hi-tech sectors including artificial intelligence (AI), semiconductors and new energy vehicles (NEVs).
Beyond CXMT, Hefei’s capital ecosystem has nurtured a host of other tech titans that have set up headquarters in the city. In emerging industrial clusters – including new energy vehicles, integrated circuits and new displays – Hefei leveraged over CNY220 billion in state-owned capital to drive project investments worth more than CNY840 billion by the end of last year. Hefei’s gross domestic product (GDP) grew by 6.8% year-on-year in the first quarter of this year, the highest increase among China’s top 30 cities. The success of its capital city helped Anhui’s annual industrial revenue grow from CNY3.8 trillion to CNY5.9 trillion in the past five years, jumping from 10th place to fifth among provincial-level regions.
Hefei, unlike other economic centers, cannot attribute its rapid development to its proximity to a large metropolitan hub. That makes its success more exceptional and interesting to policymakers and observers. Wang Dongwei, Anhui’s Executive Vice Governor, attributed the province’s broader success to a four-pillar strategy: long-term industrial planning, an excellent business environment, efficient financial support, and a policy for attracting and nurturing enterprises. Academics point to the “multiplier effect” of the city’s uniquely open capital system as state capital leverages social capital and drives employment and tax growth, creating a new form of capital supply.
“By cooperating with top domestic and foreign investment institutions like Temasek and Sequoia Capital, it not only brings in funds but also advanced investment concepts,” said Zheng Jianghuai, Dean of Nanjing University’s School of Economics, in March. Entrepreneurs hailed Hefei’s talent pool, business environment and tech ecosystem as features that drew them into the city. Zhou Fu, Senior Vice President of Chinese electric vehicle (EV) battery maker Gotion High-Tech, said the company’s deep connection with Hefei is based on the city’s unique resources, saying it provides “a tremendous amount of talent”. “It brings us exceptional research funding, an outstanding business environment, and a massive influx of top-tier tech talent,” he said.
Hefei’s innovative heft can be partially credited to the presence of the University of Science and Technology of China (USTC), one of the country’s top scientific institutions, which was relocated from Beijing in 1970. iFlyTek, China’s AI voice-recognition pioneer and an AI model developer, highlighted the role of local government support in building a completely localized tech ecosystem. “The Hefei and Anhui governments have provided immense support, from policy guidance and talent cultivation to helping us build an upstream and downstream ecosystem,” said iFlyTek Vice President Wang Wei. “The government helped us build the platforms so we could better use domestic technologies,” noting that the company’s computing infrastructure was being powered entirely by home-grown tech.
Hefei has also attracted manufacturing giants from across the country. EV maker Nio, which was founded in Shanghai in 2014, began building its advanced F2 plant in Hefei in 2021. Production commenced just 17 months later. The fully digitized smart factory features 90 km of embedded fibre optics and uses AI to manage 80% of manufacturing decisions. Fuyao Glass began production at a CNY7.75 billion plant in Hefei in June 2025 after starting construction in 2024.
