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(Bloomberg) — For some years now, China’s annual gathering of its national legislature has been an increasingly disciplined and choreographed affair — its muted vibes practically an echo of deepening concern about domestic stagnation.

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Not this time. The National People’s Congress seven-day gathering, which concludes Tuesday in Beijing, came on the heels of a breakthrough in artificial intelligence by China’s home-grown startup DeepSeek that’s fired up investors, politicians and even regulators. It also followed President Xi Jinping’s high-profile meeting with business chiefs including Jack Ma.

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Communist Party cadres from different regions competed to market their locales as China’s next AI hub. Lawmakers made a raft of proposals — from promoting AI-related education and scaling up the technology’s applications to boosting research and regulating the social impact — according to group discussions that were open to the media and records of closed-door sessions reviewed by Bloomberg News.

Dynamism was also on display in rare debates over policy, as at least one delegate complained about limited access to bank funding for smaller tech firms.

At a two-hour-long press briefing with China’s top five economic and financial officials last week, AI was a hot topic alongside queries over boosting domestic consumption — an economic priority this year — and the newfound angst over US tariff hikes.

“This presser is almost becoming a tech-themed one,” quipped Wu Qing, chairman of the China Securities Regulatory Commission, at the briefing. “Tech is taking a more prominent role here,” he said, highlighting how DeepSeek has propelled a revaluation of Chinese assets.

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Wu and his fellow policymakers, including the finance minister and central bank governor, each spent some time talking about tech and innovation.

The unveiling of a state-backed startup guidance fund of 1 trillion yuan ($138 billion) by Zheng Shanjie, who heads the National Development and Reform Commission, spurred fresh discussion over China’s push to develop AI and quantum technology.

In one session attended by nearly 200 reporters, Yuan Jiajun, the Communist Party chief of Chongqing, explained how his megacity will translate its high-end manufacturing capacity into new success in producing connected vehicles, smart equipment and new materials. And, he said, Chongqing will be deploying “AI+” citywide.

Yuan, who sits on the party’s elite 24-member Politburo, pledged to support the private sector and build an entire ecosystem with “bigger companies as pillars and small and mid-sized companies ubiquitous.”

Solar, EV Parallel

Lawmakers from Shanghai and Guangdong similarly aim to identify areas their constituencies could excel at in AI, such as scientific research and industrial applications, records of closed-door meetings showed.

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Meantime, the governments of Beijing and Shenzhen in recent days set up their own funds, at 10 billion yuan, to nurture AI and robotics development. On Monday, the southern province of Guangdong, where Shenzhen is located, became the latest to unveil subsidies. And Wuhan, capital of the central province of Hubei, announced a plan to develop AI products in areas including health care, education and law.

The fervor bore some resemblance to surging interest in solar energy and electric vehicles in past years, when regional governments scrambled to build capacity in those sectors. That led to overcapacity and a rat-race competition among companies that undermined profitability — but at the same time secured China’s position as an industry leader in both sectors.

After years when the economic narrative has often turned to deflation risks and local officials who prefer to “lie flat” than take on new endeavors, AI offers a new story. For some, it also sparked some soul-searching.

Regional Rivalry

The provincial mouthpiece of Jiangsu, a powerhouse coastal province north of Shanghai, ran three articles last month asking why its neighbor to the south, Zhejiang, had become the base for DeepSeek and five other firms now known as the “six little AI dragons.”

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Zhejiang’s tech megapolis Hangzhou is known for a more hands-off regulatory approach toward companies, a model that might have helped spur discussion at the gathering.

The government should avoid setting up “hidden barriers” for private companies, especially in areas that involve new technologies and business models, said NPC deputy Zhou Tongyu, vice president of the Shanghai Federation of Industry and Commerce, at a session open to journalists.

She also lamented that nearly 80% of small and medium-sized tech companies struggle to get bank loans for lack of physical assets to offer as collateral. That could be addressed if business-operation data were accepted as a basis for security credit, she said.

State Model

National regulators, too, may be taking on board lessons. The new tech guidance fund announced last week emphasized the role of the market.

That suggests the state is “evolving from identifying favored sectors to modeling the role of a patient, long-term investor” focused on early-stage investments in small companies working on challenging technologies, according to Tilly Zhang, an analyst at Gavekal Dragonomics. 

Still, challenges remain for a state-led approach, she wrote in a recent note. While Beijing is idealizing small-scale, decentralized development, “the methods it prefers are often large-scale, centralized and tightly directed,” Zhang wrote.

—With assistance from Charlie Zhu.

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