Chips lottery is no cure for China’s property bust

Country Garden Holdings

04/08/2026 04:10

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
By Ka Sing Chan
HONG KONG, Aug 4 (Reuters Breakingviews) - It's hard not to gamble when your neighbour has just hit the jackpot. The eye-watering valuation of chipmaker CXMT  688825.SS has left its hometown of Hefei sitting on a windfall. Yet a fiscal model centred on hunting for the next big tech payoff looks both risky and hard to sustain. 
CXMT, or ChangXin Memory Technologies, is worth 3.67 trillion yuan ($545 billion) after soaring nearly 500% from its Shanghai listing price. State-backed investors linked to Hefei, the capital of landlocked Anhui province, own about a third of the memory-chip maker, giving them a stake worth roughly $180 billion, or more than 10 times the city’s fiscal revenue last year. Some of those shares came from real estate group Country Garden 2007.HK, which sold a 1.6% stake in 2024 for less than $280 million as it scrambled to stave off default. That stake would now be worth $8.7 billion, or 8.5 times the embattled developer’s current market value. 
This captures China's struggle for a post-property growth model. Income from land sales nationwide, local governments’ main source of revenue for decades, has halved to 4.2 trillion yuan last year in the wake of President Xi Jinping’s sweeping deleveraging campaign in 2021. Provinces and cities have since put greater emphasis on investment to build out strategic industries and rev up new engines of growth that will, ideally, also book handsome returns. 
The shift has turbocharged the state's role in Chinese venture capital. State-linked investors supplied more than 90% of 1.8 trillion yuan in private-equity commitments last year, up from less than 80% in 2021, according to local data provider Zerone. CXMT, founded in 2016 as part of Xi's semiconductor self-sufficiency drive, has fuelled hopes that investment windfalls can fill the financing gap produced by shrinking land sales and payments on vast piles of local-government debt.
But venture capital requires patience. Moreover, Hefei's success in nurturing national champions such as display maker BOE Technology and electric-vehicle manufacturer Nio 9866.HK will be hard to replicate elsewhere. Indeed, many big bets have failed, such as HSMC, Wuhan's ill-fated challenger to TSMC 2330.TW; others have resulted in overcapacity. The domestic stock market probably won't be able to support frequent large-scale exits by government backers, either. Hefei may prove the exception, not the rule.
     
CONTEXT NEWS
CXMT’s IPO has delivered paper gains of over 5,000% for the government of Hefei, its hometown, after its early investment in what has become China’s most valuable listed firm. Meanwhile, Country Garden sold a 1.58% stake in CXMT in 2024 for about 2 billion yuan. 
State-linked investors supplied more than 90% of 1.8 trillion yuan ($266 billion) in private-equity commitments in 2025, up from less than 80% in 2021, according to data provider Zerone. 

(Editing by Hudson Lockett; Production by Ujjaini Dutta)
((For previous columns by the author, Reuters customers can click on CHAN/ KaSing.Chan@thomsonreuters.com))