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All manner AITSMCAIAIAIBYDEVAIAIEVEVYour browser does not support the element.By Don Weinland, China business and finance editor, The Economistofconsumer-electronic devices pass through Shenzhen’s markets. The southern Chinese city is at the centre of one of the world’s densest industrial clusters for electronics manufacturing. More recently some costly parts have been making their way through the markets—but these objects can only be manufactured overseas.They are the ultra-powerful artificial intelligence () chips designed by Nvidia, an American company, and manufactured in Taiwan by , the world’s leading chipmaker. A single chip can go for well over $30,000 when purchased from its maker; on the black market they fetch far more. And tech companies from across China are flocking to Shenzhen to get their hands on them.What does this thriving black market reveal about Chinese entrepreneurs in 2025? It shows that they face many challenges: President Joe Biden’s ban on high-powered chips, introduced in 2022 and since tightened, is just one example. Chinese chipmakers struggle to make comparable wares, which has forced those in the country’s burgeoning scene to pay higher prices. Yet at the same time the shortage of powerful chips has forced startups to innovate and find ways to do more with less, highlighting the inventive nature of China’s entrepreneurs.Unexpected shifts in domestic regulation are another hazard that innovators have been forced to navigate. In recent years fintech and consumer-tech barons have faced sudden clampdowns as Xi Jinping, China’s supreme leader, has tried to steer innovation towards fields that he considers strategically more valuable. The prospects for giants such as Alibaba in e-commerce, and Tencent, a gaming and social-media colossus, have darkened. Unicorns, or unlisted companies valued at more than $1bn, have also been losing their horns as China’s economy faces greater economic pressures. In 2024 even Mr Xi asked underlings where all the unicorns had run off to.But new champions are rising. Companies such as , a maker of electric vehicles (s), Longi, a solar-power firm, and Cambricon, which makes chips, are the current stars of China’s tech scene. The message from Mr Xi has been clear: the government wants entrepreneurs and investors to focus on the next wave of emerging technologies.These include advanced chips, robotics and ; ; and even fringe areas such as flying taxis and brain-computer interfaces. The Communist Party has stressed the importance of self-sufficiency for many years and has done much to support local innovation, particularly in the chipmaking industry. Expect the buzz around this new generation of Chinese technology firms to intensify in 2025. Autonomous taxis, for example, are operating in a handful of American cities, but are on the verge of widespread commercialisation in China. Hubs (or “vertiports”) for flying taxis, which have yet to take off in the West, are opening in cities across the country; passengers may start whizzing between Shanghai and nearby cities in 2025. And even remote Chinese counties will have charging stations by the end of the year.The weakness of China’s economy will bite harder in the coming months, however. Many of these impressive technological leaps will be bankrolled by the state at a time when local governments are finding it harder to pay the bills. As flying taxis lift off in some cities, bus services may halt in poorer regions. Consumer confidence will remain low if China’s leaders cannot fix the country’s ailing property market; households may hold off on buying an , even if they are able to charge one.And no matter how much Mr Xi would like to isolate China from the American political cycle, Donald Trump’s return to the White House, with his plan to impose tariffs on Chinese goods, is likely to pose fresh challenges to China’s storm-tossed army of innovators.
