Chinese artificial intelligence startup Zhipu has raised more than 1 billion yuan ($140 million) in a funding round led by government-backed investment firms, reflecting the growing focus on domestic AI development amid the rise of 
DeepSeek.
The latest funding round saw participation from Hangzhou Municipal Construction Investment Group Co. and Shangcheng Capital, both of which are affiliated with the Hangzhou government. These firms joined existing investors, including Alibaba Group Holding Ltd. and Tencent Holdings Ltd., reinforcing financial support for Zhipu. The company, previously valued at approximately $3 billion in May 2024, disclosed its latest investment and backers in a WeChat statement but did not provide further details on the funding.
Interest in China’s AI sector has intensified since DeepSeek introduced its AI model in January, which was positioned as a cost-effective alternative to leading Western models. This development has prompted major Chinese tech firms, including Alibaba and Baidu Inc., to accelerate their efforts in enhancing large-language models, fostering stronger competition both domestically and with U.S. companies such as 
OpenAI and Meta Platforms Inc.. Meanwhile, Baidu is reportedly planning to issue offshore bonds worth approximately 10 billion yuan.
However, Zhipu’s expansion comes amid regulatory challenges. In January, the U.S. Commerce Department placed the company on a trade-restrictions blacklist, potentially limiting its access to key technologies. Zhipu has denied allegations of links to the Chinese military.
Despite these obstacles, the company remains committed to advancing its AI capabilities. In its WeChat statement, Zhipu announced plans to introduce new AI models this year and make them open-source, aligning with broader efforts to bolster China’s presence in the global AI landscape.
