China has been in the news a lot recently because many U.S. companies depend on the region for growth. This is especially true for the semiconductor industry, which comprises the brains behind the many electronic gadgets currently selling like hotcakes in the region. So growth concerns, which always hit consumer spending power, put the industry in a tailspin. It wasn’t until stimulus measures were announced that the shares attained an uncomfortable equilibrium.

And this isn’t without reason: China’s chip consumption is the largest in the world (and growing), with most chips coming from international players. While a boon for these international players, it has been a drain for the country. Government policy has therefore focused on strengthening local players to reduce this dependence.

Chinese Policy Making

China’s financial planning since the year 2000 has favoured local semiconductor players with benefits ranging from duty concessions on equipment imports to tax holidays. There was also a substantial amount of government funding for infrastructure development and government-supported establishment of startups.