China's 'little giants' are its latest weapon in the US tech war

In today’s China, behemoths like Alibaba Group Holding and Tencent Holdings are out of favour, but “little giants” are on the rise.

That’s the designation for a new generation of start-ups that have been selected under an ambitious government program aimed at fostering a technology industry that can compete with Silicon Valley. These often-obscure companies have demonstrated they’re doing something innovative and unique, and they’re targeting strategically important sectors like robotics, quantum computing and semiconductors.

Wu Gansha won the little giants title for his autonomous driving start-up after a government review of his technology. That gave the Beijing company, Uisee, an extra dose of credibility and financial benefits. Last year, it raised more than 1 billion yuan ($157 million), including money from a state-owned fund. It’s also become a unicorn, with a valuation of at least $1 billion.

“It’s an honor to wear the little giant label,” Wu said. “The essence of the project is that the companies must possess some specialty that others don’t have.”

The programme has been around for more than a decade, but it has taken on new prominence after Beijing launched a sweeping crackdown against leading companies like Alibaba and Tencent. The little giants label has become a valued measure of government endorsement, a signal for investors and employees that the companies are insulated from regulatory punishment. President Xi Jinping has given his personal blessing to the programme.

“This is helpful to startups in many ways: It's a subsidy. It's a grant. It's an honor. It's a stamp of approval,” said Lee Kai-Fu, founding managing director of the venture firm Sinovation.

The programme is key to the Communist Party’s ambitious strategy to reposition the country’s technology industry. For two decades, China largely followed the Silicon Valley model, allowing entrepreneurs to pursue their ambitions with little government oversight. That led to enormous successes, including e-commerce pioneer Alibaba, social media giant Tencent and ByteDance, creator of the hit TikTok short-video app.

But in a series of regulatory moves over the past year, Beijing made clear the technology industry must realign to conform with government priorities. Alibaba and Tencent were quickly forced to eliminate anti-competitive practices, while games companies had to limit minors to three hours of online play per week. More broadly, the government has signaled softer internet services are out of favour.