OMM Newsroom
One of China’s financial regulators has warned that a rapid increase in investment in artificial intelligence (AI) could deprive other parts of the economy of vital funding. The risk is heightened by capital being concentrated in a small number of technology giants.
Xiao Yuanqi, deputy head of the National Financial Regulatory Administration, raised the concern on Tuesday at the Hong Kong Monetary Authority’s Global Financial Leaders’ Investment Summit. Capital flowing into the technology sector and a handful of leading companies is driving up borrowing and increasing the risk of excessive expansion, he said, AnewZ reports.
Impact on traditional businesses
Investment concentration raises borrowing costs for traditional businesses, increases their financial burden and limits their ability to reinvest and expand production, Xiao said. It could also increase credit risks.
He urged policymakers to develop frameworks to manage the economic transformation brought about by AI, taking into account both broader economic challenges and financial stability risks.
AI’s share of investment is growing
The figures show a widening gap in the distribution of investment: AI companies attracted 61% of global venture capital in 2025, compared with 30% in 2022. Deals exceeding $100 million accounted for about 73% of venture funding in the AI sector.
US-based AI companies took the largest share of the market, attracting about 75% of global AI venture investment by value. The European Union accounted for 6%, while China and the United Kingdom each accounted for 5%.
Xiao’s warning focused not on AI investment itself, but on the possible consequences of excessive capital flowing to a small number of companies. Such concentration could distort the distribution of financing across the economy and make it harder for other productive businesses to obtain loans on reasonable terms.
The International Monetary Fund has said financial stability risks remain manageable for now. However, it has warned that rising borrowing, market concentration and increasingly interconnected financing could amplify shocks if expected returns from AI or productivity gains fail to materialize.
Pressure on Asian technology markets
The warning came as pressure on Asian technology markets intensified. China’s technology-focused STAR 50 index fell about 4% on Tuesday, reaching its lowest level since April 2025. Markets in South Korea, Japan and Taiwan have also recorded significant declines in recent trading sessions.
Beijing examines AI’s economic impact
Beijing is also examining the broader economic consequences of rapid AI development, particularly its effects on employment and competition. China’s National Development and Reform Commission said on Tuesday it would closely monitor AI’s impact on employment and strengthen early-warning systems to identify potential job losses.
According to an industry forecast cited in South Korean media, at least 15% of China’s humanoid robot manufacturers could cease operations or be absorbed through mergers within three years. More than 150 companies are competing in the sector, but commercialization has progressed more slowly than expected.
The developments highlight the challenge facing Beijing: sustaining rapid technological innovation while ensuring traditional industries retain access to the financing they need to grow.
