$70M investment in US-blacklisted Zhipu AI raises concerns about Chinese govt tampering

Chinese artificial intelligence startup Zhipu AI secured a 500M yuan, approximately $69M, investment from the government-linked Huafa Group. The investment, while beneficial to the startup, has brought the focus back to concerns about Chinese government’s influence on local AI projects.

Concerns have risen over the state-owned Huafa Group’s investment in Zhipu AI for good reason. In China, there’s a practice known as owning or acquiring “ golden shares .” This practice gives the government increased control over the operations and strategic decisions of a private company. 

Golden shares come into play when government-affiliated entities invest in private companies, particularly in the technology industry. 

An example of this is Bytedance, the parent company of TikTok . China’s Internet Investment Fund (CIIF), a state-owned investment fund, acquired golden shares in the company, thus allowing the government exert control over the company’s decisions. 

Zhipu AI’s growth 

Zhipu AI was founded in 2019 and quickly rose up the ranks to become a prominent player in China’s AI sector. The startup has gained recognition as one of China’s “AI tigers.”

During its years of operation, Zhipu AI has attracted investments from major tech giants such as Tencent, Meituan, and Xiaomi across multiple funding rounds. As of July 2024, Zhipu AI was valued at an impressive 20B yuan, which is about $2.8B.

In January 2025, the U.S. Commerce Department added the company and its subsidiaries to its export control entity list. The blacklisting was a result of the Biden administration’s attempt to hinder Chinese technology development. 

As expected, the blacklisting caused a measurable setback for Zhipu AI as its access to U.S. components and technology was restricted, which slowed down its operations and growth. The startup was singled out among other large language models leading the Chinese AI sector, such as Moonshot AI, MiniMax, and 01.ai. 

The U.S. government cited concerns over national security as a justification for its decision, alleging that Zhipu AI was advancing China’s military capabilities through advanced AI research. 

The startup said it “ strongly disagreed ” with the United States’ move and stated that the claims “lacked factual basis.” 

China’s backing 

Following the U.S. blacklisting, an investor for Zhipu AI said that the US move should not affect the regular operations of the startup as most of its business was domestic. The investor also added that the startup being singled out by the U.S. could potentially work in its favor and “strengthen their positioning within China,” noting that the targeted attack would give the government an incentive to support its growth.

That investor turned out to be right on the money. In response to the challenges faced by Zhipu AI, Chinese state-owned enterprises have stepped in to support the startup’s growth and continued innovation. Prior to the U.S. sanctions, the startup was already backed by the state-run National Social Security Fund, Tencent, Alibaba Cloud, the venture capital groups HongShan and Hillhouse, and Saudi Arabian fund P7. 

Most recently, the company received a 500M yuan investment from Huafa Group , a conglomerate based in Zhuhai, Guangdong province. The startup also recently raised over a billion yuan, approximately $137M, in a funding round prior to Huafa Group’s investment. The billion yuan funding round received support from other state-backed entities, including the Hangzhou City Investment Group Industrial Fund and Shangcheng Capital. 

Zhipu AI will be directing the recent capital influx towards advancing its GLM large language model and expanding its AI ecosystem, particularly targeting businesses in the Zhejiang province and the Yangtze River Delta economic zone.

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