Hefei
A government that operates as a venture capital fund—300% returns on display tech, an $800M rescue of NIO that profited in 18 months. Hefei vaulted from China's 80th to 20th largest GDP in twenty years by betting on quantum computing and EVs.
Hefei's municipal government operates as a venture capital fund—and its returns would embarrass most Sand Hill Road firms. The city's investment vehicles have deployed over 100 billion yuan ($13.7 billion), generating estimated 300% returns on their BOE display technology stake and profiting within 18 months on their NIO rescue. In twenty years, Hefei's GDP ranking shot from 80th to 20th nationally; its fiscal revenue increased 33-fold; its population doubled from 4.4 million to over 9.3 million.
This is not where the story was supposed to go. Hefei is the capital of Anhui—historically one of China's poorest provinces, far from the coastal wealth of Guangdong or Jiangsu. The city had no natural port advantage, no colonial-era infrastructure, no Fortune 500 headquarters. What it had was the University of Science and Technology of China (USTC), relocated from Beijing during the Cultural Revolution in 1970. That single institutional transplant became the founder effect that rewrote the city's economic genome.
USTC researchers built the Zuchongzhi superconducting quantum processor and established 'Quantum Avenue'—Yunfei Street, where over 70 quantum technology companies now cluster, making Hefei China's quantum capital. The National Laboratory for Quantum Information Science, touted as the world's largest quantum research facility, operates on USTC's campus. Meanwhile, the government's venture bets diversified into EVs: when NIO faced bankruptcy in 2020, Hefei acquired a 25% stake for $787 million and helped secure bank loans. NIO now operates three production plants in Hefei and is building its China headquarters here. BYD and Volkswagen also manufacture EVs locally. Anhui's 'new trio' exports—EVs, lithium batteries, photovoltaics—surged 110% in a recent year.
Hefei's GDP has more than doubled in a decade, exceeding $150 billion. Strategic emerging industries account for 60% of industrial output. The World Economic Forum now cites Hefei alongside Changsha as a city 'rewriting the rules of globalization.'
The biological parallel is mutualism between a government host and the research organisms it cultivates: USTC provides the intellectual substrate, the city provides capital and infrastructure, and the returns flow both ways. The risk is that government-as-VC requires picking winners—and Hefei's streak of successful bets creates path dependence on a strategy that fails catastrophically when a single investment goes wrong.