Xiao Yuanqi, vice head of the National Financial Regulatory Administration, stated that excessive capital concentration in artificial intelligence is increasing leverage within the technology sector. He noted that this rapid expansion is driven by borrowed funds, which creates potential financial risks.
The regulator highlighted a crowding-out effect where the influx of investment into AI and leading tech firms drives up borrowing costs for traditional industries. This shift limits the ability of conventional companies to reinvest and expand, while simultaneously increasing their credit risks.
During the Global Financial Leaders’ Investment Summit in Hong Kong, Xiao called for new policy frameworks to manage macroeconomic shifts and prevent financial risks associated with AI-driven capital allocation. The remarks reflect broader concerns in China regarding lopsided investment patterns.
Data from early 2026 indicates that capital has heavily favored hard tech sectors like robotics and AI, while funding for less advanced industries has declined. The regulator's public warning signals a potential shift toward stricter oversight of capital flows in these areas.
