The momentum in China’s venture-capital industry, which is recovering after years of decline, is likely to continue this year, mainly bolstered by government financing, but an expert warned that the lack of funding diversity poses a hidden risk.

Fundraising picked up in 2025, with most of the gains coming from government sources, as central policymakers loosened rules to allow local governments to issue more bonds to finance government guidance funds, according to a report released on Tuesday by Gavekal Dragonomics, a Hong Kong-based research firm.

The report said government funding was likely to rise further in the coming months following the formation of four funds.

In late December, the National Development and Reform Commission launched a 100 billion yuan (US$14.5 billion) national venture capital guidance fund, financed by ultra-long special treasury bonds.

Three regional funds have also been established, each with more than 50 billion yuan, alongside 49 sub-funds and 27 direct investment projects. The three regional funds are for the Beijing-Tianjin-Hebei region, the Yangtze River Delta and the Guangdong-Hong Kong-Macau Greater Bay Area.

“The funding structure is fundamentally different from previous cycles, with government and state-owned capital as the absolute driving force,” said Jin Zhao, assistant professor of finance at Cheung Kong Graduate School of Business. “The national fund’s significance lies not only in its size but also in its [impact], conveying the central government’s clear support for the venture capital industry.”