While a $44 million pre-seed funding round for one Chinese start-up may seem like a sudden windfall, it is actually the latest salvo in a tightening global race.
As quantum computing shifts from an academic pursuit to a heavily fortified national asset, a deepening divide between the U.S. and China is forcing both governments to abandon traditional free-market playbooks in a neck-and-neck sprint for technological supremacy.
Shanghai-based Taiyi Quantum announced last week that it had completed a 300 million yuan, or roughly $44 million, Pre-A funding round, nearly double the original fundraise target of $29 million. The start-up was formed in January by Liu Hongbin, a former researcher at Microsoft Azure Quantum, and tech investor Fang Zenghao.
Taiyi's ability to raise so much capital so soon after its founding could reflect a scarcity of other quantum investment opportunities. In reality, it is just the latest entrant in a steadily expanding market.
Last year, Shenzen-based SpinQ made history as the first Chinese enterprise to ship a complete superconducting quantum system overseas. Most quantum companies are backed by the government in some regard, through the support of government-aligned investors (in SpinQ's case), alignment with national research labs, or as direct recipients of federal infusions.
Barclays analysts described China as an emerging quantum computing hub, noting that "state involvement in the industry has intensified in the last two years."
Take QuantumCTek, the first quantum technology company to list on a Chinese exchange. Now majority-controlled by China Telecom Quantum Group, the company serves as a key government supplier and a critical player in the nation's quantum communication network, backed by substantial subsidies.
Naturally, China's tech titans wanted a piece of the action, even if their enthusiasm didn't last. Baidu and Alibaba formed dedicated quantum research groups, only to shutter them months apart in 2023. Today, Tencent -- China's largest tech firm by market capitalization -- stands as a notable exception, continuing to operate its own quantum lab.
And while Baidu and Alibaba exited the space, the companies transferred their capabilities and equipment to the Beijing Academy of Quantum Information Sciences and Zhejiang University, respectively, handing control of these assets to the state.
For American investors, much of what goes on in China's quantum ecosystem is a mystery. Aside from company announcements, papers and patents are the only indications of scientific and commercial progress. Xanadu Quantum Technologies CEO Christian Weedbrook described China's quantum effort as "a huge black box" in a Barron's interview earlier this year.
But one thing is clear: Quantum computing is a government priority. China's latest Five-Year Plan explicitly designates it as one of seven "future industries" set to drive national growth.
The ultra-powerful systems leverage physics to solve complex problems faster than classical machines. However, this unprecedented power poses a major security threat, as quantum systems are expected to be able to crack the encryption safeguarding much of the world's data in just a few years' time.
With such high stakes, the technology is increasingly viewed through a national security lens. And while U.S. free-market advocates may balk at Beijing's aggressive support of quantum companies, the Trump administration has adopted a similar playbook as it aims to establish quantum development as a national imperative.
Last month, the Commerce Department reached tentative agreements with nearly all publicly traded, pure-play quantum firms in the U.S. Unlike past initiatives, the deals weren't standard grants or subsidies; they were structured as a pseudo-sovereign wealth fund mechanism exchanging ownership stakes for capital.
Notably absent from the talks was IonQ, formerly the largest quantum pure play by market capitalization before it was overtaken by Honeywell spinoff Quantinuum earlier this month. Alphabet-owned Google, Microsoft, and Amazon, all with their own quantum initiatives, were missing as well.
Speaking at a conference last month, a Google Quantum AI executive confirmed that the company had turned down the deal because "various conditions that came with the funding" would have bogged down their engineering progress.
But one storied tech giant is embracing its role as a key federal collaborator. In addition to being allocated half of the total $2 billion funding package, IBM plans to partner with the Commerce Department to build a standalone quantum chip foundry called Anderon.
IBM research director Jay Gambetta told Barron's he welcomes federal involvement, seeing it as the state's responsibility to consult with experts across academia and the private sector.
"I think it is clear that we are now in a race for this technology," Gambetta said. "If I'm still talking about the potential of quantum computing five years from now, we've failed. We need to make this exist for our nation."
It's tempting to portray competition in the quantum space as a mad dash, akin to the high-stakes sprints to commercialize cloud compute and artificial intelligence. The U.S. and China have sparred for dominance in both fields.
Joe Fitzsimons, CEO of Horizon Quantum, has witnessed this fracturing firsthand. "It used to be that quantum computing was quite a global effort, of colleagues and many different countries around the world," he told Barron's. "As computing has advanced, gotten closer to reality, things have become more siloed."
This division makes picking a winner difficult. Data from McKinsey and Barclays Research show China and the U.S. are nearly neck-and-neck in patent volume. China leads in quantum computing, while the U.S. dominates quantum communication and sensing. Crucially, patents do not always guarantee viable commercial products.
On the scientific front, Jefferies notes that China has advanced further in post-quantum cryptography and communication, whereas the U.S. holds the edge in quantum sensing and computing. This balance is bound to evolve as state support intensifies.
"China definitely has a lead in quantum communication," Fitzsimmon agreed. "You may ask how they got that, and the answer is because they spent a lot of money to get that lead. It really depends where you put in the investment."
Beijing operates the world's largest integrated space-to-ground quantum network, a feat that the U.S. will struggle to match anytime soon. However, fresh government backing should ensure it remains anyone's game for now, and potentially help the U.S. establish an edge in other parts of the market.
The government is visibly reacting to the advances overseas. An executive order signed in mid-June has accelerated the migration to quantum-safe systems by 2031.Alongside a renewed emphasis on quantum sensing and networking, these measures are designed to secure critical networks against foreign interference.
Jefferies analysts project that "the race will accelerate in earnest this year," if it hasn't already. Barclays analysts predict that, sometime within the next 12 to 24 months, investors will see evidence of quantum superiority over classical systems on "useful problems."
IonQ CEO Niccolo de Masi underscored this sense of urgency in an interview with Barron's.
"I don't think the gap will be the same as the Manhattan Project," he said, referring to the scramble to build the first atomic bomb. "First time around, we got the bomb in 1945. China was 1964. It's not that kind of a gap -- I hope they're 10 quarters behind, but they're definitely not 10 years behind."
Write to Mackenzie Tatananni at mackenzie.tatananni@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
June 29, 2026 07:43 ET (11:43 GMT)
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