AI in action · Regulation
China's Bank Regulator: AI Money Is Starving Other Firms
A vice minister at China's financial regulator warned on November 3 that heavy AI investment is raising borrowing costs for traditional industries and adding leverage.
The warning came from a senior official in a country that is itself racing to build AI. Xiao Yuanqi, a vice minister of China's National Financial Regulatory Administration, which supervises banks and insurers, told the Global Financial Leaders' Investment Summit in Hong Kong on Tuesday, November 3, that excessive AI investment around the world is squeezing other parts of the economy, Caixin Global reported.
His argument, as reported by Caixin and Anewz, was about where the money goes rather than about the technology. Capital is flowing heavily into technology and into a small number of leading companies, he said, increasing leverage and the risk of excessive expansion. That concentration raises borrowing costs for traditional businesses, adds to their financial burden and limits their ability to reinvest and expand production, which could in turn increase credit risk. He urged policymakers to build frameworks to manage the economic changes driven by AI, both for growth and for financial stability.
The figures cited alongside his remarks show how concentrated the flows have become. AI companies took 61% of global venture capital investment in 2025, up from 30% in 2022, according to data reported by Anewz; deals larger than $100 million made up about 73% of AI venture funding, and US-based companies attracted about 75% of global AI venture investment by value, against 6% for the EU and about 5% each for China and the UK.
The remarks landed in a nervous week. China's STAR 50 index of technology shares fell nearly 4% on the same Tuesday to its lowest since April 2025, and two days later US chip stocks had their worst day since March 2020. Separately, China's National Development and Reform Commission said it will monitor AI's effect on employment. The International Monetary Fund has said financial stability risks from AI remain manageable, but that leverage, concentration and interconnected financing could magnify shocks if expected revenues or productivity gains fall short.
For investors the point is the transmission channel. Regulators are no longer only asking whether AI valuations are too high; they are asking what an AI-heavy credit market does to the companies that are not part of it. Higher funding costs for steelmakers, retailers and manufacturers rarely make headlines, but they show up in bank loan books, which is exactly what a banking regulator watches.
Sources: Caixin Global — China Regulator Warns AI Investment Boom Crowds Out Traditional Industries (Nov 3, 2026); Anewz — China warns AI investment boom could squeeze funding for wider economy