Hefei’s Fusion Sector Drives New Approach to Development
Executive Summary:
- Beijing is transitioning fusion investment from fiscal budgets to society-funded models to mitigate short-term fiscal constraints and manage the capital requirements of fusion’s long-term research and development cycles.
- This is part of the “Four Chains Integration” framework that links innovation, industrial, capital, and talent chains, utilizing a “whole-of-society” approach to developing fusion by transferring operational and incentive costs from the state budget to social financing platforms.
- Formerly a local experiment, this framework is now a national strategy for the People’s Republic of China’s (PRC) fusion engineering pivot.
On October 18, 2024, General Secretary Xi Jinping visited the city of Hefei, where he encouraged officials to pursue a new framework for the research and development of nuclear fusion. He called for a “deep integration of innovation, industrial, capital, and talent chains” (创新链、产业链、资金链、人才链深度融合), a policy that has since been abbreviated as the “four chains integration” (四链融合). Xi described the framework as a “critical deployment” (重要部署) for the “accelerated implementation of the innovation-driven development strategy” (加快实施创新驱动发展战略), and said that it serves as a tangible manifestation of the so-called “advantages of the new-type whole-of-nation system” (新型举国体制优势) (CCP Members Net, October 16, 2022; CCTV, October 19, 2024). [1] Xi had made similar calls in the past, and this specific model, which involves leveraging social financing (via local government financing vehicles) to drive innovation, was standardized as a national initiative by the Party in October 2022 (Shaanxi Provincial Government News Bureau, December 12, 2024). But until now, take-up has been slow. [2]
One year on from Xi’s Hefei visit, the leadership doubled down on the framework. In its “Recommendations” for the 15th Five-Year Plan, the Party Central Committee mandated that enterprises “take the lead” (牵头) and shoulder the primary responsibility for promoting the “four chains integration” policy (Xinhua, October 28, 2025). And now, the policy seems to be getting off the ground. On January 16–17, the “Nuclear Fusion Energy Science and Technology and Industry Conference” (核聚变能科技与产业大会) was held in Hefei. Coverage from the conference indicates that Xi’s directive is being implemented across the sector as research organs seek to operationalize the “four chains” (Hefei Daily, January 17). As part of the overall strategy, Beijing plans to use state-led research bases to dictate technical standards, driving vertical integration and technological upgrading across the industry. The government is simultaneously attempting to construct a state-mobilized financing system to support strategic technologies with long research and development cycles. This new model aims to replace the country’s traditional reliance on its fiscal budget for funding these kinds of projects, sharing risk across the broader economy to alleviate fiscal pressure and address persistent capital constraint issues that have long hampered Beijing’s ambitions.
Innovation and Industrial Chains Form the Foundation
Under the strategic blueprint, Hefei will leverage its existing nuclear fusion campus, the Hefei Institutes of Physical Science of the Chinese Academy of Sciences (中国科学院合肥物质科学研究院), to serve as the innovation link of the “four chains” (HIPS, accessed January 24). The plan involves upgrading the Nuclear Fusion Industry Alliance (核聚变产能联盟) into a “Nuclear Fusion Industry Federation” (核聚变产业联合会) that can organize fragmented research institutes and upstream/downstream manufacturing enterprises into a unified industrial phalanx (Science and Technology Daily, January 20).
The objective is to facilitate the iterative advancement of innovation from Hefei’s Experimental Advanced Superconducting Tokamak (EAST) and the Burning plasma Experimental Superconducting Tokamak (BEST) fusion reactors to the entire fusion value chain, including materials, research and development, manufacturing, and civilian commercialization. By allowing multiple sectors to collectively capitalize on innovation dividends, Beijing intends to catalyze technological breakthroughs in other fields (Science and Technology Daily, January 20). For example, at the January conference, the company Lanzhou LS Heavy Equipment (兰石重工) exhibited a new heat exchanger for fusion facilities. This component emerged from the company’s prior experience designing exchangers for the EAST reactor (WeChat/LS Heavy Equipment, January 21).
Capital and Talent Chains a Response to Fiscal Pressure
Beijing is also keen to integrate capital and talent chains. At the conference, authorities unveiled a “patient capital” (耐心资本) initiative, launched by 15 financial institutions and involving over 130 others, featuring an initial fund of Renminbi (RMB) 1 billion ($143 million) with a 15-year duration (Science and Technology Daily, January 20). This long-term deployment is designed to provide continuous financial support for nuclear fusion development, a field that lacks near-term profit potential, by focusing on talent cultivation. The fund is being deployed to support the establishment of a School of Fusion Science and Engineering at Hefei University of Technology (合肥工业大学), and Beijing is planning to set up similar colleges at 20 other institutions within the next five years (Xinhua, January 20; Party Committee Propaganda Department, accessed January 25).
By pooling capital to fund specialized education and research, Beijing is overseeing an asset-light restructuring of the “new-type whole-of-nation system.” Fiscal pressures help explain this shift. Given the field’s long cycles and high risks, authorities are pivoting away from direct fiscal appropriations and toward mobilizing a broader pool of social capital. By socializing risk, the state can override capital’s short-term profit-seeking orientation and convert social funds into state-serving patient capital. This approach allows the state to hedge against longstanding capital constraints in strategic science and technology investment without significantly increasing government debt.
Establishing a successful “talent chain” nevertheless requires a massive financial mobilization. By establishing fusion colleges at scale, Beijing intends to mass-produce a highly specialized, highly educated workforce. Unlike elite researchers within the permanent state establishment (编制), whose lifetime salaries, pensions, and healthcare represent fixed, long-term fiscal liabilities for the state, this application-oriented engineering talent team will primarily be absorbed by enterprises within the innovation and industrial chains that are funded by social capital. Through this mechanism, Beijing can decouple the massive human operational and incentive costs of strategic competition from the state budget, transferring them to social financing platforms.
Conclusion
Hefei is implementing the “four chains integration” as a state-led, society-funded model of innovation-driven development. It ensures that the Beijing can continue to support large-scale research projects despite fiscal pressures, and demonstrates how the government, through administrative fiat, is seeking a sustainable model for research and development in fields with limited returns on investment in the short term.
Notes
[1] The innovation-driven development strategy is one of seven development strategies enshrined in the Party Charter (see China Brief, September 26, 2025). Xi also referred to it in his report to the 20th Party Congress in 2022.
[2] This was not the first time that Xi had called for integrating innovation, capital, talent, and industry, but it was the first time that such a formulation has been carried forward and successfully made its way into a five-year plan document. Xi proposed integrating the innovation and capital chains as early as the 9th Politburo study session in 2013 (Xinhua, October 8, 2013). The integration of innovation and industrial chains also predates the current framework. Xi floated a “five chains integration” during a tour of Jiangxi Province in 2019 (which disappeared in later speeches), before issuing instructions for a “two chains integration” during a 2020 visit to Shaanxi Province (Xinhua, December 11, 2019; Department of Science and Technology of Hunan Province, April 28, 2020). He re-emphasized strengthening the integration of the innovation and industrial chains at a May 2021 joint congress of the Party’s top scientists and engineers, and again during a meeting of the Central Commission for Comprehensively Deepening Reform in February 2022 (Xinhua, May 28, 2021; February 28, 2022).
