China’s government is thinking about creating a venture capital fund of as much as $122 million a year to support domestic semiconductor start-ups, a way of getting around complaints by outsiders (think Silicon Valley chip start-ups) that Beijing’s current policy of tax refunds has discriminated against foreign companies.

Silicon Valley venture firms are salivating over China’s huge market, which still imports a large proportion of its chips — Silicon Valley being a prime beneficiary. Here’s a link to the WSJ story (sorry, subscription required), and brief blurb:

While the planned fund’s size hasn’t been finalized, officials have agreed in principle to set it up by April, when the tax-rebate policy is set to expire….Part of Beijing’s policy since 2000 has been to refund most of the country’s 17% value-added tax on domestically produced chips sold in the Chinese market. Critics said the rebates, of as much as 14 percentage points of the 17% tax, were unfair to foreign companies, whose chip sales in China were subject to the full VAT…. Beijing has taken pains to stress to nervous domestic chip companies that it remains committed to helping them, but by using WTO-compliant policies.

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