Dreame makes a popular robot vacuum. Its founder had a much bigger dream.
He said he would build the first $100 trillion company ever. Last week, a Chinese city started digging into the firm's books. The vacuum isn't the real story. How China funds its tech dreams is.
Dreame became the world's top robot-vacuum seller early this year. Then it kept going. Since 2017, it has spun up nearly 1,000 side businesses, from electric cars to robots to bubble tea.
Most of that ran on government money. One of its funds holds 41.6 billion yuan. About 80% came from local-government pots in cities like Suzhou and Xiamen. And that's just one fund. Its venture arm runs nearly 30 of them, spread across more than 10 cities.
Then the mood changed. A city asked local firms to add up their ties to Dreame. The founder's social media went quiet. The signal was hard to miss.
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Here's the part investors should care about. Chinese cities used to make money selling land. After the housing crash, that cash dried up.
US investors used to fund Chinese tech, but many pulled out in recent years. That left local government money to fill the gap. So cities started buying stakes in startups. They hoped the winners would pay the bills. The catch? City officials aren't pro investors.
They bet big on a few favorites. Public money is on the hook when those bets fail. One failed chip project in Wuhan cost a city about 15 billion yuan.
Smaller cities had missed the early chip and AI booms. So they chased the next hot thing, and Dreame looked like it.
"Singapore has Temasek. In China, every level of government has its own Temasek," one Shanghai investor said. Temasek is the fund that invests Singapore's money.
China's State Council wants "strict control" now. Small districts can't start new funds without sign-off from above.
Beijing also tightened rules on its $3.4 trillion private fund industry. Funds must now come clean on big, all-in bets.
The aim is to slow a wasteful spending race. By the end of 2025, China had set up more than 2,100 of these funds.
This is how China pays for its tech goals. Not with tax breaks like the US. It buys pieces of companies outright.
One scholar calls it a "spray and pray" plan. China funds a lot and fails a lot, then hopes a few big winners cover the losses. It has minted winners like EV maker Nio. It has also buried cities in bad bets. Beijing just admitted the second part is real.
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