China is preparing to spend about $295 billion over the next five years to build data centers nationwide as Beijing seeks to accelerate domestic artificial intelligence development and challenge U.S. leadership in the technology, according to people familiar with the matter.

Key government agencies, including the National Development and Reform Commission (NDRC), are drafting a blueprint to create a network of interconnected computing hubs across the country, Bloomberg reported. 

State-owned firms, including China Mobile and China Telecom, would operate most of the facilities and ensure they are connected, one of the people said.

The plan calls for at least 80% of the technology used in the project, including AI chips, to come from domestic suppliers such as Huawei Technologies, reducing reliance on U.S. companies, including Nvidia and Advanced Micro Devices, the people said.

The initiative represents one of Beijing's most ambitious efforts to build the infrastructure needed for future AI development.

It is part of the government's broader "Six Networks" program announced earlier this year, which focuses on major infrastructure projects spanning sectors including water, electricity and computing, one of the sources said.

The proposal remains in the early stages, and details could change, Bloomberg's sources added, speaking on condition of anonymity because the discussions are private.

Funding would come primarily from sovereign debt, including ultra-long-term special government bonds, as well as state-backed investment funds targeting strategic industries, the people said. Bank loans and private capital are also expected to contribute.

The effort reflects Beijing's continued commitment to advancing critical technologies despite concerns about rising government debt and slowing spending in other areas.

The concept of a nationwide computing network was outlined in China's latest five-year plan through 2030, which prioritizes the construction of data infrastructure.

The planned investment is significantly smaller than the roughly $725 billion that major U.S. technology companies, including Meta Platforms and Microsoft, are expected to spend on AI this year alone. However, data center construction costs in China are generally lower because of cheaper labor, components, and government incentives.

The $295 billion estimate does not include spending by private Chinese technology firms such as Alibaba Group Holding and Tencent Holdings, the people said.

Under the proposal, China aims to connect scattered data facilities into a unified network by 2028, supporting broader AI adoption in sectors including healthcare, transportation, and city management.

The project would also integrate China's power grid with AI infrastructure, the people said. Including power-related investments, total spending could exceed $735 billion.

Charlie Dai, principal analyst at Forrester Research, said a unified computing network could help pool fragmented regional resources and expand access to high-performance computing.

"It would also help speed up AI model iteration and the expansion of agentic and physical AI services across industries," Dai said. "Elevating it to a national strategy ensures policy alignment and capital mobilization."

If the initiative moves forward, Chinese technology firms are expected to benefit.

Although Washington recently agreed to allow Nvidia to sell its previous-generation H200 AI chips to Chinese customers, shipments have not yet begun, as the H200 chips trail Nvidia's latest Blackwell systems by roughly one generation.

Meanwhile, China has continued to promote domestic alternatives.

In May, nine homegrown AI chips from companies including Huawei, Alibaba, Shanghai Biren Technology, and Moore Threads Technology passed security reviews by a Chinese technology-security agency, allowing broader use in sectors with higher security requirements.

China's efforts to expand AI infrastructure come as U.S. officials and technology companies continue to scrutinize Beijing's use of artificial intelligence tools.

OpenAI said that Chinese influence operators attempted to use the company's chatbot to generate content opposing President Donald Trump's tariffs and to intervene in U.S. debates over data centers and artificial intelligence.

The company said the activity, which dated to late 2025 and early 2026, appeared to have little or no measurable impact. However, OpenAI said the campaigns highlighted the growing role of generative AI in digital influence operations, including efforts targeting debates surrounding AI development itself.

The disclosure comes as China moves to expand its domestic AI capabilities and reduce reliance on U.S. technology suppliers.