Taking a Look at China’s Quantum Ecosystem

What Procurement Data Reveals About State Control

Hello, I’m Ylli Bajraktari, CEO of the Special Competitive Studies Project. In this week’s edition of our newsletter, SCSP’s Dr. Damien Bérubé and the Tech Leadership Directorate partnered with Datenna to capture a snapshot of China’s quantum ecosystem. We document in unprecedented detail how state funding, commercial actors, and the People's Liberation Army are deeply interconnected across quantum technology development, infrastructure, and procurement.

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China’s quantum dominance ambitions are written in national plans, but they are built through ordinary purchases: lab space, wiring, components, instruments, and consumables. Procurement contracts capture those needs in fragments — a supplier name, a device category, a contract value, and a military buyer. By aggregating hundreds of entries from Datenna’s 2024–2025 dataset, we turn those fragments into evidence of how China’s state-backed quantum ecosystem actually functions.

For domain experts, this paper trail offers an unprecedented primary-source view into questions that have long been difficult to quantify. For the first time, we estimate government funding to academic quantum research directly from primary evidence; map the scale of China’s quantum research activity through its supply chain; document the rise of low-cost, high-volume Chinese-made equipment; and put numbers behind a critical policy debate: whether export controls are accelerating China’s domestic alternatives.

The dataset has limits. Procurement records do not capture every transaction, every classified project, or every informal channel of state support. They also understate the full scale of China’s quantum activity because many military, intelligence, and internal state-owned enterprise transactions are not publicly visible. The findings below should therefore be read as a lower-bound view into a wider system. Even with that caveat, the available evidence reveals that China’s quantum ecosystem is commercial in form, but deeply shaped by state direction, public financing, military demand, and infrastructure procurement.

QuantumCTek provides the clearest company-level example of this system. Spun out of the University of Science and Technology of China (USTC) in 2009, the company helped move quantum communications from the laboratory into a 7,500-mile fiber backbone underpinning China’s national quantum communications architecture. It has also announced plans to deploy a constellation of quantum internet satellites in the coming years.

Its balance sheet tells the broader story. QuantumCTek went public in 2020 and reported roughly $35.3 million in revenue in 2024, with a market capitalization of approximately $3.5 billion. By early 2026, its market capitalization had more than doubled to about $7.7 billion after reporting $43 million in 2025 revenue. State capital helped drive that rise, giving the firm privileged access to critical infrastructure customers and supporting expansion through public fundraising. Chinese sources underscore the sector’s reliance on public funds: government spending in China is comparable to that in the United States, but U.S. private investors outspend their Chinese counterparts fourteen to one. QuantumCTek’s trajectory illustrates the lifecycle of a Chinese quantum startup: public research creates the technical base, procurement creates demand, state capital lowers scaling risk, and infrastructure priorities turn emerging technology into national capability.

A Private Sector Kept Afloat by State Activity

China’s quantum market is sustained by buyers with state resources before many firms become commercially competitive. Datenna records more than $18 million in private-sector deals that show state-affiliated telecom giants, with China Telecom at the center, channeling funds to a network of quantum startups. Many of these firms trace their origins to state laboratories or university research groups, where Beijing retains influence through funding, ownership, procurement, or institutional ties.

As a result, China is creating demand before the market can sustain itself. This pattern resembles earlier Chinese industrial strategies in electric vehicles, solar panels, and 5G, in which subsidies and state-backed customers helped domestic firms scale up before competing internationally. Quantum firms such as QuantumCTek and Origin Quantum appear to be following a similar path. Origin, like QuantumCTek, was supported by funding from the Chinese Academy of Sciences (CAS) and is now preparing for an IPO at a valuation of roughly $1 billion.

The rise of these emerging players does not pose an immediate risk of replacing U.S. and allied firms in every high-end market. Instead, it will be through the gradual emergence of Chinese suppliers that can survive on protected domestic demand, improve through repeated state-backed sales, and eventually enter foreign markets at lower prices. A network map of these contracts should therefore be read less as a list of isolated transactions and more as an industrial policy map: which buyers sustain certain suppliers, which sectors are receiving demand signals, and which firms are being positioned to scale.

China Telecom as System Orchestrator

China Telecom is not just a customer in China’s quantum ecosystem, but an organizer of the market. As the country’s largest telecommunications conglomerate, it treats quantum as a core growth area and reported 65.4% revenue growth in the segment in 2025. In Datenna’s records, China Telecom appears as the buyer in 19 contracts worth nearly $4 million, signaling sustained strategic intent rather than experimental interest.

This role as a primary market organizer was formalized in 2023 with the creation of China Telecom Quantum Information Technology Group (CTQG). Across 30 contracts worth roughly $3.65 million, CTQG acts as both buyer and orchestrator, often selling to its parent company in a self-contained funding cycle. Backed by an initial $436 million investment and an explicit mandate from China Telecom, CTQG then spent $265 million in 2024 to acquire a controlling stake in QuantumCTek.

This hierarchical structure matters because it gives Beijing a mechanism to consolidate control over both demand and supply. China Telecom can direct capital, shape procurement, absorb or elevate favored firms, and standardize infrastructure around state-linked suppliers. The 2024 “One Network, One Pool” cryptographic project at CTQG, worth roughly $18.6 million, illustrates this model. The project aimed to combine infrastructure and tighten national control over encryption standards. In three related contracts, CTQG appeared simultaneously as buyer and bidder, allowing China Telecom, using CTQG as the vehicle, to maintain control over the deployment of quantum networking technologies.

China Telecom’s role also extends into quantum computing, where state firms are filling gaps left by retreating private-sector actors. Alibaba and Baidu exited quantum computing R&D in 2023 and 2024, donating their equipment to state-backed research labs, leaving China Telecom as the primary cloud gateway for a hardware integration “shell game.” The company has rebranded a USTC-developed chip series under its own label, while circulating related capabilities through its subsidiaries, including QuantumCTek. This recycling helps Beijing project industrial scale while obscuring the maturity and origin of underlying technologies. More broadly, the shift toward state-owned firms allows Beijing to pull resources from lagging commercial actors and reward state affiliates with expanded responsibilities.

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Who Controls China’s Quantum Network?

China’s quantum communications network is controlled by a layered state-linked stack spanning planning, capital allocation, hardware production, deployment, and operations. China Telecom sits at the top of the system, directing capital and system-wide planning for a national quantum communications buildout. Through CTQG and its stake in QuantumCTek, it also gains influence over the production of core hardware, including routers, relays, and repeaters.

Below China Telecom, China Comservice functions as the implementation arm, deploying the network’s physical backbone and executing procurement across its affiliates. At the operational layer, Guoke Quantum Communications, affiliated with the CAS, operates the national trunkline and metropolitan extensions that link government, military, and institutional users. In parallel, China Mobile has pursued its own quantum initiatives, including experimental deployments such as the “Light Up 100 Cities” network. The result is a dual-operator model in which both state carriers advance quantum communications along separate but similar tracks.

The takeaway is that China’s flagship quantum network is not an open commercial market. It is a vertically structured system in which state carriers shape demand, state-linked firms provide core technologies, implementation arms build the network, and affiliated operators manage use. That structure gives Beijing control across the full lifecycle of strategic infrastructure.

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Regional Hubs and Military Integration

China’s regional quantum hubs play distinct roles within a shared national system: Hefei converts university research into startups, Shanghai connects quantum suppliers to global markets, and Beijing links state-backed research to military-civil fusion. A separate Datenna dataset of procurements by PLA-affiliated entities reinforces this pattern. Hefei, Beijing, and Shanghai are not merely centers of scientific activity; they are also channels through which civilian-facing quantum firms become connected to defense demand.

This matters for international trade and technology transfer since external commercial engagement with Chinese quantum firms may appear civilian on paper, but the procurement trail shows that suppliers, investors, and customers often overlap with state-directed and PLA-affiliated activity.

Hefei is China’s clearest lab-to-market hub. Anchored by USTC and the CAS, its High-Tech Zone hosts more than 30 quantum firms along a two-mile stretch. Local Government Financing Vehicles reinforce this ecosystem by taking large equity stakes in emerging technology firms, repurposing a subsidy tool traditionally associated with real estate into an instrument for strategic technology development. This “Hefei Model” uses local capital to finance entrepreneurship that can benefit the military-civil fusion system.

There is a spectrum of risk associated with this model. Some firms mainly reflect state subsidy and university spinout dynamics. Others have direct PLA exposure. For example, Chinaprosp Quantum, a USTC spin-off focused on magnetic sensing, served the PLA’s Cyberspace Force through a $750,000 contract to deliver a low-temperature system essential for specialized quantum computers, despite operating outside its core business. Boyo IT, a supplier to China Telecom’s new laboratory, raises broader concerns because it has been publicly praised for its surveillance, internet monitoring, and data scraping capabilities used on behalf of government agencies. Overall, there is not just one risky firm but a regional ecosystem in which public funding, quantum commercialization, and security applications sit close together.

Shanghai plays a different role: it links China’s quantum ecosystem to global supply chains. On the funding side, the Shanghai-Hefei corridor is backed by provincial-scale spending, including a $6.5 billion subnational venture fund launched in December 2025—levels of public support unmatched abroad. On the production side, its market-oriented firms import, distribute, and sometimes rebrand or manufacture specialized equipment used in quantum research. Nibiru Technology supplied optical products to the Central Military Commission under two 2025 contracts. SH Connect retails U.S.-made laser products, manufactures hundreds of products under its own brands, and has sold light-based detectors to the PLA. It remains unclear whether the photonic goods sold to the PLA were imported or domestically produced, but the broader implication is clear: Shanghai’s capital and global connectivity can create pathways for foreign-origin technologies or know-how to enter military-relevant quantum work.

Beijing is the most direct hub for military-civil fusion in China’s state-backed quantum ecosystem. In the PLA-contracting dataset, all eight bidders on the BIS Entity List are affiliated with state universities. The city’s quantum market is highly concentrated, with more than 50 quantum companies in a single district, and in 2025, Beijing announced a $70 million quantum venture capital fund to support the sector. Beijing-based Physike Technology illustrates this model. Linked to CAS, it sold a $500,000 low-temperature system in 2024 to the Beijing Institute of Technology, one of the “Seven Sons of National Defense” — a primary university pipeline for China’s military-industrial complex (as seen in graduate employment, funding, PLA staffing, and national leverage). In 2025, Physike was added to the BIS Entity List for attempting to acquire U.S.-origin items to support China’s quantum capabilities, citing national security risks tied to military applications.

Taken together, these regional hubs show how China’s quantum ecosystem distributes function: Hefei incubates, Shanghai connects, and Beijing militarizes. The absence of major quantum communications contracts in the PLA dataset sample is also notable. Beyond minor purchases such as quantum walkie-talkies, networking-related contracts are largely missing. One possible explanation is that quantum communications has moved beyond research procurement and into operational use, where transactions are less visible.

University Sales Data Reflect Supply Chain Localization Push

University purchases show that China is building domestic alternatives to foreign quantum equipment. Datenna’s data sample includes more than $40 million in sales from quantum firms to universities, as well as companies that also appear in PLA-linked contracting. The spending profile suggests that funding for materials research now matches the combined funding for both communications and sensing. This indicates that quantum networking has moved into a more commercial phase, while sensing — despite frequent state-media attention — appears to be less prominent in purchasing data. SCSP’s analysis of research output reinforces this shift: China produces roughly twice as many high-end quantum materials papers as the United States.

Cryogenics as the Strategic Bottleneck

One technology stands out across both university and PLA-linked contracting: cryogenics. These low-temperature systems enable key quantum computers and related research platforms. The United States and its allies have long dominated the high-end cryogenic components market, but recent Chinese investments show a concerted push to localize them. Contract data indicates that quantum-enabling manufacturers Chinaprosp¹ and Physike² total nearly $3 million and account for roughly a third of total contract activity in the relevant sample, suggesting that PLA-linked procurement is making core infrastructure supply chains a mainstream military priority.

Many of the cryogenic manufacturers involved are state-backed, including Entity Listed CSSC Pengli (also known as CryoPride) and CAS-linked Zhongke Fuhai. These suppliers serve the same commercial ecosystem that sells to universities, underscoring how civilian-facing firms and military end-users remain linked through shared supply chains. As CryoPride’s founder said after the firm was placed on the Entity List, “What we do will definitely be feared by Americans.”

From Export Controls to ‘Point-by-Point Substitution’

Tighter U.S. controls on cryogenics around 2023 and the continued Chinese push for self-reliance in strategic chokepoints coincided with rapid growth in cheaper Chinese alternatives that closely resemble Western designs. Chinese strategists describe this as “point-by-point substitution,” borrowing from the chips and electronics industries to replace foreign suppliers one component at a time. The longer-term goal is “chain-wide synergy” or localizing the entire supply chain. Either way, Chinese firms with military ties may soon be able to offer advanced low-temperature equipment at prices well below those of Western competitors.

That does not mean China has already caught up. These tools still appear less mature than Western counterparts. Funding is also finite, as resources devoted to cryogenics development are not available for core quantum innovation. Therefore, China’s effort to close the refrigeration gap may slow primary lines of effort, such as computing research at QuantumCTek or sensor production at Chinaprosp. But even an imperfect domestic alternative can be strategically meaningful if it reduces dependence on foreign suppliers.

The push towards localization even impacts university-backed startups originally focused exclusively on quantum technologies. This includes Origin Quantum, which was established to develop advanced quantum computers rather than enabling technologies such as refrigeration units. Government officials nevertheless celebrate this vertical integration as part of “technological self-reliance,” showing that firms are being encouraged to fill supply-chain gaps even when doing so stretches them beyond their original technical focus.

The Retreat of Foreign Suppliers

Oxford Instruments, a British scientific instrument maker, illustrates this shift from the foreign supplier side. Before 2021, especially during the buildout of enabling hardware at institutions such as the CAS Institute of Physics and the Beijing Institute for Quantum Information Science, Oxford fulfilled more than 40% of relevant contracts in Datenna’s records. That role ended abruptly in late 2023. In a March 2024 financial disclosure, Oxford said it exited the Chinese quantum market “in response to geopolitical dynamics,” noting damage to its bottom line. Its experience shows that China’s sourcing of specialized quantum equipment is shifting away from foreign suppliers toward domestic manufacturers.

We project that Chinese universities now hold a cumulative minimum inventory of 280 cryostats.³ This figure matters because cryostats are enabling infrastructure: their importance lies less in constant use than in a sufficient number and capability to support future advances at scale. Approximately 90% of these systems procured before 2020 were imported. By 2025, roughly two dozen Chinese manufacturers accounted for nearly 90% of ultra-low-temperature equipment sales, marking a major reduction in foreign dependence and a step toward a largely domestic quantum ecosystem.

Additionally, this figure of 280 cryostat units is likely a lower-bound estimate. For example, procurement records show four dilution refrigerator sales by Shanghai Liangxi Technologies in 2024, while public reporting indicates that the company sold nine units that year, totaling $7 million.⁴ That gap underscores the caveat about the broader scope: visible procurement records capture only part of the market, but they are sufficient to show broader market trends.

Estimating State Funding for Academic Quantum Research

The same evidence base allows us to estimate the scale of state funding behind China’s academic quantum research. Because dilution refrigerators and cryostats are the workhorses of quantum laboratories, they help serve as a useful proxy for underlying research capacity. Fitting China’s sales and inventory of cryostats in a typical laboratory budget, we estimate that at least $150 million to $350 million in university quantum research in China was state-funded in 2024.⁵ Previous estimates of Chinese government quantum spending have been highly speculative and widely divergent. The often-cited $15 billion cumulative figure, for example, traces back to a single press report that cited unnamed insiders regarding a 100 billion RMB National Quantum Center in 2018. By contrast, our estimate uses visible purchasing patterns tied to enabling infrastructure. While it does not capture the full universe of state support, it offers a more grounded way to measure academic quantum activity.

The estimate also helps put China’s system in comparative perspective. Public funding in China appears broadly comparable to U.S. government spending, but the private-capital picture is very different: U.S. private investors outspend their Chinese counterparts 14-to-1. Therefore, China’s advantage is not necessarily the absolute size of private investment. Instead, it lies in the state’s ability to coordinate research funding, procurement demand, infrastructure deployment, and supplier localization into a single strategic ecosystem.

Conclusion

China’s quantum ecosystem is an interconnected web of universities, state laboratories, public funds, semi-private firms, state-owned enterprises, and military-linked buyers. Procurement evidence shows how that web works in practice: ordinary purchases support research capacity, state-backed customers create demand, regional hubs specialize by function, and domestic suppliers are pushed to fill gaps left by foreign firms.

The system’s strength is coordination. Even companies that appear private are often linked to the state — and sometimes the PLA — through parent institutions, financial backers, procurement relationships, or core customers. With continued investment in enabling infrastructure such as domestic cryostat production, China is building a quantum ecosystem with the scale, direction, and state support to challenge U.S. and allied leadership globally.

While not every Chinese quantum firm is equally advanced or equally risky, China is putting immense effort into insulating its quantum ecosystem by building the machinery to absorb setbacks, replace foreign inputs, and move quantum technologies from research into fielded infrastructure. Datenna’s procurement data does not show the whole system, but it reveals enough to make the direction clear - and concerning.

1. Manufacturer of quantum sensing products.

2. Manufacturer of cryogenic equipment.

3. An estimate reached by normalizing cryogenics procurements to 2024 to account for contract acquisition gaps in years with fewer contracts recorded, where we interpolate total yearly cryostat purchase. While U.S. tallies of cryostats are unavailable, the authors estimate American academic laboratories own around 500-1000 cryogenic systems.

4. The primary source of this number indicates sales value a factor 100 larger, but we believe that to be a typo.

5. U.S. estimates of 2024 university-based quantum funding stand at $400M, while total academic funding for quantum in 2024 (including national laboratories and federal facilities) reaches about $800M.