Abstract:The venture capital (VC) industry plays a crucial role in advancing the development of the artificial intelligence (AI) sector. As a key bridge between technological innovation and industrialization, VC not only provides financial support to AI startups but also empowers them in strategic planning, technological research and development, and market expansion. However, China’s VC industry currently faces several challenges in supporting AI development, including an imbalance in the roles of state-owned and private capital, a short-term investment mindset, and the cyclical phenomenon of “herding” and abrupt market exits. These issues hinder the growth trajectories of Chinese AI enterprises and constrain the industry’s overall technological breakthroughs and competitiveness. This study aims to analyze the major obstacles preventing VC from effectively supporting China’s AI industry and propose targeted policy recommendations to foster a more efficient, rational, and sustainable VC ecosystem. By systematically examining the current state of China’s VC sector and its key challenges, and drawing from best international practices, this study puts forward a series of strategic measures. These include optimizing the division of labor among “three layers of capital”, reforming the management of state-owned VC funds, strengthening investor confidence in private capital, promoting long-term investment, attracting international VC talent, and learning from the growth trajectories of companies such as OpenAI in the United States. The study also explores the case of DeepSeek, illustrating how VC can drive fundamental AI innovation and enable breakthroughs across the entire AI industry chain. Through this analysis, the study aims to provide strategic and actionable recommendations for optimizing the VC landscape in China, thereby fostering a more resilient AI ecosystem and enhancing the country’s position in global AI technology and industry development.