BEIJING (Reuters) - Chinese AI startup Zhipu AI secured 500 million yuan ($69.04 million) in funding from state-owned Huafa Group, just one week after announcing a separate 1 billion yuan capital raise.

Huafa Group, a state conglomerate based in Zhuhai in Guangdong province, announced its investment in Zhipu in a statement on Wednesday, as Chinese cities compete to back promising AI startups in a sector Beijing views as crucial in its technology rivalry with the United States.

This comes after Hangzhou, home to rival DeepSeek, was among the major investors in a 1 billion-yuan funding round announced earlier this month through state-backed entity Hangzhou City Investment Group Industrial Fund.

The funding follows the recent emergence of rival DeepSeek, whose large language models have garnered attention for purportedly matching Western competitors' capabilities at lower develoment costs.

Zhipu AI, founded in 2019 and widely known as one of China's "AI tigers," has attracted investment from tech giants Tencent, Meituan and Xiaomi across more than 15 funding rounds, according to business registration platform Qichacha.

The company was valued at 20 billion yuan in a funding round in July 2024, according to business registration platform Qichacha.

The new capital will be used to advance technological innovation and ecosystem development of its GLM foundation model, Huafa said in the statement.

In January, Zhipu and its subsidiaries were added to the U.S. Commerce Department's export control entity list, barring it to procure U.S. components.

($1 = 7.2417 Chinese yuan renminbi)