Xi questions provincial push for same sectors

President Xi Jinping expressed concern over provinces nationwide pursuing identical emerging sectors, marking a rare critique amid official unease about internal deflation and escalating international trade pressures.

According to Thursday’s issue of People’s Daily, Xi raised these points during an urban development session in Beijing on July 17. He observed that officials tend to direct new initiatives toward select areas, citing “artificial intelligence, computing power, new‑energy vehicles.”

He then asked, “Should every province in the country be developing industries in these areas?” This query was featured in the Party’s official organ, People’s Daily.

According to Business Times, analysts warned that some provincial authorities, keen to impress central leadership, were funneling investments into limited priority areas, resulting in over-investment and hindering industry rationalization.

Senior leaders have increasingly urged an end to aggressive undercutting in major industries, cautioning that such competitive discounting are shrinking companies’ profits and pushing down what workers earn.

Beijing moves to curb unfair EV competition

In a related development, on Wednesday Premier Li Qiang led a State Council session promised to stop unfair price battles in the electric‑vehicle industry. Earlier this month, the Party’s top economic committee said it would tighten rules on how local governments make investment decisions.

Although the economy has shown underlying strength, slow household spending and a continued uptick in output are exerting downward pressure on prices.

Nominal GDP expansion decelerated to 3.9% in Q2, marking the lowest such outcome apart from the pandemic era since records began in 1993.

For years, subnational authorities have pursued an investment‑first strategy to outpace their peers, fueling rapid economic growth.

But chasing growth has left governments with huge debts and wasteful projects, created too much unneeded output that gets sold overseas, and worsened tensions with other countries.

In a recent issue, Qiushi,  the Party’s flagship ideological periodical,  delivered a sharp assessment of disorderly competition at the local level. It denounced secretive subsidy schemes, imprudent bets on hyped industries, and protectionist measures that disadvantaged external participants.

Xi cautions against rapid urbanization

Back in March 2024, Xi cautioned provinces against uniform approaches and encouraged them to cultivate “new productive forces.” These include sectors aligned with regional advantages, while steering clear of speculative “industry bubbles.”

Imbalanced supply and demand are evident in legacy industries like steel as well as in nascent areas such as electric vehicles and photovoltaic equipment.

Although the count of EV manufacturers declined for the first time last year, utilization remains below 50 percent of installed capacity.

Data compiled by Caixin Global report reveal that 26 out of 31 provinces with 2025 new energy storage objectives have collectively set ambitions in excess of double the countrywide benchmark.

During the session, Xi criticized certain local administrations for overreach, emphasizing that “promoting urbanization should be a gradual process that unfolds naturally.”

“It must align with the laws of economic and social development and should not be divorced from reality or driven by a rush for quick success,” he added.

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