The pro-mainland Hong Kong News Agency recently reported that Chinese leader Xi Jinping issued unusual criticism of local Chinese governments over their rush to investing in emerging industries such as artificial intelligence and “new energy” vehicles (i.e. non-fossil-fuel vehicles). Xi’s remarks may reflect concerns among Chinese central leadership over domestic overcapacity, deflation risks, and foreign trade frictions.
People’s Daily quoted Xi on its front page: “When it comes to investment projects, everybody looks at the usual three: artificial intelligence, computing power, and new energy vehicles. Should all provinces in the country develop industries in these same directions?” Xi Jinping pointed out at a city work conference not long ago.
Analysts noted that local Chinese governments’ investment behavior in recent years was prompted by the central government’s call to focus on “New Productive Forces,” a term coined by Xi. Duplicate investments have led to exacerbated problems such as overcapacity and vicious competition in those industries, however, with consequences for China’s broader economy.
The CCP Central Committee recently signaled that it’s time for a course reversal: Premier Li Qiang presided over a recent State Council executive meeting where he spoke of “disorderly competition” in the electric vehicle field, and the CCP Central Committee’s Financial and Economic Commission spoke of the need to “regulate local investment and prevent duplicate development and inefficient investments.”
Xi also said that such investments “must conform to the laws of economic and social development and must not be out of touch with reality, and must not short-sightedly aim for quick results.”
Source: Hong Kong News Agency, July 18, 2025
https://www.hkong.hk/2025/0718/44178.shtml