China’s President Xi Jinping has called for greater discipline in strategic industries such as electric vehicles and artificial intelligence, as concerns over overcapacity intensify.
The country’s top leadership urged to avoid “irrational competition” and wasteful investments driven by local governments seeking short-term growth.
The auto industry in the world’s second largest economy has the capacity to produce 55.5 million vehicles a year, but only used 49.5% of that capacity in 2023, Gasgoo Automotive Research Institute recently reported.
Speaking at the Central Urban Work Conference in Beijing this week, Xi criticized the focus on the same areas.
“When it comes to launching new projects, it’s always the same few things: artificial intelligence, computing power, new-energy vehicles,” Xi said, according to the People’s Daily, the official newspaper of the Communist Party.
“Should every province in the country be developing industries in these areas?” Xi questioned.
In 2018, China had over 500 registered electric vehicle startups.
Today, just 15 of the 129 remaining brands are expected to remain financially viable by the end of the decade, according to consulting firm AlixPartners.
His comments follow a separate State Council meeting on Wednesday chaired by Premier Li Qiang, where China’s cabinet pledged to “rein in irrational competition” in the EV sector, regulate pricing practices, and ensure automakers honor recent commitments to pay suppliers within 60 days.
In June, China sold 1.33 million new energy vehicles, up 27% from a year earlier and 1.7% from May, according to data from the China Association of Automobile Manufacturers. The figures include both domestic sales and exports.
Authorities also pledged to guide companies to focus on technological innovation and quality instead of deep price cuts—a strategy widely seen in auto industry.
“We should not let some people pass the buck and leave problems to future generations,” Xi said. “The usual way of judging performance—just looking at how much GDP has grown or how many big projects have been built—is not enough. We also need to ask how much debt has been incurred.”
In his speech, Xi emphasized China’s pace when compared to the Western world.
“Western countries took centuries to industrialize, but we’ve done it in decades. Still, we have many shortcomings to address.” He warned against a “rush for quick results” and “short-termism,” especially in regions racing to build capacity without regard for actual demand or technical readiness.
The People’s Daily article positioned Xi’s remarks as setting a new trajectory for China’s urban and industrial planning.
“China’s urbanization is shifting from rapid growth to a stage focused on quality and efficiency,” the paper said, quoting Xi as saying, “Cities must follow an inward, content-driven path of development. Expanding blindly by piling projects together won’t produce a modern urban cluster.”
Looking ahead, policymakers laid out six guiding principles for building what they call a “modern people’s city”: innovation, livability, sustainability, safety, cultural civility, and smart development. These objectives, Xi said, must be judged not by vanity projects but by “people’s real sense of well-being.”
