China’s Xi Jinping cautions against energy investment overload at meeting

President Xi Jinping warned against a lopsided rush of investment into the new energy sector and promised China would be a place for fair competition in a meeting with business executives and economists, held as a row with the US and Europe over purported industrial overcapacity is all but certain to escalate.

Xi, who previously warned against economic bubbles stemming from pouring an excess of resources into certain fields, said support for the “new three” commodities – electric vehicles, lithium-ion batteries and solar panels – must be “adapted” to local conditions.

The new energy industry should not be the sole focus, he said at a meeting with business executives and economists on Thursday, as the transformation of traditional industries can also develop “new productive forces” – a term coined last year to describe up-and-coming sectors, mostly tech-related, which could take the place of traditional standbys like real estate as drivers of economic growth.

“If a company collapses within a few years of its establishment, then our development of modern industries and cultivation of new productive forces will not be sustainable. The enterprise itself must develop internal strength,” the president was quoted as saying in a detailed account of the meeting from state news outlet Xinhua published on Saturday.

Xi made the comments when responding to Zhang Bin, a researcher at the Chinese Academy of Social Sciences, who discussed fierce domestic competition and declining prices.

The meeting, held in Jinan, Shandong province, was attended by executives from across state and private sectors, including personnel from tech start-ups, Hong Kong firms and foreign investment houses. The high-level conclave was closely watched, as it comes in advance of the heavily anticipated third plenum of the Communist Party’s Central Committee – a gathering which typically unveils major economic policy.

Enthusiasm for the “new three” – the aforementioned products which show promise as essential goods undergirding the global green transition – has led local governments to spend heavily in support of their own champions, with companies mostly focusing on the lower end of value chains rather than pushing technological frontiers.

External forces are also a factor. Washington has announced plans to raise tariffs on roughly US$18 billion of Chinese goods in strategic sectors like electric vehicles, batteries, steel and critical minerals, and the issue of overcapacity was mentioned in a communique from the finance chiefs of the Group of 7 countries issued over the weekend.

The European Union has launched several investigations to determine the nature of Chinese subsidies for producers of green tech. At issue are whether the introduction of these goods into EU markets constitutes dumping, and whether government support to Chinese companies operating inside the EU is sufficient to be classified as an unfair benefit.

Chinese authorities have expressed their own concerns about excess capacity, but they have also refuted claims from the US and Europe that the country is purposefully flooding global markets with cheap goods to crowd out competitors, especially in new energy.

To drive his point home, Xi reminisced at the meeting on his tenure as governor of Fujian province and party secretary of Zhejiang province, the Xinhua report said. It was there he bore witness to the transformation of numerous private garment companies, turning from simple warehouses to brands in their own right that now outperform their international competitors.

“I observed these companies – they were focused, consistent, and they strengthened their core business,” he said.

Earlier in his trip on Wednesday, Xi praised the state-owned Shandong Port Group for successfully automating its ports and container terminals through “independent innovation” that has reduced reliance on foreign technology, the Xinhua report said.

But Xi also assured multinational executives at the meeting that the country is committed to creating a “level playing field” and will not squeeze foreign-funded companies out of the Chinese market “just because they are foreign companies”.

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