Chinese President Xi Jinping has issued a rare warning to local governments against over-investment in artificial intelligence and electric vehicles as the world’s second-largest economy fights overcapacity in key industries, stubborn deflationary pressure and a mountain of local debt.
“When it comes to projects, there are a few things — artificial intelligence, computing power and new energy vehicles. Do all provinces in the country have to develop industries in these directions?” Xi said at a high-level Communist party meeting on urban development, according to the Financial Times.
Xi also mounted criticism on so-called ‘three pats’ officials — “those who pat their own heads and chests while making reckless decisions and assuring others everything is fine, then “pat [the dust off] their buttocks” and slip away,” the FT reported.
Xi told the conference that officials needed to focus not only on GDP growth but also “on how much debt is owed.”
“We should not let some people pass the buck and leave problems to future generations,” he said.
Xi’s unprecedented remarks come at a time when local governments across China have rushed to build data centres and join in the AI boom. That rush has, however, resulted in a glut of computing power — with processors lying unused in new data centres.
In the electric vehicle industry, effects of overcapacity are already playing out, especially in the form of cut-throat price wars that have hit suppliers and carmakers alike. In May, one top EV-maker said the “Evergrande” of China’s EV industry “was already here”, referring to the former top developer that went bankrupt with more than $300 billion worth of debt.
Xi’s comments, however, have strengthened expectations that CCP officials will take steps to curb overcapacity in these and other industries, the FT report said.
Read the full report: Financial Times
- Vishakha Saxena
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