Xi Challenges Provincial Economic Strategy: ’Why the Copycat Approach?’

China's leadership puts local governments on notice—duplicate industries won't fly.

When provinces play follow-the-leader, who's left to innovate? Beijing's latest pushback against cookie-cutter economic planning could force a reckoning.

One cynical take: Maybe they're just tired of competing with their own shadow—like hedge funds chasing last quarter's alpha.

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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