Overcapacity and oversupply are causing ‘involution’ and putting growth at risk, manufacturers told
China is urging its electric vehicle industry to stop cutting prices and rein in production amid fears that persistent deflation is imperilling economic growth.
In recent months Chinese officials have talked repeatedly of the need to combat “involution” in sectors suffering from overcapacity, such as EVs, referring to the phenomenon of investing more effort and money for diminishing returns.
Xi Jinping has spoken of the problem directly. In an unusually blunt speech this month, China’s president criticised provincial governments for blindly overinvesting in artificial intelligence, in computing power and in new energy vehicles, industries that Beijing has identified as strategic priorities but which are also at risk of overheating.
On 23 July, Xi gave another speech in which he stressed the importance of breaking the cycle of “involution” that has gripped parts of the Chinese economy, the world’s second-biggest after the US.
