China's emphasis on electric vehicles (EVs) and artificial intelligence (AI) faces scrutiny as leaders, including Xi Jinping, challenge the strategy's sustainability. Xi expressed concerns over the repetitive focus on these sectors and questioned whether all provinces should prioritize them. The hyper-competitive environment, particularly in the EV market, has triggered intense price wars that threaten profitability and lead to potential overcapacity. In response, Beijing is advocating for market consolidation and addressing practices that harm economic stability as deflationary pressures grow, indicated by a significant drop in the producer price index in June.
Xi Jinping questioned whether China should maintain a singular focus on high-tech sectors like artificial intelligence and new energy vehicles during a meeting about urban development.
The intense price wars in the EV sector have significantly squeezed profit margins, raising questions about long-term sustainability and leading to calls for market consolidation.
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