Chinese President Xi Jinping has issued a stark warning against excessive investment in artificial intelligence (AI) and electric vehicles (EVs).
In an unusually direct and unprecedented statement, President Xi cautioned local governments to refrain from reckless spending in the fields of AI and EVs—a move analysts interpret as a sign of possible central government intervention in overcapitalized industries.
Criticizing local officials for launching massive projects without realistic evaluations, Xi said:
“When it comes to new projects, a few areas immediately come to mind: artificial intelligence, computing power, and electric vehicles. But should every province be investing in exactly the same fields?”
In recent months, local governments in remote regions like Xinjiang have launched numerous data center construction projects in hopes of capitalizing on the AI boom. However, according to the Financial Times, many of these projects lack the required technical expertise and have wasted critical resources like chips.
In the electric vehicle sector, intense price competition has severely eroded profitability for many manufacturers. Some of China’s trade partners have even warned about the global negative consequences of this aggressive pricing strategy.
President Xi emphasized:
“We shouldn’t focus solely on GDP growth or the number of large-scale projects. We must consider how much debt is being created. We cannot allow some people to pass problems on to the future and walk away.”
Xi’s tough stance marks a notable shift from his remarks last year during a trip to France, where he denied the existence of overcapacity in China—a clear signal of a changing tone in central government policy on industrial intervention.
Economists warn that China is currently experiencing its longest period of deflationary pressure since the 1990s. The GDP Deflator, which provides a broader view of inflation across goods and services, has declined for nine consecutive quarters. This has fueled speculation that the government may directly intervene to curb production capacity or stabilize prices.
In the AI sector, some industry insiders have raised concerns that chips in newly built data centers are sitting idle. One investor noted that Xi’s warning is unlikely to affect hubs like Beijing or Shenzhen, but is more likely aimed at smaller cities that have rushed into the AI race without proper preparation.
