During the meeting, China’s Xi Jinping warned against overloading with energy investments

President Xi Jinping warned against an uneven rush of investment in the new energy sector and promised to make China a place of fair competition during a meeting with business executives and economists, held amid a row with the United States and Europe over alleged excess industrial capacity it is almost certain that it will get worse.

Xi, who has previously warned against economic bubbles resulting from excess raw materials being poured into certain fields, said support for the “new trio” of goods – electric vehicles, lithium-ion batteries and solar panels – must be “tailored” to local conditions.

At Thursday’s meeting with business executives and economists, he said the focus should not be solely on the new energy industry because the transformation of traditional industries could also develop “new productive forces” – the term invented last year describing emerging sectors, mainly technology-related, that could replace traditional standards such as real estate as drivers of economic growth.

“If a company fails within a few years of its inception, then our development of modern industries and the cultivation of new productive forces will not be sustainable. The enterprise itself must develop internal strength,” the president was quoted as saying in a detailed account of the meeting published on Saturday by state news website Xinhua.

Xi shared the comments in response to Zhang Bin, a researcher at the Chinese Academy of Social Sciences, who discussed fierce domestic competition and falling prices.

The meeting, held in Jinan, Shandong Province, was attended by managers from across the public and private sectors, including employees of technology start-ups, Hong Kong companies and foreign investment houses. The high-profile conclave was closely watched as it came ahead of the highly anticipated event third plenum Central Committee of the Communist Party – an assembly that usually presents the main assumptions of economic policy.

Enthusiasm for the ‘new three’ – the above-mentioned products that show promise as core commodities underpinning the global green transition – has led local governments to spend significant resources to support their own leaders, with companies focusing mainly on the lower end of value chains, and not to push technological boundaries.

External forces also matter. Washington announced plans raise customs duties on Chinese goods worth around $18 billion in strategic sectors such as electric vehicles, batteries, steel and critical minerals, and the issue of excess production capacity was raised in a statement issued by Group of 7 finance chiefs over the weekend.

The European Union has started some research to determine the nature of Chinese subsidies to green technology producers. It is disputed whether the introduction of these goods to EU markets constitutes dumping and whether government support for Chinese companies operating in the EU is sufficient to be considered an unfair advantage.

Chinese authorities have expressed their own concerns about overcapacity, but have also rejected claims by the United States and Europe that the country is deliberately flooding global markets with cheap goods to crowd out competition, especially in new energy.

To emphasize his point, Xi mentioned his tenure as governor of Fujian province and party secretary of Zhejiang province during the meeting, according to a Xinhua report. It was there that he witnessed the transformation of many privately owned clothing companies, moving from simple wholesalers to standalone brands that now outperform their international competitors.

“I watched these companies – they were focused, consistent and strengthening their core business,” he said.

In a Xinhua report at the beginning of his trip Wednesday, Xi praised state-owned Shandong Port Group for successfully automating ports and container terminals through “independent innovation” that reduced dependence on foreign technology.

But Xi also assured international executives at the meeting that the country is committed to creating a “level playing field” and will not push foreign-financed companies out of the Chinese market “just because they are foreign companies.”