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Investors look to China’s Politburo meeting for signs of fighting industrial overcapacity

All eyes will be on how gathered leaders address hyper-competition in industries including solar and lithium batteries, EVs and e-commerce

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New-energy vehicles are parked in Hangzhou. Photo: Xinhua
Zhang Shidongin Shanghai

Equity investors are shifting their attention to China’s coming Politburo meeting for any clues on whether top leaders will introduce measures to fight back against overcapacity in some of the nation’s emerging industries.

All eyes will be on how the gathered leaders address hyper-competition in industries including solar, lithium batteries, electric vehicles (EVs) and e-commerce. The summit was expected to be convened later this month and the 24 members of the Communist Party’s decision-making Politburo were expected to attend. Excessive output in these sectors has been blamed for exacerbating China’s deflation and the issue has been highlighted at several high-level meetings as “involution”, a term referring to a self-defeating cycle of excessive competition.

While expectations are low that the Politburo conclave will yield sweeping stimulus measures that would be a boon for equities, investors were hoping for a repeat of an anti-overcapacity campaign in 2016 that took on bloat among coal, steel and commodity producers. On Thursday, HSBC said the solar industry would benefit most from an anti-involution drive because the need for a revamp was urgent due to low utilisation and nagging losses at leading firms.

“There’s no obvious inflection point for the macroeconomy and [related] policies,” said Huang Hongwei, an analyst at Chasing Securities. “But if the policy of anti-involution is effectively implemented, it will improve profitability.”

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