China said it will prevent excess competition in the red-hot artificial intelligence sector, a signal that Beijing wants to avoid wasteful investment even as it seeks to turn the technology into a key pillar of the economy.
The country’s top economic planner said the government will encourage provinces to develop AI in a coordinated and complementary way. The goal is to leverage their distinctive strengths to foster growth without duplicating efforts, according to Zhang Kailin, an official with the National Development and Reform Commission.
“We will resolutely avoid disorderly competition or a ‘follow-the-crowd’ approach,” Zhang told reporters at a briefing Friday. Development should be based on local advantages, resources and industrial foundations, he said, expanding on an action plan published by the government earlier this week aimed at accelerating AI development.
His remarks echo Chinese President Xi Jinping’s caution against excessive local government investment in AI last month. The comments underscore policymakers’ desire to avoid a repeat of the overcapacity seen in other emerging industries like electric vehicles, which has contributed to deflationary pressures.
While the state planner didn’t specify which part of the sector needs moderation, investment has been particularly pronounced globally in constructing datacenters that underpin AI development. A slowdown of that buildout would hit the providers of chips, networking and other components essential to servers, from Cambricon Technologies Corp. to Lenovo Group Ltd. and Huawei Technologies Co. The NDRC also emphasized the need to ensure “the orderly flow of talent capital and other resources.”
On Friday, Cambricon dived as much as 11% after warning investors about a doubling in its share price over just a month. The record gain helped fuel a $1 trillion Chinese market rally, as retail investors buy into the concept of Beijing’s support for emerging technologies.
The Chinese government appears to be pushing for a more calibrated approach to developing AI without slowing down overall progress. It has identified the technology as a new growth driver and a critical area of competition with the US, which has spurred public and private investment.
The NDRC at the briefing vowed better AI planning at the national level and greater support for private companies to nurture more “dark horses” for innovation, a likely reference to the rapid rise of Chinese startups like DeepSeek.
The company catapulted to global prominence earlier this year with an powerful yet cost-effective AI model and spurred a domestic AI frenzy. A separate Bloomberg News analysis shows Chinese firms are aiming to install more than 115,000 Nvidia Corp. AI chips in data centers across the country’s western deserts.
While the government moves to curb investor euphoria in emerging sectors, it’s at the same time seeking to increase private investment in traditional industries to bolster economic growth.
The authorities will set a minimum private shareholding requirement for infrastructure projects such as railways, nuclear power and oil pipelines, NDRC spokeswoman Li Chao said at the Friday briefing, a move aimed to broaden private investors’ access to major national ventures.
Policymakers are also considering increasing central government spending in projects related to people’s well-being to ease the burden of debt-strapped local governments, she added.
“The government increasingly recognizes the importance of boosting long-term consumption,” said Michelle Lam, Greater China economist at Societe Generale SA, citing recent measures such as subsidies for pre-school education and childcare.
This story originally appeared on Fortune
