China to crack down on 'herd behaviour' in emerging sector investment

BEIJING (Reuters) -China will crack down on "herd behaviour" in investment in emerging sectors and tighten oversight of local governments' investment promotions, officials at the state planner said on Friday.

"Currently, 'involution' and disorderly competition appeared in some industries," Wang Renfei, an official at the National Development and Reform Commission (NDRC), said at a media briefing.

"In emerging sectors, we will continue to encourage innovation and appropriate competition, while resolutely opposing blind imitation and strictly preventing herd behaviour, such as everyone rushing in or out at once," Wang said.

Chinese leaders have signalled their intention to rein in price wars among producers, as expectations grow for a new round of factory capacity cuts in a long-awaited but challenging campaign against deflation, a move that could pose risks to economic growth.

NDRC did not specify which new sectors could be targeted. However, analysts expect Beijing to focus first on high-profile industries once touted as the "new three" growth drivers — autos, batteries, and solar panels — which state media now singles out for engaging in price wars.

China will seek to better combine the roles of an effective market and a proactive government, leveraging the strengths of both, standardising government conduct, and further clarifying which investment promotion practices are encouraged or prohibited, Wang said.

Local governments have strived to attract investment for years as foreign investors diversify their production bases amid rising trade uncertainties and property developers stop the purchase of state land aggressively.

Jiang Yi, another NDRC official, noted at the same press conference that healthy competition can benefit consumers as long as it remains within reasonable limits.

"If competition goes too far, leading to disorderly low-price competition, declining quality, cutdown of services, infringement and counterfeiting, it will harm consumers' rights and drag down firms' development," he said.

Last week, China released a draft amendment to its pricing law as part of efforts to curb excessive competition and price wars among firms, amid persistent deflationary pressures.

(Reporting by Kevin Yao and Ellen Zhang; Editing by Michael Perry)

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