During the recent meeting of Central Financial and Economic Affairs Commission, the Chinese authorities reiterated their stance against disorderly competition and encouraged the acceleration of phasing out inefficient capacities, Citi said in its research report.

Meanwhile, official media commented on how to promote high-quality development after breaking rat-race style competition, mentioning that such competition undermines overall competitiveness and disrupts industry ecosystems.

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Breaking involution competition is currently the top priority of the Chinese government, said the broker, noting that associations in industries such as cement, photovoltaic, and wind power proactively communicated with the government and enterprises, urging the government to introduce more policies in response.

Citi believed that more specific measures will be introduced by authorities in 2H25.

In view of that the steel industry is facing oversupply and low profits, the product supply-side reform 2.0 is lagging in terms of timeline and execution strength compared to expectations. Thus, Citi tweaked down its preference order for steel sector.