GreenergyDaily

Jul. 9, 2025

Policies in China that are aimed at curbing excess capacity may be positive for equities and global trade if executed right, according to JPMorgan Chase & Co.

Companies that are sector leaders, especially those involved in new energy vehicles and property, are likely to benefit from stronger pricing, higher revenue market share and healthier margins, strategists including Wendy Liu wrote in a note Wednesday.

“China’s excess capacity has hurt margins and valuation,” the strategists wrote, citing a capacity utilization rate that sits at around 74%, trailing the US and European Union.

These policies may ease deflationary pressures and boost margins, while helping to reduce trade frictions by curbing China’s low-price exports, according to the strategists. Data from the MSCI China Index show that businesses related to autos, chemicals, construction materials, as well as metals and mining are expected to see better net profit margins as output tightens, they wrote.

The Chinese government has pledged to rein in supply gluts in the solar, steel and cement industries to address excessive competition and falling prices. Solar glass makers announced that they will cut production by 30% starting July, while steel mills have received notice to lower emissions and limit output.

At present, all industries with overcapacity are trading below their 2021 peaks, with battery, solar, cement, steel and chemicals recording a share price correction of over 50%, the strategists added.

Mainland and Hong Kong-listed shares of Contemporary Amperex Technology Co., Aluminum Corp of China and Hengli Petrochemical Co. may benefit from sector consolidation, JPMorgan said.