Lithium, EVs and now drones: How can China curb over-competition?

Over-investment by local governments in sectors favoured by Beijing under scrutiny

- Lim Min Zhang China Correspondent and Joyce ZK Lim China Correspondent

A small county best known for its mountains and melons is one of dozens of Chinese regions racing for a slice of the booming drone economy.

A gleaming new complex for drone-related companies has emerged down the street from mom-and-pop stores and sleepy homestays in Xinfeng, which has a population of 266,000 and is one of Guangdong province's less developed counties.

For now, just two drone firms appear to have settled into the complex, which opened in 2024. Several floors in the main five-storey office building stood vacant or were under renovation when The Straits Times visited earlier in August.

But the staff there are not worried. "The businesses will definitely come," said a deputy general manager of the state-owned company which runs the complex, who asked to be identified only as Mr Chen.

As China ramps up a push to develop its "low-altitude economy", projected to be worth 1.5 trillion yuan (S$270 billion) in 2025, Xinfeng is just one of at least 45 localities on a quest to develop drone-related industries, according to a tally by local newspaper The Economic Observer in November 2024.

Industrial parks for drones are being set up around the country. Officials armed with cash incentives are thronging drone expos, wooing companies with generous procurement contracts and rent-free premises. The Xinfeng government, for one, has announced a range of subsidies as well as a 300,000 yuan reward for businesses that can rake in large revenues.

This rush echoes a familiar phenomenon that is now in the authorities' crosshairs: the over-investment by local governments in sectors favoured by Beijing.