China Sees Orderly Exit of Excess-Capacity Firms as AI and High-Tech Companies Expand

A deliberate shift in the structure of China's economy is showing up in the data on company registrations and deregistrations. According to the State Administration for Market Regulation, in the first half of 2026 firms in some sectors with excess capacity exited in an orderly way, while new companies surged in emerging fields such as generative AI and humanoid robots.

Exit from sectors with excess capacity

In some industries that expanded rapidly and then fell into fierce price competition, the number of company deregistrations rose. In the first half, 7,632 new energy vehicle-related companies were deregistered, up 4.6 percent year on year; 5,089 photovoltaic firms, up 8.3 percent; and 155 lithium battery firms, up 12.3 percent. Amid overcapacity and involution-style competition, a batch of weaker companies left the market.

A surge in emerging fields

At the same time, new companies multiplied in emerging and high-end fields. In the first half, 55,000 companies newly registered in generative AI, up 28 percent, and 116,000 in humanoid robots, up 9.5 percent. High-end manufacturing was equally striking: new registrations in spacecraft and launch vehicle manufacturing rose 185.7 percent year on year, optical fiber and cable manufacturing 129.4 percent, and integrated circuit manufacturing 24.2 percent.

Overall, about 15,000 new high-tech manufacturing firms were set up in the first half. By June 30, the total number of high-tech manufacturing enterprises nationwide had reached about 330,000.

A signal of restructuring

Between exit and entry lies a process of tilting the economy's structure toward future growth engines. The exit from sectors with excess capacity is not a decline of industry but more like clearing space for emerging sectors, while the surge of new firms shows capital and talent accelerating toward AI, robots and advanced manufacturing.

Of course, the heat in emerging fields can also breed new risks of overcapacity. How to encourage innovation while avoiding a rush of everyone piling in will be key to whether this restructuring can go the distance.