Zhongtai: This round of "anti-inner circle" policies may focus more on key areas with characteristics similar to rare earths on a global scale.

Zhongtai released a research report stating that since 2024, industries such as photovoltaics, batteries, and automobiles have faced intensified low-price competition, attracting policy attention. The advocacy of "anti-internal competition" has gradually become institutionalized within departments. This round of "anti-internal competition" policies may focus more on key areas with global "rare earth-like" characteristics, having three features: first, dominating production capacity and technology in the global market, possessing "irreplaceability"; second, facing the dilemma of disorderly expansion and low-price competition, threatening the healthy development of the industry; third, having medium to long-term growth potential driven by external demand, having the potential to evolve into strategic tools or bargaining chips between countries. Zhongtai's main points are as follows: 1. From the government work report to the "14th Five-Year Plan": the context of the "anti-internal competition" policy Since 2024, intensified low-price competition in industries such as photovoltaics, batteries, and automobiles has attracted policy attention. The advocacy of "anti-internal competition" has gradually become institutionalized within departments: the 2024 Political Bureau meeting proposed measures to address internal competition; the 2025 government work report included it in the annual tasks; the "14th Five-Year Plan Proposal" proposed to "comprehensively rectify 'internal competition'", once again elevating the height of "anti-internal competition" to the strategic level of the national five-year plan. This round of governance presents the features of "top-level institutionalization, market-oriented clearance, and expectation management running through". 2. What is different about the background of this round of "anti-internal competition"? In macroeconomic terms, during the previous round of supply-side reforms, when the economy was still growing at over 6%, although there was a "speed change", total demand remained relatively abundant. This round of "anti-internal competition" policies started as the economy entered a new stage of growth at 5% or even lower, with investments, consumption, and exports all under pressure. Furthermore, in terms of industrial structure, around 2015, China's high-end manufacturing was still in a growth stage, with a higher proportion of low-end production capacity; now, China has leading global capabilities in areas such as photovoltaics, new energy vehicles, and high-end electromechanical equipment, but slowing demand and intensified competition have also led high-end industries to face overcapacity. Against the backdrop of a tightening macroeconomic environment, a moderate policy orientation, and a complex industrial base, this round of "anti-internal competition" policy may exhibit characteristics of limited strength, market guidance as the main approach, emphasis on expectation management, and a longer governance cycle. 3. The strategic logic of "anti-internal competition": shifting from "reversing deflation" to "enhancing industrial bargaining power" Currently, the core of China's high-level policies still focuses on responding to international competition and enhancing national competitiveness. Therefore, "anti-internal competition" is no longer an extension of "supply-side reforms", but a key lever serving the enhancement of national competitiveness. "Anti-internal competition" is fundamentally an engineering project for optimizing the supply-side structure, with the ultimate goal of establishing a number of advantaged industries with global pricing power, technological barriers, and resource control, and using them as China's trump cards in future games. This round of "anti-internal competition" policies may follow a clear policy transmission path: by increasing industry concentration, enhancing the global bargaining power of industries, and ultimately transforming advantaged industries into strategic chips at the national level. 4. The "rare earth experience": from low-end "cabbage prices" to the most important bargaining chip in national games Before 2010, the rare earth industry was embroiled in disorderly competition, with continuous low prices for rare earths, leading to waste of resources and China's positioning at the low end of the global rare earth value chain. In 2014, the Ministry of Industry and Information Technology officially launched the policy deployment of establishing large rare earth enterprise groups. By 2016, the national rare earth industry had basically completed the integration framework led by six major state-owned groups. By the end of 2021, the formation of China Rare Earth Resources And Technology Group, along with China Northern Rare Earth, had significantly improved the previous situation of inefficient redundant construction and disorderly competition. With the optimization of the industry structure and the maturity of integration mechanisms, China Rare Earth Resources And Technology has become an important strategic link in the global high-tech industry chain. Against the backdrop of intensified China-US tech competition, rare earths, as an important controllable resource lever for China, have strong geopolitical attributes. 5. The main battleground of "anti-internal competition" may focus on "rare earth-like" industries This round of "anti-internal competition" policies may focus more on key areas with global "rare earth-like" characteristics, having three features: first, dominating production capacity and technology in the global market, possessing "irreplaceability"; second, facing the dilemma of disorderly expansion and low-price competition, threatening the healthy development of the industry; third, having medium to long-term growth potential driven by external demand, having the potential to evolve into strategic tools or bargaining chips between countries. Shanxi Guoxin Energy Corporation's entire chain has already taken a key position in the global energy transition and is expected to become a strategic tool in international games. The new energy chain naturally possesses global "strategic value": China maintains technological leadership and occupies major global capacities in sectors such as photovoltaics, wind power, and battery energy storage. On the demand side, AI brings a large amount of electricity demand, but traditional electricity system construction has a longer cycle, so new energy is the only option to fill the short-term "electricity gap" brought by AI. With the integration of policy guarantees and global demand, "anti-internal competition" will not only help eliminate inefficient production capacity but also further enhance Shanxi Guoxin Energy Corporation's material concentration and bargaining power in the global supply chain, laying a solid foundation for future strategic games. 6. Investment recommendations (1) New energy upstream: It is recommended to focus on leading companies in lithium ore, silicon materials, electrolytes, positive and negative electrode materials with raw material barriers and cost advantages, as well as second-tier companies with potential for technological substitution. (2) Power equipment and energy storage: The structural growth opportunities brought by the "electricity gap" in the AI era. It is recommended to focus on energy storage leaders mainly targeting overseas markets, high-boom PCS inverter manufacturers, and large-scale storage system integrators. (3) Resource security and minor metal materials: The strategic pillars of industry bargaining power. It is recommended to focus on resource companies with high concentration and high barriers, especially rare earth magnetic materials, copper-cobalt-lithium leaders, and others. Risk warning: Economic growth is below expectations, industrial development falls short of expectations, geopolitical risks exceed expectations, etc. The publicly available information used in this research report may have the risk of information lag or delayed updates.