1、 Disclosures&Disclaimer This report must be read with the disclosures and the analyst certifications in the Disclosure appendix,and with the Disclaimer,which forms part of it.Issuer of report:The Hongkong and Shanghai Banking Corporation Limited View HSBC Global Research at:https:/ The 20theditionof

2、 the EM Sentiment SurveyClick to viewHesitant bulls of summer China has launched a campaign to cut capacity and rebalance supply and demand Unlike supply-side reform 1.0 in 2016,the emphasis is on fair competition and allowing the market to choose winners The pace of policy implementation is set to

3、accelerate,supported by demand-boosting measures,led by urbanisation Its finally here.On 1 July,after 33 consecutive months of producer price index(PPI)deflation,price wars in multiple sectors,and rising concern from trading partners,China launched a campaign to cut overcapacity and address the prob

4、lem of irrational price competition.This marks the official start of what is known as the“anti-involution”(反内卷)campaign.Dj vu?In many ways,this campaign resembles the supply-side reform 1.0 of a decade ago.Back then,policymakers addressed the issue of capacity reduction by using“one-size-fits-all”to

5、p-down administrative measures.The steel and coal sectors were given strict reduction quotas by the central government and the targets were reached ahead of schedule.However,this“fast and furious”approach led to a loss of market efficiency and unintended consequences:some high quality,advanced steel

6、 capacity was reduced and the coal sector soon faced supply shortages.This time is different.We think the big difference this time will be that market forces will play a much bigger role,with the emphasis on fair competition and allowing the market to choose winners.So far,efforts to reduce capacity