In July 2024, the Central Politburo meeting first proposed the prevention of “involution-style” vicious competition. The Central Economic Work Conference held subsequently further emphasized a comprehensive rectification of such competition and the need to regulate the conduct of local governments and enterprises. In March this year, the “Government Work Report” listed this as a key annual task. At the sixth meeting of the Central Financial and Economic Affairs Commission held in early July, it was again emphasized that enterprises must be governed in accordance with the law to prevent disorderly price wars, guide them to improve product quality, and promote the orderly exit of outdated production capacity. This signifies that “anti-involution” has risen from being a popular social buzzword to a critical direction in national economic policy, now reshaping the competitive landscape and development model of China’s market economy.
01. What is “Involution-style” Competition?
Economists define “involution-style” competition as an irrational competition mode where marginal returns decline despite increasing inputs—sometimes even resulting in negative total output growth. This phenomenon is typically characterized by a dual dilemma of price wars and overcapacity. Under prolonged “involution-style” competition, the economy tends to fall into a negative cycle of “excessive competition → declining corporate profits → stagnating household income growth → weakening consumer spending power → prolonged price deflation.”
02. Why is It Being Targeted Now?
Unlike a decade ago, when overcapacity was primarily concentrated in upstream industries, the current wave of “involution-style” competition has three new characteristics: broader industry distribution, structural changes in competition entities, and strengthened demand constraints. This round affects not only traditional sectors but also emerging industries such as electric vehicles, lithium-ion batteries, and solar cells, with private enterprises being the main participants. On the demand side, global economic uncertainty is on the rise, the domestic real estate market is in decline, and a combination of factors—including negative population growth and high local government debt—has created mounting pressure on China’s economy from shrinking demand and weakened expectations.
03. E-Commerce Platforms: Optimizing Rules, Escaping the “Low-Price Trap”
The e-commerce sector is a hotbed for “involution-style” competition. Major platforms once engaged in fierce battles over “refund without return” policies, severely harming merchant interests. Some “coupon clippers” abused these refund rules, and combined with mechanisms such as “automatic price matching” and “site-wide price comparison,” this led to malicious merchant competition. In November 2024, China’s State Administration for Market Regulation summoned six major e-commerce platforms for talks, pointing out that “refund without return” policies were squeezing merchant survival margins and encouraging low-quality, low-price competition. Since then, e-commerce platforms have taken measures such as improving merchant appeal channels and enhancing detection of unusually frequent returns, in order to refine their refund rules.
04. Manufacturing: Technological Innovation to Shed Low-End Labels
Taizhou, Zhejiang, is home to more than 1,600 eyewear manufacturing enterprises and produces 400 million pairs of sunglasses annually. However, over 60% of finished sunglasses previously had a factory price of only around RMB 5 (approx. USD 0.69), with a profit margin of merely 4%. Many companies were forced to take orders at a loss just to retain workers. The reputation of Taizhou as the place for “cheap, low-end eyewear” placed immense pressure on local firms. In response, Taizhou built the high-standard Duqiao Eyewear Micro Business Park in 2021. Companies must meet admission standards: their equipment, production processes, and technical levels must reach or approach the domestic industry’s advanced standards. In 2024, Taizhou introduced an administrative compliance guide for the eyewear and eyewear accessories industry, shifting focus from “price competition” to “technology competition.” Today, local companies are driving continued technological breakthroughs—such as lens color-change range and lightweight design—via the “Mirror Enjoy Future” integrated service platform, which has attracted 36 “shared talent officers” to work remotely with firms.
05. New Energy Vehicles: From Price Wars to Value Battles
The new energy vehicle (NEV) sector is another key area for addressing “involution-style” competition. Since the beginning of the year, NEV “price wars” have intensified. On July 18, the Ministry of Industry and Information Technology, the National Development and Reform Commission, and the State Administration for Market Regulation jointly held a forum on the NEV industry to arrange further actions to regulate competition. In June, 17 major auto companies committed to paying suppliers within 60 days, and follow-up actions are ongoing.
Some automakers have voluntarily lowered their sales targets and abandoned unchecked expansion. Executives from companies like BYD, Chery, and Geely reiterated their strong opposition to “price wars” and emphasized the need to focus on improving core competencies to break the involution cycle.
06. Photovoltaics: Resisting Below-Cost Vicious Competition
As a strategic emerging industry where China holds global leadership, the photovoltaic (PV) sector has recently been affected by complex factors, leading to acute supply-demand imbalances and intensified market disorder. On August 19, six ministries, including the Ministry of Industry and Information Technology, jointly held a forum on the PV industry to further regulate competition. The next day, the China Photovoltaic Industry Association issued an initiative calling on companies to resolutely resist vicious competition through pricing below cost. It also urged solar station companies to optimize bidding rules, reduce the emphasis on pricing, and increase weight given to technical evaluation. The initiative further encouraged enterprises to plan production reasonably based on real market supply and demand, improve coordination between production and sales, and resolutely oppose blind capacity expansion that violates market economic laws and legal regulations and worsens the market ecosystem.
07. Express Delivery: Unified Price Hikes to Reject Vicious Competition
On July 8, the State Post Bureau held a meeting emphasizing enhanced industry supervision, refinement of market regulations in the postal and express delivery sector, and a clear stance against “involution-style” competition. Yiwu, Zhejiang—home to the world’s largest small commodity distribution center—raised its base delivery price from RMB 1.1 to RMB 1.2 (approx. USD 0.15 to 0.17) starting July 17, firing the first shot of the “anti-involution” movement.
Guangdong Province increased its base rate by RMB 0.4 (approx. USD 0.06) starting August 4 and stipulated that collection prices must not fall below RMB 1.4 (approx. USD 0.19). Violations will be penalized. The Fujian Express Delivery Industry Association called for a united front to resist vicious competition and maintain market order. Likewise, the Beijing Express Delivery Association urged express firms to abandon the short-sighted “price war” mentality and maintain reasonable profit margins in express services.
08. Banking: Easing Employee Pressure and Improving the Operating Environment
Newly released regulatory data shows that the net interest margin of commercial banks fell to 1.42% in the first half of the year. Behind this figure lies the untold hardship and struggle of grassroots bank employees, who are under unprecedented performance pressure. For example, a post-95-generation bank staff member who joined a branch of a joint-stock bank received a performance target of completing over RMB 10 million (approx. USD 1.37 million) in current deposits daily, and hundreds of millions in loans monthly.
In the summer of 2025, Guangdong became the first to launch a full-scale anti-involution initiative in the banking and insurance sector, followed by Shanghai, Zhejiang, Anhui, and others.
Industrial and Commercial Bank of China (ICBC) explicitly called for taking the lead in rectifying “involution-style” competition at its mid-year work conference, becoming the first state-owned major bank to include “anti-involution” in its key tasks for the second half of the year.
09. Deep-Seated Causes: Imbalanced Demand Structure and Algorithmic Acceleration
Huang Qunhui, a researcher at the Institute of Economics of the Chinese Academy of Social Sciences, pointed out that “involution-style” competition in manufacturing mainly manifests in two dimensions: horizontal price competition among enterprises and vertical “chain involution” along the supply chain. Platform algorithms can misjudge effective market demand structures and misalign matches, distorting price mechanisms in manufacturing, interfering with competitive strategies, and ultimately triggering involution. Some e-commerce platforms “guide” manufacturers’ production decisions through traffic control, leading manufacturers to passively cater to platforms’ preference for low-price, high-frequency products in order to gain more exposure and sales conversions.
10. The Solution: Restructuring Domestic Demand and Driving Technological Innovation in Parallel
Huang Qunhui believes that optimizing the domestic demand structure and unlocking consumption potential is one of the fundamental paths to mitigate “involution-style” competition. This requires pushing forward reforms in the income distribution system to improve the distribution pattern and enhance residents’ actual spending power.
Improving the mechanism for technological innovation and upgrading manufacturing is the core path for achieving high-quality industrial development. It is recommended that policy incentives prioritize technological innovation in industrial subsidies while limiting subsidies aimed at capacity expansion.
Experts also suggest that companies in the supply chain should focus on innovation and product upgrading to further curb “chain involution.” Large state-owned enterprises and research institutions should concentrate on tackling key common industry technologies and promote open sharing of research outcomes.
[Disclaimer]: The above content reflects analysis of publicly available information, expert insights, and BCC research. It does not constitute investment advice. BCC is not responsible for any losses resulting from reliance on the views expressed herein. Investors should exercise caution.