In July 2024, the Central Political Bureau held a meeting and pointed out that we need to strengthen industry self-discipline and prevent vicious involutionary competition. In December, the Central Economic Work Conference proposed to comprehensively rectify the involutionary competition and regulate the behavior of local governments and enterprises. This year's government work report includes comprehensively rectifying the involutionary competition for the first time.
The phenomenon of involutionary competition actually describes a state of excessive competition, in which the ratio of resource input to output is imbalanced, leading to ineffective internal consumption and a possible vicious competitive environment. This phenomenon mainly occurs in the general manufacturing industry in China. Currently, the existence of outdated and inefficient production capacities, as well as the involutionary competition among them, are the main factors hindering the economy from entering a normal development sequence. Preventing involutionary competition is the top priority for achieving high-quality development.
The essence of involutionary competition is a result of the combination of market mechanism failure and policy distortion. To achieve breakthrough, we need to adhere to the synergy of efficient market and proactive government, eliminate administrative segmentation through the construction of a unified national market, break low-end lock-in through innovation, and constrain irrational expansion through institutional reform. Only in this way can the pressure of involutionary competition be transformed into the driving force of external expansion, promoting China's economy to move towards a new stage of high-quality development.
