‘Sectors in distress’: China’s intense competition demands action, economic official warns

The worsening problem of ‘involution’, or neijuan, is forcing Beijing to ramp up rhetoric to overcome a major obstacle to China’s economic growth

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Employees work on an electric vehicle (EV) production line during an organised media tour to a factory in China’s Jiangxi province in May. Photo: Reuters

Published: 5:30pm, 31 Dec 2024

China should take action to abate low-quality vicious competition resulting in neijuan, or “involution”, and encourage high-quality development, a senior economic official said in an article published by the official newspaper of the Communist Party.

“Intensified involutionary competition in certain industries has driven down product prices, reducing profitability and putting some sectors in distress,” wrote Han Wenxiu, deputy director of the Central Financial and Economic Affairs Commission’s general office, in a piece published by People’s Daily on Tuesday.

“We should focus on raising standards in environmental protection, energy use, and technology, as well as accelerating industry mergers and reorganisations,” Han said, adding that competition that fosters growth should be encouraged while a “race to the bottom” should be curbed.

“Involutionary competition” refers to cutthroat competition wherein a rise in resource investment fails to generate proportional returns or support reinvestment in research and development.

It has been one of the major obstacles in China’s economy, as such intense internal competition is now prevalent in several sectors.

Echoing Han’s comments, Li Shufu, the founder and chairman of Geely, one of the major automobile manufacturers in China, pledged to “firmly oppose the vicious involutionary competition” in his year-end speech on Tuesday.