Chen Weiwei: Addressing Both Symptoms and Root Causes to Deepen the Rectification of "Involution-style" Competition
In recent years, low-price, low-quality, and low-level "involutionary" competition [1] has faced significant criticism. From irrational competition in the electric vehicle industry and seasonal supply-demand imbalances in the photovoltaic sector to disorderly subsidies on internet platforms, the essence of these phenomena is a homogenized zero-sum game decoupled from innovation. This "involutionary" competition distorts market mechanisms and stifles corporate innovation vitality, becoming a chronic malady in the current process of China’s economic transformation and upgrading. In response, both the 2025 Central Economic Work Conference and this year's Government Work Report have identified "deeply remediating 'involutionary' competition" as a critical task, aiming to foster a healthy market ecosystem, resolve the contradiction between strong supply and weak demand, and smooth the domestic dual circulation.
"Involutionary" competition is not normal market competition; rather, it is an internal-wastage type of disorderly competition initiated by market entities through low-price dumping and redundant construction when they lack breakthroughs in core technologies or differentiated advantages. Its typical characteristic is "growth without quality," where enterprises fall into a strange loop of "the more input, the lower the return," ultimately leading to the deterioration of industry ecosystems and inefficient resource allocation. While such competition may appear to grant consumers short-term low-price dividends, it harbors risks. When corporate profit margins are severely squeezed, it inevitably weakens their ability to invest in high-value-added segments such as R&D and brand building; the low-quality issues hidden behind low prices will ultimately be borne by the consumer.
From the micro to the macro, and from the enterprise to the market, "involutionary" competition obstructs the pace of high-quality development across multiple dimensions. From the enterprise dimension, it acts as a "corrosive agent" to innovation vitality, seriously hindering industrial upgrading. Reasonable profits are the "living water" [2] source for corporate R&D investment; however, "involutionary" competition sacrifices profit for market share, causing enterprises that uphold quality and persist in innovation to fall into a disadvantageous position due to higher costs. Meanwhile, speculators participate in the low-price game by lowering standards and reducing configurations, resulting in "bad money driving out good." From the industrial dimension, it is a "disruptor" of market order, exacerbating overcapacity. In the absence of institutional constraints, "involution" easily triggers a sector-wide homogenization predicament, wherein some enterprises blindly expand production regardless of market demand and then rely on price suppression to digest capacity, forming a cycle of "expansion—price drop—further expansion." This not only causes the misallocation of production factors but also shocks the normal pricing systems and profit logic of the industry. More notably, it serves as a "stumbling block" [3] to the construction of a national unified market. The key to building a national unified market is breaking barriers to achieve the free flow of factors and the optimal allocation of resources; however, "involution" is often accompanied by local protectionism. Some localities segment the market through restrictions or differentiated subsidies, leading to inconsistent rules and obstructed factor flows. Such regionalized "involution" weakens the overall competitiveness of the national market.
Why does "involutionary" competition occur? The reasons are complex. First, structural supply-demand imbalance is a major incentive, breeding a typical "prisoner's dilemma." Structural overcapacity on the supply side and lagging consumer capacity on the demand side both force enterprises into low-level games within limited market space, making them prone to price wars. Second, insufficient innovation-driven capacity restricts competition from leaping to a higher level. Some enterprises suffer from path dependency and short-termism, focusing competition on the "efficient utilization of existing resources" rather than "creating superior resources," which easily leads to a low-level equilibrium trap and a lack of capacity to escape homogenized competition. Third, the current performance evaluation systems for officials, as well as fiscal, tax, and statistical systems, contain links that are incompatible with the construction of a national unified market. Some local governments engage in improper behavior, pursuing short-term political achievements by intervening in the market through hidden barriers, local protectionism, discriminatory entry thresholds, or improper subsidies. This artificially creates "policy troughs" [4] that fragment the national unified market, distort competitive signals, and encourage a tendency among some enterprises toward "policy arbitrage" rather than "innovation-based profit." Fourth, certain specific industries have high exit barriers, locking in inefficient capacity and intensifying "involution." For example, some manufacturing investments are massive with highly specific asset uses, causing enterprises to be "tied down" by their own upfront investments; even when the industry is in a downturn, enterprises find it difficult to exit smoothly and are forced to participate in price wars to survive, resulting in persistently low resource allocation efficiency.
Currently, China's economy is in a stage of promoting high-quality development and consolidating the trend of recovery and improvement; remediating "involutionary" competition can play a pivotal role. This measure strikes precisely at the key bottlenecks currently restricting the smooth flow of the economic cycle. On one end, it connects to the foundational project of "building a national unified market," fundamentally eradicating the soil that breeds regional and low-level "involution" by breaking down local protectionism and market fragmentation. On the other end, it aligns with the strategic direction of "developing new quality productive forces," effectively reallocating resources from internal-wastage "involutionary" competition to "value competition" led by standards and driven by innovation by correcting incentive mechanisms.
Since last year, relevant departments have issued various measures to remediate "involutionary" competition—for example, requiring the curb of low-price disorderly competition in the photovoltaic supply chain and launching special rectification actions against online chaos in the automotive industry—all of which have yielded good results. At the same time, it must be recognized that remediating "involutionary" competition is by no means easy. To further consolidate achievements, we must continue to adhere to a systems thinking approach and precise policy implementation, achieving the unification of treating both symptoms and root causes.
First, we must solidify the institutional foundation, advancing the construction of a national unified market in depth by regulating government behavior. We must strictly implement the Fair Competition Review Regulations and their implementation measures, comprehensively clearing and abolishing policies containing provisions for local protection or market fragmentation. We must vigorously rectify improper market intervention and prevent competitive chaos caused by government "overstepping" or "absence" from the source. In accordance with the basic requirements of "five unifications and one openness" [5], we must resolutely break through bottlenecks and blockages.
Second, we must activate the innovation engine, guiding competition toward "competing on technology" and "competing on the ecosystem." Enterprises should be encouraged to explore differentiated development paths, enhancing value creation capabilities by relying on technological innovation and standard leadership. The series of practices by relevant departments to formulate and revise national standards in fields such as photovoltaics, batteries, and new energy vehicles are precisely powerful measures to guide industries toward quality-based and standard-based competition.
Third, we must clarify the "bottom line" of rules and construct a regulatory system that combines rigidity with flexibility. We should strengthen enforcement against monopolies and unfair competition, utilizing flexible tools such as advance warnings, compliance guidance, and administrative guidance talks. This will resolutely break down barriers while leaving sufficient space for corporate innovation, achieving a balance between regulatory effectiveness and developmental vitality.
Fourth, we must pool governance efforts to form a pattern of multi-party synergy. The government must be a good "gatekeeper" for fair competition; industry associations should call for strengthened self-discipline; and enterprises should establish long-term perspectives focusing on breakthroughs in key core technologies. In particular, "chain leader" enterprises [6] should lead collaborative innovation across the industrial chain, jointly pushing the industry from low-level internal wastage to high-level synergy, allowing "involutionary pressure" to transform smoothly into "innovation tension."
Fair competition is the core of a market economy; only regulated and orderly competition can stimulate market vitality. Remediating "involutionary" competition is not a negation of market competition, but rather a move to break the shackles of low-level internal wastage and guide enterprises and industries to shift from "competing on price" and "competing on consumption" to "competing on value" and "competing on innovation." As the relevant institutional systems continue to improve and regulatory efficiency rises, the order of market competition will become clearer, corporate innovation vitality will flow fully, and the foundation for building a national unified market will become increasingly solid, injecting lasting impetus into the promotion of high-quality development and the construction of the New Development Paradigm.