Latest news with #involution
New York Times
22-07-2025
- Business
- New York Times
China's Problem With Competition: There's Too Much of It
It's the circle of life in China's business world. A promising technology or product emerges. Chinese manufacturers, by the dozens or sometimes the hundreds, storm into that nascent sector. They ramp up production and drive down costs. As the overall market grows, the competition becomes increasingly cutthroat, with rival companies undercutting one another and enduring razor-thin profit margins or even losses in the hope of outlasting the field. Adding to the competitive fervor, China's local governments, each with its own target for economic and job growth, back a homegrown champion and shower it with financial and bureaucratic support. Soon, the whole industry, awash in production capacity, is trapped in a race for survival. While most governments encourage vigorous competition and low prices, China is going in the opposite direction. It is trying to rein in 'involution,' a sociological phrase widely used in China to describe a self-defeating cycle of excessive competition and damaging deflation. Xi Jinping, China's top leader, pledged to take steps to crack down on 'low price and disorderly competition' and eliminate outdated industrial capacity at a high-level economic policy meeting this month. At another recent gathering, on urban development, Mr. Xi questioned whether every province needed to rush into sectors like artificial intelligence and electric cars. 'Price wars and 'involutionary' competition will only encourage 'bad money driving out good money,'' wrote People's Daily, the official mouthpiece of the Chinese Communist Party. 'Simply 'rolling' prices downward will not result in a winner.' China's efforts to tackle involution are taking on new life as President Trump's tariffs discourage exports to the United States. Other countries are also wary of a flood of inexpensive Chinese goods redirected their way. These unsold goods, combined with a slowing domestic economy, have intensified competition, fueling a deflationary spiral. Want all of The Times? Subscribe.
South China Morning Post
21-07-2025
- Business
- South China Morning Post
China urged to curb ‘neijuan' by boosting domestic consumption, innovation-led growth
Stimulating consumer demand and encouraging sustainable innovation are vital to China's efforts to combat excessive competition – termed neijuan in Chinese, or 'involution' - and could even help turn the trend into a virtuous cycle, analysts said. Top-down macroeconomic policies are also crucial, as actions taken by enterprises alone are insufficient, they added. 'The essence of 'involutional' competition is inefficient competition in a limited market space,' analysts from China International Capital Corporation (CICC) said in a research note. 'Therefore, boosting demand to create an 'incremental cake' by expanding the scale of market demand can provide a favourable macro environment to combat involution.' The term neijuan, or 'involution', refers to a self-defeating cycle of excessive competition in which companies are forced to invest increasing resources without benefiting from proportional returns. To tackle the roots of the problem, companies must increase research and development and offer differentiated products – fostering a positive, demand-driven cycle, the CICC analysts said in the July 17 note.
Bloomberg
12-06-2025
- Business
- Bloomberg
Hong Kong Restaurateurs Fight to Survive Amid Wave of Closures
Save In this week's Hong Kong Edition, we speak to restaurant owners about how to succeed in a challenging environment, look at why China's leaders are so worried about the word 'involution,' talk to Samsen co-founder Adam Cliff about his expansion plans, and review a new Japanese restaurant on Caine Road. To subscribe to this weekly newsletter for free, click here.
Bloomberg
07-06-2025
- Automotive
- Bloomberg
How China's Woes Resurrected the Economic Term ‘Involution'
Prolonged economic challenges tend to generate their own terminology. When the US struggled with low growth and below-target inflation in the years after the 2008 crisis, the oft-used phrase was ' secular stagnation.' Even worse conditions in Japan gave rise to a ' deflationary mindset. ' Nowadays, in China, economists, investors and even the government itself are angst-ridden over 'involution' — a term likely unfamiliar even to those who took college macroeconomics. It refers to destructive competition, and it popped up again in recent days after BYD Co., China's biggest electric vehicle maker, triggered 'a new round of 'price-war' panic,' in the words of the nation's automobile industry association.
South China Morning Post
31-05-2025
- Business
- South China Morning Post
Why China's problem of cutthroat competition demands the world's attention
When Joseph Schumpeter coined the term 'creative destruction', he might not have realised just how destructive unrestrained competition could be. That is the paradox at the heart of China's recent economic success. Advertisement On Monday, People's Daily ran an editorial , calling for neijuan or involution – a self-defeating cycle of excessive competition – to be nipped in the bud. For China's Communist Party mouthpiece to publicly acknowledge the issue signals its severity. Involution has become an economic undercurrent shaping what we are seeing, from industrial strategy to global trade dynamics. For example, around the time the People's Daily article was published, BYD slashed prices on 22 vehicle models by up to 34 per cent, with its Seagull model now selling for just 55,800 yuan (US$7,750). Other competitors are likely to follow suit shortly. Headlines largely focused on the stock price of carmakers. However, the real story is that BYD could have just priced an entire cohort of Japanese, Korean and European cars out of relevance. Let's not forget the knock-on effects: foreign carmakers facing shrinking margins and slowing innovation budgets could end up withdrawing from electric vehicle (EV) battles they cannot win. Then there are Meituan and , both stepping up subsidies, fighting for user growth in an already saturated food delivery market. This is not because demand has collapsed but because competition has become pathological. Businesses are stuck in a race to the bottom. Advertisement Classical economic theory suggests profits will converge to a normal level in the long run, but such intense competition means supernormal profit plunges quickly while subnormal profit takes much longer to converge upwards. Margins get relentlessly compressed. Incentives trigger an excessive response. Everyone chases the same opportunity – often recklessly.
