China targets ‘involuted’ competition to protect market stability

Chinese authorities are developing policies to curb ‘involuted’ competition, a phenomenon where intense rivalry drives down prices and profit margins without increasing quality, innovation, or productivity.

According to the National Development and Reform Commission (NDRC), this issue arises when companies compete using prices disconnected from actual costs and when local governments encourage redundant projects through excessive incentives. This cycle results in diminished profits, reduced investment in research and development, and lowered industry standards.

The government's strategy aims to distinguish healthy market pressure from destructive behaviors that weaken entire sectors. Proposed measures include enforcing competition laws, establishing quality standards, reducing local protectionism, and creating a unified national market to prevent a permanent ‘race to the bottom’.