Jing Ji Wang·2025-07-31 06:32Core Viewpoint - The banking industry is facing intense competition characterized by price wars and a struggle for quality customers, leading to a phenomenon known as "involution" which is detrimental to long-term profitability and resource allocation efficiency [1][2][3]. Group 1: Industry Challenges - The banking sector is experiencing a downward trend in loan interest rates, with some banks offering rates as low as 2.5% for business loans, leading to a competitive environment where banks are forced to lower rates to retain customers [2][3]. - The net interest margin for banks has dropped to 1.43% in the first quarter, indicating shrinking profit margins due to intense competition and price wars [3]. - The internal competition has led to a "prisoner's dilemma" where banks are aware that price wars harm overall industry profits but feel compelled to follow suit to avoid losing market share [4][5]. Group 2: Recommendations for Improvement - Experts suggest that financial management departments should implement strong measures to create a multi-tiered, widely covered, and differentiated financial institution system to better serve various customer groups [1][6]. - There is a call for a shift in performance evaluation from a scale-oriented approach to one focused on quality and efficiency, incorporating risk-adjusted returns and customer value contributions into assessment criteria [6][7]. - The restructuring of business models is recommended, moving from a scale-driven to a value-driven approach, emphasizing the profitability of individual customers and reducing reliance on single credit products [6][7].