Explainer-What is "involution", China's race-to-the-bottom competition trend?

Core Insights - China's leaders are committed to ending aggressive price cuts by companies, which regulators believe are leading to excessive competition and harming the economy [1][2] - The "anti-involution" campaign is a response to overcapacity in manufacturing, a result of previous government stimulus efforts, and price cuts aimed at clearing stock or boosting consumption [2][6] - There are growing concerns that ongoing price wars could lead to entrenched deflation, which would impede efforts to stabilize China's $19 trillion economy [2][8] Industry Context - The term "involution" has gained traction in China, describing the hypercompetitive environment that often results in self-defeating behaviors among individuals and companies [3][6] - The shift from property-driven growth to a more industrial complex has led to increased resource investment without corresponding returns, contributing to a "race to the bottom" in various sectors [6][7] - The current level of competition is resulting in diminishing returns, posing a threat to economic stability, prompting the government to consider interventions [7][8]