Core Viewpoint - The root cause of "involution" competition lies not in industries or enterprises, but in the improper intervention of local governments in micro-level affairs [2][3]. Group 1: Government Intervention and Involution - The "anti-involution" policy will become a mainline policy in supply-side reforms starting from mid-2024, focusing on regulating local government and enterprise behavior [2]. - Local governments' selective industrial policies and various subsidies are significant drivers of market supply-demand imbalance, which is the essence of "involution" [3][16]. - The need for local governments to abandon selective industrial policies and restrict their micro-level interventions is emphasized as crucial for addressing "involution" [3][16]. Group 2: Economic Growth and Demand Management - China's GDP growth in the first half of the year showed resilience, but nominal GDP growth has slowed, with the second quarter's nominal GDP growth dropping to 3.9% [4]. - The nominal GDP growth is critical for enterprises, local governments, and households, as it directly impacts cash flow and financial health [4]. - Consumption should be the focal point for stimulating total demand, as insufficient consumption can hinder economic growth [5]. Group 3: Policy Recommendations for Consumption - Expanding the scope of consumption subsidies, such as including service consumption, is suggested to further stimulate demand [6]. - Issuing quasi-cash vouchers to residents is proposed as a viable option to enhance purchasing power and alleviate financial pressure on enterprises [6]. - Increasing the issuance of special government bonds to support financial institutions and improve liquidity for enterprises is recommended [6]. Group 4: Supply-Side Reforms and Long-Term Strategy - Supply-side reforms must continue alongside demand management to ensure sustainable economic growth [7]. - The experience of Japan in the 1980s highlights the importance of improving supply-side efficiency to complement demand-side stimulus [7]. - A shift in economic growth model towards innovation and technological advancement is necessary to address the root causes of demand insufficiency [8]. Group 5: Innovation and Market Dynamics - The distinction between Schumpeterian entrepreneurs, who drive original innovation, and Kirznerian entrepreneurs, who capitalize on market opportunities, is crucial for understanding market dynamics [9][10]. - The rapid entry of Kirznerian entrepreneurs, spurred by government subsidies, can lead to market saturation and reduced profitability for original innovators [11][12]. - The role of local governments in fostering competition can inadvertently stifle original innovation, as seen in various industries like photovoltaics and electric vehicles [11][14]. Group 6: Regulatory Framework and Market Competition - The need for a legal framework to constrain local government interventions is emphasized, as many interventions are self-assigned rather than mandated by central government [17]. - Market competition should be the primary mechanism for clearing inefficient capacities, rather than relying on administrative measures [18]. - The emergence of "trusts" or monopolistic behaviors in the market, as seen in historical contexts, necessitates stringent regulatory oversight to prevent anti-competitive practices [20].

Group 1 - The core policy direction from mid-2024, especially into 2025, is the comprehensive rectification of "involutionary" competition, which has gained significant market attention across various industries such as photovoltaics, automotive, and e-commerce [2] - The essence of "involution" is identified as a market supply-demand imbalance, primarily driven by local government interventions through subsidies and industrial funds [2][18] - The need for local governments to abandon selective industrial policies and restrict their micro-intervention capabilities in industries and enterprises is emphasized as a key aspect of the "anti-involution" initiative [18] Group 2 - In the first half of 2023, China's GDP growth showed resilience, but nominal GDP growth slowed marginally, with a second-quarter nominal GDP growth rate of 3.9% and a real GDP growth rate of 5.2% [3] - The nominal GDP growth is crucial for businesses, local governments, and households, as it directly impacts cash flow and tax revenues, highlighting the importance of managing total demand effectively [3] - Consumer spending is identified as the primary focus for stimulating demand, as insufficient consumption can hinder economic growth and lead to ineffective investments [4] Group 3 - Measures such as expanding the scope of subsidies to include service consumption and considering the issuance of quasi-cash vouchers are suggested to further stimulate consumer spending [5] - The issuance of special government bonds could provide liquidity to repay local government debts to enterprises, thereby improving their financial conditions [6] - Continuous supply-side reforms are necessary alongside demand management to ensure a balanced economic growth model [7][8] Group 4 - The supply-side also relies on capital accumulation, labor input, and total factor productivity improvement, with a focus on enhancing labor's contribution to GDP growth through innovation [9][10] - The current industrial upgrades in China are primarily technology improvements in engineering, with significant room for breakthroughs in original innovation [10][11] - The lack of profitability in industries like photovoltaics and new energy vehicles is attributed to excessive competition driven by local government policies that encourage rapid market entry without fostering original innovation [11][12] Group 5 - The relationship between local governments and industries has evolved since the 1980s, with local governments often supporting similar industries due to tax revenue motivations and distorted performance metrics [17] - The need for regulatory reforms to limit local government interventions and promote a market-driven economy is highlighted, as excessive government support can lead to inefficiencies and market distortions [18][20] - Establishing a legal framework to constrain local government decision-making and interventions is essential for fostering a competitive market environment [19]

Core Viewpoint - The article emphasizes the need for a proactive macroeconomic policy, particularly through the implementation of moderately loose monetary policy, to address the uncertainties arising from the changing external environment and to ensure high-quality economic development [1]. PART.01: Reasons for Implementing Moderately Loose Monetary Policy - Global economic growth is slowing, with increased uncertainty due to rising trade protectionism. The IMF has revised the global economic growth forecast for 2025 from 3.3% to 2.8%, and the WTO has cut the global trade growth forecast from 3.2% to 1.7% [2]. - The slowdown in global trade is primarily attributed to the U.S. government's tariff and trade policies, which have raised trade costs and inflation pressures, leading to reduced investment and economic growth [2]. - China's economy is highly integrated into the global market, with a trade dependence of 72.4% as of April 2025, and external shocks from global trade slowdowns are impacting China's foreign trade growth [2]. PART.02: Understanding Moderately Loose Monetary Policy - Monetary policy focuses on total demand management and counter-cyclical adjustments. It aims to restore balance between total demand and supply, ensuring price stability and economic growth [6]. - Moderately loose monetary policy involves dynamic adjustments based on macroeconomic and financial market changes, utilizing various tools to lower financing costs and stimulate demand [7]. - The policy framework includes five stances: loose, moderately loose, stable, moderately tight, and tight, with adjustments made according to economic conditions [8]. PART.03: Implementing Moderately Loose Monetary Policy - The implementation of moderately loose monetary policy has shown effectiveness in promoting economic growth and managing total demand [10]. - Key measures include lowering policy interest rates and maintaining reasonable growth in money and credit, with significant reductions in loan rates for enterprises and individuals [11]. - The People's Bank of China has introduced ten monetary policy measures to enhance support for the real economy, focusing on total, price, and structural aspects to ensure effective policy transmission and support for key sectors [12][13].