China’s generous local subsidies have helped it dominate high-tech industries such as electric vehicles and solar panels. But they’ve also helped fuel an oversupply of the same goods and a vicious price war. This new phenomenon of “involution” is damaging the country’s economy, as The Economist’s China economics editor, Simon Cox, explains.Find out what China’s government could do to turn things around: https://t.co/4DuPRbRuhz ...

Economic Concerns & Restructuring - Overproduction, referred to as involution, negatively impacts the economy [1] - Significant restructuring is needed, similar to the 1990s, involving selecting companies for survival, auction, or restructuring [2] - China's potential restructuring challenges are compared to Japan's debt issues, highlighting the need for decisive action [2][3] Global Manufacturing & Market Dynamics - China accounts for 32% of global manufactured goods, exceeding the combined output of the United States, Japan, and Germany [3] - Due to market closures, China may need to focus on developing countries [3] Innovation & Challenges - China faces challenges related to its pension and income tax systems [4] - China demonstrates significant innovation, particularly in government-directed initiatives [4] - China is more advanced in the application of AI compared to the United States [4]

China is producing more goods than there’s demand for, sparking a race to the bottom for prices and destructive competition known as “involution." Here's what to know. https://t.co/gImW6RiwVr ...

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]