Core Viewpoint - The Guangdong banking industry is initiating a comprehensive rectification of "involutionary" competition through a structured system of "1+3+N" to address the challenges posed by intense market competition and declining net interest margins [1][6][7]. Group 1: Background and Current Situation - The "involutionary" competition in the banking sector is characterized by asymmetric declines in deposit and loan interest rates, leading to a continuous narrowing of net interest margins [1][7]. - The competition among banks has intensified, resulting in a gradual escalation of price wars and a slowdown in net income growth due to weakened economies of scale in loan issuance [1][7]. - The Guangdong Banking Association has convened a meeting to address these issues, with the participation of major banks like Ping An Bank, which has already taken steps to respond to the initiative [2][7]. Group 2: Regulatory Framework and Measures - The "1+3+N" system includes a negative list for comprehensive rectification issued by regulatory authorities, a self-discipline convention, an initiative letter, and a commitment letter from the banking association, along with various self-regulatory measures across related business areas [6][7]. - The meeting emphasized the importance of self-regulation within the industry to combat "involutionary" competition and promote sustainable development in the Guangdong banking sector [7]. Group 3: Market Dynamics and Interest Rates - The external manifestation of "involution" in the banking industry is most evident in the declining interest rates for loans and deposits, particularly in consumer loans, which have seen rates drop below 3% [8][9]. - The competition has led to some banks offering consumer loans at rates as low as 2.5% to 2.8%, prompting concerns about profitability [8]. - The People's Bank of China has highlighted the rapid decline in loan rates compared to deposit rates, indicating a significant deviation from policy interest rate adjustments due to fierce market competition [9][10]. Group 4: Challenges and Recommendations - The deeper causes of "involution" include a lack of differentiated competition among banks, an imbalance between supply and demand, and a concentration of market share among a few large banks [10][11]. - Recommendations for addressing these challenges include encouraging banks to reshape their operational philosophies, explore differentiated competition models, and enhance risk management practices [11].