中国：反内卷运动是否会影响经济-China_ Will the anti-involution campaign reflate the economy_

Summary of Key Points from the Conference Call Industry Overview - The focus is on the Chinese economy, particularly the impact of the anti-involution campaign on economic recovery and deflation issues stemming from the property sector collapse and overcapacity in the green sector [1][2][3][4]. Core Insights and Arguments - Deflation and Economic Recovery: China's economic recovery post-pandemic has been weak, characterized by deflation, primarily due to the collapse of the property sector, which accounted for 25% of GDP and 38% of national fiscal revenue [1][14]. - Anti-Involution Campaign: Launched in mid-2024, aimed at curbing aggressive price competition among enterprises. Recent actions include increased enforcement and price coordination meetings, leading to rising commodity prices and stock prices for certain companies [2][7]. - Concerns Over Overcapacity: Despite the anti-involution efforts, overcapacity in the green sector remains a significant concern. The campaign may not effectively reflate the economy due to anticipated demand shocks and lack of substantial stimulus programs [3][4][33]. - Price Trends: Recent spikes in commodity prices are viewed as speculative and unsustainable. PPI inflation remains negative, with forecasts of -2.5% for 2025 and -0.6% for 2026 [4][10]. - Sector-Specific Impacts: The solar industry has been particularly affected by price competition, with many producers incurring losses. Investment growth in the solar sector contracted by 29.1% in 2024 [9][29]. Additional Important Insights - Investment Trends: Local governments have heavily invested in manufacturing sectors, particularly in EVs, batteries, and solar, leading to excessive capacity and price wars. Investment growth in lithium-ion batteries dropped from 104.6% in 2021 to 19.1% in 2023 [29][44]. - Property Market Decline: The property market continues to struggle, with contract sales of top developers dropping by 73.1% in value from H1 2021 to H1 2025. Average home prices have fallen by around 30% [20][47]. - Export Challenges: Despite a temporary rebound in exports, significant headwinds are expected due to US tariffs and a slowdown in demand. Exports to the US fell by 21.6% y-o-y in July [54][61]. - Social Security Enforcement: Stricter enforcement of social security contributions is anticipated to challenge SMEs, particularly in labor-intensive sectors, potentially leading to closures or workforce reductions [55][57]. Conclusion - The anti-involution campaign, while aimed at addressing deflation and overcapacity, faces significant challenges. The lack of robust demand-side stimulus, ongoing property market issues, and potential demand shocks could hinder effective economic recovery in China [3][33][67].