China’s firms risk stunting growth with ‘vicious competition’, senior official says

In a recent article, a Chinese official has cautioned against ‘vicious competition’ among firms which could stifle growth if left unchecked

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Han Wenxiu, a high-level economic official, has warned against “vicious competition” between firms that could slow down growth. Photo: Simon Song

Published: 9:00pm, 17 Jun 2024

As a fierce debate rages among China’s biggest electric vehicle (EV) manufacturers over an ongoing price war, a senior official has invoked “involution” – a term popularised by pessimistic online discussion of the country’s economy – to caution against the intense competition that has stifled growth in some sectors.

Han Wenxiu, deputy director of the General Office of the Central Financial and Economic Affairs Commission, published an article discussing recent guidelines from Beijing to achieve “high-quality development” – a common phrase referencing the world’s second-largest economy’s attempts to rise up the global value chain.

“We have to … remove administrative barriers, dismiss local protectionism and the vicious competition of ‘involution’ so we can speed up the building of a unified market,” Han wrote in Qiushi, a theoretical journal of the country’s Communist Party, in an article published on Sunday.

Han’s deployment of the buzzword serves as tacit acknowledgement by a top Chinese official of the challenges the country’s few booming industries face in an economy desperate for new growth drivers. Observers have also taken notice as they look for signs of policy directions to be taken at the third plenum of the party’s Central Committee, scheduled to be held in the coming weeks.

Endless involution and a boorish price war will result in cutting corners and substandard products

Li Shufu

“Involution”, in its earliest iteration, referred to the shrinking opportunities available in a fiercely competitive society despite the hard work put in by its participants. It has since been adopted by players in the industries labelled the “new three”- photovoltaics, lithium-ion batteries and EVs – which China considers potential new sources of economic growth.

But challenges, both domestic and international, have arisen for these industries which could disrupt China’s manufacturing sector as it attempts to walk the path of “high-quality development”.