China's Anti-Involution Battle: A New Approach to Market Stability

China's domestic market faces overcapacity and price wars, leading to collapsing profitability and deflation. The government introduced an 'anti-involution' program to mitigate these issues. Despite early successes, challenges remain, including private sector cooperation and the possibility of inhibiting innovation and causing job losses.

China is tackling overcapacity and intense price wars in its domestic market with an 'anti-involution' program aimed at stabilizing profitability and curbing deflation. The program, launched by the government, has seen early victories but must overcome significant hurdles to ensure its sustained success.

The anti-involution campaign targets areas like electric vehicles, food delivery, and the steel industry, with strategies to moderate investments in these high-competition sectors. However, private sector compliance remains uncertain, and local governments' fiscal priorities could hinder long-term reforms.

To effectively address excess capacity, China may need to enhance domestic consumption and consider innovative policies to support industry consolidation. As the nation pursues high-quality development, balancing market stability with growth remains a complex challenge.

(With inputs from agencies.)