Shi Lei: What Does “Anti-Involution” Really Mean? (AI Translation)

【周刊提前读】石磊专栏：“反内卷”的内涵是什么

[para. 1] In the second quarter of 2025, under the pressure of an ongoing tariff war, China's economy reported a year-over-year GDP growth of 5.2%, considerably surpassing expectations. However, the GDP deflator—a measure reflecting changes in overall price levels—fell by 1.26% year-over-year, marking the ninth consecutive quarter of price declines. In parallel, the sales-to-production ratio for large-scale industrial enterprises dropped to its lowest level for the same period in nearly 20 years. These statistics indicate that despite adequate demand spurred by fiscal stimulus measures and a surge in exports during the quarter, the growth in production outpaced demand, leading to worsening overcapacity[para. 1].

[para. 2] Responding to these circumstances, a Central Financial and Economic Commission meeting in early July 2025 mandated the regulation of disordered low-price competition and called for the orderly exit of outdated production capacities. This recalls the supply-side structural reforms proposed a decade ago, which prioritized five key objectives: reducing overcapacity, lowering inventories, deleveraging, cutting costs, and filling institutional gaps[para. 2].

[para. 3-4] The concept of "anti-involution"—fighting destructive internal competition—has emerged in policy discussions, paralleling a new round of supply-side reform. In July 2024, the Central Politburo stressed the need to reinforce industry self-discipline, prevent "involutionary" vicious competition, and strengthen mechanisms for the survival of the fittest, facilitating the exit of inefficient capacities. While China’s industrial structure has significantly changed over the past ten years, with many new industries assuming global leadership, overcapacity and involution now affect not only traditional heavy industries but also emerging sectors like new energy vehicles, e-commerce, and photovoltaics. Here, "involution" refers to a scenario where economic players invest significant resources without corresponding overall gains—essentially, unproductive competition. The primary aim of "anti-involution" is not simply to reduce capacity or hamper competition but to combat unfair and inefficient forms of competition that provide no net benefit[para. 3][para. 4].

[para. 5] The rapidly changing international environment poses significant challenges for China’s development. However, as global strategies and circumstances evolve, China’s globally competitive production capacity could become an advantage[para. 5].

[para. 6] China’s competitive strength is increasingly reflected in its rising prominence across various global networks, including energy, goods trade, supply chains, payment, and information networks. Notably, the nature of China’s "traffic" or flows over the past five years differs from the previous decade. Whereas earlier growth was situated within established global trade structures, recent growth has occurred as those systems fragment and new ecological networks emerge, changing the underlying order. Therefore, in evaluating competitive positions, it’s necessary to consider a player’s "ecological niche" within these networks—not just scale, but actual network influence[para. 6].

[para. 7] Several metrics are central to network analysis: degree centrality (number of connections), betweenness centrality (how often a node acts as a bridge along the shortest paths within the network), closeness centrality (proximity to other nodes), and eigenvector centrality (connections to other influential nodes). Through this analytic lens, it is evident that as China becomes more open, its degree centrality increases. Policies like visa-free entry boost the country’s role as a key transit hub, particularly evident in the post-pandemic rebound in travel. Online travel agencies occupy pivotal positions in the value chain, reaping high profits, even as downstream sectors such as hotels and scenic spots struggle. Traditional e-commerce giants like JD.com are also entering the sector to compete with established players like Ctrip[para. 7].

[para. 8] Multinational companies, by virtue of their unique resources and brands, often have high eigenvector centrality in supply chains. Their partners, however, occupy more substitutable positions—benefiting from rising traffic and sales in these networks, but at the cost of heavy investment and potentially low returns, often resulting in increased capacity without proportionately higher profits[para. 8].

[para. 9] In conclusion, network flows are not the end goal; what matters is the influence nodes exert across the entire ecological network. Thus, the ongoing restructuring of network order and flows will ultimately drive a revaluation of value and competitiveness in China going forward[para. 9].