China's ‘involution' trap is hurting nation's competitiveness, state media warns
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A self-defeating cycle of excessive competition – known as
neijuan , or involution – has remained prevalent, distorting market dynamics and hindering sustainable growth, the Economic Daily warned in a commentary on Wednesday, as the issue has been a focal point in the past year.
Explaining the term as 'the harder you work, the less you gain', the state-owned newspaper focusing on economic reports urged government officials and business owners to focus on long-term economic health rather than short-term gains.
Such a phenomenon 'traps all kinds of entities in a vicious cycle of low-price, low-quality, and ineffective repeated competition, ultimately damaging the overall competitiveness of related industries in China', it said.
Among local governments, that type of self-defeating competition includes misguided efforts to attract businesses through unsustainable policies – such as offering excessive incentives like tax breaks and subsidies – resulting in rising debt and long-term risks, the newspaper noted.
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For businesses, 'involution' manifests in excessive price wars, a lack of differentiation, and a focus on short-term profits at the expense of long-term innovation, which leads to resource waste, stagnation and lowered overall competitiveness.
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By choosing not to retaliate publicly, Beijing maintains strategic flexibility. It keeps markets calm, retains diplomatic maneuverability and avoids giving Trump the satisfaction of a public spat. For Washington, the silence should not be mistaken for complacency; the long-term implications are profound. In Beijing's strategic playbook, stillness is often the opening move, not the endgame. It reacts to Trump's policies with a mix of defiance, strategic counterpunches and diplomatic maneuvering, ultimately weathering the storm without major economic collapse. While headlines focus on Trump's bombast and Beijing's stillness, the real shift may be structural: an acceleration in China's quest to insulate itself from Western financial leverage and a weakening of the dollar's uncontested supremacy. China is already adapting its financial posture to reduce reliance on the US-dominated system. Over time, this quiet recalibration may do more to undermine American financial power than any headline-grabbing confrontation. The risk is not that China reacts now, but that it quietly and slowly restructures its entire financial strategy, with long-term and negative consequences for the US-led financial order. The question now is not whether China will retaliate, but how subtly and how soon.
