Abstract

Currently, the intensification of ‘involutionary’ competition among Chinese industrial enterprises is starkly evidenced by declining corporate profit growth rates, lower industrial capacity utilization, and impaired macroeconomic growth engines. This escalation is inextricably linked to mounting downward pressure on the macroeconomy amid shifting internal and external environments. However, its root cause lies in the behavioral resonance of three key economic actors—households, enterprises and the government under transitional stress. The adaptive actions of these actors, constrained by their respective limitations, have trapped industries in low-level competition through a vicious cycle from ‘demand contraction to supply inefficacy and ultimately policy failure’. This paper proposes a coordinated three-pronged approach, that is boosting household income, optimizing corporate supply-side responses, and refining government policies, to holistically rebalance market supply-demand dynamics, foster a virtuous economic cycle, and ultimately break the intensifying ‘involutionary’ competition trap.

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