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

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.)