Overcapacity causes “excessive competition” in China
From restaurants to automobiles, several sectors of the Chinese economy have engaged in a merciless price war. An economic researcher attempts to explore the causes of this phenomenon, which he believes has only worsened over the past decade.
Neijuan… This Chinese concept, which literally means “to curl inward,” and is translated as “involution,” is often used to refer to excessive competition. And while several Chinese leaders have recently spoken out against this phenomenon, it has only increased over the past ten years, according to researcher Wang Mingyuan.
In an article published on July 31 on the Sina portal, he points out that, in the manufacturing industry, this involution translates into a drop in the profit margin, from 6.6% on average in 2011 to 5.3% in 2024.
Wang Mingyuan, an expert at the Beijing Reform and Development Research Center and a columnist for the business magazine Caixin, points to overcapacity in the industry, particularly in the automotive and electrical machinery sectors, where the capacity utilization rate is only 71%, below the red line of 75%.
The problem of overcapacity is also found in the service sector, where “several million restaurants closed” last year. According to the author, this wave of bankruptcies is not only due to the sluggish market, but also to “excessive concentration and homogenization of services.” This worrying situation is found in many
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