Premier Li Qiang vowed to stamp out ‘neijuan’ – which refers to excessive, cutthroat competition – in his agenda-setting annual work report.
China has signalled its plans to up the ante in its fight to stamp out the excessive, cutthroat competition plaguing its economy, with the issue becoming a focus at one of the country’s most important political events of the year.
Premier Li Qiang vowed to launch a “comprehensive crackdown on neijuan” during his work report to the National People’s Congress on Wednesday – the first time the premier has mentioned the concept in his agenda-setting annual address.
The term neijuan, or “involutionary competition”, refers to a self-defeating cycle of excessive competition in which companies are forced to invest ever greater resources without generating proportional returns.
The once-obscure concept has become a catch-all term to describe the chronic overcapacity and vicious price wars affecting a wide range of industries in China, including electric vehicles and solar energy.
China’s leaders have begun to discuss the need to tackle neijuan with growing frequency in recent years as the country has come under increasing pressure from a string of Western nations over trade issues.
But this is the first time the term has been used in a government work report to the NPC – the annual meeting of China’s top legislature in Beijing.
“China will accelerate the establishment and improvement of fundamental institutional rules, eliminate local protectionism and market fragmentation, and remove bottlenecks in market entry and exit as well as resource allocation,”
Li added during his address.
This year, it’s no longer about price wars – it’s about intelligence
He Xiaopeng, CEO of Xpeng Motors
The United States and European Union have accused China of dumping its excess capacity onto the global market, which they claim has strangled their domestic manufacturing sectors – especially in the new energy industry.
China, however, has pushed back, dismissing the overcapacity narrative as a pretext for trade protectionism and arguing that its industrial expansion is driven by innovation and global demand rather than unfair competition.
Nevertheless, Beijing has been intensifying its efforts to curtail neijuan.
Last July, the Politburo mentioned neijuan for the first time, stressing the need for industries to exercise self-discipline and prevent destructive neijuan-style competition.
A few months later, China’s top leaders reiterated this stance at the annual tone-setting Central Economic Work Conference, calling for a comprehensive crackdown on neijuan-driven competition and stricter regulation of local governments and businesses.
He Xiaopeng, founder and CEO of electric vehicle maker Xpeng Motors, told the Post that the price war in China’s EV market was starting to wane.
“This year, it’s no longer about price wars – it’s about intelligence,” He said on the sidelines of the ongoing “two sessions” in Beijing. “Many competitors, along with the entire auto industry, are making smart features the new standard, pushing them to be more advanced.” “As a result, China’s smart EV market is shifting from competing on price to competing on quality, and now, on intelligence.”
Trivium, a policy research firm headquartered in Beijing, said in a report last week that Beijing had talked a lot about neijuan, but taken minimal action to tackle the issue, meaning that calls to end the vicious price wars resembled “a vain attempt to scare industry into independent action”.
“Meaningful action now means direct market intervention – which may be justified, but will spook investors,” the report stated. “There’s certainly a limit to Beijing’s patience – but the key question is when exactly officials will determine that the benefits of intervention outweigh the costs.”
China’s market regulator last week also convened a meeting with seven major companies from the technology, solar and automotive industries to discuss how to stamp out neijuan in their fields.
Luo Wen, head of China’s State Administration for Market Regulation, said on the sidelines of the two sessions that the regulator would also push for new regulations to curb vicious price wars in the online commerce sector.
Source: SCMP
