Anti-Overcompetition Drive Takes Hold Across Multiple Chinese Industries

In recent years, sectors such as automobiles, photovoltaics, and lithium batteries in China have witnessed intensifying involution-style competition, marked by excessive input and redundant construction in pursuit of limited market share. This trend has not only diluted overall industry profitability but also undermined the structural health of key sectors. Addressing this issue, the sixth meeting of the Central Financial and Economic Affairs Commission on July 1 emphasized the need to deepen the development of a unified national market by curbing disorderly low-price competition and promoting the orderly exit of outdated capacity. This signaled the beginning of a coordinated “anti-involution” movement spanning multiple sectors.

The Ministry of Industry and Information Technology followed up on July 3 by convening the fifteenth manufacturing enterprise forum, reiterating the need to guide enterprises toward improved product quality and sustainable development. Industries have already started taking action. The domestic auto market has seen aggressive price wars this year, with over 100 models discounted in May alone. This has led to declining profits, with the sector’s Q1 2025 profit margin falling to 3.9% and A-share listed passenger car companies reporting a combined negative net operating cash flow of RMB 2.376 billion—the lowest in five years. In response, the China Association of Automobile Manufacturers issued an appeal on May 31 opposing destructive price competition, followed by similar statements from trade associations and local governments.

Photovoltaics, another sector severely affected by internal price wars, is also seeing signs of consolidation. GCL Group Chairman Zhu Gongshan warned against extreme cost-cutting at the expense of industry sustainability, while major silicon firms reportedly discussed forming a special fund to absorb excess capacity. Similarly, the battery industry has initiated efforts to shift focus from price to quality and innovation, supported by joint calls from industry associations. Cement-producing provinces like Shandong and Sichuan have issued staggered production notices, and steel and coal sectors have also begun limiting output in response to policy guidance.

Concrete progress has been observed in the automotive industry. Following the implementation of the “Regulation on Ensuring SME Payment” on June 1, 17 automakers committed to paying suppliers within 60 days. Companies such as SAIC Motor and GAC Group pledged not to use commercial paper for settlement and to fulfill dealer rebate obligations on time. Several automakers also moved to halt high-interest auto loan promotions, helping reduce financial risk for consumers and curb speculative pricing behavior. BYD reportedly cancelled its fixed-time pricing policy and tightened control over retail pricing, enforcing strict dealer compliance through monthly audits.

The shift from price competition to value creation is becoming more apparent, as automakers increasingly emphasize service and technology as differentiators. In the photovoltaic sector, top PV glass manufacturers announced a 30% production cut beginning in July. Companies such as Almaden see this as a necessary measure to restore long-term viability. Lithium battery producers, meanwhile, have slowed or withdrawn expansion plans. CNNC Hua Yuan Titanium Dioxide and Polyplastics terminated previously announced multi-billion yuan projects, reallocating funds or citing sector-wide headwinds as justification.

In civil aviation, the CAAC convened a meeting on June 26 to address disorderly pricing, indicating a forthcoming regulatory framework for airfares. Analysts believe this may help stabilize both pricing and market expectations.

As the December 2024 Central Economic Work Conference highlighted, rectifying overcompetition is a long-term task that demands coordinated action by government, industries, and enterprises. Experts stress the importance of fair, rule-based market behavior to ensure high-quality development. In photovoltaics, Fitch Ratings noted that while short-term discipline is essential, long-term structural reform will require elimination of inefficient capacity under government guidance. Executives from LONGi and other top firms echoed this view, calling for greater regulatory support to facilitate orderly industry consolidation.

The lithium battery sector is also calling for more strategic oversight. Industry voices are urging policymakers to exercise control at the project approval stage to prevent overcapacity from taking root. According to one executive, the second half of 2025 will be a critical window for deploying targeted policy tools that balance competing interests and ensure stable development.