Continued involution would undermine China’s ambition to move up the value chain via ‘new productive forces’
The authorities, who criticised the domestic dumping of products, have directed local governments to behave and stop offering unreasonable incentives that would lure enterprises into highly competitive segments.
If profit margins are worth next to zero, businesses would have little to no resources for new investments.
As an unwanted phenomenon, involution is symptomatic of bigger problems. While no one wants to throw themselves into a self-defeating rat race, local governments and enterprises have engaged in excessive competition because they have no other options.
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