Addressing the Issue of "Neijuan-Style Competition" in China: Recent Developments and Insights

Introduction

In recent months, the phenomenon of "neijuan-style competition" has emerged as a significant topic of public discourse in China. For the first time, this issue was directly addressed by Chinese Premier Li Qiang in the highly anticipated government work report presented on Wednesday, March 5, 2025, during the opening of the National People’s Congress (NPC) in Beijing. Premier Li emphasized the necessity to develop and enhance foundational institutions and rules to tackle this issue, aiming to eliminate local protectionism and market segmentation, as well as to remove bottlenecks and obstacles that impede economic flows, market access and exit, and the allocation of production factors. He also pledged to take comprehensive measures to address rat race competition.

This marked the first time that "neijuan-style competition" was mentioned in a government work report, indicating the government’s heightened concern over this negative phenomenon. The inclusion of this term reflects the government’s commitment to addressing the challenges posed by industrial overcapacity and vicious competition, which were also emphasized at the Central Economic Work Conference (CEWC) in Beijing last December.

Understanding "Neijuan-Style Competition"

"Neijuan-style competition" refers to a form of cutthroat competition that is not only intense but also unsustainable and harmful to the market ecosystem. It is characterized by excessive competition that leads to reduced profit margins, overcapacity, and a race to the bottom in terms of prices and quality. This type of competition is often detrimental to innovation, as companies focus more on short-term gains rather than long-term sustainability and quality improvements.

In the context of China’s rapidly growing economy, "neijuan-style competition" has become a pressing issue, particularly in industries where there is a surplus of production capacity. This has led to market saturation, price wars, and in some cases, the decline of entire industries due to unsustainable business practices.

The Role of the Central Economic Work Conference

At the Central Economic Work Conference (CEWC) held in Beijing last December, officials highlighted the need for industry self-discipline and sustainable market practices to combat industrial overcapacity and vicious competition. This conference underscored the urgency of addressing these issues and laid the groundwork for the measures that were subsequently announced in the government work report.

The CEWC serves as a critical platform for setting the tone and direction of China’s economic policies for the coming year. By addressing the issue of "neijuan-style competition" at this forum, policymakers emphasized the need for coordinated efforts across industries to promote sustainable growth and fair competition. The conference’s focus on industry self-discipline suggests a shift towards more responsible and regulated business practices, which are essential for maintaining the health and stability of China’s economy.

The Government Work Report and Policy Measures

In his remarks during the opening of the National People’s Congress, Premier Li Qiang outlined specific measures that the government will undertake to address the challenges posed by "neijuan-style competition." These measures include the development and improvement of foundational institutions and rules aimed at eliminating local protectionism and market segmentation. The government also aims to remove bottlenecks and obstacles that hinder economic flows, such as those related to market access and exit, as well as the allocation of production factors.

Premier Li’s announcement builds upon previous pledges made at the CEWC and signifies a proactive approach by the government to restore order and fairness in the market. By addressing these issues comprehensively, the government seeks to create a more favorable business environment that encourages innovation, sustainability, and healthy competition among enterprises.

Expert Opinions and Perspectives

Dr. Chen Bo, a senior research fellow at the National University of Singapore’s East Asian Institute, commented on the significance of the government work report highlighting "neijuan-style competition." He noted that the inclusion of this term in such a high-profile document clearly indicates the government’s strong concern over this negative phenomenon. Dr. Chen expressed optimism that through high-level policy documents and the policymaking process, effective measures will be introduced to address the issue.

On the other hand, Liu Zhibiao, a professor and director of the Yangtze Industrial Economic Think Tank at Nanjing University, offered a more nuanced view. He downplayed the significance of the term being mentioned for the first time in a government work report, suggesting that it was simply a matter of implementing the spirit of the Central Economic Work Conference. This perspective highlights the importance of understanding the broader policy context and the continuity of previous declarations in addressing these economic challenges.

Recent Initiatives by Regulatory Bodies and Local Governments

In addition to the pronouncements at the national level, there have been notable initiatives by both regulatory bodies and local governments to tackle the issue of "neijuan-style competition." On February 25, 2025, the State Administration for Market Regulation (SAMR), China’s top industry regulator, chaired a fair competition symposium with top executives from major conglomerates such as Alibaba Group, JD.com, and Mercedes-Benz China. The symposium focused on addressing involution and gathering industry feedback on market challenges and potential solutions.

Local governments have also taken proactive steps to combat the negative effects of "neijuan-style competition." For instance, officials in Jiangsu province proposed addressing involution in key industries through coordinated industrial planning, while Hunan province prioritized regulating competition in investment attraction. These regional efforts complement the national initiatives and demonstrate a multi-level approach to mitigating the adverse impacts of cutthroat competition.

Conclusion

The inclusion of "neijuan-style competition" in Premier Li Qiang’s government work report marks a significant milestone in China’s efforts to address this pressing economic issue. By acknowledging the problem at the highest levels of government and outlining concrete measures to tackle it, policymakers have signaled their commitment to fostering a more balanced and sustainable economic environment.

The insights from experts such as Dr. Chen Bo and Liu Zhibiao provide valuable perspectives on the significance of these developments. While there is broad agreement on the need to address "neijuan-style competition," there are differing views on the extent to which the government work report represents a new direction in policy or a continuation of existing efforts. Regardless, the combination of national policy measures, regulatory initiatives, and local government actions suggests a comprehensive approach to resolving this issue and promoting healthy market competition.

As China continues to navigate the complexities of its rapidly evolving economy, the effective implementation of these measures will be crucial in determining the success of efforts to curb "neijuan-style competition" and promote sustainable economic growth. The outcomes of these initiatives will not only shape the future of China’s economy but also have broader implications for global markets and trade dynamics.