China Calls for Stronger Industrial Innovation and Action Against ‘Involution-Style’ Competition

China has called for stronger integration between technological research and industrial production while intensifying efforts to curb excessive price competition, as policymakers seek to improve manufacturing efficiency and support higher-quality economic growth.

Vice Premier Zhang Guoqing made the remarks during an inspection tour of Shanghai on Monday and Tuesday, visiting companies involved in instrumentation and medical equipment and meeting with local officials and business representatives.

Zhang, who is also a member of the Political Bureau of the Communist Party of China Central Committee, said scientific and technological innovation should be more closely aligned with the needs of industry. He emphasized the importance of translating research results into practical applications and improving the country's industrial innovation capabilities.

The remarks were reported by Xinhua through the Chinese government portal.

Zhang called for stronger basic research and breakthroughs in advanced manufacturing processes, key materials and essential components. He also stressed the need to improve mechanisms that connect scientific research with commercial applications, including services that help companies bring new technologies to market.

The policy direction reflects China's effort to move beyond manufacturing based primarily on scale and cost advantages. As competition intensifies in sectors such as electric vehicles, medical equipment, industrial machinery and advanced electronics, policymakers are seeking to encourage companies to develop higher-value products and improve technological capabilities.

One of the central themes of Zhang's remarks was the need to strengthen cooperation across industrial supply chains. He said enterprises of different sizes should work together to create a more effective innovation ecosystem, allowing research institutions, manufacturers and suppliers to coordinate development and commercial deployment.

The vice premier also stressed that traditional industries remain an important foundation for economic growth and employment. Rather than focusing exclusively on emerging sectors, China should apply advanced technologies to upgrade established industries and improve their productivity, environmental performance and competitiveness.

A particularly important part of the inspection was Zhang's call to intensify efforts to curb "involution-style" competition, a term used by Chinese policymakers to describe excessive competition that can lead to price wars, duplicated investment and declining profitability.

The issue has become increasingly visible in industries where companies expand production capacity rapidly while competing aggressively for market share. In some sectors, businesses have reduced prices to levels that place pressure on profit margins and make it harder to sustain investment in research, worker training and product quality.

The problem is particularly relevant to China's electric-vehicle, solar-panel and battery industries, where rapid expansion has created intense domestic competition. Policymakers have warned that excessive price competition can undermine long-term industrial development even when production volumes continue to increase.

Zhang called for further progress in building a unified national market and creating a fairer and more orderly competitive environment. A more integrated domestic market could reduce local barriers, improve the allocation of resources and allow companies to compete on the basis of innovation and efficiency rather than regional protectionism.

The vice premier also highlighted the need to create new consumption scenarios and improve the environment for consumer spending. He urged officials to expand the supply of quality products and services and to combine investment in physical infrastructure with improvements in institutions and public services.

The comments point to a broader policy challenge facing China: balancing industrial investment and technological upgrading with the need to strengthen household demand. A manufacturing sector that produces increasingly sophisticated goods may still face pressure if domestic consumers do not purchase enough of those products.

The government has repeatedly emphasized high-quality development as a central economic objective. This approach involves upgrading traditional industries, expanding strategic emerging sectors, improving productivity and strengthening domestic innovation.

For companies, the policy signals could mean greater scrutiny of investment decisions that lead to redundant capacity, alongside stronger incentives to improve technology, quality and supply-chain cooperation.

However, reducing excessive competition will not be straightforward. Price pressure is often linked to weak demand, intense rivalry and the pursuit of market share. Regulatory measures alone may not resolve those underlying commercial incentives.

The effectiveness of the policy approach will depend on whether companies can shift toward sustainable business models while consumers and businesses generate enough demand to support higher-value production.