EU chamber urges China to tackle involution, boost efficiency

Involution means low-quality price competition fuelled by oversupply in certain sectors.

Releasing its ‘European Business in China Position Paper 2025/2026’, it called on policymakers in the country to use the upcoming 15th Five-Year Plan (2026–2030) to affect a shift towards a new, productive development model, and strike at the heart of cutthroat price competition that hurts both foreign and domestic firms.

The chamber’s individual industry and horizontal position papers provide more granular detail, putting forward more than 1,100 constructive recommendations for optimising China’s business environment, a release by the chamber said.

“We hope China’s next chapter will be one of sustainable growth, which requires solving systemic challenges, such as entrenched deflation and a persistent investment-driven mismatch between demand and supply growth,” said chamber president Jens Eskelund.

“While consumption in China is actually growing, a core issue is that manufacturing output has grown faster…. Involution, expanding inventories, pressure on profit margins, decreasing asset utilisation and pressure to export are all natural consequences of this mismatch,” the paper noted.

To boost consumption, the position paper advises increasing national medical expenditures, fostering the ‘silver economy’ and facilitating remote work.

Resources are ‘wasted’, the paper noted, when provincial governments approve wind or hydrogen projects in ways that create ‘redundant project clusters’.

ALCHEMPro News Desk (DS)