October 8, 2026 | Discourse on China’s New Economic Growth Model (Part I) | Economics
In this series, scholars and industry practitioners discuss the challenges faced by the Chinese economy, both internal and external, as it seeks to transition toward a new growth model that emphasizes sustainable, high-quality development. They also offer theoretical and policy recommendations on the way forward.
The following article is by Prof. Zhiyuan Cui, who is an internationally renowned political economist, Professor at the Tsinghua School of Public Policy and Management, and Advisor to the Hong Kong Reform Institute. The Chinese version of the article first appeared in Issue 616 of the “Experimental Governance” Wechat public account. Prof. Cui has recently released two books in Hong Kong, including Manifesto of Petty-Bourgeois Socialism: Thoughts on the Political Economy of China’s Reforms (2026) and The Spirits of Modernism: A Group Portraits (2026).
The “15th Five-Year Plan” and“Outline of the 15th Five-Year Plan” [1], adopted by the National People’s Congress in March 2026, propose “comprehensively addressing ‘involutionary’ competition,” a concept of significant theoretical and practical importance that demonstrates the Central Government’s determination to fundamentally transform the model of China’s economic development. This article first traces the theoretical and policy preparations made in the year leading up to the introduction of the concept of “comprehensively addressing ‘involutionary’ competition” in the “15th Five-Year Plan,” and goes on to offer recommendations for deepening theoretical research in light of issues that have emerged during the implementation stage in recent months.
I. Theoretical and Policy Preparations in the Year Leading Up to the Introduction of the Concept of “Comprehensively Addressing ‘Involutionary’ Competition”
In fact, preventing“involutionary” cutthroat competition was first documented in the press release of the Politburo meeting on July 30, 2024. Following that, the Politburo meeting on July 30, 2025, which reviewed the draft proposal for the “15th Five-Year Plan,” again mentioned“regulating disorderly competition among enterprises in accordance with the law and relevant regulations, and advancing capacity management in key industries.”
Notably, the September 16, 2025, issue of Qiushi magazine published an article by President Xi Jinping entitled “Advancing the Construction of a Unified National Market in Depth,” which identified overcoming “involution” as a top priority in establishing a unified domestic market. The article stated “First, focus on rectifying the chaos caused by low-price, disorderly competition among enterprises. In areas severely affected by ‘involution,’ effective governance must be carried out in accordance with the law and relevant regulations. Better leverage the self-regulatory role of industry associations, guide enterprises to improve product quality, and promote the orderly phasing out of outdated production capacity.”
In December 2025, Qiushi magazine published another important article by General Secretary Xi Jinping entitled “Expanding Domestic Demand Is a Strategic Move,” which stated that “expanding domestic demand concerns both economic stability and economic security; it is not a stopgap measure but a strategic move. Implementing the strategy of expanding domestic demand is necessary for maintaining the long-term, sustained, and healthy development of China’s economy, as well as for meeting the people’s growing needs for better lives.” This effectively combines the concept of ”comprehensively addressing ‘involutionary’ competition“—which primarily pertains to microeconomics—with the macroeconomic concept of “expanding domestic demand.” This is because the essence of “involution” is overcapacity; in a situation where demand exceeds supply, it is hard to imagine enterprises competing to lower prices and engaging in cutthroat competition. On the other hand, overcapacity is closely linked to insufficient aggregate domestic demand.
Guided by the spirit of the Politburo meeting and President Xi’s articles, various government departments took swift action and proposed a series of policy measures in 2025 to address “involutionary” competition. Of particular importance was the public consultation on the “Draft Amendment to the Pricing Law of the People’s Republic of China (Draft for Public Comment),” which was tabled by the National Development and Reform Commission and the State Administration for Market Regulation on July 24. The draft amendment further clarifies the criteria for determining unfair pricing practices, regulates market pricing order, and addresses “involutionary” competition. Specifically, regarding Article 14 of the 1998 “Pricing Law,” which states that “operators shall not engage in the following unfair pricing practices,”the draft amendment makes a significant revision by amending item (2) to read: “Except for legally reducing prices to clear out perishable goods, seasonal goods, or overstocked goods, or reducing prices to provide services where there are legitimate grounds, an operator shall not, for the purpose of squeezing out competitors or monopolizing the market, dump at prices below cost, or compel other operators to sell at prices below cost in accordance with its price-setting rules.” The key phrase here is to“dump at prices below cost” “for the purpose of driving out competitors or monopolizing the market” [2].
On January 21, 2026, the State Administration for Market Regulation held a special press conference to announce ten typical cases from the 2025 comprehensive campaign to address “involutionary” competition. These cases spanned multiple aspects, including the platform economy, new energy, product quality, and advertising compliance. Among them, the second case was titled: “Risk Warning and Rectification Regarding the ‘Spillover of Involutionary Competition’ in the Photovoltaic Industry.” “Through measures such as early warning, policy coordination, and guidance meetings, the initiative effectively prevented overseas antitrust risks that may arise from the spillover of companies’ internal coordination behaviors, helped enterprises avoid potential legal risks and economic losses abroad, and promoted a shift in the industry’s competitive model from ‘price-driven internal competition’ to ‘innovation-driven competition’” [3]. The reference here to preventing “spillover of internal competition” may be related to the increase in recent years in the number of anti-dumping and countervailing duty investigations initiated against China at the WTO by both developed and developing countries. In fact, research by Professor Lu Feng of Peking University’s National School of Development found that in 2024, the number of trade investigations initiated against China by developing countries had already surpassed that of developed countries: in 2024, China faced a total of 198 WTO trade remedy investigations, of which 117 were initiated by developing countries—accounting for nearly 60 percent—significantly exceeding the number initiated by developed countries [4]. This trend challenges the widely held public perception that trade disputes targeting China primarily originate from developed countries. It demonstrates that China’s trade surpluses are rapidly increasing across mid-to-high-end and emerging sectors as well as traditional and low-end industries, thereby triggering broader trade tensions that include developing countries. Fortunately, China has been adjusting this development model that relies excessively on exports. Our decision in recent years to specifically host the China International Import Expo in Shanghai is an example of how China shares the dividends of its rapid development with the rest of the world, demonstrating that we have come to recognize that long-term, large trade surpluses—especially when accompanied by substantial export subsidies and export tax rebates—could be detrimental to the independent industrial development of other countries, especially developing countries.
On September 23, 2025, while attending relevant events of the 80th session of the United Nations General Assembly, Premier Li Qiang solemnly declared to the world that, as a responsible major developing country, China would not seek new special and differential treatment in current and future WTO negotiations [5]. Although China has not relinquished its “developing country status” within the WTO, it has voluntarily given up certain trade privileges available to developing countries. This reflects China’s principle and stance of proactively opening up its domestic market in the interest of building a “community with a shared future for mankind.” In line with this announcement, on September 26, 2025, four ministries—the Ministry of Commerce, the Ministry of Industry and Information Technology, the General Administration of Customs, and the State Administration for Market Regulation—decided to implement an export licensing system for pure electric passenger vehicles, marking a major step by China to proactively restrict exports.
II. Measures Taken Following the “15th Five-Year Plan”’s Call to “Comprehensively Address ‘Involutionary’ Competition”in March This Year
The “Outline of the 15th Five-Year Plan” was reviewed by the National People’s Congress and the Chinese People’s Political Consultative Conference in March 2026, and adopted simultaneously with the “15th Five-Year Plan.” The proposal to “improve the production capacity monitoring and early warning mechanism” is currently in the process of transitioning from top-level design to sector-specific implementation. On July 7, 2026, the State Administration for Market Regulation held a press conference on the in-depth rectification of “involutionary” competition in the first half of 2026, outlining new and specific progress made in efforts to“comprehensively rectify‘involutionary’ competition” [6]. The State Administration for Market Regulation in particular emphasized that “ We are focusing on industries where ‘involutionary’ competition is especially pronounced, deploying a ‘combined approach’ that focuses both on price as well as regulatory and enforcement measures to combat unfair competition in order to drive enterprises to shift from ‘price wars’ to ‘quality competition.’ On the one hand, we are improving the system of institutional rules to strengthen the legal foundation for in-depth rectification of ‘involutionary’ competition. We are continuing to advance the amendment of the “Pricing Law,” studying revisions to the “Anti-dumping Regulations,” guiding relevant industry associations to formulate group standards for cost calculation, and promoting the formation of a ‘1+1+N’ legal framework for regulating low-price dumping.” This constitutes the concrete implementation of the call in President Xi Jinping’s previously cited article to “better leverage the self-regulatory role of industry associations, guide enterprises to improve product quality, and promote the orderly phasing out of outdated production capacity.”
A recent example of efforts to address “involutionary competition” is this: on the evening of August 6, 2026, just one week after the State Administration for Market Regulation gave price compliance guidance to the photovoltaic industry on July 31, 8 major domestic polysilicon companies jointly signed an anti-involution initiative in Shanghai. These 8 companies collectively account for over 90% of effective domestic polysilicon production capacity. They include 4 publicly listed companies—Tongwei Co., Ltd., GCL Technology, Daquan Energy, and Xinte Energy—as well as Asia Silicon (Qinghai) Co., Ltd., Xinjiang East Hope New Energy Co., Ltd., Qinghai Lihao Qingneng Co., Ltd., and Xinjiang Goens Energy Technology Co., Ltd. The companies jointly pledged that “the sales prices of all photovoltaic products (including bids in tendering processes) must not be lower than the corresponding costs calculated in accordance with the group standard ‘General Rules for Cost Accounting Models in the Photovoltaic Industry.’ Sales below full costs must be immediately stopped and corrected.”[7] Since the “General Rules for Cost Accounting Models in the Photovoltaic Industry” did not take effect until July 27, 2026, it is not yet possible to assess the effectiveness of its implementation. However, we can imagine that this shall put to the test the controversy surrounding the 1998 “Pricing Law”which, as mentioned earlier, has been included in the National People’s Congress legislative process this year. The key point in the NPC’s deliberations relates to how to interpret and enforce Article 14 of the “Pricing Law” amendment, which prohibits “dumping at prices below cost for the purpose of squeezing out competitors or monopolizing the market.” Does “cost” here refer to average cost of an individual enterprise or industry-wide average cost? If it is the former, does this encourage underperforming enterprises? If it is the latter, how is the industry-wide average cost determined? It should be noted that if calculated as an arithmetic mean, half of the enterprises in an industry would be in violation of the “Pricing Law” by definition. As a further example, Article 41(2) of the “Law of the People’s Republic of China on Bidding and Tendering” pertains to “a bid that meets the substantive requirements of the bidding documents and is evaluated as having the lowest price; provided, however, that bids priced below cost are excluded.” Here, too, it is not specified whether the reference is to the average cost of an individual enterprise or the industry-wide average cost, and existing court rulings on this matter are inconsistent.[8]
III. Recommendations for Deepening Theoretical Research on “Comprehensively Addressing ‘Involutionary’ Competition”
The “15th Five-Year Plan” does not provide a precise definition of what constitutes “involutionary” competition. However, based on the aforementioned statements by national leaders and policies issued by relevant ministries and commissions, it is clear that “involutionary” competition refers to a vicious cycle of price-cutting among homogeneous products, primarily in the form of “price wars.” It stands in direct opposition to the central government’s advocacy of “high-quality development,” which emphasizes “competing based on quality.”
In this context, the “core” theory—which argues that market competition relying primarily on price as a regulatory mechanism does not necessarily lead to a stable market equilibrium—offers valuable insights for deepening theoretical research on “comprehensively addressing ‘involutionary’ competition.” This theory was developed by the late University of Chicago economist Lester Telser (1931–2022). The First Theorem of Welfare Economics in mainstream Western economics states that, under certain conditions, market competition with price as the regulatory mechanism will achieve a Pareto-optimal equilibrium of supply and demand, and that this equilibrium will necessarily lie within the “core.” The “core” refers to a set of transactions and income distribution schemes such that no suballiance composed of any combination of firms and buyers can improve the situation for all its members by breaking away from the existing arrangement and entering into a new contract. The competitive equilibrium is typically a point within the core. Telser, however, goes against the mainstream: in works such as The Core Theory in Economics [9], he systematically argues that in a type of industrial structure of real-world importance, the “core” may be empty—that is, no allocation exists that cannot be overturned by some coalition. In this case, unconstrained competition does not produce stable solution: any price set will induce further deviations, and the market becomes mired in an endless price war and a cycle of entry and exit of firms. Therefore, more accurately, Telser’s theory is an “empty core” theory concerning “anti-involutionary competition.”
Telser uses the example of the movie “The Treasure of the Sierra Madre” to illustrate the “empty core” theory simply and clearly—a treasure worth 100 is buried under a massive boulder; moving the boulder requires two or more people; a single person cannot do it alone. When three people compete to move the rock, any alliance of two can claim the 100, but any such alliance can be overthrown by an alliance of the other two; thus, the set of inequalities required for the core to be non-empty produces no solution [10]. Only after introducing a single licensed rock-mover can the core become non-empty, but all rent goes to the licensee. Telser’s conclusion is that excessive price competition can destroy equilibrium, and various forms of “cooperation” or “restrictions on cutthroat competition” (in this example, the license serves as a restriction on competition eligibility) are precisely the institutional arrangements that make stability and efficiency possible.
A key new concept in Telser’s “empty core” theory is “avoidable costs,” which go beyond fixed and variable costs: for example, shipbuilding involves fixed costs as well as variable costs that vary with distance and time traveled, but there are also voyage costs that can be avoided by docking at a port. As an example, a generator itself, as capital, is a fixed cost, but avoidable costs arise only when it is put into operation. Similarly, locomotives and railcars are fixed costs, while crews are avoidable costs, because idle trains do not require crews, whereas operating trains do—regardless of the length of the journey. Likewise, cement, glass, and steel incur enormous start-up and shutdown costs, i.e. “avoidable costs,” due to the high temperatures required for production.
Telser proved that the typical conditions for the emergence of the “empty core” are: (1) the firm has significant avoidable costs—that is, fixed costs that must be paid in full once a decision to produce is made but can be avoided by halting production; (2) marginal costs are very low or even decreasing within the capacity limit, and capacity is itself “indivisible”; (3) Demand is “incompatible” with integer multiples of the optimal scale—that is, the demand volume cannot be exactly divided by a number of optimal-scale plants operating at full capacity, or demand fluctuates and withers. Under this structure, there are always firms with idle capacity that are willing to snap up orders at any price above marginal cost (but below average cost); each firm’s price is driven below its own average cost, leading to industry-wide losses, yet no one can commit to not lowering prices, because any tacit agreement to maintain prices could be overturned by a “buyer-plus-price-cutter” alliance. The absence of a competitive equilibrium is not necessarily due to distortion by monopoly, but rather because competition itself cannot achieve a stable outcome. In empty-core industries, certain forms of “cooperation”to restrict competition—cartels, freight rate alliances, production capacity coordination, mergers, basing-point pricing, and even government regulation—are not deviations from efficiency, but rather necessary institutional arrangements for achieving efficiency [11]. George Bittlingmayer, a student of Telser, demonstrated in his famous study of the 1897 “Addyston Pipe & Steel Co. Case” that the cast-iron pipe industry was precisely such an empty-core industry with high avoidable costs. After the U.S. Supreme Court struck down its price-fixing alliance under the Sherman Act, the rational response of firms was not to return to competition, but to merge outright into a single company. The great wave of mergers in the United States from 1898 to 1902 was, in part, the result of antitrust laws prohibiting “soft cooperation” (cartels) and thereby forcing “hard cooperation” (mergers) [12].
The characteristics of the photovoltaic industry align with Telser’s “empty core” theory. The industry’s “modified Siemens process reduction furnace” precisely exemplifies “avoidable costs”- once the furnace is fired up, it must operate continuously at full capacity; shutting it down and restarting it involves a lengthy heating and purging process, and production adjustments can only be made by starting and stopping the entire furnace rather than through continuous fine-tuning. In the first half of 2026, China’s photovoltaic industry posted the worst results in its history: of the 26 listed companies that disclosed their half-year reports, 22 reported losses, with projected losses totaling between 18.3 billion and 21.4 billion yuan. Meanwhile, China’s global market share of polysilicon, wafers, solar cells, and modules stood at 96%, 96.2%, 91.3%, and 80.1%, respectively. Why has overcapacity reached a point where it cannot be cleared at any price? Why can’t losses automatically restore equilibrium through exit mechanisms, as mainstream textbooks promise? This is precisely what Telser discussed earlier: in an empty-core industry, there are always companies with idle capacity willing to snap up orders at any price above marginal cost (but below average cost). Each firm’s price is driven below its own average cost, leading to industry-wide losses, yet no one can commit to not lowering prices. We can understand Telser’s “empty core” theory by examining the distinction between “cash-basis losses” and “full-cost-basis losses” in China’s photovoltaic industry, as recently published by CITIC Securities [13].
Cash costs refer to the portion of expenses that result in actual cash outflows: raw materials (industrial silicon powder), electricity, labor, auxiliary materials, packaging, and transportation, among others. Full costs, on the other hand, are calculated by adding depreciation, amortization, and corresponding share of management, R&D, and financial expenses to the cash costs. Polysilicon production is a capital-intensive process, with depreciation accounting for more than 20% of total costs. As such, there is significant discrepancy between cash costs and full costs. The “cash profit margins” for solar cells and modules are 1.58% and 9.26%, respectively, while the “full-cost profit margins” are -16.27% and 0.18%. Although companies generate net cash inflows from every piece of cell sold, their reported financial statements show a loss—a loss attributable to depreciation. Depreciation corresponds to facilities and equipment already built. That money was spent long ago, and halting production would not bring it back. Therefore, when a company decides whether to “continue operations or suspend production,” depreciation is an irrelevant variable. What truly matters is what can be saved by suspending production. As long as the product price is higher than the cash costs, continuing production is better than halting it—this is not “dumping at prices below cost to drive out competitors or monopolize the market,” as described in Article 14 of the amendment to the “Pricing Law,” but rather a rational business decision. This also explains why the industry can continue to operate for a long time despite being in a state of comprehensive book losses- cash flow has not yet dried up [14].
The accounting concept of “cash costs” in China’s photovoltaic industry, as cited by CITIC Securities, is not entirely equivalent to Telser’s “avoidable costs”—the latter refer to “all expenditures that can be saved by halting production,” which, in addition to cash costs, should also include opportunity costs such as the resale value of equipment. However, the two are quite similar. The mechanism described by Telser—where “there are always firms with idle capacity willing to snap up orders at any price above marginal cost (but below average cost)”—is similar to the mechanism whereby China’s photovoltaic firms are willing to continue production at prices above cash costs (but below their own average costs). In understanding the current debate over how to interpret the phrase “dumping at prices below cost to drive out competitors or monopolize the market” in the amendment to the “Pricing Law,”we can draw reference from Telser’s theory that “avoidable costs” lead to an “empty core” in price competition. The real issue may not be whether the “cost” in “dumping at prices below cost” refers to the firm’s own cost or the industry’s average cost, but rather whether it refers to the firm’s “average avoidable cost” or its “average total cost.” This is a major topic worthy of in-depth research through collective wisdom and effort.
If Telser’s “empty core” theory represents a microeconomic contribution to deepening research on the “comprehensive rectification of ‘involutionary’ competition,” we still need to conduct in-depth exploration of the macroeconomic aspects of this issue. As mentioned earlier in this article, President Xi Jinping’s successive statements in 2025 on “comprehensively addressing ‘involutionary’ competition” and “expanding domestic demand as a strategic move” illustrate the close relationship between the two. Many domestic scholars have already conducted excellent research on the relationship between overcapacity and insufficient aggregate demand, as well as the mechanisms by which low-price competition leads to deflation [15]. I myself also conducted a preliminary macroeconomic analysis of addressing “involution” from the perspective of income distribution reform in an interview with Beijing Cultural Review last November [16]. Here, I shall focus solely on the etymology of the term “involution” to discuss the need for further macro-level research in political economy as required by“comprehensive rectification of ‘involutionary’ competition.”
The first person to introduce the concept of “involution” to China was Professor Philip Huang, a renowned professor of Chinese economic and legal history at the University of California. In the 1980s, he argued: “Under the objective conditions of a large population and scarce land, it is easy to see an ever-increasing labor input per unit of land and ever-decreasing marginal returns, thereby forming a relatively rigid and unchanging closed system. Due to its state of ‘involution’ (or ‘overcrowding’), it can even resist and exclude qualitative changes.” The cotton-yarn-cloth economy of the Yangtze River Delta during the Ming and Qing dynasties, which relied heavily on auxiliary and part-time labor inputs, serves as the best example: cotton farmers invested 18 times as much labor per mu to earn a return per mu that was only a few times higher than that of rice, forming a rigid production system in which agriculture was closely integrated with artisanal sideline activities. This completely eliminated the larger-scale, wage-labor-dependent farms (characterized by capitalist production relations) that had previously existed. The key mechanism at work was that, relative to a small plot of farmland, a small farmer household—relying on its own cheap, supplementary family labor (which involved only a low opportunity cost)—could afford to pay higher rent, or land prices, than a profit-driven, wage-labor-based farm, thereby completely driving the latter out of the market. Such agriculture was even able to tenaciously resist the introduction of mechanization.” In recent years, Professor Philip Huang has further explored the commonalities between the involution and anti-involution of China’s agricultural economy and the evolution of modern Chinese industry, and has linked these phenomena to the involution and anti-involution of bureaucracy within China’s system of governance. He emphasizes that “to achieve more complete de-involution, China’s path forward lies in particular in advancing ‘innovation’ and qualitative change more broadly.”[17] It is evident that he has expanded the meaning of “involution” from the declining marginal rate of return on labor per unit of land to a more macro-level mechanism.
Interestingly, the international academic community generally holds that the term “involution” was first introduced by anthropologist Clifford Geertz in his 1963 monograph on Javanese agriculture [18], and Professor Philip Huang traced its origins in the same way when introducing the term to the Chinese academic community. However, Geertz himself pointed out that his concept of “involution” originated from a 1936 study of late Gothic art by the Russian-American anthropologist Alexander Goldenweiser [19].
Goldenweiser’s “involution” refers to the phenomenon where certain cultural patterns, after reaching a seemingly definitive form, are unable to stabilize or transform into new patterns, yet continue to “develop”—only now, the direction of that development shifts toward increasing internal complexity. The basic elements of Māori carvings are actually few in number; all their complexity stems from the infinite proliferation of the same unit through spatial arrangement. The same applies to late Gothic art: the basic forms have reached their culmination, structural characteristics are fixed and unchanging, and creative potential has long been exhausted; yet development has not ceased. Trapped on all sides by established patterns, it has turned to the function of elaboration, where a particular kind of technical mastery has replaced expansive creativity, becoming “technical nitpicking.” Geertz argues that the metaphor of late Gothic art helps us understand Javanese economic, political, and cultural systems in four ways: First, the persistence of basic patterns: Javanese paddy-field agriculture had long been established before the colonial period. Geertz states that the initial establishment of river valley terraces was merely a rough sketch of this adaptive strategy; the Javanese principalities and the Dutch East India Company era filled in the solid compositional elements, while the period of the cultivation system brought about excessive ornamentation. Second, technical nitpicking: seedling cultivation, transplanting, more thorough land preparation, extremely meticulous planting and weeding, harvesting each ear with a small knife, two harvests per year, more precise water level regulation, and pushing fields to the very edge of volcanoes—in economics, this list amounts to nothing more than “increased labor input,” but within Geertz’s framework, it constitutes embellishment. Harvesting each ear individually with a small knife rather than a sickle is precisely the kind of craft that involves infinite subdivision within a given form. Third, ornamentation spreads across the entire surface of objects: this is the most crucial point. Geertz explicitly writes that this “late Gothic quality” increasingly permeates the entire rural economy: tenure systems become ever more complex, tenant-landlord relationships ever more entangled, and cooperative labor arrangements ever more intricate—all aimed at assigning a place to each person within the overall system, so that technical involution spills over into the involution of social organization. Fourth, visual isomorphism: He does not explicitly mention this aspect, but it is hard to overlook: the Maori carvings and late Gothic imagery—the infinite rearrangement of identical units, decoration covering the entire surface—overlap to a high degree with the Javanese landscape itself [20].
In recent years, Professor Philip Huang has expanded the meaning of “involution” from a decline in the marginal rate of return on labor per unit of land to a more macro-level mechanism. This is entirely consistent in spirit with Geertz’s interpretation of “involution” through the lens of late Gothic art, and it also aligns with the Chinese Government’s recent repeated emphasis that the key to the new development paradigm lies in “innovation” and “high-quality development” in the economic, political, and cultural spheres. To deepen theoretical research on “comprehensive rectification of ‘involutionary’ competition” as proposed in the “15th Five-Year Plan,” we need to draw upon Telser’s “empty core” theory at the micro-level and the analysis by Geertz and Huang—which traces the spillover of technological “involution” to social organizational “involution”—at the macro level.
Prof. Zhiyuan Cui, an internationally renowned political economist, is a Professor at the Tsinghua School of Public Policy and Management and an Advisor to the Hong Kong Reform Institute. His recently published books include Manifesto of Petty-Bourgeois Socialism: Thoughts on the Political Economy of China’s Reforms (2026) and The Spirits of Modernism: A Group Portraits (2026). The two books are complementary, with the first focusing on the economic institutions and policies associated with “petty-bourgeois socialism,” and the latter focusing on the life attitudes and political institutions that correspond with “petty-bourgeois socialism.”
The views expressed in this article are the author’s own, and do not necessarily represent the institutional stance of the Hong Kong Reform Institute.
Translated with AI, with subsequent editing done manually.
Notes:
[1] https://www.ndrc.gov.cn/fggz/fzzlgh/gjfzgh/202603/U020260317369114704096.pdf
[2] http://www.news.cn/politics/20250724/4fb02d6a35814bf5bd2c23c4d02918da/c.html
[3] State Administration for Market Regulation Holds Press Conference on Ten Typical Cases of the 2025 Campaign to Comprehensively Address “Involutionary” Competition, http://www.scio.gov.cn/xwfb/bwxwfb/gbwfbh/gjscjgzj/202601/t20260127_947961.html
[4] Lu Feng: Why We Must Employ a Two-Pronged Approach to Counter the U.S. Tariff War—From the Perspective of Extraordinary Growth in Foreign Trade Surplus During the 14th Five-Year Plan Period, https://nsd.pku.edu.cn/sylm/gd/540618.htm
[5] Li Qiang’s Remarks at the High-Level Meeting of the Global Development Initiative, https://www.gov.cn/yaowen/liebiao/202509/content_7042042.htm
[6] State Administration for Market Regulation Holds Press Conference on In-Depth Rectification of “Involutionary” Competition in the First Half of 2026, http://www.scio.gov.cn/xwfb/bwxwfb/gbwfbh/gjscjgzj/202607/t20260709_998291.html
[7] Major News in the Photovoltaic Industry, https://m.sohu.com/a/1059964441_313170/?_trans_=010004_zyllqxtmrfx
[8] Huizhong Research | Hot Topics in Construction Engineering 01 [Bidding and Tendering Process]—Determination of and Legal Consequences for Winning Bids Below Cost, https://www.huizhonglaw.com/Content/2025/07-02/1800002410.html#
[9] Lester Telser, The Core Theory in Economics, Routledge, 2006
[10] In his article introducing “the core” (Telser, Lester G. 1994. “The Usefulness of Core Theory in Economics.” Journal of Economic Perspectives 8(2): 151–164), Telser provided a proof of the empty core for the game in“The Treasure of the Sierra Madre”:
• P₁ and P₂ agree to cooperate and split the rewards equally, resulting in an allocation of {50, 50, 0}, leaving P₃ with nothing.
• P₃ then approaches P₂ and offers 60, keeping 40 for himself → {0, 60, 40}, leaving P₁ with nothing.
• P₁ then approaches P₃ and proposes an equal split → {50, 0, 50}.
• P₂ then tries to win over P₁, offering 55 and keeping 45 for himself…
Every allocation is overturned by some “two-player alliance,” because any two players can guarantee 100, while the three players combined have only 100. Written as inequalities:
x₁ + x₂ ≥ 100, x₁ + x₃ ≥ 100, x₂ + x₃ ≥ 100, x₁ + x₂ + x₃ ≤ 100
Adding the first three equations together, each person is counted twice: 2(x₁ + x₂ + x₃) ≥ 300, meaning the total sum ≥ 150, which contradicts the upper limit of 100. There is no solution—the “core” is empty, and the bargain can continue indefinitely.”
[11] This passage largely draws on the summary provided by Claude Opus5 of Telser’s book The Core Theory in Economics (see Note 9).
[12] Bittlingmayer, George. “Decreasing Average Cost and Competition.” Journal of Law and Economics 25 (1982): 201-29.
[13] https://finance.sina.com.cn/money/future/fmnews/2026-08-02/doc-inikxwif9772412.shtml，Aug. 2, 2026
[14] The analysis on the photovoltaic industry prepared by CITIC Securities partially incorporates interpretations generated by Claude Opus5.
[15] For example, refer to the full text of Liu Shijin’s landmark speech: “A Comprehensive Economic Revitalization Plan Combining Stimulus Measures and Reforms to Substantially Expand Domestic Demand,” https://wallstreetcn.com/articles/3728547
[16] “Tsinghua Professor Reveals the True Cost and Way Out of ‘Involution,’ A Misunderstood Keyword,” https://news.qq.com/rain/a/20251018A02AX500. This interview was also translated into English by University of California scholar Nils Gilman: https://nilsgilman.substack.com/p/chinas-search-for-a-new-political
[17] Huang, Philip : “A Further Discussion on Involution and the Path to Overcome It,” http://www.snzg.net/article/2021/0130/article_42552.html. The officially published version appeared in Open Times, 2021, Issue 1: pp. 157–168
[18] Geertz, Clifford. 1963. Agricultural Involution: The Process of Ecological Change in Indonesia. Berkeley: University of California Press.
[19] Goldenweiser, Alexander A. 1936. “Loose Ends of Theory on the Individual, Pattern, and Involution in Primitive Society.” In Essays in Anthropology Presented to A. L. Kroeber, ed. Robert H. Lowie, 99‒104. Berkeley: University of California Press.
[20] This analysis of Geertz’s metaphor drawing on Gothic art is largely based on the interpretation provided by Claude Opus5.