Notes on Involution in China
Involution (內卷), is a phenomenon in China that too many people does the same thing without much difference lead to no one benefiting from the competition. 同質競爭 (compete by doing the same thing) would be a more accurate term.
Keyword: a bunch of people doing nearly the same thing.
Verified potential causes:
- A shrinking market.
- No copyright protection, not to mention patents. (Not the case if the firm has government background.)
- No economic freedom. Little risk capital due to CCP’s control on capital.
- Lack of invention of new technology.
- De dure 18% transfer tax (when goods and services changing hands between two companies, this amount is taxed on the transfer price), coined misleadingly as “value-added tax” (增值稅).
- Lack of social trust leads to short supply chain.
To be honest, this feels like a engineered problem, like how nearly all students in China need to pass one exam to go in a college. Fully planned education, like a planned economy, does not have diversity and can have little to no innovation, contrary to what purpose education should serve.
References
https://theinitium.com/opinion/20210107-opinion-china-industry-workers-involution
https://www.youtube.com/watch?v=42giCVlE_ts
I didn’t learn anything from the two articles below. Listed here for completeness.
https://carnegieendowment.org/posts/2025/08/whats-new-about-involution?lang=en
https://www.thinkchina.sg/economy/chinas-involution-could-spur-post-capitalist-era-part-1
The wikipedia pages on this are trash.
More?
There’s more to China’s economy than this. Hopefully I’ll be able to understand it and write about it.