Accelerating the economic human capital race to the bottom.
FEW words have captured China’s economic mood as sharply as neijuan — involution. Originally an academic term coined by the American anthropologist Clifford Geertz in the 1960s to describe agricultural systems that grew more complex without growing more productive, the concept has been repurposed for the modern Chinese economy. Geertz described involution as a situation where “agricultural production becomes increasingly intricate but without corresponding economic development.”
Today, the same dynamic is playing out across industries from electric vehicles to food delivery — and artificial intelligence may be making it worse.
From Campus Slang to Economic Warning: Lying Flat
Involution entered Chinese popular culture around 2020, when young workers and students began using it to describe a system in which effort escalates but rewards do not. It quickly became paired with a counter-movement: tang ping, or “lying flat” — a quiet refusal to participate in relentless competition. The 996 work culture — nine in the morning to nine at night, six days a week — had become normal in parts of China’s technology sector, yet many workers found that the sacrifices no longer translated into meaningful progress.
The pressures are real. A 2025 research report found that employees in Taiwanese and Chinese firms average 48.7 hours of work per week, substantially above most developed economies. Graduate unemployment has hovered around 17–18 percent, housing costs have soared, and wages in many sectors have stagnated. As one widely circulated social-media joke put it: “In other countries, governments intervene to stop monopolies. In China, they intervene to stop too much competition.” Behind the humour is a serious concern: it is not competition itself that is damaging, but destructive competition.
Industries Caught in the Spiral
Several of China’s most strategically important sectors now illustrate how involution reshapes entire industries.
The electric vehicle market has become a battlefield, with dozens of brands engaged in aggressive price-cutting.
Companies including BYD and Tesla have participated in repeated waves of discounts since 2023. The result has been a collapse in margins: data covering 33 Chinese-listed automakers shows the sector’s median net profit margin falling to just 0.83 percent in 2024, down from 2.7 percent in 2019.
China’s solar industry is similarly afflicted. Gao Jifan, chairman of Trina Solar, has warned that
“intense price competition and oversupply across the photovoltaic manufacturing chain produced losses of around US$40 billion last year.”
Analysts estimate that China’s solar manufacturing capacity is already sufficient to meet global demand through to 2032. Digital platforms offer yet another example: Alibaba, JD.com and Meituan have poured billions into subsidies to capture market share in food delivery and instant retail, with analysts at Nomura estimating industry-wide cash burn exceeded US$4 billion in a single quarter.
The AI Accelerant
Artificial intelligence was supposed to be the solution. Instead, it may be accelerating the problem. By dramatically lowering the cost of tasks — marketing, coding, design, logistics planning — AI enables more competitors to enter markets faster, flooding them with similar products and services and driving prices down further.
Keyu Jin, professor of economics at the London School of Economics, argues the effect can be counterintuitive:
“When technologies reduce entry barriers, firms often compete more aggressively rather than innovate. The result can be declining profitability despite rising efficiency.”
Nomura analysts recently warned that AI risks becoming “a table-stakes technology rather than a differentiator” — when every firm uses the same tools, competitive advantage quickly erodes, pushing companies into faster cycles of price competition rather than value creation.
In manufacturing, AI-driven automation and quality control systems have enabled companies to scale production faster than global demand can absorb, worsening the oversupply dynamics already visible in EVs and solar panels. In the services sector, generative AI tools are creating similar pressures across marketing, content creation and software development, where freelancers and small firms can now replicate work that once required entire teams — only to find that thousands of competitors are doing the same thing.
A Regional Competition Spiral
China is not alone. Across Asia South Korea, Japan and Singapore governments have launched ambitious national AI strategies investing heavily in infrastructure, research and talent.
While the aim is to capture a share of the global AI economy, the simultaneous build-out of similar industries risks triggering what analysts describe as a regional technology competition spiral: multiple countries expanding supply faster than demand grows.
Economists warn of a “productivity paradox of competition”: technological progress increases output potential, but profits decline because too many firms chase the same markets. This dynamic has already appeared in Chinese technology sectors over the past decade and could intensify as AI adoption accelerates.
Finding a Way Out
China’s leadership has begun signalling that certain industries must curb destructive price wars through consolidation, restructuring and stronger regulation. Whether these measures will succeed remains uncertain. The deeper challenge is structural: China’s economy is transitioning from rapid expansion to a more mature, slower-growth phase, where productivity gains are harder to achieve and volume-driven competition yields diminishing returns.
For policymakers and business leaders across Asia, the central question is no longer whether AI will transform industries — it already is. The question is whether that transformation generates sustainable value or simply accelerates the race to the bottom.
As the original analysis puts it, the real test is
“whether Chinese industries can move away from volume-driven competition toward innovation, quality and profitability.”
If they cannot, involution — working harder for less — may define the region’s economic trajectory for years to come.
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