Anti-Involution in China’s Chemical Industry
Curb of Destructive Competition in Chemicals is an Indication of a Broader Transformation in China’s Economic Strategy
Kai Pflug, CEO, Management Consulting – Chemicals, Shanghai, China
China’s chemical industry has entered a period of intense competition and declining margins. Rapid capacity expansion has created persistent oversupply in several polymers and basic chemicals, triggering aggressive price competition. As China accounted for 46% of global chemical production in 2024, these developments have major implications for global markets.
In China policy discussions, the current situation is described as “involution”: companies invest in additional capacity and lower prices to maintain and increase market share. The Chinese government is concerned about this situation and promotes “anti-involution” measures to limit destructive competition and encourage higher-value industrial development.
What Is “Involution”?
Involution describes excessive competition in which increasing effort and investment do not generate material gains in productivity or profitability – the English expression “rat race” captures the dynamic reasonably well.
Typical signs of involution are rapid capacity expansion, homogeneous products, and aggressive price competition, resulting in declining profits despite output growth. The concept is now widely used in China to describe competitive dynamics in sectors such as electric vehicles, solar panels, batteries – and chemicals.
Drivers of Involution in China’s Chemical Industry
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