Comprehensive efforts to address "involution-style" disorderly competition have achieved positive results, with market expectations high for how policies will continue to develop.
Recent data released by the National Bureau of Statistics shows that both profits and prices in related industries have improved. For example, profits in raw materials manufacturing increased 22.1% year-on-year in the first eight months, while the steel industry turned from losses to profits. In August, price declines in photovoltaic and new energy vehicle manufacturing narrowed by 2.8 and 0.6 percentage points respectively compared to the previous year.
The "anti-involution" campaign remains a protracted battle. SASAC Director Zhang Yuzhuo recently chaired a symposium on economic operations of some state-owned enterprises, requiring central enterprises to take the lead in resolutely resisting "involution-style" competition and guide healthy, positive, and sustainable industry development. Recent intensive releases by the Ministry of Industry and Information Technology of growth stabilization work plans for ten major industries including automotive, steel, and non-ferrous metals have also made clear deployments on strengthening industry governance and standardizing corporate competition order.
Currently, prices in some upstream industries have begun to recover, but "anti-involution" efforts in mid and downstream industries still require more policy support. Guotai Haitong Securities analyst Li Linzhi noted in a research report that if subsequent policies can precisely strengthen downstream demand through measures such as expanding the scope of consumer goods trade-in programs and increasing consumption and real estate stimulus, the profit improvements from "anti-involution" could further transmit to mid and downstream sectors, driving overall industrial profits from structural recovery to comprehensive recovery.
**Industrial Profit Growth Turns Positive**
With macroeconomic policy implementation combined with low base effects, industrial profit growth turned positive in the first eight months.
Data released by the National Bureau of Statistics on September 27 showed that profits of above-scale industrial enterprises increased 0.9% year-on-year in the first eight months, reversing the trend from a 1.7% decline in the first seven months and ending the continuous decline in cumulative enterprise profits since May this year.
From a monthly perspective, profits of above-scale industrial enterprises grew in double digits in August, turning from a 1.5% decline in July to 20.4% growth, showing significant monthly profit improvement.
Yu Weining, chief statistician of the National Bureau of Statistics' Industry Department, analyzed that under the combined effects of effective macroeconomic policy implementation, deepening construction of a unified national market, and low base effects from the same period last year, profits of above-scale industrial enterprises increased 0.9% year-on-year in the first eight months, with strong support from equipment manufacturing and improvements across enterprises of different sizes.
Wei Qijia, director of the Industrial Economics Research Office at the National Information Center's Economic Forecasting Department, stated that from overall data changes, industrial profit improvements are mutually corroborated and matched with revenue growth, cost reductions, and improvements in other related financial indicators, proving the accelerated marginal improvement in current industrial profits, providing good support for market expectations and laying a solid foundation for full-year industrial profit improvements.
Price improvements are an important driver of profit growth. From the three factors of volume, price, and profit margins, the resilience of August production, narrowing declines in the Producer Price Index (PPI), and continuous profit margin improvements jointly supported the recovery of industrial enterprise profits. August PPI declined 2.9% year-on-year, with the decline narrowing by 0.7 percentage points compared to July, marking the first narrowing since March this year; month-on-month, it ended eight consecutive months of decline, turning from a 0.2% decrease in July to flat.
By industry, August year-on-year price declines in coal processing, ferrous metal smelting and rolling, coal mining and washing, photovoltaic equipment and components manufacturing, and new energy vehicle manufacturing narrowed by 10.3, 6.0, 3.2, 2.8, and 0.6 percentage points respectively compared to the previous month, reducing the downward impact on PPI by about 0.5 percentage points, making them the main reasons for the narrowing PPI decline.
Dong Lijuan, chief statistician of the National Bureau of Statistics' Urban Department, analyzed that besides the influence of lower comparison bases from the same period last year, China is accelerating implementation of more proactive macroeconomic policies, with some industries showing positive price changes. Continuous optimization of domestic market competition order has driven narrowing year-on-year price declines in related industries. Deep advancement of unified national market construction, governance of disorderly enterprise competition, and orderly capacity governance in key industries have led to narrowing year-on-year price declines in related industries.
China Galaxy Securities research shows that August industrial enterprise profit improvements demonstrate the results of "anti-involution," but on the other hand, revenue growth rates indicate demand has not yet significantly improved, with inventory growth bottoming out and accounts receivable collection periods rising, showing enterprises still face certain operational pressures amid rising costs.
**Downstream Industries Await Precise Policy Implementation**
Driven by "anti-involution," raw materials manufacturing profits grew rapidly. Supported by increased market demand, price recovery, and some cost reductions, raw materials manufacturing profits increased 22.1% year-on-year in the first eight months, accelerating by 10 percentage points compared to the first seven months. Among these, steel industry profits turned from losses to gains, while non-ferrous industry profits grew 12.7%.
China Minsheng Bank Chief Economist Wen Bin expects industrial enterprise profits to continue moderate recovery, with cumulative growth maintaining steady recovery. On one hand, policy emphasizes "continuous effort and timely strengthening." On the other hand, as "anti-involution" governance continues, market competition order gradually improves, and price transmission and cost allocation mechanisms are expected to become more reasonable, providing marginal support for profit quality.
Guotai Haitong Securities also believes current enterprise profit structural differentiation is obvious, with upstream and midstream industries experiencing continuous marginal profit recovery driven by "anti-involution" policies combined with high-end manufacturing demand. However, downstream consumer industries remain constrained by weak terminal demand, limiting upstream price transmission to downstream sectors and causing profit differentiation among upstream, midstream, and downstream sectors. If subsequent policies can precisely strengthen downstream demand through measures such as expanding consumer goods trade-in programs and increasing consumption and real estate stimulus, profit improvements from "anti-involution" could further transmit to mid and downstream sectors, driving overall industrial profits from structural recovery to comprehensive recovery.
**Anti-Involution Policies Continue Strengthening**
Comprehensive governance of "involution-style" disorderly competition is a protracted battle requiring continued policy strengthening. As Liu Yiyang, Secretary-General of the China Photovoltaic Industry Association, recently mentioned at the "Photovoltaic Industry 2025 First Half Development Review and Second Half Outlook Symposium": "The involution momentum is far from over; we've only taken the first step of a long march. If we don't truly handle things properly, we'll just return to the past."
Industries involved in "anti-involution" such as steel and coal have high concentration among leading enterprises, requiring state-owned central enterprises to lead by example. Zhang Yuzhuo recently chaired a symposium on economic operations of some state-owned enterprises, understanding enterprise economic operations and challenges, focusing on stabilizing electricity and coal prices and preventing "involution-style" vicious competition, listening to enterprise opinions and suggestions, and further studying policy measures to strengthen foundations for high-quality enterprise development.
Zhang Yuzhuo emphasized the need to lead in resolutely resisting "involution-style" competition, firmly pursuing differentiated development and brand competition paths, strengthening industry self-discipline, guiding healthy, positive, and sustainable industry development, and building an industrial ecosystem with coexistence of competition and cooperation and open sharing. Efforts should focus on strengthening risk prevention, further improving normalized risk monitoring and early warning mechanisms, strengthening risk disposal in key businesses, and firmly maintaining risk control bottom lines.
The Ministry of Industry and Information Technology recently intensively released growth stabilization work plans for ten major industries including automotive, petrochemical, building materials, steel, electronic information, and power equipment, making clear deployments for strengthening industry governance and standardizing enterprise competition order over the next two years.
On September 28, eight departments including the Ministry of Industry and Information Technology, Ministry of Natural Resources, and Ministry of Commerce jointly released the "Non-ferrous Metals Industry Growth Stabilization Work Plan (2025-2026)," proposing scientific and reasonable layout of alumina, copper smelting, lithium carbonate and other projects to avoid repetitive low-level construction.
Ge Honglin, Chairman of the China Nonferrous Metals Industry Association, stated that the industry must actively take measures to strengthen self-discipline construction while avoiding various irrational behaviors in new energy mineral tracks, promoting compatibility and balance between supply and demand.
The "Steel Industry Growth Stabilization Work Plan (2025-2026)" jointly issued by five departments including the Ministry of Industry and Information Technology, Ministry of Natural Resources, and Ministry of Ecology and Environment focuses on strengthening governance, optimizing supply, promoting transformation, expanding consumption, and increasing cooperation, proposing 10 specific measures across 5 areas, with "stabilizing growth and preventing involution" as the core, pointing out implementation paths for structural adjustment and high-quality development of China's steel industry.
Strict capacity control is an important tool for steel industry anti-involution. The plan proposes implementing precise capacity and output regulation, revising and releasing steel industry capacity replacement implementation measures, increasing capacity reduction and replacement efforts, providing differentiated reduction and replacement ratio support for projects developing electric arc furnace steel, hydrogen metallurgy and other low-carbon ironmaking processes, mergers and acquisitions, and high-end specialty steel that align with industrial development directions, promoting industry volume reduction development and transformation upgrading.
Zhang Longqiang, Director of the Metallurgical Industry Information Standards Research Institute, analyzed that the plan further strengthens supply-demand coordination, deploying specific measures to regulate total supply, optimize supply quality, expand consumption demand, and promote renovation and upgrading, solidly promoting dynamic supply-demand balance and effectively stabilizing industry development expectations.
Additionally, the "Automotive Industry Growth Stabilization Work Plan (2025-2026)" released by eight departments including the Ministry of Industry and Information Technology and Ministry of Finance also clearly states the need to combine long-term and short-term approaches with comprehensive measures to effectively standardize industrial competition order, strengthen cost investigation and price monitoring, enhance product production consistency supervision and inspection, and urge key automotive enterprises to implement payment period commitments.