Key Takeaways:
China's market regulator is escalating its campaign against "involution" — the destructive price competition that has squeezed margins across industries from e-commerce to manufacturing.
China's State Administration for Market Regulation said it will legally punish "involution" practices including predatory pricing and fake discounting, signaling a regulatory clampdown on the price wars that have deflated corporate profits across the world's second-largest economy.
"We will severely crack down on enterprises that take the lead in ultra-low-price bidding and illegally engage in dumping," Luo Wen, director of the State Administration for Market Regulation, wrote in an article published in People's Daily, the official newspaper of the Chinese Communist Party.
The regulator plans special actions targeting low-quality, low-price products, anti-monopoly enforcement, and investigations into pricing tactics such as "one-price" and "flash sale" promotions that create a false impression of low prices. SAMR will also conduct cost investigations and increase product quality supervision, with a focus on traditional crafts markets where counterfeit goods have proliferated.
The crackdown marks an escalation of Beijing's broader push to curb "involution" — a term that has become a national buzzword for cutthroat competition — as policymakers seek to shift the economy toward higher-value production and away from the volume-driven, low-margin model that has characterized sectors from express delivery to solar manufacturing.
The express delivery industry illustrates the scale of the problem. China's courier sector delivered 198.95 billion parcels in 2025, up 13.6% from a year earlier, yet average revenue per parcel fell 6.3% to about 7.51 yuan ($1.11), according to the State Post Bureau. In the first five months of 2026, parcel volume rose 5.2% to 82.87 billion while revenue increased 7.2% to 635.37 billion yuan, implying a modest 1.9% recovery in per-parcel revenue to 7.67 yuan — suggesting the anti-involution campaign may already be gaining traction.
The regulatory push poses the most immediate risk to e-commerce platforms that have built their business models around aggressive discounting. Pinduoduo, Alibaba Group's Taobao and JD.com have all relied on price as a primary competitive weapon, with Pinduoduo's group-buying model and "lowest-price" algorithm driving market share gains at the expense of margins. The SAMR's focus on fake discounting — "one-price" and "flash sale" promotions that mislead consumers — directly targets the promotional tactics these platforms use to drive traffic.
Manufacturing sectors locked in price wars — including solar panels, lithium batteries and home appliances — could also face pressure as the regulator steps up cost investigations and quality supervision. The anti-monopoly enforcement component signals that larger players using pricing power to squeeze smaller competitors may face heightened scrutiny.
The SAMR's campaign aligns with a broader policy direction set at the Central Economic Work Conference in December 2025, which called for strengthening the security guarantee of strategic resources and shifting away from low-value-added production. The question for investors is whether this represents a genuine structural shift in China's regulatory approach or a cyclical intervention that will fade once economic growth targets come under pressure.
Previous anti-monopoly campaigns — such as the 2021 crackdown on technology platforms — produced sharp but temporary market dislocations before regulatory intensity moderated. The current push differs in its explicit targeting of pricing practices across the broader economy rather than focusing on a single sector.
For investors, the key metric to watch will be whether the campaign translates into measurable margin improvement in price-sensitive sectors. Express delivery companies including ZTO Express, YTO Express and SF Holding have already shown signs of pricing recovery in recent months, with ZTO's first-quarter revenue per parcel rising 8.2% year-on-year. If this trend broadens, it could signal that the anti-involution campaign is producing real economic effects rather than remaining a rhetorical exercise.
This article is for informational purposes only and does not constitute investment advice.
