China Warns Officials Against Trend Chasing as Five Year Plan Era Begins
China’s leadership has issued a fresh warning to local officials against blindly following popular policy trends, cautioning that herd behaviour could worsen what authorities describe as involution, a cycle of excessive competition that erodes profits and undermines sustainable economic growth.
The message was delivered through an editorial published by the official newspaper of the Communist Party of China as the period covered by the country’s next Five Year Plan begins. The commentary urged provincial and municipal governments to focus on long term development strategies rather than rushing to copy initiatives launched elsewhere in pursuit of quick political or economic gains.
In recent years, involution has become a widely used term in Chinese policy debates. It refers to intense internal competition that leads to falling prices, duplicated investment and declining returns without corresponding improvements in productivity or innovation. The phenomenon has been blamed for problems in sectors ranging from electric vehicles and solar panels to property development and local infrastructure projects.
According to the editorial, some local governments have fallen into a pattern of chasing fashionable industries or policy slogans without fully assessing local conditions. When multiple regions pour resources into the same sectors, the result can be oversupply, wasted capital and heightened financial risk. The paper warned that such behaviour may appear proactive in the short term but can weaken economic fundamentals over time.
The warning comes as China enters a new planning cycle marked by slower growth, tighter fiscal conditions and heightened external uncertainty. Central authorities have repeatedly stressed the need for high quality development, urging officials to prioritise innovation, efficiency and resilience rather than sheer expansion. Reducing involution is increasingly seen as central to that goal.
Policy analysts note that competition among local governments is deeply ingrained in China’s governance system. Officials are often evaluated on economic performance, which can incentivise rapid project launches and headline grabbing investments. The editorial appears aimed at recalibrating those incentives by emphasising sustainability and coordination over speed.
The article also highlighted the risks to private companies, particularly small and medium sized firms. Fierce price competition driven by oversupply can squeeze margins and discourage long term investment. Authorities fear that unchecked involution could sap business confidence at a time when the private sector is already under pressure from weak demand and rising costs.
At the same time, the leadership is wary of simply slowing activity across the board. The editorial made clear that the goal is not to suppress competition but to guide it more effectively. Local governments were encouraged to differentiate their development strategies, build on genuine comparative advantages and avoid duplicating projects that have already saturated the market.
The emphasis on discipline and restraint reflects broader shifts in economic management. Beijing has signalled that it wants fewer speculative booms and more stable growth, even if that means accepting lower headline expansion in the near term. Coordination between regions and clearer industrial planning are expected to play a larger role under the new Five Year Plan.
For local officials, the message is a reminder that political signals are evolving. Success will increasingly be measured by the quality and durability of growth rather than the ability to jump on the latest trend. As China navigates a more complex economic landscape, curbing involution has become not just an economic priority but a governance test as well.
