Currently, the involution phenomenon has attracted widespread attention both domestically and internationally. It has essentially affected the trend and direction of China's economic operation and development. There are two completely different views on this topic. One is that the market competition is manifested as involution to some extent, and the international competitiveness is obtained through domestic market competition. Another viewpoint holds that China's involution style competition is one of the reasons for the current economic contraction. If the latter holds true, the problem will become quite severe and will no longer be an ordinary market competition phenomenon.
This article proposes four methods to solve the problem of involution.
1. To fundamentally solve the problem, it is necessary to strengthen the autonomy and decision-making independence of enterprises, and implement hard budget constraints.
2. We need to carry out institutional reform of local government participating in competition. We will gradually solve the problem based on the rule of law mainly from the aspects of power constraint and function separation.
3. We need to reconstruct the organizational structure of China's industries. National policies should aim to promote the formation of monopolistic competition market and drive mergers, acquisitions, bankruptcies, and restructuring activities of enterprises through market competition mechanism.
4. Efforts should be made at the national macro-level policies, including supporting the forward shift of industrial policies, adjusting the subsidy methods of industrial policies, and changing the implementation methods of industrial policies.
