China’s Involution Trap: Profitless Growth Cannot Last
Letting zombie companies fail will be painful, but is essential for building a healthier economy.
Workers assemble electric cars on the production line at an auto plant of Zhejiang Kandi Vehicles Co., Ltd, in Hangzhou, Zhejiang. Credit: IC Photo via Depositphotos
China’s economy keeps posting solid headline numbers — around 5 percent GDP growth in 2025, hitting the official target once again. Yet look closer, and a troubling picture emerges. Corporate profits have barely budged. Industrial earnings across the country rose just 0.6 percent in 2025, finally ending three straight years of declines but still scraping along at near-zero levels. This isn’t a sign of robust health; it’s the symptom of a deeper issue: intense, cutthroat competition that
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