BEIJING, June 29, 2025 /PRNewswire/ -- Prices of photovoltaic (PV) modules have fallen to just above 0.6 yuan ($0.08) per watt, over 100 car models have initiated price reductions, and energy storage system bidding prices keep hitting new lows. For some time, disorderly price wars and homogenized competitions have become prominent signs of "rat race" competition in certain industries. Under these circumstances, unrestrained competition distorts market mechanisms and hinders high-quality development.

It is necessary to deepen market-oriented factor allocation reforms, proactively eliminate local protectionism, market segmentation and "rat race" competition.

Based on a clear understanding of these cyclical challenges and a deep grasp of market dynamics, China, has prioritized comprehensive measures to address "rat race" competition. This is a critical step to resolve current economic contradictions, key guarantee for deepening economic system reforms and effective path to promote enterprise innovation, elevate value chains and enhance developmental resilience.

Urgent need

Eliminating "rat race" competition is a necessity for economic law.

Competition is the cornerstone of a market economy, but it can be either constructive or unfair. "Rat race" or destructive competition defies economic principles, with clear drawbacks.

First, "rat race" competition weakens industry competitiveness. 

China's new-energy vehicle (NEV) sector has led global production and sales for a decade, contributing significantly to global carbon neutrality. However, concerns loom: In 2024, the NEV industry's profit margin fell to 4.3 percent, with only BYD, Seres, Li Auto and Leapmotor reporting profits, while many other firms had to cut R&D spending.

Excessive focus on price wars may boost short-term sales but squeezes profits, limiting innovation, technical progress and after-sales investment, ultimately undermining the industry's global competitiveness.

Second, "rat race" competition disrupts industrial ecosystems. 

To reduce costs, some firms abuse their market dominance to delay payments or shift burdens. In 2024, China's auto parts industry saw a 0.3 percent drop in profit margins and a 10.6 percent rise in liabilities.

Some firms' behaviors resulted in inferior products to crowd out quality ones, necessitating urgent ecosystem optimization.

Third, "rat race" competition hinders the domestic economic cycle. 

High-quality development requires strong innovation, demand responsiveness, brand influence and product quality. It should yield returns for investors, corporate profits, adequate wages and tax revenue.

"Rat race" competition, however, wastes resources in inefficient competition, stifling innovation, disrupting supply-demand balance, and reducing wages, tax revenues, and investment confidence, impacting the broader economy.

In recent years, China's "new trio" products, namely NEVs, solar batteries and lithium-ion batteries, have thrived, lowering global green transition costs and diversifying energy supplies. Yet, high-input, low-output "rat race" competition harms industry health and deviates from the essence of high-quality development.

Ongoing improvement

Eliminating "rat race" competition is essential for a high-level socialist market economy.

What are the root causes of "rat race" competition?

Taking the PV sector as an example. Total annual capacity surpasses 1,100 gigawatts, pushing down prices for polysilicon, wafers, cells and modules. On the other hand, some local governments continue to aggressively attract investment, offering land, policies and funds, with investments exceeding 800 billion yuan in 2024, according to incomplete statistics.

The "rat race" competition stems from several factors, including supply-demand mismatch, imperfect market systems and misaligned local priorities.

The key to ending "rat race" competition lies in coordinating the relationship between an effective government and a functional market.

The market plays a decisive role in resource allocation and the government better fulfills its role, which is part of the efforts to build a high-standard socialist market economy, read the resolution adopted at the third plenary session of the 20th CPC Central Committee in July 2024.

In early 2025, China unveiled a guideline for building a unified national market, explicitly aiming to curb unfair market competition and improper intervention.

Based on this guidance, provinces such as Guangdong and Zhejiang have accelerated fair competition reforms. These efforts dismantle regional "small cycles" and market barriers, laying a foundation for unleashing domestic demand and eliminating "rat race" competition.

On April 20, a set of measures to enhance the implementation of China's fair competition review regulations took effect, requiring that public affairs must conduct fair competition reviews when formulating laws, rules and policies related to business activities.

Ongoing improvements to foundational institutions are slated to foster a fairer and more dynamic market environment.

Reforms are gaining momentum. The more standardized government actions become, the more effective the market's role. To comprehensively address "rat race" competition, it is essential to create a fairer, more vibrant market environment, achieving optimal resource allocation efficiency and maximum economic benefits.

Fueling economic cycle

Eliminating "rat race" competition is essential for strengthening domestic economic cycles and building a unified national market.

On June 1, the regulations aimed at ensuring timely payments to small and medium-sized enterprises took effect, with 17 automakers committing to unify supplier payment terms within 60 days. Following the China Automobile Industry Association's initiative, multiple automakers pledged to foster a healthy, orderly industrial ecosystem.

As a result, relevant authorities are intensifying efforts to curb "rat race" competition and promote high-quality development by expanding demand to grow the market, strengthening legal enforcement, driving upgrades through standards and with collaborative action across sectors.

The 15 percent subsidies for 3C products and 20 percent subsidies for home appliances and home goods have driven trade-in programs, with the Ministry of Commerce reporting 1.1 trillion yuan in sales across five major categories by May 31.

Leveraging the policies that aim to promote the large-scale equipment renewal and trade-in of consumer goods, China is unleashing the potential of its 1.4 billion people market to boost domestic demand.

A market economy thrives on the rule of law. Enhanced product consistency checks, anti-unfair competition enforcement and crackdowns on low-quality products, counterfeiting and intellectual property violations correct market failures. A better business environment and freer flow of resources promote survival of the fittest, helping industries escape the "rat race" trap.

Strengthened standards help boost upgrades. In May alone, the Ministry of Industry and Information Technology proposed four mandatory and seven recommended national standards, alongside 79 industry standards soliciting public opinions, while nine industries issued 421 standards.

Standards guide industries away from price wars toward value-driven competition, achieving both quantitative growth and qualitative improvement.

Industry associations are stepping up. As economic promotion organizations, industry associations serve as key intermediaries connecting the government, market, enterprises and society.

For example, the China Photovoltaic Industry Association promoted voluntary production control agreements, the Chinese Wind Energy Association set standards against predatory pricing, and the China Cement Association explored price coordination mechanisms. These efforts help normalize behaviors and sustain industry health.

Enterprises are also acting responsibly: State-owned enterprises revised bidding rules to prioritize technology and China's top 10 PV glass producers cut output by 30 percent.

With government guidance, industry self-regulations, and corporate accountability, eliminating "rat race" competition is progressing steadily.

China's economy is like a vast sea, with enterprises as navigators. By fostering fair competition, innovation and a "quality-over-price" consensus, China's economic ship is steering toward a future of high-quality development.