Will Xi crush market competition by unifying China's national economy?
Or will he transform China into a crucible of market competition for the creation of global champions?
Xi Jinping has issued another call for the transformation of China into a “grand unified market,” as an essential means of dealing with its besetting economic challenges.
His economic advisors hope the move can help to overcome the secular headwinds of aging demographics and a dwindling working age population, alongside the declining effectiveness of an outmoded investment-driven development strategy.
They expect the grand unified market policy to boost economic growth across several fronts.
First on the list is the optimisation of the allocation of resources and factors of production - the indispensable inputs for the process of economic production.
The second is bringing an end to "involuted competition" - the excessive price and investment-driven competition that Chinese economists believe is ruining domestic industry by sapping it of profits.
Third - in seeming contradiction to the second - is the intensification of domestic market competition, creating a nation-sized crucible for the forging of globally competitive Chinese companies.
Communist Party’s top economic policy body meets in July
On 1 July, the Central Financial and Economic Affairs Commission (中央财经委员会) (CFEAC) convened its sixth meeting in Beijing.
CFEAC is a commission of the Communist Party's Central Committee - the highest organ of the Party when its National Congress isn't in session.
The commission is responsible for supervising the economic policy of the Party and China’s State Council, and is under the direct leadership of Xi Jinping.
The primary theme for the July meeting was “deepening the development of a grand national unified market.”
In a noteworthy adjustment to the Communist Party's standard phrasing, the CFEAC meeting said the creation of a national market would now encompass the “five unifications and the one opening” (五统一、一开放).
According to CFEAC, this refers to “unified basic market systems, unified market infrastructure, unified standards for government conduct, unified market regulation and enforcement, and unified market for factors of production and resources,” alongside the “continued expansion of external opening” of the Chinese economy.
Domestic observers say the introduction of this new phrasing marks the strategic and ideological elevation of China’s ambitions for the integration of the national economy into a single unified market.
It signals the accelerated launch of related policies in the second half of 2025, as well as greater prioritisation of the goal in long-term strategic decision making.
A brief history of Xi’s fixation with market unification
This is far from the first time that the Xi government has made reference to the notion of a grand national market.
The concept is actually one of the earliest to make its debut following Xi’s rise to China’s top offices of party secretary, then president, in 2012 and 2013 respectively.
The Third Plenum of the 18th Central Committee convened in early 2013 made reference to “establishing a unified and open, competitive and orderly market system.”
In August 2015, the State Council affirmed the use of the phrase “grand unified market” (统一大市场) - marking its entry into general circulation as a part of Chinese government and Communist Party boilerplate.
2022 - the same year that Xi assumed a precedent-breaking third term in office, saw the elevation of the concept of the “grand unified market” to the level of strategic priority.
In April, Beijing released the “Central Committee and State Council Opinions on Accelerating the Establishment of a Grand National Unified Market” (中共中央国务院关于加快建设全国统一大市场的意见).
The Opinions made debut use of the phrase ““deepening the development of a grand national unified market,” which reappeared in the CFEAC meeting convened by Xi at the start of July.
Why Xi wants to unify China into a grand national market
The explicit motivation for Xi’s dream of creating a grand national market is the “eradication of local protectionism and market divisions” (“破除地方保护和市场分割”) that are viewed as roadblocks to productivity, just as China’s economy confronts multiple headwinds.
Due to its immense size and geographic variation, China readily succumbs to division into regional sub-economies that are not amenable to full integration. This can foment regional protectionism and the formation of local monopolies.
The issue is further exacerbated by the long-standing practice of assessing senior regional officials on their ability to drive GDP growth - a policy that pundits believe has driven deleterious competition between provinces, the accumulation of excess industrial capacity, as well as led to problems with economic data.
Prominent economic pundit Fu Yifu (付一夫) - a senior researcher at the Xingtu Financial Research Institute, argues the issue of economic regionalism is an especially acute problem when it comes to China’s market for the factors of production - the inputs in the economic process that are used to create products for final sale and consumption.
He argues that unification into a grand national market could boost China’s growth, by optimising resource allocation across the full breadth of an immense and highly diverse economic system.
“China’s territory is vast and the resource endowments of its different regions are markedly varied," he writes in a recent opinion piece ("高层再提“统一大市场”).
“The market divisions of the past made it difficult for resources to flow to those regions and industries where their value can be best utilised.
"Following the establishment of a grand unified market, labour and other resources will be able to freely flow in accordance with the signals of market pricing.
"Enterprises will be able to allocate resources at a national scale, reducing their costs and raising productivity.
“This will form a higher-level and more beneficial dynamic balance between supply and demand at a national scope, thus enabling different markets for factors of production to achieve greater efficiency.”
Cracking down on involuted competition
Another key goal of nationwide market integration is advancing efforts to crack down on "involuted competition."
China's top policymakers view this is one of the economy's most debilitating problems since the rise of its hi-tech industries.
Involuted competition has been defined as companies pursuing “blind” and excessive investment, leading to reduplication of capacity, severe undercutting of prices and slipshod product quality.
State-owned media has referred to it as “bad money driving out good,” squeezing out industry-wide profits and “wrecking the foundations of industry.”
The 6th CFEAC meeting held on 1 July called for “lawfully regulating disorderly, low-price competition by enterprises," as part of efforts to “fully drive the establishment of a grand national unified market."
It also called for “guiding enterprises to raise product quality, and driving the orderly withdrawal of lagging capacity.”
Chinese financial publication Securities Times interprets this as a “clarion call” for the launch of a campaign by Beijing against involuted competition (“反内卷”号角吹响 多个行业应声而动”).
The state-owned news outlet has since published a series of related reports that “focus on warped, malignant competition in various regions and industries.”
Key industries where involuted competition is considered to be an especially pressing issue include electric vehicles, solar PV technology and lithium batteries.
CFEAC's July meeting was closely followed by a key event held by the Ministry of Industry and Information Technology (MIIT) on 3 July - the 15th Manufacturing Enterprise Summit (第十五次制造业企业座谈会).
MIIT pointed in particular to the need to "comprehensively address low price, disorderly competition in the solar photovoltaic industry."
It called for "guiding enterprises to raise product quality and drive the orderly withdrawal of backwards capacity."
This move was interpreted by the market as a key signal that the solar PV sector would be a key front line in Beijing's battle against involuted competition.
2025 a key year for cracking down on involuted competition
Beijing hatched plans at the end of last year to make 2025 a key period for dealing with the issue of involuted competition.
The Central Economic Work Conference held in December 2024 made “comprehensively rectifying involuted competition and standardising the conduct of local governments and enterprises” one of the “focal point missions” for this year.
This announcement was followed by stern measures from the Chinese government to deal with involuted competition across key sectors - chief amongst them vehicles, solar PV technology and lithium batteries.
These measures are ongoing as the second half of 2025 continues.
1 June saw the release of the “Regulations on Guaranteeing Small and Medium-sized Enterprise Payments” (保障中小企业款项支付条例) that targeted the automotive sector. Since then, 17 Chinese auto companies have announced that they would standardise payment periods for suppliers at 60 days.
In the solar PV sector, China’s leading PV glass companies announced that starting from September they would collectively reduce output by 30%, in a bid to ease the excess capacity created by involuted competition.
Pan Helin (盘和林), an economist from the Ministry of Industry and Information Technology, said that in the lithium battery sector, measures to combat involuted competition primarily consisted of planned reductions to output alongside price restrictions.
“At the end of the day, expunging involuted competition requires that a portion of capacity be withdrawn, in order to achieve a balance between supply and demand,” he said.
Transforming China into a crucible of market competition
Xi also hopes to further intensify and unleash the creative energies of market competition, by welding China into a unified national market.
At first blush, this goal would appear to be at loggerheads with Beijing's aforementioned ambitions to crack down on the excesses of involuted competition, that are viewed as enervating industry.
Chinese economists nonetheless argue that intensifying nationwide competition will boost indigenous innovation, as well as create national champions that are better equipped to prevail against their established global rivals.
“With a grand unified market, enterprises in all regions will face even greater nationwide market competition,” Fu Yifu writes.
“This will help spur their endogenous innovative vitality…enterprises will expand R&D investment, and develop new technologies and products amidst intense competition.
“A grand national market also provides a vast space for applying the fruit of innovation.
“Domestic enterprises grow and become strong by means of full competition in a grand unified market, giving them greater wherewithal to compete internationally.”