The removal of PLA senior generals Zhang Youxia and Liu Zhenli in January 2026 represented the peak, if not the end, of a massive purge of the military leadership that began in mid-2023. The absence of credible information from Beijing has allowed many theories about the causes of these dismissals to circulate, which often center on factional politics or power consolidation. An examination biographical records, however, yields more support for the view that most purges are intended to clean up corruption-prone parts of the PLA in support of Xi Jinping’s broad agenda of readying the military for combat by its 2027 centennial. The massive scale of the purges, however, has probably set that agenda back as key positions are vacant or filled by less experienced officers. The purges paradoxically also showcase Xi’s ability to remove powerful subordinates but also his inability to corral the bureaucracy, which failed to heed his earlier injunctions about professionalism. “Absolute leadership” of the party over the army remains elusive even for Xi at the height of his power. For China’s People’s Liberation Army (PLA), the year 2026 began on a similar note that had defined the past two years—with the downfall of senior generals, new questions about how ready they are for war, and rumors about how much Xi Jinping is in control of the world’s largest military. Investigations were announced into Zhang Youxia, who served as the PLA’s most senior officer as vice chairman of the Central Military Commission (CMC), and Liu Zhenli, who was its top operational commander as chief of staff of the CMC Joint Staff Department. [1] This followed the dismissal of nine officers at the October 2025 Fourth Plenum, including CMC vice chairman He Weidong and CMC Political Work Department director Miao Hua. [2] These were only the latest targets in a wave that began in July 2023 with the removal of the leadership of the Rocket Force that encompassed the dismissal of several dozen generals and admirals.   As usual, few details accompanied these purges. A PLA Daily editorial claimed that Zhang and Liu had “seriously fostered political and corruption problems that undermined the party’s absolute leadership over the military,” but without specifying any charges. [3]  Announcing the removal of the nine generals in October, the Ministry of National Defense claimed that the infractions concerned “job-related crimes involving exceptionally large sums of money,” and had resulted in an “extremely serious impact” on the PLA. [4]  Clues were offered in the cases of former defense ministers Li Shangfu and Wei Fenghe. The charges from the CMC Discipline Inspection Commission, which conducted the investigations and announced their expulsion from the party, indicated that both had solicited “huge sums of money.” [5]  Li, former head of the Equipment Development Department, had also “polluted” the “military equipment sector.” [6]   Even with these revelations, the reasons for the purges remain unclear. Official statements such as those issued about Zhang and Liu may be manufactured to justify the elimination of officers for political reasons. Indeed, the absence of credible evidence has led to theories about factional struggles in the military and even speculation that Xi is desperately trying to hang on to power by eliminating rivals who are lining up against him. [7]   Nevertheless, an analysis of the career paths of those who have been targeted provides insight into the reasons for the purges. Biographies of the more than three dozen senior officers who have been dismissed since July 2023 suggest that Xi is engaged in an unprecedented campaign to clean up the leadership—reaching into sectors of the PLA untouched in his earlier anti-corruption drive from 2012–2015 and focusing on higher tiers of the command structure. The data also suggest that Xi’s main goal was to improve overall PLA readiness. Based on the positions and responsibilities of those purged and their career histories, explanations focusing on factional politics or power consolidation have less value. The purges have renewed doubts that corruption may have undermined PLA readiness by compromising equipment, personnel, and training. Moreover, many key positions are vacant or staffed by less experienced officers, raising questions about China’s ability to conduct major operations. At a minimum, this points to added risks for Xi to order the PLA into combat during this decade. Making matters worse, it also appears that the system within the PLA that is responsible for preventing corruption in the first place is broken. Internal watchdogs including the political work and military prosecution systems have been purged, while power has been funneled into an opaque Discipline Inspection Commission system. The absence of external checks and balances creates structural impediments to altering the basic “conditions,” as Xi puts it, that give rise to corruption. The necessity for such campaigns after Xi has been in office for nearly 15 years speaks more to a ceiling that he has hit in pursuing absolute party control over the military than it does to his ability to corral the system. Purge 2.0 Xi’s purges of senior PLA officers have taken place in two waves. The first involved the expansion of an anti-corruption campaign that began in the former General Logistics Department prior to his appointment as CMC chairman in November 2012. [8]  This complemented a broader anti-corruption effort that Xi was spearheading across the party-state. [9]  Between then and March 2015, an official report named 31 current or former generals who had been punished. [10] The highest-ranking officer was former CMC vice chairman Xu Caihou, though another former CMC vice chairman, Guo Boxiong, and current CMC members Fang Fenghui and Zhang Yang were later investigated. The second wave began in July 2023 with the dismissal of several Rocket Force leaders. While Beijing has not provided a complete list, the 2025 China Military Power Report  identifies 43 officers purged between 2023 and December 2025, including CMC vice chairman He Weidong, CMC members Miao Hua and Li Shangfu, and former CMC members Wei Fenghe and Zhao Keshi (the investigations of Zhang Youxia and Liu Zhenli came after that report was published and are not included). [11]  There are possible inaccuracies in both lists given the opacity of the Chinese system, but they provide a basis to compare the two periods.  While both campaigns nominally supported Xi’s drive to clean up the officer corps, the second wave is unique in several ways. First, it focuses on officers at higher tiers of the command structure. The 2012–2015 campaign mainly targeted officers at lower grades, comparable to U.S. two-stars (major generals or rear admirals). [12] This may have been because Xi lacked the political capital to evict higher officers at that time or due to the necessity of buy-in from senior commanders to support his 2015–16 reforms. [13]  By contrast, as shown in Figure 1, the more recent investigations involve at least 18 officers at the Theater Command Leader grade, roughly equivalent to U.S. four-stars. These include positions such as theater commanders, service chiefs, the top political commissars in the theater and service headquarters, and senior officials in the CMC departments. The campaign also removed 19 individuals a grade lower, at the Theater Command Deputy Leader grade (similar to U.S. three-stars). Figure 1: Grades of the Highest Officers Purged in 2012–2015 vs. 2023–2025 Second, the 2023–2025 probes cover more officers from outside the ground forces. The overwhelming majority of officers in the 2012–2015 campaign were from the army. This reflected the focus of the campaign on positions typically held by army generals, such as logistics officers and commanders of the provincial military districts, whose functions include mobilization and supervision of the local militia forces. As demonstrated in Figure 2, the 2023–2025 purges extended more deeply into the navy and Rocket Force, with a few officers also from the People’s Armed Police and former Strategic Support Force. The air force was less prominent but not immune given the dismissal of former Air Force commander Ding Laihang from his position as a representative to the National People’s Congress in December 2023. Figure 2: Service Affiliations of Officers Purged in 2012 – 2015 vs. 2023 – 2025 Third, the recent purges focus on officers in key Beijing-based positions. As noted in Figure 3, most of the officers caught up in the previous round were from obscure regional positions, primarily in the military districts or in the military academies where there may have been opportunities for corruption and supervision may have been more lax. Beginning with the purge of the Rocket Force leadership, Xi’s latest campaign has implicated officers at the center. This includes leaders of several CMC departments, including the Joint Staff, Political Work, and Training and Management departments, and the Political and Legal Affairs Commission, as well as in the army, navy, Rocket Force, Strategic Support Force, and People’s Armed Police headquarters. Nevertheless, the campaign also toppled senior leaders (commanders, deputy commanders, or service component commanders) of the theater commands—which are the main regional organizations responsible for warfighting—rather than the lower-level military districts. Figure 3: Organizations of Officers Purged in 2012 – 2015 vs. 2023 – 2025 Fourth, the 2023–2025 purges cut more deeply into the operational muscle of the senior leadership than the earlier round. As shown in Figure 4, the focus of the 2012–2015 campaign was on political commissars, which corresponds to the impression that the PLA was trying to address corruption in the personnel system. [14]  The recent purges also involved a number of political commissars, the highest-ranking of which was Miao Hua, but most of the 43 officers listed in the China Military Power Report  had operational backgrounds. Some of these individuals were in service headquarters or CMC departments, and others were in theater commands, but all possessed decades of experience in successively senior operational roles. Figure 4: Functional Specialties of Officers Purged in 2012 – 2015 vs. 2023 – 2025   In short, the purges that began in July 2023 should not be interpreted as simply a second act of the earlier anti-corruption campaign but as a more audacious movement against the PLA senior leadership, involving higher-level officers, those in bureaucratic fiefdoms (such as the service headquarters and theaters) largely untouched in earlier purges, and involving those with some of the lengthiest operational pedigrees in the force. The Relentless Pursuit of Readiness Analysts have offered four basic explanations for the latest round of purges. These vary along two dimensions (see Table 1). First is whether the dismissals are based on politics or a professional motivation to clean up the military and promote higher standards. Second is whether the campaign is confined to a specific network or group, or whether it involves a more comprehensive attempt to rebalance the system. The discussion below weighs evidence from the careers of the purged officers against each of the resulting explanations: a targeted cleanup of the PLA, strife among competing factions, Xi’s Stalin-esque need to consolidate and maintain power, or promoting overall readiness. While each of these perspectives has merit, the final explanation can best account for the range of officers purged since July 2023. Table 1: Range of Explanations for Purges   Political Professional Specific Factional Strife Targeted Removals of Opposing Rivals or Cliques   Targeted Cleanup Narrow Investigations to Clean Up a Particular Network or Sector   Systemic Power Consolidation Stalin-esque Purges to Maintain the Power of the Core Leader  Overall Readiness Open-Ended Across-the-Board Investigations  to Improve Readiness  Targeted Cleanup. This explanation focuses on a particular subset of officers who share a professional linkage, and it speculates about graft in the system over which they have responsibility. The initial purges that implicated senior Rocket Force leaders and officials in the CMC Equipment Development Department, combined with rumors about deficiencies in missile or nuclear capabilities (including the infamous “missiles filled with water”), [15] led to conjectures that the purge sought to root out corruption in the development of strategic capabilities. [16]  Others focused on the downfall of Miao Hua and several other political commissars, suggesting that the campaign had moved on to address graft in the personnel system. [17]   However, this explanation is too narrow to account for the range of organizations and responsibilities of those involved in the recent dismissals. The fact that analysts identified clusters in the Rocket Force procurement and personnel systems alone implies that the campaign had expanded beyond a specific sector. Moreover, there are also many other targets who have no connection to either of these systems or to each other. Some examples include People’s Armed Police commander Wang Chunning, former Air Force commander Ding Laihang, Army commander Li Qiaoming, Eastern Theater commander Lin Xianyang, and Southern Theater Navy commanders Li Pengcheng and Ju Xinchun. [18]  This speaks to the possibility that inspectors were casting a much wider net than initially intended. Factional Strife. Another explanation draws from the history of factional politics in the PLA. [19]  Specifically, there has been speculation about an escalating turf war between a network of officers around Miao Hua and He Weidong—who allegedly represented a “Fujian clique,” many of whose members began their careers in the former 31 st  Group Army based in Fuzhou and supported each other’s rise despite humble beginnings—and an “old guard” (or “Shaanxi gang”) led by CMC vice chairman and close Xi confidante Zhang Youxia. Many analysts attribute the schism to a contest for power, though some also suggest that differences between these groups regarding how to handle military preparations for combat against Taiwan might have played a role. [20]   Career data from purged officers provide limited support for this hypothesis; 18 of the 43 officers on the China Military Power Report list had some connection to He Weidong, either serving with him in the same command or based in the same geographic theater at the same time. Ten officers shared a similar connection with Miao Hua. While some overlaps might be coincidental, Miao and He themselves served in the 31 st  Group Army, making a longstanding relationship between them in the years prior to their service on the CMC probable. There is also a cluster of officers on the list who were close to He later in his career. Interestingly, these officers were not with He at the time of his purge but had been part of his leadership team when he was Eastern Theater commander between 2019 and 2022 (see Table 2). Perhaps he had organized them into a clique and was wielding influence after they had been appointed to higher-level positions, with the blessing of Miao. [21]   Table 2: Close Associates of He Weidong Who Were Purged Name Eastern Theater Position (2019–2022) Position When He Weidong Was Purged in 2025 Yuan Huazhi Air Force Political Commissar (2018–2019) Navy Political Commissar Li Pengcheng Navy Chief of Staff (precise dates unknown) Southern Theater Navy Commander Lin Xiangyang Army Commander (2020–2021) Eastern Theater Commander Wang Xiubin Deputy Commander (2019–2021) CMC Joint Operations Command Center Executive Deputy Director Zhang Hongbing Army Political Commissar (2019–2021) People’s Armed Police Political Commissar Liu Qingsong Navy Political Commissar (2018–2022) Eastern Theater Political Commissar Wang Zhongcai Navy Commander (2022–5) Eastern Theater Navy Commander Nevertheless, several factors reduce the value of this explanation. First, as Daniel Mattingly has shown through an analysis of 12,000 promotions, there has been a stark decline in the role of patronage networks involving CMC vice chairmen during the Xi era. [22] With Xi playing a more influential role in appointments than Hu Jintao, officers were more likely to be promoted based on professional qualification and political loyalty to him rather than on personal ties with a vice chairman. Second, the data do not support arguments about the role of a “Fujian clique.” Aside from Miao, only two of the 42 other  officers on the China Military Power Report list are from Fujian (He Weidong and Lin Xiangyang) and only four officers served in the 31 st Group Army; those purged from the ground forces had their roots in a variety of commands, including but not limited to the former Nanjing Military Region. [23]  Third, there are notable individuals who had served with He in the Eastern Theater who were not purged, including He Ping, who was political commissar from 2019–2022. It is dubious that He Weidong could have organized a clique without participation from his own commissar. Finally, even if there were such a faction, it can explain only one subset of individuals: the majority have no career link to either Miao or He and many were from other services with no pedigree in any group army. Power Consolidation. A third explanation is that purges are a feature, and not a bug, of Xi’s preservation of power. It is true that in earlier purges, Xi targeted individuals such as former CMC vice chairmen Xu Caohou and Guo Boxiong who had been appointed by his political rival Jiang Zemin. They were punished just as Xi was rounding up other political opponents such as Zhou Yongkang and Ling Jihua. The 2023–2025 purges, however, were different because the targets had all been appointed by Xi himself. Guoguang Wu argues that this fact is irrelevant because Xi is following a “Stalin logic” of continuous upheaval in the military and other sectors to preserve his own influence against possible or imagined enemies. [24]  Purges of military officers may create a climate of fear that keeps Xi’s top generals and their fiefdoms in line. [25]   This explanation is most relevant to the downfall of Zhang Youxia. Although Zhang had long been an associate of Xi, the removal of He left Zhang and Liu as the sole remaining CMC members with operational expertise. Zhang, in particular, a princeling son of a revolutionary hero and a close confidante of Xi, might have appeared to be an unacceptable threat to the core leader. [26]  This fits with the “Stalin logic” of being most distrustful of those closest to the inner circle. There is also a Stalin-esque parallel to Zhang’s removal in who was left standing. Like Stalin, Xi removed many senior operational commanders who had the military expertise to pose a threat to the top civilian. Stalin also purged most of his field marshals but needed to retain Kliment Voroshilov, who was a political officer responsible for carrying out the purges; similarly, Xi was left with Discipline Inspection Commission chief Zhang Shengmin. [27]   Nevertheless, this explanation has less utility with the other targets of investigations in the preceding two and a half years. Other than a handful of individuals who worked with Zhang in the former General Armaments Department and on the CMC, few of the officers in the 2025 China Military Power Report  had notable career-long connections to Zhang. None of them had served in the 13 th Group Army with Zhang, and only two had their origins in the Shenyang Military Region. There is no obvious rationale for why these individuals would have been closer to Zhang than the hundreds of generals and admirals who were not caught up in the purges. This does not preclude the possibility of hidden networks, but it also cannot rule out the more straightforward explanation that there were many different networks of corruption that needed to be eviscerated for Xi to achieve his goals of cleaning up the PLA. Overall Readiness. The final explanation is that the purges represented an element of a broader program by Xi to instigate the PLA to meet its modernization goals, including promoting readiness in 2027. The 2025 China Military Power Report discloses that Xi has ordered that by 2027 the PLA should be able to secure a “strategic decisive victory” against Taiwan, achieve “strategic counterbalance” through nuclear and other strategic capabilities to deter U.S. intervention, and implement “strategic deterrence and control” against other countries to prevent them from taking opportunistic actions against China. [28]  Rather than an operational timeline for action against Taiwan, as it has sometimes been construed, the 2027 date is only the first of three modernization timeframes guiding the PLA’s development, with other targets in 2035 and 2049. [29]   Serving this agenda, authoritative PLA texts explain that anti-corruption investigations should support higher levels of readiness. A circular on discipline inspection work notes that 2025 would be “a crucial year for winning the decisive battle to achieve the [2027] centenary goal of the PLA.” [30]  It continues that anti-corruption efforts undertaken in 2025 “should be focused on combat readiness” and “concentrate on winning the decisive, protracted, and overall war against corruption, so as to provide strong style and discipline guarantees for achieving the centenary goal of the PLA.” [31]  The document also heralds disciplinary achievements in 2024, including  “investigations and rectification and governance of quality and safety issues.” [32] Toward this end, the CMC also promulgated new discipline inspection rules focusing on promoting combat effectiveness, tightening supervision of “key areas such as planning and construction, personnel selection, and engaging in profit-making activities.” [33]  A PLA Daily editorial released when Zhang and Liu were removed notes that 2026 will be crucial in meeting the “centenary goal” as well as the goals of the 15 th Five-Year Plan. [34] The timeline of the 2023–2025 purge supports the view that the main intent was to keep the PLA on track to meet its readiness goals. The first batch of officers purged were from the Rocket Force, whose nuclear and long-range ballistic missile capabilities are key to the 2027 goal to achieve “strategic counterbalance” against the United States. If the campaign stopped there, the best explanation would have been a targeted cleanup. Instead, the scandal appears to have prompted Xi and his allies to expand the scope of investigations into other systems. Xi’s concern was on display when he called a rare gathering of senior officers to Yan’an in June 2024. Echoing warnings that he gave at a political work conference in Gutian nine years earlier, [35]  he said that it was necessary to “eradicate the soil that breeds the conditions for corruption” and that discipline inspectors should follow a “strict approach” and “expand the breadth and depth of the anti-corruption struggle.” [36] Xi’s Yan’an speech represented a pivotal moment for this second wave of purges. Prior to the conclave, 13 of the 15 officers on the China Military Power Report list were associated with the Rocket Force or the Equipment Development Department. After this date, 21 of 25 officers purged through December 2025 were from other systems. There were clusters associated with the political work system, including Miao Hua, but 16 of the 25 were operational commanders across CMC departments, services, and theaters. [37]  These were individuals whose basic responsibility was to ensure that land, naval, air, and strategic forces would be ready for combat in 2027. Yet the fact that the lion’s share of senior officers were not purged, unlike under Stalin, speaks to Xi’s pragmatism: to prepare for war, the leadership cannot be totally gutted of its expertise. The worst offenders must go, but good performers need to stay, even if they benefited from corruption in the personnel or other systems along the way. [38] This explanation can also account for the group of officers who had been close to He Weidong during his tenure as Eastern Theater commander. While it is tempting to reduce He’s purge to factional strife against Zhang Youxia, or to Xi’s desire to wrest control from a powerful aide, the elimination of officers who had served in the Eastern Theater can also be understood through a readiness lens. In this role, He would have been the most senior officer responsible for readying the force for a “strategic decisive victory” against Taiwan, including exercises designed to simulate combat. Yet those preparations are subject to disciplinary penalties if officers do not follow training guidelines or manipulate results to burnish their own reputation or avoid punishment. [39]  It is notable that whereas the initial purges targeted procurement, discipline inspectors in 2025 were instructed to focus on operational considerations including “deviation of training and exercises from actual combat.” [40]  PLA political work, ironically beginning with a speech by He Weidong himself, [41]  began to discuss “sham combat readiness” such as substandard training that will “inevitably result in utter defeat on the battlefield.” [42]  Hence, discipline inspectors could have found evidence that He and his associates had conspired to conceal or distort information on readiness or were failing to meet their targets for implementing combat realistic training. Rumors that the PLA had failed in some of its tasks during the response to the Pelosi visit to Taiwan in August 2022, toward the end of He’s tenure, would support this view. [43] The purge of other generals might have created the necessary conditions for targeting Liu and Zhang. Prior to his CMC appointment, Liu led the army, which as the PLA’s largest service receives its largest budgets. Zhang previously headed the corruption-prone General Armaments Department. As CMC members, both also had opportunities to engage in graft through personnel selections, major procurement decisions, and in protecting those at lower levels who might not have been up to standard. By starting with lower-level aides, Discipline Inspection Commission inspectors might have been gradually working their way to the heart of the problem. The downfall of Zhang and Liu would then be the result of a process triggered initially by the Rocket Force scandal and not a spasmodic move by Xi. To recap, the four explanations offer different perspectives through which to understand the contours of the 2023–2025 purge. As Jonathan Czin and Allie Matthias contend, a full accounting likely requires reference to multiple explanations. Yet, as they note, political elements such as factionalism were probably “embedded in a broader effort to clean house.” [44]  Career histories of the purged officers support this argument. While political calculations can never be ruled out, a more straightforward explanation is that officers were dismissed because they were failing to do what Xi has asked of the PLA all along—to prepare to “fight and win battles.” Implications Interpreting the purges as part of Xi’s plans to prepare the PLA for combat has implications not only for readiness but also for party-army relations. At a technical level, gauging the extent to which the scandals have impaired the PLA’s ability to reach its 2027 objectives is difficult because Beijing has not publicized the damage and likely never will. Like any military, it would be loath to advertise its vulnerabilities. Certainly the PLA is not a Potemkin army because it continues to roll out new combat capabilities and carry out difficult operations, such as dual-aircraft carrier patrols past the first island chain. [45]  The 2025 exercise Justice Mission  was a sign that the PLA and coast guard continue to sharpen their ability to blockade Taiwan, which could be an option for Xi even if corruption has taken its toll. [46] But deficiencies in equipment, personnel, and training may exist below the surface of these publicized activities and create greater risks and uncertainties for PLA forces in high-end combat conditions when readiness needs to be at peak levels. [47]  Such factors would weigh on Xi’s calculus as to whether to order the PLA into combat not only because of known problems but because they point to a “known unknown”—the reality that Xi cannot be certain that inspectors have cleaned out all the rot and that critical systems are now reliable. This would apply to a full-scale attack on Taiwan or operations against the U.S. military. Moreover, the removal of Zhang and Liu meant that the CMC had narrowed to Xi and Zhang Shengmin; it had ceased to function as a forum for Xi to receive military advice and adjudicate decisions or as a high command that could plan and direct national-level operations. Along with frequent turnover in the theater commands, services, and CMC departments, Xi lacks a cohort of experts who have been in their positions for many years and can provide a strong hand to oversee the planning and leadership of major operations. This will create at least a near-term disruption. A critic would counter that Xi will emerge from the latest round of purges more confident in the PLA’s capabilities. Some technical problems may have been addressed and some of the worst offenders removed (even if the PLA continues to suffer some weaknesses, such as lack of combat experience). [48]  This may also send a message to powerful interests in the PLA that no one is immune from investigation. Xi might therefore be confident enough by 2027 to ramp up escalation against China’s opponents or at least his successors will inherit a more professional force that can institute his vision of becoming “world-class” by 2049, one prerequisite of which is to treat the underlying conditions that have made corruption so rampant. However, this sanguine view probably gives Xi too much credit. The basic structural problem is that anti-corruption investigations have been carried out by the PLA; there were no external checks and balances other than Xi himself. [49]  This situation reflects limits on his ability to weaken the PLA’s institutional position relative to other power centers in the party-state, such as civilian auditors who might be able to come in and conduct a wider-ranging financial probe or internal security forces like the Ministry of State Security. To the extent that military officers are captured by personal or bureaucratic interests contrary to the party’s, anti-corruption campaigns now or in the future will have been of limited use. As a manifestation of this problem, the recent purges suggest that the system through which the PLA polices itself is broken. As part of his 2015–2016 reforms, Xi eliminated the General Political Department and replaced it with a more comprehensive supervisory toolkit, including the Political Work Department (responsible for personnel appointments), the military legal system, and the Discipline Inspection Commission. [50]  This was supposed to have provided the CMC chairman with multiple ways to gather information about the PLA and to implement control. Yet recent purges of leaders of the Political Work Department, the Politics and Legal Affairs Commission, and the military courts suggest that the reformed system has not been working. Indications of turmoil in the CMC General Office, which orchestrates the bureaucracy and is a critical gatekeeper of Xi, compounds this problem. [51]  The only part of the supervisory apparatus that has not been touched is the Discipline Inspection Commission, whose leader Zhang Shengmin was elevated to CMC vice chairman at the Fourth Plenum. This is the system that has been on the front lines of the recent purges. Instead of showcasing the value of a more intricate and diversified set of control instruments, the purges may have returned the PLA to an earlier state—concentrating power in a system which may become its own vested interest. What does this imply for Xi’s authority over the PLA? In a sense, the purges suggest that Xi remains in firm control. [52]  The removal of key figures such as Zhang Youxia and He Weidong illustrate Xi’s ability to uproot subordinates who are among the most elite and respected of their generation. This may provide him a political benefit like Mao swimming across the Yangtze river in 1966—proving that rumors of his demise are premature and setting the stage for major strategic decisions yet to come. Xi’s 2024 speech at Yan’an and the expansion of the campaign to root out graft beyond the procurement system and into core functions for personnel selections and operations also suggest that Xi is committed to ensuring that the PLA can meet its readiness targets. At a minimum, he has shed light on rot that has been festering inside the PLA and he has punished high-level offenders to an extent that would have been very difficult for Jiang Zemin or Hu Jintao to achieve given their comparative weakness in the PLA. But there is also a risk in overstating Xi’s authority. Xi may have mobilized the discipline inspection system to carry out expanded investigations, but this should not have been necessary if senior PLA officers had listened to his earlier injunctions at Gutian to return to their austere roots, nor would it have been necessary if they had been sufficiently coerced by the downfall of Xu and Guo. The fact that corruption proliferated into multiple systems and was engineered by those Xi trusted enough to promote into senior roles ultimately speaks to the limits on his ability to control the bureaucracy. Xi may have attained power greater than Jiang or Hu, but there is a ceiling on how successful any party leader can be. In retrospect, his quest for “absolute leadership” of the party over the army must be judged to have been incomplete. This essay represents only the views of the author and not those of the National Defense University, Department of War, or U.S. Government. About the Contributor Joel Wuthnow is Senior Research Fellow of the Institute for National Strategic Studies at the U.S. National Defense University. He also serves as Adjunct Professor of Security Studies at Georgetown University. His latest books and monographs include China’s Quest for Military Supremacy (Polity, 2025, with Phillip C. Saunders), Taming the Hegemon: Chinese Thinking on Countering U.S. Military Intervention in Asia (NDU Press, 2025), and Sea Dragons: Special Operations and Chinese Military Strategy (Naval War College Press, 2025, with John Chen). He holds a Ph.D. in Political Science from Columbia University, an M.Phil. in Modern Chinese Studies from Oxford University, and an A.B., summa cum laude, in Public and International Affairs from Princeton University. Notes [1]  “Zhang Youxia and Liu Zhenli Are Under Investigation for Suspected Serious Violations of Discipline and Law” [张又侠、刘振立涉嫌严重违纪违法被立案审查调查], Ministry of National Defense, January 24, 2026, http://www.mod.gov.cn/gfbw/qwfb/16439106.html . [2]  “China’s NPC Announces Personnel Changes: Five Military Generals Have Their NPC Representative Statuses Revoked” [中国全国人大人事任免五军方将领被终止人大代表资格], Lianhe Zaobao , December 27, 2025,  https://www.zaobao.com.sg/news/china/story20251227-8020322 .  [3]  “Resolutely Win the Decisive Battle, Protracted War, and Overall War Against Corruption in the Military” [坚决打赢军队反腐败斗争攻坚战持久战总体战], PLA Daily , January 25, 2026, http://politics.people.com.cn/n1/2026/0125/c1001-40652025.html . [4]  “He Weidong, Miao Hua, and Eight Others Were Expelled from the Party and the Military for Serious Violations of Discipline and Law” [何卫东, 苗华等9人严重违纪违法被开除党籍军籍], PRC Ministry of National Defense, October 17, 2025, http://www.mod.gov.cn/gfbw/qwfb/16416031.html . [5]  “Li Shangfu, Former Member of the Central Military Commission, Former State Councilor and Minister of National Defense, Was Expelled from the Party” [中央军委原委员, 原国务委员兼国防部长李尚福受到开除党籍处分], Xinhua, June 27, 2024, http://politics.people.com.cn/n1/2024/0627/c1001-40265853.html ; Wei Fenghe, Former Member of the Central Military Commission, Former State Councilor, and Minister of National Defense, Was Expelled from the Party” [中央军委原委员, 原国务委员兼国防部长魏凤和受到开除党籍处分], Xinhua, June 27, 2024, http://www.mod.gov.cn/gfbw/qwfb/16319114.html . [6]  “Li Shangfu, Former Member of the Central Military Commission, Former State Councilor and Minister of National Defense, Was Expelled from the Party.” [7]  Katsuji Nakazawa, “Analysis: Collective Leadership Reasserts Itself in China’s Military,” Nikkei Asia , July 31, 2025, https://asia.nikkei.com/editor-s-picks/china-up-close/analysis-collective-leadership-reasserts-itself-in-china-s-military . [8]  James Mulvenon, “The Only Honest Man? General Liu Yuan Calls Out PLA Corruption,” China Leadership Monitor, issue no.   37, April, 30, 2012, https://www.hoover.org/research/only-honest-man-general-liu-yuan-calls-out-pla-corruption . [9]  For analysis, see Kerry Brown, “The Anti-Corruption Struggle in Xi Jinping’s China: An Alternative Political Narrative,” Asian Affairs 49:1 (2018), 1–10; Andrew Wedeman, “Xi Jinping’s Tiger Hunt: Anti-Corruption Campaign or Factional Purge?” Modern China Studies 24:2 (2017), 35–94; and Samson Yuen, “Disciplining the Party: Xi Jinping’s Anti-Corruption Campaign and Its Limits,” China Perspectives , no. 3 (2014), 41–47. [10]  “Since the 18th National Congress of the Communist Party of China, 98 Officials at the Vice-Ministerial Level or Above and Military Officers at the Corps Level or Above Have Been Investigated and Punished”  [十八大后98名副部以上官员和军级以上军官落马], People’s Daily Online , March 18, 2015, https://www.spp.gov.cn/spp/zdgz/201503/t20150318_93350.shtml . [11]   Annual Report to Congress: Military and Security Developments Involving the People’s Republic of China (Washington, DC: Office of the Secretary of War, 2025), 27–28. [12]  There were also many junior and mid-level officers investigated, including more than 4,000 officers at the lieutenant colonel or above rank, from 2013–2015. This study, however, only focuses on senior leaders (generals and admirals). Dennis J. Blasko, “Corruption in China’s Military: One of Many Problems,” War on the Rocks , February 16, 2015, https://warontherocks.com/2015/02/corruption-in-chinas-military-one-of-many-problems/ . [13]  Thanks to Phillip Saunders for this observation. On Xi’s need to respect institutional equities to achieve restructuring goals, see Joel Wuthnow, “Stabilizing the Boat: Revisiting Party-Army Relations Under Xi Jinping,” in Benjamin Frohman and Jeremy Rausch, eds., The PLA in a Complex Security Environment: Preparing for High Seas and Choppy Waters (Washington, DC: National Bureau of Asian Research, 2025), 41–64. [14]  James Mulvenon, “Lawyers, Guns and Money: The Coming Show Trial of General Xu Caihou,” China Leadership Monitor , issue no. 45, October 21, 2014, https://www.hoover.org/research/lawyers-guns-and-money-coming-show-trial-general-xu-caihou . [15]  Peter Martin and Jennifer Jacobs, “U.S. Intelligence Shows Flawed China Missiles Led Xi to Purge Army,” Bloomberg, January 9, 2024, https://www.bloomberg.com/news/articles/2024-01-06/us-intelligence-shows-flawed-china-missiles-led-xi-jinping-to-purge-military . [16]  Elliot Ji, “Rocket-Powered Corruption: Why the Missile Industry Became the Target of Xi’s Purge,” War on the Rocks , January 23, 2024, https://warontherocks.com/2024/01/rocket-powered-corruption-why-the-missile-industry-became-the-target-of-xis-purge/ . [17]  K. Tristan Tang, “Cronyism and Failed Promotions: Xi’s PLA Purge,” China Brief , October 17, 2025, https://jamestown.org/cronyism-and-failed-promotions-xis-pla-purge/ ; Kathrin Hille, “Xi Jinping’s Purge of Military Officers Raises Doubts About China’s Readiness for War,” Financial Times , November 13, 2025, https://www.ft.com/content/f61c20db-91fc-4404-b89c-e4ba79eedd73 . [18]  Few of these dismissals have received attention from analysts. Vice Admiral Li Pengcheng and other navy leaders are an exception due to outstanding work by researchers at the Naval War College’s China Maritime Studies Institute. See, e.g., Christopher H. Sharman and Andrew S. Erickson, “Dirty But Preparing to Fight: VADM Li Pengcheng’s Downfall Amid Increasing PLAN Readiness,” CMSI China Maritime Report No. 44, January 2025; Andrew S. Erickson and Christopher H. Sharman, “PLAN Chief of Staff VADM Li Hanjun: Fast-Rising Star of Training and Education Extinguished,” CMSI Note 15, July 2025; and Andrew S. Erickson and Christopher H. Sharman, “Replacement Removed: VADM/General Wang Houbin—Naval Star Turned Rocket Force Commander’s Terminal Trajectory,” CMSI Note 17, November 2017. [19]  Michael D. Swaine, The Military & Political Succession in China: Leadership, Institutions, Beliefs  (Santa Monica, CA: RAND, 1992), part two. [20]  See, e.g., Dennis Wilder, “Glimpses of a Power Struggle Within the Chinese Military High Command,” The Diplomat , October 21, 2025, https://thediplomat.com/2025/10/glimpses-of-a-power-struggle-within-the-chinese-military-high-command/ ; Joseph DeTrani, “Inside Xi Jinping’s Military Purge: Loyalty, Power, and Taiwan,” The Cipher Brief , October 31, 2025, https://www.thecipherbrief.com/inside-xi-jinpings-military-purge-loyalty-power-and-taiwan ; Miles Yu, “Global Reciprocal Tariffs, Xi Jinping’s PLA Purges, and China’s Military Aggression Against Taiwan,” China Insider , April 9, 2025, https://www.hudson.org/economics/china-insider-global-reciprocal-tariffs-xi-jinpings-pla-purges-chinas-military-aggression-miles-yu ; Gordon G. Chang, “Has Xi Jinping Lost Control of China’s Military—And China Itself?” Gatestone Institute, October 19, 2025, https://www.gatestoneinstitute.org/21996/xi-losing-control-of-china ; Gerui Zhang and Brandon Tran, “Political Purification and Strategic Realignment in the PLA,” China Brief , November 14, 2025, https://jamestown.org/political-purification-and-strategic-realignment-in-the-pla/ ; and “Xi Jinping’s Latest Purge: Paranoid or Purposeful?” The Economist , October 27, 2025, https://www.economist.com/china/2025/10/27/xi-jinpings-latest-purge-paranoid-or-purposeful . [21]  Presumably, Miao would have been able to influence those appointments due to his position as director of the CMC Political Work Department beginning in 2017. [22]  Daniel C. Mattingly, The Decline of Factions in the PLA (Washington, DC: Woodrow Wilson International Center for Scholars, 2023). For additional analysis, see Daniel C. Mattingly, “How the Party Commands the Gun: The Foreign-Domestic Threat Dilemma in China,” American Journal of Political Science 68:1 (2024), 227–242. [23]  The four were He, Miao, Lin Xianyang, and Zhao Keshi. A few others had origins in other Nanjing Military Region–based group armies, such as the 1 st  and 12 th , but would not necessarily have known officers from a different group army. [24]  Guoguang Wu, “Xi Jinping’s Purges Have Escalated: Here’s Why They Are Unlikely to Stop,” Center for China Analysis, February 26, 2025, https://asiasociety.org/policy-institute/xi-jinpings-purges-have-escalated-heres-why-they-are-unlikely-stop . [25]  Mark Parker-Young, “Turmoil in the High Command Creates Political and Operational Disruptions,” Thoughts on China, April 17, 2025, https://markparkeryoung.net/posts/turmoil-in-chinas-high-command-creates-political-and-operational-disruptions/ . [26]  Cate Cadell and Christian Shepherd, “China Fires Top General in Shocking Purge of Senior Military Command,” Washington Post , January 25, 2026, https://www.washingtonpost.com/national-security/2026/01/25/china-military-purge-zhang-youxia-xi/ . [27]  Thanks to Elliot Ji for this observation. [28]   Annual Report to Congress: Military and Security Developments Involving the People’s Republic of China (2025), 10. [29]  Brian Hart and Bonnie S. Glaser, “China’s 2027 Goal Marks the PLA’s Centennial, Not an Expedited Military Modernization,” China Brief, March 26, 2021, https://jamestown.org/chinas-2027-goal-marks-the-plas-centennial-not-an-expedited-military-modernization/ . [30]  “Interpretation of the Military Discipline Inspection and Supervision Work Tasks in 2025” [2025年军队纪检监察工作任务解读], PLA Daily , January 21, 2025, https://drc.xizang.gov.cn/gfdy/gfdy_xwzx/gfdy_xwzx_xwdd/202501/t20250121_458610.html . [31]  Ibid [32]  Ibid. [33]  “The Central Military Commission Issued Newly Revised Supplementary Regulations for the Military's Implementation of the ‘Regulations on Disciplinary Sanctions of the Communist Party of China’” [中央军委印发新修订的《军队贯彻执行〈中国共产党纪律处分条例〉的补充规定》] , PLA Daily , December 1, 2025, https://www.news.cn/politics/20251201/ceee4e6ef9c44547b732b1f94415bab3/c.html . [34]  “Resolutely Win the Decisive Battle, Protracted War, and Overall War Against Corruption in the Military.” [35]  James Mulvenon, “Hotel Gutian: We Haven’t Had That Spirit Here Since 1929,” China Leadership Monito,  issue no.   46, March 19, 2015, https://www.hoover.org/research/hotel-gutian-we-havent-had-spirit-here-1929 . [36]  “The Political Work Conference of the CMC Commission was held in Yan'an; Xi Jinping Attended the Meeting and Delivered an Important Speech,” Xinhua, Jule 19, 2024,  http://politics.people.com.cn/n1/2024/0619/c1024-40260089.html . [37]  The dismissal dates for 3 of the 43 officers on the China Military Power Report list are unclear and therefore are not included in this analysis. [38]  Indeed, a consequence of Stalin’s much larger purge was the collapse of Soviet military leadership that Hitler saw as an opportunity when he decided to invade Russia in 1941. [39]   Disciplinary Regulations of the Chinese People's Liberation Army  [中华人民共和国中央军事委员会命令 ], PRC Ministry of National Defense, February 27, 2025, http://www.mod.gov.cn/gfbw/fgwx/flfg/16372287.html . [40]  “Interpretation of the Military Discipline Inspection and Supervision Work Tasks in 2025.” [41]  Amber Wang, “Chinese General Calls for Crackdown on ‘Fake Combat Capabilities’ in the Military,” South China Morning Post , March 9, 2024, https://www.scmp.com/news/china/military/article/3254722/chinese-general-calls-crackdown-fake-combat-capabilities-military . [42]  See, e.g., Wang Yaodong, “Taking Action Against All Deep-Rooted Problems That Impact Combat Effectiveness” [向一切损害战斗力的痼疾开刀], PLA Daily , August 24, 2024, http://www.mod.gov.cn/gfbw/jmsd/16333218.html ; “From ‘Waiting for Alerts on Thursdays’ to ‘Ready to Deploy at Any Time,’ an Army Brigade Is Cracking Down on False Combat Readiness” [从“周四等警报”到“随时能出动,” 陆军某旅整治虚假备战现象], PLA Daily , November 17, 2025, http://www.mod.gov.cn/gfbw/wzll/lj/16422315.html . [43]  Minnie Chan, “How Pelosi’s Trip to Taiwan Set Off a New Wave of U.S.–China Electronic Warfare,” South China Morning Post , August 14, 2022, https://www.scmp.com/news/china/military/article/3188803/how-pelosis-trip-taiwan-set-new-wave-us-china-electronic . [44]  Jonathan A. Czin and Allie Matthias, “Assessing China’s Fourth Plenum: Policy Continuity, Personnel Turmoil,” Brookings Institution, November 26, 2025, https://www.brookings.edu/articles/assessing-chinas-fourth-plenum-policy-continuity-personnel-turmoil/ . [45]  Sharman and Erickson, “Dirty But Preparing to Fight.” [46]  John Dotson, “The PLA’s ‘Justice Mission-2025’ Exercise Around Taiwan,” Global Taiwan Institute, January 2, 2026, https://globaltaiwan.org/2026/01/pla-justice-mission-2025/ . [47]  M. Taylor Fravel, “Is China’s Military Ready for War?” Foreign Affairs,  July 18, 2025, https://www.foreignaffairs.com/china/chinas-military-ready-war-xi-jinping-taylor-fravel . [48]  Joel Wuthnow and Phillip C. Saunders, China’s Quest for Military Supremacy (Cambridge, UK: Polity, 2025). [49]  Joel Wuthnow, “Can Xi Jinping Control the PLA?” China Leadership Monitor, issue no. 83, February 27, 2025, https://www.prcleader.org/post/can-xi-jinping-control-the-pla . [50]  Joel Wuthnow and Phillip C. Saunders, Chinese Military Reforms in the Age of Xi Jinping: Drivers, Challenges, and Implications , INSS China Strategic Perspectives 10 (2017), 32–35. The legal system and discipline inspectors previously reported to the General Political Department, whose last chief, Zhang Yang, was purged for corruption and committed suicide in 2017. [51]  Mark Parker-Young, “Turmoil in the High Command Creates Political and Operational Disruptions.” [52]  Jonathan A. Czin and John Culver, “Why Xi Still Doesn’t Have the Military He Wants,” Foreign Affairs , August 18, 2025, https://www.foreignaffairs.com/china/why-xi-still-doesnt-have-military-he-wants . Photo credit: Mil.ru , CC BY 4.0 < https://creativecommons.org/licenses/by/4.0 >, via Wikimedia Commons

China’s economic involution, characterized by cutthroat, race-to-the-bottom competition, is a symptom rooted in its political and fiscal structure. During the recent economic downturn, the central government, local governments, and businesses entered a self-reinforcing cycle. The central growth targets and debt-reduction pressures pushed local governments to expand investment in state-favored industries, creating low-profit competition and oversupply. The declining revenues further reduced demand, but businesses must expand production to survive. An examination of real estate and electric vehicles suggests that these sectors share similar dynamics: excessive capacity, slow turnover, declining prices, and high financial leverage. But they also differ in terms of dominant players, market expansion success, and the role of local governments. The central government’s recent anti-involution campaign has encountered difficulties because, while it cracks down on over-investment and excessive competition, it simultaneously pursues GDP targets and industrial growth. Instead, the central government should realign its policy goals with local actors. As China’s economic downturn continues into another year, “involution” (内卷) has become the buzzword of the moment, causing much anxiety among leaders, businesses, and the broader public. The term refers to excessive, race-to-the-bottom competition with aggressive price cuts and thin profit margins, which have occurred across a wide range of sectors, such as real estate, electric cars, solar equipment, chemicals, and platform delivery. [1] Low-priced competition is also associated with overcapacity, excessive supply, and low capacity utilization. As criticism mounted and the negative economic consequences accumulated, the central government under Xi’s leadership launched an anti-involution (反内卷) campaign. This article starts with the deeper roots of economic involution—the fundamental political, economic, and fiscal structure causing the relentless competition—and traces the self-reinforcing cycle that propelled businesses and bureaucrats to continue pursuing involution. The article also shows how state and business strategies, as well as the dynamics of involution, play out in the real estate and electric vehicle sectors. These two sectors, which share similar characteristics in terms of declining profits, excessive supply, and high debt, differ in their market expansion prospects, available regulatory tools, and the preferences of the state and businesses. As China began to undertake anti-involution measures in these sectors, they also carried distinctive implications for the success or failure of the anti-involution campaign. The cases represent dynamics across a wider range of industries where the iteration of state and business strategies has shaped their development trajectories. The article ends by calling for a realignment of the central policy goal with the incentives of local governments and firms. State and Business in the Long Shadow of the Economic Slowdown China’s economic slowdown since 2020 has heavily influenced and reinforced the behavior of local governments and businesses. The burst of real estate bubbles has crumbled a sector that once accounted for 20 percent to 30 percent of GDP and 27 percent of all bank loans. [2]  Other debt linked to land financing has further contributed to the economy’s fiscal stress, pushing local debt to $18.9 trillion by late 2025. [3]  As an authoritarian country built on economic legitimacy, reviving the economy and meeting growth targets have always been key tasks. [4]  Within this context, the central government has been using a series of economic targets, such as the GDP growth rate, the export growth rate, and the industrial growth rate, to monitor the economy and evaluate local governments. Local governments have been deprived of the most important engine of GDP growth and fiscal revenue since the post-COVID period, and furthermore, they faced huge debts from the property sector while financing local infrastructure and welfare. [5]  As such, investing resources to expand the manufacturing industries through government subsidies, loans, tax incentives, and other beneficial policies became the primary method of pursuing economic growth. Most of the heavier subsidies are concentrated in several industries encouraged by the central Chinese state (AI, electric vehicles [EV], wind), leading to repeated construction (重复建设) of these industries across different Chinese localities. [6] Depending on the province, there are also broad subsidies that promote industrial and economic growth across sectors. This playbook sounds similar to the strategies to attract local investment in the 1990s and 2000s, [7] except that now there are not enough domestic markets to absorb the amount of goods produced. The economic stress has been passed on to consumers, whose household incomes also heavily rely on the real estate sector. They would rather build up savings. [8]  As consumption entered a long-term slump, it could no longer serve as the primary driver of GDP growth. The drop in the birth rate to its lowest level in history further added to the fiscal stress. [9]  This situation pushed local governments to invest even more in industries to promote growth, expanding the supply side and contributing to excessive capacity. When domestic consumption shrinks, expanding export markets can be, and have been, another crucial strategy for local governments, especially for manufacturing industries with a competitive edge. But in an era of de-globalization, Chinese producers must compete amongst themselves at low prices for limited quotas in foreign markets. The involution of Chinese businesses thus occurred in a context of mutually interlocking interests between government and business players. Firms in the same industry competed fiercely at cutthroat prices, backed by local government subsidies and other favorable policies. Consumers who were hit by deflation were also inclined to purchase low-priced items, if they purchased at all. As businesses scrambled for markets within the sector, dominant players often used whatever resources they had (sometimes at the cost of excessive financial leverage) to pursue a low-price strategy to knock out competitors and achieve a monopoly. Smaller players, on the other hand, aimed merely to survive at razor-thin profit margins and would perish if they raised prices. In November 2025, for example, industrial profits fell 13.1 percent year on year, wiping out almost all of the profit increase in 2025. [10] Hence, the central state, local government officials, and firms have entered a self-reinforcing cycle in which the state sets a growth target, and local officials aim to achieve it by subsidizing industrial firms and investing in expanding industrial capacity. As an increasing number of firms enter these industries, fierce competition spreads across the sector, driving down profit rates. The industry’s and employees’ declining revenue, together with the housing slump, exerted downward pressure on the local economy and household income, further shrinking demand, making supply more excessive, and, ironically, driving prices down even more. Figure 1 specifies the incentives driving the behavior of central and local actors.   Figure 1. Incentives Driving State and Business Actors   Local officials and businesses also colluded to obtain subsidies at the expense of the subsidies’ original purpose. It was recently reported that in several provinces, a comprehensive operational chain called “export data purchase” has been widely used. Businesses set up a shell company and submitted fake export numbers obtained from another company’s export data. After they used the export data to secure grants and subsidies from local governments, the shell company closed its businesses. Local officials would tacitly agree to do this to expand export numbers that help build political achievement, while also obtaining personal kickbacks in the process. [11]  Some officials in the commerce bureau even directly assign quotas to local enterprises to ensure that they meet the desirable economic target set by the upper level. Will the central state stop setting targets for localities, or will local governments entirely give up helping industries when the property sector is no longer an option? As will be discussed later, this is unlikely in the short- to mid-term. Therefore, involution became a manifestation of the self-reinforcing system among the central government, local officials, and businesses. An Industrial Sector Perspective It would be difficult to measure the exact “degree” of involution. Still, observers, in and out of China, have relied on proximate indicators, such as the proportion of loss-making companies in a given sector, gross profit margin, return on equity, inventory turnover or asset turnover speed, and the sales-to-stock rate or capacity utilization rate. [12] Overall, China’s Producer Price Index (PPI) has declined continuously since October 2022 and has remained in the range of –2 to –3 for 38 months, even as industrial output has increased. [13] Similarly, the average export price per unit has been decreasing and has fallen much more steeply than that in other emerging economies, even though reported export amounts have been increasing. [14]  The capacity utilization rate for manufacturing industries has steadily declined since 2021, reaching a low of 74 percent in 2025. [15]   A variety of sectors have demonstrated characteristics of involution using the above criteria, with the top sectors ranging from EVs and solar panels to garments, steel, chemicals, platform deliveries, and, of course, real estate. These sectors all share the characteristics of thin profit margins, slow turnover, low capacity utilization, and relatively high stock levels. That said, each sector has its own trajectory toward involution, with firms and the government adopting varied strategies that embody a combination of state capitalism and market capitalism. Such variation also entails different costs and solutions to their problems. This article selects the real estate and the EV sectors as representative examples of involution. These two sectors have been major engines of growth for the local economy, with the former being the bubble sector and the latter being the new energy manufacturing sector. Both have experienced a high level of supply relative to demand, excessive capacity across provinces, continuously decreasing prices and profits, and high financial leverage supporting investment. Private businesses, state-owned enterprises (SOEs), and local governments have all been involved in the development, involution, and anti-involution processes of these two sectors, making them interesting cases for examination. That said, these two sectors differ in terms of challenges and risks, developmental stages, market expansion success, the role of SOEs, and the alignment of interests among central governments, local governments, and businesses. Of course, other sectors have different characteristics in terms of their causes of and solutions to involution. The platform delivery sector, which has attracted much attention due to its recent brutal price wars, is a case driven mainly by business. Unlike the real estate and EV sectors, the central and local governments have not played a significant role in driving involution and price wars. In fact, the rise of e-commerce challenges the usual assumptions about state-business relations, as it is increasingly untethered from a particular locality. [16] Meituan, which used to be a dominant player in food delivery, was challenged by Alibaba and JD. The latter two entered delivery services at more competitive prices, drawing on their financial resources and supplier networks to reshape the sector. This competition has driven down prices for food delivery and restaurants, at a high cost ($22 billion for Alibaba), but not necessarily with high debt. And more importantly, because it was largely caused by several big platform companies, countering their involution was less complicated, as regulators only had to contain the behavior of these companies. [17] However, regulating markets in many other sectors is often complex, requiring the central government to adjust how it manages local economies and to consistently implement policies. Real Estate: The Collapse and Rescue of a Bubble Sector The crumbling of the real estate sector has had a shattering effect on the entire economy, and the story of China’s economic involution should begin with this sector. Since the 2000s, an essential part of China’s economy and revenue—20–30 percent of GDP, 40 percent of local revenue, and up to 70 percent of household income—has been built on the real estate sector. [18]  At the peak of the boom, right before 2021, the total stock of China’s housing market reached $50 to $60 trillion, three to four times China’s nominal GDP. [19]  The real estate sector represents the bubble sector, or what Xi Jinping calls the “gray rhino” (灰犀牛) sector, characterized by price hikes and financial risks. The direct trigger for the burst of the property bubbles was the central government’s issuance of its three redline policies. As an increasing number of high-leverage real estate firms exploded and were driven out of the market due to their debt structures, existing firms began to panic and sought to sell their stock at much lower prices. The collapse of the property sector and housing prices led to an oversupply of property and a drastic drop in demand, which in turn caused a long-term slump and drove down housing prices further. In 2022, some developers, both in coastal cities such as Shenzhen and in inland cities such as Wuhan, listed properties at half the price at which other units in the same complex were sold for in 2020 and 2021. Others started experimenting with zero down payment policies. This situation aroused strong resistance from existing homeowners, prompting local industrial regulators to cancel such sales out of concern for the social impact. [20]  Office buildings faced an equally dire situation, with supply exceeding demand by more than double in key cities. [21]   The real estate downturn also caused a long-term slump in other directly connected sectors. Local government financing vehicles, banks, investors, and customers of investment trusts associated with real estate developers were all dragged into similar debt crises caused by over-leveraging. The upstream and downstream manufacturing suppliers, such as building materials (cement, glass) and furniture, also experienced excess supply amid declining demand, leading firms in these industries to engage in price wars. In Chongqing, prices of some construction materials declined by almost 70 percent, and prices for concrete dropped by almost 50 percent. In other words, the real estate sector and its affiliated industries can no longer profit from the former strategy of “overleveraging as far as one can,” and they are now merely surviving through price cuts. [22]   The real estate sector has two distinctive features in comparison to other sectors. The first is the relatively strong and direct state regulation of the lowest prices at both the central and local levels. Recognizing the sector’s importance, the state has set a floor to prevent prices from falling to the bottom, requiring developers to register their prices before selling. [23]  While prices have dropped by 10 percent to 30 percent, depending on the city, setting a floor price was essential to prevent the situation from worsening. [24]  What concerns the state here is not only the economy but also the social unrest among citizens and homeowners that accompanies devaluation and default. This concern became especially serious after the attack on price-cutting of developers’ office buildings, and protests for compensation among homeowners were reported across localities. [25]  Local governments began holding formal meetings (约谈) with price-cutting firms after the emergence of excessively low prices. [26] The second key feature is the increasing dominance of SOEs, especially since the start of the housing crisis. The majority of the remaining top real estate developers are SOEs rather than private developers. SOEs such as Poly are less indebted and are perceived to be less financially vulnerable than private developers, some of which have adopted illegal leverage measures, leading to a later explosion.  [27] The dramatic collapse of Evergrande, the world’s most indebted developer with $300 billion in debt, exposed deep crony ties between private firms and officials. Country Garden, which previously was a top private firm across all sectors, suffered a debt crisis of more than 1 trillion RMB. Such a perception in favor of SOEs also made it easier for SOEs to find customers, despite the sector’s overall excess capacity. [28]  Local governments, on the other hand, have used various measures to remove house purchase restrictions and to encourage property market consumption, even though these measures do not appear to have yielded any real results yet. Electric Vehicles: Brutal Competition and Financial Risks The fierce competition among EV producers and their declining profits often placed the sector at the top of the list of sectors experiencing involution. But unlike the real estate sector, which entered a downward spiral after the bursting of the bubbles, the EV sector is still at the stage of massive growth. It has not yet triggered a systemic crisis, even amid fierce price cuts and the bankruptcy of many firms. While the industry has been characterized by some as having overcapacity, sales have thus far been increasing, especially in the export market (which doubled in 2025), leading to China surpassing Japan and becoming the world’s largest auto producer. [29]  The central and local governments implemented industrial policies through cash subsidies, tax incentives, and bank loans, which have been crucial at the early stages of development. In addition, Beijing has offered continuous subsidies for EV purchases and recently decided to renew such subsidies amid deflationary pressures. [30] The sector flourished with hundreds of producers across China’s localities since the mid-2010s, but since 2018, 400 producers have ceased operations due to fierce competition. [31]  Of the remaining 100, several large producers dominate the market, with BYD leading in both domestic and foreign markets. Like other sectors that experienced involution, EV producers have faced brutal price wars and various discount measures over the past three years, along with a continuous drop in profit rates. The profit margin dropped from 7.8 percent in 2017 to 4.3 percent in 2024 and 4.4 percent in 2025, representing the two lowest years in history. [32]  It is estimated that about 50 unprofitable mainland Chinese EV makers will have to cut back their operations in 2026. [33]  While leading firms like BYD have had profit margins of about 5 percent, others are not as lucky: SAIC and BAIC (0 percent), Geely and Chery (1 percent), and Dongfeng (recording a loss of –1 percent) in 2025. [34]  Many others have filed for bankruptcy. Meanwhile, auto dealers have been urging automakers to stop offloading excess cars on them, as price wars have driven some of them out of business. [35]   Behind the brutal price competition of EVs is rising debt, which makes it relevant to compare it with the real estate industry’s overleveraged issue. [36]  Wei Jianjun, chairman of Great Wall Motors, mentioned in an interview that the “Evergrande” in the auto sector (汽车行业的恒大) had already emerged; it just had not yet exploded. Some of the top auto producers, like BYD, have easier access to loans from banks and local governments and have incurred a huge amount of debt, including BYD’s 61.2 billion yuan (with a debt ratio of more than 70 percent), surpassing SAIC’s 57.3 billion yuan and Geely’s 49.8 billion yuan. [37]  This means that in 2025, BYD’s debt increased by 641 percent from the start of the year, while profits fell by almost one-third. Other producers, such as NIO and Seres, have lower total debt but higher debt ratios of 87 percent. [38]   Adding to formal loans is the informal and problematic practice of cutting costs by significantly delaying payments to suppliers. Pioneered by BYD, the strategy is called D-chain (迪链), which represses supplier prices and delays payment to suppliers for up to 270 days (and, in practice, can be as much as a year) by issuing interest-free IOUs (D-chain notes). The strategy helps reduce current costs and makes the selling price to customers as attractive as possible. Suppliers can use these notes as financing tools, but ironically, they have to pay interest if they need the money earlier. Other EV producers have copied such a practice as well. [39]  The total amount of IOUs and accounts payable for each producer ranged from 5 billion yuan for Dongfeng (49 percent of revenue) to 250 billion yuan for BYD (31 percent of revenue), but for companies like Leapmoter, the ratio is 59 percent. [40] In 2025, state regulators and industrial associations began requiring the use of formal bank loans instead of informal notes (such as D-chain notes), but informal notes still dominate, and real change will take a long time. Even if informal notes were to be replaced by formal bank notes, this would not reduce the substantial debt added to the enterprise. [41] Another potentially problematic practice, associated with using low prices to increase sales volume, is to tacitly and systematically turn new cars into zero-mileage second-hand cars (零公里二手车), which has occurred in both domestic and export markets. The practice reduced a company’s existing stock, thereby easing overcapacity pressure, and at the same time artificially increasing sales volume by pricing cars at a used-car level without blatantly violating price regulations. Many car producers used such a strategy to create a false image of a hot-selling product. It also lowered the costs of after-sales service for customers (since used cars do not require such service), and, importantly, utilized state subsidies targeted at second-hand cars. Just as with informal IOU notes, regulators began to curb such practices in late 2025, but whether there will be real changes remains to be seen. [42] Why would it be rational for a producer to lower the current price as much as possible at the cost of high debt while raising the risk of defaulting or even bankruptcy in the future? One can simply point to the need for short-term survival, and indeed that is the case for smaller firms that aim to carry over the worst several years. For them, raising prices would mean losing the entire market, and going out of business is still worse than competing at throat-cutting prices. But for big players like BYD, the goal is to use low prices to dominate the market and knock out competitors before the producer can raise prices under a market monopoly. In addition to business strategies, local governments, which have already suffered from the collapse of the real estate sector, have certainly jumped at the opportunity of EVs becoming a source of economic growth and political targets. Their support in land, subsidies, and loans directly contributed to EV producers’ competitive strategy and enabled them to survive in fierce competition. Examples abound, such as Xpeng’s support from the Guangdong government, Li Auto’s support from the Beijing government, and NIO’s support from the Anhui government. [43] However, such strategies have recently incurred increasing costs, showing warning signs. Smaller players may go out of business, especially when governments can no longer bail out firms. Levdeo, an EV company, received a loan of more than 1 billion yuan in 2018 from a local SOE owned by the Changle government in Shandong province to expand its business. But after the central government issued policies against such behavior, the Changle government decided in 2023 to cut off its finances. Levdeo’s owner fought back by exposing Changle’s party secretary, who forced the company to report a fake figure of 7 billion yuan in EV output, rather than the real figure of 2.5 billion yuan, to show an increased political achievement. [44]  But Levdeo’s substantial sales decline and financing problems still forced it into bankruptcy. Similar stories occurred with Neta Auto, which adopted a low-price, negative-profit strategy to enter the market but ran out of financing from local government-backed state-investment firms across multiple localities (e.g., Tongxiang, Ningbo, Nanning) and entered into bankruptcy, with 26 billion yuan in debt and large unpaid service obligations to its suppliers. [45]  In addition to Neta, Niutron, Weltmeister,   HiPhi, Jidu, and Qoros recently went bankrupt as well. Large players like BYD may not face the same challenges, as their sales markets continue to expand domestically and internationally. However, the high-leverage finance model, which relies heavily on IOUs, rests entirely on the assumption that market sales must continuously expand. The Anti-Involution Campaign and Its Bottlenecks Due to a variety of economic and social stresses stemming from industrial involution, especially amid a downward economic trajectory, the Chinese state has launched an anti-involution campaign. In March 2025, at the end of the Two Sessions, Xi Jinping mentioned the importance of “anti-involution” and industrial self-discipline. In July 2025, at an urban city conference, Xi criticized local governments: Whenever we invest in any projects, it’s always the same: AI, computing, new energy cars. Does it mean that all provinces in China have to develop these industries? (上项目, 一说就是几样：人工智能、算力、新能源汽车，是不是全国各省份都要往这些方向去发展产业?) [46]   At various central economic conferences and during local visits between 2024 and 2025, Xi has attributed the root cause to local officials and undisciplined enterprises. [47] Following such comments, in June 2025, the National People’s Congress revised and issued the Anti-Unfair Competition Law of the People’s Republic of China, seeking to maintain market order and defining the scope of unfair competition as well as the rights and obligations of regulators. [48]  China’s 15 th  Five-Year Plan, which was approved in late 2025, seeks to combat local protectionism and “comprehensively rectify involutionary competition” (综合整治内卷竞争). [49]   While the various central initiatives and speeches set the tone for anti-involution, the real question is: how do these policies translate into on-the-ground policies for each sector? The real estate sector has primarily focused on reducing current stock and preventing the construction of new properties. The Ministry of Natural Resources issued a formal policy in 2024 to constrain and strictly regulate the supply of land for residential housing. [50]  The government also issued 4.4 trillion yuan of bonds to purchase unsold homes. [51]  While the state faces a complex set of actors in the sector, their interests are largely aligned following the burst of the property bubbles. Local governments, homeowners, and the majority of surviving businesses all have an interest in avoiding prices from further plunging. [52]  That is why local governments have set a floor for pricing through direct supervision to avoid further race-to-the-bottom competition. And whenever price violations occur, local authorities intervene to stop them. [53]  The state has also removed purchasing barriers and encouraged house purchasing to stimulate demand. As a consequence of deleveraging, the state is allowing over-leveraged firms to go through bankruptcy and restructuring (such as the recent case of Vanke), while keeping a watchful eye on prices. The fact that SOEs now increasingly dominate the sector also means the state can more easily use them as tools to control prices. In contrast, the EV sector, as a new energy industry, is still in an expansionary phase, characterized by fierce competition and rising financial debt. While the state repeatedly urged automakers to end price wars amid overcapacity pressures over the last year or so, it lacked a concrete tool to address a market in which private firms, state-owned enterprises, and local governments all played a role. In June 2025, the State Council issued a rule requiring small and medium enterprises to receive payments on time, directly challenging the widespread practice of IOUs in the EV sector. The auto industry association also issued a regulation in 2023 stating that a firm should not use irregular prices to disrupt fair market competition. But over time, these measures were not taken seriously as competition intensified. [54]   Moreover, there has been an inconsistency in state policy. On the one hand, the government certainly tried to clamp down on business strategies, such as the use of informal IOUs with suppliers and the sale of new EVs as second-hand cars. On the other hand, the central government has been subsidizing EV prices, and beginning in January 2026, it also decided to continue subsidizing them, leaving businesses and consumers confused about state signals and its resolve to stop deflation. [55]  And as noted, local governments, which lost a windfall of wealth from land-leasing fees in the property sector, also have a stake in the EV sector. This strategy encouraged some EV producers to continue competing on low prices and prevented them from entering into direct bankruptcy. [56]  Further complicating the matter is that while the EV sector includes some SOEs, it is mainly populated by private businesses supported by one or more local governments, which makes direct state regulation difficult. Some sectors, such as platform deliveries, may be quite different from real estate and EVs, as only several of the dominant platform companies drove involution, and the state can straightforwardly focus on countering such business strategies through direct conversations with executives or by delegating regulation of these platforms. Most sectors, however, such as solar panels, batteries, steel, and cement, face a similar level of complexity in state-business dynamics and anti-innovation outcomes, as do the real estate and EV sectors. This complexity means that recent efforts to control involution differ from combating overcapacity in the past (from 2011 to 2016), when the state instructed infrastructure-related SOEs to consolidate industries and cut supply. [57] Therefore, if the central government wants to pursue a successful anti-involution campaign, it will have to undertake a more profound change in how the central state manages the local economy. The supply side was shaped by the central government’s setting of growth or export targets as a political task, as well as the local government’s incentive to improve the debt-ridden economy through industrial development, both of which resulted in soft budget constraints for firms to expand their production regardless of market needs. On the demand side, although the central government certainly took measures to stimulate consumption, such as issuing subsidies and vouchers for consumers, it has not fundamentally addressed welfare and social security policies that would prevent excessive household savings. Meanwhile, consumption itself is a hard-to-measure target to pass on to any level of government. This means that local governments have little incentive to pay attention to consumption and to continue boosting industrial development from the supply side, colluding with businesses and taking advantage of subsidies, some of which were provided by the central government. In other words, the central government faces a tough dilemma if it seeks to set a GDP growth target as a political task while simultaneously cracking down on overinvestment and race-to-the-bottom competition. Local governments are also trapped in a quandary: on the one hand, they need to address the urgent task of rescuing the economy and stimulating industrial growth, and, on the other hand, they have to respond to the central government’s push to discipline business behavior and cut supply. Ultimately, this calls for realigning the interests of the central state, local governments, and businesses. About the Contributor Ling Chen is William L. Clayton Associate Professor in the School of Advanced International Studies (SAIS) at Johns Hopkins University. Her research interests lie in political economy and state-business relations in China. Her articles have appeared in journals such as American Journal of Political Science , China Journal , Comparative Politics , International Security , and Perspectives on Politics . Her first book, Manipulating Globalization: The Influence of Bureaucrats on Business in China , published by Stanford University Press, explores the politics of government-business coalitions and policy implementation. Chen was a Wilson China Fellow and a PIP Fellow of the National Committee on U.S.-China Relations. Notes [1]  This article focuses on involution in industrial sectors. The term “involution” can be used to describe intense competition in other spheres of Chinese society as well, such as education. For a broader definition, see Patricia Thornton, “Punching Down: Beijing’s Playbook for Unwinding ‘Involutionary Competition,’” China Leadership Monitor , issue no. 86, 2025. [2]  Tianlei Huang, “China’s Looming Property Crisis Threatens Economic Stability,” RealTime Economics , Peterson Institute for International Economics, 2022. [3]  Yusho Cho, “China's Local Debt Rises to $18.9tn as Property Slump Lingers.” Nikkei Asia , December 3, 2025. https://asia.nikkei.com/business/markets/china-debt-crunch/china-s-local-debt-rises-to-18.9tn-as-property-slump-lingers . [4]  Ling Chen, “Getting China’s Political Economy Right: State, Business, and Authoritarian Capitalism,” Perspectives on Politics 20 (4):1397–1402. [5]  Meg Rithmire, “China’s Perilously Imbalanced Economic Success,” Current History , September 2025. [6]  Michael Pettis, “What’s New about Involution?” Carnegie Endowment for International Peace, August 26, 2025. [7]  Ling Chen, Manipulating Globalization: The Influence of Bureaucrats on Business in China. (Stanford, CA: Stanford University Press, 2018); Yuen Yuen Ang, How China Escaped the Poverty Trap  (Ithaca, NY: Cornell University Press, 2017). [8]  Gerard DiPippo, “Changing Course in a Storm: China’s Economy in the Trade War,” China Leadership Monitor , issue no. 85, Fall 2025. [9]  Alexandra Stevenson, “China’s Birthrate Plunges to Lowest Level Since 1949,” New York Times , January 18, 2026. https://www.nytimes.com/2026/01/18/business/china-population-data.html . [10]  Edward White, “China’s Industrial Profits Plunge as Weak Demand and Deflation Bites,” Financial Times , December 27, 2025. [11]  蔡真, “买来的出口数据：耗费地方财政，对经济无实质带动.” 第一财经, December 29, 2025. [12]  “2025年十大内卷行业,” 新浪财经， https://finance.sina.com.cn/roll/2025-09-13/doc-infqkhhe8180064.shtml , September 13, 2025. Robin Xing and Zhipeng Cai, “Anti-Involution- Priority, Progress and Potential: Market, Sector and Stock Implications.” Morgan Stanley Research Note, September 1, 2025. [13]  陶川、张云杰、钟渝梅, “反内卷”的下一步,” 华尔街见闻, July 3, 2025, [14]  DiPippo, “Changing Course in a Storm”; “十年前 ‘去产能,’ 十年后  ‘反内卷’?” 尤斯财富, July 22, 2025. https://www.usewealth.com/Information/Details.aspx?i=136134 . [15]  陶川、张云杰、钟渝梅, “‘反内卷’的下一步,” 华尔街见闻, July 3, 2025, https://wallstreetcn.com/articles/3750355 . [16]  Lizhi Liu, From Click to Boom: The Political Economy of E-Commerce in China  (Princeton, NJ: Princeton University Press, 2024). [17]  “Involution Fueled Alibaba’s E-Commerce Comeback,” November 5, 2025, https://www.hardingloevner.com/insights/involution-fueled-alibabas-e-commerce-comeback/ . [18]  Tianlei Huang, “China’s Looming Property Crisis”; Andrew G. Walder and Xiaobin He, “Public Housing into Private Assets: Wealth Creation in Urban China,” Social Science Research , 46 (2014): 85–99. doi: 10.1016/j.ssresearch.2014.02.008. [19]  Stella Yifan Xie and Mike Bird, “The $52 Trillion Bubble: China Grapples With Epic Property Boom,” The Wall Street Journal ,   July 16, 2020. [20]  Cao Li, “China’s Property Developers Cut Prices—and Homeowners Are Resisting,” The Wall Street Journal , November 1, 2023. [21]  Chen Bo, “China’s Top Cities Face Office Glut with Supply Doubling Demand in 2025,” Caixin Global , January 10, 2026. [22]  邹碧颖, 孙颖妮, “九大行业调研, 万字详解中国反内卷风暴,” 财经, https://cj.sina.com.cn/articles/view/6233406682/1738a3cda01901b3fm , August 20, 2025. [23]  Cao Li, “China’s Property Developers Cut Prices.” [24]  Kenneth Rogoff and Yuanchen Yang, “China’s Real Estate Challenge,” Finance & Developmen t 61 (2024): 2832. [25]  Cao Li, “China’s Property Developers Cut Prices.” [26]  Reuters, “中国多地对房企‘跳水’降价进行约谈，严格控制恶意降价扰乱市场秩序行为,” September 9, 2021. https://www.reuters.com/article/markets/asia/-idUSL4S2QC0D3/ . [27]  Wang Jing, “China’s Property Slump Knocks Half of Top Developers off Key Ranking,” Caixin Global , January 5, 2026. https://www.caixinglobal.com/2026-01-05/chinas-property-slump-knocks-half-of-top-developers-off-key-ranking-102400361.html . [28]  Of course, SOEs also face a crisis. Even Vanke, which started as a private firm and became increasingly state-dominated, had to face a huge debt that the state was not able to rescue. [29]  Themis Qi, “China’s EV Makers Face Slowdown in Export Growth After Doubling in 2025,” South China Morning Post , January  15, 2026, https://www.scmp.com/business/china-evs/article/3339919/chinas-ev-makers-face-slowdown-export-growth-after-doubling-2025 . Ilaria Mazzocco, “Canada and the European Union: Two New Wins for Chinese Exports in the West,” Center for Strategic and International Studies, January 22, 2026,  https://www.csis.org/analysis/canada-and-european-union-two-new-wins-chinese-exports-west  . [30]  Daniel Ren, “Beijing Renews Trade-in subsidy Scheme Amid Domestic Car Market’s Gloomy Outlook,” South China Morning Post , https://www.scmp.com/business/china-business/article/3338281/beijing-renews-trade-subsidy-scheme-amid-domestic-car-markets-gloomy-outlook , December 31, 2025. The difference is that starting in 2026, the vehicle sales tax will be charged at half-rate instead of a complete exemption. [31]  EVBoosters, “400 Chinese EV Companies Ceased Operations between 2018 – 2025, Only a Few Will Dominate Towards 2030,” https://evboosters.com/ev-charging-news/400-chinese-ev-companies-ceased-operations-between-2018-2025-only-a-few-will-dominate-towards-2030/  . [32]  邹碧颖, 孙颖妮, “九大行业调研”; Dong Yi Chen, “Profit Margin of China’s Auto Industry Was 4.4 Percent,” https://carnewschina.com/2025/12/27/profit-margin-of-chinas-auto-industry-was-4-4-2000-usd-per-vehicle-second-lowest-in-history-jan-to-nov-2025/ . December 27, 2025. [33]  Daniel Ren, “Dozens of Chinese EV Makers Under Pressure to Fold Ortrim Operations in 2026,” South China Morning Post , December 28, 2025. [34]  “新能源汽车产业链“肥瘦”不均,” 新浪财经, https://finance.sina.com.cn/roll/2024-08-26/doc-inckyeri4934301.shtml . August 26, 2024. [35]  “Chinese Dealers Call for Auto Brands to Balance Inventory Levels to Help Ease Glut,” Reuters,   January 13, 2026. https://www.reuters.com/business/autos-transportation/chinese-dealers-call-auto-brands-balance-inventory-levels-help-ease-glut-2026-01-14/ . [36]  To be sure, the real estate sector has more concentrated risks in terms of generating significant bubbles compared to the car manufacturing industry. But some of the overleveraging practice by EV producers, as will be shown, also causes concerns about long-term liquidity. [37]  Vision Times News, “BYD Faces Mounting Inventory and Surging Debt as Quality Complaints Flood the Internet,” https://www.visiontimes.com/2025/12/16/byd-faces-mounting-inventory-and-surging-debt-as-quality-complaints-flood-the-internet.html . December 16, 2025. [38]  梁耀丹, “负债规模接近瑞士全年GDP! 光伏储能电车“新三样”还好吗?” https://finance.sina.com.cn/stock/zqgd/2025-08-28/doc-infnrhci4238703.shtml . August 28, 2025; Vision Times News, “BYD Faces Mounting Inventory and Surging Debt.” [39]  “BYD Shifts Away From In-house Payment System that Strained Suppliers, Sources Say,” Reuters, November 14, 2025. https://www.reuters.com/sustainability/boards-policy-regulation/byd-shifts-away-in-house-payment-system-that-strained-suppliers-sources-say-2025-11-14/ . In addition, in 2025 BYD  required that suppliers cut prices by 10 percent, which also aroused criticism. Although foreign brands like Tesla have also used IOUs for suppliers, the pay period has not exceeded 60 days. The fact that D-link notes can be used as finance tools is  another distinctive feature. [40]  梁耀丹, “负债规模接近瑞士全年GDP.” [41]  “比亚迪减少‘迪链,’ 改用它.” 新浪财经, January 13, 2026, https://finance.sina.com.cn/stock/relnews/hk/2026-01-13/doc-inhhcnuc5064522.shtml . [42]  彦飞, “车圈的‘比亚迪病’，60天治不好,” 新浪财经, June 16, 2025. https://finance.sina.com.cn/tech/csj/2025-06-16/doc-infaheke3117901.shtml . 43 “习近平罕见直批地方扎堆发展新能源和AI: ‘反内卷’运动背后的政绩焦虑,” BBC News 中文, July 24, 2025. https://www.bbc.com/zhongwen/articles/c62824dx6pko/simp . [44]  “实名举报县委书记, 山东通报,” 新浪财经, July 25, 2023.  https://finance.sina.cn/2023-07-25/detail-imzcxqem9333760.d.html . [45]  “车企暴雷谁最惨? 40万车主成牺牲品, 5000员工被拖欠4.6亿,” September 17, 2025. https://news.qq.com/rain/a/20250917A01CU500 . [46]  “习近平罕见直批地方扎堆发展新能源和AI.” [47]  陶川、张云杰、钟渝梅, ‘反内卷’的下一步,” 华尔街见闻, July 3, 2025. https://wallstreetcn.com/articles/3750355 . [48]  “中华人民共和国反不正当竞争法,” https://www.spp.gov.cn/spp/fl/202506/t20250627_699862.shtml , June 26, 2025. Another law that regulators often invoke and use is the Anti-Monopoly Law of China. [49]  Minxin Pei, “Same Strategy, But Different Emphasis: Main Takeaways from the Central Committee’s Proposals for the 15th Five-Year Plan,” China Leadership Monitor, issue no. 86, 2025. [50]   自然资源部, “关于做好2024年住宅用地供应有关工作的通知,” March 1, 2024, https://cn.chinadaily.com.cn/a/202405/01/WS66321ef4a3109f7860ddbfdc.html . [51]  Jeff Pao, “Beijing Mulls Buying Unsold Homes for 4 trillion Yuan,” Asia Time , November 1, 2024. https://asiatimes.com/2024/11/beijing-mulls-buying-unsold-homes-for-4-trillion-yuan/ . [52]  For property-related industries, such as construction, cement, concrete, other building materials and furniture, the price control situation is different. Industry associations tried to regulate by issuing suggested rules to these industries. [53]  See the section in this article on the real estate sector for more details. [54]  彦飞, “车圈的 ‘比亚迪病.’” 中华人民共和国国务院, “保障中小企业款项支付条例,” March 25, 2025, https://www.mee.gov.cn/zcwj/gwywj/202503/t20250325_1104643.shtml ; 吴遇利, “特斯拉比亚迪长城等签承诺书：不以非正常价格扰乱市场公平竞争秩序,” 澎湃, July 6, 2023, https://www.thepaper.cn/newsDetail_forward_23750708 .. [55]  Ren, “Beijing Renews Trade-in Subsidy Scheme;” Thornton, “Punching Down: Beijing’s Playbook.” [56]  “习近平罕见直批地方扎堆发展新能源和AI.” [57]  Scott Kennedy, “Involution and Industry Self-Discipline: Echoes from the Past,” CSIS, September 17, 2025. https://www.csis.org/blogs/trustee-china-hand/involution-and-industry-self-discipline-echoes-past . Photo credit: Grevault, CC BY-SA 4.0 < https://creativecommons.org/licenses/by-sa/4.0 >, via Wikimedia Commons

The decimation of the top ranks of the People’s Liberation Army (PLA) during the last two years has fueled an intense debate about the reasons behind the largest purge in the Chinese military in the post-Mao era. Despite the absence of credible evidence, many observers and journalists attribute the purge to factional strife and Xi Jinping’s insecurity. However, Joel Wuthnow’s close examination of the available evidence, primarily biographical records of the fallen PLA commanders, reveals a different picture: most purges seem to have been intended to clean up the corruption-prone branches of the PLA to support Xi’s broad agenda of readying the military for combat by its 2027 centennial date, even though, the unprecedented scale of the purges has likely set that agenda back. A mixed picture emerges from an examination of these purges. While they demonstrate Xi’s ability to remove powerful subordinates, in spite of his ceaseless exhortations they reveal his failure to turn the party’s armed wing into a truly professional and potent military force. In recent years, the Chinese leadership, state media, and foreign policy analysts have consistently perceived the U.S. as a declining but dangerous power. As Jonathan Czin and Allie Matthias note, three factors account for the remarkable durability and appeal of this perspective in the Chinese press: genuine assessments of U.S. internal contradictions, the Chinese Communist Party’s ideological predisposition to see the capitalist powers as declining, and a desire to bolster party propaganda. However, contrary to previous expectations, perceptions of U.S. decline have not prompted a shift toward a more aggressive policy. Instead, until recently, this assessment seems to have led Chinese officials to judge that time is on China’s side, and that the PRC should avoid provoking the U.S., which has the capacity to lash out at China even as its power declines. PRC strategy in response to a declining but dangerous hegemon focuses on insulating itself against the U.S. and gaining international prestige from its various Global Initiatives. In her in-depth analysis of the Chinese political economy causes of economic “involution,” Ling Chen shows that this type of cutthroat, race-to-the-bottom competition is a symptom of the fiscal structure and flawed political institutions. In response to post-Covid economic doldrums, the central government, local governments, and businesses adopted policies and strategies that have created a vicious cycle. The strict growth targets and debt-reduction targets set by Beijing force local governments to expand investment in state-favored industries, creating low-profit competition, oversupply, declining revenue, and falling overall demand. Yet the survival imperative of businesses dictates an expansion of production. A deep dive into the real estate and electric vehicle sectors reveals that these sectors share similar dynamics. Although they differ in terms of dominant players, market expansion success, and the role of local governments, they both are struggling with excessive capacity, slow turnover, declining prices, and high financial leverage. The difficulties Beijing has encountered in fighting “involution” are thus self-inflicted. A more effective effort would require the central government to realign its policy goals with those of local stakeholders. Although Taiwan is the most likely flashpoint of a direct military conflict between the U.S. and China, Beijing’s intentions remain as difficult to decipher as ever. In this context, any change in the official framing of the Taiwan issue warrants scrutiny. This is the case with “the party’s overall strategy for solving the Taiwan issue in the new era,” a new, albeit unwieldy, phrase the Chinese government began to adopt at the end of 2021 to summarize Xi Jinping’s policy toward Taiwan since 2013. Minxin Pei traces the origin, appearances, and interpretation of the phrase in statements by top Chinese leaders and senior officials responsible for the Taiwan portfolio to determine what exactly the “overall strategy” is. He finds that, for the most part, this “overall strategy” does not deviate much from the policy of Xi’s predecessors. However, the elevation of “resolute opposition to interference by external forces” to the same level as “opposition to Taiwan independence” indicates a fundamental shift in Beijing’s thinking about Washington’s role in cross-Strait relations. Apparently convinced that the U.S. now has effectively gutted its one-China policy, Chinese leaders have correspondingly raised their risk tolerance in reacting to perceived U.S. actions in support of Taiwan. Even though the “overall strategy” continues to emphasize the priority of domestic development over reunification, a future crisis resulting from gray-zone coercion in response to perceived provocations by Taipei or Washington is nevertheless more likely than a pre-meditated naval blockade or a full-scale invasion in the foreseeable future.  China’s widely condemned crackdown on the Uyghur minority in Xinjiang may have disappeared from news headlines. But the closing of the so-called re-education camps may have led to a troubling misconception that state violence targeting Uyghurs is over. In reality, as Tim Grose shows, China’s infrastructure of repression has become more deeply entrenched in the region, as evidenced by open-source materials, especially government reports, official county-level blogs, and cadre diaries. Notably, long prison sentences have replaced short-term internment, boarding schools increasingly separate Uyghur children from their families, and labor programs continue to relocate hundreds of thousands of Uyghurs from their hometowns. Designed to weaken Uyghur attachments to their homeland and to dismantle their social institutions, on-going Chinese policies are reshaping Uyghur identity and creating a new reality on the ground.

The China Leadership Monitor informs the international foreign policy community about current trends in China's leadership politics and in its foreign and domestic policies with articles written and researched by experts. Welcome to the China Leadership Monitor Expert-written, in-depth, independent research on Chinese policy, politics, and foreign relations published quarterly. Spring Issue Join our mailing list! Join I agree to the privacy policy. View. At-A-Glance Topics Ideology Elite & Party Affairs Explore this topic Other Coverage Insights Interviews: CLM conducts interviews with authors to discuss their new books and research Access Insights 1/1 Digests: Summaries of our quarterly issues to refresh you on Chinese politics Find Digests Digest: Winter 2024 Issue 82 Adam Terenyi 1 2 3 1 ... 1 2 3 ... 3 Our Issues Issue 87 March 1, 2026 Issue 86 December 1, 2025 Issue 85 September 1, 2025 Issue 84 June 1, 2025 Issue 83 March 1, 2025 Issue 82 December 1, 2024 Issue 81 September 1, 2024 Issue 80 June 1, 2024 Issue 79 March 1, 2024 Issue 78 December 1, 2023 Issue 77 September 1, 2023 Issue 76 June 1, 2023

China Leadership Monitor provides independent, timely, and in-depth research on Chinese politics. Find our most current publication here. Browse other issues and articles: All Articles Sunday, March 1, 2026 Spring 2026 Issue 87 Editor's Note The decimation of the top ranks of the People’s Liberation Army (PLA) during the last two years has fueled an intense debate about the reasons behind the largest purge in the Chinese military in the post-Mao era. Despite the absence of credible evidence, many observers and journalists attribute the purge to factional strife and Xi Jinping’s insecurity. However, Joel Wuthnow’s close examination of the available evidence, primarily biographical records of the fallen PLA command Minxin Pei 49 minutes ago 4 min read Why Is Xi Still Purging His Generals? The removal of PLA senior generals Zhang Youxia and Liu Zhenli in January 2026 represented the peak, if not the end, of a massive purge of the military leadership that began in mid-2023. The absence of credible information from Beijing has allowed many theories about the causes of these dismissals to circulate, which often center on factional politics or power consolidation. An examination biographical records, however, yields more support for the view that most purges are in Ideology & Elite, Party Affairs Joel Wuthnow 49 minutes ago 27 min read Occidental Fall: Assessing Chinese Views of U.S. Decline China’s leadership, state media, and foreign policy analysts consider the U.S. a declining but dangerous power. That assessment has remained durable since Michael Swaine analyzed views in the People’s Republic of China (PRC) in his 2021 essay for China Leadership Monitor , though the frequency of that assessment has fluctuated. The resilience of such views in the PRC press reflects genuine assessments of U.S. internal contradictions, the Chinese Communist Party’s Leninist pre National Security & Foreign Policy Jonathan A. Czin and Allie Matthias 49 minutes ago 28 min read China’s Economic Involution: State and Business Strategies China’s economic involution, characterized by cutthroat, race-to-the-bottom competition, is a symptom rooted in its political and fiscal structure. During the recent economic downturn, the central government, local governments, and businesses entered a self-reinforcing cycle. The central growth targets and debt-reduction pressures pushed local governments to expand investment in state-favored industries, creating low-profit competition and oversupply. The declining revenues f Economy & Technology Ling Chen 50 minutes ago 24 min read (Mostly) Old Wine in a New Bottle: What is the CCP’s Overall Strategy for Solving the Taiwan Issue in the New Era? Toward the end of 2021 China unveiled a new framing, “The party’s overall strategy for solving the Taiwan issue in the new era,” to summarize General Secretary Xi Jinping’s policy toward Taiwan since 2013. A close examination of statements by top Chinese leaders and senior officials responsible for the Taiwan portfolio shows that the “overall strategy,” for the most part, deviates little from the policy of Xi’s predecessors. However, the “new” components of the “overall strat National Security & Foreign Policy Minxin Pei 50 minutes ago 25 min read “The Patient Labor of Assimilation”: China’s Strategies to Create a New “New Territory” With the so-called re-education camps closed, not only has media attention on Xinjiang waned but a troubling misconception seems to have taken hold: state violence targeting Uyghurs is over. In reality, the party-state’s infrastructure of repression has become more deeply entrenched in the region. Using open-source materials, especially government reports, official county-level blogs, and cadre diaries, this essay demonstrates that long prison sentences have replaced short-te Domestic Security Timothy A. Grose 50 minutes ago 26 min read CLM Insights Interview with Fiona S. Cunningham Fiona S. Cunningham. Under the Nuclear Shadow: China’s Information-Age Weapons in International Security (Princeton Studies in International History and Politics). Princeton University Press, January 2025. 400 pages. ISBN-10: ‎0691261032; ISBN-13: ‎978-0691261034 Insights Interview In your book you advance a novel theory of “strategic substitution” that explains the decisions made by successive Chinese leaders in the post-Cold War era to modernize the military. Can you brief Insights Interviews Fiona S. Cunningham 50 minutes ago 9 min read

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