Justin Yifu Lin: There's no need to be overly anxious about "involution"; it will inevitably occur.

Ask AI · How should the government optimize policies to reduce “involution”?

China News Network, March 24 (Xue Yufei) “We don’t need to be too anxious about ‘involution’ because we know it’s something that will inevitably appear, just like when people grow, their old clothes no longer fit, and they need to buy new ones. ‘Involution’ is the same,” said Lin Yifu, former chief economist of the World Bank and director of the New Structural Economics Research Institute at Peking University, at the Boao Forum for Asia Annual Conference 2026 on the 24th.

Lin Yifu stated that “involution” is an inevitable phenomenon that occurs during economic development because economic growth relies on technological innovation, industrial upgrades, and the continuous emergence of new productive forces. In this process, new industries with comparative advantages continually appear. When new industries with comparative advantages emerge, they attract significant investment, leading to competition and the so-called “involution.”

He noted that this issue is not unique to China; it occurs in any country. For example, the emergence of the internet industry in the 1990s led to significant investments in countries like the United States, resulting in “involution.” This is a necessary process. If we fear “involution,” how can we know if investments are just right? Unless it’s a planned economy, but planned economies lack competitiveness.

“We know it will inevitably appear, but how can we lessen the degree of ‘involution’?” Lin Yifu said that economic development requires effective markets on one hand and a proactive government on the other. What should a proactive government do? First, provide some subsidies for the externalities of pioneers, encouraging them to enter and helping them address bottlenecks in soft and hard infrastructure. When a new comparative advantage emerges, the government should withdraw and no longer subsidize enterprises, allowing them to face market competition. In this process, good companies will remain, while poorly managed companies will exit, leading to a more stable economic state and an elevation of productivity levels.

(For more reporting clues, please contact the author of this article, Xue Yufei: xueyufei@chinanews.com.cn) (China News Network APP)

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Editor: Wei Wei Li Zhongyuan