By April-May 2024, China's massive investment in electric vehicles, solar panels, and batteries created so much excess capacity (called 'involution') that companies were forced to sell products at prices below their variable costs, something microeconomic theory says cannot happen in equilibrium, because banks would not finance inventory of unsaleable goods.
factualpending
Speaker
Michael PettisEvidence Quote
“around April or May of this year...involution...they had to sell them at cut-rate prices...below variable prices...something which...can't happen”
Source
Michael Pettis: China’s Consumption Crisis Is The World’s Crisis— The Monetary Matters NetworkCreated: 8/11/2026, 7:43:21 AM
My Notes
Loading notes...