“Go global, or go down” (不出海，就出局).
These are the words on the lips of many entrepreneurs in China right now.
From fast-growing tech start-ups, to venture-backed growth companies, to industry giants, and even state-owned behemoths, these businesses face the same existential pressures in the China market, forcing them to look overseas, or die.
A mix of factors unique to China have made this happen.
State-backed venture building, tech transfer (pinched, purchased, or otherwise), country-wide logistics, supply and manufacturing capacity, rapid development of fintech and ecommerce technologies, and huge investment in scientific research and rapid commercialisation of key “choke-point technologies” (卡脖子技术) have led to this rapid growth.
At the same time, a total lack of, unpredictable changes to, or poor implementation of policies and laws, have created an environment which can quickly kill a business off.
Imagine that: infinite opportunity, immeasurable risk.
Exciting stuff!
Combine that with the scale of the China market, and the scale of ambition of its entrepreneurs, and you’ve got capitalism in its purest and most savage form.
Tapping into the needs of 1.4 billion customers at a time of rapid development and wealth creation, the companies which scaled quickly and aggressively through competing on efficiency, quality, and innovative business models became dominant.
They killed and consumed their competitors along the way.
But now, many of these companies are facing a very different market, characterised by a different kind of competition:
“Involution” (内卷), which we also discussed last week.
Specifically, “price involution” (卷价格), or “a race to the bottom”.
Whereas previously, opportunity was infinite, now, many sectors are maturing, stagnating, and in some cases being closed down altogether.
Companies, desperate for survival, are undercutting their competitors on price, even selling at prices lower than their costs.
Manner Coffee’s recent struggles are an example.
“Going global” (出海) is seen as the solution, a way to access new growth, with less competition.
The problem is, as one entrepreneur told me in Beijing this week:
“They’ve taken the involuted competition from China to the rest of the world.”
“他们从中国卷到海外去了。”
This is not just happening in service sectors such as take-away coffee.
In renewable energy, photovoltaic (PV) solar panel manufacturers face the same challenges.
It’s one of the main messages coming out of an industry conference held recently, the International Photovoltaic Power Generation and Smart Energy Conference (国际太阳能光伏与智慧能源大会暨展览会), or the SNEC, which was held in Shanghai from June 13 to 15.
Now in its 17th year, the SNEC is the world's largest photovoltaic event, showcasing the latest advancements in PV and related technologies. It attracted over 3,000 exhibitors from 95 countries in 2024.
The SNEC is a “must attend” event for founders of China’s top PV companies, now some of the biggest producers of solar technology in the world.
Huge changes have happened since the last SNEC in 2023.
Prices of the four main PV components — polysilicon, silicon wafers, solar cells, and modules — have fallen by over 50%. Whereas overall production capacity has tripled, and profit margins are down by around 70%.
All within the space of one year.
This has created a highly competitive environment, according to one of China’s most successful solar entrepreneurs, Zhū Gòngshān 朱共山, the chairman of GCL Group (协鑫集团):
“Of course, we need to compete in the market, but we should not compete at all costs to a point that we do not make any profit, that we undercut the market, and leave no way out for ourselves.
Let's stop the race to the bottom!”
“卷是市场常态，但我们不能赢了面子，输掉裤子，把行业卷坏，把自己卷死。咱都别卷价格了！”
Instead, Zhu goes on to say, the industry needs to compete on innovation and products:
“Only breakthroughs in core technology can give the industry more potential and make the competition more productive.”
“唯有核心技术突破，才能带来产业上限拓展和内卷生态改善。” 1
As well as looking overseas, major PV manufacturers are also going into new businesses, such as energy storage (储能), which is one of the hottest sectors at the moment.
The competition is intense, and industry insiders believe that it’s only going to get worse in the next few years.
So Zhu Gongshan and others believe going global is the only way out.
“Resolving overcapacity takes time.
We need to venture out into the global market to find solutions.”
“产能能不能消化好需要时间，解决问题要出去，那就是全球化。”3
But he also underlines the lessons to be learned from how Chinese companies entered Southeast Asia: they took their “involuted competition”, and the race to the bottom, with them.
So, that's what we're exploring this week!
Favourite Five
1. 洗牌 xǐ pái
reshuffle
当时的300家家电品牌洗牌之后就剩下了长虹、海尔、康佳、海信、美的、格兰仕、格力 - After the reshuffle, only Changhong, Haier, Konka, Hisense, Midea, Galanz, and Gree survived out of the 300 home appliance brands. [3]
2. 卷价格 juǎn jià gé
race to the bottom
协鑫反而算是业内最不主动卷价格的企业之一 - GCL is actually one of the least aggressive companies in the industry when it comes to competing on price. [1]
Related:
白菜价 bái cài jià - “white cabbage price”, dirt cheap
卷心菜 juǎn xīn cài - “cabbage”, a new metaphor meaning “competing to the bottom” which Zoe discusses more in the Member Podcast
3. 香饽饽 xiāng bō bo
hot commodity
在经受了多年“冷眼”之后，储能电站在2023年摇身一变，成了光伏安装商的香饽饽 - After years of being overlooked, energy storage power stations became a hot commodity for photovoltaic installers in 2023.
4. 肉搏战 ròu bó zhàn
hand-to-hand combat, fierce battle
这些问题在未来几年都有机会被解决，“肉搏战”看上去不可避免 - These issues will probably be resolved in the coming years, so a fierce battle seems inevitable. [2]
5. 红海 hóng hǎi
red ocean, an existing market with many competitors
结果，储能行业“刚蓝海又红海” - As a result, the energy storage industry went from being a blue ocean to a red ocean in no time. [2]
Related:
蓝海 lán hǎi - blue ocean, a market yet to be discovered with no competitors, originally from Blue Ocean Strategy published in 2005.
Consuming the conversation
Useful words
6. 劲头 jìn tóu
energy, enthusiasm
朱共山明确要求团队把内卷的劲头放在新技术和新产品上 - Zhu Gongshan clearly demanded that the team channel their enthusiasm for destructive competition into new technologies and products. [1]
7. 出路 chū lù
way out, solution
如果都盯着同一拨客户，那怎么会有出路 - If everyone is focused on the same group of clients, how can anyone be successful? [1]
8. 丢单 diū dān
lose orders
隆基绿能因为价格劣势，在主战场接连丢单 - LONGi Green Energy has continuously lost orders in its main business segment due to price disadvantages. [1]
9. 砒霜 pī shuāng
arsenic, poison
卷价格是“砒霜”，这谁都知道，但新路径能将隆基绿能带到哪里呢？ - Everyone knows that competing on price is like taking poison, but where can the new path take LONGi Green Energy? [1]
10. 赛道 sài dào
field, sector
这看上去比现有的光伏行业高一个维度，甚至不在一个赛道里 - This seems to have added a different dimension to the current PV market, so different that it seems to have created a new sector. [1]
11. 饱和 bǎo hé
saturated
原有市场极度饱和，整个行业急需新市场 - The existing market is extremely saturated, and the entire industry urgently needs new markets. [1]
12. 竞对 jìng duì
competitors
他傻眼了，“放眼望去，全是竞对，光伏展可以改名叫储能展了” - He was stunned, "I see competitors everywhere. The photovoltaic exhibition should be called the energy storage exhibition." [2]
Notes: short for 竞争对手
13. 制衡 zhì héng
balance, counterbalance
为此通威股份不得不选择进军下游组件业务，以实现制衡 - Therefore, Tongwei Co., Ltd. had to enter the downstream component business to balance the competition. [2]
Three character phrases
14. 冰河期 bīng hé qī
ice age
行业遭遇史上最强内卷，供需严重错配，产业步入冰河期 - The industry has encountered the most aggressive competition in history, with severe mismatch of supply and demand. It has now entered an ice age. [1]
15. 两重天 liǎng chóng tiān
a world of difference
和去年大会相比，光伏产业变化已经两重天 - There's a world of difference between the PV industry today and that at last year's conference. [3]
Related:
冰火两重天 bīng huǒ liǎng chóng tiān - a world difference (the full phrase)
Idioms
16. 制胜之道 zhì shèng zhī dào
key to success
侯金龙在云计算赛道的制胜之道是部署了强大的政企客户资源网络 - Hou Jinlong's key to success in cloud computing is to deploy a strong network of clients from the public and private sectors. [1]
17. 愈演愈烈 yù yǎn yù liè
escalating, intensifying
价格战愈演愈烈，冲业绩、抢份额、报价跌破成本 - The price war is escalating, with companies focusing on revenue, grabbing market share, and offering prices below cost. [2]
18. 肉眼可见 ròu yǎn kě jiàn
visibly, clearly
对于光伏企业来说也是个机会，毕竟业绩增长空间肉眼可见得大 - For photovoltaic companies, this is also an opportunity, as it is clear that there is huge room for growth. [2]
19. 坐以待毙 zuò yǐ dài bì
sit idly by, passively await doom
储能电芯公司也没有坐以待毙 - Energy storage cell companies are not sitting idly by either. [2]
20. 剑拔弩张 jiàn bá nǔ zhāng
with swords drawn and bows bent, at daggers drawn
双方的“竞合”关系也不一定走向剑拔弩张 - The "competition and collaboration" between the two sides may not necessarily lead to a state of hostility. [2]
Phrases
21. 一跌再跌 yì diē zài diē
keep dropping
他们打开了价格线，展会之后的售价更是一跌再跌 - They broke the bottom-line price, and the prices kept dropping after the exhibition. [1]
Related
跌无可跌 diē wú kě diē - can't drop any further
22. 同质化竞争 tóng zhì huà jìng zhēng
a market where competitors offer very similar products
关键多数都是同质化竞争，太内卷了 - The key issue is that products offered by most competitors are too similar. The competition is simply unproductive and destructive. [1]
23. 卷无可卷 juǎn wú kě juǎn
no room left to compete (by cutting prices)
过去一年，光伏行业“卷无可卷”，售价已经贴近成本价 - In the past year, the photovoltaic industry had no room left to compete, as prices were already close to cost. [2]
Note: you can also say “卷到底” which Zoe discusses more in the Member Podcast.
24. 撸起袖子加油干 lū qǐ xiù zi jiā yóu gàn
roll up your sleeves and work hard
不要说今天变穷人就失去信心，还要继续撸起袖子加油干 - Don't lose confidence just because the current prospect in the PV industry is not bright. We still need to roll up our sleeves and keep working hard. [3]
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