The internal characteristics of “involutionary” competition in China are manifested as follows： significant homogeneous competition and widespread low-price competition strategies，prominent disorderly competition patterns within industries coupled with pervasive imitation behaviors among enterprises， low capacity utilization rates and severe overcapacity at the industry level， as well as generally low profit margins with significant short-term fluctuations in corporate earnings. This study constructs a foundational analytical framework to define and interpret China's “involutionary” competition while thoroughly investigating its formation mechanisms， in particular， the inappropriate government interventions and institutional deficiencies at various administrative levels. The research reveals that multiple factors collectively contribute to “involutionary” competition formation， including government's industrial policies dominated by fiscal subsidies， corporate competition patterns emphasizing “economies of scale-low cost advantages”， market entry barriers， defects in intellectual property protection， and global value chain governance mechanisms. To effectively address “involutionary” competition， comprehensive reform strategies must be adopted， including defining reasonable government boundaries， constructing an efficient market， establishing industry cooperation order， advancing fundamental institutional reforms， and optimizing the external environment. These measures aim to break the vicious cycle of homogeneous and low-price competition while incentivizing enterprises to achieve differentiated competitive advantages through innovation， thereby promoting high-quality economic development in China.