Beijing - China is stepping up efforts to curb rat race competition plaguing some of its industries, an endeavor aimed at fostering a market that rewards innovation and quality, with tentative progress beginning to emerge.

A revised anti-unfair competition law took effect on Wednesday, giving regulators stronger legal tools to tackle rat race competition, a concept gaining traction in recent years to describe cutthroat competition, where companies, vying for market share, engage in aggressive price cuts but only get trapped in a cycle of diminishing returns.

The new law, which includes provisions to establish a fair competition review system, provides an improved institutional framework to curb such practice, said Shi Hong, an official of the Legislative Affairs Commission of the National People's Congress Standing Committee.

The push also includes a major overhaul of the country's nearly 30-year-old pricing law, widely viewed as a critical move to curb disorderly price competition. A draft revision published in July proposed to ban firms from selling goods and services below cost to "crowd out competitors or monopolize the market," targeting a core tactic of the rat race competition.

The issue drew broad attention after a Chinese central leadership meeting in July 2024 urged stronger industry discipline and preventing rat race competition. It was later embedded into the country's 2025 government work report, which pledged "comprehensive steps" against the practice, and was reinforced in a high-level meeting this July with pledges to further regulate disorderly competition among enterprises in accordance with laws and regulations, and advance the management of production capacity in key industries.

China's multi-pronged measures to address rat race competition -- ranging from capacity control in crowded sectors like photovoltaic and cement, and pricing monitoring for new energy vehicles to the phase-out of obsolete industrial capacity -- are yielding early results.

The country's producer price index, a measure of factory-gate prices, saw its decline narrow for the second consecutive month in September. Profits at major industrial firms climbed 20.4 percent year on year in August, rebounding from a 1.5-percent drop in July and marking the strongest growth since November 2023.

In the hard-hit photovoltaic sector, polysilicon prices, a key industry bellwether, have risen for three consecutive months.

Analysts have cautioned that unchecked disorderly competition could create a "bad money drives out good" scenario, suffocating innovation and weighing on China's long-term development. They view the endeavor not as a short-term fix, but as part of the country's sustained effort to retool its growth model.

"What lies behind this endeavor is a systematic and forward-looking reform agenda," said Wan Zhe, an economist and professor at Beijing Normal University, noting that it is an important part of the country's plans for deepening reforms and boosting development in the years ahead.

The push comes as China crafts its 15th Five-Year Plan (2026-2030) amid a rapidly shifting global landscape -- including supply chain realignment and rising protectionism -- while striving to revive domestic demand and spur tech innovation.

To absorb overcapacity that fuels disorderly price competition, China must stimulate domestic demand more aggressively, analysts said.

Liu Yuanchun, president of the Shanghai University of Finance and Economics, said boosting domestic consumption is the key, and the solution requires deepening reform of the income distribution system, improving the consumption environment and removing supply bottlenecks, rather than just relying on short-term stimulus.

To spur domestic demand, the Chinese government has unveiled a raft of measures, including an expanded consumer goods trade-in program, increased consumer finance offerings, and stronger employment support.

On Tuesday, Chinese Premier Li Qiang presided over a symposium on the economic situation, during which he urged continued efforts to remove bottlenecks through reform, expand domestic demand, and strengthen domestic circulation.

Greater efforts should be made to boost effective investment, stimulate market vitality, and address disorderly and irrational competition, Li said.