Market Transformation Through Policy Shift
China’s ongoing anti-involution campaign has fundamentally reshaped market dynamics throughout 2025. This strategic initiative, coupled with the establishment of a unified national market, has shifted focus from destructive price wars to sustainable growth through quality competition. The effects are becoming increasingly visible as companies leverage improving pricing environments to achieve remarkable turnarounds or accelerate their growth trajectories.
Inventory reduction and stable growth have emerged as dominant themes across domestic markets. Numerous enterprises have capitalized on these trends, with many reporting significant performance improvements during the first half of 2025. The anti-involution policy has created a more rational competitive landscape where companies can focus on technological advancement and product differentiation rather than engaging in destructive price competition.
Case Study: CCTC’s Remarkable Turnaround
China National Materials Group Corporation (CCTC) exemplifies the positive impact of these market changes. On August 21, the company reported staggering first-half results, achieving net profits of 999 million yuan—representing a 114.92% year-over-year increase. This performance marked the company’s highest half-year profit growth in a decade.
Drivers Behind the Success
Several factors contributed to CCTC’s outstanding results. The company benefited from optimized product structure in its glass fiber segment and meaningful price increases across its product portfolio. Additionally, CCTC’s technological innovations played a crucial role. The company had previously disclosed through investor interactions that its first-generation low-dielectric products for high-end PCB applications had received recognition from major domestic clients and entered mass production.
The combination of product price increases and improved industry conditions throughout the supply chain propelled CCTC’s exceptional performance. Market recognition was immediate and emphatic—the company’s stock price surged to the daily limit upward on August 22, following the earnings announcement.
Industry-Wide Impact of Anti-Involution Measures
The anti-involution policy’s effects extend far beyond individual companies. Across multiple sectors, the reduction in irrational competition has created conditions conducive to price recovery and sustainable profitability. Industries experiencing notable benefits include the copper-clad laminate (CCL) sector within the PCB supply chain and titanium dioxide producers.
Commodity Price Movements
Industry data reveals substantial commodity price increases through July and August 2025. According to Business Society data, multiple commodities recorded price jumps exceeding 15% from month-start to month-end in July:
– Toluene diisocyanate (TDI)
– Chloroform
– Lithium phosphate
– Neodymium oxide
Rare earth elements showed particularly strong performance. Data from BaiChuan Info indicates that as of August 21, praseodymium oxide prices reached 657,500 yuan per ton, representing a 110,000 yuan increase from month-start levels—a jump exceeding 20%. Year-to-date gains surpassed 58%, highlighting the sustained upward momentum in this sector.
Identifying the Anti-Involution Beneficiaries
Through comprehensive analysis of approximately 1,600 companies that disclosed half-year performance forecasts, researchers have identified 64 enterprises that specifically benefited from anti-involution policies or price increases. These companies either achieved profit growth or transitioned from loss to profitability during the first half of 2025.
Sector Concentration
The 64 identified companies span 13 industries, with notable concentration in three sectors:
– Basic chemicals: 21 companies
– Nonferrous metals: 19 companies
– Building materials: 5 companies
Among these sectors, nine recorded year-over-year net profit growth during the first half of 2025. The agriculture, forestry, animal husbandry, and fishery sector demonstrated particularly impressive performance with overall profit growth exceeding 820%, compared to less than 100% growth during the same period last year.
Standout Performers and Their Strategies
Among the 64 identified beneficiaries, 54 companies achieved profit growth while 10 transitioned from loss to profitability. Several companies implemented particularly effective strategies within the new market environment.
Fujian Cement successfully returned to profitability by implementing peak-shift production schedules, actively participating in industry anti-involution coordination efforts, and enhancing precision marketing. These measures enabled the company to achieve higher average cement prices and slightly increased sales volume.
Huaxin Cement embraced the anti-involution and stable growth initiatives, adopting a philosophy that prioritizes profit targets while recognizing pricing as the foundation. This approach resulted in higher average cement prices and median net profit growth exceeding 50%—breaking a three-year trend of declining profits during the same period.
Extraordinary Growth Cases
Several companies achieved truly exceptional growth during the period:
– Huahong Technology: Approximately 34-fold profit growth (median value)
– Xianda Company: Over 10-fold profit growth
– Suoto Development: Over 10-fold profit growth
– Suli Company: Over 10-fold profit growth
Huahong Technology’s remarkable growth, while partly attributable to a low comparison base from the previous year, primarily resulted from stabilized rare earth material prices driven by national industrial policies, improved supply-demand dynamics, and changing international trade conditions. The company leveraged its technological expertise and operational advantages in comprehensive rare earth resource utilization to capitalize on emerging market opportunities.
Market Performance Analysis
The market has recognized the improved fundamentals of these anti-involution beneficiaries. As of August 22, the 64 identified stocks achieved an average year-to-date gain of approximately 52%. Remarkably, 27 stocks (over 40% of the group) gained more than 50%, with seven stocks doubling in value.
Notable Outperformers
Several companies delivered exceptional returns:
– Zhongyida: Gained over 220%, benefiting from price recovery in its core pentaerythritol product series
– Limin Company: Gained nearly 170%, with profits growing over 740% due to increased sales volume, higher prices, improved margins, and investment income from affiliated companies
Companies that transitioned from loss to profitability also saw strong market recognition. Shenghe Resources and Guangdong Rising Assets Management both gained over 130%, benefiting from rare earth price increases and production expansion.
Margin Trading Activity Reveals Opportunities
Among the 64 identified companies, 52 qualify as margin trading securities. Analysis reveals that nearly 70% (36 companies) experienced increased margin loan balances as of August 21 compared to year-end 2024 levels, including newly eligible securities.
Over 30 stocks saw margin buying increase by more than 10%, with several companies experiencing particularly aggressive margin investor accumulation:
– Suoto Development: Margin balance increased over 275% to 765 million yuan
– Fujian Cement: Margin buying increased over 195%
– Zhongyida: Significant margin accumulation exceeding 100%
Identifying Undervalued Opportunities With Institutional Support
The most compelling investment opportunities emerge at the intersection of fundamental improvement and market undervaluation. Despite the strong overall performance of anti-involution beneficiaries, a small group of five companies has lagged their sector indices while simultaneously experiencing substantial margin buying support.
The Five Undervalued Candidates
These companies, ranked by margin buying intensity, present potentially undervalued opportunities:
1. Haohua Technology: Margin buying increased over 120% despite gaining only 0.17% year-to-date, significantly underperforming the basic chemicals sector index by more than 22 percentage points
2. Zhongjin Gold: Profit growth exceeded 50% during the first half
3. China State Shipbuilding Corporation: Median profit growth surpassed 100%
4. China Dynamics: Median profit growth exceeded 100%
5. Shanjin International
Each of these companies has underperformed their respective sector indices by at least 10 percentage points, with China State Shipbuilding Corporation lagging the national defense military industry index by nearly 22 percentage points.
Strategic Implications for Investors
The identification of these five undervalued companies with strong margin trading support and improving fundamentals presents compelling opportunities for investors seeking exposure to the anti-involution theme. These stocks potentially offer attractive risk-reward profiles given their relative undervaluation compared to sector peers.
Investors should consider conducting further due diligence on these companies, examining their specific competitive advantages, management quality, and growth sustainability. The combination of institutional margin buying support and fundamental improvement suggests that these companies may be positioned for potential catch-up performance relative to their sectors.
As China’s anti-involution policy continues to reshape market dynamics, investors should monitor how these companies capitalize on the improved competitive environment. The policy shift from destructive price competition to quality and technology-focused competition creates sustainable conditions for companies with strong operational capabilities and innovative products.
For investors seeking to capitalize on these trends, focusing on companies with demonstrated margin buying support, improving fundamentals, and relative undervaluation may offer attractive opportunities. The market doesn’t always immediately recognize fundamental improvements, creating potential opportunities for investors who can identify these discrepancies before broader market recognition occurs.