China’s anti-involution shift: Indian themes that can offer multi-year opportunities

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China’s so-called anti-involution campaign has driven a structural reset in the local economy, and for India, this opens up opportunities across commodities, renewables, chemicals and EVs.

Analysts believe China reining in excess supply could be a turning point for domestic companies that have long-struggled with cheaper Chinese imports and volatile pricing cycles.

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China’s policy circles have been abuzz with a new term – anti-involution, or a reversal of excessive competition. Beijing had rolled out sweeping measures in July to curb cut-throat price wars, over-expansion and profitless competition, in order to move away from excessive capacity addition towards more rational growth.

While this may sound like an inward-looking change, the global consequences are far-reaching.

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For India, the ripple effect will show up in commodities, manufacturing, renewables, and even electric vehicles. Shares of metal producers – both ferrous and non-ferrous – have already seen sharp gains since Beijing’s announcement, as analysts believe China reining in excess supply could be a turning point for domestic companies that have long-struggled with cheaper Chinese imports and volatile pricing cycles.

Metals Lead the Way

China produces 60% of the world’s steel, but of late it has started cutting back its output. Between January and July 2025, it churned out less steel than last year, at 594.5 million tonne, a 3.1% decrease on-year in a clear sign of moderation. This is good news for Indian mills as there is expected to be less Chinese steel flooding the Indian markets, implying stronger pricing power and better spreads for local producers.

In a recent note, CLSA has said that India’s metal sector could finally be entering a more profitable cycle, with the brokerage adjusting its FY26-FY28 EBITDA estimate for metal and mining companies by -4% to +8%. Meanwhile, aluminium producers such as Nalco are benefitting from a favourable balance between consumption and supply, as aluminium prices have stayed resilient with stronger global consumption outpacing production, CLSA noted.

Emkay Global said in its note that the extension of safeguard duty on steel will keep a lid on imports, and with demand expected to recover post-monsoon on government capex and GST rationalisation, valuations may get a boost. SAIL and Tata Steel are the brokerage’s top bets.

Pankaj Tibrewal of Ikigai Asset Management recently said, “China’s policy of rationalising capacities has already driven sharp spikes in coking coal, polysilicon, iron ore and steel. This suggests that higher-for-longer inflation, coupled with supply chain reorientation, could create sustained opportunities for Indian metal, renewables, and commodity-linked sectors. Therefore, commodities could be an alpha idea.”

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He added that chemicals, after years of downturn, may also be at an inflection point as de-stocking ends and China pulls back capacity.

Boost for Solar Ambitions

Another sector poised to benefit from China’s retreat from aggressive discounting may be solar, which has seen ultra-cheap imports.

Morgan Stanley has said that it sees Reliance Industries as a major beneficiary, as the company’s push into an integrated solar supply chain could directly benefit from China scaling back polysilicon production. The brokerage estimates Reliance Industries could cut its energy costs by 40% by 2030, with new energy businesses contributing 13% to earnings as early as 2027.

Breathing Space for Indian EVs

Electric vehicles are another area where Indian companies could benefit, as Chinese players have sometimes dumped ultra-cheap cars to export markets amid domestic price wars and heavy discounting. There’s also the possibility that Chinese firms may pivot towards partnerships and technology licensing with Indian companies, offering better access to battery and charging tech without the destructive pricing pressure. This can be beneficial for leading automotive players such as Tata Motors, M&M and Ola Electric.

Aishvarya Dadheech of Fident Asset Management said, “India’s EV ecosystem is still in its infancy compared to China, but it enjoys protectionist policies, rising demand, and localisation mandates. We are invested in companies manufacturing electrolytes for EV batteries. In terms of EV manufacturers, we see strong potential in Tata Motors, TVS, Mahindra and Bajaj Auto, who are consolidating their lead in passenger and two-wheeler EVs, while avoiding pure-play OEMs due to balance sheet strain. US protectionist policies like the ‘Big Beautiful Bill’ also support India’s battery ecosystem in the near term.”

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