From auto to solar: China cracks down on 'disorderly' price wars

Business Standard

3 days ago

Chinese President Xi Jinping has issued a warning against 'disorderly low-price competition', calling for urgent regulation to stop damaging price wars spreading across key sectors of China's economy.
Speaking at a meeting of the Central Financial and Economic Affairs Commission on Tuesday, Xi said the government must take action to raise product quality, remove inefficient firms, and reduce industrial overcapacity, state media Xinhua reported.
His remarks come amid price cuts across steel, autos, education, e-commerce, and solar sectors, to stay afloat amid intensifying competition.
Xi, who also heads the commission, said advancing Chinese modernisation depends on a healthy market environment and leveraging strategic sectors, including the ocean economy, for long-term strength.
Growing price pressures in Chinese industries
Across industries, companies are cutting prices below cost to stay competitive, according to a report by the South China Morning Post.
In the steel industry, producers are selling at or below cost. The same trend is visible in the auto industry, where dozens of manufacturers remain active due to large-scale state and private investment. Analysts say this has delayed the natural consolidation of the market.
E-commerce firms are also locked in price wars. JD.com's recent expansion into food delivery has intensified competition with Meituan, driving down prices in the sector.
In education, providers are also under pressure from budget-conscious consumers demanding the lowest rates.
Solar sector oversupply pushes down prices
The solar photovoltaic industry, where China controls more than 80 per cent of the global supply chain, is also facing challenges as record capacity additions have pushed prices down sharply.
On Thursday, China stated that it will tighten oversight of its struggling solar industry as overcapacity and falling prices drive heavy losses, according to a report by Bloomberg.
Industry Minister Li Lecheng met with executives from 14 solar photovoltaic firms, urging them to curb price competition and accelerate the shutdown of outdated production lines
China cracks down on industry price war
Xi's comments mark a shift in tone from earlier warnings about 'involutionary competition' — a more abstract term — to a clear call for tighter controls. While no formal regulations have been announced, the language signals a policy turn.
China has previously acted on similar warnings, such as the 2020 crackdown on the tech industry's 'disorderly capital expansion'.
For now, the central government appears focused on stabilising core industries and preventing long-term damage caused by price wars, which have become more common amid weak demand, high production, and global trade tensions.
Xi Jinping calls for 'unified national market'
At the same meeting, Xi reiterated the need to accelerate the building of a 'unified national market' to support China's economic transition. He called for better coordination between local and central authorities and improvements to core market systems — including infrastructure, regulation, procurement, and pricing enforcement.
Efforts should also include reforming fiscal and tax systems, credit systems, and statistical reporting frameworks. The government will also look to tighten rules around public procurement and regulate how local governments attract investment.
'The basic requirement is to unify underlying institutions, infrastructure, and enforcement mechanisms,' the commission said in a summary of the meeting. Officials were also urged to facilitate the sale of export goods into the domestic market and encourage private investment.