
Chinese investors snap up stocks on hopes for an end to price wars and overcapacity
The prevailing catchphrase is 'anti-involution,' and it reflects efforts to curb intense competition and overcapacity in industries like solar panels, steel, and electric vehicles.
With rising trade barriers such as President Donald Trump 's higher tariffs, and relatively weak domestic demand, manufacturers have been slashing prices, undermining their bottom lines and driving some out of business.
The producer price index, which measures the price that factories receive for their goods, has fallen steadily for nearly three years in China in a prolonged bout of deflation. The long-running issue spilled over into global markets as low-priced Chinese exports worsen trade friction with key trading partners including the United States and Europe.
Solar panel glass makers agree to cut output by 30%
In a series of recent statements, the Chinese government and industry associations have signaled they're getting serious about reining in cut-throat competition, known as invollution or 'neijuan' in Chinese.
The top 10 makers of glass for solar panels agreed on June 30 to shut kilns and cut production by 30%, an industry association said. The government has launched an auto safety inspection campaign, addressing concerns that automakers were skimping on quality to cut costs.
It's unclear whether these efforts will succeed, but the sense that China may finally be tackling this chronic problem was enough to spark a rally in stocks in some of those under-pressure sectors.
Shares of Liuzhou Iron & Steel Co. gained 10% on Friday and have risen more than 70% since June 30. Solar panel glass producer Changzhou Almaden Co. fell at the end of last week but is still up about 50%.
More broadly, two exchange traded funds in solar panels and steel have risen about 10%, outpacing a 3.2% rise in the Shanghai Composite, China's leading market index.
The performance of EV-maker stocks has been mixed, with Li Auto and Nio recording double-digit percentage gains while market leader BYD declined.
Foreigners can't buy Chinese stocks directly but they are able to invest in about 2,700 stocks and 250 exchange traded funds through the Hong Kong exchange.
Government calls intense price wars 'disorderly'
The gains follow high-level government pronouncements against disorderly price wars. On June 29, the People's Daily newspaper, the mouthpiece of the ruling Communist Party, ran a lengthy page 1 article on involution, saying they run counter to the party's goal of high quality economic development.
Chinese leader Xi Jinping weighed in at a closed-door economic meeting, calling for better regulating competition and incentives by local governments to attract factory investments that are blamed for overinvestment in affected industries.
The tougher talk began with a focus on automakers in late May, specifically around electric vehicle price wars that began more than three years ago.
Analysts at investment bank UBS said the shift is good news for auto industry profits and company stocks.
'Though it's difficult to imagine a sudden U-turn of the industry from fierce competition to orderly consolidation, it's indeed possible to have near-term ceasefire of the price war,' they wrote.
Weak demand and overcapacity bring a fight for survival
After BYD launched another round of price cuts on May 23, some competitors, the main industry association and government all called for fair and sustainable competition.
The EV battery industry, the cement association and major construction companies have issued statements echoing calls for an end to excess competition.
The term involution, which suggests a spiraling inward and shrinking, was initially applied in China to students and young workers, who felt they were caught up in meaningless competition that led nowhere as the job market weakened and wages stagnated in recent years.
At the industry level, it has come to mean sectors that have too many companies competing for a slice of the pie, leading to fierce price cutting to try to gain market share.
The mismatch between production capacity — how much an industry can make — and actual demand for the product, reflects overcapacity that forces companies to compete for survival in a limited market space, said a recent article in the Communist Party magazine Qiushi.
Obstacles to fixing the problem
Some Chinese industries, especially steel and cement, have long suffered from overcapacity. A government push to promote green industries has fostered similar problems in that sector, including solar panels, wind turbines and electric vehicles.
A flood of Chinese exports is leading to more trade barriers in Europe and the U.S. and in some emerging markets such as Mexico, Indonesia and India.
Ultimately, economists say industries need to consolidate through company mergers and bankruptcies. But the process will take time. A major obstacle is provincial governments that want to protect local companies and jobs.
Alicia García-Herrero, the chief economist for Asia-Pacific at the Natixis investment bank, said that recent comments by top Chinese economic officials suggest they realize something needs to be done.
'How much is action versus words, I don't know,' she said. 'But I do think it's a big problem for China.'
___
Associated Press researcher Yu Bing contributed.
Hashtags

Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles


Reuters
31 minutes ago
- Reuters
India's Trident reports higher first-quarter profit on lower expenses
July 24 (Reuters) - Indian textiles firm Trident ( opens new tab reported a nearly 90% rise in first-quarter profit on Thursday, as lower raw material and employee costs offset a decline in sales. The company reported a consolidated net profit of 1.4 billion rupees ($16.21 million) for the three months ended June 30, compared to 737 million rupees a year ago. A marginal 2% decline in revenue for Trident, which supplies home textiles to major global retailers such as Walmart (WMT.N), opens new tab and Target (TGT.N), opens new tab, was overshadowed by a 7% decline in expenses. ($1 = 86.3930 Indian rupees)


Reuters
31 minutes ago
- Reuters
Pakistan spy agency targets black market dollar trade to curb rupee slide
KARACHI, July 24 (Reuters) - A deputy chief at Pakistan's spy agency met with currency exchange firms this week amid a sharp slide in the rupee, leading to a crackdown on black market dollar trade, the head of the country's forex association told Reuters on Thursday. The move, a demonstration of the military's growing role in managing the economy, marks the second such intervention, following a 2023 army clamp down that halted an earlier sharp plunge in the currency, helping stabilise the exchange rate until this month. Currency dealers say the rupee is again under pressure as a result of dollar hoarding, cross-border smuggling, and banking restrictions that have driven demand to unregulated dealers offering quicker or better rates. Faisal Naseer, a major general heading the internal security arm of the military's Inter-Services Intelligence, met with exchange firms this week, according to Malik Muhammad Bostan, chairman of the Exchange Companies Association of Pakistan. Following the meeting, security forces, including the Federal Investigation Agency - a civilian security agency - began targeting illegal currency dealers, many of whom subsequently went underground, he said. The open market dollar rate was down one rupee following the intervention, said Bostan, who credited the enforcement drive and a resulting improvement in the supply of dollars to the market. A spokesperson for the military's media wing did not immediately respond to a request for comment. Border controls with Iran and Afghanistan were tightened during tensions with India earlier this year, curbing illicit currency flows. But with checks now eased and the central bank buying dollars to build reserves, formal supply is under strain, Bostan said. Under Pakistan's $7 billion programme with the International Monetary Fund, authorities have pledged to keep the gap between the interbank and open market rates within 1.25% to prevent remittances - crucial to maintaining foreign exchange levels - from shifting to informal channels and eroding reserves. Despite this week's crackdown, dollars are still not available in upscale areas of the commercial hub Karachi, pushing buyers to the grey market, where rates remain about 5% above interbank, said Adnan Sheikh of Pakistan Kuwait Investment Company.


Daily Mail
31 minutes ago
- Daily Mail
The car makers discounting EV models ahead of government grants
It's barely been a week since the government announced its new Electric Car Grant but already confusion is rife and skepticism at an all time high amongst both car makers and buyers. With it still unclear which brands and models will pass stringent sustainability criteria built into the official grant scheme, it's been reported that Chinese brands are likely to be excluded on manufacturing-related emissions grounds. Preempting their exclusion, some East Asian makers have decided to take matters into their own hands and offer grant-style savings of their own - some matching the Government's maximum subsidy of £3,750. But it's not just Chinese brands who have their own grants. European manufacturers are in on the act too in a bid to 'proactively' offer car buyers 'financial support' and to 'help them make the switch to electric'. Brands such as Fiat have always been ahead of the game, offering customers an EV grant since the Conservative Government removed the UK's Plug-In Car Grant back in 2022. So, while we wait to know for sure which new EVs will be eligible for Labour's subsidies of between £1,500 and £3,750, we've rounded up the car makers that have guaranteed to slash money off their models. Here are EV brands to go to if you want to secure a decent saving on your new electric car. MG - its own Electric Car Grant Offer ends: 30 September 2025 but likely to roll over. In terms of UK sales, MG is the most prominent Chinese brand to announce its own Electric Car Grant in recent days. As of 21 July, MG offers buyers £1,500 off select EV models 'in clear support of the Government's initiative'. The grant will be offered to private buyers of the new MG4 EV and the MGS5 EV. MG says this is 'over and above any incentives currently offered by MG's 255 UK dealer partners'. At the time of writing this includes a £1,000 test drive offer, so buyers can get up to £2,500 off either new models. The MG4 EV starts at £26,995 and goes up to £36,496. The MGS5 EV starts at £28,495 and goes up to £33,495. In both cases, this is before MG's grant is applied. While the combined test drive and EV grant offer run until 30 September, the EV grant is almost certainly set to continue on, MG told us. Alfa Romeo - Italian EV Grant Offer ends: 30 September 2025. As of the 22 July, Italian car brand Alfa Romeo has introduced the 'Alfa Romeo EV Grant' to 'make the exciting world of electric driving even more accessible'. The £1,500 grant will be available against the on-the-road (OTR) price and is accessible on top of existing retail offers including 0 per cent APR on Personal Contract Purchase (PCP) and a complimentary EV home charger and standard residential installation. The grant will be applicable across all Junior Elettrica models; the Elettrica, Elettrica Speciale, Elettrica Intensa, and Elettrica 280 Veloce. The Elettrica starts at £33,905 before the EV Grant is applied and goes up to the 280 Veloce's £42,305 price tag (again before the grant is applied). Leapmotor - the Leap-Grant Offer ends: 30 September 2025. Also under the Stellantis umbrella, Leapmotor UK was the first Chinese EV maker to offer its own electric car grant , and the first car manufacturer in general to do so after the Government announced its EV Grant. The Leap-Grant ranges from £1,500 to £3,750 depending on the model. At the top end, the Leapmotor C10 family SUV will be available with a £3,750 grant applied and will cost £32,750 now. The small city Leapmotor T03 now has a £1,500 grant applied and will cost £14,495. By launching its own self-funded EV grant, effective from 18 July, Leapmotor says it is 'taking a proactive leap forward to help electric car buyers'. Great Wall Motors (GWM) - Green Car Grant Offer ends: 30 September 2025. Great Wall Motors (GWM) says it is 'taking decisive action to help drivers switch to electric' by offering a £3,750 'Green Grant'. As GWM only has one electric car on offer it's easy for customers to know what will be eligible for the grant – the Ora 03. All Ora 03 (previously known as the 'Funky Cat') models are applicable – the Pure, Pro and GT. With the grant applied, the cheapest Ora 03 will now be £21,245 after savings. The grant is also able to be used towards a PCP deposit. Fiat - the manufacturer-supplied car grant from 2023 Offer ends: 30 September 2025. Fiat introduced its own electric vehicle grant, the 'Fiat E-Grant' in June 2023. The initiative was launched after the previous government regime discontinued its Plug-in Car Grant , and Fiat was the first manufacturer to do this. At first, Fiat provided a £3,000 incentive for buyers of the Fait 500e and 500e Convertible. But as of January this year, the Italian marque expanded the offering to all customers of the 600e and Abarth 500e models too. The grant is now built into those two models' OTRs and applied to both retail and fleet customers. As a result, the 600e and Abarth 500e are both available from £29,975.