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Business Standard
2 days ago
- Business
- Business Standard
From auto to solar: China cracks down on 'disorderly' price wars
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. 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with executives from 14 solar photovoltaic firms, urging them to curb price competition and accelerate the shutdown of outdated production lines China cracks down on industry price war Xi's comments mark a shift in tone from earlier warnings about 'involutionary competition' — a more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.
South China Morning Post
5 days ago
- Business
- South China Morning Post
China's top leadership takes aim at ‘disorderly low-price competition'
In addressing the price wars plaguing many industries in China, the country's top leadership has resorted to a phrase rarely seen at a high-level meeting, saying that enterprises' 'disorderly low-price competition' needs to be regulated. Speaking at a top-level economic meeting on Tuesday, President Xi Jinping used that phrase to explicitly characterise the much-debated phenomenon, in stark contrast to officials who have, since late last year, favoured the vaguer term 'involutionary competition' when discussing the problem. China needs to 'lawfully regulate enterprises' disorderly low-price competition, guide companies to improve product quality, and promote the orderly exit of outdated production capacity', Xi urged at a meeting of the Central Financial and Economic Affairs Commission, the Communist Party body that supervises economic matters. Beijing sees tackling such competition as crucial for the health of the world's second-largest economy as it harms innovation, lowers efficiency and hinders industrial upgrading and product quality improvement. Compared with 'involutionary competition', which was broader and potentially involved technology, talent and other areas, 'disorderly low-price competition' was more focused on price wars and market behaviour – and especially on enterprises suppressing prices to capture market share – said Hou Xuchao, founding partner of China Insights Consultancy.
Business Times
5 days ago
- Business
- Business Times
China's top leaders vow crackdown on price wars as deflation risks mount
[BEIJING] China's top leaders pledged on Tuesday (Jul 1) to step up regulation of aggressive price-cutting by Chinese companies, state news agency Xinhua reported, as the world's second-biggest economy struggles to shake off persistent deflationary pressures. Overcapacity among Chinese manufacturers and the price cuts made to clear stock, have sparked price wars that are showing signs of influencing consumer behaviour. Analysts worry this could drive further reductions, raising concerns that deflation may become entrenched and hinder efforts to stabilise the US$19 trillion economy. 'Enterprises engaging in disorderly low-price competition must be regulated in accordance with laws and regulations,' Xinhua quoted a meeting of the Central Financial and Economic Affairs Commission as saying. The commission is a top economic policy body of the ruling Communist Party and is chaired by President Xi Jinping. 'Businesses should be guided to improve product quality and support the orderly phasing out of outdated production capacity,' the Xinhua report added. Data showed on Monday that manufacturers were slashing prices to attract buyers, as US President Donald Trump's tariff onslaught threatens the long-term viability of selling to the US, the world's top consumer market, and domestic demand remains weak. While new orders edged up, factory gate prices remained in the doldrums, the data showed, suggesting that the economy risks getting stuck in a cycle of ever lower prices. A front-page editorial published on Sunday in the Communist Party's official newspaper, People's Daily, drew significant attention for its call for China's economy to 'break free from 'rat race-style' competition' among firms. The article concluded that relentless price-cutting fostered destructive competition that defied economic principles and had clear negative economic consequences. REUTERS
