Latest news with #neijuan
South China Morning Post
4 days ago
- Business
- South China Morning Post
China needs to show it can compete on more than price
When policymakers start using internet slang to describe the economy, it is a sign something is not right. The word neijuan was once used by Chinese students to depict burnout from seemingly pointless competition. Now it is showing up in policy language, to explain the growing economic strain caused by China's price war. Advertisement Too much supply and weak demand are pushing prices down. The deflationary pressure is building not just on company profits, but on the growth model that China has relied on for decades. The Chinese government has been shifting towards a growth model driven by innovation since at least 2014. We are now seeing the results of that shift in sectors like electric vehicles, semiconductors and high-end manufacturing – where Chinese companies are no longer just competing on price, but leading on technology, production capacity and global market share. Still, the pressure to cut prices remains widespread, especially among firms that have yet to transition away from volume-led growth. The next phase of China's transformation depends on getting more companies to follow the lead of innovation powerhouses like BYD, Huawei, Haier and DeepSeek. That means moving beyond low-cost competition and continuing to build brands, invest in technology and deliver differentiated products and services. That shift will not be easy. The producer price index has been falling year on year since late 2022, fuelling a deflationary spiral. And while the economy grew 5.2 per cent in the second quarter this year, pricing power is now being eroded. 01:58 China GDP figures beat market forecasts despite looming US tariff risks China GDP figures beat market forecasts despite looming US tariff risks For years, many Chinese firms competed in overseas markets by offering cheaper goods. At home, where competition is fierce, the focus has been on scale and volume. This model worked reasonably well when demand was strong. But with global trade under pressure from tariffs and domestic spending still weak, production is outpacing demand.
South China Morning Post
29-06-2025
- Business
- South China Morning Post
Stop the price wars: China's state media guns target cutthroat industrial competition
China's Communist Party mouthpiece has taken another shot at the unsustainable price wars dragging down industrial profits in the world's second-biggest economy, urging firms to abandon the race to the bottom and refocus on quality. In a front-page editorial on Sunday, People's Daily raged against cutthroat neijuan tactics 'infesting' various industries with excess capacity, including electric vehicles , photovoltaics and batteries. Neijuan, also known as 'involution', refers to a self-defeating cycle of excessive competition. 'Solar module prices have tumbled to just 0.6 yuan per watt, prices have been slashed on over a hundred EV models while producers of energy storage equipment seek to underbid each other in the race for orders,' the editorial said. 'Disorderly price undercutting and homogeneous competition have infested many industries, distorting the market mechanism. 'It is a race to the bottom and will weaken the competitiveness of the entire industry.'
South China Morning Post
26-05-2025
- Business
- South China Morning Post
China's regulators must act quickly to stamp out price wars: People's Daily
China's Communist Party mouthpiece has run an editorial arguing that regulators must act decisively to prevent the spread of vicious 'neijuan-style' competition in the economy, as a frenzied battle for control of the country's vast food delivery sector stirs controversy. Advertisement Chinese authorities have repeatedly vowed to clamp down on neijuan – a term referring to a self-defeating cycle of excessive competition – in recent months, as businesses in a slew of industries launch intense price wars to win orders amid an economic slowdown. The trend has been most obvious in the food delivery sector, where the entry of tech giant has triggered a fierce battle for market share with incumbents Meituan and that is leading all three companies to invest huge sums to lure customers with heavy discounts and other special offers. Though these incentives can provide short-term benefits to consumers, the state-run People's Daily warned on Monday that such neijuan-style tactics ultimately harm a market's long-term development by squeezing profits and creating instability across the supply chain. The commentary said it was crucial for regulators to intervene in a timely manner to prevent such practices, noting with approval that China's State Administration for Market Regulation (SAMR) had recently summoned Meituan and to discuss problems in the food delivery sector. Advertisement 'To strike a balance between market forces and government oversight, regulators need to step in decisively when necessary,' the article stated. 'Regulators stepping in to restore fair competition is not about preventing rivalries, but guiding platforms away from destructive price wars so they pursue innovation, focus on product differentiation, and return to healthy, value-driven competition – the key to high-quality industry growth.'
