Saturday, July 5, 2025

"China's top leaders vow crackdown on price wars as deflation risks mount"

From Reuters, July 1:

China's top leaders pledged on Tuesday 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 $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"Businesses should be guided to improve product quality and support the orderly phasing out of outdated production capacity," the Xinhua report added.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 U.S. President Donald Trump's tariff onslaught threatens the long-term viability of selling to the United States, the world's top consumer market, and domestic demand remains weak....
....MUCH MORE  

As pointed out introducing June 24's Dear Europe: "China’s BYD expands car-carrier fleet to bolster EV exports amid furious domestic competition"it was the auto sector that caught our attention most recently:

BYD doesn't sell in the U.S. and there aren't very many markets that can absorb the overproduction.

And the government does not want the price war for the domestic market to get any more cut throat:

May 28 - "Chinese EV Stocks Tumble After BYD Slashes Prices Up to 35%"

Nay 29 - Whoa!—Chinese Electric Vehicles: "The Evergrande of the automotive industry already exists; it just hasn't collapsed yet."

June 3 - Chinese Government Warns Against Electric Vehicle Price War

But since the covid reopening it has been apparent what is going on in the wider economy:

The Great Wall Of Debt: "China Needs $3 Trillion Local Debt Solution, Top Economist Says"
That is such an enormous drag on the local economies. Think Chicago, cubed, or to the fourth. Eventually everything just grinds to a halt, stasis, entropy, death.

"Banks cut China growth forecasts over tariffs, deflation"

"China risks a spiral into deeper deflation as it diverts U.S.-bound exports to domestic market"

"China's May industrial profits slip back into sharp decline"

Those are just in the last four months.