Domestic price wars escalate Chinese economic deflation problems
The post Domestic price wars escalate Chinese economic deflation problems appeared on BitcoinEthereumNews.com. Chinese businesses, from coffee shops to electric-vehicle makers to property developers, are accused of rushing into markets and then slashing prices to stay afloat, a practice that has economists worried. A report by Natixis, mentioned by CNBC, examined 2,500 publicly traded firms in China. It found that while unit sales climb, falling price levels are undermining overall revenue, Alicia Garcia Herrero, the bank’s Asia-Pacific chief economist, said on Friday. “On the surface you’re dominating, but deep inside you’re paying a high price to dominate,” she said, warning that firms can’t generate enough revenue to carry on. Government figures indicate that over the first half of 2025, overall consumer prices eased by 0.1% year-on-year, while factory-gate rates dropped by 2.8%. Among the 48 manufacturing sectors tracked, only seven recorded increases, versus nearly half of the 37 consumer-goods categories. This fierce, often unproductive rivalry is known in China as “involution.” Beijing has even used the term in policy papers, calling for steps to curb the trend. While this race has made tech gadgets and other products cheaper for many shoppers, it has also raised worries that endless price cuts could force companies to lay off staff. “With involution, the Chinese economy feels much colder than the headline growth suggests,” said Larry Hu, chief China economist at Macquarie. A-share companies increased their headcount by just 1% in 2024, the slowest hiring pace ever. According to Hu, this dynamic carries both advantages and drawbacks within what Beijing dubs its “China model.” He noted big investments often spark price wars and low investor returns, but this fierce competition can also drive industry improvement and boost self-reliance. Beijing faces new overcapacity crisis One prominent example appears in the electric-vehicle segment. This year, BYD has trimmed sticker prices by close to a third, and Xiaomi’s new SUV…
The post Domestic price wars escalate Chinese economic deflation problems appeared on BitcoinEthereumNews.com.
Chinese businesses, from coffee shops to electric-vehicle makers to property developers, are accused of rushing into markets and then slashing prices to stay afloat, a practice that has economists worried. A report by Natixis, mentioned by CNBC, examined 2,500 publicly traded firms in China. It found that while unit sales climb, falling price levels are undermining overall revenue, Alicia Garcia Herrero, the bank’s Asia-Pacific chief economist, said on Friday. “On the surface you’re dominating, but deep inside you’re paying a high price to dominate,” she said, warning that firms can’t generate enough revenue to carry on. Government figures indicate that over the first half of 2025, overall consumer prices eased by 0.1% year-on-year, while factory-gate rates dropped by 2.8%. Among the 48 manufacturing sectors tracked, only seven recorded increases, versus nearly half of the 37 consumer-goods categories. This fierce, often unproductive rivalry is known in China as “involution.” Beijing has even used the term in policy papers, calling for steps to curb the trend. While this race has made tech gadgets and other products cheaper for many shoppers, it has also raised worries that endless price cuts could force companies to lay off staff. “With involution, the Chinese economy feels much colder than the headline growth suggests,” said Larry Hu, chief China economist at Macquarie. A-share companies increased their headcount by just 1% in 2024, the slowest hiring pace ever. According to Hu, this dynamic carries both advantages and drawbacks within what Beijing dubs its “China model.” He noted big investments often spark price wars and low investor returns, but this fierce competition can also drive industry improvement and boost self-reliance. Beijing faces new overcapacity crisis One prominent example appears in the electric-vehicle segment. This year, BYD has trimmed sticker prices by close to a third, and Xiaomi’s new SUV…
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