China’s top leadership takes aim at ‘disorderly low-price competition’
Officials have favoured a vaguer term – “involutionary competition” – but president cut to the chase at top-level economic meeting
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disorderly low-price competition, guide companies to improve product quality, and promote the orderly exit of outdated production capacity”, Xi urged at a meeting of the Central Financial and Economic Affairs Commission, the Communist Party body that supervises economic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.
The vicious competition within China in recent years is threatening the domestic industrial ecosystem and complicating China’s economic outlook amid a trade war with the United States and an uncertain international environment, researchers and industry insiders said.
“The low-price battle has become pretty brutal,” said Cao Lei, the 44-year-old owner of Hebei Zhongjing, a company that makes rebar couplers.
“In the steel industry, some low-end products are facing weak demand and huge inventory pressure, so some manufacturers are selling at cost or even taking a loss. Online platforms are bleeding money with subsidies just to keep traffic and hold onto customers.”