No Result
View All Result
SUBMIT YOUR ARTICLES
  • Login
Friday, October 24, 2025
TheAdviserMagazine.com
  • Home
  • Financial Planning
    • Financial Planning
    • Personal Finance
  • Market Research
    • Business
    • Investing
    • Money
    • Economy
    • Markets
    • Stocks
    • Trading
  • 401k Plans
  • College
  • IRS & Taxes
  • Estate Plans
  • Social Security
  • Medicare
  • Legal
  • Home
  • Financial Planning
    • Financial Planning
    • Personal Finance
  • Market Research
    • Business
    • Investing
    • Money
    • Economy
    • Markets
    • Stocks
    • Trading
  • 401k Plans
  • College
  • IRS & Taxes
  • Estate Plans
  • Social Security
  • Medicare
  • Legal
No Result
View All Result
TheAdviserMagazine.com
No Result
View All Result
Home Market Research Markets

China’s deflationary slide worsens as companies spiral into price wars

by TheAdviserMagazine
4 months ago
in Markets
Reading Time: 5 mins read
A A
China’s deflationary slide worsens as companies spiral into price wars
Share on FacebookShare on TwitterShare on LInkedIn


The urban skyline and cityscape in Shanghai China.

Lu Shaoji | Moment | Getty Images

BEIJING — From coffee to cars to real estate, there’s a recurring pattern in China: companies rush into an industry, then resort to discounts to stay afloat. That has economists worried.

Natixis’ study of 2,500 listed Chinese companies reinforce how volume is growing while value is being hurt by deflationary pressure, Alicia Garcia Herrero, the firm’s chief economist for Asia-Pacific, said on a webinar Friday. “You can see it sector by sector, company by company.”

“On the surface you’re dominating, but deep inside you’re paying a high price to dominate,” she said. “You don’t get the revenue needed to continue.”

A reflection of the breadth of impact, consumer prices fell by 0.1% in the first six months of the year from a year ago, while factory-gate producer prices dropped by 2.8%, official data shows. In that time, only seven of 48 producer price sub-categories rose, versus about half of the 37 consumer price components.

That fierce and often unproductive competition is described as “involution” in China. The government has picked up on the term in recent policy documents, calling for efforts to tackle the trend.

While the trend has made tech and products more affordable for the mass market, it has also underscored worries of a vicious cycle that forces businesses to cut more jobs.

“With involution, the Chinese economy feels much colder than the headline growth suggests,” Larry Hu, chief China economist at Macquarie, said in a report Thursday. He pointed out that mainland China-listed “A share” companies expanded their workforces by just 1% in 2024, the slowest on record.

“From a more fundamental perspective, involution is both a feature and a bug of the ‘China model,'” he said. “Massive investment leads to price wars and poor returns for shareholders. But for policymakers, intense competition could help achieve industrial upgrading and self-reliance.” 

China’s push into electric cars has been the most apparent example, with industry giant BYD offering some discounts of nearly 30% or more this year and smartphone company Xiaomi pricing its latest SUV below that of Tesla’s Model Y.

U.S. coffee giant Starbucks has struggled in China with falling sales as it maintains prices of around 30 yuan per cup ($4.20) — while a host of rivals from Luckin Coffee to boutiques sell lattes for as low as 9.9 yuan.

Even in commercial real estate, property owners who have tried to raise prices in Beijing ended up facing higher vacancies, Rayman Zhang, managing director for North China, at property manager JLL, told reporters Thursday. He noted that there’s still insufficient demand — with little expectation for a turnaround in the near future.

China is expected Tuesday to report second-quarter gross domestic product growth of 5.2% from a year ago, according to a Reuters poll. That would be slower than the 5.4% increase in the first quarter, but in line with the national target of around 5% growth for the year.

But the second half of the year will likely reveal a far more stressful picture, warned Jianwei Xu, senior economist for Greater China at Natixis. He was also speaking at Friday’s webinar.

“We are seeing the profits especially for manufacturing companies, are still decreasing,” he said. “There could be more households under stress in [the second half of the year] because it will be more difficult to find a job.”

A different challenge

This isn’t the first time China has dealt with overcapacity, analysts pointed out, referencing excessive capacity in the state-dominated commodities sector about a decade ago. But this time, fewer state-owned companies are involved, making it more difficult for policymakers to act.

“The dominance of private firms in industries with overcapacity tends to complicate the coordination of mergers, even with government guidance,” Robin Xing, chief China economist at Morgan Stanley, and a team said in a report Thursday.

“The economy is also starting from a weaker point, which necessitates more demand-side stimulus to counter the impact of supply reduction,” the report said. “However, the government’s debt level is already high (~100% of GDP), which may constrain its willingness and ability to undertake aggressive fiscal expansion.”

China’s top leaders are expected to maintain the current fiscal stimulus at a high-level Politburo meeting late this month. Beijing in March raised the country’s fiscal deficit for the year to 4% — up from 3% last year.

Weekly analysis and insights from Asia’s largest economy in your inbox
Subscribe now

Notably, Chinese President Xi Jinping on July 1 led a high-level financial and economic commission meeting that called for more governance of “low price, disorderly competition,” according to a CNBC translation of Chinese state media.

The ruling Chinese Communist Party’s official Qiushi journal on July 1 even outlined several measures that promote standardized government behavior to address involution-style competition, warning of serious economic damage. The article cited high-level government meetings from the last several months. 

“To achieve the growth target, Beijing will have no choice but to launch a major demand stimulus,” Hu said. “Afterwards, the improved domestic demand would ease the price competition among material producers and internet giants. But for manufacturers, it will be a long and painful process to absorb the existing capacity.”

Global spillover

Exacerbating problems with resolving China’s domestic overcapacity is the trade war with the U.S., Goldman Sachs analysts pointed out in a July 1 report.

The U.S. and European Union became more critical of China’s persistent overcapacity issues last year. Both have raised tariffs on Chinese electric cars in particular in an attempt to protect domestic automakers. The U.S. in April also targeted China with higher duties across the board.

The escalation of tariffs has made Chinese manufacturers more determined to build factories overseas, “potentially generating redundant supply in the coming years,” the Goldman report said. The analysts estimated a 0.5% to 14% increase in capacity by the end of 2028, up from the 0.4% to 10% expansion projected a year ago.

And among seven sectors — air conditioners, solar modules, lithium batteries, electric vehicles, power semiconductors, steel and construction machinery — five have more capacity than the entire global demand, the Goldman analysts said. Only ACs, and EVs — just barely — enjoy some market potential.

— CNBC’s Victoria Yeo contributed to this report.



Source link

Tags: ChinasCompaniesDeflationaryPriceslideSpiralWarsWorsens
ShareTweetShare
Previous Post

Malta’s MiCA license process under scrutiny by EU regulators

Next Post

Bitcoin: Can Bulls Sustain a Charge Beyond All-Time Highs?

Related Posts

edit post
China strikes conciliatory tone ahead of expected Trump-Xi meeting

China strikes conciliatory tone ahead of expected Trump-Xi meeting

by TheAdviserMagazine
October 24, 2025
0

China's Minister of Commerce Wang Wentao spoke alongside other senior officials at a press conference on Friday, Oct. 24, 2025.Picture...

edit post
How Some Retirees Are Finding Happiness Again After Age 60

How Some Retirees Are Finding Happiness Again After Age 60

by TheAdviserMagazine
October 23, 2025
0

JLco Julia Amaral / Shutterstock.comIf you are an unhappy senior, there is hope. About 1 in 4 adults who are...

edit post
INTC Earnings: Intel swings to profit in Q3 FY25; revenue up 3%

INTC Earnings: Intel swings to profit in Q3 FY25; revenue up 3%

by TheAdviserMagazine
October 23, 2025
0

Semiconductor giant Intel Corporation (NASDAQ: INTC) reported a profit for the third quarter of fiscal 2025, compared to a loss in...

edit post
An Age-Old Fear Grows More Common: ‘I’m Going to Die Alone’

An Age-Old Fear Grows More Common: ‘I’m Going to Die Alone’

by TheAdviserMagazine
October 23, 2025
0

imtmphoto / Shutterstock.comThis summer, at dinner with her best friend, Jacki Barden raised an uncomfortable topic: the possibility that she...

edit post
5 Ways Medicare Advantage Plans Are About to Change

5 Ways Medicare Advantage Plans Are About to Change

by TheAdviserMagazine
October 23, 2025
0

Lordn / Shutterstock.comIf you thought last year’s Medicare open enrollment was tough, brace yourself. The 2026 enrollment period brings another...

edit post
‘Cash, precious metals, crypto’ is new norm for peak stock market risk

‘Cash, precious metals, crypto’ is new norm for peak stock market risk

by TheAdviserMagazine
October 23, 2025
0

With a handful of mega-cap tech and AI stocks at the top of the S&P 500 Index dominating the U.S....

Next Post
edit post
Bitcoin: Can Bulls Sustain a Charge Beyond All-Time Highs?

Bitcoin: Can Bulls Sustain a Charge Beyond All-Time Highs?

edit post
Rilla founder offers employees ,500 rent stipend to live closer to the office

Rilla founder offers employees $1,500 rent stipend to live closer to the office

  • Trending
  • Comments
  • Latest
edit post
77-year-old popular furniture retailer closes store locations

77-year-old popular furniture retailer closes store locations

October 18, 2025
edit post
Pennsylvania House of Representatives Rejects Update to Child Custody Laws

Pennsylvania House of Representatives Rejects Update to Child Custody Laws

October 7, 2025
edit post
What to Do When a Loved One Dies in North Carolina

What to Do When a Loved One Dies in North Carolina

October 8, 2025
edit post
Probate vs. Non-Probate Assets: What’s the Difference?

Probate vs. Non-Probate Assets: What’s the Difference?

October 17, 2025
edit post
California Attorney Pleads Guilty For Role In 2M Ponzi Scheme

California Attorney Pleads Guilty For Role In $912M Ponzi Scheme

October 15, 2025
edit post
Baby Boomers Are Flocking to This Florida Town — but Not for the Weather

Baby Boomers Are Flocking to This Florida Town — but Not for the Weather

October 9, 2025
edit post
EconLog Price Theory: Pricing Plumbing

EconLog Price Theory: Pricing Plumbing

0
edit post
Harmony Gold Mining completes MAC Copper acquisition

Harmony Gold Mining completes MAC Copper acquisition

0
edit post
China’s Baidu to test robotaxis in Switzerland in race for Europe

China’s Baidu to test robotaxis in Switzerland in race for Europe

0
edit post
U.S. CPI Comes In Lower Than Expectations, Bitcoin Rises

U.S. CPI Comes In Lower Than Expectations, Bitcoin Rises

0
edit post
How Men and Women Perceive Fairness in the Workplace As Parents

How Men and Women Perceive Fairness in the Workplace As Parents

0
edit post
What to know about Ireland’s election as the country votes for a new president

What to know about Ireland’s election as the country votes for a new president

0
edit post
Harmony Gold Mining completes MAC Copper acquisition

Harmony Gold Mining completes MAC Copper acquisition

October 24, 2025
edit post
How Men and Women Perceive Fairness in the Workplace As Parents

How Men and Women Perceive Fairness in the Workplace As Parents

October 24, 2025
edit post
U.S. CPI Comes In Lower Than Expectations, Bitcoin Rises

U.S. CPI Comes In Lower Than Expectations, Bitcoin Rises

October 24, 2025
edit post
The Myth of the “Robber Barons”: James Hill versus the Crony Competitors

The Myth of the “Robber Barons”: James Hill versus the Crony Competitors

October 24, 2025
edit post
EconLog Price Theory: Pricing Plumbing

EconLog Price Theory: Pricing Plumbing

October 24, 2025
edit post
If tokenized gold is just a “trust-me-bro” IOU, what’s really on-chain?

If tokenized gold is just a “trust-me-bro” IOU, what’s really on-chain?

October 24, 2025
The Adviser Magazine

The first and only national digital and print magazine that connects individuals, families, and businesses to Fee-Only financial advisers, accountants, attorneys and college guidance counselors.

CATEGORIES

  • 401k Plans
  • Business
  • College
  • Cryptocurrency
  • Economy
  • Estate Plans
  • Financial Planning
  • Investing
  • IRS & Taxes
  • Legal
  • Market Analysis
  • Markets
  • Medicare
  • Money
  • Personal Finance
  • Social Security
  • Startups
  • Stock Market
  • Trading

LATEST UPDATES

  • Harmony Gold Mining completes MAC Copper acquisition
  • How Men and Women Perceive Fairness in the Workplace As Parents
  • U.S. CPI Comes In Lower Than Expectations, Bitcoin Rises
  • Our Great Privacy Policy
  • Terms of Use, Legal Notices & Disclosures
  • Contact us
  • About Us

© Copyright 2024 All Rights Reserved
See articles for original source and related links to external sites.

Welcome Back!

Login to your account below

Forgotten Password?

Retrieve your password

Please enter your username or email address to reset your password.

Log In
No Result
View All Result
  • Home
  • Financial Planning
    • Financial Planning
    • Personal Finance
  • Market Research
    • Business
    • Investing
    • Money
    • Economy
    • Markets
    • Stocks
    • Trading
  • 401k Plans
  • College
  • IRS & Taxes
  • Estate Plans
  • Social Security
  • Medicare
  • Legal

© Copyright 2024 All Rights Reserved
See articles for original source and related links to external sites.