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

Beijing – from coffee to cars to real estate, there is a frequent pattern in China: companies rush to industry, then resort to discounts to stay on their feet. This made economists anxious.

On Friday on the Internet, Alicia Garcia Hero, the Senior Economist in Asia and the Pacific Ocean, said in one of the Wisinar on Friday that the Natixis study, which was conducted on 2,500, listed Chinese companies, enhances how the size grows while the value is hurt due to contraction. “You can see the sector by sector, the company by the company.”

She said, “On the roof, it dominates the roof, but in the depths of a high price for control,” she said. “Do not get the necessary revenues to follow up.”

Reflection of the expansion of the effect, Consumer prices decreased by 0.1 % In the first six months of the year a year ago, while the prices of the portal product are manufactured It decreased by 2.8 %Official data appears. At that time, only seven categories of 48 sub -category for producers rose, compared to about half of the 37 consumer prices.

This fierce and unproductive competition is often described as “involvement” in China. The government chose the term recent political documents, and called for efforts to address this trend.

While the trend made technology and products more expensive in the comprehensive market, it has also emphasized fears of a vicious course that forces companies to reduce more jobs.

“With the engagement, the Chinese economy feels very cold than what the title growth suggests,” said Larry Ho, the Chinese chief economist in Macquari, in a report on Thursday. He pointed out that the “Saham” companies listed in China have expanded their operating bases by only 1 % in 2024, which is the slower ever.

“From a more fundamental perspective, engaging is an advantage and an imbalance of the” Chinese model “.” The massive investment leads to price wars and weak returns for shareholders. But for policy, intense competition can help achieve industrial upgrade and self -reliance. ”

Paying China to electric cars was the most obvious example, with a giant BYD company in the industry, some of which are offered Divists of approximately 30 % or more This year and the Xiaomi smartphone company The latest SUV Less than the Tesla Y.

The giant Starbucks in the United States in China has struggled with its sales drop, maintaining the prices of about 30 yuan per cup ($ 4.20) – while a group of competitors from Luckin coffee to the stores sell Lattes for up to 9.9 yuan.

Even in commercial real estate, Rayman Zhang, the administrative director of Northern China, told JLL managers on Thursday that real estate owners who tried to raise prices in Beijing ended up in a higher vacant vacancy. He pointed out that there is still insufficient demand – with little expectations for a conversion in the near future.

On Tuesday, China is expected to reach the growth of GDP in the second quarter of 5.2 % from last year, according to a Reuters poll. This will be slower than the 5.4 % increase in the first quarter, but in line with the national goal of about 5 % growth for this year.

But the second half of the year is likely to reveal a more tired picture, as Gianoy Show, the chief economist in Greater China in Natixis. He was also speaking at the web symposium on Friday.

“We see profits, especially for manufacturing companies, still decrease,” he said. “There can be more families under pressure in [the second half of the year] Because it will be difficult to find a job. “

Senior leaders of China are expected to maintain the current financial incentive at a high -level political policy meeting in late this month. Beijing in March Raising the country’s financial deficit for this year to 4 % – an increase of 3 % last year.

It is worth noting that on July 1, Chinese President Xi Jinping led a high -level financial and economic committee meeting More governance “low price, uncontrolled competition”, “ According to the translation of CNBC by the Chinese government media.

Chewchi’s official ruling magazine in the Chinese Communist Party on July 1 has identified many measures that enhance the behavior of the unified government to address competition similar to the involvement, with a warning of dangerous economic damage. The article has been martyred with high -level government meetings from the past few months.

“To achieve the goal of growth, Beijing will have no choice but to launch a great catalyst for demand,” he said. “Then, improving local demand will reduce competition between producers and giants on the Internet. But for manufacturers, it will be a long and painful process to absorb the current capacity.”