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Beijing – from coffee to car to real estate in China repeats the sample: the companies rush into the industry, and then go to the discounts to stay afloat. This economists are worried.
Natixis study from 2500 listed Chinese companies amplified as a growing volume when the value suffered from deflationary pressure, said Alicia Garcia Gerrer, chief economist in the Asia-Pacific region, Friday. “You can see it by the company’s company sector.”
“You dominate the surface, but deep inside you pay a high price to dominate,” she said. “You don’t receive the income required to continue.”
Display the width of the impact Consumer prices have fallen by 0.1% In the first six months of the year from year ago at the time decreased by 2.8%Official data shows. At this time, only seven of the 48 pricing manufacturers grew, against about half of 37 consumer prices.
This fierce and often unproductive competition is described as “involution” in China. The government has taken the term in recent political documents, calling for efforts to combat the trend.
Although the trend made technology and products more accessible to the mass market, it also emphasized the hassle of a vicious cycle that causes the enterprise to cut more jobs.
“With the participation of the Chinese economy, it feels much colder than the headlines think,” said Larry Hu, Chinese economist Macquarie. He noted that the mainland campaigns, which listed their labor for only 1% in 2024, the slowest recording.
“From a more fundamental point of view, the involution is both a feature and a” Chinese model “mistake,” he said. “Massive investments lead to price wars and poor profitability for shareholders. But for politicians intensive competition can help achieve modernization of industry and independence. ”
Chinese push in electric cars was the most obvious example, and the branch giant offered some Discounts nearly 30% or more This year and the Xiaomi Smartphones Company on its Last SUV Below the Tesla Y.
The American Coffee Giant Starbucks struggled in China with a drop in sales because it supports about 30 yuan prices per cup ($ 4.20) – while many Luckin coffee competitors sell Latts for 9.9 yuan.
Even in commercial real estate, real estate owners who tried to raise Beijing prices eventually faced higher vacancies, Ryan Zhang, the head of the North China Manager Jll, told reporters on Thursday. He noted that in the near future there is still insufficient demand – with little wait for the turn.
China is expected to report on the growth of gross domestic product in the second quarter by 5.2% compared to the year, reports Reuters. This would be slower than 5.4% increase in the first quarter, but in accordance with the national goal by about 5% growth per year.
But the second half of the year is likely to identify a much more tense picture, warned Juanwei SU, the senior economist of the Great China in Natsis. He also performed on the Webinar on Friday.
“We see profits, especially for manufacturing companies, are still decreasing,” he said. “There may be more households under stress in (the second half of the year) because it will be harder to find a job.”
Another problem
Analysts have noted that this is not the first time China was engaged in excessive capacity, citing excessive power in the sector of goods where states prevail about ten years ago. But this time, less state -owned companies are involved, complicating politicians.
“The dominance of private firms in the fields of exceeding, as a rule, complicates the coordination of mergers, even with the introduction of government recommendations,” the report said in the report, Robin Sing, Chinese Chinese chief in Morgan Stanley and the team.
“The economy also begins with weaker points, which requires more stimulating demand to resist the impact of a decrease in supplies,” the statement reads. “However, the government’s debt level is already high (~ 100% GDP), which can restrain its willingness and ability to carry out aggressive financial expansion.”
Chinese leaders are expected to support the current fiscal stimulus at a high -level political bureau at the end of this month. Beijing in March raised the country’s financial deficit for the year up to 4% – compared to 3% last year.
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In particular, Chinese President Xi Jinping headed a high -level financial and economic commission meeting on July 1 More control of “low price, fine competition”, According to the translation of CNBC Chinese state media.
On July 1, on July 1, the official magazine of the Chinese Communist Party Qiushi posted several measures that contribute to the government’s standardized behavior to resolve the involution style competition, preventing serious economic damage. The article cited high -level government meetings over the past few months.
“There will be nothing left to reach the Growth goal in Beijing, how to start a serious demand,” Hu said. “After that, the improvement of domestic demand will facilitate the price competition among the manufacturers of materials and internet giants. But for manufacturers it will be a long and excruciating process for the absorption of existing power.”
The global overflow
In the report on July 1, Goldman Sachs analysts noted problems with solving internal power in China, Goldman Sachs analysts noted.
Last year, the United States and the European Union became more critical of China’s permanent problems. Both raised tariffs for Chinese electric cars, in particular, trying to protect home automakers. The US also sent China with higher responsibilities in April.
Escalation of the tariff made Chinese manufacturers more determined to build factories abroad, “potentially creating excess deliveries in the coming years,” Goldman said. Analysts estimated the capacity increase by 0.5% to 14% by the end of 2028, which is from 0.4% to 10% of the expansion year ago.
Among the seven sectors – air conditioners, solar modules, lithium batteries, electric cars, semiconductors, steel and construction machines – five are more likely than all world demand, Goldman analysts said. Only ACS and EVS – barely – enjoy some market potential.
– Victoria Yeo made this report in this report.
