A recent report shows that Chinese companies are lowering prices to survive in competitive markets, raising concerns in the economic community.
Overview of China's Economic Situation
According to a report by Natixis, consumer prices in China eased by 0.1% year-on-year in the first half of 2025, while factory-gate prices fell by 2.8%. This occurs amid rising sales volumes, but falling prices are negatively impacting overall revenue.
Price Wars Across Sectors
In various sectors, from electric vehicle manufacturing to coffee, companies are slashing prices. For instance, BYD has lowered car prices by a third, while Starbucks is losing competitiveness against Luckin Coffee, which offers coffee starting at 9.9 yuan. This trend raises concerns about potential layoffs as companies struggle to generate sufficient profit.
Outlook and Possible Government Measures
To address current economic issues, authorities plan to continue supporting the economy, including budget increases. They are also seeking to curb 'low, disorderly' competition and boost overall demand, which may help mitigate price wars. However, analysts warn that conditions could worsen in the second half of the year.
The current situation with price wars in China highlights the need for government measures to stabilize the market and support companies amid falling prices.
