Beijing has amplified its warnings over cutthroat price wars among carmakers as deflationary pressure persists in the world’s second-largest economy, and economists say a reflation is likely to remain elusive.
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The Ministry of Industry and Information Technology (MIIT), party mouthpieces and a carmaker association aired concerns at the weekend over recent discounts offered by manufacturers, while collectively deeming price wars a threat to product quality and the long-term development of the industry.
“Uncontrolled price wars among businesses are a classic example of ‘involutionary’ competition. They hinder companies’ sustained investment in research and development, ultimately affecting product quality, performance and service levels,” the MIIT was quoted as saying on Saturday by the state-run Xinhua.
“There are no winners in price wars, and certainly no future.”
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Echoing the ministry’s call, People’s Daily admonished the industry in a commentary on Sunday, describing the domestic carmaking sector as being in a “sub-healthy” state, pointing to its shrinking profit margin in the face of industrial overcapacity.
