China's domestic price wars are a threat to its economy

Overproduction, deflation and debt are hurting China's companies and putting its workers' jobs at risk. This is the second in a three-part Opinion series on the Chinese economy.

- Vikram Khanna

If there was a prize for the country that sells the best value-for-money products, the hands-down winner would, of course, be China.

On Nov 11, known as Singles' Day, there were blockbuster deals to be had online for made-in-China products. Even sitting in Singapore, you could get a Lenovo ThinkPad laptop at a 40 per cent discount, packaged with a stereo headset, a backpack and a wireless mouse for an additional $3.

In China, the bargains are astounding. A cup of bubble tea is available in many places for one to two yuan (roughly 18 to 36 Singapore cents). Some restaurant set meals have been offered for three to five yuan (roughly 54 to 90 Singapore cents). The deals even extend to high-ticket items. A BYD Seagull plugin hybrid electric vehicle (EV) is offered at 55,000 yuan (about S$10,000), a more than 30 per cent discount on the normal price. Smartphones and household appliances are selling at discounts of 25 per cent to 40 per cent.

CUTTHROAT PRICE WARS

China is in the throes of cutthroat price wars that cover a range of industries and services. Known, somewhat confusingly, as "involution", these are basically a race-to-the-bottom competition that impacts everything from corporate profits and jobs to deflation and the banking sector, as well as social morale and even mental health.

After Covid-19, as China's property downturn accelerated, its government ramped up support for domestic manufacturing, especially in high-tech areas like EVs, batteries and solar panels.