UPDATE 1-China Communist Party magazine calls for crackdown on price wars

A prominent Chinese Communist Party publication called for a crackdown on competition that fuels price wars and squeezes profits in various industries, criticising large companies and local governments for unfair practices. In the most strongly-worded Communist Party warning yet on industrial overcapacity risks, the Qiushi article on Tuesday said price wars cause "enormous waste of social resources," and unsustainable debt that could endanger long-term growth.

The warning follows mounting concerns over deflationary pressures in the world's second-largest economy and as U.S. President Donald Trump's tariffs threaten global demand, which China relies heavily on for its ambitious growth targets. Public messaging against price wars has increased in recent weeks in China, with

top leaders pledging on Tuesday to increase regulation against aggressive price-cutting and state media carrying front-page editorials against what it described as a race to the bottom.

This is fuelling hopes of new policies allowing unprofitable factories

to close or improving consumer incomes

, though analysts warn Beijing may struggle to convince local governments to rein in access to cheap credit over fears of job losses. "This cuts to the heart of China's economic model and therefore we're not going to see quick fixes necessarily," said Fred Neumann, chief Asia economist at HSBC.

"But I do think it's encouraging now that we've seen the recognition of these issues – that there is such a thing as too much competition and excessive price wars." The Qiushi article, written under a pseudonym, focused on "involutionary competition" where firms and local governments invest capital to chase market share amid limited demand and fail to achieve revenue growth.

It singled out industries such as photovoltaics, lithium batteries, electric vehicles, and e-commerce platforms. Solar manufacturers called last month for an end to price wars, while on Tuesday car dealers in eastern China complained some automakers are pressuring them to sell cars below cost, warning of high inventories and cash flow risks.

The Qiushi article also highlighted problematic corporate behaviour such as compromising on product quality to cut costs, which weakens innovation and reduces research and development investments and harms overall consumer interests. Other firms expand their capacity while delaying payments to suppliers and contractors, squeezing the entire industrial chain, it said.

WARNING TO LOCAL OFFICIALS The magazine also offered rare criticism of local officials, saying they should step in more as regulations have not kept up with the development of new industries and business models. Bankruptcy mechanisms are also "imperfect," preventing curbs to excessive supply.

Other local governments, focused on short-term growth, attract investment by "artificially creating policy havens" with preferential taxes, fees, subsidies and land use, as well as protectionist measures. Economists have warned that high levels of state-guided investment and subdued domestic demand, caused by a feeble social safety net and deep rural-urban inequalities, leave China overly dependent on exports for growth, and pose debt and deflation risks similar to Japan in the 1990s.

The article did not mention deflation, but warned that China might suffer from "development model path dependence" and needed supply-side reforms to reduce excess industrial capacity and a strategy to expand domestic demand. It warned, however, that the issue is "complex" and cannot be solved "overnight or with a single decisive move."

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)