China to amend key law as push to stamp out vicious price wars intensifies
Beijing has become increasingly concerned about aggressive price cuts in a slew of industries, which are fuelling deflationary pressure
China plans to amend a decades-old pricing law as part of an ongoing campaign to curb the vicious price wars plaguing several industries – a deep-rooted issue that threatens to wipe out corporate profits and fuel deflationary pressure.
The amendment, which covers 10 clauses in the law, updates the definition of unfair pricing practices to include “involution-style” competition, according to a draft released by China’s National Development and Reform Commission (NDRC) and the State Administration for Market Regulation on Thursday.
The term “involution” has become a buzzword in China that refers to the excessive, cutthroat style of competition that has emerged in several industries, as companies facing weak domestic demand and oversupply problems slash prices in a bid to attract customers.
As China’s economic landscape had undergone profound changes, the pricing law that originally came into effect in 1998 needed to be updated, government agencies said in a statement.
“With new economic forms and business models continuing to emerge, some industries have seen prominent cases of disorderly low-price competition, creating new demand for price regulation and oversight,” the statement said.
The amendment, which is open for public comment until August 23, adds a new clause stating that businesses shall not force other operators to dump products at below-cost prices. Previously, the law only banned firms from selling goods below cost to eliminate competitors or monopolise the market.