A planned amendment to an old pricing law aims to encourage firms to compete under healthy market conditions rather than vicious price wars
As Beijing works aggressively to make sure the economy meets the 5 per cent growth target at year end, one new tool in its arsenal is to amend a key law to discourage vicious price wars that have plagued multiple sectors in recent years. From food delivery and e-commerce to solar power and electric cars, steep price cuts – with the aim to drive out competitors but which also undercut one’s own profits – are fuelling deflationary pressure. That has led regulators to propose urgent amendments to an old pricing law. A public consultation is open until August 23. With transparency and an open mind, the authorities can use positive public feedback to fine-tune the changes.
In the existing law, firms are banned from selling goods below cost to eliminate competitors or monopolise the market. The new amendment adds the condition that businesses cannot fight each other by dumping products at below-cost prices.
With more transparent price regulation and oversight, they will also be prohibited from “leveraging data, algorithms and technological tools” to chase clients and beat rivals. So far, market reactions have been positive. Listed companies in consumer services, non-ferrous metals and financial companies – sectors that have experienced cutthroat competition or what officials have termed “involution” – have seen share prices move up since the news broke.
