Beijing commits to “proactively” cracking down on enduring industrial price wars
On Wednesday, China's market regulator (SAMR) corralled seven tech, solar, and auto companies to discuss their industries' overcapacity-driven price wars. Specifically:
- Alibaba and JD.com attended from the tech side
- JA Solar, Trina Solar, and LONGi attended from the solar side
- BAIC and Mercedes-Benz attended from the auto side
Some context: These high-end industries, all critical for China's movement up the value chain, are suffering from "involution" – cut-throat competition for market share that has dramatically reduced returns on R&D.
- The situation is not new – dating back to 2022 for cleantech – but Beijing has so far been reluctant to do much more than talk about it.
After hearing the companies' views, SAMR Vice Minister Meng Yang stated SAMR would:
- "Proactively resolve issues hindering fair competition"
Our first concern: This meeting about price wars was missing the auto companies driving the auto price war – industry leaders Tesla, BYD, Geely, Chery.
- The solar and tech participants made sense, at least.
Our second concern: The time for "proactive" resolutions was 2022-2023.
- Meaningful action now means direct market intervention – which may be justified, but will spook investors.
Our third concern: Beijing has talked a lot about involution, with minimal action.
- Nothing here convinces us that the trend is about to break.
Get smart: We'll believe in Beijing's crackdown when we see it.
- There's certainly a limit to Beijing's patience – but the key question is when exactly officials will determine that the benefits of intervention outweigh the costs.
Our take: This looks like a vain attempt to scare industry into independent action.