China’s NDRC: to curb excessive competition and regulate local investment promotion practices

China’s NDRC: to curb excessive competition and regulate local investment promotion practices

The National Development and Reform Commission (NDRC) of China has released a draft amendment to its pricing law aimed at addressing excessive competition and price wars among firms. This move comes amidst persistent deflationary pressures and growing concerns over the economic impact of price wars [1].

The proposed revisions to the pricing law include prohibitions on firms selling below cost to drive out competitors or monopolize the market, and the use of data, algorithms, or technology for improper pricing behaviors. The NDRC and the State Administration for Market Regulation have also signaled their intention to refine standards for identifying price collusion, price gouging, price discrimination, and other unfair pricing practices [2].

China's economic landscape has significantly changed since the current pricing law was adopted in 1998. The draft amendment reflects the need to address new economic forms and business models, including issues like disorderly low-price competition in some industries [3].

Additionally, the NDRC has indicated that it will take steps to address "involution-style" competition, a term referring to a destructive state of intense competition sparked by excess capacity. The draft amendment also proposes tougher penalties for unfair pricing practices, including higher fines for violations of clear price marking requirements [4].

The move by the NDRC aligns with broader efforts by the Chinese government to manage overcapacity in key industries and regulate local government practices in attracting investment. President Xi Jinping has emphasized the need to reduce excess competition and manage local government practices to address the root causes of involution [5].

The NDRC’s actions are part of a broader strategy to mitigate the impact of price wars and deflation on the economy. By curbing excessive competition and regulating local investment practices, the Chinese government aims to create a more stable and sustainable economic environment.

References:
[1] https://ca.finance.yahoo.com/news/china-releases-draft-law-amendment-115834973.html
[2] https://www.businesstimes.com.sg/international/asean/china-galaxy-cicc-plan-over-us1-billion-investment-funds-south-east-asia
[3] https://www.businesstimes.com.sg/international/china-releases-draft-law-amendment-help-curb-price-wars
[4] https://finance.yahoo.com/news/china-makes-ending-price-wars-040112155.html