China Manufacturing Slowdown enjoyed several decades of rapid economic growth. The basis for this development wasβfast mass production capabilities and low-cost manufacturing. Over time, however, a weakness began to emerge.
When hundreds of companies making the same kind of goods enter the same market, competition crosses its limits.
Let’s take a look at China Manufacturing Slowdown EV sector. At one time it was considered the future of China. More than 150 companies jumped into EV manufacturing as soon as they got government subsidies. But demand did not grow as fast as the number of companies. The resultβa tremendous price-war.
Many companies lowered prices so much that they plunged themselves into financial distress. Not all sales increased, instead losses increased.
Likewise, more than 500 brands are competing in the smartphone industry, and profit margins are falling every day.
When there is so much competition that companies are forced to lower the prices of their products just to survive, it weakens the entire industry in the long run. Lower pricesβlower earnings.
Lower earnings meanβno money on research, no investment in expansion, no global branding.
Impact of Price War on China Manufacturing Slowdown
China Manufacturing Slowdown price falls are not just a problem for one company. It affects the economic structure of the entire country.
Lower prices cause the market value of companies to fall. Even big tech giants like Alibaba, Tencent, Didi could not escape.
Price-war and government pressure caused their valuation to fall sharply several times.
Investors lose confidence, the stock market weakens, and spending on new technology stops.
Chinaβs economy is already facing many troublesβyouth unemployment is up,
- property market has collapsed, export orders are down.
- Now, on top of all this, there is heavy competition.
- The resultβslowdown and deepening.
- Company stopped recruitment, salary cut, million job was in jeopardy.
- That is why youth unemployment in China has reached over 21%.
- Cheap prices also affect China’s global image.
- In many countries, Chinese goods are called “cheap goods”, who question both quality and trust.
- If brand value weakens, then the place in the global market also weakens.
How ββChina Can Solve This Crisis
Now the question arisesβhow will China get out of this problem?
The solution can be found on several levels.
1.Streamlining the industry
Many companies are just increasing the crowd. No their financial strength and nothing special in their product.
If China merges or shuts down weaker companies, then competition and price-war could be significantly reduced.
2.Move away from quantity and focus on quality
China cannot survive long by giving the world only cheap goods.
South Korea used to make cheap electronics, later increased the quality and made Samsung and LG global brands.
If China takes this path, there will be less need to reduce prices.
3.Innovation
If the product is unique, the company will not be forced to reduce the price.
Huawei is a good example in this eraβit focused on research and stayed in the global market despite heavy restrictions.
4.Control of Subsidies
Subsidies increase competition and crowding.
Even the weakest company survives.
Subsidies should be given to companies that can survive in the long-term and provide high-quality products.
5.Strengthening Domestic demand.
If Chinese people start buying more themselves, companies will not rely solely on exports.
If export dependency is reduced, the compulsion to reduce prices under international pressure will also be broken.
Raising salaries, increasing the purchasing power of the middle-class, providing easy loansβthese can revive the domestic market.
Conclusion
The challenge that China faces today is not just competition but uncontrolled competition.
Price war has broken industry earnings, company market value has fallen, innovation has slowed and youth unemployment has increased.
But China also has a way out of this crisisβif it organizes industry properly, controls weak factories, focuses on quality and innovation, and strengthens domestic demand.
If China changes its strategy in time, it can remain a global economic power. Otherwise, todayβs price war will slowly eat away at what was Chinaβs greatest strengthβits manufacturing supremacy.
