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American Focus > Blog > Economy > China’s deflationary slide worsens as companies spiral into price wars
Economy

China’s deflationary slide worsens as companies spiral into price wars

Last updated: July 11, 2025 10:45 pm
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China’s deflationary slide worsens as companies spiral into price wars
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-China trade war has led to supply chain disruptions and increased production costs for Chinese manufacturers, making it even harder for them to compete on a global scale.

As China struggles to address its overcapacity issues, the global economy is likely to feel the effects. A slowdown in China’s growth could impact global demand for commodities and consumer goods, leading to a ripple effect across international markets.

Investors and policymakers around the world are closely monitoring China’s economic situation, as the country plays a crucial role in the global economy. Any further deterioration in China’s economic health could have far-reaching consequences for businesses and consumers worldwide.

Despite the challenges ahead, Chinese authorities are taking steps to address the issue of involution and overcapacity. By promoting standardized government behavior and implementing demand-side stimulus measures, Beijing aims to steer the economy towards sustainable growth and stability.

As China navigates these complex economic challenges, the world watches with bated breath to see how the country’s policymakers and businesses will adapt to a changing global landscape.

The European Union and the United States have become increasingly concerned about China’s persistent overcapacity issues, particularly in the electric car industry. In response, both entities have raised tariffs on Chinese electric cars to protect their domestic automakers. The U.S. took further action in April by imposing higher duties on a wide range of Chinese products.

As a result of these tariffs, Chinese manufacturers are now looking to expand their operations overseas. This move could potentially lead to an increase in redundant supply in the coming years, according to a report from Goldman Sachs. The analysts at Goldman estimated that there could be a 0.5% to 14% increase in capacity by the end of 2028, compared to the 0.4% to 10% expansion projected a year ago.

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In fact, the report highlighted that out of seven sectors including air conditioners, solar modules, lithium batteries, electric vehicles, power semiconductors, steel, and construction machinery, five have more capacity than the global demand. Only air conditioners and electric vehicles, by a narrow margin, have some potential in the market.

The escalation of tariffs and the resulting shift in manufacturing strategies have raised concerns about the oversupply in various industries. It remains to be seen how these developments will impact the global economy and trade dynamics in the years to come.

— CNBC’s Victoria Yeo contributed to this report.

This rewritten article incorporates the original HTML tags, headings, and key points while presenting the information in a unique manner suitable for a WordPress platform.

TAGGED:ChinascompaniesdeflationaryPriceSlideSpiralWarsWorsens
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