China has a DEFLATION Problem - Larrea Wealth Management

China’s cutthroat business world is making prices cheaper for consumers. But deflation could cause a depression. That’s the economic paradox we’re talking about on the “TMI Show with Ted Rall and Manila Chan”!

China’s “involution” crisis: fierce competition and overcapacity are strangling industries. A hot new technology or product sparks a frenzy of copycats, with hundreds of Chinese manufacturers then flooding the market. They slash prices, ramp up production, and battle for survival, often with razor-thin margins or outright losses. Local governments fuel the chaos, backing hometown champs with cash and clout, pushing industries like steel, solar, and electric vehicles into a brutal race to the bottom.

Take BYD, China’s EV giant, which slashed prices on nearly two dozen models in May, only to get a slap on the wrist from a government-linked auto group for sparking “price wars.” Xi Jinping is on the case, vowing to curb this “disorderly competition” and outdated capacity. With Trump’s tariffs slamming exports and a slowing economy piling on unsold goods, China’s facing a deflationary spiral—its GDP deflator has tanked for eight straight quarters.

The People’s Daily warns that price wars could drive out quality players. Can China tame this self-defeating cycle, or is it too late? Could something like that happen here?