China urges its companies in the US to avoid the cutthroat competition that has sent prices down

Luckin Coffee is challenging Starbucks with wallet-friendly promotions and discounts.

Spencer Platt/Getty Images

China’s Commerce Minister has called on Chinese companies in the US to avoid price wars.
Beijing is cracking down on cutthroat competition at home, which has fueled deflation.
US-China trade tensions could worsen if Chinese firms engage in big price-cutting.

Chinese companies have been making inroads into the US economy, with brands like e-commerce giant Temu and Starbucks challenger Luckin Coffee breaking through with American consumers.

Beijing has taken notice — and it doesn’t want its firms to repeat the bruising price wars they’ve waged at home.

On Tuesday, Commerce Minister Wang Wentao met with representatives from over 10 Chinese companies in New York and urged them to avoid cutthroat competition, according to a statement from the ministry. The firms spanned industries including finance, logistics, and e-commerce.

“Chinese companies in the United States have overcome difficulties and achieved significant results, which is a remarkable achievement,” Wang said at the meeting.

He urged them to support one another in their expansion efforts but to “oppose the externalization of involution,” referring to a term used in China to describe relentless, unsustainable competition.

Wang’s comments come as US consumers have become increasingly familiar with budget-friendly Chinese upstarts like Luckin Coffee, Temu, and Miniso. Luckin’s regular retail prices are comparable to Starbucks, but the newcomer offers significant promotional discounts.

At home, Beijing has pledged to rein in aggressive price cutting to stabilize an economy still reeling from a yearslong property crisis. In July, China’s top leadership vowed to curb “low-price and disorderly competition among enterprises” at a high-level meeting chaired by Xi Jinping.

That pressure has been most visible in food delivery, where consumers have been flooded with rock-bottom offers — from 1 Chinese yuan bubble tea to full meals delivered in under 30 minutes. Analysts told Business Insider that such strategies can hook consumers but aren’t sustainable in the long run.

Beyond profits

It’s not just about business.

If Chinese firms export their price wars to the US, it could hurt their own profitability and reignite trade tensions with Washington.

Western governments have accused China of fueling overcapacity and flooding markets with cheap exports — a charge that Beijing has consistently pushed back against.

On Tuesday, Wang pointed to the global backdrop, warning that the trade landscape faces “severe challenges” from unilateralism and protectionism. He urged firms to “respond proactively” and pursue “diversified strategies and compliant operations.”

He added that China and the US have reached a series of “important consensus” after multiple rounds of talks.

Read the original article on Business Insider

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