A view of the financial district of Pudong is reflected on a bus passing by, in Shanghai, China September 27, 2024. REUTERS/Tingshu Wang/File Photo Purchase Licensing Rights , opens new tab

BEIJING, July 24 (Reuters) – China released a draft amendment to its pricing law on Thursday as part of efforts to curb excessive competition and price wars among firms, amid persistent deflationary pressures.

Chinese leaders have signaled they will rein in price wars among producers as expectations grow for a new round of factory capacity cuts in a long-awaited but challenging campaign against deflation – a move that could pose risks to economic growth.

Under the proposed revisions, apart from lawful discounts on seasonal or overstocked goods, or other legitimate reasons for price cuts, firms will be prohibited from selling below cost to drive out competitors or monopolise the market, and from forcing others to adopt similar pricing practices.

The draft law, published on the website of the National Development and Reform Commission (NDRC) – the state planner, also stipulates that firms cannot use data, algorithms, or technology to engage in improper pricing behaviors.

The NDRC and the State Administration for Market Regulation said in a statement that China’s economic landscape has changed significantly since the current pricing law was adopted in 1998.

“The vast majority of goods and services prices are now formed by the market, new economic forms and business models are constantly emerging, and issues such as disorderly low-price competition in some industries have become prominent,” they said.

China will refine standards for identifying price collusion, price gouging, price discrimination and other unfair pricing practices, and take steps to address “involution-style” competition, the state agencies said.

The draft amendment, which is open for public comment until August 23, also proposes tougher penalties for unfair pricing practices, including higher fines for violations of clear price marking requirements.

China’s producer prices dropped for the 33rd month in June.

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