Monday, February 9, 2009

You Foreigners Keep your Low Prices to Yourselves!

Minister of Commerce, Chen Deming, expressed concern about price cuts in the midst of the downturn. According to this report from SCMP, Chen specifically mentioned price cuts by Wal-Mart. But other foreign players including McDonald's and KFC are also cutting menu prices, driving some local competitors to do the same.

"We hope companies will offer promotions at healthy and limited levels, and we know how much discounts companies can afford," Mr Chen said. "We support promotion levels based on demand and supply. However, if they are overdone, there will be an adverse impact."

Some economists, who described the minister's comment on commercial behaviour as rare, said Mr Chen's warning underlined his fears about worsening deflation and unemployment as well as concerns that a punishing price war could squeeze smaller domestic players out of business.

Of particular interest is the above phrase by Chen: "we know how much discounts companies can afford". This is fascinating! Apparently some companies are in danger of pricing themselves right out of business without even knowing it. It's a great thing the government is knowledgeable enough to prevent that from happening.

I'm sure consumers are also relieved to know those annoying discounts won't last much longer.