# China's economy is facing a new threat https://www.youtube.com/watch?v=bsVvO0YX22U Translation: fr [00:00] China's economy is facing a new threat. [00:03] In most countries, governments complain [00:05] when prices are too high, but in China, [00:07] the government's angry that prices are [00:09] too low. [00:10] This has come about due to a phenomenon [00:12] called involution. [00:14] Companies are cutting prices to gain [00:16] market share. [00:17] That's forcing everyone else to do the [00:19] same. [00:20] As a result, profits have plummeted and [00:23] no one's market share is any higher. [00:26] This fight for survival has gone beyond [00:28] normal market competition. [00:30] That's because many of the firms have [00:32] been nurtured by China's local [00:33] governments. Industries like solar [00:35] panels and lithium batteries have become [00:38] world-leading, but this has resulted in [00:40] an oversupply of these goods and not [00:42] enough customers to meet the demand. [00:45] One example is the car industry. There [00:47] are now 130 domestic car companies [00:50] battling for sales. Discounts are so [00:53] steep that you can buy this electric [00:55] car, the BYD Seagull, for less than [00:57] $8,000. [00:59] That might sound like a great deal, but [01:01] households should think twice before [01:03] being [music] too happy about cheap [01:04] prices. As profits have come down, wage [01:07] growth has stalled and employment looks [01:10] weak. China has been here before. [01:12] A decade ago, [music] it also suffered [01:14] another long spell of falling industrial [01:16] prices. [01:17] Back then, the government cut capacity [01:20] in industries like steel and coal to [01:22] limit production. [01:23] It was a crude measure, but effective. [01:26] Prices rose, but profit margins [01:28] increased. But this time [music] around, [01:30] involution is more widespread. [01:32] The companies involved are often [01:34] privately owned, so the government has [01:36] less [music] control over them. They [01:38] also operate in high-tech sectors with [01:40] shiny new facilities, not like the [01:43] dirty, outmoded plants that the [01:44] government shut down last time. [01:49] An alternative response to involution [01:50] [music] is just to flood foreign markets [01:52] with goods. [01:54] But trading partners are pushing back. [01:57] Ultimately, the best response to falling [01:59] prices is to boost demand, not to curb [02:01] supply. [music] [02:02] China's leader, Xi Jinping, is wedded to [02:05] his vision of China as a manufacturing [02:07] powerhouse. [02:08] Even if customers are hard to find, [02:10] manufacturing is a big part [music] of [02:11] China's economy and he doesn't want it [02:13] getting any smaller. [02:15] If that's the case, Mr. Xi won't solve [02:18] involution without a bit of [02:19] introspection.