Recently, China's National Development and Reform Commission (NDRC) and the State Administration for Market Regulation (SAMR) jointly issued a notice on regulating disorderly price competition and maintaining a sound market pricing order. The move aims to safeguard fair market competition while protecting businesses' lawful right to set prices independently.

A customer purchases imported fruits at a market near the Dongxing port in Dongxing, South China's Guangxi Zhuang Autonomous Region, April 17, 2025. (Photo: Xinhua)

In some industries, disorderly price competition has emerged—appearing to offer consumers short-term gains but ultimately harming these sectors' long-term development. Such issues are expected to ease as the notice takes effect.

The notice lays out key requirements.

First, it sets clear principles: "Operators shall, in accordance with the pricing law, adhere to the principles of fairness, legality, and good faith, base their pricing decisions on production and operational costs as well as market supply and demand, and lawfully exercise their right to set prices independently while consciously maintaining market price order."

Second, it strengthens oversight. The notice specifies three regulatory tools—reminders and warnings, law enforcement, and penalties for untrustworthy behaviors—to address disorderly pricing practices. Any violations of laws and regulations will be dealt with accordingly.

Experts noted that these measures target the root causes of the problem, helping to restore order to pricing competition and foster a healthier, more standardized business environment.

Price competition is one of the most important forms of market competition. In China's socialist market economy, giving full play to the decisive role of the market in resource allocation is reflected in the establishment of a mechanism where prices are primarily determined by market forces.

Customers select products at a supermarket in Zaozhuang, East China's Shandong Province, January 9, 2025. (Photo: Xinhua)

In recent years, as China has deepened price reforms, more and more goods and services have shifted to market-based pricing, while government-set prices have been largely confined to essential public utilities and services.

However, for the price mechanism to function effectively, prices must operate within the bounds of fair competition. Once businesses fall into destructive "price wars" and disorderly competition, multiple problems arise.

— Harm to industry sustainability. Companies that sell products or services at ultra-low prices may temporarily gain customers and orders, but over time, such behavior can trigger a "race to the bottom." Other businesses are then forced to follow suit, eroding profit margins across the industry. This, in turn, squeezes investment in research, innovation, and branding—undermining long-term competitiveness.

— Harm to consumers' long-term interests. While lower prices may benefit consumers in the short term, persistent "price wars" often result in declining product quality, weaker innovation, and unmet expectations as consumer demands evolve.

— Potential violations of law. "Generally speaking, price discounts are a normal business practice. However, if pricing strategies drive prices significantly below cost and disrupt normal business order, they may cross the legal red line for unfair pricing," said Xu Guangjian, Professor at the School of Public Administration and Policy, Renmin University of China.

Taken together, disorderly price competition represents a typical form of irrational and unhealthy competition. It benefits no one—not the industry, not businesses, and not consumers.

Several factors contribute to the emergence of price disorder.

— Supply-demand imbalances. Some industries are grappling with insufficient effective demand. In this context, companies lacking strong innovation or distinctive advantages often resort to low prices as their main competitive tactic, while others use deep discounts to seize market share or establish early advantages.

— Weak standards in certain sectors. While China has made steady progress in improving its system of quality standards, some fields still lack mandatory national standards or have insufficiently stringent requirements. This leaves room for disorderly competition to persist without strong constraints.

To effectively curb price disorder, both industrial and pricing policies must work in concert.

Industrial policies will play a key role. Relevant authorities have already taken action—for example, by working to address structural imbalances in key industries, phase out outdated and inefficient capacity, and expand the supply of mid- to high-end production.

Price policies are also essential. While prices are increasingly determined by the market, stronger oversight is needed to ensure fair play. That is why the notice, while protecting businesses' right to set prices independently, introduces targeted measures such as assessing average industry costs, strengthening price supervision, and standardizing bidding practices.

A woman promotes products via live-streaming at the 5th China new e-commerce conference in Yanbian Korean Autonomous Prefecture, Northeast China's Jilin Province, July 27, 2025. (Photo: Xinhua)

Ultimately, the vitality of a policy lies in its implementation. The NDRC and SAMR have pledged to guide local authorities in promoting policy awareness, encouraging industry self-discipline, enhancing market monitoring, and tightening law enforcement. With these measures taking effect, price competition is expected to become healthier and market order more regulated.

It is worth noting that efforts to curb disorderly price competition will not deprive consumers of legitimate discounts. As long as price reductions comply with the pricing law—for example, in cases of market expansion or inventory clearance—they remain entirely permissible.

Curbing disorderly competition is a systematic endeavor, with pricing only one part of the equation. From revising national and industry standards to standardizing investment promotion practices, strengthening industry self-regulation, and improving regulatory capacity, much remains to be done. Through coordinated and sustained efforts to eliminate irrational competition and accelerate the building of a unified national market, China's vast market will grow ever stronger and healthier.