China\u2019s intensified fight against cutthroat, low-quality price competition \u2013 known as involution \u2013 is unlikely to result in supply-side reform of the same magnitude as such reform in 2015, as the world\u2019s second-largest economy lacks the mettle to cut production capacity or add consumption stimulus, according to an economic research firm.<\/p>\n
Investors have been quick to draw parallels between recent and earlier meetings of the Central Committee of Financial and Economic Affairs (CCFEA) that became \u201cturning points\u201d and raised hopes of a more sweeping supply-side campaign, said a note authored by Louise Loo, the Asia economics head for UK-based advisory firm Oxford Economics.<\/p>\n
\u201cOur view is that these expectations are misplaced,\u201d the note said. \u201cThe path towards a decisive resolution of China\u2019s supply-demand imbalances looks far less direct than in the past.\u201d<\/p>\n
A July 1 meeting of the CCFEA suggested that prices would reflate because President Xi Jinping used the event to criticise price competition as a lever for \u201cdestructive discounting\u201d and \u201cunproductive outcomes\u201d, according to the note, published on Thursday.<\/p>\n
A mixture of capacity cuts and \u201cmeaningful\u201d demand stimulus \u201cis far more difficult to deliver in the current environment\u201d, it added.<\/p>\n