PHOTO: Wikimedia Commons
A BEIJING store has resorted to extreme discounts, including giving away items, in a bid to clear stock, illustrating the growing deflationary pressures within the Chinese economy.
Leo Liu, manager of the Wankelai store, reportedly announced progressively lower prices via microphone during a flash sale, eventually selling a jacket for a fraction of its original price and giving away an undershirt.
This practice, conducted multiple times daily, reflects the challenges faced by retailers in a climate of weak consumer demand.
Liu reportedly explained that these sales were necessary to reduce inventory and that the store operated on a “small-profit, quick-turnover business model.”
He acknowledged some items were sold at a loss, emphasising the store’s focus on serving “ordinary people.”
Analysts, according to reports, suggest that the rise of discount retail, driven by consumer uncertainty over jobs and incomes, is exacerbating deflationary trends.
This trend, coupled with expanding industrial capacity, has led to price wars across various sectors, from restaurants offering heavily discounted meals to electric vehicle manufacturers slashing prices.
Lynn Song, chief Greater China economist at ING, was quoted as saying that the shift towards “value-for-money purchases” and “intense price competition” were contributing to deflationary pressures and impacting traditional retail models.
Reuters reported that recent figures show China’s consumer price index fell by 0.7 per cent in February, with producer prices dropping by 2.2 per cent, continuing a prolonged period of negative readings. The growing industrial output, while boosting exports, is also contributing to domestic deflation. Louis Kuijs, chief Asia economist at S&P Global Ratings, reportedlyobserved that many Chinese companies were prioritising market share over profit, further driving down prices.
Premier Li Qiang has reportedly signalled a renewed focus on boosting household spending and lowered the official inflation target.
Shoppers at Wankelai expressed concerns about job security and financial constraints, with many cutting back on discretionary spending. Lily Liu, a financial auditor, and Vivian Liu, a student, both highlighted the impact of economic uncertainty and youth unemployment on consumer behaviour.
-BTS Media
