At some point the Chinese economy will go bust, but before that happens something else will happen: Beijing will go further and further down the rabbit hole of trying to stamp out inflation, and adjust tiny imbalances, in a failing effort to continue the success of a planned economy with an artificially cheap currency.
We just got another sign of that.
According to WSJ, the country is implementing all kinds of new anti-monopoly, anti-collusion, and price-setting regulations in the vain hope that it can beat inflation by fiat.
Under the new rules, competitors will be banned from reaching agreements to fix prices, while business partners will be barred from agreeing to minimum resale prices, the NDRC said.
Companies that have a so-called dominant market share will be barred from charging “unfairly high prices” for their goods, and from paying “unfairly low prices” for inputs. Various anticompetitive pricing strategies adopted by companies with a dominant market share will also be prohibited, including pricing goods below their production cost, using special rebates to force out competitors and discriminatory pricing between similar customers.
It won’t work, of course. As long as China keeps growing via its undervalued currency, the economy is going to suffer from inflation, and until that core issue is rectified, the government will introduce more and more measures such as these.
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