Economists warn of deflationary cycle in China's consumer market

Discount retailers in China are thriving amid shifting retail landscape.

This price war is driven by a lack of consumer confidence, with many facing a tough economic outlook.

While cheap options are good for budget shoppers, economists warn of deflation.

As retailers cut prices, they squeeze suppliers for lower costs, which could lead to stagnant wages and ultimately, less consumer spending.

This is the same worry of Japan's decades long deflation.

China’s may inflation data is expected to rise slightly. But analysts think it’s hiding deeper deflation.

The price war is not limited to certain sectors. Chinese car makers are in a two-year price war.

Since some traders rely on extreme methods like zero-down payment and zero-interest loans.

This disappointment reflects weak domestic demand.

Even giants like Starbucks are not immune. Their China revenues fell 8 per cent, hurt by tough competition from low-priced coffee chains.

Alibaba and JD are facing pressure from up-and-comers. They reported slower revenue growth relative to discount retailers.

To compete, both companies also have plans of their own - extended selling times and price guarantees. In contrast, the discount retailers are now seeing hypergrowth.

Nonetheless, it will hinge on higher wages and the rate at which jobs are created in other sectors to counterbalance potential job loss due to price wars.

Experts warn that a prolonged price war could hamper China's economy and exacerbate deflation.