Core Insights - The National Development and Reform Commission and the State Administration for Market Regulation have issued an announcement to address disorderly competition in certain industries, proposing measures such as evaluating average industry costs, enhancing price regulation, and standardizing bidding behaviors to maintain fair competition [1][3] Group 1: Industrial Profit Trends - From January to August, China's industrial enterprises above designated size achieved a total profit of 4.69 trillion yuan, a year-on-year increase of 0.9%, which was better than Bloomberg's forecast of a 1.6% decline, reversing the downward trend in cumulative profits since May [1] - In August, profits of large-scale industrial enterprises increased by 20.4% year-on-year, indicating that government actions to address overcapacity and excessive competition are proving effective [1][3] Group 2: Price Index and Economic Outlook - The Producer Price Index (PPI) for August showed a year-on-year decline of 2.9%, with the rate of decline narrowing compared to July, marking the first alleviation of factory deflation pressure in six months [3] - The chief statistician of the Industrial Department at the National Bureau of Statistics emphasized the need to further expand domestic demand and standardize competition to create favorable conditions for the sustained recovery of industrial profits [3] - The chief economist at Minsheng Bank noted that with ongoing efforts to combat "involution," market competition is gradually improving, and industrial profits are expected to continue a moderate recovery trend [3]

Core Viewpoint - The recent announcement by the National Development and Reform Commission and the State Administration for Market Regulation aims to address disorderly price competition and maintain a sound market price order, marking a significant step in regulating enterprise competition in China [1][2]. Group 1: Key Features of the Announcement - The new approach combines proactive guidance and comprehensive regulation throughout the process, moving away from solely punitive measures after the fact [2]. - The introduction of "industry average cost" as a reference point is a key tool, which will assist industry associations in evaluating and publishing average costs to guide reasonable pricing and identify abnormally low prices [2][3]. Group 2: Focus Areas of the Regulation - A critical aspect of the regulation is the clarification of "cost" in bidding processes, specifying that it refers to the bidder's own costs, thus establishing a consensus in the industry [3]. - The policy aims to protect innovation and product quality, preventing the phenomenon of "bad money driving out good," and ultimately promoting high-quality industry development [3].

Core Viewpoint - The recent announcement by the National Development and Reform Commission and the State Administration for Market Regulation aims to address disorderly price competition and maintain a sound market price order, marking a shift in approach compared to previous efforts in 2005 and 2007 [1][2][3] Group 1: Key Features of the Announcement - The new governance approach combines proactive guidance and comprehensive supervision, moving away from solely punitive measures to a full-chain regulation process that includes cost reference, reminders, and enforcement [1] - The introduction of "industry average cost" as a reference point is intended to guide industry associations in evaluating and publishing average costs, providing a benchmark for reasonable pricing and helping to identify abnormally low prices [2] Group 2: Implications for Industries - The announcement signals that the goal is not to eliminate price competition but to protect innovation and product quality, preventing the phenomenon of "bad money driving out good" and ultimately promoting high-quality industry development [3] - The government positions itself as a rule-maker and maintainer rather than a direct price intervener, using the "industry average cost" as an informational tool to guide enterprises in making autonomous decisions and returning to fair competition [3] - As companies withdraw from disorderly price wars, improved profitability is expected to allow for greater investment in research and innovation, leading to higher quality and better value products and services for consumers in the long run [3]

Core Viewpoint - The announcement by the National Development and Reform Commission and the State Administration for Market Regulation aims to address chaotic price competition in key industries, providing a framework for reasonable pricing based on average costs and market conditions [1][2] Event Summary - On October 9, 2025, the National Development and Reform Commission and the State Administration for Market Regulation issued a notice to combat price chaos, emphasizing fair and lawful pricing practices based on production costs and market supply-demand dynamics [2][3] Event Analysis - The policy continues the "anti-involution" approach initiated earlier in 2025, focusing on curbing disorderly low-price competition and reinforcing supply-side management across various sectors, including cement, steel, and coal [3][4] - The announcement is a continuation of previous policies aimed at regulating low-price competition, enhancing market confidence, and facilitating the implementation of sector-specific policies [3][4] Supply-Side Management - Strong supply-side controls are expected to lead to significant changes in traditional cyclical industries, particularly in the chemical sector, which is characterized by cyclical pressures and supply-demand mismatches [4][5] - If effective supply-side constraints are established, it could fundamentally improve the long-term supply trends of cyclical products, allowing for extended profitability [4][5] Industry Collaboration - Certain industries are beginning to collaborate to improve profitability ahead of stringent supply-side constraints, with initial efforts to control production and pricing already underway [5][6] - The policy is likely to foster further collaboration among industries that have already started self-regulating against low-price competition, particularly in sectors with strong market concentration and manageable new capacity [5][6] Investment Recommendations - The announcement is seen as a continuation of previous policies, with a focus on energy consumption, approvals, environmental protection, and safety in the chemical industry [6] - Key areas for monitoring include supply-side management in petrochemical and coal chemical sectors, as well as industries with steep cost curves or significant process cost differences [6]