In recent years, due to the uncertainty of the domestic and international economic environment and the deep-seated changes in the printing industry chain, Chinese printing companies, which have long been in a favorable environment since the reform and opening up, have begun to increasingly feel the pressure of market competition. Especially since the outbreak of the international financial crisis in 2008, domestic and foreign market demand has been relatively sluggish, and many printing companies have faced the challenge of both sales revenue and profitability 'declining'. In order to win limited customers and business resources in competition, various printing companies have spared no effort and used all means possible. In this process, there is a phenomenon that is very thought-provoking: on one hand, many industry insiders deeply believe that competition based mainly on price is harmful and denounce it as 'vicious competition' that disrupts market order; on the other hand, many companies are deeply trapped in it, using price as a 'killer weapon' to win customers. Even those companies that detest price competition often find it difficult to remain aloof from it under market and customer pressure, joining the ranks of price-cutting for survival. In such a complex market environment, how should we correctly understand and view price competition in the printing industry? What response strategies can printing companies adopt in the face of price competition? This is precisely what this article hopes to explore.

Reflections triggered by a Weibo post

Recently, a Weibo post by a printing entrepreneur from Shenzhen quickly attracted attention from many industry insiders. The post reads: "Nowadays, printing prices are really outrageous; there are even several companies competing for orders that clearly can't even cover paper costs. Survival is tough! I just sent off a senior figure from the printing world who opened a factory in Bagualing; he believes this year is particularly hard."

This Weibo post is short but conveys rich information. Firstly, printing prices are indeed very low because order quotes do not even cover paper costs; secondly, competition in the printing industry is becoming increasingly fierce with several companies competing for orders that are clearly unprofitable; finally, quoting an industry senior indicates that this year's market situation for printing does not look optimistic.

In light of the current low prosperity level in the industry, such content easily resonates with everyone. Among more than 20 shares and comments on this Weibo post, complaints about price wars in the printing industry, vicious competition, and concerns about industry prospects accounted for an overwhelming majority. Some typical comments include: "Printing labor costs are negative; we’ve been tortured by market conditions to an extreme"; "In 2008 Bagualing's bosses could still make money from waste plates and waste paper; now they’re just barely making ends meet due to labor costs, rent increases, and machine payments"; "When manufacturers only have pricing strategies left at their disposal, markets will become increasingly brutal for uncompetitive firms—it's pure agony"; "The severity of vicious competition in printing can be seen clearly"; "Such outrageous competition can only be seen as a final struggle," with one netizen exclaiming: "The last madness."

Amidst nearly unanimous resonance voices, there were also relatively calm perspectives. One netizen commented: "We should carefully understand how others operate,"

'there must be unknown reasons behind it because I believe there are illegal activities happening nowadays but no one would engage in losing businesses.' Although this viewpoint was quickly drowned out by others' opinions, it provided a different perspective on observing industry competition. When we judge our peers or competitors' quotes, we often reference our own costs and quotes while neglecting deeper reasons behind their 'moves'. For instance, regarding an order seemingly unable to cover paper costs being fought over by several companies mentioned above—before making judgments about 'vicious competition', at least several questions could be raised: Does the other party have a more optimized procurement system? Is their cost management more effective? What secrets lie within their production processes? Is there longer-term strategic consideration behind their low prices? As netizens pointed out under market economic conditions—many enterprises competing fiercely over what seems like obviously losing businesses must have unknown reasons behind them.

Why does the implied premise of price wars seem misleading?

Undoubtedly, over more than thirty years since reform and opening up began—while the scale of China's printing industry has rapidly expanded—the prices for printed materials have not followed suit with an upward trend synchronously. Especially since late last century's 90s—with intensified market competition—the prices once rapidly declined leading to discussions and concerns within industries regarding vicious price competitions. After nearly ten years of decline adjustments—the current prices for printed materials are at historical lows—for example—in mid-1990s single-sheet color print labor cost could reach ¥60/color version while current mainstream quotes range between ¥10~¥20/color version—only about one-sixth to one-third of previous levels. The question remains: how should we correctly understand this trend regarding labor cost changes? Is it entirely caused by vicious competitions or does it also involve reasonable factors?

'Viewing declining labor costs as results from disordered market competitions or price wars relies on vertical comparisons as premises—arguing current labor costs are too low while print enterprises still engage in vicious undercutting—and will also present various factors against declining labor costs such as rising labor expenses or raw material prices significantly increasing.' This viewpoint holds considerable reasonableness—short-term fluctuations in production costs indeed bring significant operational difficulties—but when viewed over longer periods—it overlooks improvements in production efficiency affecting pricing trends along with long-term equilibria concerning raw material pricing.

'Firstly—using absolute values of print labor costs as references cannot reflect true output situations within enterprises.' Taking single-sheet color prints again as an example—the current mainstream quote stands at approximately one-sixth to one-third compared with mid-1990s levels—a significant gap indeed exists. However when considering production efficiency factors—the unit output value per enterprise does not appear so disparate after all—for instance around 1990 single-sheet four-color offset presses had maximum speeds around 10 thousand prints/hour requiring roughly two hours preparation time whereas currently maximum speeds can reach up to twenty thousand prints/hour with preparation times reduced down to around fifteen minutes thus inferring current single-sheet color print production efficiency has improved five- or six-fold compared with twenty years ago should not deviate much from reality therefore if inflation factors aren't considered although labor rates significantly decline—the output value created per unit time by print enterprises may not only remain unchanged but possibly increase.

'Secondly—increasing average wage levels do not necessarily indicate substantial rises in artificial expenses within print enterprises.' Once—a boss from a print company complained saying ten years ago hiring an ordinary worker required only about ¥800/month while currently hiring that same worker requires at least ¥2500~¥3000/month—a three- or four-fold increase—but this doesn't imply during past decade his company's artificial expenses similarly increased three- or four-fold because workers’ productivity has risen significantly reducing numbers needed for creating equivalent output values according statistics—in2011 China’s print workforce numbered approximately3566700 people generating total outputs worth867713000000 yuan over ten years’ time workforce grew18.9% total outputs increased fivefold per capita output reached original fivefold thus measured against these figures growth rate wages lag slightly.

Finally, the price increase of major raw and auxiliary materials for printing is not significant. Taking coated paper as an example, in the early 1990s, China largely relied on imports for coated paper. Data shows that in 1992, China imported 204,000 tons of coated paper at a cost of $178 million, which, based on the exchange rate at that time, was about 5,000 yuan/ton. Currently, the mainstream price of domestic coated paper is roughly between 5,000 to 5,500 yuan/ton, indicating a not very significant increase. If we consider a cycle of nearly ten years, the current price of coated paper is actually at a historical low. Of course, due to the large fluctuations in coated paper prices, before 2008 the prices once rose rapidly, putting considerable pressure on printing companies. Looking at another type of printing material plate, the current mainstream price for CTP plates is about 30 yuan/square meter, which is roughly one-third of what it was ten years ago and also far below the price of traditional “PS plate + film” methods.

Correctly view price competition

The various points mentioned earlier do not mean that I advocate for a continuous decline in printing labor costs as something natural or encourage printing companies to engage in fierce 'price wars' in market competition. On the contrary, I am well aware that many printing companies are currently facing unprecedented challenges in transformation and upgrading and are under significant survival and competitive pressure. The reason for this discussion is that I hope industry professionals can view the trend of declining printing labor costs and inter-company price competition more comprehensively and rationally. While recognizing that irrational price competition exists among some companies, it is also important to understand the rationality behind the sustained decline in printing labor costs over a long period and to enhance confidence in the industry's development prospects without losing heart or complaining. In a market economy environment where industries like printing are fully competitive, market forces are the primary determinants of prices. In light of an irreversible trend towards lower average market prices, what printing companies should do is look inward by adjusting internal management and production processes or innovating technology or business models to reduce costs or escape homogeneous competition to achieve profit margins above industry averages.

Just as this article was about to be completed, I saw another Weibo post that provided much insight. A user named TonyLee wrote: 'If British manufacturing is significantly cheaper than Chinese manufacturing, many might not believe it; however, facts are evident: In magazine printing industry for 60 thousand copies of an 80-page magazine, a certain British company's quote was actually lower by a full 20% compared to the lowest quote from five Shenzhen companies! (This is purely factory gate pricing comparison). The reasons: automated production close to raw material sources (Finland and Germany), high-efficiency equipment with fewer but more efficient employees leading to high output and low rent...' When we feel that vicious competition within China's printing industry seems bottomless with labor costs already at rock bottom levels; this information suggests otherwise: A British company's quote for exactly the same magazine was still lower by 20% than Shenzhen's lowest quoted company.

If TonyLee's words hold true based on his provided information as reference; it’s very likely that average prices within China's printing industry will continue to decline over time ahead. For those already struggling with thin profit margins; this naturally isn't good news. To succeed amidst increasingly fierce competition and become one of the last 'survivors', Chinese printing companies must learn from their more competitively priced British counterparts: automated production with more efficient equipment while reducing staff numbers but increasing efficiency while controlling costs. This direction aligns perfectly with what many Chinese printing enterprises undergoing transformation and upgrading currently pursue.