A viral video by Singaporean finance educator, Loo Cheng Chuan, has sparked debates over whether China is exporting an “economic cancer,” in the form of its deflation and overcapacity, to Singapore, Malaysia, as well as other countries across Southeast Asia.
More to the point, is China’s “involution” — a destructive form of competition — spreading to Singapore? That’s the current state of affairs, according to Loo, who is better known as an advocate for the 1M65 movement (“$1 Million by 65”), which advises on how to grow Central Provident Fund (CPF) assets to S$1 million.
Loo’s view? “I would like to raise the alarm that we are in the early phase of an economic cancer that we are importing from China, and this is quite a serious matter.”
And this is a view, while alarmist, that aligns with observations from various economists worldwide. China is known to be suffering from severe, prolonged deflation across a wide range of goods.
Loo explains: “China now is experiencing a very painful economic deflation… sustained price decrease and nobody makes money and as a result the rest of the economy suffers.”
Citing 10 consecutive quarters of deflation, coupled with declines in producer price indices, Loo argues that China’s current economic model rewards ultra-low pricing over profitability.
In his video essay, he observes: “It’s a brutal bloodletting competition where company fights massively bloodletting price cuts, and as a result, they earn less. The workers have to work more for declining pay. Businesses now have to chase market share at any cost, and as a result, many companies just simply lose money.”
“And this is really very bad because this is what I call an economic burnout, where competition is cannibalistic rather than creative. So there is a price collapse right now, evidence of internal implosion,” he adds.
The spillover effect: Dumping abroad
This is driving Chinese firms to turn outwards to regions like Southeast Asia, since they can’t sell products profitably at home and this impacts consumers through the ultra-low prices on Chinese-owned platforms.
In fact, there are major worries that China’s economy could mirror the trajectory of Japan’s economy in the 1990s. Loo notes: “That’s why today you can buy incredibly cheap things at Shopee, Lazada, TikTok, whatsoever. That’s just insanely cheap, and that’s great for consumers. But is it great for [local] businesses in the long run?”
Loo makes the point that Singapore and Malaysia are the economic front lines in this, due to the environment being relatively friendly to the mainland Chinese. The result? Chinese companies entering these markets as scale. Already, multiple Chinese firms are making their way into Southeast Asia via Singapore.
Loo summarises: “Right now we are seeing thousands of Chinese companies and factories setting up shops all over ASEAN. In Singapore, we see a lot; in Malaysia, even more. And right now, we have got Shein, Temu, Meituan—all these are coming in with zero-margin business model, trying to capture market share at all cost.”
“And of course, food and beverage, we love them. The food is nice. The retail is at great prices. They are undercutting local businesses, and they are willing to do it because in China, it’s even worse.”
Low Costs? Attractive – but risky
Loo admits the appeal of Chinese brands from a consumer perspective, as well as their operational efficiency and capability. But on a long-run basis? Such cheap pricing undermines local companies.
Loo highlights: “When it becomes bloodletting competition, compression, reducing tax revenue and wage growth, all this deflationary pressure now is being exported. I really consider this an economic cancer, and I think we are in stage one or stage two of it. Their country [China] is already at stage four…and now they’re exporting it.”
Today’s victory for consumers with its low-priced goods can become tomorrow’s economic weakness. And Loo argues that Singapore’s domestic businesses simply cannot compete.
Highlighting recent price reductions in China, particularly in housing, as well as consumer goods (e.g. wine and pears), Loo states: “I call it corporate meltdown. Analysis of 9,000 listed companies reveal 25% operating at losses, and investments are collapsing, and many sectors are just lock in with a race to zero pricing.”
“Now we’re not talking about zero profit, we’re talking about zero pricing. That means they’re even giving things free in order to garner for market share,” Loo shares.
What it means for Singapore
The warning is that the benefits are immediate, but the damage could be long-term. Loo believes Singapore is at the early stages, with Singapore’s government facing a difficult balance, though regulatory interventions are possible.
One commentator, going by the handle ‘Singapore, as an open and free-market economy, has traditionally taken a hands-off approach to market intervention to attract foreign investment. However, this strategy may no longer serve us as effectively, as imported deflationary pressures can disadvantage our domestic workforce and industries.”
“Moving forward, a more calibrated approach could be considered — with targeted measures on specific product categories or imports from economies experiencing significant deflation — to safeguard local interests while maintaining our global competitiveness,” he added.
One approach Loo suggested was a form of anti-competition law, although it raised doubts about it aligning with the open economy policies the government maintains. However, he is candid about his uncertainty.
In the video, he notes: “We haven’t reached [a] bloodbath level yet, but it’s coming. Some sectors are experiencing it. I think that it is necessary to rein in some of this kind of unhealthy competition. So I would, I would seriously be more concerned and tread on this carefully.”
The Singapore approach
Another commentator going by the handle ‘Currently, locals are feeling rich with their appreciating property prices and comfortable salary. However, with the rising influx of foreigners, many locals will lose their jobs and gradually lose their purchasing power. Just a matter of time; local-born population will decline and disappear. The big giants don’t need to fire a shot to take over this tiny red dot.”
In fact, this trend may be unfolding faster than many assume. Singapore’s policymakers haven’t seen fit to address the matter too publicly. It remains a free port, but rather than block Chinese companies, the government is pumping money into local firms to help them survive the “bloodletting”.
The most obvious sign? Cash flow support in the form of the Business Adaptation Grant plus a 50% corporate tax rebate for 2024/2025. Introduced in late 2025, the grant offers up to S$100,000 to help companies cope with supply chain disruptions and rising costs. It’s also giving a leg up via existing schemes, such as the Market Readiness Assistance (MRA) Grant, to help local businesses expand abroad.
The warning is pretty clear. Today’s reality of cheaper goods and easy market access may come at the cost of tomorrow’s competitive strength. As Loo puts it: “An economy can bleed to death on discount.”
