market economies rely on profit, if prices drop, then profits will be squeezed which doesn’t help future investments and can result in downsizing. subsidies are a way to maintain profitability, but then the question becomes where should the subsidies be going which helps workers over capitalists, and as xiaohongshu has said, local Governments which rely on revenues are trying to run deficits, which without adequate transfers from the central gov squeezes their budgets.

The idealized fully price flexible market system is ironically mainly only possible under a centrally planned economy where the state can run deficits. That is the contradiction between China being an economy where employment and output are kept stable even during deflation with the help of central government deficits, or one where everyone tries to run surpluses, which is impossible.