China will improve governance of 'disorderly competition'

China will improve governance of 'disorderly competition'

Title: China's Regulatory Crackdown on 'Disorderly Competition' in Food Delivery Sector

In a move aimed at addressing the escalating "disorderly competition" in the food delivery sector, the Chinese government has summoned key players, including Meituan, JD.com, and Ele.me, to address excessive discounting and unfair pricing practices. This regulatory intervention comes amidst a significant downturn in profits for these internet commerce giants, driven by aggressive subsidy campaigns to capture market share.

Meituan, the leading food delivery platform in China, reported a 97% drop in its net profit for the second quarter of 2025, missing analysts' estimates [1]. The company's shares have plummeted to a one-year low in Hong Kong, reflecting the intense competition from rivals such as JD.com and Alibaba. Meituan's CEO, Wang Xing, has emphasized that the company will prioritize market share over profitability in the near term to counter the aggressive moves of competitors.

The regulatory scrutiny is adding a layer of complexity to Meituan's operations. The Chinese government has warned against excessive discounting and unfair pricing practices, which have eroded profitability across the sector. This regulatory crackdown is aimed at fostering a more sustainable and competitive environment in the food delivery sector.

Despite the challenges, Meituan's Instashopping segment has shown strong growth. According to a recent report by CLSA, the company's core local commerce business saw a 12% year-over-year (YoY) increase in total revenue, reaching RMB92.1 billion. The company's gross transaction value (GTV) for Instashopping also showed a 10% YoY increase to RMB67 billion [2].

Long-term investors should closely monitor Meituan's ability to balance growth with profitability as the subsidy war evolves. The company's strategy of prioritizing market share over profitability in the near term reflects its efforts to maintain its dominant market position amidst intense competition and regulatory scrutiny.

References:
[1] AInvest. (2025, Aug). Meituan strategic resilience: China food delivery price war calculated bet. Retrieved from https://www.ainvest.com/news/meituan-strategic-resilience-china-food-delivery-price-war-calculated-bet-long-term-2508/
[2] CLSA. (2025, Aug). Meituan: Instashopping achieved strong Q2 growth in order volume and GTV, strengthening market position. Retrieved from https://www.clsa.com/news/meituan-instashopping-achieved-strong-q2-growth-order-volume-gtv-strengthening-market-position-2508/