Beijing to crack down on Chinese tech firms using price wars to gain market share

Xi Jinping wants China’s tech companies to stop tearing each other apart with endless price cuts. Platforms keep slashing costs to beat each other, and now regulators are getting involved.

Beijing doesn’t want another year of businesses throwing subsidies at users just to win market share. The government is under pressure to stop this, especially with deflation hanging over the economy and prices falling for more than three years straight.

The main watchdog, SAMR, is picking off companies one by one. First, it went after food delivery services. Then this week, it announced an investigation into China’s biggest travel booking site, Ctrip.

Ctrip joins food delivery groups under investigation

Ctrip is now under official investigation, which SAMR made public on Wednesday, saying that it came right after earlier probes into Meituan and Alibaba’s delivery businesses.

Regulators are trying to stop what’s being called “involution;” basically, when companies go all-in on cutting prices and launching discounts just to stay relevant, without any real long-term plan. It’s a problem across China, from tech to electric cars to solar panels.

Trip.com, Ctrip’s parent company listed in Hong Kong, dropped over 20% in the past week. Ctrip put out a statement saying it’ll cooperate with the probe and that its operations are still running like normal.

SAMR’s new energy isn’t coming out of nowhere. For years after the 2021 tech crackdown, enforcement slowed down. Companies had room to breathe. But now, things are ramping up again. Experts say SAMR feels more confident now, but it’s still understaffed.

So instead of launching complex cases, it’s calling in execs for warnings and asking the State Council (China’s top government body) to support its efforts publicly.

Price war in food delivery pushes regulators to act

The food delivery space is where this really exploded. Last year, Alibaba and JD.com started crowding into Meituan’s territory. Everyone started throwing money at discounts; cheap burgers, free drinks, whatever it took. Platforms bled money. Restaurants had to slash prices too.

Regulators called in the platforms for a meeting in July and told them to chill. But the battle didn’t stop. Subsidies kept flowing all summer. One executive said it’s tough to end the fight unless the government starts handing out real fines. But officials are nervous. These companies hire millions of workers and feed thousands of restaurants, so they’re treading lightly during a weak job market.

Chelsey Tam at Morningstar said the big discounts seem to be slowing down now, but it took too long. And that lag showed how bad the relationship between tech and the regulators has gotten. Tensions are high.

Last month, things got physical. SAMR staff showed up at PDD Group’s Shanghai office. They were there to gather info on pricing and how suppliers were being treated.

According to local media, a fight broke out between employees and regulators during the inspection.

One source allegedly said SAMR saw PDD’s behavior as arrogant. That kind of reaction could lead to even harsher action later. So far, no fine’s been announced. But if PDD keeps acting like this, it’s probably next in line.

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