Chinese directive asking on-demand platforms to lower merchant fees triggers sell off in Meituan shares in Hong Kong
- The new guidelines, published by the National Development and Reform Commission, are aimed at helping the service sector recover from the impact of the pandemic
- Chinese regulators have taken a tough stance on the country’s tech giants since last year
A new Chinese government directive ordering internet platforms to lower the fees they charge restaurants dealt a heavy blow to the shares of Meituan, China’s on-demand delivery giant, as the ruling could shrink the platform’s revenues.
Meituan’s shares plunged 14.9 per cent in Hong Kong on Friday after China’s regulators ordered platforms to lower their charges.
The new guidelines, published by the National Development and Reform Commission, are aimed at helping the service sector recover from the impact of the pandemic.
Internet platforms will follow guidance to “further lower the service fee standards for catering businesses to help them reduce costs”, and give “preferential service fees to catering companies in county-level administrative regions where middle and high-risk areas are located”, according to the guidelines.
Chinese regulators have taken a tough stance on the country’s tech giants. Last October, Meituan was fined US$533 million for abusing its dominant market position, after a nearly six-month investigation by antitrust regulators. The company was required to stop forcing merchants to “pick one from two”, a policy that demanded platform exclusivity.
Meituan’s share price closed at HK$188 on Friday, just 40 per cent of its peak value reached a year ago. Other Chinese tech stocks in Hong Kong were also hit. Video-streaming company Bilibili fell 5.1 per cent and short video company Kuaishou Technology was down 4.9 per cent when the market closed.
The hit to Meituan’s share price came on the 43rd birthday of its billionaire founder Wang Xing, who established the company in 2010.
The company’s valuation has more than halved in the past year amid Beijing’s scrutiny over its operations.
On May 10 last year, the stock lost 7 per cent after Wang deleted a 1,000-year-old poem from his personal blog. The Tang dynasty poem was perceived by some as dissatisfaction with Chinese authorities, but Wang later explained the poem was a metaphor about business, not politics.
Since then, the Chinese entrepreneur has hidden from public view all his social media posts over the last decade.
Meituan’s shares took another hit on July 26 last year after seven Chinese regulators, including the labour ministry, pledged to force platforms like Meituan to provide better protection to their workers, a move that was seen as having potential to significantly increase the company’s cost of doing business.