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Investing.com - JD.com (HK:9618) and Meituan (HK:3690) shares rose on Wednesday after China’s national broadcaster CCTV said that the state market authority has put forward new rules to promote fairer competition in the domestic food delivery industry.
The draft rules from China’s State Administration for Market Regulation would include increased transparency around subsidies and discounts as well as a cap on the fees charged to restaurants, CCTV and media sources reported.
Other proposed alterations ban food delivery platforms from making restaurants subsidize promotional activities, which has become more common in recent months, the reports said.
Hong Kong-listed shares of Chinese e-commerce giant JD.com gained more than 3%, while Meituan -- the country’s leading food delivery firm -- advanced by a little over 1%.
JD.com has been pushing hard to expand its instant-delivery business, with the firm looking to develop a fresh revenue stream to offset a sputtering Chinese economy and intense competition at its core retail segment.
Since the launch of JD Takeaway earlier this year, the unit has also faced a tough battle with rivals to grab market share, with peers like Meituan and Alibaba’s Ele.me rolling out more discounts to boost demand. However, such moves have placed pressure on margins at merchants and couriers.
At the same time, JD.com’s expenditures in food delivery have squeezed its own profitability. Adjusted operating margin at the group shrank to 0.3% in the June quarter, compared to 4% in the same period a year ago.
Meituan’s daily orders across food and retail goods, meanwhile, have spiked to a record 120 million, giving it control over roughly 70% of the delivery market. Ele.me, along with Alibaba’s Taobao instant commerce unit, also notched 80 million daily orders in July.
Executives have flagged worries over the competition, particularly after the three companies have vowed to introduce almost 200 billion yuan in instant delivery subsidies in recent months. This has ignited concerns over a nascent "price war" in the sector, fueling regulatory scrutiny.
(Reuters contributed reporting.)