Food delivery giant Meituan lost $38.96 billion of its value as Chinese government’s antitrust crackdown wiped off over $250 billion from Chinese tech stocks
Doing business in China may sound appealing to a lot of American companies. However, doing business in China comes at a heavy price. Unlike the United States, the Chinese Communist Party has a major influence on virtually all the companies in China. In a piece titled, “Influence without Ownership,” Paris, France-based Montaigne Institute wrote about the Chinese Communist Party targets and controls the private sector.
In November 2020, the State Administration for Market Regulations (SAMR), China’s top market regulator, outlined draft guidelines it says are intended to prevent internet monopolies. The regulator said on its website that it’s soliciting public opinions on the draft until the end of this month and welcomes suggestions for revisions.
Then on December 24, 2020, the regulator announced the launch of an antitrust inquiry into e-commerce giant Alibaba. The SAMR also sent investigators to the e-commerce giant’s headquarters. Alibaba’s financial affiliate, Ant Group, was later ordered to scale back its operations.
Since then, shares in Alibaba and JD.com have plunged more than 10% each in Hong Kong trading. The plunge has also wiped off $97 billion (756 billion Hong Kong dollars) of the market value of Alibaba.
Alibaba and JD.com are not alone. More than five months after the crackdown began, Meituan, a Tencent-backed startup that public on September 20, 2018, has also lost billions of dollars in its market value. In the past two weeks alone, Meituan has seen around $38.96 billion wiped off its value as Chinese government regulators turn their regulatory scrutiny on the 11-year old food delivery company.
On April 26, SAMR opened an investigation into “suspected monopolistic practices” of Meituan wiping off billions of dollars in the company’s market value. In response to the SAMR probe, Meituan said it will “actively cooperate with the regulators on the investigation, take steps to improve its businesses’ compliance management, safeguard the legitimate rights and interests of its users and all relevant parties, promote the healthy and long-term development of the industry, and strive to fulfill its social responsibilities.”
Meituan was founded in 2010 by Wang Xing. It was one of China’s most popular internet startups. Meituan-Dianping is a daily deal site for locally found consumer products and retail services. In addition to its food delivery service, Meituan also offers deals of the day by selling vouchers on local services and entertainment.