Nation trying to halt price wars in food delivery, NEVs

China has vowed to address rat-race competition across various industries, to shift from excessive, unproductive rivalry to a more sustainable and innovative business environment, analysts said.

"As capital lacks new growth avenues, this, in turn, has forced businesses to engage in fierce battles over the existing market share," said Huang Yong, a professor specializing in competition law at the University of International Business and Economics in Beijing.

In particular, with consumer confidence wavering and discretionary spending power constrained due to the downward pressure facing the Chinese economy, aggressive price competition has become a survival strategy for many businesses, Huang said.

When companies resort to price wars as a strategy, it inevitably results in a race to the bottom, where profits are squeezed and the long-term viability of the industry is jeopardized, he added.

In mid-July, the State Administration for Market Regulation held a meeting with prominent online food delivery companies, including Ele.me from Alibaba Group, Meituan and JD, stressing the need for these companies to adopt more "rational" competitive practices.

This intervention by the administration follows a period of intense rivalry among the three food delivery platforms, which have been engaged in aggressive discounting to increase their market presence.

The phenomenon of rat-race competition is not limited to the food delivery industry, as the solar and new energy vehicle sectors are also grappling with similar challenges.

"We are seeing a concerning pattern emerge, where enterprises across different industries are resorting to unsustainable tactics in a bid to maintain their market position," said Zhang Jiqiang, head of the research institute of Huatai Securities.

China released a draft amendment to its pricing law in late July as part of efforts to curb excessive competition and price wars among firms.

Addressing the root causes of rat-race competition requires a multipronged approach, with demand-side stimulation being a crucial lever, Zhang said.

Reviving domestic demand can expand the overall market size and provide an enabling macroeconomic environment to alleviate the pressure of rat-race competition, Zhang said, adding that shifting the focus toward higher-quality, value-added products and services can spur enterprises to invest in upgrading their capabilities, ultimately benefiting the entire industry.

The government must also take a more active stance in guiding the industry's supply-side restructuring, ensuring that new capacity is aligned with market demand and that outdated, inefficient capacity is phased out in an orderly manner, he added.