Beijing urged to curb 'free milk tea'-style cash burn in e-commerce battle
Wang Yiming, a central bank adviser, said 'quick commerce' – involving the rapid delivery of food and essential goods, often within 30 minutes – creates new opportunities for consumption, which could be vital for long-term growth.
He urged officials to guide the sector's high-quality development through targeted policy measures.
'Anti 'involution'-style competition is not against competition itself, but against behaviours that undermine fair competition,' said Wang, who also serves as vice-chairman of the China Centre for International Economic Exchanges, a Beijing-based governmental think tank.
'Instead, the goal is to raise competition to a higher level – moving away from a zero-sum mindset towards a win-win approach through innovation, quality upgrades and a better industrial ecosystem.'
Beijing has increasingly warned about 'neijuan' – cutthroat competition that drives prices down and suppresses domestic demand. E-commerce giants, including JD.com, Alibaba and Meituan, have been at the centre of the controversy as they fight to lure customers through aggressive subsidies.
After warnings from China's market regulator in late July, the three firms pledged to embrace 'rational' competition and stop incentives such as free giveaways. However, they continue to offer substantial discount coupons.
Alibaba owns the South China Morning Post .
At a closed-door meeting in late July organised by the Beijing-based think tank New Economist, Wang said the current cycle of competition reflects shifting market dynamics as platforms prioritise speed, efficiency and deeper customer engagement over sheer size and geographic reach.
'On the surface, competition among e-commerce platforms appears to be a battle for market share, but beneath this lies a deeper transformation driven by the technology revolution, reshaping e-commerce service models,' Wang said.
Instant retail holds strong potential to boost domestic demand, he added, as China's service sector still has ample room for growth while household spending on services continues to rise.
In a research note released last week, Morgan Stanley analysts said instant retail can help merchants expand their customer reach, especially to lower-income consumers in smaller cities, while subsidies from platforms boost consumption, rider incomes and employment.
'Quick commerce is unlocking new spending and replacing offline consumption, with limited cannibalisation of the current e-commerce pie,' the note's authors said, estimating that market demand could reach 2.5 trillion yuan by 2030.
Despite Beijing's pressure on the industry, which is limiting giveaways and other incentives, competition would likely remain intense because it has proven effective in attracting new users and boosting demand, according to the analysts.
'China's 'anti-involution' guideline should curb 'free milk tea'-style cash burn. It's not aimed at stopping competition, but rather guiding it towards efficiency, innovation and ecosystem sustainability, including rider welfare and merchant profitability,' they added.
Meanwhile, Wang urged the government to develop policies that help companies upgrade technology – such as by adopting large AI models – while stimulating consumption.
He called for a full-chain regulatory framework to adapt to the new economic model, combining advanced guidance, active prevention and oversight.
Stronger collaboration between government, businesses and industry groups is needed to set standards and refine anti-monopoly rules, balancing efforts to curb unfair practices with the need to protect innovation, he said. – South China Morning Post
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
The Star
an hour ago
- The Star
Hong Kong's Cathay offers first post-Covid voluntary unpaid leave in 2 quarters
Hong Kong flag carrier Cathay Pacific Airways has offered voluntary three-month unpaid leave to cabin crew for the first time since the pandemic for two consecutive quarters, amid modest profit growth forecasts. The company informed its Hong Kong-based cabin crew that applications were open for the fourth quarter of this year via an internal memo, a copy of which was seen by the Post.
The Star
2 hours ago
- The Star
China's early South American soybean buys squeeze US out of peak export window
China has moved early to lock in soybean supplies from Brazil for September and October, sidelining US exporters from what is traditionally their most lucrative selling period. The shift underscores Beijing's growing trade reliance on South America and comes amid renewed political and commercial tensions with Washington. According to market analysis from Brazil's Safras & Mercado, traders reported Chinese purchases of roughly 8 million tonnes of soybeans for September and 4 million tonnes for October, about half of the country's projected demand for the two months. All volumes are sourced from South America, with Brazil capturing the lion's share. The move effectively shortens the US 'window' for soybean shipments to China, which typically runs from September to January before the Brazilian harvest arrives. Last year, China imported 105 million tonnes of soybeans, 22.13 million of them from the US, illustrating how pivotal this early-season slot has been for American farmers. The decision to buy more soybeans from South America comes as Chicago Board of Trade soybean futures hover near five-year lows, with reduced Chinese buying expected to keep prices under pressure. When asked about the soybean purchases and their impact on US producers, Liu Pengyu, a spokesperson for the Chinese embassy in Washington, did not directly address the trade volumes. Instead, he said Bejing hoped 'the US side will work with China to implement the important common understandings reached by our heads of state' and called for dialogue 'on the basis of equality, respect and mutual benefit' to promote sustainable bilateral relations. The Chinese embassy in Brasilia did not respond to requests for comment. On Monday, US President Donald Trump publicly urged Beijing to quadruple its soybean purchases from the United States, a dramatic call just days before a tariff truce between the two countries was set to expire. Posting on social media, Trump claimed China was concerned about soybean shortages and said he expected 'quick' orders from Beijing. The remarks briefly sent Chicago futures higher, but market watchers quickly questioned whether such a deal was realistic. Meeting the request would require China to source most of its soybean imports from the United States, an unprecedented shift that would displace established Brazilian volumes. It remains unclear whether increased Chinese agricultural purchases would be a condition for a lasting trade deal between Beijing and Washington. In the meantime, China has not booked any US soybeans for the fourth quarter, and some feed manufacturers are reportedly testing alternative suppliers, including Argentina, to secure cheaper South American protein meals. In Brazil, the news of both the early Chinese commitments and Trump's gambit was met with quiet confidence among exporters. In a statement, the Brazilian Soybean Producers Association said on Monday that it was monitoring the impact of a potential trade deal on crops, but that the combination of strong September and October sales could be an opportunity to further cement Brazil's role as China's primary supplier. As the US risks losing ground in the Chinese market, Brazil and China are also working on longer-term trade integration. On Sunday, the Brazilian newspaper Folha de S. Paulo reported that officials from both countries were said to be drafting a bilateral protocol to recognise environmental certifications and traceability systems for key agricultural exports, particularly beef and soybeans. The plan would align methodologies for measuring emissions, land use and animal welfare, allowing Chinese authorities to formally recognise Brazilian sustainability seals such as 'Carbon Neutral Meat' and 'Low Carbon Soy'. Measures include integrated digital tracking, QR codes linking to environmental data and shared databases. The protocol aims to smooth trade flows, add value to certified products and pre-empt future non-tariff barriers. A Chinese technical delegation is expected in Brazil later this year to inspect systems on the ground before finalising the deal. The talks come against a backdrop of US tariff hikes on Brazilian goods and growing political friction between Washington and Brasília, even as China expands its list of authorised Brazilian exporters in other sectors, from coffee to processed foods. -- SOUTH CHINA MORNING POST
The Sun
2 hours ago
- The Sun
Modi's tax overhaul to strain finances but boost image amid US trade tensions
NEW DELHI: Indian Prime Minister Narendra Modi's deepest tax cuts in eight years will strain government revenues but are winning praise from businesses and political pundits who say they will bolster his image in an ongoing trade fight with Washington. In the biggest tax overhaul since 2017, Modi's government on Saturday announced sweeping changes to the complex goods and services tax (GST) regime which will make daily essentials and electronics cheaper from October, helping consumers and also companies like Nestle, Samsung and LG Electronics. At the same time, in his Independence Day speech on Friday, Modi urged Indians to use more goods made domestically, echoing calls from many of his supporters to boycott U.S. products after Donald Trump hiked tariffs on imports from India to 50% as of August 27. The tax cut plan comes with costs given GST is a major revenue generator. IDFC First Bank says the cuts will boost India's GDP by 0.6 percentage points over 12 months but will cost the state and federal government $20 billion annually. But it will improve weak stock market sentiment and bring political dividends for Modi ahead of a critical state election in the eastern state of Bihar, said Rasheed Kidwai, a fellow at New Delhi-based Observer Research Foundation. 'GST reduction will impact everyone, unlike cuts to income tax, which is paid by only 3%-4% of the population. Modi is doing this as he is under a lot of pressure due to U.S. policies,' said Kidwai. 'The move will also help the stock market, which is now politically important as it has a lot of retail investors.' India launched the major tax system in 2017 that subsumed local state taxes into the new, nationwide GST to unify its economy for the first time. But the biggest tax reform since India's independence faced criticism for its complex design that taxes products and services under four slabs - 5%, 12%, 18% and 28%. Last year, India said caramel popcorn would be taxed at 18% but the salted category at 5%, triggering criticism about a glaring example of GST's complexities. Under the new system, India will abolish the 28% slab - which includes cars and electronics - and move nearly all of the items under the 12% category to the lower 5% slab, benefitting many more consumer items and packaged foods. Government data shows the 28% and 12% tax slabs together garner 16% of India's annual GST revenue of roughly $250 billion last fiscal year. 'A brighter gift' and politics Bihar is a key state politically and goes to the polls by November. A recent survey by the VoteVibe agency showed Modi's opposition has an edge largely because of a lack of jobs. 'Any tax cut has wide public appreciation. But of course, the timing is purely determined by political exigencies,' said Dilip Cherian, a communications consultant and co-founder of Indian public relations firm Perfect Relations. 'It seems to be an indication of some mixture of frustration as well as recognition that there is a broad public pushback against high and crippling rates of taxation.' Modi's ruling Bharatiya Janata Party has seized on his tax announcement, posting on X that on the Hindu festival of lights, Diwali, 'a brighter gift of simpler taxes and more savings is waiting for every Indian.' Modi has vowed to protect farmers, fishermen and cattlemen, following Trump's surprise tariff announcement on India, after trade talks between New Delhi and Washington collapsed over disagreement on opening India's vast farm and dairy sectors and stopping Russian oil purchases. The latest round of trade talks between the two nations set for August 25-29 has also been called off - REUTERS
