refuse to fade. China’s consumer prices ended 2025 flat year on year, far below policymakers’ long-standing target of “around 2 per cent”. A vast market built on thin margins China is already the world’s largest food delivery market. Gross merchandise value reached RMB1.64 trillion (about $229 billion) in 2024 and is projected to approach RMB2 trillion by 2027, according to Daxue Consulting. More than 550 million users, just over half of China’s internet population, now order meals online. The sector is dominated by two giants: Meituan and Alibaba’s Ele.me, together controlling about 90 per cent of the market. The high barriers to entry did not deter JD.com, which entered food delivery and local services in 2025 with an unusually public show of force, including founder Liu Qiangdong personally delivering meals to promote the service. Food delivery became a loss-leading weapon in a larger contest to become the “everyday app” – the default platform for shopping, groceries, logistics and local services. Last year, Meituan, Alibaba and JD collectively spent more than RMB100 billion on consumer subsidies, according to industry estimates. Burgers, coffee and milk tea were sold at prices that barely covered packaging, let alone labor or logistics. For consumers, the short-term benefits were obvious. For investors and merchants, the costs mounted quickly. Meituan reported its first quarterly loss since late 2022, warning that margins would remain under pressure. Alibaba’s profits slid, dragging on broader earnings. Restaurant operators complained of chaotic order volumes, compressed margins and growing dependence on platform algorithms they did not control. Subsidies may boost volumes, but they also anchor consumer expectations around ultra-low prices, making it harder for businesses to raise prices later.  Why food delivery matters to Beijing Food delivery is unusually sensitive politically and economically. According to Daxue Consulting, the user base skews young and urban: about 85 per cent of users are aged 18 to 40, women account for slightly more than half, and white-collar workers dominate demand. Top-tier cities still generate the highest volumes, but growth is increasingly coming from lower-tier cities where disposable incomes are thinner and price sensitivity higher. This demographic profile makes the sector a powerful transmission channel for deflation. When millions of urban workers become accustomed to meals priced well below cost, it puts pressure on restaurants, wages, and suppliers, rippling outward into the “real economy” that regulators are trying to protect. Beijing has already signaled discomfort. Regulators publicly urged platforms to rein in competition last summer and summoned executives for talks. Yet the subsidy war dragged on for months.  A wider tech crackdown, again? Over the past year, authorities have stepped up scrutiny of pricing practices across digital platforms as part of a campaign to counter deflation. Tensions have occasionally spilt into public view. Last month, an on-site inspection by SAMR officials at PDD Group’s Shanghai headquarters reportedly ended in a physical altercation, The Financial Times reported.  Meituan and Alibaba have publicly welcomed the investigation and pledged cooperation. Subsidies are already easing, though few expect platforms to abandon discounts entirely. Price competition is deeply embedded in China’s delivery culture, reinforced by a demanding work environment, long hours and a consumer base accustomed to convenience at low cost. Further reading: E-commerce rivals in China fuel ‘instant retail’ war amid policy uncertainty.