China Tech Giants Tumble Amid Growing Fears of Price Wars

China’s internet firms are revving up efforts to outdo each other since Beijing began to wind back its bruising internet crackdown, spurring an abrupt surge in competition that’s threatening margins and spooking investors.

A battle is brewing as companies that laid low or sought to limit expansion during the years-long crackdown now feel the shackles coming off. Beijing hasn’t sanctioned a return to the free-for-all that marked the sector’s pre-Covid heyday — but a flurry of aggressive campaigns announced by Big Tech in recent weeks is reviving the specter of debilitating price wars.

E-commerce leader Inc. slumped 8% in US premarket trading after a media report said it was planning a 10 billion yuan ($1.5 billion) subsidy campaign to compete against rival PDD Holdings Inc. Meituan is said to be expanding into Hong Kong and has embarked on a campaign to hire 10,000 people on the mainland — an effort to beat back heightened competition from new entrants such as ByteDance Ltd. in the $145 billion Chinese food arena.

Away from online commerce, NetEase Inc. and MiHoYo are upping their battle against gaming leader Tencent Holdings Ltd., while search-engine operator Baidu Inc. is rolling out a new chat service based on artificial intelligence to try and wrest ad revenue away from the likes of Alibaba Group Holding Ltd. and Tencent.

The rush of initiatives come after Beijing appeared to grow less stringent in recent months in efforts to curb the industry’s influence. While the growth plans caused a run-up in a number of shares, they also come with broader risks: intensifying competition has the potential to severely depress profit margins.