Meituan stock further plunges after China ramps up rider protections
Updated 13:43, 27-Jul-2021
By Yao Nian
A food deliveryman of Meituan is driving on the street in Shenyang, northeast China's Liaoning Province, May 18, 2021. /VCG

A food deliveryman of Meituan is driving on the street in Shenyang, northeast China's Liaoning Province, May 18, 2021. /VCG

Meituan shares further plunged by nearly 10.6 percent Tuesday after Chinese authorities issued new guidelines (link in Chinese) to protect the rights and interests of hard-pressed food deliverymen, fueling investor concerns over rising employment costs.

Food delivery platforms are required to offer social insurance covering accidents and sickness and pay no less than the local minimum wage to food deliverymen, appropriately relax delivery time limits, and ensure traffic safety of deliverymen, according to the guidelines.

The guidelines were jointly issued on Monday afternoon by seven departments, including the State Administration for Market Regulation, the Cyberspace Administration of China, and the National Development and Reform Commission.

Tencent-backed Meituan, one of China's biggest food delivery services, said it will resolutely implement the guideline and actively improve labor security, delivery safety and employee benefits of deliverymen.

Another large food delivery platform, Alibaba's, said it will resolutely support and earnestly abide by the guidelines, and make plans around safety and benefits of deliverymen. The firm said it has been working on insurance covering occupational injuries for riders.

"The guidelines are very pragmatic. They are to solve common problems such as wage and treatment, labor protection and occupational protection. It is protection for riders, and it is also not a bad thing for the platforms," Cheng Yang, a partner lawyer with Lantai Law Firm, told CGTN.

The guidelines also require the platforms to establish a democratic mechanism for conflict resolution with riders, where riders can explain the late delivery of orders due to objective factors within 24 hours.

Cheng believed it is a good thing for the platform in the long run. "It will help the platforms to establish common interests with riders, if the rules work well," she said.

Meituan saw its shares plunge by nearly 14 percent – its worst on record – and close at 235.6 HK dollars ($30.30) with a market cap of 1.44 trillion HK dollars in Hong Kong's trading on Monday. That was against a 4.13 percent drop in the Hang Seng Index.

Investors are worried about the rising employment costs of the platform.

"It does have cost changes, but the overall cost is not high," Chen told CGTN. "Actually, the platforms have been working on minimum wages and occupational protection."

Labor issues at food delivery platforms like Meituan and have come under scrutiny in recent months, as these platforms were reported to give delivery men impossible routes through stringent algorithms to follow when fulfilling orders and penalize them for late deliveries.

In April, a video clip went vital on Chinese social media, where a labor official was filmed rushing around Beijing as an experiential Meituan deliveryman to pick up and send food orders while struggling with congested traffic. The official was penalized a 60-percent cut in delivery fee for being 20 minutes late on an order and ended the day with 41 yuan ($6.30) in earnings.

Meituan employed about 3 million riders delivering an average of over 27 million food orders per day last year.

Monday's guidelines were announced just days after the Ministry of Human Resources and Social Security, along with seven other departments, issued guidelines on guaranteeing the basic rights of workers in new employment forms that go beyond food delivery men to include ride hailing drivers.

The slide in shares is the latest blow to Meituan, which is already facing an antitrust probe announced in April on whether it has forced merchants to sell exclusively on its platform.

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