I was talking to a journalist yesterday about the situation in China’s hog market for a story they were writing. At one point, they asked why China even cares about overcapacity in the hog industry? These hog companies expand too much, some go out of business, and in the meantime, consumers get really cheap pork. What’s the issue?
A similar situation with overcapacity has been playing out in China’s food delivery market. On Wednesday, state media outlet Economic Daily published an article titled “The food delivery war should end”. The State Administration for Market Regulation posted this article on their website, it was seen as a new round of regulation for the industry, and the stock price of the delivery company Meituan rallied 14% in response.
In this case, it would be positive for Meituan if there was further regulation because it has a strong market position and would no longer need to spend large amounts on subsidies to keep that market position.
The article does a very good job explaining why China’s regulators are trying to reduce overcapacity. In this context, it’s about the food delivery market, but the same logic applies to the hog industry.
It notes that consumers love being able to order a coffee for delivery at 3 yuan (0.44 USD), but this is only available due to incredibly heavy subsidies from the delivery companies that are fighting for market share, and this has broader economic impacts.
The ‘food delivery war’ started in February 2025, when logistics and shopping company JD entered the market. The article says that since that time, the three companies in the space have spent an estimated 80-100 billion yuan (11.6-14.5 billion USD) on subsidies to fight for market share.
Of China’s CPI basket, food, tobacco, alcohol, and dining out account for nearly 30% of the total. CPI growth has been incredibly weak and was in deflation for periods of 2025. Retail spending at restaurants also barely grew in 2025.
“To survive in this subsidy war, restaurant businesses are forced to sacrifice quality and compress profits, plunging the entire industry into a vicious cycle of losing money to gain market share. This ultimately hinders the overall trend of consumption recovery—which runs counter to the central government’s efforts to boost consumption and adds unnecessary resistance to macroeconomic control.”
That last sentence is particularly important. These companies fighting for market share are going against the central government’s goals and making it more difficult for the government to do macroeconomic management.
The article goes on to say that this competition also seeps into other parts of the economy. If restaurants are barely able to make money or are losing money, that impacts their ability to create jobs. And it definitely does not allow for wage increases.
It then sums up the general view of the government when it comes to the anti-involution campaign: “Healthy competition should be a virtuous cycle of technological innovation, efficiency improvement, and service optimization, not a money-burning game built on capital, much less a zero-sum game of using monopolistic positions to control traffic”.
In that sense, there is a difference. Hog companies aren’t profitable tech companies that are subsidizing the sales of their hogs to break into the market. However, the similarity is that the government does see this level of competition in the hog market as not serving its broader development goals.
Every company in the industry is losing money at current prices. Small farmers are taking out loans just to pay for feed. Consumers are getting cheap pork. But there are the broader economic costs if farms go out of business. Upstream suppliers don’t get paid, there are job losses in rural areas, and in previous cases of very low prices, companies cut back on biosecurity and outbreaks of African Swine Fever increased.
Based on this, the government wants to shrink the hog herd so that the industry is sustainable. Companies continuing to expand “runs counter to the central government’s efforts … and adds unnecessary resistance to macroeconomic control”.