China has launched a more extensive investigation into PDD Holdings. Previously, employees of the company had clashed with regulatory authorities. In recent weeks, about 100 investigators from various departments have gone to the company's headquarters in Shanghai for the investigation, according to people familiar with the matter.

A special investigation team composed of regulatory personnel from institutions including the State Administration for Market Regulation (SAMR) and State Taxation Administration (STA) has carried out extensive on-site checks, said the people, who asked not to be identified due to the sensitivity of the issue.

The investigation, triggered in part by fistfights last month between PDD employees and SAMR inspectors, covers alleged misconduct ranging from fraudulent deliveries to taxation issues, the people said.

The heightened scrutiny has the potential to disrupt business activities and further rattle investors. PDD shares have already slumped for six consecutive days, losing more than 12% since Jan. 8.

The scrutiny has slowed marketing campaigns ahead of the Lunar New Year and delayed ongoing projects, as staff prepare for further inspections and interviews, the people said. The setback comes at a difficult time for PDD, which in November warned of a slowdown in China’s fiercely competitive market as rivals Alibaba Group Holding Ltd. and JD.com Inc. intensify pressure.

Representatives of PDD, SAMR and the STA did not respond to requests for comment.

PDD has in the span of a few years grown from a scrappy VC-backed underdog into one of China’s leading e-commerce players, at one point even surpassing Alibaba in market value. Today, it is best known internationally as the owner of Temu, and competes with Shein across the US and Europe.

Scrutiny from SAMR carries particular weight, especially after its landmark 2020 antitrust probe into Alibaba triggered a sector-wide clampdown. PDD’s ascent, which accelerated after Alibaba came under antitrust fire and is now propelled by Temu’s global expansion, raises the risk of attracting regulatory attention beyond China.

PDD largely avoided the harshest penalties of the years-long government crackdown on the tech sector, though — like many of its peers — it pledged significant contributions to Xi Jinping’s common prosperity drive.

Meanwhile, Chinese regulatory authorities have strengthened their supervision over domestic internet platforms. The tax department last year was the first to require major e-commerce giants to provide sales data, which was a rare measure taken against tax evasion. New regulations introduced in recent weeks prohibit platforms from forcing merchants to engage in promotional activities, and the regulatory authorities have also launched an investigation into Trip.com Group Ltd.