PDD Holdings Inc, the Chinese e-commerce giant, saw its stock plummet 5.05% in the pre-market trading session on Wednesday. This sharp decline comes amid mounting regulatory pressure on the company to rectify its controversial "refunds-only" policy, which allows customers to claim refunds without returning purchased goods.

According to reports, China's State Administration of Market Regulation and Ministry of Commerce summoned PDD executives recently, directing them to address the refund policy that has drawn ire from merchants. Regulators argue that the practice places an unfair burden on small sellers on PDD's Pinduoduo platform, denying them payment even after delivering products.

While regulators stopped short of outlawing the practice or suggesting specific solutions, they have ordered PDD to fix the issue. This regulatory intervention follows a growing backlash from merchants, who accuse PDD of pandering to shoppers' whims at the expense of their bottom line. The dispute has escalated amid PDD's aggressive global expansion through its Temu platform, which has proven popular with international sellers and consumers but faces mounting dissatisfaction from domestic Chinese merchants.