Temu's Global Growth Hits Regulatory Wall as Era of Cheap Chinese E-commerce Faces Reckoning

30%. That's how much PDD Holdings' stock has tumbled since November, as the parent company of Temu faces a reality check that's reshaping the global e-commerce landscape.

The app that topped download charts worldwide in 2023 and 2024 is now discovering that the very tactics that fueled its meteoric rise are becoming its biggest liability. What started as a brilliant arbitrage play is turning into a regulatory nightmare that could define the future of cross-border retail.

The Regulatory Dragnet Tightens

On January 21, Turkish competition authorities raided Temu's Istanbul office as part of an antitrust investigation. This came just weeks after EU regulators stormed the company's Dublin headquarters, probing whether Temu benefits from unfair Chinese state subsidies. In Poland, regulators slapped fines on the platform for misleading discount advertisements, accusing it of inflating reference prices to exaggerate savings.

The pattern is clear: Temu's "China-to-door" model—cheap goods shipped directly from Chinese factories to global consumers with free shipping—has triggered a coordinated regulatory response across multiple jurisdictions.

"Temu's original 'China-to-door' model was a brilliant, but ultimately fragile, strategy built on regulatory arbitrage," Ashley Dudarenok, founder of China research firm ChoZan, told Rest of World. "That era is coming to a close. The model is now undergoing a forced, rapid evolution into a localized cross-border hybrid."

The Growth Engine Sputters

The numbers tell the story of a company hitting turbulence. PDD Holdings' revenue growth has slowed to single digits—a stark shift for a company long defined by hypergrowth. Since launching internationally in late 2022, Temu had combined ultralow prices with aggressive marketing and gamified referral systems to achieve explosive adoption, particularly in the U.S.

But the regulatory pushback is taking its toll. In Europe, while Temu continues growing overall, adoption rates in top-tier markets like the Netherlands have plateaued. The share of online shoppers purchasing from the platform has largely remained flat in key markets.

Governments Draw Battle Lines

The regulatory offensive isn't just about antitrust concerns—it's about protecting domestic industries from what many see as unfair competition. In July, the EU will end its duty-free allowance on parcels under 150 euros ($176), directly targeting the pricing advantage that platforms like Temu and Shein have exploited.

Turkey has already scrapped its duty-free allowance on imports up to 30 euros, forcing both Temu and Shein to suspend sales in the country. The message is clear: governments are erecting guardrails to level the playing field for local businesses.

The EU's Digital Services Act, which began enforcement in 2024, adds another layer of compliance costs for large online platforms. For Chinese e-commerce companies accustomed to operating in less regulated environments, these requirements represent a fundamental shift in how they must do business globally.

Consumer Backlash Emerges

Regulatory pressure isn't Temu's only problem. In South Africa, angry customers have flooded social media with complaints about delayed deliveries, unresponsive couriers, and unresolved refunds, prompting calls for boycotts. The country's Department of Trade, Industry and Competition has publicly warned Temu to comply with local consumer and competition laws.

Local retailers across multiple markets have accused Temu of exploiting import tax loopholes to undercut domestic businesses—a charge that resonates with policymakers concerned about protecting local jobs and tax revenues.

The Fundamental Trade-off

The broader question facing Temu—and by extension, the entire Chinese cross-border e-commerce model—is whether it can adapt without losing what made it competitive in the first place. Tighter compliance reduces regulatory risk but also erodes the price advantage that attracted consumers.

This trade-off strikes at the heart of what Temu represents: a direct challenge to traditional retail structures through radical price compression. If regulatory pressure forces the company to operate more like conventional retailers, it risks losing its core value proposition.

The stakes extend beyond one company. Temu's struggles signal a potential shift in how global e-commerce operates, with implications for everything from supply chain structures to consumer expectations about pricing.