(Yicai Global) March 2 -- Shares in Meituan advanced as much as 4.9 percent today after the leading Chinese meal delivery platform said that it is slashing its commissions in response to government recommendations last month that delivery platforms should lower the fees they charge to restaurants to help the service sector which has been badly hit by the Covid-19 pandemic.

Meituan’s share price [HKG:3690] closed up 1.73 percent at HKD176.40 (USD22.60), giving it a market capitalization of HKD1.08 trillion (USD138.2 billion). Earlier its shares gained 4.9 percent to hit HKD181.90.

Meituan is prepared to halve its commissions in areas where caterers are experiencing difficulties and the maximum fee for each order will be CNY1 (USD0.16), the Beijing-based company said yesterday. This preferential policy is valid from the day that the area is inducted into the list of medium- and high-risk Covid-19 regions to one month after they are lifted.

Those small and medium-sized vendors who are experiencing operating difficulties will be charged commissions of up to 5 percent, a quarter of the usual rate, and more than one million merchants are expected to benefit, it added.

Rival Ele.me has also said that it will subsidize caterers in 87 districts, including those areas designated as medium to high-risk since the beginning of the year, to the tune of CNY20 million (USD3.2 million).

Small-scale restaurants make up the majority of vendors in the catering sector and the government’s measures to help the service sector will have a big impact on takeout platforms’ bottom lines in the short term, said Wang Pengbo, senior analyst at market research firm BoTong Analysys. But in the long run, the policy will spur long-term development and the platforms will also benefit.

Meituan logged revenue of CNY23.2 billion (USD3.7 billion) from its food delivery commissions in the third quarter of last year, accounting for 48 percent of total revenue over the period, according to its latest earnings report. On average, the company earned CNY5.80 (USD0.92) on each order's commission.

Editors: Shi Yi, Kim Taylor