China has intensified regulatory action against PDD Holdings Inc., widening an existing inquiry after a confrontation between company staff and officials escalated into physical altercations, according to people with direct knowledge of the situation.

More than 100 inspectors from multiple government bodies have been sent to PDD’s Shanghai offices in recent weeks. The coordinated effort involves agencies such as the State Administration for Market Regulation and the State Taxation Administration, forming a dedicated taskforce that has carried out detailed on-site inspections. The people familiar with the matter spoke on condition of anonymity because of the political sensitivity surrounding the case.

The expanded investigation follows clashes last month in which employees allegedly fought with market regulation officials. Authorities are now examining a broad range of potential violations, including accusations of misleading delivery practices and possible tax-related irregularities.

The deeper probe is weighing on the company’s operations and market sentiment. PDD’s American depositary receipts fell 2.2 per cent in New York trading on Tuesday and have declined by roughly 8 per cent since the start of the year.

Analysts at Citigroup, led by Alicia Yap, said recent weakness in the share price may already reflect concerns about the incident and growing regulatory pressure. They warned that confirmation of a formal investigation, or a public statement by the company acknowledging it, could prompt further selling despite the bank maintaining a buy recommendation.

Internally, the scrutiny has forced PDD to scale back marketing activity ahead of the Lunar New Year and has slowed several projects as employees prepare for interviews and additional inspections. The disruption comes as the company faces tougher competition at home, after warning in November that growth was slowing amid renewed pressure from rivals Alibaba Group Holding Ltd. and JD.com Inc.

Requests for comment sent to PDD, the market regulator and the tax authority were not answered.

JPMorgan analysts, including Andre Chang, said the lack of transparency around the investigation is likely to hang over the stock. With no clarity on the scope or possible outcomes, they said it was impossible to assess the financial impact, reiterating the bank’s neutral stance on the shares.

Over a relatively short period, PDD has transformed itself from a venture capital-backed newcomer into one of China’s largest online retail groups, at one stage overtaking Alibaba in market value. Outside China, it is best known as the parent company of discount marketplace Temu, which competes aggressively with fast-fashion giant Shein in the United States and Europe.

Attention from the State Administration for Market Regulation is particularly significant given its role in the 2020 antitrust case against Alibaba, an action that ushered in a sweeping crackdown across the technology sector. PDD’s rapid rise, helped initially by Alibaba’s regulatory troubles and more recently by Temu’s overseas expansion, increases the likelihood of closer scrutiny both domestically and abroad.

Although PDD avoided the most severe penalties imposed during the prolonged tech crackdown, it joined other major platforms in pledging financial support for President Xi Jinping’s common prosperity agenda.

Regulators have continued to tighten oversight of China’s internet companies. Last year, tax authorities demanded sales data from leading e-commerce platforms for the first time as part of an anti-evasion push. New regulations introduced in recent weeks have barred platforms from forcing merchants into promotions, while a separate investigation has also been launched into Trip.com Group Ltd.