China Deploys Digital Licenses to Curb Ghost Restaurants

China’s State Administration for Market Regulation (SAMR) is rolling out a nationwide electronic license verification system for online food delivery platforms, a move designed to eliminate “ghost restaurants” — unlicensed vendors that operate on delivery apps without valid credentials or physical locations. The initiative, announced at a SAMR press conference, represents a fundamental shift from reactive enforcement to proactive prevention in one of the world’s largest food delivery markets.

The system, detailed in People’s Daily, requires merchant legal representatives to authorize their electronic business licenses through facial recognition before platforms can display them. Platforms will automatically cross-check business premises from licenses against food preparation addresses and rider pickup locations in a triple-coordinate verification process, creating what regulators describe as an “electronic fence” around each merchant.

The Ghost Restaurant Problem

“Ghost restaurants” are unlicensed food vendors that use forged qualifications, borrowed permits, or fabricated addresses to appear legitimate on delivery platforms. They exploit the virtual, cross-regional nature of online food delivery to evade oversight, according to Guangming Daily.

The scale of the problem became clear in April 2026, when SAMR imposed penalties totaling 3.597 billion yuan (approximately $500 million) on seven major e-commerce platforms — Pinduoduo, Meituan, JD.com, Taobao Flash Purchase, Douyin, Taobao, and Tmall — for hosting 67,604 “ghost stores.” It was the largest fine since China’s Food Safety Law took effect, as Jiefang Daily reported.

An investigation revealed a sophisticated ecosystem: order-transfer platforms like “ZhuanDanBao” and “XunMeng” enabled ghost stores to receive orders from major platforms and auction them to the lowest-bidding actual food producers. In one case, a 252.4-yuan cake ordered by investigators was resold to an actual producer for just 80 yuan, with the ghost store pocketing 121.9 yuan.

From Reactive to Proactive Regulation

SAMR Food Safety Director Sun Huichuan described the electronic license verification as “a reshaping of the regulatory model” — moving from “firefighting after the fact to fire prevention beforehand.” Previously, detecting ghost restaurants relied largely on consumer complaints. Now, the system uses biometric verification as a rigid constraint to block rented or borrowed credentials at the source.

“We must warn delivery platforms: they cannot just collect commissions without taking responsibility; they cannot just manage traffic without caring about quality,” Sun said at a February press conference, as reported by Guangzhou Daily. “Delivery platforms must genuinely shoulder the main responsibility of being the ‘gatekeepers’ of food delivery safety.”

New regulations that took effect June 1 require platforms to conduct substantive — not just formal — review of merchant licenses, display prominent labels for no-dine-in merchants, and re-verify merchant information at least every six months. Violations carry fines of up to 200,000 yuan.

The Ministry of Public Security has also joined the effort, issuing directives in February to crack down on online food safety crimes specifically targeting ghost restaurants, as China News Service reported.

Shanghai Leads the Pilot

Shanghai launched the nation’s first electronic license verification pilot in May 2026. More than 70,000 licensed food merchants operate online in the city, and platforms have displayed electronic licenses for over 5,000 new merchants, according to China News Service.

Shanghai has also inspected more than 150 “no-dine-in” food delivery clusters, implementing a “management entity plus N operators” collaborative governance model that requires each merchant to hold independent licenses, as Shanghai Observer reported.

Complementary Transparency Measures

Beyond electronic licenses, regulators are pushing “Internet + Open Kitchen” initiatives that require food merchants to install cameras streaming live kitchen feeds to delivery platforms. Beijing’s first such food court launched in Tongzhou District in May, with 17 stalls equipped with HD cameras, as China Food Safety Net reported.

However, enforcement challenges remain. A July investigation by Worker’s Daily found that among 100 “Open Kitchen” labeled stores across five cities, 29 had no live feed at all, and many cameras pointed at ceilings or floors, according to Guangming Net.

Delivery riders are also being enlisted as “food safety sentinels.” In Zhengzhou, over 8,000 riders have registered on the “ZhengQi Xianfeng” snap-and-report platform, earning 50-yuan rewards for verified reports of food safety violations, as CCTV News reported.

What’s Next

SAMR Deputy Director Li Zheng acknowledged that data quality remains the biggest challenge for the electronic license system, requiring continuous data cleaning and correction across regulators, platforms, and merchants. The agency is focusing on more practical systems, more solid data foundations, and more targeted technologies.

With China’s food delivery market projected to exceed 1.4 trillion yuan in 2026 — roughly 24 percent of total restaurant industry revenue — the stakes are high. The electronic license system, combined with open kitchen transparency and rider-based social oversight, signals a comprehensive regulatory push to make food delivery safer at its source. The question now is whether enforcement can keep pace with the industry’s rapid growth.