Hundreds of Chinese sellers on Temu have protested against what they call unbearably high penalties imposed by the firm, one of the merchants involved in the protest told Reuters, a fresh sign of tough price competition with low-cost rival Shein.

Temu, the international online site owned by PDD Holdings, sells a wide variety of products, many of them made in China, for rock-bottom prices. Its popularity has grown since its launch in September 2022, as has competition with e-commerce incumbents such as Shein and Amazon in the Untied States and other markets.

A garment merchant from Guangzhou said Temu introduced new penalties in April which can amount to up to five times of the value of a sale when customers return their purchases for a refund.

"I'm fine if I must refund consumers ... What vendors want is for Temu to stop fining us without a reason," the 25-year-old garment seller from Guangzhou said, adding she went to Temu's headquarters in Guangzhou on Monday to protest.

"To calm things down, Temu told us to register the amount of fines we need to pay, but they did nothing afterwards. So, more vendors gathered on July 29 and there were about 400 to 500 people," she said. She declined to be named due to the sensitivity of the matter.

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