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(Bloomberg) – China’s biggest companies are starting to make a habit of giving away profits.
In the last example, Pinduoduo Inc., an e-commerce company known for offering big discounts to customers when they buy products together, said it would donate all of its first net profit since going public. to support farmers and agricultural areas of the country. The company will continue to distribute profits at least until donations reach 10 billion yuan ($ 1.5 billion).
“Improving agriculture has been at the forefront and central to our business from the very beginning. Agriculture touches everyone’s daily life and has a relatively low rate of digitization, ”Managing Director Chen Lei told analysts on a post-earnings call. “We want to bring even more farmers on board and work with them to improve their lives and livelihoods. “
PDD’s announcement comes after a series of similar contributions from the country’s biggest corporations and wealthiest people. Tencent Holdings Ltd., China’s most valuable company, announced last week that it would double the amount allocated to social responsibility programs to around $ 15 billion. PDD co-founder Colin Huang previously pledged to personally fund scientific research.
President Xi Jinping has increasingly emphasized the idea of ”common prosperity” as the Communist Party tries to close the country’s wealth gap. Regulators are forcing most private education companies to convert to nonprofits, while they have pushed other tech players to raise wages for low-skilled workers at the expense of incomes. The DP’s decision squarely targets one of Xi’s top priorities: reducing rural poverty.
In the United States, companies made charitable contributions to corporate profits, but the practice declined after criticism that CEOs were using shareholder money for their own glory. Investors had no such qualms about PDD’s engagement. Shares climbed 22% in U.S. trading after the company released the news and surprised earnings for the quarter.
“This move shows the company’s willingness to embrace social responsibility and explore new opportunities in a blue ocean, although the profit margin may again be under pressure from these investments,” analysts wrote. China International Capital Corp. in a research note. “We expect the 2H21 non-GAAP profit to break even, reflecting that all profits will be invested in the initiative.”
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