China’s biggest companies are starting to make a habit out of giving away their earnings.
In the latest example, Pinduoduo, an e-commerce company known for giving big discounts to customers when they buy produce together, said it will donate all of its first net profit since going public to support the country’s farmers and agricultural areas. The company will keep giving away earnings at least until the donations reach C¥10-billion (R22.5-billion).
“Improving agriculture has been at the front and centre of our business from the very beginning. Agriculture touches the daily lives of everyone and has a relatively low digitisation rate,” CEO Chen Lei told analysts on a post-results call. “We want to bring even more farmers on board and work with them to improve their lives and livelihoods.”
Pinduoduo’s announcement comes after a series of similar contributions from the country’s biggest companies and wealthiest people. Tencent Holdings, China’s most valuable company, said last week it would double the amount of money it’s allocating for social responsibility programmes to about $15-billion. Pinduoduo co-founder Colin Huang had earlier pledged personally to bankroll research into sciences.
President Xi Jinping has increasingly emphasised the idea of “common prosperity” as the Communist Party tries to address the country’s wealth gap. Regulators are forcing most private education companies to convert into non-profits, while they’ve pushed other tech players to boost pay for low-skill workers at the expense of earnings. Pinduoduo’s decision squarely targets one of Xi’s top priorities: alleviating rural poverty.
No qualms
In the US, companies used to make charitable contributions out of corporate profits, but the practice declined after criticism that CEOs were using shareholder money for their own glory. Investors had no such qualms about Pinduoduo’s pledge. Shares soared 22% in US trading after the company unveiled the news and a surprise profit for the quarter.
“The move shows the company’s willingness to take social responsibility and explore new opportunities in a blue ocean, though profit margin may be pressured again by these investments,” analysts at China International Capital wrote in a research note. “We expect 2H21 (second half 2021) non-Gaap profit to break even, reflecting all the profits will be invested in the initiative.” — Reported by Coco Liu, (c) 2021 Bloomberg LP
