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What changed in PDD Holdings Inc.'s 20-F — 2022 vs 2023

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Paragraph-level year-over-year comparison of PDD Holdings Inc.'s 2022 and 2023 20-F annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+1055 added−1018 removedSource: 20-F (2024-04-25) vs 20-F (2023-04-26)

Top changes in PDD Holdings Inc.'s 2023 20-F

1055 paragraphs added · 1018 removed · 868 edited across 5 sections

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

489 edited+105 added−71 removed321 unchanged
Biggest change(Primary ​ ​ ​ ​ ​ Other Subsidiaries ​ ​ ​ ​ ​ ​ beneficiary ​ Hangzhou ​ VIE and Its ​ of PDD ​ ​ ​ Consolidated ​ of the VIE) Weimi* Subsidiaries Holdings Inc.** Eliminations Total ​ ​ (RMB in thousands) Current assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ 2,269 1,033 2,430,440 3,992,973 ​ — 6,426,715 Restricted cash ​ — — 59,402,079 215,177 ​ — 59,617,256 Short-term investments ​ — — 12,306,340 74,210,278 ​ — 86,516,618 Amounts due from Group companies (1) ​ — 1,239,992 40,425,872 29,829,301 ​ (71,495,165) — Others ​ 390 9,393 6,198,116 2,140,680 ​ — 8,348,579 Total current assets ​ 2,659 1,250,418 120,762,847 110,388,409 ​ (71,495,165) 160,909,168 Non-current assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other non-current assets ​ — — 5,300,938 11,125,028 ​ — 16,425,966 Investments in subsidiaries, the VIE and its subsidiaries (2) ​ 86,252,341 2,000 — 1,579,309 ​ (87,833,650) — Others ​ 674,057 9,690 2,581,092 609,745 ​ — 3,874,584 Total non-current assets ​ 86,926,398 11,690 7,882,030 13,314,082 ​ (87,833,650) 20,300,550 Total assets ​ 86,929,057 1,262,108 128,644,877 123,702,491 ​ (159,328,815) 181,209,718 Current liabilities: ​ ​ ​ ​ ​ ​ ​ ​ Payable to merchants ​ — — 61,947,517 562,197 ​ — 62,509,714 Merchant deposits ​ — — 13,360,409 217,143 ​ — 13,577,552 Amounts due to Group companies (1) ​ — 1,315,756 27,978,153 123,501,613 ​ (152,795,522) — Others ​ 24,607 191,953 12,619,600 4,806,288 ​ — 17,642,448 Total current liabilities ​ 24,607 1,507,709 115,905,679 129,087,241 ​ (152,795,522) 93,729,714 Non-current liabilities ​ ​ ​ ​ ​ ​ ​ ​ Convertible bonds ​ 11,788,907 — — — ​ — 11,788,907 Others ​ 996 75 324,285 251,194 ​ — 576,550 Total non-current liabilities ​ 11,789,903 75 324,285 251,194 ​ — 12,365,457 Total liabilities ​ 11,814,510 1,507,784 116,229,964 129,338,435 ​ (152,795,522) 106,095,171 ​ 13 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, 2020 ​ ​ PDD Holdings ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Inc.
Biggest change(Primary ​ ​ ​ ​ ​ Other Subsidiaries ​ ​ ​ ​ ​ ​ beneficiary ​ Hangzhou ​ VIE and Its ​ of PDD ​ ​ ​ Consolidated ​ of the VIE) Weimi* Subsidiaries Holdings Inc.** Eliminations Total ​ ​ (RMB in thousands) Current assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash, cash equivalents, restricted cash and short-term investments ​ 2,269 1,033 74,138,859 78,418,428 ​ — 152,560,589 Amounts due from Group companies (1) ​ — 1,239,992 40,425,872 29,829,301 ​ (71,495,165) — Others ​ 390 9,393 6,198,116 2,140,680 ​ — 8,348,579 Total current assets ​ 2,659 1,250,418 120,762,847 110,388,409 ​ (71,495,165) 160,909,168 Non-current assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other non-current assets ​ — — 5,300,938 11,125,028 ​ — 16,425,966 Investments in subsidiaries, the VIE and its subsidiaries (2) ​ 86,252,341 2,000 — 1,579,309 ​ (87,833,650) — Others ​ 674,057 9,690 2,581,092 609,745 ​ — 3,874,584 Total non-current assets ​ 86,926,398 11,690 7,882,030 13,314,082 ​ (87,833,650) 20,300,550 Total assets ​ 86,929,057 1,262,108 128,644,877 123,702,491 ​ (159,328,815) 181,209,718 Current liabilities: ​ ​ ​ ​ ​ ​ ​ ​ Payable to merchants ​ — — 61,947,517 562,197 ​ — 62,509,714 Amounts due to Group companies (1) ​ — 1,315,756 27,978,153 123,501,613 ​ (152,795,522) — Others ​ 24,607 191,953 25,980,009 5,023,431 ​ — 31,220,000 Total current liabilities ​ 24,607 1,507,709 115,905,679 129,087,241 ​ (152,795,522) 93,729,714 Non-current liabilities ​ ​ ​ ​ ​ ​ ​ ​ Convertible bonds ​ 11,788,907 — — — ​ — 11,788,907 Others ​ 996 75 324,285 251,194 ​ — 576,550 Total non-current liabilities ​ 11,789,903 75 324,285 251,194 ​ — 12,365,457 Total liabilities ​ 11,814,510 1,507,784 116,229,964 129,338,435 ​ (152,795,522) 106,095,171 ​ Selected Condensed Consolidated Cash Flows Information ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, 2023 ​ ​ PDD Holdings Inc. ​ ​ ​ ​ ​ Other ​ ​ ​ ​ ​ ​ (Primary ​ ​ ​ ​ ​ Subsidiaries ​ ​ ​ ​ ​ ​ beneficiary ​ ​ ​ VIE and Its ​ of PDD ​ ​ ​ Consolidated ​ of the VIE) Hangzhou Weimi * Subsidiaries Holdings Inc.** Eliminations Total ​ ​ (RMB in thousands) Net cash generated from/(used in) operating activities (3) ​ 71,615 (206,025) ​ 49,705,625 44,591,316 ​ — ​ 94,162,531 Net cash generated from/(used in) investing activities ​ 8,816,124 ​ (254,396) ​ (43,637,362) ​ (50,505,975) ​ 30,150,331 ​ (55,431,278) Net cash (used in)/generated from financing activities ​ (8,960,626) 460,421 ​ 3,390,438 26,299,472 ​ (30,150,331) ​ (8,960,626) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, 2022 ​ PDD Holdings Inc. ​ ​ ​ Other ​ ​ ​ (Primary ​ ​ ​ Subsidiaries ​ ​ ​ ​ beneficiary ​ ​ ​ VIE and Its ​ of PDD ​ ​ ​ Consolidated ​ of the VIE) Hangzhou Weimi* Subsidiaries Holdings Inc.** Eliminations Total ​ (RMB in thousands) Net cash (used in)/generated from operating activities (3) ​ (24,202) 25,830 ​ 25,650,939 22,855,293 — 48,507,860 Net cash generated from/(used in) investing activities ​ 65,707 (93,576) ​ (43,513,150) (1,053,261) 22,232,610 (22,361,670) Net cash generated from financing activities ​ 10,079 66,786 ​ 16,710,269 5,455,555 (22,232,610) 10,079 ​ 14 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, 2021 ​ PDD Holdings Inc. ​ ​ ​ Other ​ ​ ​ (Primary ​ ​ ​ Subsidiaries ​ ​ ​ beneficiary ​ ​ ​ VIE and Its ​ of PDD ​ ​ ​ Consolidated ​ ​ of the VIE) Hangzhou Weimi* Subsidiaries Holdings Inc.** Eliminations Total ​ (RMB in thousands) Net cash generated from/(used in) operating activities (3) ​ 82,074 (150,891) ​ 34,365,025 (5,513,197) — 28,783,011 Net cash used in investing activities ​ (91,170) (270,312) ​ (26,828,581) (33,008,291) 24,635,989 (35,562,365) Net cash generated from/(used in) financing activities ​ 318 368,069 ​ (1,445,969) 23,838,417 (24,635,989) (1,875,154) ​ Notes: * Represents Hangzhou Weimi, a PRC subsidiary of the Company that has entered into contractual arrangements with the VIE, the VIE’s shareholders and, as applicable, their spouses.
The Data Security Law, the Regulations on the Protection of Critical Information Infrastructure, and the Cybersecurity Review Measures promulgated by PRC authorities (collectively, the “Cybersecurity Laws”) impose cybersecurity review obligations on critical information infrastructure operators and network platform operators.
The Data Security Law, the Regulations on the Protection of Critical Information Infrastructure, and the Cybersecurity Review Measures promulgated by the PRC authorities (collectively, the “Cybersecurity Laws”) impose cybersecurity review obligations on critical information infrastructure operators and network platform operators.
Our growth may slow down or become negative, and revenues may decline for a number of possible reasons, some of which are beyond our control, including decreasing consumer spending, increasing competition, declining growth of our overall market or industry, the emergence of alternative business models, changes in rules, regulations, government policies or general economic conditions.
Our growth may slow down or become negative, and revenues may decline for a number of possible reasons, some of which are beyond our control, including decreasing consumer spending, increasing competition, declining growth of our overall market or industry, the emergence of alternative business models, changes in rules, regulations, government policies or changes in general economic conditions.
Any strategic alliances, investments or acquisitions and the subsequent integration of the new assets and businesses obtained or developed from such transactions into our own may divert management from their primary responsibilities and subject us to additional liabilities. In addition, the costs of identifying and consummating investments and acquisitions may be significant.
Any strategic alliances, investments or acquisitions and the subsequent integration of the new assets and businesses obtained or developed from such transactions into our own businesses may divert management from their primary responsibilities and subject us to additional liabilities. In addition, the costs of identifying and consummating investments and acquisitions may be significant.
Individuals or entities that illegally obtain confidential or private data may further engage in various other illegal activities using such data. The methods used by hackers and others engaging in illegal online activities are increasingly more sophisticated and constantly evolving. In addition, all online payments for products sold on our platforms are settled through third-party online payment services.
Individuals or entities that illegally obtain confidential or private data may further engage in various other illegal activities using such data. The methods used by hackers and others engaging in illegal online activities are increasingly more sophisticated and constantly evolving. In addition, all online payments for products sold on our platforms are settled through third-party payment services.
Critical information infrastructure operators, as determined and notified by the applicable governing authorities, are required to undergo cybersecurity reviews if they procure network products and services which could affect the security of their information infrastructure, network or data.
Critical information infrastructure operators, as determined and notified by the applicable governing authorities, are required to undergo cybersecurity reviews if they procure network products and services which could affect the security of their information infrastructure, network or data.
However, many of the specific requirements of the Personal Information Protection Law remain to be clarified by the CAC, other regulatory authorities, and courts in practice. We may be required to make further adjustments to our business practices to comply with personal information protection laws and regulations.
However, in practice, many of the specific requirements of the Personal Information Protection Law remain to be clarified by the CAC, other regulatory authorities, and courts. We may be required to make further adjustments to our business practices to comply with personal information protection laws and regulations.
If any governmental authority considers us operating without proper approvals, licenses, filings, registrations or permits or promulgates new laws and regulations that require additional approvals, filings, registrations or licenses or impose additional restrictions on the operation of any part of our business, it has the power, among other things, to levy fines, confiscate our income, revoke our business licenses, and require us to discontinue our relevant business or impose restrictions on the affected portion of our business.
If any governmental authority considers us operating without proper approvals, licenses, filings, registrations or permits or promulgates new laws and regulations that require additional approvals, filings, registrations or licenses or impose additional restrictions on the operation of any part of our business, it has the power to, among other things, levy fines, confiscate our income, revoke our business licenses, require us to discontinue the relevant part of our business or impose restrictions on the affected portion of our business.
If the competent governmental authorities deem that we fail to meet such requirements, we may receive warnings, be ordered to make rectifications, or subject to other administrative sanctions and/or penalties that may have a material adverse effect on our reputation, business, financial condition and results of operations.
If the competent governmental authorities deem that we fail to meet such requirements, we may receive warnings, be ordered to make rectifications, or be subject to other administrative sanctions and/or penalties that may have a material adverse effect on our reputation, business, financial condition and results of operations.
In addition, changes in our services or policies have resulted and could result in objections by the public, our competitors, operators of traditional or new media and social networks, merchants on our platform or others.
In addition, changes in our services or policies have resulted or could result in objections by the public, our competitors, operators of traditional or new media and social networks, merchants on our platform or others.
Further, because of the rapid pace of technological change in our industry, parts of our business rely on technologies developed or licensed by third parties, and we may not be able to obtain or continue to obtain licenses and technologies from these third parties at all or on reasonable terms.
Further, because of the rapid pace of technological change in our industry, parts of our business rely on technologies developed or licensed by third parties, and we may not be able to obtain or continue to obtain licenses and technologies from these third parties on reasonable terms or at all.
Confidentiality, invention assignment and non-compete agreements may be breached by counterparties, and there may not be adequate remedies available to us for any such breach. Accordingly, we may not be able to effectively protect our intellectual property rights or to enforce our contractual rights.
Confidentiality, invention assignment and non-compete agreements may be breached by counterparties, and there may not be adequate remedies available to us for any such breach. Accordingly, we may not be able to effectively protect our intellectual property rights or enforce our contractual rights.
If the PRC government determines that the Pinduoduo platform was operating without the proper approvals, licenses or permits or promulgates new laws and regulations that require additional approvals or licenses or imposes additional restrictions on any part of the operations of the Pinduoduo platform, the PRC government has the power to, among other things, levy fines, confiscate income, revoke business licenses, and require the Pinduoduo platform to discontinue its relevant business or impose restrictions on the affected portion of the Pinduoduo platform.
If the PRC government determines that the Pinduoduo platform was operating without the proper approvals, licenses or permits or promulgates new laws and regulations that require additional approvals or licenses or imposes additional restrictions on any part of the operations of the Pinduoduo platform, the PRC government has the power to, among other things, levy fines, confiscate income, revoke business licenses, and require the Pinduoduo platform to discontinue the relevant part of its business or impose restrictions on the affected portion of the Pinduoduo platform.
Any factors that reduce cross-border e-commerce or make such trade activities more difficult could harm our business. Shipping and handling of goods across national borders is often expensive and complicated in the context of cross-border e-commerce.
Any factors that reduce cross-border e-commerce or make such trade activities more difficult could harm our business. The shipping and handling of goods across national borders is often expensive and complicated in the context of cross-border e-commerce.
In case of failure to register or file a lease in China, the parties to the unregistered lease may be ordered to make rectifications (which would involve registering such lease with the relevant PRC authority) before being subject to penalties. The penalty ranges from RMB1,000 to RMB10,000 for each unregistered lease, at the discretion of the relevant PRC authority.
In the case of failure to register or file a lease in China, the parties to the unregistered lease may be ordered to make rectifications (which would involve registering such lease with the relevant PRC authority) before being subject to penalties. The penalty ranges from RMB1,000 to RMB10,000 for each unregistered lease, at the discretion of the relevant PRC authority.
The PCAOB had historically been unable to inspect our auditor in relation to their audit work performed for our financial statements and the inability of the PCAOB to conduct inspections of our auditor in the past has deprived our investors of the benefits of such inspections.
The PCAOB had historically been unable to inspect our auditor in relation to their audit work performed for our financial statements and the inability of the PCAOB to conduct inspections of our auditor in the past has deprived our investors of the benefits of such inspections.
On December 15, 2022, the PCAOB issued a report that vacated its December 16, 2021 determination and removed mainland China and Hong Kong from the list of jurisdictions where it is unable to inspect or investigate completely registered public accounting firms.
On December 15, 2022, the PCAOB issued a report that vacated its December 16, 2021 determination and removed mainland China and Hong Kong from the list of jurisdictions where it is unable to inspect or investigate completely registered public accounting firms.
On December 16, 2021, the PCAOB issued a report to notify the SEC of its determination that the PCAOB was unable to inspect or investigate completely registered public accounting firms headquartered in mainland China and Hong Kong and our auditor was subject to that determination.
On December 16, 2021, the PCAOB issued a report to notify the SEC of its determination that the PCAOB was unable to inspect or investigate completely registered public accounting firms headquartered in mainland China or Hong Kong and our auditor was subject to that determination.
Although the authorities in China may establish a regulatory cooperation mechanism with the securities regulatory authorities of another country or region to implement cross-border supervision and administration, such cooperation with the securities regulatory authorities in the Unities States may not be efficient in the absence of mutual and practical cooperation mechanism.
Although the authorities in China may establish a regulatory cooperation mechanism with the securities regulatory authorities of another country or region to implement cross-border supervision and administration, such cooperation with the securities regulatory authorities in the Unities States may not be efficient in the absence of a mutual and practical cooperation mechanism.
As a Cayman Islands exempted company listed on the Nasdaq Global Select Market, we are subject to the Nasdaq Stock Market corporate governance listing standards. However, Nasdaq Stock Market rules permit a foreign private issuer like us to follow the corporate governance practices of its home country.
As a Cayman Islands exempted company listed on the Nasdaq Global Select Market, we are subject to the Nasdaq Stock Market corporate governance listing standards. However, the Nasdaq Stock Market rules permit a foreign private issuer like us to follow the corporate governance practices of its home country.
In particular, we face a number of challenges relating to data from transactions and other activities on our platforms, including: ● protecting the data in and hosted on our system, including against attacks on our system by outside parties or fraudulent behavior or improper use by our employees, and securely transmitting such data over public networks; ● addressing concerns related to privacy and sharing, safety, security and other factors; and ● complying with applicable laws and regulations relating to the collection, use, storage, transfer, disclosure and security of personal data, including any requests from regulatory and government authorities relating to these data.
We face a number of challenges relating to data from transactions and other activities on our platforms, including: ● protecting the data in and hosted on our system, including against attacks on our system by outside parties or fraudulent behavior or improper use by our employees, and securely transmitting such data over public networks; ● addressing concerns related to privacy, sharing, safety, security and other factors; and ● complying with applicable laws and regulations relating to the collection, use, storage, transfer, disclosure and security of personal data, including any requests from regulatory and government authorities relating to these data.
The depositary may refuse to deliver, transfer or register transfers of our ADSs generally when our share register or the books of the depositary are closed, or at any time if we or the depositary thinks it is advisable to do so because of any requirement of law or of any government or governmental body, or under any provision of the deposit agreement, or for any other reason. 60 Table of Contents We may incur increased costs as a result of being a public company.
The depositary may refuse to deliver, transfer or register transfers of our ADSs generally when our share register or the books of the depositary are closed, or at any time if we or the depositary thinks it is advisable to do so because of any requirement of law or of any government or governmental body, or under any provision of the deposit agreement, or for any other reason. 60 Table of Contents We may incur costs as a result of being a public company.
For example, Duo Duo Grocery, a next-day grocery pick-up service that we started in August 2020 as an extension of the Pinduoduo platform, and the Temu platform, a global e-commerce marketplace that we launched in September 2022, may each require financial, personnel and other resources commitment over time and may not attract or retain enough users or otherwise perform in accordance with our expectations.
For example, Duo Duo Grocery, a next-day grocery pick-up service that we started in August 2020 as an extension of the Pinduoduo platform, and Temu, a global e-commerce platform that we launched in September 2022, may each require financial, personnel and other resources commitment over time and may not attract or retain enough users or otherwise perform in accordance with our expectations.
Our entities in China are required by PRC laws and regulations to comply with PRC labor laws and regulations, pursuant to which they must pay overtime compensation and various government statutory employee benefit plans, including medical insurance, maternity insurance, workplace injury insurance, unemployment insurance and pension benefits through a PRC government-mandated multi-employer defined contribution plan.
Our entities in China are required by PRC laws and regulations to comply with PRC labor laws and regulations, pursuant to which they must pay overtime compensation and provide various government statutory employee benefit plans, including medical insurance, maternity insurance, workplace injury insurance, unemployment insurance and pension benefits through a PRC government-mandated multi-employer defined contribution plan.
As a result, we may be required to expend valuable resources to comply with the SAT circulars or to request the relevant transferors from whom we purchase taxable assets to comply with these circulars, or to establish that our company should not be taxed under these circulars, which may have a material adverse effect on our financial condition and results of operations.
As a result, we may be required to expend valuable resources to comply with the SAT circulars or to request the transferors from whom we purchase taxable assets to comply with these circulars, or to establish that our company should not be taxed under these circulars, which may have a material adverse effect on our financial condition and results of operations.
In addition, according to the PRC Anti-unfair Competition Law and relevant laws and regulations, business operators are prohibited from inducing consumers into transactions via misleading pricing terms or engaging in other anti-competitive conducts associated with product price. Violators of these laws and regulations may be subject to fines and other administrative penalties.
In addition, according to the PRC Anti-unfair Competition Law and other laws and regulations, business operators are prohibited from inducing consumers into transactions via misleading pricing terms or engaging in other anti-competitive conducts associated with product price. Violators of these laws and regulations may be subject to fines and other administrative penalties.
If the relevant PRC authorities determine that the relevant PRC entities need to make supplemental contributions, that these entities are not in compliance with labor laws and regulations, or that these entities are subject to fines or other legal sanctions, such as order of timely rectification, our business, financial condition and results of operations may be adversely affected.
If the PRC authorities determine that the PRC entities need to make supplemental contributions, that these entities are not in compliance with labor laws and regulations, or that these entities are subject to fines or other legal sanctions, such as order of timely rectification, our business, financial condition and results of operations may be adversely affected.
We collaborate with Tencent, one of our principal shareholders and the owner of Weixin and QQ, with respect to various aspects of our business, including our Pinduoduo mini-programs within Weixin and the entry point to our Pinduoduo mini-program in Weixin Pay, which serves as one of the access points to the Pinduoduo platform, as well as services such as payment processing, advertising and cloud technology.
We collaborate with Tencent, one of our principal shareholders and the owner of Weixin and QQ, with respect to various aspects of our business, including our Pinduoduo mini-programs within Weixin and the entry point to our Pinduoduo mini-program in Weixin Pay, which serves as one of the access points to the Pinduoduo platform, as well as providing services such as payment processing, advertising and cloud technology.
We began our business operations in multiple jurisdictions through the launch of the Temu platform in September 2022. As we continue to expand our global operations, we will face risks associated with expanding into markets where we have limited or no experience and where we may be less well-known or have fewer local resources.
We began our business operations in multiple jurisdictions through the launch of the Temu platform in September 2022. As we continue to expand our global operations, we face risks associated with expanding into markets where we have limited or no experience and where we may be less well-known or have fewer local resources.
In addition, because we hold a significant amount of cash and cash equivalents and short-term investments, if financial institutions and issuers of financial instruments that we hold become insolvent or if the market for these financial instruments become illiquid as a result of a severe economic downturn, our business and financial condition could be materially and adversely affected.
In addition, because we hold a significant amount of cash and cash equivalents and short-term investments, if financial institutions and issuers of financial instruments that we hold become insolvent or if the market for these financial instruments becomes illiquid as a result of a severe economic downturn, our business and financial condition could be materially and adversely affected.
However, the interpretation and application of the regulations could change so that we may need to obtain the CSRC’s approval with respect to our previous or future offshore offerings. To the extent such CSRC approvals are required, we cannot assure you that we would be able to obtain them in a timely manner.
However, the interpretation and application of the regulations could change so that we may need to obtain the CSRC’s approval with respect to our previous or future offerings. To the extent such CSRC approvals are required, we cannot assure you that we would be able to obtain them in a timely manner.
In addition, if the CSRC or other regulatory authorities subsequently promulgate new rules or explanations requiring that we obtain their approvals or accomplish the required filing or other regulatory procedures for our prior offshore offerings, we may be unable to obtain a waiver of such approval requirements, if and when procedures are established to obtain such a waiver.
In addition, if the CSRC or other regulatory authorities subsequently promulgate new rules or explanations requiring that we obtain their approvals or accomplish the required filing or other regulatory procedures for our prior offerings, we may be unable to obtain a waiver of such approval requirements, if and when procedures are established to obtain such a waiver.
For example, to the extent that we need to convert U.S. dollars we receive from our initial public offering, follow-on offerings or convertible senior notes offerings into Renminbi for our operations in the PRC, appreciation of the Renminbi against the U.S. dollar would have an adverse effect on the Renminbi amount we would receive from the conversion.
For example, to the extent that we need to convert U.S. dollars we received from our initial public offering, follow-on offerings or convertible senior notes offerings into Renminbi for our operations in the PRC, appreciation of the Renminbi against the U.S. dollar would have an adverse effect on the Renminbi amount we would receive from the conversion.
We may implement further measures in an effort to eliminate infringing products on our platforms, including taking legal actions against merchants of counterfeit or infringing products, which may cause us to spend substantial additional resources or result in reduced revenues. In addition, these measures may not appeal to consumers, merchants or other participants on our platforms.
We may implement further measures in an effort to eliminate infringing products on our platforms, including taking legal actions against merchants of counterfeit or infringing products, which may cause us to spend substantial additional resources or result in reduced revenues. These measures may not appeal to consumers, merchants or other participants on our platforms.
Therefore, it is possible that users may engage in conversations or activities with illegal, obscene or infringing content that may be deemed unlawful under the applicable laws and regulations on our platforms. In addition, certain merchants may post and sell on our platforms products that may not be sold via e-commerce platform under the applicable regulations.
Therefore, it is possible that users may engage in conversations or activities with illegal, obscene or infringing content that may be deemed unlawful under the applicable laws and regulations on our platforms. In addition, certain merchants may post and sell on our platforms products that may not be sold via e-commerce platforms under the applicable regulations.
Any negative publicity on our platforms’ data safety or privacy protection mechanisms and policies, and any claims asserted against us or fines imposed upon us as a result of actual or perceived failures, could have a material and adverse effect on our public image, reputation, financial condition and results of operations.
Any negative publicity on our platforms’ data safety or privacy protection mechanisms and policies, and any claims asserted or investigations against us or fines imposed upon us as a result of actual or perceived failures, could have a material and adverse effect on our public image, reputation, financial condition and results of operations.
Any failure or perceived failure to comply with the relevant anti-monopoly laws and guidelines relating to investments in or by us may result in governmental investigations or enforcement actions, litigations or claims against us and could have an adverse effect on our business, financial condition and results of operations.
Any failure or perceived failure to comply with the anti-monopoly laws and guidelines relating to investments in or by us may result in governmental investigations or enforcement actions, litigations or claims against us and could have an adverse effect on our business, financial condition and results of operations.
As a result, there is a risk that these lessors may not have the right to lease such properties to us, in which case the relevant lease agreements may be deemed invalid or we may face challenges from the property owners or other third parties regarding our right to occupy the premises.
As a result, there is a risk that these lessors may not have the right to lease such properties to us, in which case the lease agreements may be deemed invalid or we may face challenges from the property owners or other third parties regarding our right to occupy the premises.
Such expansion may require us to introduce new products and work with a variety of additional merchants to address the evolving needs of our buyers. We may have limited or no experience for certain new product offerings, and our expansion into these new product offerings may not achieve broad buyer acceptance.
Such expansion may require us to work with a variety of additional merchants to introduce new products and address the evolving needs of our buyers. We may have limited or no experience with certain new product offerings, and our expansion into these new product offerings may not achieve broad buyer acceptance.
We have been, and from time to time in the future may be, subject to legal proceedings and claims relating to the intellectual property rights of others. In addition, there may be other third-party intellectual property that is infringed by products offered by our merchants and our services or other aspects of our business.
We have been, are, and from time to time in the future may be, subject to legal proceedings and claims relating to the intellectual property rights of others. In addition, there may be other third-party intellectual property that is infringed by products offered by our merchants, our services or other aspects of our business.
As it is in short sellers’ interest for the price of the security to decline, many short sellers publish, or arrange for the publication of, negative opinions and allegations regarding the relevant issuer and its business prospects in order to create negative market momentum and generate profits for themselves after selling a security short.
As it is in short sellers’ interest for the price of the security to decline, many short sellers publish, or arrange for the publication of, negative opinions and allegations regarding the issuer and its business prospects in order to create negative market momentum and generate profits for themselves after selling a security short.
As an ADS holder, you will only be able to exercise the voting rights carried by the underlying Class A ordinary shares represented by your ADSs indirectly by giving voting instructions to the depositary in accordance with the provisions of the relevant deposit agreement. Under the deposit agreements, you may vote only by giving voting instructions to the depositary.
As an ADS holder, you will only be able to exercise the voting rights carried by the underlying Class A ordinary shares represented by your ADSs indirectly by giving voting instructions to the depositary in accordance with the provisions of the deposit agreement. Under the deposit agreements, you may vote only by giving voting instructions to the depositary.
Any failure to obtain or delay in obtaining such permission, clearing such review process or meeting such requirements would subject us to restrictions and penalties imposed by the CSRC, the CAC or other PRC regulatory authorities, which could include fines and penalties on our operations in China, delays of or restrictions on the repatriation of the proceeds from our offshore offerings into China, restrictions on our ability to remain listed on a U.S. exchange, or other actions that could materially and adversely affect our business, financial condition, results of operations, and prospects, as well as significantly limit or completely hinder or to offer or continue to offer our securities to investors and cause the value of such securities to significantly decline or be worthless.
Any failure to obtain or delay in obtaining such permission, clearing such review process or meeting such requirements would subject us to restrictions and penalties imposed by the CSRC, the CAC or other PRC regulatory authorities, which could include fines and penalties on our operations in mainland China, delays of or restrictions on the repatriation of the proceeds from our offerings into mainland China, restrictions on our ability to remain listed on a U.S. exchange, or other actions that could materially and adversely affect our business, financial condition, results of operations, and prospects, as well as significantly limit or completely hinder our ability to offer or continue to offer our securities to investors and cause the value of such securities to significantly decline or be worthless.
If our growth rate declines, investors’ perceptions of our business, operating results and prospects may be materially and adversely affected and the market price of our ADSs could decline. You should consider our prospects in light of the risks and uncertainties that companies with a limited operating history may encounter.
If our growth rate declines, investors’ perceptions of our business, operating results and prospects may be materially and adversely affected and the market price of our ADSs could decline. You should consider our prospects in light of the risks and uncertainties that companies with a relatively limited operating history may encounter.
This would have a material adverse effect on our financial condition and results of operations and the value of our ADSs. We face uncertainties with respect to the implementation of the Foreign Investment Law and how it may impact the viability of our current corporate structure, corporate governance and business operations.
This would have a material adverse effect on our financial condition and results of operations and the value of our ADSs. We face uncertainties with respect to the implementation of the PRC Foreign Investment Law and how it may impact the viability of our current corporate structure, corporate governance and business operations.
As a result, it may be difficult or impossible for you to bring an action against us or against these individuals in the United States in the event that you believe that your rights have been infringed under the U.S. federal securities laws or otherwise.
As a result, it may be difficult or impossible for you to bring an action against us or against these individuals in the United States in the event that you believe that your rights have been infringed upon under the U.S. federal securities laws or otherwise.
Any change, disruption, discontinuity in the features and functions of major social networks could severely limit our ability to continue growing our buyer base, and our business may be materially and adversely affected. Our success depends on our ability to attract and retain new buyers and expand our buyer base.
Any change, disruption, or discontinuity in the features and functions of major social networks could severely limit our ability to continue growing our buyer base, and our business may be materially and adversely affected. Our success depends on our ability to attract and retain new buyers and expand our buyer base.
Any lack of additional requisite approvals, licenses or permits or failure to comply with any requirements of the applicable laws, regulations and policies may materially and adversely affect our daily operations and hinder our growth. Our business is subject to governmental supervision and regulation by the relevant governmental authorities.
Any lack of additional requisite approvals, licenses or permits or failure to comply with any requirements of the applicable laws, regulations and policies may materially and adversely affect our daily operations and hinder our growth. Our business is subject to governmental supervision and regulation by the governmental authorities.
However, the definition of “foreign investment” under the Foreign Investment Law is broad and covers all activities whereby foreign investors invest in China, including investments made through “any other methods” under laws, administrative regulations, or provisions prescribed by the State Council.
However, the definition of “foreign investment” under the PRC Foreign Investment Law is broad and covers all activities whereby foreign investors invest in China, including investments made through “any other methods” under laws, administrative regulations, or provisions prescribed by the State Council.
The approval of or filing with the CSRC or other PRC government authorities may be required in connection with our previous or future offshore offerings under PRC laws, and, if required, we cannot predict whether or for how long we will be able to obtain such approval or complete such filing.
Under PRC laws, the approval of or filing with the CSRC or other PRC government authorities may be required in connection with our previous or future offerings, and, if required, we cannot predict whether or for how long we will be able to obtain such approval or complete such filing.
Shareholder claims or regulatory investigation that are common in the United States generally are difficult to pursue as a matter of law or practicality in China. For example, in China, there are significant legal and other obstacles to providing information needed for regulatory investigations or litigation initiated outside China.
Shareholder claims or regulatory investigations that are common in the United States generally are difficult to pursue as a matter of law or practicality in China. For example, in China, there are significant legal and other obstacles to providing information needed for regulatory investigations or litigation initiated outside China.
If we fail to obtain such additional licenses, permits, filings or approvals, our business and results of operations, as well as the value of our ADSs, may be materially and adversely affected. For more detailed information, see “Item 3. Key Information—D.
If we fail to obtain such additional licenses, permits, filings or approvals, our business and results of operations, as well as the value of our ADSs, may be materially and adversely affected. For more information, see “Item 3. Key Information—D.
Our business depends on the performance and reliability of the internet infrastructure in the countries or regions where we have operations. The reliability and availability of our platforms depends on telecommunications carriers and other third-party providers for communications and storage capacity, including bandwidth and server storage, among other things.
Our business depends on the performance and reliability of the internet infrastructure in the countries or regions where we have operations. The reliability and availability of our platforms also depends on telecommunications carriers and other third-party providers for communications and storage capacity, including bandwidth and server storage, among other things.
The costs associated with complying with these laws and regulations, including any penalties or fines for our failure to so comply if required, could have a material adverse effect on the Pinduoduo platform’s business, financial condition and results of operations.
The costs associated with complying with these laws and regulations, including any penalties or fines for our failure to comply if required, could have a material adverse effect on the Pinduoduo platform’s business, financial condition and results of operations.
We are subject to the reporting requirements of the Exchange Act of 1934, or the Exchange Act, the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, and the rules and regulations of the Nasdaq Global Select Market. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting.
We are subject to the reporting requirements of the Securities Exchange Act of 1934, or the Exchange Act, the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, and the rules and regulations of the Nasdaq Global Select Market. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting.
However, in connection with any future overseas capital markets activities, we may need to obtain permission from the CSRC, undergo a cybersecurity review conducted by the CAC or meet other regulatory requirements that may be adopted in the future by PRC authorities.
However, in connection with any future capital markets activities, we may need to obtain permission from the CSRC, undergo a cybersecurity review conducted by the CAC or meet other regulatory requirements that may be adopted in the future by the PRC authorities.
For instance, the Pinduoduo platform is required to hold a number of licenses and permits in connection with its business operations, including the ICP license and approvals for the establishment of foreign-invested enterprises engaging in the sale of goods over the internet.
For instance, the Pinduoduo platform is required to hold a number of licenses and permits in connection with its business operations, including the ICP license and approvals for the establishment of PRC foreign-invested enterprises engaging in the sale of goods over the internet.
The PRC government has released regulations and policies that have significantly impacted various industries in general and specific operators within such industries, and may in the future release new regulations or policies that could intervene in or influence our operations or the industry sectors in which we operate.
The PRC government has released regulations and policies that have impacted various industries in general and specific operators within such industries, and may in the future release new regulations or policies that could intervene in or influence our operations or the industry sectors in which we operate.
According to SAT Circular 37, where the non-resident enterprise fails to declare the tax payable pursuant to Article 39 of the Enterprise Income Tax, the tax authority may order it to pay the tax due within required time limits, and the non-resident enterprise shall declare and pay the tax payable within such time limits specified by the tax authority.
According to SAT Circular 37, where a non-resident enterprise fails to declare the tax payable pursuant to Article 39 of the Enterprise Income Tax, the tax authority may order it to pay the tax due within required time limits, and the non-resident enterprise shall declare and pay the tax payable within such time limits specified by the tax authority.
Before clarification or confirmation by future laws, administrative regulations or provisions promulgated by the State Council on the nature of contractual arrangements, there is no assurance that contractual arrangements would not be considered to be foreign investment under the Foreign Investment Law.
Before clarification or confirmation by future laws, administrative regulations or provisions promulgated by the State Council on the nature of contractual arrangements, there is no assurance that contractual arrangements would not be considered to be foreign investment under the PRC Foreign Investment Law.
While we would strongly defend against any such short seller attacks, we may be constrained in the manner in which we can proceed against the relevant short sellers by principles of freedom of speech, applicable state law or issues of commercial confidentiality.
While we would strongly defend against any such short seller attacks, we may be constrained in the manner in which we can proceed against the short sellers by principles of freedom of speech, applicable state law or issues of commercial confidentiality.
Together, these government authorities promulgate and enforce regulations that cover many aspects of the operation of online retailing and related business, including entry into this industry, the scope of permissible business activities, licenses and permits for various business activities, and foreign investment.
Together, these government authorities promulgate and enforce regulations that cover many aspects of the operation of online retailing and related business, including entry into the industry, the scope of permissible business activities, licenses and permits for various business activities, and foreign investment.
Based on the advice of King & Wood Mallesons, our PRC legal counsel, we are of the view that we did not need, and will not need, to obtain the CSRC’s approval under the M&A Rules for our previous offshore offerings.
Based on the advice of King & Wood Mallesons, our PRC legal counsel, we are of the view that we did not need, and will not need, to obtain the CSRC’s approval under the M&A Rules for our previous offerings.
Maintaining complete security on our platforms and systems for the storage and transmission of confidential or private data, such as buyers’ personal information, payment-related information and transaction information, is essential to maintain consumer confidence in our platforms and systems.
Maintaining complete security on our platforms and systems for the storage and transmission of confidential or private data, such as buyers’ personal information, payment-related information and transaction information, is essential to maintaining consumer confidence in our platforms and systems.
Although the shareholders of the VIE hold equity interests on record in the VIE, each such shareholder has irrevocably authorized Hangzhou Weimi to exercise his rights as a shareholder of the VIE pursuant to the terms of the relevant shareholders’ voting rights proxy agreement.
Although the shareholders of the VIE hold equity interests on record in the VIE, each such shareholder has irrevocably authorized Hangzhou Weimi to exercise his rights as a shareholder of the VIE pursuant to the terms of the shareholders’ voting rights proxy agreement.
However, the tax resident status of an enterprise is subject to determination by the PRC tax authorities and uncertainties remain with respect to the interpretation of the term “de facto management body.” If the PRC tax authorities determine that we are a PRC resident enterprise for enterprise income tax purposes, we could be subject to PRC tax at a rate of 25% on our worldwide income, which could materially reduce our net income, and we may be required to withhold a 10% withholding tax from dividends we pay to our shareholders that are non-resident enterprises, including the holders of our ADSs.
However, the tax resident status of an enterprise is subject to determination by the PRC tax authorities and uncertainties remain with respect to the interpretation of the term “de facto management body.” If the PRC tax authorities determine that we are a mainland China resident enterprise for enterprise income tax purposes, we could be subject to PRC tax at a rate of 25% on our worldwide income, which could materially reduce our net income, and we may be required to withhold a 10% withholding tax from dividends we pay to our shareholders that are non-resident enterprises, including the holders of our ADSs.
Moreover, applicable consumer protection laws in China provide that a platform will be held liable for failing to meet any undertaking that it made to consumers with regard to products listed on it, and the Pinduoduo platform is required to report violations of applicable consumer protection laws, regulations or administrative rules by merchants on the platform to the State Administration for Market Regulation of the PRC, or the SAMR, or its local branches, and take appropriate remedial measures, including ceasing to provide services to the relevant merchants, as a platform.
Moreover, consumer protection laws in China provide that a platform will be held liable for failing to meet any undertaking that it made to consumers with regard to products listed on it, and the Pinduoduo platform is required to report violations of applicable consumer protection laws, regulations or administrative rules by merchants on the platform to the State Administration for Market Regulation of the PRC, or the SAMR, or its local branches, and to take appropriate remedial measures, including ceasing to provide services to those merchants, as a platform.
Using a “substance over form” principle, the PRC tax authority may disregard the existence of the overseas holding company if it lacks a reasonable commercial purpose and was established for the purpose of reducing, avoiding or deferring PRC tax.
Using a “substance over form” principle, the PRC tax authority may disregard the existence of the holding company if it lacks a reasonable commercial purpose and was established for the purpose of reducing, avoiding or deferring PRC tax.
Service interruptions, failures, or constraints of these third parties or any disruptions or malfunctions of the e-waybill systems could severely harm our business and prospects. ● We face intense competition, and if we fail to compete effectively, we may lose market share, buyers and merchants. ● If we fail to maintain and expand our relationships with merchants, our revenues and results of operations will be harmed. ● We have incurred net losses in the past, and we may not be able to maintain profitability in the future. ● We may incur liability for counterfeit, unauthorized, illegal, or infringing products sold or misleading information available on our platforms. 7 Table of Contents ● We may be subject to claims under consumer protection laws, including health and safety claims and product liability claims, if property or people are harmed by the products and services sold on our platforms.
Service interruptions, failures, or constraints of these third parties or any disruptions or malfunctions of the e-waybill systems could severely harm our business and prospects. ● We face intense competition, and if we fail to compete effectively, we may lose market share, buyers and merchants. ● If we fail to maintain and expand our relationships with merchants, our revenues and results of operations will be harmed. ● We have incurred net losses in the past, and we may not be able to maintain profitability in the future. ● We may incur liability for counterfeit, unauthorized, illegal, or infringing products sold or misleading information available on our platforms. ● We may be subject to claims under consumer protection laws, including health and safety claims and product liability claims, if property or people are harmed by the products and services sold on our platforms.
In addition to fraudulent transactions with legitimate buyers, merchants on our platforms may engage in fictitious transactions with themselves or collaborate with third parties in order to artificially inflate their sales records and search results rankings.
In addition to fraudulent transactions with legitimate buyers, merchants on our platforms may engage in fictitious transactions with themselves or collaborate with third parties to artificially inflate their sales records and search results rankings.
Any disruptions or continuing or worsening slowdown could significantly reduce domestic commerce activities in China, which could lead to significant reduction in merchants’ demand for and spending on the various services we offer.
Any disruptions or continuing or worsening slowdown could significantly reduce commerce activities in China, which could lead to significant reduction in merchants’ demand for and spending on the various services we offer.
In the case of the Pinduoduo platform, these authorities include the Ministry of Commerce of the PRC, or MOFCOM, the MIIT, the National Radio and Television Administration of the PRC, or the NRTA, and other governmental authorities in charge of the relevant categories of products sold on the Pinduoduo platform.
In the case of the Pinduoduo platform, these authorities include the Ministry of Commerce of the PRC, the MIIT, the National Radio and Television Administration of the PRC, or the NRTA, and other governmental authorities in charge of the relevant categories of products sold on the Pinduoduo platform.
If the Cybersecurity Review Measures and the enacted version of the Draft Network Data Security Regulations mandate that issuers like us must clear cybersecurity review or obtain other regulatory approvals for their previous issuances of securities in the United States or future offerings, it is unclear whether we would be able to complete such regulatory procedures in a timely fashion, or at all.
If the Cybersecurity Review Measures and the enacted version of the draft Regulations on Network Data Security Management mandate that issuers like us must clear cybersecurity review or obtain other regulatory approvals for their previous issuances of securities in the United States or future offerings, it is unclear whether we would be able to complete such regulatory procedures in a timely fashion, or at all.
Furthermore, if we are deemed a PRC resident enterprise, dividends payable to our non-PRC individual shareholders (including our ADS holders) and any gain realized on the transfer of ADSs or ordinary shares by such shareholders may be subject to PRC tax at a rate of 10% in the case of non-PRC enterprises or a rate of 20% in the case of non-PRC individuals unless a reduced rate is available under an applicable tax treaty.
Furthermore, if we are deemed a mainland China resident enterprise, dividends payable to our non-mainland China individual shareholders (including our ADS holders) and any gain realized on the transfer of ADSs or ordinary shares by such shareholders may be subject to PRC tax at a rate of 10% in the case of non-mainland China enterprises or a rate of 20% in the case of non-mainland China individuals unless a reduced rate is available under an applicable tax treaty.
The Foreign Investment Law stipulates three forms of foreign investment, but is silent as to whether contractual arrangements are a form of foreign investment. The Implementation Regulations on the Foreign Investment Law are also silent as to whether contractual arrangements should be deemed to be a form of foreign investment.
The PRC Foreign Investment Law stipulates three forms of foreign investment, but is silent as to whether contractual arrangements are a form of foreign investment. The Implementation Regulations on the PRC Foreign Investment Law are also silent as to whether contractual arrangements should be deemed to be a form of foreign investment.
Our business depends on the billing, payment and escrow systems of these payment service providers to maintain accurate records of payments of sales proceeds by buyers and collect such payments.
Our business therefore depends on the billing, payment and escrow systems of these service providers to maintain accurate records of payments of sales proceeds by buyers and collect such payments.
In addition, an overseas-entrusted institution must be retained to handle matters in connection with the exercise or sale of stock options and the purchase or sale of shares and interests.
In addition, an entrusted institution must be retained to handle matters in connection with the exercise or sale of stock options and the purchase or sale of shares and interests.
Assuming that we are the owner of the VIE (including its subsidiaries) for U.S. federal income tax purposes, we do not believe that we were a PFIC for the taxable year ended December 31, 2022 and based upon our current and expected income and assets, including goodwill, and the current and projected value of our ADSs, we do not expect to be a PFIC in the current taxable year or for the foreseeable future.
Assuming that we are the owner of the VIE (including its subsidiaries) for U.S. federal income tax purposes, we do not believe that we were a PFIC for the taxable year ended December 31, 2023, and based upon our current and expected income and assets, including goodwill, and the current and projected value of our ADSs, we do not expect to be a PFIC in the current taxable year or for the foreseeable future.
Furthermore, cash transfers from our PRC subsidiaries, the VIE and its subsidiaries to entities outside of China are subject to PRC government controls on currency conversion.
Furthermore, cash transfers from our mainland China subsidiaries, the VIE and its subsidiaries to entities outside of mainland China are subject to PRC government controls on currency conversion.
Our servers may also be vulnerable to computer viruses, physical or electronic break-ins and similar disruptions, which could lead to system interruptions, mobile app slowdown or unavailability, delays or errors in transaction processing, loss of data or the inability to accept and fulfill buyer orders. Any such occurrence could cause disruption to our daily operations.
Our servers may also be vulnerable to computer viruses, physical or electronic break-ins and similar disruptions, which could lead to system interruptions, mobile app slowdowns or unavailability, delays or errors in transaction processing, loss of data or the inability to accept and fulfill buyer orders. Any such occurrence could cause disruption to our daily operations.

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Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeThe Pinduoduo platform also offers merchants additional training resources and merchant support, which are easily accessible through the main merchant dashboard and are frequently updated to guide merchants through the various tools available to them on the Pinduoduo platform. ​ 63 Table of Contents Once an order is placed on the platform and confirmed with the applicable merchant, the merchant will handle fulfilment, select the most suitable third-party logistics service provider and arrange for the delivery of the products to the buyers.
Biggest changeOnce an order is placed on the Pinduoduo platform and confirmed with the applicable merchant, the merchant will handle fulfillment, select the most suitable third-party logistics service provider and arrange for the delivery of the products to the buyers. Pinduoduo requires merchants to strictly abide by the return policy for products they sell on the Pinduoduo platform.
SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC on www.sec.gov . You can also find information on our website http://investor.pddholdings.com . The information contained on our website is not a part of this annual report. B.
The SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC on www.sec.gov . You can also find information on our website http://investor.pddholdings.com . The information contained on our website is not a part of this annual report. B.
Pursuant to publicly available information, the PRC government has issued VATS Licenses to only a limited number of foreign-invested enterprises, most of which are Sino-foreign joint ventures engaging in the value-added telecommunication business.
Pursuant to publicly available information, the PRC government has issued VATS Licenses to only a limited number of PRC foreign-invested enterprises, most of which are Sino-foreign joint ventures engaging in the value-added telecommunication business.
Pursuant to these measures, foreign investors and foreign-invested enterprises must submit investment information through the Enterprise Registration System and the National Enterprise Credit Information Publicity System operated by the SAMR for their direct or indirect foreign investments in the PRC.
Pursuant to these measures, foreign investors and PRC foreign-invested enterprises must submit investment information through the Enterprise Registration System and the National Enterprise Credit Information Publicity System operated by the SAMR for their direct or indirect foreign investments in the PRC.
In addition to the Personal Information Protection Law, PRC authorities have enacted a number of other laws and regulations on internet use to protect personal information and data privacy.
In addition to the Personal Information Protection Law, the PRC authorities have enacted a number of other laws and regulations on internet use to protect personal information and data privacy.
In addition, the guidelines included concentrations involving companies with VIE structure within the ambit of the SAMR’s merger control review, if certain reporting thresholds are met. In addition to the currently enacted laws and regulations, PRC authorities have proposed certain draft regulations that would further strengthen unfair competition and anti-monopoly laws if enacted into law.
In addition, the guidelines included concentrations involving companies with VIE structure within the ambit of the SAMR’s merger control review, if certain reporting thresholds are met. In addition to the currently enacted laws and regulations, the PRC authorities have proposed certain draft regulations that would further strengthen unfair competition and anti-monopoly laws if enacted into law.
An employer and an employee may enter into a fixed-term labor contract, an un-fixed term labor contract, or a labor contract that concludes upon the completion of certain work assignments, after reaching agreement upon due negotiations.
An employer and an employee may enter into a fixed-term labor contract, an un-fixed term labor contract, or a labor contract that concludes upon the completion of certain work assignments, after reaching an agreement upon due negotiations.
An employer may legally terminate a labor contract and dismiss its employees after reaching agreement upon due negotiations with the employee or by fulfilling the statutory conditions. Labor contracts concluded prior to the enactment of the Labor Contract Law and subsisting within the validity period thereof shall continue to be honored.
An employer may legally terminate a labor contract and dismiss its employees after reaching an agreement upon due negotiations with the employee or by fulfilling the statutory conditions. Labor contracts concluded prior to the enactment of the Labor Contract Law and subsisting within the validity period thereof shall continue to be honored.
When companies violate these regulations and fail to pay up housing provident fund contributions in full amount as due, the housing provident fund administration center shall order such companies to pay up within a designated period, and may further apply to the People’s Court for mandatory enforcement against those who still fail to comply after the expiry of such period.
When companies violate these regulations and fail to pay up housing provident fund contributions in the full amount as due, the housing provident fund administration center shall order such companies to pay up within a designated period, and may further apply to the People’s Court for mandatory enforcement against those who still fail to comply after the expiry of such period.
If the PRC government finds that the arrangements that establish the structure for operating our e-commerce business do not comply with PRC government restrictions on foreign investment in our businesses, we could be subject to severe penalties including being prohibited from continuing operations. See “Item 3. Key Information—D.
If the PRC government finds that the arrangements that establish the structure for operating our e-commerce business do not comply with the PRC government restrictions on foreign investment in our businesses, we could be subject to severe penalties including being prohibited from continuing operations. See “Item 3. Key Information—D.
The amended Anti-monopoly Law increased the maximum amount of fines that may be imposed on a business operator for violations of certain market concentration requirements to 10% of the business operator’s sales revenue from the preceding year and also proposes that the relevant authority should investigate a transaction if the concentration resulting from the transaction has or may have the effect of eliminating or restricting competition, even if such concentration does not reach the filing threshold.
The amended Anti-monopoly Law increased the maximum amount of fines that may be imposed on a business operator for violations of certain market concentration requirements to 10% of the business operator’s sales revenue from the preceding year and also proposes that the authority should investigate a transaction if the concentration resulting from the transaction has or may have the effect of eliminating or restricting competition, even if such concentration does not reach the filing threshold.
The Data Security Law introduces a data classification and multilevel protection system, pursuant to which data is classified based on such data’s importance to China’s economic and social development, as well as the degree of harm that may be caused to national security, the public interest, and the legitimate rights and interest of individuals or organizations if such data were to be tampered with, destroyed, leaked, illegally acquired or illegal used.
The Data Security Law introduces a data classification and multilevel protection system, pursuant to which data is classified based on such data’s importance to China’s economic and social development, as well as the degree of harm that may be caused to national security, the public interest, and the legitimate rights and interests of individuals or organizations if such data were to be tampered with, destroyed, leaked, illegally acquired or illegal used.
If any entity subject to such requirements fails to complete the filing or fails to fulfill the relevant duties of examination and supervision in accordance with this regulation, it may be subject to an order to cease illegal acts and a warning by the competent publication administrative authority, as well as a penalty not exceeding RMB30,000.
If any entity subject to such requirements fails to complete the filing or fails to fulfill the duties of examination and supervision in accordance with this regulation, it may be subject to an order to cease illegal acts and a warning by the competent publication administrative authority, as well as a penalty not exceeding RMB30,000.
Circular 16 reiterates the principle that Renminbi converted from foreign currency-denominated capital of a company may not be directly or indirectly used for purposes beyond its business scope or prohibited by PRC laws or regulations, and such converted Renminbi shall not be provided as loans to its non-affiliated entities.
SAFE Circular 16 reiterates the principle that Renminbi converted from foreign currency-denominated capital of a company may not be directly or indirectly used for purposes beyond its business scope or prohibited by PRC laws or regulations, and such converted Renminbi shall not be provided as loans to its non-affiliated entities.
According to the Interim Measures for Participation in the Social Insurance System by Foreigners Working within the Territory of China, employers who employ foreigners must participate in the basic pension insurance, unemployment insurance, basic medical insurance, occupational injury insurance, and maternity leave insurance in accordance with the relevant law, with the social insurance premiums to be contributed respectively by the employers and foreigner employees as required.
According to the Interim Measures for Participation in the Social Insurance System by Foreigners Working within the Territory of China, employers who employ foreigners must participate in the basic pension insurance, unemployment insurance, basic medical insurance, occupational injury insurance, and maternity leave insurance in accordance with the law, with the social insurance premiums to be contributed respectively by the employers and foreigner employees as required.
The Discretional Foreign Exchange Settlement refers to the foreign exchange capital in the capital account of a foreign-invested enterprise for which the rights and interests of monetary contribution has been confirmed by the local foreign exchange bureau (or the book-entry registration of monetary contribution by the banks), and this foreign exchange capital can be settled at the banks based on the actual operational needs of the foreign-invested enterprise.
The Discretional Foreign Exchange Settlement refers to the foreign exchange capital in the capital account of a PRC foreign-invested enterprise for which the rights and interests of monetary contribution has been confirmed by the local foreign exchange bureau (or the book-entry registration of monetary contribution by the banks), and this foreign exchange capital can be settled at the banks based on the actual operational needs of the PRC foreign-invested enterprise.
Marketing We have built up our brand awareness and our large base of loyal buyers by leveraging word-of-mouth referrals on social networks, as well as online and offline marketing and brand promotion activities, such as online advertisements and television commercials. From time to time, we also offer coupons to consumers on our platforms.
Marketing We have built up our brand awareness and our large base of loyal buyers by leveraging word-of-mouth referrals on social networks, as well as online and offline marketing and brand promotion activities, such as online advertisements and television commercials. From time to time, we also offer coupons and credits to consumers on our platforms.
If the online service provider receives any notice from the infringed party on any infringing activities, the online service provider shall take necessary measures, including deleting, blocking and unlinking the infringing content, in a timely manner. Otherwise, it will be held jointly liable with the relevant online user for the extended damages.
If the online service provider receives any notice from the infringed party on any infringing activities, the online service provider shall take necessary measures, including deleting, blocking and unlinking the infringing content, in a timely manner. Otherwise, it will be held jointly liable with the online user for the extended damages.
In accordance with such Interim Measures, the social insurance administrative agencies shall exercise their right to supervise and examine the legal compliance of foreign employees and employers, and the employers who do not pay social insurance premiums in conformity with the laws shall be subject to the administrative provisions provided in the Social Insurance Law and other relevant regulations and rules.
In accordance with such Interim Measures, the social insurance administrative agencies shall exercise their right to supervise and examine the legal compliance of foreign employees and employers, and the employers who do not pay social insurance premiums in conformity with the laws shall be subject to the administrative provisions provided in the Social Insurance Law and other regulations and rules.
However, the definition of “foreign investment” under the Foreign Investment Law is broad and covers all activities whereby foreign investors invest in China, including investments made through “any other methods” under laws, administrative regulations, or provisions prescribed by the State Council.
However, the definition of “foreign investment” under the PRC Foreign Investment Law is broad and covers all activities whereby foreign investors invest in China, including investments made through “any other methods” under laws, administrative regulations, or provisions prescribed by the State Council.
In particular, the M&A Rules apply to foreign investors that (i) purchase equity interests in, or subscribe for the increased capital of, a domestic company such that the domestic company becomes a foreign-invested enterprise, (ii) establish a foreign-invested enterprise in the PRC for the purpose of purchasing and operating the assets of a domestic company; or (iii) purchase the assets of a domestic company and transfer such assets to a foreign-invested enterprise for the purpose of operating those assets.
In particular, the M&A Rules apply to foreign investors that (i) purchase equity interests in, or subscribe for the increased capital of, a PRC company such that the company becomes a PRC foreign-invested enterprise, (ii) establish a PRC foreign-invested enterprise for the purpose of purchasing and operating the assets of a PRC company; or (iii) purchase the assets of a PRC company and transfer such assets to a PRC foreign-invested enterprise for the purpose of operating those assets.
The Law on Social Insurance of the PRC has consolidated pertinent provisions for basic pension insurance, unemployment insurance, maternity insurance, workplace injury insurance and basic medical insurance, and has elaborated in detail the legal obligations and liabilities of employers who do not comply with relevant laws and regulations on social insurance.
The Law on Social Insurance of the PRC has consolidated pertinent provisions for basic pension insurance, unemployment insurance, maternity insurance, workplace injury insurance and basic medical insurance, and has elaborated in detail the legal obligations and liabilities of employers who do not comply with the laws and regulations on social insurance.
Unless terminated by Hangzhou Weimi at its sole discretion, the exclusive option agreement will remain effective until all equity interests in Hangzhou Aimi held by the shareholders of Hangzhou Aimi and all assets of Hangzhou Aimi are transferred or assigned to Hangzhou Weimi or its designated representatives. 84 Table of Contents In the opinion of King & Wood Mallesons, our PRC legal counsel, (i) the structures of Hangzhou Weimi and Hangzhou Aimi are not in any violation of PRC laws or regulations currently in effect; and (ii) the contractual arrangements among Hangzhou Weimi and Hangzhou Aimi and its shareholders governed by PRC law are legal, valid, binding and enforceable in accordance with its terms and applicable PRC laws, and do not and will not result in any violation of PRC laws or regulations currently in effect.
Unless terminated by Hangzhou Weimi at its sole discretion, the exclusive option agreement will remain effective until all equity interests in Hangzhou Aimi held by the shareholders of Hangzhou Aimi and all assets of Hangzhou Aimi are transferred or assigned to Hangzhou Weimi or its designated representatives. 86 Table of Contents In the opinion of King & Wood Mallesons, our PRC legal counsel, (i) the structures of Hangzhou Weimi and Hangzhou Aimi are not in any violation of the PRC laws or regulations currently in effect; and (ii) the contractual arrangements among Hangzhou Weimi and Hangzhou Aimi and its shareholders governed by PRC law are legal, valid, binding and enforceable in accordance with its terms and applicable PRC laws, and do not and will not result in any violation of the PRC laws or regulations currently in effect.
Before clarification or confirmation by future laws, administrative regulations or provisions promulgated by the State Council on the nature of contractual arrangements, there is no assurance that contractual arrangements would not be considered to be foreign investment under the Foreign Investment Law.
Before clarification or confirmation by future laws, administrative regulations or provisions promulgated by the State Council on the nature of contractual arrangements, there is no assurance that contractual arrangements would not be considered to be foreign investment under the PRC Foreign Investment Law.
In April 2018, MOF and the SAT jointly promulgated the Circular of the Ministry of Finance and the State Administration of Taxation on Adjustment of Value-Added Tax Rates, or Circular 32, according to which (i) for VAT taxable sales acts or importation of goods originally subject to value-added tax rates of 17% and 11% respectively, such tax rates shall be adjusted to 16% and 10%, respectively; (ii) for purchase of agricultural products originally subject to deduction rate of 11%, such deduction rate shall be adjusted to 10%; (iii) for purchase of agricultural products for the purpose of production and sales or consigned processing of goods subject to tax rate of 16%, such tax shall be calculated at the deduction rate of 12%; (iv) for exported goods originally subject to tax rate of 17% and export tax refund rate of 17%, the export tax refund rate shall be adjusted to 16%; and (v) for exported goods and cross-border taxable acts originally subject to tax rate of 11% and export tax refund rate of 11%, the export tax refund rate shall be adjusted to 10%.
In April 2018, the Ministry of Finance and the State Administration of Taxation jointly promulgated the Circular of the Ministry of Finance and the State Administration of Taxation on Adjustment of Value-Added Tax Rates, or Circular 32, according to which (i) for VAT taxable sales acts or importation of goods originally subject to value-added tax rates of 17% and 11% respectively, such tax rates shall be adjusted to 16% and 10%, respectively; (ii) for purchase of agricultural products originally subject to deduction rate of 11%, such deduction rate shall be adjusted to 10%; (iii) for purchase of agricultural products for the purpose of production and sales or consigned processing of goods subject to tax rate of 16%, such tax shall be calculated at the deduction rate of 12%; (iv) for exported goods originally subject to tax rate of 17% and export tax refund rate of 17%, the export tax refund rate shall be adjusted to 16%; and (v) for exported goods and cross-border taxable acts originally subject to tax rate of 11% and export tax refund rate of 11%, the export tax refund rate shall be adjusted to 10%.
To ensure that sellers and service providers comply with these laws and regulations, the platform operators are required to implement rules governing transactions on the platform, monitor the information posted by sellers and service providers, and report any violations by such sellers or service providers to the relevant authorities.
To ensure that sellers and service providers comply with these laws and regulations, the platform operators are required to implement rules governing transactions on the platform, monitor the information posted by sellers and service providers, and report any violations by such sellers or service providers to the authorities.
Based on the advice of King & Wood Mallesons, our PRC legal counsel, we are of the view that we did not need, and will not need, to obtain the CSRC’s approval under the M&A Rules for our previous offshore offerings.
Based on the advice of King & Wood Mallesons, our PRC legal counsel, we are of the view that we did not need, and will not need, to obtain the CSRC’s approval under the M&A Rules for our previous offerings.
See “Item 3. Key Information—D. Risk Factors— Risks Related to Our Business and Industry—We currently rely on commercial banks and third-party online payment service providers for payment processing and escrow services.
See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business and Industry—We currently rely on commercial banks and third-party payment service providers for payment processing and escrow services.
The proportion of Discretional Foreign Exchange Settlement of the foreign exchange capital of a foreign-invested enterprise is temporarily determined to be 100%. SAFE issued the Circular on Reforming and Regulating Policies on the Control over Foreign Exchange Settlement of Capital Accounts, or Circular 16.
The proportion of Discretional Foreign Exchange Settlement of the foreign exchange capital of a PRC foreign-invested enterprise is temporarily determined to be 100%. SAFE issued the Circular on Reforming and Regulating Policies on the Control over Foreign Exchange Settlement of Capital Accounts, or SAFE Circular 16.
In March 2015, SAFE promulgated the Circular on Reforming the Management Approach regarding the Settlement of Foreign Exchange Capital of Foreign-invested Enterprises, or Circular 19. According to Circular 19, the foreign exchange capital of foreign-invested enterprises shall be subject to the Discretional Foreign Exchange Settlement.
In March 2015, SAFE promulgated the Circular on Reforming the Management Approach regarding the Settlement of Foreign Exchange Capital of PRC Foreign-invested Enterprises, or SAFE Circular 19. According to SAFE Circular 19, the foreign exchange capital of PRC foreign-invested enterprises shall be subject to the Discretional Foreign Exchange Settlement.
The Foreign Investment Law stipulates three forms of foreign investment, but is silent as to whether contractual arrangements are a form of foreign investment. The Implementation Regulations on the Foreign Investment Law are also silent as to whether contractual arrangements should be deemed to be a form of foreign investment.
The PRC Foreign Investment Law stipulates three forms of foreign investment, but is silent as to whether contractual arrangements are a form of foreign investment. The Implementation Regulations on the PRC Foreign Investment Law are also silent as to whether contractual arrangements should be deemed to be a form of foreign investment.
See “Item 3. Key Information— D. Risk Factors—Risks Related to Our Corporate Structure—The shareholders of the VIE may have potential conflicts of interest with us, which may materially and adversely affect our business and financial condition.” Under PRC laws and regulations, our PRC subsidiaries may pay cash dividends to us out of their respective accumulated profits.
See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Corporate Structure—The shareholders of the VIE may have potential conflicts of interest with us, which may materially and adversely affect our business and financial condition.” Under PRC laws and regulations, our mainland China subsidiaries may pay cash dividends to us out of their respective accumulated profits.
These contractual arrangements enable us to (i) direct the activities of the VIE and its subsidiaries; (ii) receive substantially all of the economic benefits of the VIE and its subsidiaries; and (iii) have an exclusive option to purchase all or part of the equity interests in and assets of the VIE when and to the extent permitted by PRC law. 83 Table of Contents Arrangements that enable us to direct the activities of the VIE and its subsidiaries Shareholders’ Voting Rights Proxy Agreement .
These contractual arrangements enable us to (i) direct the activities of the VIE and its subsidiaries; (ii) receive substantially all of the economic benefits of the VIE and its subsidiaries; and (iii) have an exclusive option to purchase all or part of the equity interests in and assets of the VIE when and to the extent permitted by PRC law. 85 Table of Contents Arrangements that enable us to direct the activities of the VIE and its subsidiaries Shareholders’ Voting Rights Proxy Agreement .
According to the Filing Measures, an offering or listing by an issuer that meets both of the following standards shall be considered an “indirect overseas offering and listing by a domestic Chinese company”: (i) 50% or more of the issuer’s operating revenue, total profit, total assets or net assets as documented in its audited consolidated financial statements for the most recent accounting year is accounted for by domestic PRC companies; and, and (ii) the issuer conducts its principal business activities in China, or its principal places of business are located in China, or the majority of its senior management in charge of its business operations are PRC citizens or residents.
According to the Filing Measures, an offering or listing by an issuer that meets both of the following standards shall be considered an “indirect overseas offering and listing by a mainland China company”: (i) 50% or more of the issuer’s operating revenue, total profit, total assets or net assets as documented in its audited consolidated financial statements for the most recent accounting year is accounted for by mainland China companies; and (ii) the issuer conducts its principal business activities in mainland China, or its principal places of business are located in mainland China, or the majority of its senior management in charge of its business operations are PRC citizens or residents.
Circular 3 sets out various measures to tighten genuineness and compliance verification of cross-border transactions and cross-border capital flow, which include requiring banks to verify board resolutions, tax filing form, and audited financial statements before wiring foreign invested enterprises’ foreign exchange distribution above US$50,000, and strengthening genuineness and compliance verification of foreign direct investments.
SAFE Circular 3 sets out various measures to tighten genuineness and compliance verification of cross-border transactions and cross-border capital flow, which include requiring banks to verify board resolutions, tax filing form, and audited financial statements before wiring PRC foreign - invested enterprises’ foreign exchange distribution above US$50,000, and strengthening genuineness and compliance verification of foreign direct investments.
As a general principle, under the Foreign Investment Law, foreign investment is accorded pre-entry national treatment, which means that the treatment given to foreign investors and their investments must not be less favorable than those given to domestic investors and their investments, except if a foreign investment falls under a negative list, such as the 2021 Negative List.
As a general principle, under the PRC Foreign Investment Law, foreign investment is accorded pre-entry national treatment, which means that the treatment given to foreign investors and their investments must not be less favorable than those given to PRC investors and their investments, except if a foreign investment falls under a negative list, such as the 2021 Negative List.
Certain of Shanghai Xunmeng’s VATS Licenses will expire in 2025, while the remaining licenses will expire in 2027. Another consolidated affiliated entity, Hangzhou Aimi, has obtained a VATS License for online data processing and transaction processing business (operating e-commerce) and internet content-related services.
Certain of Shanghai Xunmeng’s VATS Licenses will expire in 2029, while the remaining licenses will expire in 2027. Another consolidated affiliated entity, Hangzhou Aimi, has obtained a VATS License for online data processing and transaction processing business (operating e-commerce) and internet content-related services. Hangzhou Aimi’s VATS License will expire in 2025.
Fair Trade Practices The FTC monitors and identifies practices that may be unfair or deceptive, including those that compromise privacy and consumer welfare, by examining, among other things, whether consumers are notified regarding the type of consumer data being collected and how such data will be used and stored.
The FTC monitors and identifies practices that may be unfair or deceptive, including those that compromise privacy and consumer welfare, by examining, among other things, whether consumers are notified regarding the type of consumer data being collected and how such data will be used and stored.
Risk Factors—Risks Related to Our Corporate Structure—We face uncertainties with respect to the implementation of the Foreign Investment Law and how it may impact the viability of our current corporate structure, corporate governance and business operations.” 66 Table of Contents The 2021 Negative List and the 2022 Encouraged Industries Catalog The industries in which foreign investors and foreign-invested enterprises may make investments in the PRC are regulated by the Catalog of Industries in which Foreign Investment is Encouraged (2022 edition), or the 2022 Encouraged Industries Catalog, and the Special Administrative Measures for Foreign Investment Access (Negative List 2021), or the 2021 Negative List.
Risk Factors—Risks Related to Our Corporate Structure—We face uncertainties with respect to the implementation of the PRC Foreign Investment Law and how it may impact the viability of our current corporate structure, corporate governance and business operations.” The 2021 Negative List and the 2022 Encouraged Industries Catalog The industries in which foreign investors and PRC foreign-invested enterprises may make investments in the PRC are regulated by the Catalog of Industries in which Foreign Investment is Encouraged (2022 edition), or the 2022 Encouraged Industries Catalog, and the Special Administrative Measures for Foreign Investment Access (Negative List 2021), or the 2021 Negative List.
We are subject to the Civil Code of the PRC, the PRC Consumer Rights and Interests Protection Law, and the Online Transactions Supervision Measures as an e-commerce platform service provider and believe that we are currently in compliance with these regulations in all material aspects.
We are subject to the Civil Code of the PRC, the PRC Consumer Rights and Interests Protection Law, and the Measures for the Supervision and Administration of Online Transactions as an e-commerce platform service provider and believe that we are currently in compliance with these regulations in all material aspects.
Risk Factors—Risks Related to Our Corporate Structure—We rely on contractual arrangements with the VIE and its shareholders for a large portion of our business operations, which may not be as effective as direct ownership in providing operational control.” Information Reporting Requirements Applicable to Foreign Investment In December 2019, MOFCOM and the SAMR promulgated the Measures on Reporting of Foreign Investment Information, which became effective on January 1, 2020.
Risk Factors—Risks Related to Our Corporate Structure—We rely on contractual arrangements with the VIE and its shareholders for a large portion of our business operations, which may not be as effective as direct ownership in providing operational control.” Information Reporting Requirements Applicable to Foreign Investment In December 2019, the Ministry of Commerce and the SAMR promulgated the Measures on Reporting of Foreign Investment Information, which became effective on January 1, 2020.
An amendment to the registration is required if there is a material change in the registered SPV, such as any change of basic information (including change of such PRC resident’s name and operation term), increases or decreases in investment amounts, transfers or exchanges of shares, or mergers or divisions.
An amendment to the registration is required if there is a material change in the registered SPV, such as any change of basic information (including change of name and operation term), increases or decreases in investment amounts, transfers or exchanges of shares, or mergers or divisions.
We depend on these contractual arrangements with the VIE, in which we have no ownership interests, and its shareholders to conduct most aspects of our operation. We have relied and expect to continue to rely on these contractual arrangements to conduct our business in China. The shareholders of the VIE may have potential conflicts of interest with us.
We depend on these contractual arrangements with the VIE, in which we have no ownership interests, and its shareholders to conduct most aspects of our operations in China. We have relied and expect to continue to rely on these contractual arrangements to conduct our business in China. The shareholders of the VIE may have potential conflicts of interest with us.
Entities that violate the Personal Information Protection law may be subjected to a number of penalties, including (i) orders to rectify their violations, (ii) the suspension or termination of the provision of their services, (iii) confiscation of income that was illegally earned, or (iv) fines.
Entities that violate the Personal Information Protection law may be subject to a number of penalties, including (i) orders to rectify their violations, (ii) the suspension or termination of the provision of their services, (iii) confiscation of income that was illegally earned, or (iv) fines.
In particular, on November 14, 2021, the CAC released the Draft Network Data Security Regulations for public comment.
In particular, on November 14, 2021, the CAC released the draft Regulations on Network Data Security Management for public comment.
In particular, pursuant to these draft regulations, a data processor must apply for cybersecurity review if, among others, it (i) seeks a public offering on a foreign stock exchange and processes the data of more than one million users, (ii) seeks a Hong Kong listing that affects or may affect national security, or (iii) otherwise conducts data processing activities that affect or may affect national security.
In particular, pursuant to these draft regulations, a data processor must apply for cybersecurity review if, among others, it (i) seeks a public offering on a stock exchange outside of the PRC and processes the data of more than one million users, (ii) seeks a Hong Kong listing that affects or may affect national security, or (iii) otherwise conducts data processing activities that affect or may affect national security.
Under the PRC Enterprise Income Tax Law, an enterprise established outside China with “de facto management bodies” within China is considered a “resident enterprise” for PRC enterprise income tax purposes and is generally subject to a uniform 25% enterprise income tax rate on its worldwide income.
Under the PRC Enterprise Income Tax Law, an enterprise established outside of mainland China with “de facto management bodies” within mainland China is considered a “resident enterprise” for PRC enterprise income tax purposes and is generally subject to a uniform 25% enterprise income tax rate on its worldwide income.
Additionally, to approve the overseas offering and listing of issuers who have set up variable interest entities (or other contractual arrangements), the CSRC will conduct direct communications with, and consolidate the views of, regulators of the relevant industries in which the variable interest entities operate.
Additionally, to approve the offering and listing of issuers who have set up variable interest entities (or other contractual arrangements), the CSRC will conduct direct communications with, and consolidate the views of, regulators of the industries in which the variable interest entities operate.
The Cybersecurity Review Measures lists a number of factors for assessing national security risks, including, among others: (i) the risk of any core data, important data or a large amount of personal data being stolen, leaked, destroyed, illegally used or illegally transferred abroad; and (ii) the risk of critical information infrastructure, core data, important data or a large amount of personal data being affected, controlled or maliciously used by foreign governments after a foreign listing.
The Cybersecurity Review Measures lists a number of factors for assessing national security risks, including, among others: (i) the risk of any core data, important data or a large amount of personal data being stolen, leaked, destroyed, illegally used or illegally transferred abroad; and (ii) the risk of critical information infrastructure, core data, important data or a large amount of personal data being affected, controlled or maliciously used by foreign governments after a listing outside of mainland China.
Risk Factors—Risks Related to Our Business and Industry—Any lack of additional requisite approvals, licenses or permits or failure to comply with any requirements of the applicable laws, regulations and policies may materially and adversely affect our daily operations and hinder our growth.” 77 Table of Contents Regulations Relating to Tax in the PRC Income Tax The PRC Enterprise Income Tax Law was recently amended in December 2018.
Risk Factors—Risks Related to Our Business and Industry—Any lack of additional requisite approvals, licenses or permits or failure to comply with any requirements of the applicable laws, regulations and policies may materially and adversely affect our daily operations and hinder our growth.” Regulations Relating to Tax in the PRC Income Tax The PRC Enterprise Income Tax Law was recently amended in December 2018.
As Circular 16 is newly issued, and SAFE has not provided detailed guidelines with respect to its interpretation or implementations, it is uncertain how these rules will be interpreted and implemented. In January 2017, SAFE promulgated the Circular on Further Improving Reform of Foreign Exchange Administration and Optimizing Genuineness and Compliance Verification, or Circular 3.
As SAFE Circular 16 is newly issued, and SAFE has not provided detailed guidelines with respect to its interpretation or implementations, it is uncertain how these rules will be interpreted and implemented. 80 Table of Contents In January 2017, SAFE promulgated the Circular on Further Improving Reform of Foreign Exchange Administration and Optimizing Genuineness and Compliance Verification, or SAFE Circular 3.
According to the measures, a third-party platform that fails to complete the filing in accordance with the measures may be ordered by the competent provincial food and drug administrative department to make rectification within a prescribed time limit, and failure to make such rectification may subject the platform to public exposure of incompliance and a penalty of not exceeding RMB30,000.
According to the measures, a third-party platform that fails to complete the filing in accordance with the measures may be ordered by the competent provincial food and drug administrative department to make rectification within a prescribed time limit, and failure to make such rectification may subject the platform to public exposure of non-compliance and a penalty of not exceeding RMB30,000.
Risk Factors—Risks Related to Our Business and Industry—Any lack of additional requisite approvals, licenses or permits or failure to comply with any requirements of the applicable laws, regulations and policies may materially and adversely affect our daily operations and hinder our growth.” We are required to hold certain licenses and permits and to make certain filings with the relevant PRC governmental authorities in connection with various aspects of our business, including the following: Value-Added Telecommunication Business Operation Licenses In September 2000, the Telecommunications Regulations of the People’s Republic of China, or the Telecom Regulations, were issued by the State Council as the primary governing law on telecommunication services.
Risk Factors—Risks Related to Our Business and Industry—Any lack of additional requisite approvals, licenses or permits or failure to comply with any requirements of the applicable laws, regulations and policies may materially and adversely affect our daily operations and hinder our growth.” We are required to hold certain licenses and permits and to make certain filings with the PRC governmental authorities in connection with various aspects of our business, including the following: Value-Added Telecommunication Business Operation Licenses In September 2000, the Telecommunications Regulations of the PRC were issued by the State Council as the primary governing law on telecommunication services.
Under the Cybersecurity Review Measures, any network platform operator that holds personal data of more than one million users must apply for a cybersecurity review before it makes any public offering on a foreign stock exchange. In addition to the foregoing circumstances, the Cybersecurity Review Measures also impose cybersecurity review obligations on national security grounds.
Under the Cybersecurity Review Measures, any network platform operator that holds personal data of more than one million users must apply for a cybersecurity review before it makes any public offering on a stock exchange outside of the PRC. In addition to the foregoing circumstances, the Cybersecurity Review Measures also impose cybersecurity review obligations on national security grounds.
In addition, the foreign investors of such PRC company may not be involved in the company’s operations and management, and their shareholding percentage is subject to the relevant regulations on domestic securities investments by foreign investors.
In addition, the foreign investors of such PRC company may not be involved in the company’s operations and management, and their shareholding percentage is subject to the regulations on securities investments in the PRC by foreign investors.
These lists were promulgated, and are amended from time to time, by MOFCOM and the NDRC. The 2021 Negative List limits the industries in which foreign investors may invest. It sets out a list of “restricted” and “prohibited” industries. Foreign investors may only invest in restricted industries if they satisfy certain conditions, including government approval.
These lists were promulgated, and are amended from time to time, by the Ministry of Commerce and the NDRC. The 2021 Negative List limits the industries in which foreign investors may invest. It sets out a list of “restricted” and “prohibited” industries. Foreign investors may only invest in restricted industries if they satisfy certain conditions, including government approval.
The Online Transactions Supervision Measures provide a number of specific rules relating to the registration of entities that transact online, the supervision of e-commerce and other business models, and the protection of consumers’ rights and personal information.
These measures provide a number of specific rules relating to the registration of entities that transact online, the supervision of e-commerce and other business models, and the protection of consumers’ rights and personal information.
Therefore, it is uncertain whether we would be deemed to be a critical information infrastructure operator or a network platform operator under PRC law and become subject to the relevant PRC cybersecurity laws and regulations.
Therefore, it is uncertain whether we would be deemed to be a critical information infrastructure operator or a network platform operator under PRC law and become subject to PRC cybersecurity laws and regulations.
Hangzhou Weimi has the exclusive ownership of intellectual property rights created as a result of the performance of this agreement. Hangzhou Aimi agrees to pay Hangzhou Weimi service fee at an amount as determined by Hangzhou Weimi.
Hangzhou Weimi has the exclusive ownership of intellectual property rights created as a result of the performance of this agreement. Hangzhou Aimi agrees to pay Hangzhou Weimi service fees at an amount as determined by Hangzhou Weimi.
In particular, pursuant to the Online Transactions Supervision Measures, individual merchants with an aggregate annual online business turnover of RMB100,000 or more must register with the applicable local branches of the SAMR, and e-commerce platforms must remind the individual merchants on their platforms to make such registrations in a timely manner.
In particular, pursuant to these measures, individual merchants with an aggregate annual online business turnover of RMB100,000 or more must register with the applicable local branches of the SAMR, and e-commerce platforms must remind the individual merchants on their platforms to make such registrations in a timely manner.
The M&A Rules require, among other things, that MOFCOM be notified in advance of any change-of-control transaction in which a foreign investor acquires control of a PRC domestic enterprise and which involves any of the following circumstances: (i) an important industry is concerned, (ii) the transaction involves factors that impact or may impact national economic security, or (iii) the transaction will lead to a change in control of a domestic enterprise which holds a famous trademark or PRC time-honored brand.
The M&A Rules require, among other things, that the Ministry of Commerce be notified in advance of any change-of-control transaction in which a foreign investor acquires control of a PRC enterprise and which involves any of the following circumstances: (i) an important industry is concerned, (ii) the transaction involves factors that impact or may impact national economic security, or (iii) the transaction will lead to a change in control of an enterprise which holds a famous trademark or a PRC time-honored brand.
Failure to complete the relevant filing procedures in a timely manner could result in sanctions by the CSRC or other regulatory agencies in China, including fines and penalties on operations, restrictions on or the prohibition of dividend payments or remittances by PRC subsidiaries, or delays or restrictions on the repatriation of proceeds from the offering into China.
Failure to complete the filing procedures in a timely manner could result in sanctions by the CSRC or other regulatory agencies, including fines and penalties on operations, restrictions on or the prohibition of dividend payments or remittances by mainland China subsidiaries, or delays or restrictions on the repatriation of proceeds from the offering into mainland China.
Filing by Third-Party Platform Providers for Online Food Trading In July 2016, the SFDA promulgated the Measures for Investigation and Handling of Illegal Acts Involving Online Food Safety, which became effective on October 1, 2016 and was amended on April 2, 2021, pursuant to which a third-party platform providing online food trading in the PRC must file a record with the food and drug administration at the provincial level and obtain a filing number.
Filing by Third-Party Platform Providers for Online Food Trading In July 2016, the State Food and Drug Administration promulgated the Measures for Investigation and Handling of Illegal Acts Involving Online Food Safety, which became effective on October 1, 2016 and was amended on April 2, 2021, pursuant to which a third-party platform providing online food trading in the PRC must file a record with the administration for market regulation at the provincial level and obtain a filing number.
This initiative is not driven by profit or commercial goals, but instead strives to facilitate the advancement of agritech, promote digital inclusion, and provide agritech talents and workers with greater motivation and a sense of achievement. We have been funding this initiative from our profits.
This initiative is not driven by profit or commercial goals, but instead strives to facilitate the advancement of agri-tech, promote digital inclusion, and provide agri-tech talents and workers with greater motivation and a sense of achievement. We have been funding this initiative from our profits.
The State Council, the MIIT, MOFCOM, the SAIC (which has now been merged into the SAMR), the former State Administration of Press, Publication, Radio, Film and Television (which has been replaced by the State Administration of Radio and Television), and other relevant government authorities have promulgated an extensive regulatory scheme governing telecommunications, online sales and e-commerce.
The State Council, the MIIT, the Ministry of Commerce, the SAIC (which has now been merged into the SAMR), the former State Administration of Press, Publication, Radio, Film and Television (which has been replaced by the State Administration of Radio and Television), and other government authorities have promulgated an extensive regulatory scheme governing telecommunications, online sales and e-commerce.
In addition, some of the provisions under the Cybersecurity Review Measures remain unclear on whether they are applicable to companies that are already listed in the United States, such as us. ​ 72 Table of Contents Besides the Cybersecurity Law and the Cybersecurity Review Measures, a number of other rules and regulations also regulate cybersecurity.
In addition, some of the provisions under the Cybersecurity Review Measures remain unclear on whether they are applicable to companies that are already listed in the United States, such as us. Besides the Cybersecurity Law and the Cybersecurity Review Measures, a number of other rules and regulations also regulate cybersecurity.
Our consolidated affiliated entity, Shanghai Xunmeng, the main operating entity which provides platform service to third-party merchants for their sales of products, has obtained the VATS Licenses covering (i) online data processing and transaction processing business (operating e-commerce), (ii) internet content-related services, (iii) domestic call center business, and (iv) information services from Shanghai Communications Administration.
Our consolidated affiliated entity, Shanghai Xunmeng, the main operating entity which provides platform service to third-party merchants for their sales of products, has obtained the VATS Licenses covering (i) online data processing and transaction processing business (operating e-commerce), (ii) internet content-related services, (iii) call center business within mainland China, and (iv) information services from Shanghai Communications Administration.
In September 2000, the State Council promulgated the Administrative Measures on Internet Information Services, pursuant to which commercial internet content-related services operators must obtain a VATS License for internet content-related business from the relevant government authorities before engaging in any commercial internet content-related services operations within China.
In September 2000, the State Council promulgated the Administrative Measures on Internet Information Services, as amended, pursuant to which commercial internet content-related services operators must obtain a VATS License for internet content-related business from the government authorities before engaging in any commercial internet content-related services operations within China.
However, as of the date of this annual report, there have been no clarifications from the relevant authorities as to the standards for determining whether an activity is one that “affects or may affect national security.” In addition to the foregoing cybersecurity review obligations, the Draft Network Data Security Regulations also proposed to create a system of annual data security self-assessments, whereby data processors that (i) process “important data” or (ii) are listed overseas must conduct an annual data security assessment, and submit the annual assessment report to the applicable municipal cybersecurity department by the end of January in the following year.
However, as of the date of this annual report, there have been no clarifications from the authorities as to the standards for determining whether an activity is one that “affects or may affect national security.” In addition to the foregoing cybersecurity review obligations, the draft Regulations on Network Data Security Management also proposed to create a system of annual data security self-assessments, whereby data processors that (i) process “important data” or (ii) are listed outside of the PRC must conduct an annual data security assessment, and submit the annual assessment report to the applicable municipal cybersecurity department by the end of January in the following year.
According to the Regulations on the Administration of Housing Provident Fund, housing provident fund contributions by an individual employee and housing provident fund contributions by his or her employer shall belong to the individual employee. The employer must timely pay up and deposit housing provident fund contributions in full amount and late or insufficient payments shall be prohibited.
According to the Regulations on the Administration of Housing Provident Fund, housing provident fund contributions by an individual employee and housing provident fund contributions by his or her employer shall belong to the individual employee. 77 Table of Contents The employer must timely pay up and deposit housing provident fund contributions in the full amount and late or insufficient payments shall be prohibited.
The Pinduoduo Platform Overview Founded in 2015, the Pinduoduo platform provides buyers with a comprehensive selection of value-for-money merchandise and fun and interactive shopping experiences.
Overview of Our Platforms The Pinduoduo Platform Founded in 2015, the Pinduoduo platform provides buyers with a comprehensive selection of value-for-money merchandise and fun and interactive shopping experiences.
An enterprise must provide social insurance by processing social insurance registration with local social insurance agencies, and shall pay or withhold relevant social insurance premiums for or on behalf of employees.
An enterprise must provide social insurance by processing social insurance registration with local social insurance agencies, and shall pay or withhold the social insurance premiums for or on behalf of employees.
Regulations Relating to Anti-unfair Competition and Anti-monopoly On April 23, 2019, the Standing Committee of the NPC amended the PRC Anti-unfair Competition Law, pursuant to which business operators may not engage in anti-competitive activities including but not limited to, unduly influencing transactions, confusing or defrauding consumers, commercial bribery, trade secret infringement and commercial libel.
Regulations Relating to Anti-unfair Competition and Anti-monopoly On April 23, 2019, the Standing Committee of the National People’s Congress amended the PRC Anti-unfair Competition Law, pursuant to which business operators may not engage in anti-competitive activities including but not limited to, unduly influencing transactions, confusing or defrauding consumers, commercial bribery, trade secret infringement and commercial libel.
The Standing Committee of the NPC has also enacted the Decisions on Preserving Internet Security, which subject violators to potential criminal punishment in China for any attempt to: (i) gain improper entry into a computer or system of strategic importance; (ii) disseminate politically disruptive information; (iii) leak state secrets; (iv) spread false commercial information; or (v) infringe intellectual property rights.
The Standing Committee of the National People’s Congress has also enacted the Decisions on Preserving Internet Security, which subject violators to potential criminal punishment in China for any attempt to: (i) gain improper entry into a computer or system of strategic importance; (ii) disseminate politically disruptive information; (iii) leak state secrets; (iv) spread false commercial information; or (v) infringe upon intellectual property rights.
The platform provides a comprehensive suite of product categories, including agricultural produce, apparel, shoes, bags, mother and childcare products, food and beverage, electronic appliances, furniture and household goods, cosmetics and other personal care items, sports and fitness items and auto accessories. Pinduoduo pioneered an innovative “team purchase” model.
The platform provides a comprehensive suite of product categories, including agricultural produce, apparel, shoes, bags, mother and childcare products, food and beverages, consumer electronics, electronic appliances, furniture and household goods, cosmetics and other personal care items, sports and fitness and auto accessories. Pinduoduo pioneered an innovative “team purchase” model.
Shanghai Xunmeng has completed the requisite procedures with the relevant administrative authority.
Shanghai Xunmeng has completed the requisite procedures with the administrative authority.
For example, the E-Commerce Law requires e-commerce platform operators to respect and indiscriminately protect consumers’ legitimate rights and provide options to consumers, and also requires e-commerce operators to clearly identify bundle sales in which additional services or products are added by merchants to consumers’ orders, and not to assume that consumers will consent to such bundle sales by default.
The E-Commerce Law requires e-commerce platform operators to respect and protect consumers’ legitimate rights and provide options to consumers. It also requires e-commerce operators to clearly identify bundle sales in which additional services or products are added by merchants to consumers’ orders, and not to assume that consumers will consent to such bundle sales by default.
However, the interpretation and application of the regulations could change so that we may need to obtain the CSRC’s approval with respect to our previous or future offshore offerings. The 2021 Negative List On December 27, 2021, the NDRC and MOFCOM jointly issued the 2021 Negative List, which became effective on January 1, 2022.
However, the interpretation and application of the regulations could change so that we may need to obtain the CSRC’s approval with respect to our previous or future offerings. The 2021 Negative List On December 27, 2021, the NDRC and the Ministry of Commerce jointly issued the 2021 Negative List, which became effective on January 1, 2022.
This catalog also specifies that the scope of information service business includes information release and delivery services, information search and query services, information community platform services, information real-time interactive services, and information protection and processing services. Under the Telecom Regulations, telecommunications service providers are required to obtain operating licenses before they commence operations.
This catalog also specifies that the scope of information service business includes information release and delivery services, information search and query services, information community platform services, information real-time interactive services, and information protection and processing services. 68 Table of Contents Under the Telecommunications Regulations, telecommunications service providers are required to obtain operating licenses before they commence operations.
In January 2014, the State Council has issued the Decisions on Cancelling and Adjusting a Batch of Administrative Approval Items, which, among others, replaced the pre-registration approval requirement for telecommunications business with a post-registration approval requirement.
In January 2015, the State Council issued the Decisions on Cancelling and Adjusting a Batch of Administrative Approval Items, which, among others, replaced the pre-registration approval requirement for telecommunications business with a post-registration approval requirement.

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Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

102 edited+16 added−30 removed27 unchanged
Biggest changeWe adopted ASU No. 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”) on January 1, 2022, which simplified the accounting for convertible instruments by removing the separation models for convertible debt with cash conversion features and convertible instruments with a beneficial conversion feature. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, ​ ​ 2020 ​ 2021 ​ 2022 ​ RMB % RMB % RMB US$ % ​ ​ (in thousands, except for percentages) Revenues ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Online marketing services and others 47,953,779 ​ 80.6 72,563,402 ​ 77.2 ​ 102,721,924 14,893,279 78.7 Transaction services ​ 5,787,415 ​ 9.7 ​ 14,140,449 ​ 15.1 ​ 27,626,494 ​ 4,005,465 ​ 21.2 Merchandise sales 5,750,671 ​ 9.7 7,246,088 ​ 7.7 ​ 209,171 30,327 0.1 Total revenues 59,491,865 ​ 100.0 93,949,939 ​ 100.0 ​ 130,557,589 18,929,071 100.0 Costs of revenues (1) (19,278,641) ​ (32.4) (31,718,093) ​ (33.8) ​ (31,462,298) (4,561,604) (24.1) Gross profit 40,213,224 ​ 67.6 62,231,846 ​ 66.2 ​ 99,095,291 14,367,467 75.9 Operating expenses ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Sales and marketing expenses (1) (41,194,599) ​ (69.2) (44,801,720) ​ (47.7) ​ (54,343,719) (7,879,099) (41.6) General and administrative expenses (1) (1,507,297) ​ (2.5) (1,540,774) ​ (1.6) ​ (3,964,935) (574,862) (3.0) Research and development expenses (1) (6,891,653) ​ (11.6) (8,992,590) ​ (9.6) ​ (10,384,716) (1,505,642) (8.0) Total operating expenses (49,593,549) ​ (83.4) (55,335,084) ​ (58.9) ​ (68,693,370) (9,959,603) (52.6) Operating (loss)/profit (9,380,325) ​ (15.8) 6,896,762 ​ 7.3 ​ 30,401,921 4,407,864 23.3 Other income ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest and investment gain, net 2,455,366 ​ 4.1 3,061,662 ​ 3.3 ​ 3,997,100 ​ 579,525 ​ 3.1 Interest expenses (757,336) ​ (1.3) (1,231,002) ​ (1.3) ​ (51,655) (7,489) (0.0) Foreign exchange gain/(loss) 225,197 ​ 0.4 71,750 ​ 0.1 ​ (149,710) (21,706) (0.1) Other income, net 193,702 ​ 0.3 656,255 ​ 0.7 ​ 2,221,358 322,066 1.7 (Loss)/profit before income tax and share of results of equity investees (7,263,396) ​ (12.2) 9,455,427 ​ 10.1 ​ 36,419,014 5,280,260 27.9 Income tax expenses — ​ — (1,933,585) ​ (2.1) ​ (4,725,667) (685,157) (3.6) Share of results of equity investees 83,654 ​ 0.1 246,828 ​ 0.3 ​ (155,285) (22,514) (0.1) Net (loss)/income (7,179,742) ​ (12.1) 7,768,670 ​ 8.3 ​ 31,538,062 4,572,589 24.2 Note: (1) Share-based compensation expenses were allocated as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, ​ ​ 2020 ​ 2021 ​ 2022 ​ RMB RMB RMB US$ ​ ​ (in thousands) Costs of revenues 32,291 ​ 26,624 ​ 33,788 4,899 Sales and marketing expenses 1,093,547 ​ 1,612,219 ​ 2,158,676 312,979 General and administrative expenses 966,985 ​ 792,421 ​ 3,004,327 435,586 Research and development expenses 1,520,220 ​ 2,343,466 ​ 2,521,574 365,594 Total 3,613,043 ​ 4,774,730 ​ 7,718,365 1,119,058 ​ Year ended December 31, 2022 compared to year ended December 31, 2021 Revenues Our revenues, which consist of revenues from online marketing services and others, transaction services and merchandise sales, increased by 39.0% from RMB93,949.9 million in 2021 to RMB130,557.6 million (US$18,929.1 million) in 2022.
Biggest changeWe adopted ASU No. 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”) on January 1, 2022, which simplified the accounting for convertible instruments by removing the separation models for convertible debt with cash conversion features and convertible instruments with a beneficial conversion feature. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, ​ ​ 2021 ​ 2022 ​ 2023 ​ RMB % RMB % RMB US$ % ​ ​ (in thousands, except for percentages) Revenues ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Online marketing services and others 79,809,490 ​ 84.9 102,931,095 ​ 78.8 ​ 153,540,553 21,625,735 62.0 Transaction services ​ 14,140,449 ​ 15.1 ​ 27,626,494 ​ 21.2 ​ 94,098,652 ​ 13,253,518 ​ 38.0 Total revenues 93,949,939 ​ 100.0 130,557,589 ​ 100.0 ​ 247,639,205 34,879,253 100.0 Costs of revenues (1) (31,718,093) ​ (33.8) (31,462,298) ​ (24.1) ​ (91,723,577) (12,918,996) (37.0) Operating expenses ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Sales and marketing expenses (1) (44,801,720) ​ (47.7) (54,343,719) ​ (41.6) ​ (82,188,870) (11,576,060) (33.2) General and administrative expenses (1) (1,540,774) ​ (1.6) (3,964,935) ​ (3.0) ​ (4,075,622) (574,039) (1.7) Research and development expenses (1) (8,992,590) ​ (9.6) (10,384,716) ​ (8.0) ​ (10,952,374) (1,542,610) (4.4) Total operating expenses (55,335,084) ​ (58.9) (68,693,370) ​ (52.6) ​ (97,216,866) (13,692,709) (39.3) Operating profit 6,896,762 ​ 7.3 30,401,921 ​ 23.3 ​ 58,698,762 8,267,548 23.7 Other income/(expenses) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest and investment income, net 3,061,662 ​ 3.3 3,997,100 ​ 3.1 ​ 10,238,080 ​ 1,442,003 ​ 4.1 Interest expenses (1,231,002) ​ (1.3) (51,655) ​ (0.0) ​ (43,987) (6,195) (0.0) Foreign exchange gain/(loss) 71,750 ​ 0.1 (149,710) ​ (0.1) ​ 35,721 5,031 0.0 Other income, net 656,255 ​ 0.7 2,221,358 ​ 1.7 ​ 2,952,579 415,862 1.2 Profit before income tax and share of results of equity investees 9,455,427 ​ 10.1 36,419,014 ​ 27.9 ​ 71,881,155 10,124,249 29.0 Income tax expenses (1,933,585) ​ (2.1) (4,725,667) ​ (3.6) ​ (11,849,904) (1,669,024) (4.8) Share of results of equity investees 246,828 ​ 0.3 (155,285) ​ (0.1) ​ (4,707) (663) (0.0) Net income 7,768,670 ​ 8.3 31,538,062 ​ 24.2 ​ 60,026,544 8,454,562 24.2 Note: (1) Share-based compensation expenses were allocated as follows: ​ 91 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, ​ ​ 2021 ​ 2022 ​ 2023 ​ RMB RMB RMB US$ ​ ​ (in thousands) Costs of revenues 26,624 ​ 33,788 ​ 132,470 18,658 Sales and marketing expenses 1,612,219 ​ 2,158,676 ​ 2,354,097 331,568 General and administrative expenses 792,421 ​ 3,004,327 ​ 2,289,272 322,437 Research and development expenses 2,343,466 ​ 2,521,574 ​ 2,302,955 324,364 Total 4,774,730 ​ 7,718,365 ​ 7,078,794 997,027 ​ Year ended December 31, 2023 compared to year ended December 31, 2022 Revenues Our revenues, which consist of revenues from online marketing services and others, and transaction services, increased by 89.7% from RMB130,557.6 million in 2022 to RMB247,639.2 million (US$34,879.3 million) in 2023.
Critical Accounting Policies An accounting policy is considered critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time such estimate is made, and if different accounting estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact the consolidated financial statements.
Critical Accounting Policies and Estimates An accounting policy is considered critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time such estimate is made, and if different accounting estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact the consolidated financial statements.
E. Critical Accounting Estimates For our critical accounting estimates, see “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Critical Accounting Policies.” ​
E. Critical Accounting Estimates For our critical accounting estimates, see “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Critical Accounting Policies and Estimates.” ​
However, approval from or registration with competent government authorities is required where the Renminbi is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of loans denominated in foreign currencies. The PRC government may at its discretion restrict access to foreign currencies for current account transactions in the future.
However, approval from or registration with competent government authorities is required where the Renminbi is to be converted into foreign currency and remitted out of mainland China to pay capital expenses such as the repayment of loans denominated in foreign currencies. The PRC government may at its discretion restrict access to foreign currencies for current account transactions in the future.
Average transaction services revenues per active merchant increased from RMB1,230 in 2021 to RMB2,125 in 2022, as a result of the growth of our merchants’ businesses and the increase in merchant demand for more value-added services driven by the increased diversity of transactions under different consumption scenarios and product categories on our platforms.
Average transaction services revenues per active merchant increased from RMB1,230 in 2021 to RMB2,125 in 2022, as a result of the growth of our merchants’ businesses and the increase in merchant demand for more value-added services driven by the increased diversity of transactions placed under different consumption scenarios and product categories on our platforms.
Interest and penalties related to unrecognized tax benefit recognized in accordance with ASC 740 are classified in the consolidated statements of comprehensive income/(loss) as income tax expenses. Recent Accounting Pronouncements See Item 17 of Part III, “Financial Statements—Note 2—Summary of significant accounting policies—Recent accounting pronouncements.” B.
Interest and penalties related to unrecognized tax benefit recognized in accordance with ASC 740 are classified in the consolidated statements of comprehensive income as income tax expenses. Recent Accounting Pronouncements See Item 17 of Part III, “Financial Statements—Note 2—Summary of significant accounting policies—Recent accounting pronouncements.” B.
Despite the absence of any explicit contractual obligations to incentivize the consumers on behalf of the merchants, we further evaluated the varying features of different incentive programs to determine that whether the incentives represent implicit obligations to the consumers on behalf of merchants and if so, should be recorded as reduction of revenues.
Despite the absence of any explicit contractual obligations to incentivize the consumers on behalf of the merchants, we further evaluated the varying features of different incentive programs to determine whether the incentives represent implicit obligations to the consumers on behalf of merchants and if so, should be recorded as reduction of revenues.
Trend Information Other than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events for the year ended December 31, 2022 that are reasonably likely to have a material and adverse effect on our net revenues, income, profitability, liquidity or capital resources, or that would cause the disclosed financial information to be not necessarily indicative of future results of operations or financial conditions.
Trend Information Other than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events for the year ended December 31, 2023 that are reasonably likely to have a material and adverse effect on our net revenues, income, profitability, liquidity or capital resources, or that would cause the disclosed financial information to be not necessarily indicative of future results of operations or financial conditions.
Risk Factors—Risks Related to Our Multi-jurisdictional Operations—If we are classified as a PRC resident enterprise for PRC income tax purposes, such classification could result in unfavorable tax consequences to us and our non-PRC shareholders or ADS holders.” Results of Operations The following table sets forth a summary of our consolidated results of operations for the periods presented, both in absolute amount and as a percentage of our revenues for the periods presented.
Risk Factors—Risks Related to Our Multi-jurisdictional Operations—If we are classified as a mainland China resident enterprise for PRC income tax purposes, such classification could result in unfavorable tax consequences to us and our non-mainland China shareholders or ADS holders.” Results of Operations The following table sets forth a summary of our consolidated results of operations for the periods presented, both in absolute amount and as a percentage of our revenues for the periods presented.
The difference was primarily due to the increase of RMB8,686.5 million in payables to merchants, an increase of RMB2,651.2 million in merchant deposits, an increase of RMB3,492.0 million in accrued expenses and other liabilities, and a decrease of RMB1,744.6 million in prepayments and other current assets, partially offset by a decrease of RMB1,422.9 million in amounts due to related parties and a decrease of RMB1,256.4 million in customer advances and deferred revenues.
The difference was primarily due to the increase of RMB8,686.5 million in payable to merchants, an increase of RMB2,651.2 million in merchant deposits, an increase of RMB3,492.0 million in accrued expenses and other liabilities, and a decrease of RMB1,744.6 million in prepayments and other current assets, partially offset by a decrease of RMB1,422.9 million in amounts due to related parties and a decrease of RMB1,256.4 million in customer advances and deferred revenues.
We believe our marketplace model has significant operating leverage and enables us to realize structural cost savings. We achieve economies of scale in our operation as a wider selection of merchandise attracts and retains a larger number of buyers, which in turn drives an increase in our scale and attracts more merchants to our platforms.
We believe our business model has significant operating leverage and enables us to realize structural cost savings. We achieve economies of scale in our operation as a wider selection of merchandise attracts and retains a larger number of buyers, which in turn drives an increase in our scale and attracts more merchants to our platforms.
Merchants are attracted to our platforms by our buyer base, plentiful sales opportunities, and the value-added services that we provide, such as targeted online marketing. Our ability to provide popular products on our platforms at attractive prices also depends on our ability to maintain mutually beneficial relationships with our merchants.
Merchants are attracted to our platforms by our buyer base, plentiful sales opportunities, and the value-added services that we provide, such as online marketing and transaction services. Our ability to provide popular products on our platforms at attractive prices also depends on our ability to maintain mutually beneficial relationships with our merchants.
Under PRC law, each of our subsidiaries, the VIE and its subsidiaries in China is required to set aside at least 10% of its after-tax profits each year, if any, to fund certain statutory reserve funds until such reserve funds reach 50% of their registered capital.
Under PRC law, each of our mainland China subsidiaries, the VIE and its subsidiaries is required to set aside at least 10% of its after-tax profits each year, if any, to fund certain statutory reserve funds until such reserve funds reach 50% of their registered capital.
We aim to enhance the value of our online marketplace services through such means as broadening our service offerings, increasing the size and engagement of our buyer base, improving recommendation features, developing innovative marketing services, and improving the measurement tools available to merchants.
We aim to enhance the value of our online platform services through such means as broadening our service offerings, increasing the size and engagement of our buyer base, improving recommendation features, developing innovative marketing services, and improving the measurement tools available to merchants.
Our general and administrative expenses increased from RMB1,540.8 million in 2021 to RMB3,964.9 million (US$574.9 million) in 2022. The increase was primarily attributable to the increase in staff related costs. Research and development expenses .
Our general and administrative expenses increased from RMB1,540.8 million in 2021 to RMB3,964.9 million in 2022. The increase was primarily attributable to the increase in staff related costs. Research and development expenses .
Sales and marketing expenses consist primarily of online and offline advertising, promotion and coupon expenses, as well as payroll, employee benefits, share-based compensation expenses and other related expenses associated with sales and marketing. We expect to continue our sales and marketing spending in the foreseeable future as we seek to increase our brand awareness, enhance user engagement and build scale.
Sales and marketing expenses consist primarily of online and offline advertising and promotions, as well as payroll, employee benefits, share-based compensation expenses and other related expenses associated with sales and marketing. We expect to continue our sales and marketing spending in the foreseeable future as we seek to increase our brand awareness, enhance user engagement and build scale.
Operating profit As a result of the foregoing, we recorded operating profit of RMB30,401.9 million (US$4,407.9 million) in 2022, compared to operating profit of RMB6,896.8 million in 2021. Other income/(expenses) Interest and investment income, net . Net interest and investment income mainly represents interest earned on demand deposits, time deposits and wealth management products in financial institutions.
Operating profit As a result of the foregoing, we recorded operating profit of RMB30,401.9 million in 2022, compared to operating profit of RMB6,896.8 million in 2021. Other income/(expenses) Interest and investment income, net . Net interest and investment income mainly represents interest earned on demand deposits, time deposits and wealth management products in financial institutions.
Risk Factors—Risks Related to Our Multi-jurisdictional Operations—We may rely on dividends and other distributions on equity paid by our PRC subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of our PRC subsidiaries to make payments to us could have a material and adverse effect on our ability to conduct our business.” If our holding company in the Cayman Islands or any of our subsidiaries outside of China were deemed to be a “resident enterprise” under the PRC Enterprise Income Tax Law, it would be subject to enterprise income tax on its worldwide income at a rate of 25%.
Risk Factors—Risks Related to Our Multi-jurisdictional Operations—We may rely on distributions and advances paid by our mainland China subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of our mainland China subsidiaries to make payments to us could have a material and adverse effect on our ability to conduct our business.” If our holding company in the Cayman Islands or any of our subsidiaries outside of mainland China were deemed to be a “resident enterprise” under the PRC Enterprise Income Tax Law, it would be subject to enterprise income tax on its worldwide income at a rate of 25%.
While our business is influenced by general factors affecting our industry, our results of operations are more directly affected by certain company specific factors, including: Our ability to further enhance buyer and merchant engagement on our platforms Our key ecosystem partners are the buyers and merchants who transact on our platforms.
While our business is influenced by general factors affecting our industry, our results of operations are more directly affected by certain company specific factors, including: 87 Table of Contents Our ability to further enhance buyer and merchant engagement on our platforms Our key ecosystem partners are the buyers and merchants who transact on our platforms.
Our research and development expenses increased from RMB8,992.6 million in 2021 to RMB10,384.7 million (US$1,505.6 million) in 2022, primarily due to the increase of RMB1,064.4 million in staff related costs. The increase in staff costs was primarily attributable to the increase in headcount for our research and development personnel, as we hired additional experienced research and development personnel.
Our research and development expenses increased from RMB8,992.6 million in 2021 to RMB10,384.7 million in 2022, primarily due to the increase of RMB1,064.4 million in staff related costs. The increase in staff costs was primarily attributable to the increase in headcount for our research and development personnel, as we hired additional experienced research and development personnel.
Our ability to improve buyer activities depends on our ability to continue to provide a wide selection of merchandise at attractive prices, as well as fun and interactive shopping experiences on our platforms.
Our ability to increase buyer activities depends on our ability to continue to provide a wide selection of merchandise at attractive prices, as well as fun and interactive shopping experiences on our platforms.
We believe that increasing the value and variety of our online marketplace services and the consequent return on investment to merchants from utilizing these services will increase demand for our services.
We believe that increasing the value and variety of our online platform services and the consequent return on investment to merchants from utilizing these services will increase demand for our services.
Material cash requirements Our material cash requirements as of December 31, 2022 and any subsequent interim period primarily include our capital expenditures, convertible bonds obligations, operating lease commitments and investment commitments.
Material cash requirements Our material cash requirements as of December 31, 2023 and any subsequent interim period primarily include our capital expenditures, convertible bonds obligations, operating lease commitments and investment commitments.
Our costs of revenues consist primarily of payment processing fees paid to third party online payment platforms, costs associated with the operation of our platforms and others, such as costs and expenses attributable to merchandise sales, fulfillment fees, merchant support services, bandwidth and server costs, amortizations, depreciation and maintenance costs, payroll, employee benefits and share-based compensation expenses, call center, surcharges and other expenses directly attributable to the online marketplace services.
Our costs of revenues consist primarily of payment processing fees paid to third-party payment service providers, costs associated with the operation of our platforms and others, such as costs and expenses attributable to merchandise sales, fulfillment fees, merchant support services, bandwidth and server costs, amortizations, depreciation and maintenance costs, payroll, employee benefits and share-based compensation expenses, call center, surcharges and other expenses directly attributable to the online platform services.
The increase in payables to merchants, merchant deposits and accrued expenses and other liabilities was primarily attributable to our business expansion and the increase of number of merchants on the Pinduoduo platform.
The increase in payable to merchants, merchant deposits and accrued expenses and other liabilities was primarily attributable to our business expansion and the increase of number of merchants on the Pinduoduo platform.
We had interest expense of RMB51.7 million (US$7.5 million) in 2022, compared to interest expense of RMB1,231.0 million in 2021, primarily due to the decrease of RMB1,170.2 million in interest expenses related to the convertible bonds’ amortization to face value. Other income, net .
We had interest expenses of RMB51.7 million in 2022, compared to interest expenses of RMB1,231.0 million in 2021, primarily due to the decrease of RMB1,170.2 million in interest expenses related to the convertible bonds’ amortization to face value. Other income, net .
Our sales and marketing expenses increased from RMB44,801.7 million in 2021 to RMB54,343.7 million (US$7,879.1 million), primarily attributable to the increase of RMB8,514.6 million in advertising expenses and promotion and coupon expenses, which was focused on building our brand awareness and driving user growth and engagement on our platforms. General and administrative expenses .
Our sales and marketing expenses increased from RMB44,801.7 million in 2021 to RMB54,343.7 million in 2022, primarily attributable to the increase of RMB8,514.6 million in advertising expenses and promotion and coupon expenses, which was focused on building our brand awareness and driving user growth and engagement on our platforms. General and administrative expenses .
Our ability to further improve the activities of buyers and merchants on our platforms is a key driver of our growth. 85 Table of Contents We benefit from a virtuous cycle as we seek to enhance our buyer and merchant engagement.
Our ability to further improve the activities of buyers and merchants on our platforms is a key driver of our growth. We benefit from a virtuous cycle as we seek to enhance our buyer and merchant engagement.
In addition, our wholly foreign-owned subsidiaries in China may allocate a portion of their after-tax profits based on PRC accounting standards to a staff welfare and bonus fund at their discretion. The statutory reserve funds and the discretionary funds are not distributable as cash dividends.
In addition, our mainland China subsidiaries may allocate a portion of their after-tax profits based on PRC accounting standards to a staff welfare and bonus fund at their discretion. The statutory reserve funds and the discretionary funds are not distributable as cash dividends.
When reviewing our financial statements, you should consider (i) our selection of critical accounting policies, (ii) the judgments and other uncertainties affecting the application of such policies, and (iii) the sensitivity of reported results to changes in conditions and assumptions. 93 Table of Contents Revenue recognition Revenues are principally comprised of those generated from online marketplace services and merchandise sales.
When reviewing our financial statements, you should consider (i) our selection of critical accounting policies, (ii) the judgments and other uncertainties affecting the application of such policies, and (iii) the sensitivity of reported results to changes in conditions and assumptions. Revenue recognition Revenues are principally comprised of those generated from online platform services and merchandise sales.
Business Overview—Technology” and “Item 4. Information on the Company—B. Business Overview—Intellectual Property.” D.
Information on the Company—B. Business Overview—Technology” and “—Intellectual Property.” D.
We are subject to value-added tax at a rate of (i) 16% (before April 1, 2019) or 13% (on or after April 1, 2019) on the sale of goods and (ii) 6% on the sale of services (including value-added telecommunication services), in each case less any deductible value-added tax we have already paid or borne in connection with such sale of goods or services.
We are subject to value-added tax at a rate of (i) 13% on the sale of goods and (ii) 6% on the sale of services (including value-added telecommunication services), in each case less any deductible value-added tax we have already paid or borne in connection with such sale of goods or services.
We had net interest and investment income of RMB3,061.7 million and RMB3,997.1 million (US$579.5 million) in 2021 and 2022, respectively. The increase was primarily attributable to the increase of our time deposits and wealth management products . Interest expense .
We had net interest and investment income of RMB3,061.7 million and RMB3,997.1 million in 2021 and 2022, respectively. The increase was primarily attributable to the increase of our time deposits and wealth management products. Interest expenses .
We also evaluate whether it is appropriate to record the gross amounts of goods and services sold and the related costs, or the net amounts earned as commissions. Payments for services or goods are generally received before deliveries.
We also evaluate whether it is appropriate to report revenue as the gross amounts of goods and services sold and the related costs, or the net amounts. Payments for services or goods are generally received before deliveries.
Therefore, our PRC subsidiaries are allowed to pay dividends in foreign currencies to us without prior SAFE approval by following certain routine procedural requirements.
Therefore, our PRC wholly foreign owned enterprises are allowed to pay dividends in foreign currencies to us without prior SAFE approval by following certain routine procedural requirements.
Our capital expenditures are primarily incurred for purchases of computer equipment relating to the operation of our platforms, furniture, office equipment and leasehold improvement for our office facilities and software. Our capital expenditures were RMB43.0 million in 2020, RMB3,287.2 million in 2021 and RMB635.7 million (US$92.2 million) in 2022. Our convertible bonds obligations represent our principal payments.
Our capital expenditures are primarily incurred for purchases of computer equipment relating to the operation of our platforms, furniture, office equipment and leasehold improvement for our office facilities and software. Our capital expenditures were RMB3,287.2 million in 2021, RMB635.7 million in 2022, and RMB583.9 million (US$82.2 million) in 2023. Our convertible bonds obligations represent our principal payments.
The difference was primarily due to the increase of RMB1,480.7 million (US$214.7 million) in merchant deposits, and an increase of RMB7,004.0 million (US$1,015.5 million) in accrued expenses and other liabilities, partially offset by an increase of RMB2,068.7 million (US$299.9 million) in amounts due from related parties.
The difference was primarily due to the increase of RMB1,480.7 million in merchant deposits, and an increase of RMB7,004.0 million in accrued expenses and other liabilities, partially offset by an increase of RMB2,068.7 million in amounts due from related parties.
In addition, our wholly foreign-owned subsidiaries in China are permitted to pay dividends to us only out of its retained earnings, if any, as determined in accordance with PRC accounting standards and regulations.
In addition, our mainland China subsidiaries are permitted to pay dividends to us only out of their retained earnings, if any, as determined in accordance with PRC accounting standards and regulations.
For example, we rely on our merchants to make available sufficient inventory and fulfill large volumes of orders in an efficient and timely manner to ensure a good user experience. Our ability to provide valuable online marketplace services and broaden service offerings We currently generate revenues primarily from online marketplace services that we provide to merchants through our platforms.
For example, we rely on our merchants to make available sufficient inventory for the timely fulfillment of large volumes of orders on our platforms to ensure a good user experience. Our ability to provide valuable online platform services and broaden service offerings We currently generate revenues primarily from online platform services that we provide to merchants through our platforms.
Revenues from online marketplace services primarily consist of online marketing services revenues and transaction services fees. Revenues represent the amount of consideration that we are entitled to in exchange for the transfer of promised goods or services in the ordinary course of our activities and are recorded net of value-added tax (“VAT”).
Revenues from online platform services primarily consist of online marketing services revenues and transaction services fees. Revenues represent the amount of consideration that we are entitled to in exchange for the transfer of promised goods or services in the ordinary course of our activities and are recorded net of indirect taxes.
Remittance of dividends by a wholly foreign-owned company out of China is subject to examination by the banks designated by SAFE. Our PRC subsidiaries have not paid dividends and will not be able to pay dividends until they generate accumulated profits and meet the requirements for statutory reserve funds. C. Research and Development See “Item 4. Information on the Company—B.
Remittance of dividends by our PRC wholly foreign owned enterprises is subject to examination by the banks designated by SAFE. Our mainland China subsidiaries have not paid dividends and will not be able to pay dividends until they generate accumulated profits and meet the requirements for statutory reserve funds. C. Research and Development, Patents and Licenses, etc. See “Item 4.
Liquidity and Capital Resources—Holding Company Structure.” ​ 95 Table of Contents In utilizing the proceeds we received from our initial public offerings, follow-on offerings, convertible senior notes offerings and private placements, we may make additional capital contributions to our PRC subsidiaries, establish new PRC subsidiaries and make capital contributions to these new PRC subsidiaries, make loans to our PRC subsidiaries, or acquire offshore entities with operations in China in offshore transactions.
Liquidity and Capital Resources—Holding Company Structure.” In utilizing the proceeds we received from our initial public offerings, follow-on offerings, convertible senior notes offerings and private placements, we may make additional capital contributions to or make loans to our existing or new mainland China subsidiaries, or acquire entities with operations in mainland China in transactions consummated outside of mainland China.
Operating activities Net cash generated from operating activities in 2022 was RMB48,507.9 million (US$7,033.0 million), as compared to net income of RMB31,538.1 million (US$4,572.6 million) in the same period.
Net cash generated from operating activities in 2022 was RMB48,507.9 million, as compared to net income of RMB31,538.1 million in the same period.
Risk Factors—Risks Related to Our Multi-jurisdictional Operations—PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion may delay or prevent us from using the proceeds of our offshore financing to make loans or additional capital contributions to our PRC subsidiaries, which could materially and adversely affect our liquidity and our ability to fund and expand our business.” A majority of our future revenues are likely to continue to be in the form of Renminbi.
Risk Factors—Risks Related to Our Multi-jurisdictional Operations—PRC regulations on loans to and direct investment in mainland China entities may delay or prevent us from using the proceeds of any financing conducted outside of mainland China to make loans or additional capital contributions to our mainland China subsidiaries, which could materially and adversely affect our liquidity and our ability to fund and expand our business.” A majority of our future revenues are likely to continue to be in the form of Renminbi.
Merchandise sales In certain cases, we acquire merchandise from suppliers and sell directly to the customers. We act as a principal as we obtain control of the merchandise, are primarily obligated for the merchandise sold to the customers, bear inventory risks and have latitude in establishing prices.
We act as a principal as we obtain control of the merchandise, are primarily obligated for the merchandise sold to the customers, bear inventory risks and have latitude in establishing prices.
Operating expenses Our total operating expenses increased by 24.1% from RMB55,335.1 million in 2021 to RMB68,693.4 million (US$9,959.6 million) primarily due to the increases in sales and marketing expenses and general and administrative expenses . Sales and marketing expenses .
Operating expenses Our total operating expenses increased by 24.1% from RMB55,335.1 million in 2021 to RMB68,693.4 million in 2022 primarily due to the increases in sales and marketing expenses and general and administrative expenses. 93 Table of Contents Sales and marketing expenses .
Our sales and marketing expenses increased from RMB41,194.6 million in 2020 to RMB44,801.7 million in 2021 and further to RMB54,343.7 million (US$7,879.1 million) in 2022, while sales and marketing expenses as a percentage of our revenues decreased from 69.2% in 2020 to 47.7% in 2021, and further decreased to 41.6% in 2022.
Our sales and marketing expenses increased from RMB44,801.7 million in 2021 to RMB54,343.7 million in 2022 and further to RMB82,188.9 million (US$11,576.1 million) in 2023, while sales and marketing expenses as a percentage of our revenues decreased from 47.7% in 2021 to 41.6% in 2022, and further decreased to 33.2% in 2023.
Online marketing services We entered into contractual agreements with certain merchants to provide online marketing services on our online marketplace for which we receive service fees from merchants. We provide merchants with performance-based marketing services that match product listings appearing in search or browser results on our online marketplace.
Online marketing services We entered into contractual agreements with certain merchants to provide various types of online marketing services on our online platform for which we receive service fees from the merchants. We match product listings appearing in search or browser results on our online platform and charge merchants based on impressions or clicks.
Dividends paid by our wholly foreign-owned subsidiaries in China to our intermediary holding company in Hong Kong will be subject to a withholding tax rate of 10%, unless the relevant Hong Kong entity satisfies all the requirements under the Arrangement between China and the Hong Kong Special Administrative Region on the Avoidance of Double Taxation and Prevention of Fiscal Evasion with respect to Taxes on Income and Capital, in which case the tax rate would become 5%.
As such, dividends paid by our subsidiaries in mainland China to their non-resident enterprise shareholders in Hong Kong will be subject to a withholding tax rate of 10%, unless all the requirements under the Arrangement between Mainland China and the Hong Kong Special Administrative Region on the Avoidance of Double Taxation and Prevention of Fiscal Evasion with respect to Taxes on Income and Capital are satisfied, in which case the tax rate would become 5%.
Please see “convertible bonds” under Note 11 to our audited consolidated financial statements. Payment due by December 31, 2022 for our convertible bonds obligations amounted to RMB15,505.0 million (US$2,248.0 million). Our operating lease commitments mainly represent our obligations for leasing offices and warehouses, which include all future cash outflows under ASC Topic 842, Leases.
Please see “convertible bonds” under Note 11 to our audited consolidated financial statements. As of December 31, 2023, the aggregate amount of payments due under our convertible bonds obligations amounted to RMB5,880.1 million (US$828.2 million). Our operating lease commitments mainly represent our obligations for leasing offices and warehouses, which include all future cash outflows under ASC Topic 842, Leases.
Financing activities Net cash generated from financing activities in 2022 was RMB10.1 million (US$1.5 million). Net cash used in financing activities in 2021 was RMB1,875.2 million, primarily attributable to the repayment of short-term borrowings.
Financing activities Net cash used in financing activities in 2023 was RMB8,960.6 million (US$1,262.1 million), primarily attributable to repurchase of convertible bonds of RMB8,968.8 (US$1,263.2 million). Net cash generated from financing activities in 2022 was RMB10.1 million. Net cash used in financing activities in 2021 was RMB1,875.2 million, primarily attributable to the repayment of short-term borrowings.
We do not have obligations that arise or could arise from variable interests held in an unconsolidated entity, or obligations related to derivative instruments that are both indexed to and classified in our own equity, or not reflected in the statement of financial position. ​ 97 Table of Contents Holding Company Structure PDD Holdings Inc. is a holding company with no material operations of its own.
We do not have obligations that arise or could arise from variable interests held in an unconsolidated entity, or obligations related to derivative instruments that are both indexed to and classified in our own equity, or not reflected in the statement of financial position.
The principal non-cash items affecting the difference between our net income and our net cash generated from operating activities in 2021 were RMB4,774.7 million in share-based compensation expenses and RMB1,495.4 million in depreciation and amortization. Net cash generated from operating activities in 2020 was RMB28,196.6 million, as compared to net loss of RMB7,179.7 million in the same period.
The principal non-cash items affecting the difference between our net income and our net cash generated from operating activities in 2022 were RMB7,718.4 million in share-based compensation expenses and RMB2,224.2 million in depreciation and amortization. Net cash generated from operating activities in 2021 was RMB28,783.0 million, as compared to net income of RMB7,768.7 million in the same period.
Year ended December 31, 2021 compared to year ended December 31, 2020 Revenues Our revenues, which consist of revenues from online marketing services and others, transaction services and merchandise sales, increased by 57.9% from RMB59,491.9 million in 2020 to RMB93,949.9 million in 2021.
Year ended December 31, 2022 compared to year ended December 31, 2021 Revenues Our revenues, which consist of revenues from online marketing services and others, and transaction services, increased by 39.0% from RMB93,949.9 million in 2021 to RMB130,557.6 million in 2022.
Incentives provided to the consumers In order to promote our online marketplace and attract more registered consumers, we at our own discretion provide various forms of incentives, for example, coupons, credits and other subsidies that are not specific to any merchant, to the consumers who are not our customers.
Incentives provided to the consumers In order to promote our online platforms and attract more registered consumers who are not our customers, we at our own discretion provide various forms of incentives.
Revenues from online marketing services and others increased from RMB72,563.4 million in 2021 to RMB102,721.9 million (US$14,893.3 million) in 2022, primarily attributable to interrelated factors, including our stronger brand and market position as a result of our branding campaigns, more active merchants offering a greater breadth of products and our continued focus on offering a wide selection of merchandise at attractive prices, as well as fun and interactive shopping experiences for consumers, which contributed to an increase in user engagement and activities. 90 Table of Contents Revenues from transaction services increased from RMB14,140.4 million in 2021 to RMB27,626.5 million (US$4,005.5 million), primarily due to the increase in the number of active merchants on our platforms and the increase in average transaction services revenues per active merchant.
Revenues from online marketing services and others increased from RMB79,809.5 million in 2021 to RMB102,931.1 million in 2022, primarily attributable to interrelated factors, including our stronger brand and market position as a result of our branding campaigns, more active merchants offering a greater breadth of products and our continued focus on offering a wide selection of merchandise at attractive prices, as well as fun and interactive shopping experiences for consumers, which contributed to an increase in user engagement and activities.
Please see “Leases” under Note 8 to our audited consolidated financial statements. Payment due by December 31, 2022 for our operating lease commitments amounted to RMB1,565.2 million (US$226.9 million). Our investment commitments primarily relate to capital contributions obligation under certain arrangement which does not have contractual maturity date.
Please see “Leases” under Note 8 to our audited consolidated financial statements. As of December 31, 2023, the aggregate amount of payments due under our operating lease commitments amounted to RMB4,528.9 million (US$637.9 million). Our investment commitments primarily relate to capital contributions obligation under certain arrangement which does not have contractual maturity date.
Transaction services We charge fees expected to receive from transaction services to merchants for sales transactions completed on our platforms, where we do not take control of the products provided by merchants at any point in time during the transactions and do not have latitude over pricing of the merchandise.
Transaction services We provide transaction services, including fulfillment services to merchants, and earn related fees for sales of the products completed on our platforms. We do not take control of the products provided by merchants at any point in time during the transactions.
We also raised proceeds from the initial public offering of our ADSs in July 2018, a follow-on offering of our ADSs in February 2019, a convertible senior notes offering in September 2019, a private placement in April 2020, a convertible senior notes offering and a concurrent follow-on offering of our ADSs in November 2020, and a private placement in December 2020.
We also raised approximately US$1.7 billion from the initial public offering of our ADSs in July 2018, US$1.2 billion from a follow-on offering of our ADSs in February 2019, US$1.0 billion from the offering of the 2024 Notes in September 2019, US$1.1 billion from a private placement in April 2020, US$2.0 billion from the offering of the 2025 Notes and US$4.1 billion from a concurrent follow-on offering of our ADSs in November 2020, and US$500 million from a private placement in December 2020.
We conduct our operations primarily through our subsidiaries, the VIE and its subsidiaries. As a result, PDD Holdings Inc.’s ability to pay dividends depends upon dividends paid by our subsidiaries.
Holding Company Structure PDD Holdings Inc. is a holding company with no material operations of its own. We conduct our operations primarily through our subsidiaries, the VIE and its subsidiaries. As a result, PDD Holdings Inc.’s ability to pay dividends may depend partially upon dividends paid by our subsidiaries.
We had other net income of RMB656.3 million in 2021, compared to other net income of RMB193.7 million in 2020, primarily due to the increase in the amount of subsidies received, such as tax refunds, disposal gains and other non-operating income items. Income tax expense We had income tax expense of RMB1,933.6 million and nil in 2021 and 2020, respectively.
We had other net income of RMB2,221.4 million in 2022, compared to other net income of RMB656.3 million in 2021, primarily due to the increase in the amount of subsidies received, such as tax refunds and other non-operating income items.
Payment due by December 31, 2022 for our investment commitments amounted to RMB80.0 million (US$11.6 million). We intend to fund our future capital expenditures with anticipated cash flows from operations, our existing cash balance and short-term investments. We will continue to make cash commitments, including capital expenditures, to meet the expected growth of our business.
As of December 31, 2023, the aggregate amount of our investment commitments amounted to RMB80.0 million (US$11.3 million). We intend to fund our future capital expenditures with anticipated cash flows from operations, our existing cash balance and short-term investments.
This information should be read together with our audited consolidated financial statements and related notes included elsewhere in this annual report.
This information should be read together with our audited consolidated financial statements and related notes included elsewhere in this annual report. The results of operations in any period are not necessarily indicative of our future trends.
As of December 31, 2022, our cash and cash equivalents were RMB34,326.2 million (US$4,976.8 million). Our cash and cash equivalents primarily consist of cash at banks and other highly liquid investments.
As of December 31, 2023, our cash and cash equivalents were RMB59,794.5 million (US$8,421.9 million). Our cash and cash equivalents primarily consist of cash at banks and other highly liquid investments.
The following descriptions of critical accounting policies, judgments and estimates should be read in conjunction with our consolidated financial statements and accompanying notes and other disclosures included in this annual report.
Some of our accounting policies require a higher degree of judgment than others in their application and require us to make significant accounting estimates. 94 Table of Contents The following descriptions of critical accounting policies, judgments and estimates should be read in conjunction with our consolidated financial statements and accompanying notes and other disclosures included in this annual report.
Revenues from online marketing services and others depend on spontaneous decisions made by the millions of merchants on our platforms based on different marketing opportunities. Transaction services . We charge merchants fees for transaction-related services that we provide to merchants on our platform.
We provide merchants with marketing services that match product listings appearing in search or browser results on our platforms. Revenues from online marketing services and others depend on spontaneous decisions made by the millions of merchants on our platforms based on different marketing opportunities. Transaction services .
Investing activities Net cash used in investing activities in 2022 was RMB22,361.7 million (US$ 3,242.1 million), primarily due to purchase of short-term time deposits, held to maturities and other investments of RMB160,414.5 million (US$23,257.9 million), purchase of long-term time deposits, held to maturities and other investments of RMB6,795.8 million (US$985.3 million) and purchases of available-for-sale investments of RMB3,581.9 million (US$519.3 million), partially offset by proceeds from sales of short-term time deposits, held to maturities and other investments of RMB141,928.4 million (US$20,577.7 million) and proceeds from sales of long-term time deposits, held to maturities and other investments of RMB7,137.8 million (US$1,034.9 million). 96 Table of Contents Net cash used in investing activities in 2021 was RMB35,562.4 million, primarily due to purchase of short-term time deposits, held to maturities and other investments of RMB116,639.6 million, purchase of long-term time deposits, held to maturities and other investments of RMB13,628.1 million, and purchase of property, equipment, software and intangible assets of RMB3,287.2 million, partially offset by proceeds from sales of short-term time deposits, held to maturities and other investments of RMB97,547.0 million.
Net cash used in investing activities in 2022 was RMB22,361.7 million, primarily due to purchase of short-term time deposits, held to maturities and other investments of RMB160,414.5 million, purchase of long-term time deposits, held to maturities and other investments of RMB6,795.8 million and purchases of available-for-sale investments of RMB3,581.9 million, partially offset by proceeds from sales of short-term time deposits, held to maturities and other investments of RMB141,928.4 million and proceeds from sales of long-term time deposits, held to maturities and other investments of RMB7,137.8 million.
The issuance and sale of additional equity would result in further dilution to our shareholders. The incurrence of indebtedness would result in an increase in fixed obligations and could result in operating covenants that would restrict our operations. We cannot assure you that financing will be available in amounts or on terms acceptable to us, if at all.
The issuance and sale of additional equity would result in further dilution to our shareholders. The incurrence of indebtedness would result in an increase in fixed obligations and could result in operating covenants that would restrict our operations.
The enterprise income tax is calculated based on the entity’s global income as determined under PRC tax laws and accounting standards. Each of Shanghai Xunmeng and Walnut Shanghai was recognized as a “high and new technology enterprise” and is eligible for a preferential corporate income tax rate of 15% until 2023.
Each of Shanghai Xunmeng and Walnut Shanghai was recognized as a “high and new technology enterprise” and is eligible for a preferential corporate income tax rate of 15% until 2023. Xinzhijiang is also eligible for a preferential corporate income tax rate of 15% until 2025.
Since the use of estimates is an integral component of the financial reporting process, actual results could differ from our expectations as a result of changes in our estimates. Some of our accounting policies require a higher degree of judgment than others in their application and require us to make significant accounting estimates.
Since the use of estimates is an integral component of the financial reporting process, actual results could differ from our expectations as a result of changes in our estimates.
Our ability to manage our costs and expenses by leveraging our scale of business Our results of operations depend on our ability to manage our costs and expenses. We expect our costs and expenses to continue to increase as we grow our business and attract and retain buyers and merchants for our businesses.
We expect our costs and expenses to continue to increase as we grow our businesses and attract and retain buyers and merchants for our platforms.
Share of results of equity investees We had share of losses of equity investees of RMB155.3 million (US$22.5 million) in 2022, compared to share of profits of RMB246.8 million in 2021. Net income As a result of the foregoing, we had net income of RMB31,538.1 million (US$4,572.6 million) in 2022, compared to RMB7,768.7 million in 2021.
Net income As a result of the foregoing, we had net income of RMB31,538.1 million in 2022, compared to RMB7,768.7 million in 2021.
We had other net income of RMB2,221.4 million (US$322.1 million) in 2022, compared to other net income of RMB656.3 million in 2021, primarily due to the increase in the amount of subsidies received, such as tax refunds and other non-operating income items. 91 Table of Contents Income tax expense We had income tax expense of RMB4,725.7 million (US$685.2 million) in 2022, compared to RMB1,933.6 million in 2021, primarily due to the increased profit before income tax expense.
Other income, net . We had other net income of RMB2,952.6 million (US$415.9 million) in 2023, compared to other net income of RMB2,221.4 million in 2022, primarily due to the increase in the amount of subsidies received, such as tax refunds and other non-operating income items.
Fee rates are not necessarily fixed and may vary based on a number of factors, including the category of the goods sold, the sellers’ transaction performance, and the attribution of the consumption scenarios, among others. Merchandise sales. We generated a small portion of revenues from direct sales, whereby we acquired products from suppliers and sold them directly to the customers.
Fee rates for our transaction services are not necessarily fixed and may vary based on a number of factors, including the types of services provided, the category of the goods sold, the sellers’ transaction performance, and the attribution of the consumption scenarios, among others.
Liquidity and Capital Resources The following table sets forth a summary of our cash flows for the periods presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2020 ​ 2021 ​ 2022 ​ RMB RMB RMB US$ ​ ​ ​ Summary Consolidated Cash Flow Data: ​ ​ ​ ​ ​ ​ ​ ​ Net cash generated from operating activities 28,196,627 ​ 28,783,011 ​ 48,507,860 7,032,979 Net cash used in investing activities (38,357,901) ​ (35,562,365) ​ (22,361,670) (3,242,137) Net cash generated from/(used in) financing activities 51,798,996 ​ (1,875,154) ​ 10,079 1,461 Exchange rate effect on cash, cash equivalents and restricted cash (139,943) ​ (145,157) ​ 100,177 14,524 Net increase/(decrease) in cash, cash equivalents and restricted cash 41,497,779 ​ (8,799,665) ​ 26,256,446 3,806,827 Cash, cash equivalents and restricted cash at beginning of the year 33,345,857 ​ 74,843,636 ​ 66,043,971 9,575,476 Cash, cash equivalents and restricted cash at end of the year 74,843,636 ​ 66,043,971 ​ 92,300,417 13,382,303 ​ To date, we have financed our operating and investing activities through cash generated by historical equity financing activities.
Liquidity and Capital Resources The following table sets forth a summary of our cash flows for the periods presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2021 ​ 2022 ​ 2023 ​ RMB RMB RMB US$ ​ ​ (in thousands) Summary Consolidated Cash Flow Data: ​ ​ ​ ​ ​ ​ ​ ​ Net cash generated from operating activities 28,783,011 ​ 48,507,860 ​ 94,162,531 13,262,515 Net cash used in investing activities (35,562,365) ​ (22,361,670) ​ (55,431,278) (7,807,332) Net cash (used in)/generated from financing activities (1,875,154) ​ 10,079 ​ (8,960,626) (1,262,078) Exchange rate effect on cash, cash equivalents and restricted cash (145,157) ​ 100,177 ​ (291,139) (41,006) (Decrease)/increase in cash, cash equivalents and restricted cash (8,799,665) ​ 26,256,446 ​ 29,479,488 4,152,099 Cash, cash equivalents and restricted cash at beginning of the year 74,843,636 ​ 66,043,971 ​ 92,300,417 13,000,242 Cash, cash equivalents and restricted cash at end of the year 66,043,971 ​ 92,300,417 ​ 121,779,905 17,152,341 ​ We had net cash generated from operating activities of RMB28,783.0 million, RMB48,507.9 million and RMB94,162.5 million (US$13,262.5 million) in 2021, 2022 and 2023, respectively.
Hong Kong Walnut HK is incorporated in Hong Kong and is subject to Hong Kong profits tax of 16.5% on its activities conducted in Hong Kong and may be exempted from income tax on its foreign-derived income.
Hong Kong Our subsidiaries incorporated in Hong Kong are subject to Hong Kong profits tax of 16.5% on their activities conducted in Hong Kong and may be exempted from income tax on their foreign-derived income. There are no withholding taxes in Hong Kong for distribution of dividends by a company incorporated in Hong Kong.
Net cash used in investing activities in 2020 was RMB38,357.9 million, primarily due to purchase of short-term time deposits, held to maturities and other investments of RMB86,438.1 million and purchase of long-term time deposits, held to maturities and other investments of RMB6,722.2 million, partially offset by proceeds from sales of short-term time deposits, held to maturities and other investments of RMB55,083.4 million.
Net cash used in investing activities in 2021 was RMB35,562.4 million, primarily due to purchase of short - term time deposits, held to maturities and other investments of RMB116,639.6 million, purchase of long - term time deposits, held to maturities and other investments of RMB13,628.1 million, and purchase of property, equipment, software and intangible assets of RMB3,287.2 million, partially offset by proceeds from sales of short - term time deposits, held to maturities and other investments of RMB97,547.0 million.
Costs of revenues The following table sets forth the components of our costs of revenues by amounts and percentages of costs of revenues for the periods presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, ​ ​ 2020 ​ 2021 ​ 2022 ​ RMB % RMB % RMB US$ % ​ ​ (in thousands, except for percentages) Costs of revenues: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Payment processing fees (1,545,564) ​ 8.0 (3,108,086) ​ 9.8 ​ (3,450,929) (500,338) 11.0 Costs associated with the operation of our platform and others (17,733,077) ​ 92.0 (28,610,007) ​ 90.2 ​ (28,011,369) (4,061,266) 89.0 Total costs of revenues (19,278,641) ​ 100.0 (31,718,093) ​ 100.0 ​ (31,462,298) (4,561,604) 100.0 ​ 87 Table of Contents Costs of revenues consist primarily of payment processing fees paid to third party online payment platforms, costs associated with the operation of our platforms and others, such as costs and expenses attributable to merchandise sales, fulfillment fees, merchant support services, bandwidth and server costs, amortization, depreciation and maintenance costs, payroll, employee benefits and share-based compensation expenses, call center, surcharges and other expenses directly attributable to the online marketplace services.
Costs of revenues The following table sets forth the components of our costs of revenues by amounts and percentages of costs of revenues for the periods presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, ​ ​ 2021 ​ 2022 ​ 2023 ​ RMB % RMB % RMB US$ % ​ ​ (in thousands, except for percentages) Costs of revenues: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Payment processing fees (3,108,086) ​ 9.8 (3,450,929) ​ 11.0 ​ (6,824,386) (961,195) 7.4 Costs associated with the operation of our platforms and others (28,610,007) ​ 90.2 (28,011,369) ​ 89.0 ​ (84,899,191) (11,957,801) 92.6 Total costs of revenues (31,718,093) ​ 100.0 (31,462,298) ​ 100.0 ​ (91,723,577) (12,918,996) 100.0 ​ Costs of revenues consist primarily of payment processing fees paid to third-party payment service providers, costs associated with the operation of our platforms and others, such as costs and expenses attributable to merchandise sales, fulfillment fees, merchant support services, bandwidth and server costs, amortization, depreciation and maintenance costs, payroll, employee benefits, share-based compensation expenses, call center, surcharges and other expenses directly attributable to the online platform services. 89 Table of Contents Operating expenses ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, ​ ​ 2021 ​ 2022 ​ 2023 ​ RMB % RMB % RMB US$ % ​ ​ (in thousands, except for percentages) Operating expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Sales and marketing expenses (44,801,720) ​ 80.9 (54,343,719) ​ 79.1 ​ (82,188,870) (11,576,060) 84.5 General and administrative expenses (1,540,774) ​ 2.8 (3,964,935) ​ 5.8 ​ (4,075,622) (574,039) 4.2 Research and development expenses (8,992,590) ​ 16.3 (10,384,716) ​ 15.1 ​ (10,952,374) (1,542,610) 11.3 Total operating expenses (55,335,084) ​ 100.0 (68,693,370) ​ 100.0 ​ (97,216,866) (13,692,709) 100.0 ​ Sales and marketing expenses .
Revenues related to transaction services are recognized in consolidated statements of comprehensive income/(loss) at a point in time when our service obligations to the merchants are determined to have been completed under each sales transaction upon the confirmation of the receipts of goods by the consumers.
Revenues related to transaction services are recognized in consolidated statements of comprehensive income at a point in time when our service obligation to the merchants is determined to have been completed under each sales transaction. Variable consideration is estimated and included in the transaction price to the extent that it is probable that a significant revenue reversal will not occur.
Merchants prepay for online marketing services that are primarily charged on a cost-per-click basis. Under ASC 606, the related revenues are recognized at a point of time when consumers click the merchants’ product listings and the online marketing services are completed by us for the merchants.
Under ASC 606, revenues are primarily recognized at a point in time when consumers view or click on the merchants’ product listings or over the period during which the advertising services are provided, depending on the type of online marketing services selected by the merchants.

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Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeDirectors and Executive Officers The following table sets forth information regarding our directors and executive officers as of the date of this annual report. ​ ​ ​ ​ ​ ​ Directors and Executive Officers Age Position/Title Lei Chen 43 Chairman of the Board of Directors and Co-Chief Executive Officer Jiazhen Zhao ​ 39 ​ Director and Co-Chief Executive Officer Anthony Kam Ping Leung ​ 62 ​ Independent Director Haifeng Lin 46 Director Qi Lu 61 Independent Director George Yong-Boon Yeo 68 Independent Director Jun Liu ​ 40 ​ Vice President of Finance Junyun Xiao ​ 43 ​ Senior Vice President of Operation Zhenwei Zheng 39 Senior Vice President of Product Development Jianchong Zhu ​ 44 ​ General Counsel ​ Lei Chen is a founding member of our company and has served as our chairman of the board of directors since March 2021 and co-chief executive officer since April 2023.
Biggest changeRietjens 65 Independent Director George Yong-Boon Yeo 69 Independent Director Jun Liu ​ 41 ​ Vice President of Finance Junyun Xiao ​ 44 ​ Senior Vice President of Operation Zhenwei Zheng 40 Senior Vice President of Product Development ​ Lei Chen is a founding member of our company and has served as our chairman of the board of directors since March 2021 and co-chief executive officer since April 2023.
Pursuant to our currently effective articles of association, our board of directors shall consist of not less than three but not more than nine directors, and shall include (i) two executive directors, if there are no more than five directors, and (ii) three executive directors, if there are more than five but no more than nine directors.
Pursuant to our currently effective articles of association, our board of directors shall consist of not less than three but not more than nine directors, and shall include (i) two executive directors, if there are no more than five directors, and (ii) three executive directors, if there are more than five but no more than nine directors.
As required by regulations in China, we participate in various government statutory employee benefit plans, including medical insurance, maternity insurance, workplace injury insurance, unemployment insurance and pension benefits through a PRC government-mandated multi-employer defined contribution plan.
In China, as required by regulations, we participate in various government statutory employee benefit plans, including medical insurance, maternity insurance, workplace injury insurance, unemployment insurance and pension benefits through a PRC government-mandated multi-employer defined contribution plan.
He currently serves as a Visiting Scholar at the Lee Kuan Yew School of Public Policy of the National University of Singapore and is an independent non-executive director of AIA Group Limited (HKEx: 01299) and an independent non-executive director of Creative Technology Ltd. (SGX: C76). Prior to that, Mr.
He currently serves as a Visiting Scholar at the Lee Kuan Yew School of Public Policy of the National University of Singapore, an independent non – executive director of AIA Group Limited (HKEx: 01299) and an independent non-executive director of Creative Technology Ltd. (SGX: C76). Prior to that, Mr.
Awards may not be transferred in any manner by the participant other than in accordance with the exceptions provided in the 2015 Plan, such as transfers by will or the laws of descent and distribution, or as provided in the relevant award agreement or otherwise determined by the plan administrator. Termination and amendment of the 2015 Plan .
Awards may not be transferred in any manner by the participant other than in accordance with the exceptions provided in the 2015 Plan, such as transfers by will or the laws of descent and distribution, or as provided in the award agreement or otherwise determined by the plan administrator. Termination and amendment of the 2015 Plan .
We may grant awards to our employees, directors and consultants of our company. Vesting schedule . In general, the plan administrator determines the vesting schedule, which is specified in the relevant award agreement. Exercise of options . The plan administrator determines the exercise price for each award, which is stated in the award agreement.
We may grant awards to our employees, directors and consultants of our company. Vesting schedule . In general, the plan administrator determines the vesting schedule, which is specified in the award agreement. Exercise of options . The plan administrator determines the exercise price for each award, which is stated in the award agreement.
Specifically, each executive officer has agreed not to (i) approach our suppliers, clients, customers or contacts or other persons or entities introduced to the executive officer in his or her capacity as a representative of us for the purpose of doing business with such persons or entities that will harm our business relationships with these persons or entities; (ii) assume employment with or provide services to any of our competitors, or engage, whether as principal, partner, licensor or otherwise, any of our competitors, without our express consent; or (iii) seek directly or indirectly, to solicit the services of any of our employees who is employed by us on or after the date of the executive officer’s termination, or in the year preceding such termination, without our express consent.
Specifically, each executive officer has agreed not to (i) approach our suppliers, clients, customers or contacts or other persons or entities introduced to the executive officer in his or her capacity as a representative of ours for the purpose of doing business with such persons or entities that will harm our business relationships with these persons or entities; (ii) assume employment with or provide services to any of our competitors, or engage, whether as principal, partner, licensor or otherwise, any of our competitors, without our express consent; or (iii) seek directly or indirectly, to solicit the services of any of our employees who are employed by us on or after the date of the executive officer’s termination, or in the year preceding such termination, without our express consent.
Prior to that, Mr. Kam served as the chief financial officer of HSBC Bank (Singapore) Limited (“HSBC Singapore”) from September 2005 to May 2013. In addition to financial accounting and control, management accounting and tax responsibilities, Mr. Kam had direct oversight on specific risk management functions such as treasury product control and asset & liabilities management. Mr.
Kam served as the chief financial officer of HSBC Bank (Singapore) Limited (“HSBC Singapore”) from September 2005 to May 2013. In addition to financial accounting and control, management accounting and tax responsibilities, Mr. Kam had direct oversight on specific risk management functions such as treasury product control and asset & liabilities management. Mr.
The functions and powers of our board of directors include, among others: ● convening shareholders’ annual general meetings and reporting its work to shareholders at such meetings; ● declaring dividends and distributions; ● appointing officers and determining the term of office of the officers; ● exercising the borrowing powers of our company and mortgaging the property of our company; and ● approving the transfer of shares in our company, including the registration of such shares in our share register. 106 Table of Contents Terms of Directors and Officers Our officers are elected by and serve at the discretion of the board of directors.
The functions and powers of our board of directors include, among others: ● convening shareholders’ annual and extraordinary general meetings and reporting its work to shareholders at such meetings; ● declaring dividends and distributions; ● appointing officers and determining the term of office of the officers; ● exercising the borrowing powers of our company and mortgaging the property of our company; and ● approving the transfer of shares in our company, including the registration of such shares in our share register. 107 Table of Contents Terms of Directors and Officers Our officers are elected by and serve at the discretion of the board of directors.
Awards granted under the 2015 Plan are evidenced by an award agreement that sets forth terms, conditions and limitations for each award, which may include the term of the award, the provisions applicable in the event that the grantee’s employment or service terminates, and our authority to unilaterally or bilaterally amend, modify, suspend, cancel or rescind the award. 102 Table of Contents Eligibility .
Awards granted under the 2015 Plan are evidenced by an award agreement that sets forth terms, conditions and limitations for each award, which may include the term of the award, the provisions applicable in the event that the grantee’s employment or service terminates, and our authority to unilaterally or bilaterally amend, modify, suspend, cancel or rescind the award. Eligibility .
None of our non-executive directors has a service contract with us that provides for benefits upon termination of service. Committees of the Board of Directors As a Cayman Islands exempted company listed on the Nasdaq Stock Market, we are subject to the Nasdaq corporate governance listing standards.
None of our non-executive directors has a service contract with us that provides for benefits upon termination of service. 105 Table of Contents Committees of the Board of Directors As a Cayman Islands exempted company listed on the Nasdaq Stock Market, we are subject to the Nasdaq corporate governance listing standards.
The nominating and corporate governance committee is responsible for, among other things: ● selecting and recommending to the board nominees for election by the shareholders or appointment by the board; ● reviewing annually with the board the current composition of the board with regards to characteristics such as independence, knowledge, skills, experience and diversity; 105 Table of Contents ● making recommendations on the frequency and structure of board meetings and monitoring the functioning of the committees of the board; and ● advising the board periodically with regards to significant developments in the law and practice of corporate governance as well as our compliance with applicable laws and regulations, and making recommendations to the board on all matters of corporate governance and on any remedial action to be taken.
The nominating and corporate governance committee is responsible for, among other things: ● selecting and recommending to the board nominees for election by the shareholders or appointment by the board; ● reviewing annually with the board the current composition of the board with regard to characteristics such as independence, knowledge, skills, experience and diversity; ● making recommendations on the frequency and structure of board meetings and monitoring the functioning of the committees of the board; and ● advising the board periodically with regard to significant developments in the law and practice of corporate governance as well as our compliance with applicable laws and regulations, and making recommendations to the board on all matters of corporate governance and on any remedial action to be taken.
Nomination by the PDD Partnership of such candidate as the executive director or chief executive officer, as applicable, shall require the affirmative votes of a majority of the partners. 99 Table of Contents Partner Termination, Retirement and Removal Partners may elect to retire or withdraw from the PDD Partnership at any time.
Nomination by the PDD Partnership of such candidate as the executive director or chief executive officer, as applicable, shall require the affirmative votes of a majority of the partners. Partner Termination, Retirement and Removal Partners may elect to retire or withdraw from the PDD Partnership at any time.
The PDD Partnership will be operated under principles, policies and procedures that evolve with our business and encompass the following major aspects: Nomination and Election of Partners Partners will be elected annually through a nomination process, whereby any existing partner may propose candidates to the partnership committee (the “Partnership Committee”), which reviews the nomination and propose candidates to the entire partnership for election.
The PDD Partnership will be operated under principles, policies and procedures that evolve with our business and encompass the following major aspects: 99 Table of Contents Nomination and Election of Partners Partners will be elected annually through a nomination process, whereby any existing partner may propose candidates to the partnership committee (the “Partnership Committee”), which reviews the nomination and proposes candidates to the entire partnership for election.
Share Ownership Except as specifically noted, the following table sets forth information with respect to the beneficial ownership of our Class A ordinary shares as of February 28, 2023 by: ● each of our directors and executive officers; and ● each person known to us to beneficially own more than 5% of our total outstanding ordinary shares.
Share Ownership Except as specifically noted, the following table sets forth information with respect to the beneficial ownership of our Class A ordinary shares as of February 29, 2024 by: ● each of our directors and executive officers; and ● each person known to us to beneficially own more than 5% of our total outstanding ordinary shares.
Prior to that, he was a member of the founding team of Ouku.com and served as operation manager from 2007 to 2010. Zhenwei Zheng is a founding member of our company and has served as our senior vice president of product development since 2016, and our director from April 2018 to July 2018. Prior to joining our company, Mr.
Prior to that, he was a member of the founding team of Ouku.com and served as operation manager from 2007 to 2010. 102 Table of Contents Zhenwei Zheng is a founding member of our company and has served as our senior vice president of product development since 2016, and our director from April 2018 to July 2018.
The compensation committee assists the board in reviewing and approving the compensation structure, including all forms of compensation, relating to our directors and executive officers. Our co-chief executive officers may not be present at any committee meeting during which his compensation is deliberated.
The compensation committee assists the board in reviewing and approving the compensation structure relating to our directors and executive officers. Our co-chief executive officers may not be present at any committee meeting during which his compensation is deliberated.
These record holders included Deutsche Bank Trust Company Americas, the depositary of our ADS program. The number of beneficial owners of our ADSs in the United States is likely to be much larger than the number of record holders of our ordinary shares in the United States.
This record holder is Deutsche Bank Trust Company Americas, the depositary of our ADS program. The number of beneficial owners of our ADSs in the United States is likely to be much larger than the number of record holders of our ordinary shares in the United States.
However, we currently intend to comply with the rules of the Nasdaq in lieu of following home country practice. We have established three committees under the board of directors: an audit committee, a compensation committee and a nominating and corporate governance committee. Each committee’s members and functions are described below. 104 Table of Contents Audit Committee .
However, we currently intend to comply with the rules of the Nasdaq in lieu of following home country practice. We have established three committees under the board of directors: an audit committee, a compensation committee and a nominating and corporate governance committee. Each committee’s members and functions are described below. Audit Committee . Our audit committee consists of Mr.
The following table summarizes, as of December 31, 2022, the number of Class A ordinary shares under outstanding options, restricted share units and other equity awards that we granted to our directors and executive officers, excluding awards that were forfeited or cancelled after the relevant grant dates. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Class A ​ ​ ​ ​ ​ ​ ​ ​ Ordinary Shares ​ ​ ​ ​ ​ ​ ​ ​ Underlying ​ ​ ​ ​ ​ ​ ​ ​ Equity Awards ​ Exercise Price ​ ​ ​ ​ Name Granted (US$/Share) Date of Grant Date of Expiration Lei Chen ​ * Nominal September 1, 2016 and September 1, 2020 August 31, 2036 and August 31, 2040 Jiazhen Zhao ​ * ​ Nominal ​ Various dates between February 1, 2016 and October 1, 2022 ​ Various dates between January 31, 2036 and September 30, 2042 Qi Lu ​ * ​ Nominal ​ Various dates between February 1, 2019 and August 1, 2022 ​ Not applicable George Yong-Boon Yeo ​ * ​ Nominal ​ Various dates between February 1, 2019 and August 1, 2022 ​ Not applicable Anthony Kam Ping Leung ​ * ​ Nominal ​ Various dates between March 1, 2020 and September 1, 2022 ​ Not applicable Junyun Xiao ​ * Nominal November 1, 2015 and September 1, 2016 October 31, 2035 and August 31, 2036 Zhenwei Zheng ​ * ​ Nominal ​ Various dates from November 1, 2015 to March 1, 2022 ​ Various dates from October 31, 2035 to February 28,2039 Jun Liu ​ * ​ Nominal ​ Various dates from September 1, 2018 to April 1, 2022 ​ Various dates from August 31, 2038 to Mar 31, 2042 Jianchong Zhu ​ * ​ Nominal ​ June 1, 2019 ​ May 31, 2039 All directors and executive officers as a group ​ 68,663,864 ​ Nominal ​ Various dates between November 1, 2015 and October 1, 2022 ​ Various dates between October 31, 2035 and September 30, 2042 * Less than 1% of our total ordinary shares outstanding.
The following table summarizes, as of December 31, 2023, the number of Class A ordinary shares under outstanding options, restricted share units and other equity awards that we granted to our directors and executive officers, excluding awards that were forfeited or cancelled after their grant dates. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Class A ​ ​ ​ ​ ​ ​ ​ ​ Ordinary Shares ​ ​ ​ ​ ​ ​ ​ ​ Underlying ​ ​ ​ ​ ​ ​ ​ ​ Equity Awards ​ Exercise Price ​ ​ ​ ​ Name Granted (US$/Share) Date of Grant Date of Expiration Lei Chen ​ * Nominal Various dates between September 1, 2016 and November 1, 2023 Various dates between August 31, 2036 and October 31, 2043 Jiazhen Zhao ​ * ​ Nominal ​ Various dates between February 1, 2016 and December 1, 2023 ​ Various dates between January 31, 2036 and November 30, 2043 George Yong-Boon Yeo ​ * ​ Nominal ​ Various dates between February 1, 2019 and August 1, 2023 ​ Not applicable Anthony Kam Ping Leung ​ * ​ Nominal ​ Various dates between March 1, 2020 and September 1, 2023 ​ Not applicable Junyun Xiao ​ * Nominal November 1, 2015 and September 1, 2016 October 31, 2035 and August 31, 2036 Zhenwei Zheng ​ * ​ Nominal ​ Various dates between November 1, 2015 and March 1, 2022 ​ Various dates between October 31, 2035 and February 28,2039 Jun Liu ​ * ​ Nominal ​ Various dates between September 1, 2018 and May 1, 2023 ​ Various dates between August 31, 2038 and April 30, 2043 All directors and executive officers as a group ​ 118,866,968 ​ Nominal ​ Various dates between November 1, 2015 and December 1, 2023 ​ Various dates between October 31, 2035 and November 30, 2043 * Less than 1% of our total ordinary shares outstanding.
Nominating and Corporate Governance Committee . Our nominating and corporate governance committee consists of Mr. George Yong-Boon Yeo and Dr. Qi Lu. Mr. George Yong-Boon Yeo is the chairman of our nominating and corporate governance committee. Dr. Qi Lu and Mr. George Yong-Boon Yeo each satisfies the “independence” requirements of Rule 5605(a)(2) of the Nasdaq Stock Market Rules.
Nominating and Corporate Governance Committee . Our nominating and corporate governance committee consists of Mr. George Yong-Boon Yeo and Dr. Ivonne M.C.M. Rietjens. Mr. George Yong-Boon Yeo is the chairman of our nominating and corporate governance committee. Mr. George Yong-Boon Yeo and Dr. Ivonne M.C.M. Rietjens each satisfies the “independence” requirements of Rule 5605(a)(2) of the Nasdaq Stock Market Rules.
Such appointment of the executive directors to the board shall become effective immediately upon the delivery by the PDD Partnership of a written notice to us, without the requirement for any further resolution, vote or approval by the shareholders or the board. Mr. Lei Chen is an executive director of our company.
Such appointment of the executive directors to the board shall become effective immediately upon the delivery by the PDD Partnership of a written notice to us, without the requirement for any further resolution, vote or approval by the shareholders or the board. Mr.
Unless terminated earlier, the 2018 Plan has a term of ten years. Our board of directors has the authority to amend or terminate the plan. However, no such action may adversely affect in any material way any awards previously granted unless agreed by the recipient.
Our board of directors has the authority to amend or terminate the plan. However, no such action may adversely affect in any material way any awards previously granted unless agreed by the recipient.
Compensation Committee . Our compensation committee consists of Dr. Qi Lu and Mr. Anthony Kam Ping Leung. Dr. Qi Lu is the chairman of our compensation committee. We have determined that Dr. Qi Lu and Mr. Anthony Kam Ping Leung each satisfies the “independence” requirements of Rule 5605(a)(2) of the Nasdaq Stock Market Rules.
Compensation Committee . Our compensation committee consists of Mr. Anthony Kam Ping Leung and Mr. George Yong-Boon Yeo. Mr. Anthony Kam Ping Leung is the chairman of our compensation committee. We have determined that Mr. Anthony Kam Ping Leung and Mr. George Yong-Boon Yeo each satisfies the “independence” requirements of Rule 5605(a)(2) of the Nasdaq Stock Market Rules.
The compensation committee is responsible for, among other things: ● reviewing and approving, or recommending to the board for its approval, the compensation for our co-chief executive officers and other executive officers; ● reviewing and recommending to the board for determination with respect to the compensation of our non-employee directors; ● reviewing periodically and approving any incentive compensation or equity plans, programs or similar arrangements; and ● selecting compensation consultant, legal counsel or other adviser only after taking into consideration all factors relevant to that person’s independence from management.
The compensation committee is responsible for, among other things: ● reviewing and approving, or participating in the approval by the board of, the aggregate compensation for our co-chief executive officers and other executive officers; ● reviewing and recommending to the board for determination with respect to the compensation of our non-employee directors, including by reviewing and approving any proposed changes thereto; ● reviewing our incentive compensation or equity plans, programs or similar arrangements, including by reviewing and approving any proposed changes thereto; and 106 Table of Contents ● selecting compensation consultant, legal counsel or other adviser only after taking into consideration all factors relevant to that person’s independence from management.
Zheng served as chief executive officer of Xinyoudi Studio since 2011. Prior to that, he held various positions at Baidu (Nasdaq: BIDU) from 2008 to 2010. Mr. Zheng received his bachelor’s degree and master’s degree in computer science from Zhejiang University. Jianchong Zhu has served as our general counsel since July 2020. Mr.
Prior to joining our company, Mr. Zheng served as chief executive officer of Xinyoudi Studio since 2011. Prior to that, he held various positions at Baidu (Nasdaq: BIDU) from 2008 to 2010. Mr. Zheng received his bachelor’s degree and master’s degree in computer science from Zhejiang University. B.
Our PRC subsidiaries, the VIE and its subsidiaries are required by law to make contributions equal to certain percentages of each employee’s salary for his or her medical insurance, maternity insurance, workplace injury insurance, unemployment insurance, pension benefits through a PRC government-mandated multi-employer defined contribution plan and other statutory benefits. 101 Table of Contents Employment Agreements and Indemnification Agreements We have entered into employment agreements with each of our executive officers.
Our PRC subsidiaries, the VIE and its subsidiaries are required by law to make contributions equal to certain percentages of each employee’s salary for his or her medical insurance, maternity insurance, workplace injury insurance, unemployment insurance, pension benefits through a PRC government-mandated multi-employer defined contribution plan and other statutory benefits.
Our audit committee consists of Mr. Anthony Kam Ping Leung, Dr. Qi Lu and Mr. George Yong-Boon Yeo. Mr. Anthony Kam Ping Leung is the chairman of our audit committee. We have determined that Mr. Anthony Kam Ping Leung, Dr. Qi Lu and Mr.
Anthony Kam Ping Leung, Dr. Ivonne M.C.M. Rietjens and Mr. George Yong-Boon Yeo. Mr. Anthony Kam Ping Leung is the chairman of our audit committee. We have determined that Mr. Anthony Kam Ping Leung, Dr. Ivonne M.C.M. Rietjens and Mr.
In order to be elected a partner, the partner candidate must meet certain quality standards including, among other things, a high standard of personal character and integrity, continued service as a director, officer or employee with our company for no less than five years (or a shorter period before our company reaches a five-year operating history), a consistent commitment to our company’s mission, vision and values as well as a track record of contribution to our business. 98 Table of Contents In order to align the interests of partners with the interests of shareholders, the Partnership Committee may require a partner to maintain a meaningful level of equity interests in our company during his or her tenure as a partner.
In order to be elected a partner, the partner candidate must meet certain quality standards including, among other things, a high standard of personal character and integrity, continued service as a director, officer or employee with our company for no less than five years (or a shorter period before our company reaches a five-year operating history), a consistent commitment to our company’s mission, vision and values as well as a track record of contribution to our business.
As of December 31, 2022, options to purchase 336,255,324 Class A ordinary shares under the 2015 Plan had been granted and were outstanding under the 2015 plan. The following paragraphs describe the principal terms of the 2015 Plan. Types of awards . The 2015 Plan permits the awards of options or restricted shares. Plan administration .
As of December 31, 2023, options to purchase 165,410,224 Class A ordinary shares under the 2015 Plan had been granted and were outstanding under the 2015 plan. The following paragraphs describe the principal terms of the 2015 Plan. Types of awards . The 2015 Plan permits the awards of options or restricted shares. 103 Table of Contents Plan administration .
Zhao has held several leadership roles across our company. He started our Duo Duo Grocery business and led the operations of a few key product categories in the Pinduoduo platform, including agriculture. He also led our supply chain efforts. Mr. Zhao received his bachelor’s degree in e-commerce management from South China University of Technology.
Zhao has held several leadership roles across our company. He started our Duo Duo Grocery business and led the operations of a few key product categories in the Pinduoduo platform, including agriculture. He also led our supply chain efforts. Mr.
Exercise of Options . The administration committee determines the exercise price for each award, which is stated in the award agreement. The vested portion of option will expire if not exercised prior to the time as the administration committee determines at the time of its grant. However, the maximum exercisable term is twenty years from the date of a grant.
The vested portion of option will expire if not exercised prior to the time as the administration committee determines at the time of its grant. However, the maximum exercisable term is twenty years from the date of a grant. Transfer restrictions .
The calculations in the table below are based on 5,314,348,396 Class A ordinary shares and no Class B ordinary Shares outstanding as of February 28, 2023. ​ 108 Table of Contents Beneficial ownership is determined in accordance with the rules and regulations of the SEC.
The calculations in the table below are based on 5,555,082,460 Class A ordinary shares and no Class B ordinary Shares outstanding as of February 29, 2024. Beneficial ownership is determined in accordance with the rules and regulations of the SEC.
Transfer Restrictions . Awards may not be transferred in any manner by the recipient other than in accordance with the exceptions provided in the 2018 Plan, such as transfers by will or the laws of descent and distribution. 103 Table of Contents Termination and Amendment of the 2018 Plan .
Awards may not be transferred in any manner by the recipient other than in accordance with the exceptions provided in the 2018 Plan, such as transfers by will or the laws of descent and distribution. Termination and amendment of the 2018 plan. Unless terminated earlier, the 2018 Plan has a term of ten years.
As of December 31, 2022, options to purchase 175,376,564 Class A ordinary shares and restricted share units representing 81,984,488 Class A ordinary shares had been granted and were outstanding under the 2018 Plan. The following paragraphs describe the principal terms of the 2018 Plan. Types of Awards .
As of December 31, 2023, options to purchase 250,035,408 Class A ordinary shares and restricted share units representing 88,462,616 Class A ordinary shares had been granted and were outstanding under the 2018 Plan.The following paragraphs describe the principal terms of the 2018 Plan. Types of awards .
We may grant awards to our employees, directors and consultants of our company. However, we may grant options that are intended to qualify as incentive share options only to our employees and employees of our parent companies and subsidiaries. Vesting Schedule . In general, the administration committee determines the vesting schedule, which is specified in the relevant award agreement.
We may grant awards to our employees, directors and consultants of our company. However, we may grant options that are intended to qualify as incentive share options only to our employees and employees of our parent companies and subsidiaries. Vesting schedule .
The chief executive officer candidate nominated by the PDD Partnership shall stand for appointment by the nominating and corporate governance committee of the board of directors.
Lei Chen is an executive director of our company. 100 Table of Contents The chief executive officer candidate nominated by the PDD Partnership shall stand for appointment by the nominating and corporate governance committee of the board of directors.
The registered address of each of Qubit Partners L.P. and Qubit GP Limited is PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands. 109 Table of Contents To our knowledge, as of February 28, 2023, a total of 2,418,018,928 Class A ordinary shares were held by three record holders in the United States, representing approximately 45.5% of our total outstanding shares.
The registered address of each of Qubit Partners L.P. and Qubit GP Limited is PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands. To our knowledge, as of February 29, 2024, a total of 2,825,941,920 Class A ordinary shares were held by one record holder in the United States, representing approximately 50.9% of our total outstanding shares.
He also serves as an independent director of OCBC Wing Hang Bank (China) Ltd since September 2021. Mr. Kam served as the deputy chief executive officer and the executive director of HSBC Bank (China) Company Limited (“HSBC China”) from February 2016 to April 2018 and served as the chief financial officer of HSBC China from May 2013 to February 2016.
Kam served as the deputy chief executive officer and the executive director of HSBC Bank (China) Company Limited (“HSBC China”) from February 2016 to April 2018 and served as the chief financial officer of HSBC China from May 2013 to February 2016. Prior to that, Mr.
The following table gives breakdowns of our employees as of December 31, 2022 by function: ​ ​ ​ ​ ​ ​ As of December 31, ​ 2022 Function: ​ Sales and marketing ​ 4,590 Product development ​ 6,444 Platform operation ​ 809 Management and administration ​ 1,149 Total ​ 12,992 ​ We are dedicated to providing employees with social benefits, diversified work environment and a wide range of career development opportunities.
We had a total of 9,762 and 12,992 employees as of December 31, 2021 and 2022, respectively. ​ The following table gives breakdowns of our employees as of December 31, 2023 by function: ​ ​ ​ ​ ​ ​ As of ​ December 31, 2023 Function: ​ Sales, marketing and fulfillment ​ 7,158 Product development ​ 7,332 Platform operation ​ 1,339 Management and administration ​ 1,574 Total ​ 17,403 ​ 108 Table of Contents We are dedicated to providing employees with social benefits, diversified work environment and a wide range of career development opportunities.
Under these agreements, each of our executive officers is employed for a specified time period.
Employment Agreements and Indemnification Agreements We have entered into employment agreements with each of our executive officers. Under these agreements, each of our executive officers is employed for a specified time period.
These shares, however, are not included in the computation of the percentage ownership of any other person. ​ ​ ​ ​ ​ ​ ​ ​ ​ Class A Ordinary Shares Beneficially Owned** ​ Number % Directors and Executive Officers**: Lei Chen ​ * * Jiazhen Zhao ​ * * Anthony Kam Ping Leung ​ * * Haifeng Lin ​ * * Qi Lu ​ * * George Yong-Boon Yeo ​ * * Jun Liu ​ * ​ * ​ Junyun Xiao ​ * * Zhenwei Zheng ​ * * Jianchong Zhu ​ * ​ * ​ All Directors and Executive Officers as a Group ​ 61,396,894 1.2 ​ Principal Shareholders: ​ ​ ​ Entities affiliated with Zheng Huang (1) ​ 1,409,744,080 26.5 Entities affiliated with Tencent (2) ​ 783,468,116 14.7 Entities affiliated with PDD Partnership (3) ​ 370,772,220 ​ 7.0 ​ Notes: * Less than 1% of our total outstanding shares. ** Beneficial ownership information disclosed herein represents direct and indirect holdings of entities owned, controlled or otherwise affiliated with the applicable holder as determined in accordance with the rules and regulations of the SEC.
Rietjens ​ — — George Yong-Boon Yeo ​ * * Jun Liu ​ * ​ * ​ Junyun Xiao ​ * * Zhenwei Zheng ​ * * All Directors and Executive Officers as a Group ​ 62,225,417 1.1 ​ Principal Shareholders: ​ ​ ​ Entities affiliated with Zheng Huang (1) ​ 1,409,744,080 25.4 Entities affiliated with Tencent (2) ​ 783,468,116 14.1 Entities affiliated with PDD Partnership (3) ​ 370,772,220 ​ 6.7 ​ Notes: 109 Table of Contents * Less than 1% of our total outstanding shares. ** Beneficial ownership information disclosed herein represents direct and indirect holdings of entities owned, controlled or otherwise affiliated with the applicable holder as determined in accordance with the rules and regulations of the SEC.
Kam was also a member of the asset and liabilities management meeting and a member of the risk management meeting under the executive committee of HSBC Singapore and HSBC China. Mr.
Kam was also a member of the asset and liabilities management meeting and a member of the risk management meeting under the executive committee of HSBC Singapore and HSBC China. Mr. Kam received bachelor of science from University of Hong Kong and his master degree in applied finance from Macquarie University.
Anthony Kam Ping Leung has served as our independent director and chairman of the audit committee since August 2019. Mr. Kam has more than 30 years of experience in the financial services industry in Asia. He is a Chartered Financial Analyst and a chartered accountant in Singapore.
Kam has more than 30 years of experience in the financial services industry in Asia. He is a Chartered Financial Analyst and a chartered accountant in Singapore. Mr. Kam also serves as an independent director of OCBC Bank Ltd. in China since September 2021. Mr.
As of December 31, 2022, our employees other than members of our senior management as a group held options to purchase 448,020,512 Class A ordinary shares, with nominal exercise prices, and restricted share units representing 76,932,000 Class A ordinary shares.
As of December 31, 2023, our employees other than our directors and executive officers as a group held options to purchase 300,266,508 Class A ordinary shares, with nominal exercise prices, and restricted share units representing 84,774,772 Class A ordinary shares.
For discussions of our accounting policies and estimates for awards granted pursuant to the 2015 Plan and 2018 Plan, see “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Critical Accounting Policies—Share-based compensation.” C. Board Practices Board of Directors Our board of directors consists of six directors.
For a discussion about our accounting policies and estimates for awards granted pursuant to the 2015 Plan and 2018 Plan, see Item 17 of Part III, “Financial Statements—Note 2—Summary of significant accounting policies—(v) Share-based compensation.” C. Board Practices Board of Directors Our board of directors consists of six directors.
Board Diversity ​ ​ ​ Board Diversity Matrix (As of February 28, 2023) Country of Principal Executive Offices: Ireland ​ Foreign Private Issuer ​ Yes ​ Disclosure Prohibited Under Home Country Law ​ No ​ Total Number of Directors ​ 6 ​ ​ ​ Female Male Non- Binary Did Not Disclose Gender ​ Part I: Gender Identity ​ ​ ​ Directors ​ 0 6 0 0 ​ Part II: Demographic Background ​ ​ ​ Underrepresented Individual in Home Country Jurisdiction ​ 0 ​ LGBTQ+ ​ 0 ​ Did Not Disclose Demographic Background ​ 0 ​ ​ Under Rule 5606(f)(2) and Rule 5606(f)(6) of the Nasdaq Listing Rules, we are required to have, or disclose why we do not have, at least one “diverse” (as such term is defined in Rule 5606(f)(2)(B) of the Nasdaq Listing Rules) director by December 31, 2023.
Board Diversity ​ ​ ​ Board Diversity Matrix (As of February 29, 2024) Country of Principal Executive Offices: Ireland ​ Foreign Private Issuer ​ Yes ​ Disclosure Prohibited Under Home Country Law ​ No ​ Total Number of Directors ​ 6 ​ Part I: Gender Identity ​ Female Male Non- Binary Did Not Disclose Gender ​ Directors ​ 1 5 0 0 ​ ​ ​ Part II: Demographic Background ​ ​ ​ Underrepresented Individual in Home Country Jurisdiction ​ 0 ​ LGBTQ+ ​ 0 ​ Did Not Disclose Demographic Background ​ 0 ​ ​ D.
We have not set aside or accrued any amount to provide pension, retirement or other similar benefits to our executive officers and directors.
Compensation In the year ended December 31, 2023, we paid an aggregate of US$2.3 million in cash to our directors and executive officers as a group. We have not set aside or accrued any amount to provide pension, retirement or other similar benefits to our executive officers and directors.
Prior to that, he served as general manager of the merger and acquisitions department of Tencent Technology (Shenzhen) Company Limited, an affiliate of Tencent Holdings Limited. From July 2003 to November 2010, Mr. Lin served in different roles in finance, strategy and business operation at Microsoft. Prior to that, Mr. Lin worked at Nokia China from 1999 to 2001. Mr.
From July 2003 to November 2010, Mr. Lin served in different roles in finance, strategy and business operation at Microsoft. Prior to that, Mr. Lin worked at Nokia China from 1999 to 2001. Mr. Lin also serves as a non-executive director of Linklogis Inc. (HKEx: 09959) since October 2019. Mr.
Lin also serves as a non-executive director of Linklogis Inc. (HKEx: 09959) since October 2019. Mr. Lin received his bachelor’s degree in engineering from Zhejiang University in June 1997 and his master’s degree in business administration from the Wharton School of the University of Pennsylvania in May 2003.
Lin received his bachelor’s degree in engineering from Zhejiang University in June 1997 and his master’s degree in business administration from the Wharton School of the University of Pennsylvania in May 2003. Ivonne M.C.M. Rietjens has served as our independent director since August 2023. Dr. Rietjens is also a member of our audit committee and nominating and corporate governance committee.
Kam received bachelor of science from University of Hong Kong and his master degree in applied finance from Macquarie University. 100 Table of Contents Haifeng Lin has served as our director since June 2017. Mr. Lin is currently the head of Tencent Financial Technology and a corporate vice president of Tencent Holdings Limited (HKEx: 00700).
Haifeng Lin has served as our director since June 2017. Mr. Lin is currently the head of Tencent Financial Technology and a corporate vice president of Tencent Holdings Limited (HKEx: 00700). Prior to that, he served as general manager of the merger and acquisitions department of Tencent Technology (Shenzhen) Company Limited, an affiliate of Tencent Holdings Limited.
We had a total of 7,986 and 9,762 employees as of December 31, 2020 and 2021, respectively.
Employees Employees As of December 31, 2023, we had a total of 17,403 employees.
The specific level of equity interests to be maintained shall be determined by the Partnership Committee from time to time.
In order to align the interests of partners with the interests of shareholders, the Partnership Committee may require a partner to maintain a meaningful level of equity interests in our company during his or her tenure as a partner. The specific level of equity interests to be maintained shall be determined by the Partnership Committee from time to time.
He holds over 40 US patents and has authored many papers in his field. George Yong-Boon Yeo has served as our independent director and chairman of our nominating and corporate governance committee since July 2018.
Rietjens received her bachelor’s and master’s degrees in molecular life sciences from Wageningen University and her Ph.D. degree in toxicology from Wageningen University. George Yong-Boon Yeo has served as our independent director and chairman of our nominating and corporate governance committee since July 2018. Mr. Yeo is also a member of our audit committee and compensation committee.
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Qi Lu has served as our independent director and chairman of our compensation committee since July 2018. Currently, he is the founding CEO of Miracle Plus and also serves as a director of SAP and a director of Pine Field.
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Directors and Executive Officers The following table sets forth information regarding our directors and executive officers as of the date of this annual report. ​ ​ ​ ​ ​ ​ Directors and Executive Officers Age Position/Title Lei Chen 44 Chairman of the Board of Directors and Co-Chief Executive Officer Jiazhen Zhao ​ 40 ​ Director and Co-Chief Executive Officer Anthony Kam Ping Leung ​ 63 ​ Independent Director Haifeng Lin 47 Director Ivonne M.C.M.
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He was president and COO of Baidu and the China founding CEO and head of research of Y Combinator China, and prior to that served as Microsoft’s global executive vice president and led Applications and Services Group. Dr. Lu joined Microsoft in 2009 as president of its Online Services Division. Earlier in his career, Dr.
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Zhao received his bachelor’s degree in e-commerce management from South China University of Technology. 101 Table of Contents Anthony Kam Ping Leung has served as our independent director and chairman of the audit committee since August 2019. Mr. Kam is also chairman of our compensation committee. Mr.
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Lu joined Yahoo! in 1998, later becoming senior vice president in charge of search and advertising technologies, and subsequently executive vice president in 2007. Dr. Lu holds both bachelor and master degrees in computer science from Fudan University in Shanghai and a Ph.D. in computer science from Carnegie Mellon University.
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Dr. Rietjens has more than 25 years of experience in food safety. She has been a full professor at Wageningen University since 2001 and is currently head of the division of toxicology. She is an elected member of the Royal Netherlands Academy of Arts and Sciences (KNAW) and the chairperson of the KNAW Scientific Council for Natural Sciences and Engineering.
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Zhu had served as senior vice president of our company since 2018. Prior to joining our company, Mr. Zhu was a partner in the Beijing office of White & Case LLP. From 2010 to 2017, he was an associate and then counsel in Skadden, Arps, Slate, Meagher & Flom LLP. Mr.
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She currently serves as the chairperson of the Expert Panel of the Flavor and Extract Manufacturers Association (FEMA) of the United States advising on GRAS (Generally Recognized As Safe) notifications for new food flavors and is an elected member of the French Academy of Agriculture.
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Zhu received his bachelor’s degree in English language and literature from Tsinghua University, and his juris doctor’s degree from University of California Hastings College of the Law. B. Compensation In the year ended December 31, 2022, we paid an aggregate of US$2.8 million in cash to our directors and executive officers as a group.
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She is also a board member of Skal Biocontrole, an independent organization that supervises and certifies the organic food chain in the Netherlands, and a member of the Fonterra Global Food Safety Science Advisory Panel.
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As of February 28, 2023, we did not have at least one diverse director because we have not yet identified a suitable candidate. We will continue our search for a suitable candidate in order to increase the diversity of our board. 107 Table of Contents D. Employees Employees As of December 31, 2022, we had a total of 12,992 employees.
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Previously, she served as the chairperson of the Dutch Society for Toxicology from 1999 to 2005, a member of the Academic Board at Wageningen University from 2012 to 2017, and a member of the Supervisory Board of Royal Wessanen BV.
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She was also an active member of several committees on food and occupational safety, including panels and working groups of the European Food Safety Authority and the Dutch Health Council. From 2013 to 2021, she was a member of the Scientific Advisory Board of the National Institute of Public Health & Hygiene (RIVM). Dr.
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In general, the administration committee determines the vesting schedule, which is specified in the award agreement. 104 Table of Contents Exercise of options . The administration committee determines the exercise price for each award, which is stated in the award agreement.
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These shares, however, are not included in the computation of the percentage ownership of any other person. ​ ​ ​ ​ ​ ​ ​ ​ ​ Class A Ordinary Shares Beneficially Owned** ​ Number % Directors and Executive Officers**: Lei Chen ​ * * Jiazhen Zhao ​ * * Anthony Kam Ping Leung ​ * * Haifeng Lin ​ * * Ivonne M.C.M.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

13 edited+2 added−12 removed3 unchanged
Biggest changeAs of December 31, 2022, Ningbo Hexin beneficially owned 50.01% equity interests in Shanghai Fufeitong. Subject to compliance with applicable laws and regulations and approval by relevant regulatory authorities, Hangzhou Aimi may require Ningbo Hexin to repay the loans at any time and use the proceeds to pay for the limited partnership interests in Ningbo Hexin.
Biggest changeSubject to compliance with applicable laws and regulations and approval by the regulatory authorities, Hangzhou Aimi may (i) require Ningbo Hexin to repay the loans we have extended to it at any time, and (ii) use the proceeds from the repayment of the loan to acquire all of the limited partnership interests of Ningbo Hexin.
As of December 31, 2022, the loans were still outstanding. In April 2020, Shanghai Xunmeng entered into a business cooperation agreement with Shanghai Fufeitong, pursuant to which both parties agreed to conduct comprehensive business cooperation in payment services, technical resources and other related professional areas.
As of December 31, 2023, the loans were still outstanding. In April 2020, Shanghai Xunmeng entered into a business cooperation agreement with Shanghai Fufeitong, pursuant to which both parties agreed to conduct comprehensive business cooperation in payment services, technical resources and other related professional areas.
If these payment services are restricted or curtailed in any way, are offered to us on less favorable terms, or become unavailable to us or our buyers for any reason, our business may be materially and adversely affected.” To mitigate risk and impact on our business operations in the event of disruption or discontinuance of our relationship with commercial banks and third-party online payment service providers, we facilitated Messrs.
If these payment services are restricted or curtailed in any way, are offered to us on less favorable terms, or become unavailable to us or our buyers for any reason, our business may be materially and adversely affected.” To mitigate risk and impact on our business operations in the event of disruption or discontinuance of our relationship with commercial banks and third-party payment service providers, we facilitated Mr.
Item 7. Major Shareholders and Related Party Transactions A. Major Shareholders Please refer to “Item 6. Directors, Senior Management and Employees—E. Share Ownership.” B. Related Party Transactions Contractual Arrangements with the VIE and Its Shareholders For a description of these contractual arrangements, see “Item 4. Information on the Company—C.
Item 7. Major Shareholders and Related Party Transactions A. Major Shareholders Please refer to “Item 6. Directors, Senior Management and Employees—E. Share Ownership.” B. Related Party Transactions Contractual Arrangements with the VIE and Its Shareholders For a description of these contractual arrangements, see “Item 4. Information on the Company—C. Organizational Structure.” Employment Agreements and Indemnification Agreements See “Item 6.
Lei Chen and Zhenwei Zheng, our executive officers, to acquire the controlling equity interests in Shanghai Fufeitong, a licensed payment service company, by providing interest-free loans in the aggregate amount of RMB697.6 million (US$101.1 million) to Ningbo Hexin Equity Investment Partnership, or Ningbo Hexin, a limited partnership controlled by Messrs. Lei Chen and Zhenwei Zheng.
Lei Chen and Mr. Zhenwei Zheng, our executive officers, to acquire the controlling equity interests in Shanghai Fufeitong, a licensed payment service company, by providing interest-free loans in the aggregate amount of RMB710.6 million (US$100.1 million) to Ningbo Hexin Equity Investment Partnership, or Ningbo Hexin, a limited partnership controlled by Mr. Lei Chen and Mr. Zhenwei Zheng.
Key Information—D. Risk Factors—Risks Related to Our Business—We currently rely on commercial banks and third-party online payment service providers for payment processing and escrow services.
Risk Factors—Risks Related to Our Business—We currently rely on commercial banks and third-party payment service providers for payment processing and escrow services.
Tencent also agreed to share technical and administrative resources with us and make reasonable efforts to provide support in a variety of professional areas, such as talent recruiting, training and technical resources. The Strategic Cooperation Framework Agreement has a term of five years. Business Cooperation with Tencent. Tencent has been a principal shareholder of us since February 2017.
Tencent also agreed to share technical and administrative resources with us and make reasonable efforts to provide support in a variety of professional areas, such as talent recruiting, training and technical resources. The Strategic Cooperation Framework Agreement had a term of five years.
As of December 31, 2020, 2021 and 2022, the carrying amount for the investments was RMB252.4 million, RMB332.6 million and RMB355.7 million (US$51.6 million). 111 Table of Contents Loan to Ningbo Hexin and Business Cooperation Agreement with Shanghai Fufeitong We currently rely on commercial banks and third-party online payment service providers for payment processing and escrow services. See “Item 3.
As of December 31, 2021 and 2022, the carrying amount for the investments was RMB332.6 million and RMB355.7 million. Loan to Ningbo Hexin and Business Cooperation Agreement with Shanghai Fufeitong We currently rely on commercial banks and third-party payment service providers for payment processing and escrow services. See “Item 3. Key Information—D.
In 2020, 2021 and 2022, we purchased from Tencent certain services, including payment processing, advertising and cloud services, in the total amount of RMB10,541.5 million, RMB8,416.6 million and RMB7,061.1 million (US$1,023.8 million), respectively.
In 2021, 2022 and 2023, we purchased from Tencent certain services, including payment processing, advertising and cloud services, in the total amount of RMB8,416.6 million, RMB7,061.1 million and RMB7,182.5 million (US$1,011.6 million), respectively.
As of December 31, 2020, 2021 and 2022, we had a receivable balance from Tencent in the amount of RMB3,177.5 million, RMB2,803.3 million and RMB2,763.9 million (US$400.7 million), respectively, and a payable balance to Tencent in the amount of RMB3,370.9 million, RMB1,916.5 million and RMB1,539.7 million (US$223.2 million), respectively.
As of December 31, 2021, 2022 and 2023, we had a receivable balance from Tencent in the amount of RMB2,803.3 million, RMB2,763.9 million and RMB3,516.2 million (US$495.3 million), respectively, and a payable balance to Tencent in the amount of RMB1,916.5 million, RMB1,539.7 million and RMB1,112.6 million (US$156.7 million), respectively.
As of December 31, 2022, we had a receivable balance from Shanghai Fufeitong and its affiliates of RMB2,856.9 million (US$414.2 million), and a payable balance to Shanghai Fufeitong and its affiliates of RMB136.7 million (US$19.8 million). C. Interests of Experts and Counsel Not applicable.
As of December 31, 2023, we had a receivable balance from Shanghai Fufeitong and its affiliates of RMB3,201.2 million (US$450.9 million), and a payable balance to Shanghai Fufeitong and its affiliates of RMB126.2 million (US$17.8 million). C. Interests of Experts and Counsel Not applicable. 111 Table of Contents
In February 2018, we entered into a Strategic Cooperation Framework Agreement with Tencent, a provider of internet value-added services serving the largest online community in China. Pursuant to the Strategic Cooperation Framework Agreement, Tencent agreed to offer us access points on the interface of Weixin Pay enabling us to utilize traffic from Tencent’s Weixin Pay.
Pursuant to the Strategic Cooperation Framework Agreement, Tencent agreed to offer us access points on the interface of Weixin Pay enabling us to utilize traffic from Tencent’s Weixin Pay.
Employment Agreements and Indemnification Agreements See “Item 6. Directors, Senior Management and Employees—B. Compensation.” Share Incentive Plans See “Item 6. Directors, Senior Management and Employees—B. Compensation.” Agreement and Business Cooperation with Tencent Strategic Cooperation Framework Agreement .
Directors, Senior Management and Employees—B. Compensation.” 110 Table of Contents Share Incentive Plans See “Item 6. Directors, Senior Management and Employees—B. Compensation.” Agreement and Business Cooperation with Tencent Strategic Cooperation Framework Agreement . In February 2018, we entered into a Strategic Cooperation Framework Agreement with Tencent, a provider of internet value-added services in China.
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Organizational Structure.” Shareholders Agreement We entered into our seventh amended and restated shareholders agreement on March 5, 2018 with our then shareholders. Pursuant to this shareholders agreement, we have granted certain registration rights to our shareholders. Set forth below is a description of the registration rights granted under the agreement. Demand Registration Rights .
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In 2023, we entered into agreements with Tencent, pursuant to which Tencent will continue to offer us access points on its Weixin platform. Business Cooperation with Tencent . Tencent has been a principal shareholder of ours since February 2017.
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Holders holding at least 30% or more of the issued and outstanding registrable securities (on an as converted basis) held by the preferred shareholders, the Class B ordinary shareholders and Class A ordinary shareholders have the right to demand in writing that we file a registration statement covering the registration of at least 25% of their registrable securities.
Added
As of December 31, 2023, Ningbo Hexin beneficially owned 50.01% of the equity interests in Shanghai Fufeitong.
Removed
We have the right to defer filing of a registration statement for a period of not more than 90 days if we determine in good faith that filing of a registration statement in the near future will be materially detrimental to us or our shareholders, but we cannot exercise the deferral right for more than once during any twelve-month period and cannot register any other securities during such 90-day period.
Removed
We are not obligated to effect more than two demand registrations.
Removed
Further, if the registrable securities are offered by means of an underwritten offering, and the underwriters advise us that marketing factors require a limitation of the number of securities to be underwritten, the number of registrable securities that may be included in the underwriting shall be reduced as required by the underwriters and allocated among the holders of registrable securities on a pro rata basis according to the number of registrable securities requested by each holder, provided that all other equity securities are first excluded and 25% of shares of registrable securities requested by the holders are included.
Removed
Registration on Form F-3 . Any holder may request us to file a registration statement on Form F-3 if we qualify for registration on Form F-3. The holders are entitled to an unlimited number of registrations on Form F-3 so long as such registration offerings are in excess of US$500,000.
Removed
We, however, are not obligated to consummate a registration if we have consummated two registrations within any twelve-month period.
Removed
We have the right to defer filing of a registration statement for a period of not more than 60 days if we determine in good faith that filing of a registration statement in the near future will be materially detrimental to us or our shareholders, but we cannot exercise the deferral right for more than once during any twelve-month period and cannot register any other securities during such 60-day period. 110 Table of Contents Piggyback Registration Rights .
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If we propose to register for a public offering or our securities other than relating to any share incentive plan or a corporate reorganization, we must notify all holders of registrable securities and offer them an opportunity to be included in such registration.
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If the managing underwriter determines in good faith that market factors require a limitation of the number of registrable securities to be underwritten, the managing underwriter may decide to exclude shares from the registration and the underwriting, and the number of shares that may be included in the registration and the underwriting will be allocated, first, to us, second, to each of the holders requesting inclusion of their registrable securities on a pro rata basis based on the total amount of registrable securities requested by each such holder, and third, to holders of other securities of our company, provided that all other equity securities are first excluded and 25% of shares of registrable securities requested by the holders are included.
Removed
Expenses of Registration . We will bear all registration expenses, other than the underwriting discounts and commissions, fees for special counsel for the holders participating in such registration and certain excepted expenses as described in the shareholders agreement, incurred in connection with registrations, filings or qualification pursuant to the shareholders agreement. Termination of Obligations .
Removed
We have no obligation to effect any demand, piggyback or Form F-3 registration upon (i) the fifth anniversary from the date of closing of a Qualified Initial Public Offering (as defined in the shareholders agreement), (ii) upon the termination, liquidation or dissolution of our company or a Liquidation Event (as defined in the shareholders agreement), or (iii) all registrable securities proposed to be sold by a holder may then be sold without registration in any 90-day period under Rule 144 of the Securities Act.

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