(AF) Pinduoduo shares surged more than a fifth after it pledged to donate $1.5 billion in future profits to charity – the latest Chinese tech company to make such a promise since Chinese President Xi Jinping called for a fairer distribution of wealth.
The e-commerce platform said it would give the money to an initiative created to bring resources to needy farmers. Its Nasdaq-listed shares climbed more than 22% following the announcement and on news that it had posted its first quarterly profit. Tencent’s American Depositary Receipts also surged more than 8%. Last week the tech giant said it would create a “common prosperity programme” that would see it donate a similar amount of cash to charity.
The philanthropic pledges come after Xi told a gathering of economic planners that the country needed to rebalance its economy towards ironing out risks such as widening wealth disparities and to “adjust excessive incomes” of the nation’s emerging super-rich. The call was seen as an extension into broader society of China’s recent regulatory crackdown on technology companies.
Helping Farmers
Pinduoduo, which has the biggest e-commerce user base in China, said it has long been committed to the agriculture sector. Among its activities, the company said it helps farmers bring their products to market and provides logistics solutions. The Shanghai-based company said it would donate a portion of its future earnings to its 10 Billion Agriculture Initiative, which aims to meet “critical needs in the agricultural sector and rural areas.”
“This is an important and challenging task, which we will invest in patiently,” chairman and CEO Chen Lei said. “All profits from the second quarter and any potential profits in future quarters will first be allocated towards this initiative until the total commitment is fulfilled.”
Philanthropic donations by China’s tech firms and billionaires have soared in recent months, with an estimated $13 billion already pledged from personal or corporate accounts, a record for any previous year, according to Fortune magazine.
Observers have linked the surge in generosity to China’s crackdown on the influence of tech giants such as Ant Group and Didi Chuxing. Authorities have turned the screws, citing financial and data risks. But analysts have also suggested political motives have been at play, with the communist leadership keen to stifle the growing power of private companies.
“It’s hard to believe there is not a direct connection between… the recent generosity and the ongoing government crackdown,” Dexter Roberts, senior fellow at the Atlantic Council’s Asia Security Initiative and author of ‘The Myth of Chinese Capitalism’ told Fortune. “They all now must be aware they could be next in Beijing’s crosshairs; and that by demonstrating this largesse, they might insulate themselves at least a little from any future state action.”
Pinduoduo reported a net income of 2.41 billion yuan in the quarter to June, compared to a net loss of 899 million yuan a year earlier.
•By Mark McCord
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