"After suffering through stock selloffs this summer, China's internet giants are working hard to regain favor with authorities and global investors as the companies try to chart paths back to normalcy.
Shares of two large Chinese online retailers, Pinduoduo Inc. and JD.com Inc., have jumped about 20% or more this week -- recouping a chunk of their heavy losses since July -- after the companies reported healthy sales increases in the second quarter and highlighted their contributions to Chinese society. Their performance took some of the focus away from Beijing's widening regulatory crackdown, which has turned many investors off the once-hot internet sector.
Pinduoduo, a fast-growing e-commerce player known for selling vegetables, groceries and household essentials, reported on Tuesday net income of $373.9 million for the three months ended June. It was the Shanghai-based company's first net profit since its listing on the Nasdaq Stock Market about three years ago and came on the back of an 89% jump in quarterly revenue to $13.6 billion.
The nearly six-year-old company said it would commit its second-quarter earnings and future profit totaling up to the equivalent of $1.5 billion to supporting farmers and rural communities by helping them modernize using agricultural technology. Chen Lei, its chairman and chief executive, said he would oversee the project, which needs majority shareholder approval.
Days earlier, Tencent Holdings Ltd. said it would invest the equivalent of $7.7 billion to promote "common prosperity" in China. The videogaming and social-media giant previously had earmarked a similar sum to fund research in areas such as science and carbon neutrality that are strategically important to Beijing. Common prosperity has become a popular catchphrase in China, used to describe President Xi Jinping's desire for people in the country to get rich together, instead of having wealth concentrated among the corporate world's upper echelons.
"All the companies want to be seen in a positive light," said Louis Lau, director of investments at Brandes Investment Partners in San Diego, a firm that holds some Chinese internet stocks. He added that some companies "are trying to please the government and trying not to become a subject for investigation."
While the companies are trying to get into Beijing's good graces, it remains to be seen whether they will be spared the wide-ranging regulatory crackdown, said David Wong, senior investment strategist for equities at AllianceBernstein in Hong Kong. "It is like if a tobacco company is making big donations to a cancer-research center, it does not remove key risks of antitobacco legislation in future against them," he said.
Pinduoduo's share surge this week followed that of its older Nasdaq-listed peer JD.com, which on Monday reported lower second-quarter net profit and a 26% rise in revenue to $39.3 billion. Both companies are rivals to industry leader Alibaba Group Holding Ltd., which has been one of the biggest targets of China's recent efforts to stamp out anticompetitive business practices.
Xu Lei, CEO of JD's core retail division, said recent regulations for China's internet industry would be beneficial to the company. "We have suffered from unfair market behaviors such as pick one from two," he said.
China's antitrust regulator has taken aim at the practice known as pick one from two, or er xuan yi in Mandarin, and has alleged that Alibaba and other large companies penalized merchants who sold their goods across different retailers.
Mr. Xu tried to paint a picture of JD as a responsible corporate citizen in China. He said that the company's express delivery business has taken care of its blue-collar workers and business partners.” [1]
And in Lithuania, it is time for business to take care of people. We are also post-communist and dumb as a shoe heel.
- Chinese Tech Firms Regain Ground. Xie, Yu. Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 26 Aug 2021: B.4.
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