PDD’s announcement comes after a series of similar contributions from the country’s biggest companies and wealthiest people. Tencent Holdings Ltd., China’s most valuable company, said last week it will double the amount of money it’s allocating for social responsibility programs to about $15 billion. PDD co-founder Colin Huang had earlier pledged to personally bankroll research into sciences.
|Colin Huang, Pinduoduo
|Company pledges $1.5 billion in profit to help agriculture development;
In March, Huang’s foundation donated $100 million to Zhejiang University;
In July 2020, Huang and Pinduoduo’s founding team transferred shares worth $2.4 billion to a charitable trust
|Lei Jun, Xiaomi
|$2.2 billion in shares
|Zhang Yiming, ByteDance
|$77.3 million of personal wealth
|Wang Xing, Meituan
|$2.3 billion in shares
|Pony Ma, Tencent
|About $7.5 billion of company money set aside (In August, Tencent doubled the pledged amount to roughly $15 billion)
President Xi Jinping has increasingly emphasized the idea of “common prosperity” as the Communist Party tries to address the country’s wealth gap. Regulators are forcing most private education companies to convert into non-profits, while they’ve pushed other tech players to boost pay for low-skill workers at the expense of earnings. PDD’s decision squarely targets one of Xi’s top priorities: alleviating rural poverty.
In the U.S., companies used to make charitable contributions out of corporate profits, but the practice declined after criticism that CEOs were using shareholder money for their own glory. Investors had no such qualms about PDD’s pledge. Shares soared 22% in U.S. trading after the company unveiled the news and a surprise profit for the quarter.
“The move shows the company’s willingness to take social responsibility and explore new opportunities in a blue ocean, though profit margin may be pressured again by these investments,” analysts at China International Capital Corp. wrote in a research note. “We expect 2H21 non-GAAP profit to break even, reflecting all the profits will be invested in the initiative.”