Company: DDC
Filing Date: 2025-01-28
Form Type: 20-F
Source: 0001213900-25-007160
Chunk: 134

Company: DDC Enterprise Ltd
Filing Date: 2025-01-28
Form: 20-F
Item: Item 5
Chunk 134
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 interest
rates.

Credit Risk

Financial instruments that
potentially subject us to significant concentrations of credit risk consist primarily of cash and cash equivalents, accounts receivable,
other receivables included in prepaid expenses, other current assets, and amounts due from related parties. As of December 31, 2022 and
December 31, 2023, RMB26.8 million and RMB78.8 million (US$11.1 million), respectively, were deposited with financial institutions located
in the Chinese mainland, Hong Kong and U. S. Management believes that these financial institutions are of high credit quality and continually
monitor the credit worthiness of these financial institutions. Historically, deposits in Chinese banks are secure due to the state policy
on protecting depositors’ interests.

For the credit risk related
to accounts receivable, we perform ongoing credit evaluations of customers. we establish an allowance for doubtful accounts based upon
estimates, factors surrounding the credit risk of specific customers and other information. The allowance amounts were immaterial for
all periods presented.

Foreign Exchange Risk

A large majority of our businesses
are transacted in RMB, which is not freely convertible into foreign currencies. On January 1, 1994, the PRC government abolished the dual
rate system and introduced a single rate of exchange as quoted daily by the People’s Bank of China. However, the unification of
the exchange rates does not imply the convertibility of RMB into USD or other foreign currencies. All foreign exchange transactions continue
to take place either through the People’s Bank of China or other banks authorized to buy and sell foreign currencies at the exchange
rates quoted by the People’s Bank of China. Approval of foreign currency payments by the People’s Bank of China or other institutions
requires submitting a payment application form together with suppliers’ invoices, shipping documents and signed contracts.

New Acquisitions

M& A is part of the company’s
growth strategy. In 2022 and 2023, the company completed several acquisitions which marked the beginning of its multi-brand strategy.
A multi-brand strategy puts the company is a good position to serve a wider spectrum of consumers across different pricing segmentations.
It also allows the company to provide a wider and more representative range of Asian Food products to global customers. The company’s
M& A strategy focuses on acquisition complimentary brands in the Asian Food category and also targets that can expand and strengthen
the company’s sales network globally. M& A is an important part of our strategy to