Company: DDC
Filing Date: 2025-05-15
Form Type: 20-F
Source: 0001213900-25-043916
Chunk: 130

Company: DDC Enterprise Ltd
Filing Date: 2025-05-15
Form: 20-F
Item: Item 5
Chunk 130
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 remediation efforts.

The process of designing and
implementing an effective financial reporting system is a continuous effort that requires us to anticipate and react to changes in our
business and the economic and regulatory environments and to expend significant resources to maintain a financial reporting system that
is adequate to satisfy our reporting obligation. See “ Risk Factors - Risks Related to Our Securities - We have identified
one material weakness in our internal control over financial reporting. If our remediation of the material weakness is not effective,
or if we experience additional material weaknesses in the future or otherwise fail to maintain proper and effective internal control over
financial reporting, our ability to produce accurate and timely consolidated financial statements could be impaired, investors may lose
confidence in our financial reporting and the trading price of our Class A ordinary shares may decline.”

Quantitative and Qualitative Disclosure about
Market Risk

Interest Rate Risk

Our exposure to interest rate
risk primarily relates to the interest income generated by excess cash, which is mostly held in interest bearing bank deposits. We have
not used derivative financial instruments to manage our interest risk exposure. Interest earning instruments carry a degree of interest
rate risk. We have not been exposed to nor do we anticipate that we will be exposed to, material risks due to changes in market 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, 2023 and December 31, 2024, RMB78.8 million and RMB61.0 million
(US$8.4 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