Company: DDC
Filing Date: 2025-05-15
Form Type: 20-F
Source: 0001213900-25-043916
Chunk: 36

Company: DDC Enterprise Ltd
Filing Date: 2025-05-15
Form: 20-F
Item: Item 3
Chunk 36
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Since the reform and opening
up, China has experienced rapid economic growth, which has resulted in significantly increased labor costs. Average labor wages are expected
to increase. In addition, we may need to increase our total compensations to attract and retain experienced personnel required to achieve
our business objectives. Any material increase in our labor costs may have an adverse effect on our results of operations.

We may not be able to detect or prevent
fraud, bribery, or other misconduct committed by our employees, customers or other third parties.

We may be exposed to fraud,
bribery, or other misconduct committed by our employees, customers or other third parties, which could subject us to financial losses
and penalties from governmental authorities. Although our internal control procedures are designed to monitor our operations and ensure
overall compliance, our internal control procedures may be unable to identify all non-compliances, suspicious transactions, fraud, corruption
or bribery in a timely manner. If such misconduct occurs, we may suffer from negative publicity and reputation damages.

We may be subject to legal proceedings in
the ordinary course of our business. Any adverse outcome of these legal proceedings could have a material adverse effect on our business,
results of operations and financial condition.

We may from time to time become
a party to various litigations, arbitrations, legal disputes, claims or administrative proceedings arising in the ordinary course of our
business. For example, we may be required to negotiate with, or institute litigation when negotiation fails, against our suppliers for
the losses arising out of contaminated raw materials. The compensation clauses in the supply contract may not be adequate enough to remedy
our damages. Such litigation could result in substantial costs and diversion of resources, which could negatively affect our sales, profitability
and prospects. Even if any such litigation is resolved in our favor, we may not be able to successfully enforce the judgment and remedies
awarded by the court and such remedies may not be adequate to compensate us for our actual or anticipated related losses, whether tangible
or intangible. Negative publicity relating to such litigation, arbitrations, legal disputes, claims or administrative proceedings may
damage our reputation and adversely affect the image of our brands and services. In addition, ongoing litigation, arbitrations, legal
disputes, claims or administrative proceedings may distract our management’s attention and consume our time and other resources.
Furthermore, any litigations, arbitrations, legal disputes, claims or administrative proceedings which are not of material importance
may escalate due to the various factors involved, such as