Jiazhilian falsely inflated its net profit and was warned by the China Securities Regulatory Commission

On August 5, Jiazhilian’s parent company “Xunxing Co., Ltd.” received a rectification notice from the China Securities Regulatory Commission!

The content stated that "Xunxing Shares" had the following problems:

In 2017 and 2018, Shenzhen Jiazhilian Cross-border E-commerce Co., Ltd. (hereinafter referred to as Jiazhilian), a subsidiary of Xunxing Co., Ltd., understated its costs and expenses by lowering the actual purchase unit price, adding fictitious rebates from suppliers to Jiazhilian, having suppliers advance factoring fees for accounts receivable on behalf of Jiazhilian, and paying the difference and fees to suppliers off the books.

Upon investigation, it was found that Jiazhilian understated its procurement costs by RMB 8.4882 million and expenses by RMB 196,500 in 2017, and understated its procurement costs by RMB 1.0811 million and expenses by RMB 239,200 in 2018.

The above situation resulted in the false increase of net profit attributable to shareholders of listed companies of "Xunxing Shares" by RMB 1.44 million, RMB 2.0858 million and RMB 1.6025 million in 2017, 2018 and 2019; and resulted in the understatement of inventory of "Xunxing Shares" by RMB 6.0352 million, RMB 3.5162 million and RMB 564,100 in 2017, 2018 and 2019.

As the value chain, a subsidiary of Xunxing Co., Ltd., understated costs and inventories, the relevant information disclosed in the annual reports of Xunxing Co., Ltd. in 2017, 2018 and 2019 was inaccurate. At present, Wang Lijun, the main person responsible for the above-mentioned violations and the then chairman of Jiazhilian, has been issued a warning letter by the Fujian Securities Regulatory Bureau.

Although warned by the China Securities Regulatory Commission, Xunxing Co., Ltd.'s revenue situation in 2021 is still relatively optimistic!

According to Xunxing Co., Ltd.'s 2021 semi-annual performance forecast: from January 1, 2021 to June 30, 2021, its net profit attributable to shareholders increased by 90.71%-131.58% compared with the same period last year, and its net profit after profit increased by 92.34%-136.72% compared with the same period last year.

However, in the cross-border e-commerce sector, Xunxing shares feel "powerless". Its subsidiary Jiazhilian achieved sales revenue of 474 million yuan in 2019, a year-on-year decrease of 38.88%, and a net profit loss of 58.582 million yuan. In 2020, Jiazhilian achieved sales revenue of 375 million yuan, a year-on-year decrease of nearly 21%, and a net profit loss of 24.3994 million yuan.

Although the net profit loss of Jiazhilian has been decreasing year by year, there is still a long way to go before stable profitability!

The grievances between Jiazhilian and Xunxing Co., Ltd. have been going on for a long time!

In February of this year, due to the failure of the bet, the founders of Jiazhilian, Gan Qingcao and his wife, and the limited partnership company jointly held by the senior management team at the time, were jointly ordered to compensate Xunxing Shares 1.01 billion yuan, and the verdict has been announced with the support of the court.

If the loan is overdue, Gan Qingcao and his wife will have to bear over 100 million yuan in overdue interest every year. Currently, Gan Qingcao (the legal person of Jiazhilian) has lived overseas...

Cross-border e-commerce has always been a road full of uncertainties. I hope that the actual controllers of Xunxing Co., Ltd. and Jiazhilian can guide the companies to take the right path to go overseas!