PDD holdings PDD The stock was down nearly 3% before the market opened on Feb. 26, as investors worry that a potential import ban on its e-commerce subsidiary, Temu, could affect their investment in the stock.
While in 2023, Pinduoduo shares recorded a gain of 73%, this year they have already fallen by 12.7%. Reports from Yahoo Finance show that US lawmakers are contemplating a potential Temu import ban.
The platform, known for its deep discount offers, is under scrutiny for alleged links to forced labor in China’s Xinjiang region. This has raised concerns among investors and market analysts.
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Temu’s supply chain practices under scrutiny: US lawmakers, including Congressman Blaine Luetkemeyer, have reportedly raised questions about Temu’s supply chain practices, saying the Chinese company has not taken adequate measures to prevent its suppliers from employing forced labor. The concerns have led lawmakers to call for Temu to be added to the list of violators under the Uighur Law on Prevention of Forced Labor, sources familiar with the situation reported.
The Uyghur Forced Labor Prevention Law, enacted in 2021, aims to prevent goods from China’s Xinjiang region from entering the United States. Allegations of forced labor involving Uyghurs and other minority groups have been leveled at China, although the Chinese government has consistently denied such allegations.
The rise of Temu’s popularity: Temu has seen a surge in popularity in the US market. It attracts cost-conscious buyers with its special offers. Despite its success and notable advertising push during the recent Super Bowl, the platform is now facing potential repercussions from US lawmakers.
Temu is the second most downloaded app on the App Store. It has totaled over 16 million downloads in the last month. According to SensorTower data, the service had about 51 million users in the United States as of January.
Bank of America suggests that Temu could generate $50 billion in gross merchandise volume by 2025, according to Seeking Alpha. However, recent legislative challenges cast a shadow over these optimistic projections.
Pinduoduo and Temu did not immediately respond to requests for comment. The situation highlights growing legislative pressures on China-based companies operating in the U.S. market.
Investors and industry observers are closely watching these developments unfold. In fact, they could have a substantial impact on the trajectory of PDD stock and Temu’s future in the United States
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