Note 19 - Concentration of Risk

12 Months Ended

Dec. 31, 2021

Notes to Financial Statements

Concentration Risk Disclosure [Text Block]

19. Concentration of risk

Credit risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents, accounts receivable and loans to unrelated parties. As of December 31, 2021, 68% of the Company’s cash and cash equivalents were held by financial institutions located in the United States of America, and the remaining 32% was held by major financial institutions located in the PRC. The Company believes that these financial institutions located in the PRC and the United States of America are of high credit quality. For accounts receivable and loans to unrelated parties, the Company extends credit based on an evaluation of the customer’s or other parties’ financial condition, generally without requiring collateral or other security. In order to minimize the credit risk, the Company delegated a team responsible for credit approvals and other monitoring procedures to ensure that follow-up action is taken to recover overdue debts. Further, the Company reviews the recoverable amount of each individual receivable at each balance sheet date to ensure that adequate allowances are made for doubtful accounts. In this regard, the Company considers that its credit risk for accounts receivable and loans to unrelated parties are significantly reduced.

Risk arising from operations in foreign countries

Substantially all of the Company’s operations are conducted within the PRC. The Company’s operations in the PRC are subject to various political, economic, and other risks and uncertainties inherent in the PRC. Among other risks, the Company’s operations in the PRC are subject to the risks of restrictions on transfer of funds, changing taxation policies, foreign exchange restrictions; and political conditions and governmental regulations.

Currency convertibility risk

Significant part of the Company’s businesses is transacted in RMB, which is not freely convertible into foreign currencies. All foreign exchange transactions 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 regulatory institutions requires submitting a payment application form together with suppliers’ invoices and signed contracts. These exchange control measures imposed by the PRC government authorities may restrict the ability of the Company’s PRC subsidiaries and VIEs to transfer its net assets, which to the Company through loans, advances or cash dividends.

Concentration of customers

The following tables summarized the information about the Company’s concentration of customers for the years ended December 31, 2021 and 2020, respectively:

Customer A

Customer B

Customer C

Customer D

Customer E

Customer F

Year Ended December 31, 2021

Revenues, customer concentration risk

*

*

*

*

-

-

Year Ended December 31, 2020

Revenues, customer concentration risk

*

*

*

-

*

*

As of December 31, 2021

Accounts receivable, customer concentration risk

33%

32%

19%

11%

-

-

As of December 31, 2020

Accounts receivable, customer concentration risk

*

28%

-

-

27%

21%

* Less than 10%.

- No transaction incurred for the reporting period/no balance existed as of the reporting date.

Concentration of supplier

The following tables summarized the information about the Company’s concentration of suppliers for the years ended December 31, 2021 and 2020, respectively:

	Supplier A		Supplier B
Year Ended December 31, 2021
Cost of revenues, supplier concentration risk		73%		*
Year Ended December 31, 2020
Cost of revenues, supplier concentration risk		-		78%

* Less than 10%.

- No transaction incurred for the reporting period/no balance existed as of the reporting date.