【Epoch Times, December 18, 2025】Recently, Chinese AI chip manufacturer Hanwuji announced that it will utilize a capital reserve of 2.778 billion RMB to offset its accumulated losses over the past four years, effectively bringing the losses to zero. As of early December, more than 30 A-share listed companies have disclosed plans to use capital reserves to cover losses. Industry experts believe that such financial maneuvers often lead to distorted financial statements, masking underlying issues within companies.
On the evening of December 15, Hanwuji, a leading AI chip manufacturer in China, released a statement announcing that the proposal to use the capital reserve to cover losses was approved during an extraordinary shareholders’ meeting. According to the proposal, the company intends to use 2.778 billion RMB from the parent company’s capital reserve to offset the accumulated losses of the past four years, effectively eliminating the company’s historical losses.
An employee from Hanwuji’s Secretary’s Office stated on December 16 during a phone consultation with Economic Observer Network, “The use of capital reserves to cover losses is primarily a financial maneuver to eliminate past losses from a financial perspective. This is a financial treatment and will not affect the company’s actual operations.”
Internet user “Henry Hates Coding” believes that the issue goes beyond just erasing losses and points to long-term problems with the company’s development. He remarked, “Shareholders have been deceived! It may seem satisfying to fill the gap, but the actual losses of the company could be more severe. Masking problems by beautifying financial statements will eventually lead the company into trouble.”
Hanwuji went public in July 2020 and has incurred losses for five consecutive years since then. The net profits attributable to the parent company from 2020 to 2024 were -435 million RMB, -825 million RMB, -1.256 billion RMB, -848 million RMB, and -452 million RMB respectively.
On the same day, Beijing Zhongguancun Technology Development Co., Ltd. (referred to as “Zhongguancun”) also issued a similar announcement, disclosing that the proposal to use capital reserves to cover losses was approved during the shareholders’ meeting. According to the proposal, the company plans to utilize 1.172 billion RMB from capital reserves and 83.01 million RMB from surplus reserves, totaling 1.255 billion RMB, to offset the parent company’s accumulated losses, effectively zeroing out the losses as of December 31, 2024.
According to First Financial, by early December 2025, more than 30 listed companies have revealed plans to use capital reserves to cover losses, totaling over 30 billion RMB. Companies such as Baiva Electric, Guanjie Technology, and Guoxin Securities have all proposed covering losses exceeding 4 billion RMB.
“Using capital reserves to cover losses” refers to the financial practice of utilizing specific portions of the capital reserve to offset accumulated losses, aiming to optimize the structure of financial statements and create conditions for future financing or dividends.
Capital Reserves refer to the portion of capital invested by shareholders in excess of the face value of the shares and the gains directly included in the equity of owners, such as asset revaluation surpluses and donations, forming special reserves that do not originate from profits.
Economic Observer Network reported that Hu, a wealth advisor at a securities brokerage in Shenzhen, stated that after Hanwuji’s announcement, many clients sought consultation on the matter. The response given was to “temporarily stay away,” as such financial maneuvers often result in distorted financial statements, and the investment market is most wary of uncertainty.
“Hanwuji has just completed a private placement and now plans to use the capital reserve to cover losses, which may raise suspicions in the market.”
An investment expert analyzed that the core reasons for these companies’ decision to cover losses can be categorized into three aspects: first, to restore dividend eligibility; second, to enhance financial indicators to meet the stringent requirements of refinancing and bank credit; and third, to clear historical operational burdens, paving the way for future business transformations.
Mr. Zhang, a professional investor, expressed that high growth in tech companies necessitates significant investment, particularly for chip companies like Hanwuji, which are now entering a period of rapid growth and require substantial funds for research and expansion. If they start preparing for cash dividends now, it may weaken their long-term competitiveness.
The new Corporate Law implemented by the Chinese Communist Party on July 1, 2024, has lifted the previous prohibition on using capital reserves to offset company losses.
According to the notice issued by the Ministry of Finance in June this year regarding financial handling issues following the implementation of the Company Law and Foreign Investment Law, a series of financial norms have been established based on the permission to use capital reserves to offset losses, covering the scope, timing, basis, and procedures for offsetting losses.
Accountant Lou Xiaoyun stated, “The Ministry of Finance’s notice has opened the window for listed companies to use capital reserves to cover losses.” The number of listed companies intending to use capital reserves to cover losses has indeed seen a noticeable increase recently.
Blogger “Meeting with Boss Sheep” analyzed that Hanwuji’s actions are equivalent to removing shackles on the financing path, paving the way for potential future fundraising. According to A-share rules, if a company has a substantial amount of unabsorbed losses on its books and still wants to issue new shares or convertible bonds, it will be quite challenging.