of resources. Although the Chinese government has implemented measures emphasizing the utilization of market forces for economic reform, the reduction of state ownership of productive assets, and
the establishment of improved corporate governance in business enterprises, a substantial portion of productive assets in China is still owned by the government. In addition, the Chinese government continues to play a significant role in regulating
industry development. The Chinese government also exercises significant control over Chinas economic growth through allocating resources, controlling payment of foreign currency-denominated obligations, setting monetary policy, and providing
preferential treatment to particular industries or companies.
Growth of Chinas economy has been uneven, both
geographically and among various sectors of the economy, and the growth of the Chinese economy has slowed down since 2012. Some of the government measures may benefit the overall Chinese economy, but may have a negative effect on us. For example,
our financial condition and results of operations may be adversely affected by government control over capital investments or changes in tax regulations. Any stimulus measures designed to boost the Chinese economy may contribute to higher inflation,
which could adversely affect our results of operations and financial condition. For example, certain operating costs and expenses, such as employee compensation and office operating expenses, may increase as a result of higher inflation.
Additionally, because a substantial portion of our assets consists of cash and cash equivalents and short-term investments, high inflation could significantly reduce the value and purchasing power of these assets.
Uncertainties with respect to the PRC legal system could adversely affect us.
We conduct our business primarily through our subsidiaries and consolidated affiliated entities in China. Our operations in
China are governed by PRC laws and regulations. Our subsidiaries are generally subject to laws and regulations applicable to foreign investments in China. The PRC legal system is based on written statutes. Prior court decisions may be cited for
reference but have limited precedential value.
PRC laws and regulations have significantly enhanced the protections
afforded to various forms of foreign investments in China for the past decades. However, China has not developed a fully integrated legal system and recently enacted laws and regulations may not sufficiently cover all aspects of economic activities
in China. In particular, because these laws and regulations are relatively new, and because of the limited volume of published decisions and their nonbinding nature, the interpretation and enforcement of these laws and regulations involve
Furthermore, the PRC legal system is based in part on government policies and internal rules, some of
which are not published on a timely basis or at all. As a result, we may not be aware of our potential violation of these policies and rules. In addition, any litigation in China may be protracted and result in substantial costs and diversion of
resources and management attention.
We may be adversely affected by the complexity, uncertainties and changes in PRC regulation of
internet and related business and companies.
The PRC government regulates the internet and related industry
extensively, including foreign ownership of, and the licensing and permit requirements pertaining to, companies in the internet industry. These internet-related laws and regulations are relatively new and evolving, and their interpretation and
enforcement involve significant uncertainty. As a result, under certain circumstances it may be difficult to determine what actions or omissions may be deemed to be violations of applicable laws and regulations. Issues, risks and uncertainties
relating to PRC government regulation of the internet industry include, but are not limited to, the following:
We only have contractual control over our websites. We do not own the websites due to the restriction of
foreign investment in businesses providing value-added telecommunications services in China, including online information services.
The licensing requirements relating to the internet business in China are uncertain and evolving. This means
that permits, licenses or operations at some of our PRC subsidiaries and consolidated affiliated