19.
Quantitative
and Qualitative Disclosure about Market Risks
| A. |
Credit
risk |
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|
| |
The
Company’s deposits are with banks located in the PRC. They do not carry federal deposit insurance and may be subject to loss
if the banks become insolvent. |
| |
|
| |
Accounts receivable are
typically unsecured and are derived from revenues earned from customers in the PRC. The credit risk with respect to account receivables
is mitigated by credit control policies we carry out with respect to our customers and our ongoing monitoring process of outstanding
balances. |
| |
|
| B. |
Economic and political
risks |
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|
| |
The Company’s operations
are conducted in the PRC. Accordingly, the Company’s business, financial condition, and results of operations may be influenced
by changes in the political, economic, and legal environments in the PRC. |
| |
|
| |
The Company’s operations
in the PRC are subject to special considerations and significant risks not typically associated with companies in North America and
Western Europe. These include risks associated with, among others, the political, economic and legal environment and foreign currency
exchange. The Company’s results may be adversely affected by changes in the political and social conditions in the PRC, and
by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion, remittances
abroad, and rates and methods of taxation, among other things. |
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|
| C. |
Interest risk |
| |
|
| |
The Company is subject
to interest rate risk when long term loans become due and require refinancing. |
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|
| D. |
Sensitivity analysis |
| |
|
| |
The long-term loans are
free of interest for the first 48 months however if interest were to charge at an annual rate of 3%, interest expense would be
$652,362 per year. The Company adopts 3% as an annual interest rate based on the China LPR announced on May 20, 2025 for one-year
loans. If interest rate increases or decreases by 10%, it could lead to an increase or decrease in interest expense of $65,236 per
year. |
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