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X Financial

X FinancialXYF決算レポート

NYSE · Internet industry

X Corp. is an American technology company headquartered in Bastrop, Texas. Established by Elon Musk in 2023 as the successor to Twitter, Inc., it is a wholly owned subsidiary of xAI since March 28, 2025, which is itself a subsidiary of SpaceX. The company owns the social networking service X, and has announced plans to use it as a base for other offerings, including the incorporation of xAI's Grok and Aurora models. They also own the trademarks of services Vine, Periscope, and X.com.

What changed in X Financial's 20-F — 2022 vs 2023

Top changes in X Financial's 2023 20-F

1080 paragraphs added · 1187 removed · 818 edited across 5 sections

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

418 edited+127 added−99 removed388 unchanged
The interests of these shareholders in their individual capacities as shareholders of our consolidated VIEs may differ from the interests of our company as a whole, as what is in the best interests of our consolidated VIEs, including matters such as whether to distribute dividends or to make other distributions to fund our offshore requirement, may not be in the best interests of our company.
The interests of these shareholders in their individual capacities as shareholders of our consolidated VIEs may differ from the interests of the Company as a whole, as what is in the best interests of our consolidated VIEs, including matters such as whether to distribute dividends or to make other distributions to fund our offshore requirement, may not be in the best interests of the Company.
There can be no assurance that when conflicts of interest arise, any or all of these individuals or entities will act in the best interests of our company or that those conflicts of interest will be resolved in our favor.
There can be no assurance that when conflicts of interest arise, any or all of these individuals or entities will act in the best interests of the Company or that those conflicts of interest will be resolved in our favor.
As a result, he will have the ability to control or exert significant influence over important corporate matters and investors may be prevented from influencing important corporate matters involving our company that require approval of shareholders, including: ● the composition of our board of directors and, through the voting of the board of directors, any determinations with respect to our operations, business direction and policies, including the appointment and removal of officers; ● any determinations with respect to mergers or other business combinations; ● our disposition of all or substantially all of our assets; and ● any change in control.
As a result, he will have the ability to control or exert significant influence over important corporate matters and investors may be prevented from influencing important corporate matters involving the Company that require approval of shareholders, including: ● the composition of our board of directors and, through the voting of the board of directors, any determinations with respect to our operations, business direction and policies, including the appointment and removal of officers; ● any determinations with respect to mergers or other business combinations; ● our disposition of all or substantially all of our assets; and ● any change in control.
Furthermore, this concentration of ownership may also discourage, delay or prevent a change in control of our company, which could deprive our shareholders of an opportunity to receive a premium for their shares as part of a sale of our company and reducing the price of the ADSs.
Furthermore, this concentration of ownership may also discourage, delay or prevent a change in control of the Company, which could deprive our shareholders of an opportunity to receive a premium for their shares as part of a sale of the Company and reducing the price of the ADSs.
We have adopted the second amended and restated memorandum and articles of association which became effective immediately prior to the completion of our initial public offering that contain provisions to limit the ability of others to acquire control of our company or cause us to engage in change-of-control transactions.
We have adopted the second amended and restated memorandum and articles of association which became effective immediately prior to the completion of our initial public offering that contain provisions to limit the ability of others to acquire control of the Company or cause us to engage in change-of-control transactions.
These provisions could have the effect of depriving our shareholders of an opportunity to sell their shares at a premium over prevailing market prices by discouraging third parties from seeking to obtain control of our company in a tender offer or similar transaction.
These provisions could have the effect of depriving our shareholders of an opportunity to sell their shares at a premium over prevailing market prices by discouraging third parties from seeking to obtain control of the Company in a tender offer or similar transaction.
In addition, our amended and restated memorandum and articles of association contain other provisions that could limit the ability of third parties to acquire control of our company or cause us to engage in a transaction resulting in a change of control.
In addition, our amended and restated memorandum and articles of association contain other provisions that could limit the ability of third parties to acquire control of the Company or cause us to engage in a transaction resulting in a change of control.
On February 24, 2023, the CSRC, Ministry of Finance of the PRC, National Administration of State Secrets Protection and National Archives Administration of China promulgated the Provisions on Strengthening Confidentiality and Archives Administration of Overseas Securities Offering and Listing by Domestic Companies, or the Archives Rules, which took effect on March 31, 2023.
On February 24, 2023, the CSRC, Ministry of Finance of the PRC, National Administration of State Secrets Protection and National Archives Administration of China promulgated the Provisions on Strengthening Confidentiality and Archives Administration of Overseas Securities Offering and Listing by Domestic Companies, or the Archives Rules, which took effect on March 31, 2023.
Such domestic companies shall not leak any state secret and working secret of government agencies, or harm national security and public interest.
Such domestic companies shall not leak any state secret and working secret of government agencies, or harm national security and public interest.
Our registered office in the Cayman Islands is located at the offices of Maples Corporate Services Limited at PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands. We maintain a website at http://ir.xiaoyinggroup.com/ that contains information about our Company, but that information is not part of this report or incorporated by reference herein. 4.B.
Our registered office in the Cayman Islands is located at the offices of Maples Corporate Services Limited at PO Box 309, Ugland House, Grand Cayman, KY1 - 1104, Cayman Islands. We maintain a website at http://ir.xiaoyinggroup.com/ that contains information about our company group, but that information is not part of this report or incorporated by reference herein. 4.B.
Where a PRC domestic company fails to fulfill the filing procedure or conceals any material fact or falsifies any major content in its filing documents, such PRC domestic company may be subject to administrative penalties such as order to rectify, warnings and fines, and its controlling shareholders, actual controllers, the person directly in charge and other directly liable persons may also be subject to administrative penalties such as warnings and fines.In addition, pursuant to the Trial Measures, an overseas offering and listing of the securities of a PRC domestic company is prohibited under any of the following circumstances, if (i) such securities offering and listing is explicitly prohibited by provisions in laws, administrative regulations and relevant state rules; (ii) the intended securities offering and listing may endanger national security as reviewed and determined by competent authorities under the State Council in accordance with law; (iii) the PRC domestic companies intending to make the securities offering and listing, or its controlling shareholder(s) and the actual controller, have committed crimes such as corruption, bribery, embezzlement, misappropriation of property or undermining the order of the socialist market economy during the latest three years; (iv) the PRC domestic companies intending to make the securities offering and listing is currently under investigations for suspicion of criminal offenses or major violations of laws and regulations, and no clear conclusion has yet been made thereof; or (v) there are material ownership disputes over equity interests held by the PRC domestic companies’ controlling shareholder(s) or by other shareholder(s) that are controlled by the controlling shareholder(s) and/or actual controller.
Where a Chinese Mainland domestic company fails to fulfill the filing procedure or conceals any material fact or falsifies any major content in its filing documents, such Chinese Mainland domestic company may be subject to administrative penalties such as order to rectify, warnings and fines, and its controlling shareholders, actual controllers, the person directly in charge and other directly liable persons may also be subject to administrative penalties such as warnings and fines.In addition, pursuant to the Trial Measures, an overseas offering and listing of the securities of a Chinese Mainland domestic company is prohibited under any of the following circumstances, if (i) such securities offering and listing is explicitly prohibited by provisions in laws, administrative regulations and relevant state rules; (ii) the intended securities offering and listing may endanger national security as reviewed and determined by competent authorities under the State Council in accordance with law; (iii) the Chinese Mainland domestic companies intending to make the securities offering and listing, or its controlling shareholder(s) and the actual controller, have committed crimes such as corruption, bribery, embezzlement, misappropriation of property or undermining the order of the socialist market economy during the latest three years; (iv) the Chinese Mainland domestic companies intending to make the securities offering and listing is currently under investigations for suspicion of criminal offenses or major violations of laws and regulations, and no clear conclusion has yet been made thereof; or (v) there are material ownership disputes over equity interests held by the Chinese Mainland domestic companies’ controlling shareholder(s) or by other shareholder(s) that are controlled by the controlling shareholder(s) and/or actual controller.
Operating Results—Critical Accounting Policies, Judgments and Estimates, Consolidated Trusts, Consolidated Partnerships”). The relationships between, on the one hand, each of Beijing Ying Zhong Tong, Shenzhen Xintang, and Shenzhen Xiaoying, and on the other, Beijing WFOE as illustrated in this diagram are governed by contractual arrangements and do not constitute equity ownership.
Operating Results—Critical Accounting Policies, Judgments and Estimates, Consolidated Trusts, Consolidated Partnerships”). The relationships between, on the one hand, each of Beijing Ying Zhong Tong (VIE), Shenzhen Xintang (VIE), and Shenzhen Xiaoying (VIE), and on the other, Beijing WFOE as illustrated in this diagram are governed by contractual arrangements and do not constitute equity ownership.
Pursuant to the Ninth Amendment to the Criminal Law issued by the SCNPC in August 2015, which became effective in November 2015, any Internet service provider that fails to fulfill the obligations related to Internet information security administration as required by applicable laws and refuses to rectify upon orders is subject to criminal penalty for the result of (i) any dissemination of illegal information in large scale; (ii) any severe effect due to the leakage of the client’s information; (iii) any serious loss of criminal evidence; or (iv) other severe situation, and any individual or entity that (i) sells or provides personal information to others in a way violating the applicable law, or (ii) steals or illegally obtain any personal information is subject to criminal penalty in severe situation. 94 Table of Contents Pursuant to the PRC Civil Code, the personal information of a natural person shall be protected by the law.
Pursuant to the Ninth Amendment to the Criminal Law issued by the SCNPC in August 2015, which became effective in November 2015, any Internet service provider that fails to fulfill the obligations related to Internet information security administration as required by applicable laws and refuses to rectify upon orders is subject to criminal penalty for the result of (i) any dissemination of illegal information in large scale; (ii) any severe effect due to the leakage of the client’s information; (iii) any serious loss of criminal evidence; or (iv) other severe situation, and any individual or entity that (i) sells or provides personal information to others in a way violating the applicable law, or (ii) steals or illegally obtain any personal information is subject to criminal penalty in severe situation. 93 Table of Contents Pursuant to the PRC Civil Code, the personal information of a natural person shall be protected by the law.
In December 2016, Shenzhen Xiaoying acquired all of the equity interest in Shenzhen Ying Zhong Tong. In December 2017, we underwent a restructuring in contemplation of our initial public offering. After such restructuring, the shareholders of Shenzhen Xiaoying were changed to Mr. Yue (Justin) Tang, entities controlled by Mr. Yue (Justin) Tang and Mr. Baoguo Zhu.
In December 2016, Shenzhen Xiaoying (VIE) acquired all of the equity interest in Shenzhen Ying Zhong Tong (VIE). In December 2017, we underwent a restructuring in contemplation of our initial public offering. After such restructuring, the shareholders of Shenzhen Xiaoying (VIE) were changed to Mr. Yue (Justin) Tang, entities controlled by Mr. Yue (Justin) Tang and Mr. Baoguo Zhu.
With the applicant’s authorization, the PRC identity card will be automatically captured and recognized by our authentication module through Optical Character Recognition, or OCR technology. Applicants are also required to do specific poses facing the front camera of their phones to complete automatic biometric recognition.
With the applicant’s authorization, the identity card will be automatically captured and recognized by our authentication module through Optical Character Recognition, or OCR technology. Applicants are also required to do specific poses facing the front camera of their phones to complete automatic biometric recognition.
Furthermore, Measures for Cybersecurity Review, which became effective on June 1, 2020, as amended on December 28, 2021, and became effective on February 15, 2022, set forth the cybersecurity review mechanism for critical information infrastructure operators, and provide that (i) critical information infrastructure operators who intend to purchase internet products and services that affect or may affect national security shall be subject to a cybersecurity review; (ii) online platform operators who are engaged in data processing are also subject to the regulatory scope; (iii) the CSRC is included as one of the regulatory authorities for purposes of jointly establishing the state cybersecurity review working mechanism; (iv) the online platform operators holding more than one million users/users’ individual information and seeking a listing outside China shall file for cybersecurity review; (v) the risks of core data, material data or large amounts of personal information being stolen, leaked, destroyed, damaged, illegally used or illegally transmitted to overseas parties and the risks of critical information infrastructure, core data, material data or large amounts of personal information being influenced, controlled or used maliciously shall be collectively taken into consideration during the cybersecurity review process.
Furthermore, Measures for Cybersecurity Review, which became effective on June 1, 2020, as amended on December 28, 2021, and became effective on February 15, 2022, set forth the cybersecurity review mechanism for critical information infrastructure operators, and provide that (i) critical information infrastructure operators who intend to purchase internet products and services that affect or may affect national security shall be subject to a cybersecurity review; (ii) online platform operators who are engaged in data processing are also subject to the regulatory scope; (iii) the CSRC is included as one of the regulatory authorities for purposes of jointly establishing the state cybersecurity review working mechanism; (iv) the online platform operators holding more than one million users/users’ individual information and seeking a listing outside Chinese Mainland shall file for cybersecurity review; (v) the risks of core data, material data or large amounts of personal information being stolen, leaked, destroyed, damaged, illegally used or illegally transmitted to overseas parties and the risks of critical information infrastructure, core data, material data or large amounts of personal information being influenced, controlled or used maliciously shall be collectively taken into consideration during the cybersecurity review process.
If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, we could lose visibility in the financial markets, which, in turn, could cause the market price or trading volume for the ADSs to decline.
If one or more of these analysts cease coverage of the Company or fail to publish reports on us regularly, we could lose visibility in the financial markets, which, in turn, could cause the market price or trading volume for the ADSs to decline.
In December 2016, Xi’an Bailu Enterprise Management Co., Ltd., or Xi’an Bailu, incorporated Shenzhen Xintang Information Consulting Co., Ltd., or Shenzhen Xintang, which used Shenzhen Tangren Financing Guarantee Co., Ltd as its name at that time. Xi’an Bailu, which held 100% equity interest in Shenzhen Xintang, is ultimately controlled by Mr.
In December 2016, Xi’an Bailu Enterprise Management Co., Ltd., or Xi’an Bailu, incorporated Shenzhen Xintang Information Consulting Co., Ltd., or Shenzhen Xintang (VIE), which used Shenzhen Tangren Financing Guarantee Co., Ltd as its name at that time. Xi’an Bailu, which held 100% equity interest in Shenzhen Xintang (VIE), is ultimately controlled by Mr.
We work with various financial institutional cooperators, such as insurance company and financing guarantee companies to provide insurance or guarantee covering loans funded by institutional funding partners, which enhances the funding partners’ confidence and enables us to obtain funding sources at favorable terms.
We work with various financial institutional cooperators, such as insurance companies and financing guarantee companies to provide insurance or guarantee covering loans funded by institutional funding partners, which enhances the funding partners’ confidence and enables us to obtain funding sources at favorable terms.
Since May 2022, market volatility in the prices of digital assets has been elevated due to a variety of factors, including, but not limited to, the macroeconomic environment (high inflation and rising interest rates) as well as the ”crypto credit crisis” brought on by the collapse and bankruptcy of a small number of key players in the sector (cryptocurrency Luna collapse, hedge fund Three Arrows Capital default on loans and filing for bankruptcy, crypto-lending platform Celsius freezing all withdraws, cryptocurrency lender Voyager Digital filing for bankruptcy, Crypto exchange FTX filing for bankruptcy among others).
In 2022, market volatility in the prices of digital assets has been elevated due to a variety of factors, including, but not limited to, the macroeconomic environment (high inflation and rising interest rates) as well as the ”crypto credit crisis” brought on by the collapse and bankruptcy of a small number of key players in the sector (cryptocurrency Luna collapse, hedge fund Three Arrows Capital default on loans and filing for bankruptcy, crypto-lending platform Celsius freezing all withdraws, cryptocurrency lender Voyager Digital filing for bankruptcy, Crypto exchange FTX filing for bankruptcy among others).
The following diagram illustrates a simplified transaction process of Xiaoying Card Loan: Stage 1: Application Applicants of Xiaoying Card Loan must first register a user account by providing requested personal details, including mobile phone number and PRC identity card information.
The following diagram illustrates a simplified transaction process of Xiaoying Card Loan: Stage 1: Application Applicants of Xiaoying Card Loan must first register a user account by providing requested personal details, including mobile phone number and identity card information.
Moreover, an overseas offering and listing is prohibited under circumstances if (i) it is prohibited by PRC laws, (ii) it may endanger national security as reviewed and determined by competent PRC authorities under the State Council in accordance with law, (iii) the PRC domestic companies intending to make the securities offering and listing, or its controlling shareholder(s) and the actual controller, have committed corruption, bribery, embezzlement, misappropriation of property or undermining the order of the socialist market economy during the latest three years, (iv) the PRC domestic companies intending to make the securities offering and listing is currently under investigations for suspicion of criminal offenses or major violations of laws and regulations, and no clear conclusion has yet been made thereof, (v) it has material ownership disputes over equity interests held by the PRC domestic companies’ controlling shareholder(s) or by other shareholder(s) that are controlled by the controlling shareholder(s) and/or actual controller.
Moreover, an overseas offering and listing is prohibited under circumstances if (i) it is prohibited by Chinese Mainland laws, (ii) it may endanger national security as reviewed and determined by competent Chinese Mainland authorities under the State Council in accordance with law, (iii) the Chinese Mainland domestic companies intending to make the securities offering and listing, or its controlling shareholder(s) and the actual controller, have committed corruption, bribery, embezzlement, misappropriation of property or undermining the order of the socialist market economy during the latest three years, (iv) the Chinese Mainland domestic companies intending to make the securities offering and listing is currently under investigations for suspicion of criminal offenses or major violations of laws and regulations, and no clear conclusion has yet been made thereof, (v) it has material ownership disputes over equity interests held by the Chinese Mainland domestic companies’ controlling shareholder(s) or by other shareholder(s) that are controlled by the controlling shareholder(s) and/or actual controller.
Pursuant to the Notice of the State Administration of Taxation on Negotiated Reduction of Dividends and Interest Rates , issued on January 29, 2008 and supplemented and revised on February 29, 2008, and the Arrangement between Mainland China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and Prevention of Fiscal Evasion with Respect to Taxes on Income , which became effective on December 8, 2006 and applicable to income derived in any year of assessment commencing on or after April 1, 2007 in Hong Kong and in any year commencing on or after January 1, 2007 in the PRC, such withholding tax rate may be lowered to 5% if a Hong Kong enterprise is deemed the beneficial owner of any dividend paid by a PRC subsidiary by PRC tax authorities and holds at least 25% of the equity interest in that particular PRC subsidiary at all times within the 12-month period immediately prior to the distribution of the dividends.
Pursuant to the Notice of the State Administration of Taxation on Negotiated Reduction of Dividends and Interest Rates , issued on January 29, 2008 and supplemented and revised on February 29, 2008, and the Arrangement between Chinese Mainland and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and Prevention of Fiscal Evasion with Respect to Taxes on Income , which became effective on December 8, 2006 and applicable to income derived in any year of assessment commencing on or after April 1, 2007 in Hong Kong and in any year commencing on or after January 1, 2007 in the Chinese Mainland, such withholding tax rate may be lowered to 5% if a Hong Kong enterprise is deemed the beneficial owner of any dividend paid by a Chinese Mainland subsidiary by Chinese Mainland tax authorities and holds at least 25% of the equity interest in that particular Chinese Mainland subsidiary at all times within the 12 - month period immediately prior to the distribution of the dividends.
Regulations Relating to Overseas Listing On July 6, 2021, the General Office of the Communist Party of China Central Committee and the General Office of the State Council jointly issued a document to crack down on illegal activities in the securities market and promote the high-quality development of the capital market, which, among other things, requires the relevant governmental authorities to strengthen cross-border oversight of law-enforcement and judicial cooperation, to enhance supervision over China-based companies listed overseas, and to establish and improve the system of extraterritorial application of the PRC securities laws. 102 Table of Contents On February 17, 2023, the CSRC promulgated the Trial Administrative Measures of the Overseas Securities Offering and Listing by Domestic Companies, or the Trial Measures, and five supporting guidelines, together with five supporting guidelines, which took effect on March 31, 2023.
Regulations Relating to Overseas Listing On July 6, 2021, the General Office of the Communist Party of China Central Committee and the General Office of the State Council jointly issued a document to crack down on illegal activities in the securities market and promote the high-quality development of the capital market, which, among other things, requires the relevant governmental authorities to strengthen cross-border oversight of law-enforcement and judicial cooperation, to enhance supervision over China-based companies listed overseas, and to establish and improve the system of extraterritorial application of the Chinese Mainland securities laws. 102 Table of Contents On February 17, 2023, the CSRC promulgated the Trial Administrative Measures of the Overseas Securities Offering and Listing by Domestic Companies, or the Trial Measures, and five supporting guidelines, together with five supporting guidelines, which took effect on March 31, 2023.
If the PCAOB determines in the future that it no longer has full access to inspect and investigate completely accounting firms in mainland China and Hong Kong and we use an accounting firm headquartered in one of these jurisdictions to issue an audit report on our financial statements filed with the SEC, we would be identified as a Commission-Identified Issuer following the filing of the annual report on Form 20-F for the relevant fiscal year.
If the PCAOB determines in the future that it no longer has full access to inspect and investigate completely accounting firms in Chinese Mainland and Hong Kong and we use an accounting firm headquartered in one of these jurisdictions to issue an audit report on our financial statements filed with the SEC, we would be identified as a Commission-Identified Issuer following the filing of the annual report on Form 20-F for the relevant fiscal year.
We provide user service from 9:00 a.m. to 6:00 p.m. every day through our user service hotline, 24/7 artificial intelligence customer service and human customer service from 9:00 a.m. to 7:00 p.m. every day through our website, mobile applications and WeChat public account.
We provide user service from 9:00 a.m. to 9:00 p.m. every day through our user service hotline, 24/7 artificial intelligence customer service and human customer service from 9:00 a.m. to 9:00 p.m. every day through our website, mobile applications and WeChat public account.
Regulations Relating to Loans between Individuals On May 28, 2020, the National People’s Congress approved the PRC Civil Code, which came into effect on January 1, 2021 and repealed the PRC Contract Law and the General Principles of the Civil Law of the PRC .The PRC Civil Code confirms the validity of loan agreement between individuals and provides that a loan agreement becomes effective when an individual lender provides loan to an individual borrower provided that the interest rates charged under the loan agreement do not violate the applicable provisions of the PRC laws and regulations.
Regulations Relating to Loans between Individuals On May 28, 2020, the National People’s Congress approved the PRC Civil Code, which came into effect on January 1, 2021 and repealed the PRC Contract Law and the General Principles of the Civil Law of the PRC .The PRC Civil Code confirms the validity of loan agreement between individuals and provides that a loan agreement becomes effective when an individual lender provides loan to an individual borrower provided that the interest rates charged under the loan agreement do not violate the applicable provisions of the Chinese Mainland laws and regulations.
Risk Factors—Risks Relating to Doing Business in China—Any failure to comply with PRC regulations regarding employee share incentive plans may subject the PRC plan participants or us to fines and other legal or administrative sanctions. ” In addition, the State Administration for Taxation has issued circulars concerning employee share options, under which our employees working in the PRC who exercise share options will be subject to PRC individual income tax.
Risk Factors—Risks Relating to Doing Business in China—Any failure to comply with Chinese Mainland regulations regarding employee share incentive plans may subject the Chinese Mainland plan participants or us to fines and other legal or administrative sanctions. ” In addition, the State Administration for Taxation has issued circulars concerning employee share options, under which our employees working in the PRC who exercise share options will be subject to PRC individual income tax.
As a result, we may be required to expend valuable resources to comply with Bulletin 37 and Bulletin 7 or to request the relevant transferors from whom we purchase taxable assets to comply with these circulars, or to establish that our company should not be taxed under these circulars, which may have a material adverse effect on our financial condition and results of operations. 54 Table of Contents We are subject to restrictions on currency exchange.
As a result, we may be required to expend valuable resources to comply with Bulletin 37 and Bulletin 7 or to request the relevant transferors from whom we purchase taxable assets to comply with these circulars, or to establish that the Company should not be taxed under these circulars, which may have a material adverse effect on our financial condition and results of operations. 58 Table of Contents We are subject to restrictions on currency exchange.
Because we qualify as a foreign private issuer under the Exchange Act, we are exempt from certain provisions of the securities rules and regulations in the United States that are applicable to U.S. domestic issuers, including: ● the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q or current reports on Form 8-K; 62 Table of Contents ● the sections of the Exchange Act regulating the solicitation of proxies, consents, or authorizations in respect of a security registered under the Exchange Act; ● the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades made in a short period of time; and ● the selective disclosure rules by issuers of material nonpublic information under Regulation FD.
Because we qualify as a foreign private issuer under the Exchange Act, we are exempt from certain provisions of the securities rules and regulations in the United States that are applicable to U.S. domestic issuers, including: ● the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q or current reports on Form 8-K; ● the sections of the Exchange Act regulating the solicitation of proxies, consents, or authorizations in respect of a security registered under the Exchange Act; ● the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades made in a short period of time; and ● the selective disclosure rules by issuers of material nonpublic information under Regulation FD.
In addition, if a claim is successfully made against us, we may be required to pay significant damages, which could have a material adverse effect on our financial condition and results of operations. 64 Table of Contents Risks Relating to Our Investment We make investments using our own capital and do not expect to realize any profits from these investments for a considerable period of time.
In addition, if a claim is successfully made against us, we may be required to pay significant damages, which could have a material adverse effect on our financial condition and results of operations. 67 Table of Contents Risks Relating to Our Investment We make investments using our own capital and do not expect to realize any profits from these investments for a considerable period of time.
History and Development of the Company Shenzhen Ying Zhong Tong Financial Information Service Co., Ltd., or Shenzhen Ying Zhong Tong, was incorporated in March 2014 and controlled by Mr. Yue (Justin) Tang.
History and Development of the Company Shenzhen Ying Zhong Tong Financial Information Service Co., Ltd., or Shenzhen Ying Zhong Tong (VIE), was incorporated in March 2014 and controlled by Mr. Yue (Justin) Tang.
In March 2015, our co-founders, Mr. Yue (Justin) Tang and Mr. Baoguo Zhu, incorporated Beijing Ying Zhong Tong Rongxun Technology Service Co., Ltd, or Beijing Ying Zhong Tong, which is controlled by Mr.
In March 2015, our co-founders, Mr. Yue (Justin) Tang and Mr. Baoguo Zhu, incorporated Beijing Ying Zhong Tong Rongxun Technology Service Co., Ltd, or Beijing Ying Zhong Tong (VIE), which is controlled by Mr. Yue (Justin) Tang.
Recent Investment YTZ (HK) Limited , a wholly-owned subsidiary of X Financial, entered into a subscription agreement dated March 2, 2021, for subscribing certain limited partnership interests in Dragonfly Ventures II, L.P., a limited partnership governed under the laws of the Cayman Islands and managed by Dragonfly GP II, LLC, focusing on the blockchain industry investment with its long-term value investment strategy and research-driven process.
Recent Investment YZT (HK) Limited, a wholly-owned subsidiary of X Financial, entered into a subscription agreement dated March 2, 2021, for subscribing certain limited partnership interests in Dragonfly Ventures II, L.P., a limited partnership governed under the laws of the Cayman Islands and managed by Dragonfly GP II, LLC, focusing on the blockchain industry investment with its long-term value investment strategy and research-driven process.
The basic telecommunications services provider who provides public network infrastructure, public data transmission and basic voice communications services shall obtain a Basic Telecommunications Service Operating License, and the value-added service provider who provides telecommunications and information services provided through the public network infrastructure shall obtain a Value-added Telecommunications Service Operating License, or VATS License.
The basic telecommunications services provider who provides public network infrastructure, public data transmission and basic voice communications services shall obtain a Basic Telecommunications Service Operating License, and the value-added service provider who provides telecommunications and information services provided through the public network infrastructure shall obtain a VATS License.
Accordingly, government actions in the future, including any decision not to continue to support recent economic reforms and to return to a more centrally planned economy or regional or local variations in the implementation of economic policies, could have a significant effect on economic conditions in China or particular regions thereof, and could require us to divest ourselves of any interest we then hold in Chinese properties.
Accordingly, government actions in the future, including any decision not to continue to support recent economic reforms and to return to a more centrally planned economy or regional or local variations in the implementation of economic policies, could have a significant effect on economic conditions in Chinese Mainland or particular regions thereof, and could require us to divest ourselves of any interest we then hold in Mainland Chinese properties.
The risk assessment model optimization maintains over 100 models primarily including logistics regression and machine learning models that are employed at different stages for different products. Each model performs the function independently but operates in close synchronization with each other, enabling WinSAFE to effectively analyze a borrower’s value, payment capability and payment attitude to accurately evaluate the borrower’s credit worthiness.
The risk assessment model optimization maintains over 20 models primarily including logistics regression and machine learning models that are employed at different stages for different products. Each model performs the function independently but operates in close synchronization with each other, enabling WinSAFE to effectively analyze a borrower’s value, payment capability and payment attitude to accurately evaluate the borrower’s credit worthiness.
The Trial Measures stipulate that the overseas securities offering and listing of any issuer will be deemed as indirect overseas offering by PRC domestic companies if the following conditions are met: (i) 50% or more of any of the issuer’s operating revenue, total profit, total assets or net assets as documented in its audited consolidated financial statements for the most recent fiscal year is accounted for by PRC domestic companies; and (ii) the main parts of the issuer’s business activities are conducted in mainland China, or its main place(s) of business are located in mainland China, or the majority of senior management staff in charge of its business operations and management are PRC citizens or have their usual place(s) of residence located in mainland China.
The Trial Measures stipulate that the overseas securities offering and listing of any issuer will be deemed as indirect overseas offering by Chinese Mainland domestic companies if the following conditions are met: (i) 50% or more of any of the issuer’s operating revenue, total profit, total assets or net assets as documented in its audited consolidated financial statements for the most recent fiscal year is accounted for by Chinese Mainland domestic companies; and (ii) the main parts of the issuer’s business activities are conducted in Chinese Mainland, or its main place(s) of business are located in Chinese Mainland, or the majority of senior management staff in charge of its business operations and management are Chinese Mainland citizens or have their usual place(s) of residence located in Chinese Mainland.
Any actions by Chinese government, including any decision to intervene or influence our operations or to exert control over any offering of securities conducted overseas and/or foreign investment in China-based issuers, may cause us to make material changes to our operation, may limit or completely hinder our ability to offer or continue to offer securities to investors, and may cause the value of such securities to significantly decline or be worthless.
Any actions by Chinese government, including any decision to intervene or influence our operations or to exert control over any offering of securities conducted overseas and/or foreign investment in Chinese Mainland-based issuers, may cause us to make material changes to our operation, may limit or completely hinder our ability to offer or continue to offer securities to investors, and may cause the value of such securities to significantly decline or be worthless.
According to the PRC Foreign Investment Law, “foreign investment” refers to investment activities directly or indirectly conducted by one or more natural persons, business entities, or otherwise organizations of a foreign country (collectively referred to as “foreign investor”) within China, and the investment activities include the following situations: (i) a foreign investor, individually or collectively with other investors, establishes a foreign-invested enterprise within China; (ii) a foreign investor acquires stock shares, equity shares, shares in assets, or other similar rights and interests of an enterprise within China; (iii) a foreign investor, individually or collectively with other investors, invests in a new project within China; and (iv) investments in other means as provided by laws, administrative regulations, or the State Council.
According to the PRC Foreign Investment Law, “foreign investment” refers to investment activities directly or indirectly conducted by one or more natural persons, business entities, or otherwise organizations of a foreign country (collectively referred to as “foreign investor”) within Chinese Mainland, and the investment activities include the following situations: (i) a foreign investor, individually or collectively with other investors, establishes a foreign-invested enterprise within Chinese Mainland; (ii) a foreign investor acquires stock shares, equity shares, shares in assets, or other similar rights and interests of an enterprise within Chinese Mainland; (iii) a foreign investor, individually or collectively with other investors, invests in a new project within Chinese Mainland; and (iv) investments in other means as provided by laws, administrative regulations, or the State Council.
Although the Judicial Interpretation Amendment and the Supreme People’s Court Reply provide that they do not apply to licensed financial institutions including microcredit companies that conduct loan and consumer finance business, there remain uncertainties in the interpretation and implementation of the Judicial Interpretation Amendment, including whether licensed financial institutions may be subject to its jurisdiction under Circular 141 or in certain circumstances, the basis of calculation formula used to determine the interest limit, the scope of inclusion of related fees and insurance premiums, as well as inconsistencies between the standard and level of enforcement by different PRC courts.
Although the Judicial Interpretation Amendment and the Supreme People’s Court Reply provide that they do not apply to licensed financial institutions including microcredit companies that conduct loan and consumer finance business, there remain uncertainties in the interpretation and implementation of the Judicial Interpretation Amendment, including whether licensed financial institutions may be subject to its jurisdiction under Circular 141 or in certain circumstances, the basis of calculation formula used to determine the interest limit, the scope of inclusion of related fees and insurance premiums, as well as inconsistencies between the standard and level of enforcement by different Chinese Mainland courts.
Failure to comply with the registration procedures set forth in SAFE Circular 37 and the subsequent notice, or making misrepresentation on or failure to disclose controllers of the foreign-invested enterprise that is established through round-trip investment, may result in restrictions being imposed on the foreign exchange activities of the relevant foreign-invested enterprise, including payment of dividends and other distributions, such as proceeds from any reduction in capital, share transfer or liquidation, to its offshore parent or affiliate, and the capital inflow from the offshore parent, and may also subject relevant PRC residents or entities to penalties under PRC foreign exchange administration regulations.
Failure to comply with the registration procedures set forth in SAFE Circular 37 and the subsequent notice, or making misrepresentation on or failure to disclose controllers of the foreign-invested enterprise that is established through round-trip investment, may result in restrictions being imposed on the foreign exchange activities of the relevant foreign-invested enterprise, including payment of dividends and other distributions, such as proceeds from any reduction in capital, share transfer or liquidation, to its offshore parent or affiliate, and the capital inflow from the offshore parent, and may also subject relevant Chinese Mainland residents or entities to penalties under Chinese Mainland foreign exchange administration regulations.
Specifically, the overseas securities offering and listing of any issuer will be deemed as indirect overseas offering by PRC domestic companies if the following conditions are met: (i) 50% or more of any of the issuer’s operating revenue, total profit, total assets or net assets as documented in its audited consolidated financial statements for the most recent fiscal year is accounted for by PRC domestic companies; and (ii) the main parts of the issuer’s business activities are conducted in mainland China, or its main place(s) of business are located in mainland China, or the majority of senior management staff in charge of its business operations and management are PRC citizens or have their usual place(s) of residence located in mainland China.
Specifically, the overseas securities offering and listing of any issuer will be deemed as indirect overseas offering by Chinese Mainland domestic companies if the following conditions are met: (i) 50% or more of any of the issuer’s operating revenue, total profit, total assets or net assets as documented in its audited consolidated financial statements for the most recent fiscal year is accounted for by Chinese Mainland domestic companies; and (ii) the main parts of the issuer’s business activities are conducted in Chinese Mainland, or its main place(s) of business are located in Chinese Mainland, or the majority of senior management staff in charge of its business operations and management are Chinese Mainland citizens or have their usual place(s) of residence located in Chinese Mainland.
We have completed the registration of the pledge of equity interests in Beijing Ying Zhong Tong and Shenzhen Xiaoying with the competent administration for market regulation.
We have completed the registration of the pledge of equity interests in Beijing Ying Zhong Tong (VIE) and Shenzhen Xiaoying (VIE) with the competent administration for market regulation.
Risk Factors—Risks Relating to Doing Business in China—PRC regulations relating to investments in offshore companies by PRC residents may subject our PRC-resident beneficial owners or our PRC subsidiary to liability or penalties, limit our ability to inject capital into our PRC subsidiary or limit our PRC subsidiary’s ability to increase their registered capital or distribute profits. ” Regulations Relating to Stock Incentive Plans SAFE promulgated the Notice on Issues Concerning the Foreign Exchange Administration for Domestic Individuals Participating in Stock Incentive Plan of Overseas Publicly Listed Company, or the Stock Incentive Plan Notice, in February 2012, replacing the previous rules issued by SAFE in March 2007.
Risk Factors—Risks Relating to Doing Business in China—Chinese Mainland regulations relating to investments in offshore companies by Chinese Mainland residents may subject our Chinese Mainland-resident beneficial owners or our Chinese Mainland subsidiary to liability or penalties, limit our ability to inject capital into our Chinese Mainland subsidiary or limit our Chinese Mainland subsidiary’s ability to increase their registered capital or distribute profits. ” Regulations Relating to Stock Incentive Plans SAFE promulgated the Notice on Issues Concerning the Foreign Exchange Administration for Domestic Individuals Participating in Stock Incentive Plan of Overseas Publicly Listed Company, or the Stock Incentive Plan Notice, in February 2012, replacing the previous rules issued by SAFE in March 2007.
Currently, through our continuous optimization, WinSAFE is able to process data through the processes from loan application to approval and is able to make decisions within ten minutes for over half of Xiaoying Card Loan, providing instant feedback that the mobile users are in desire of and strengthening our risk control and fully automatic decision-making capability.
Currently, through our continuous optimization, WinSAFE is able to process data through the processes from loan application to approval and is able to make decisions within ten minutes for over 90% of Xiaoying Card Loan, providing instant feedback that the mobile users are in desire of and strengthening our risk control and fully automatic decision-making capability.
SAFE Circular 37 requires PRC residents to register with local branches of the SAFE in connection with their direct establishment or indirect control of an offshore entity, for the purpose of overseas investment and financing, with such PRC residents’ legally owned assets or equity interests in domestic enterprises or offshore assets or interests, referred to in SAFE Circular 37 as a “special purpose vehicle.” SAFE Circular 37 further requires amendment to the registration in the event of any significant changes with respect to the special purpose vehicle, such as increase or decrease of capital contributed by PRC individuals, share transfer or exchange, merger, division or other material event.
SAFE Circular 37 requires Chinese Mainland residents to register with local branches of the SAFE in connection with their direct establishment or indirect control of an offshore entity, for the purpose of overseas investment and financing, with such Chinese Mainland residents’ legally owned assets or equity interests in domestic enterprises or offshore assets or interests, referred to in SAFE Circular 37 as a “special purpose vehicle.” SAFE Circular 37 further requires amendment to the registration in the event of any significant changes with respect to the special purpose vehicle, such as increase or decrease of capital contributed by Chinese Mainland individuals, share transfer or exchange, merger, division or other material event.
For example, we generally experience lower transaction volume during national holidays in China, particularly during the Chinese New Year holiday season in the first quarter of each year. As we facilitate loans to institutional funding partners, such as commercial banks, our business may also be affected by liquidity seasonality in the banking system.
For example, we generally experience lower transaction volume during national holidays in Chinese Mainland, particularly during the Chinese New Year holiday season in the first quarter of each year. As we facilitate loans to institutional funding partners, such as commercial banks, our business may also be affected by liquidity seasonality in the banking system.
YTZ (HK) Limited entered into a subscription agreement dated May 15, 2022, for subscribing US$5 million convertible notes in C Sqaured Ventures, a company governed under the laws of the Cayman Islands. The notes are convertible into class B ordinary shares of C Sqaured Ventures. In 2021, Shenzhen Ying Ai Gou Trading Co., Ltd.
YZT (HK) Limited entered into a subscription agreement dated May 15, 2022, for subscribing US$5 million convertible notes in C Sqaured Ventures, a company governed under the laws of the Cayman Islands. The notes are convertible into class B ordinary shares of C Sqaured Ventures. In 2021, Shenzhen Ying Ai Gou Trading Co., Ltd.
The Standing Committee of the National People’s Congress, or the SCNPC, has enacted the Decisions on Maintaining Internet Security on December 28, 2000 and further amended on August 27, 2009, which may subject violators to criminal punishment in China for any effort to: (i) gain improper entry into a computer or system of strategic importance; (ii) disseminate politically disruptive information; (iii) leak state secrets; (iv) spread false commercial information; or (v) infringe intellectual property rights.
The Standing Committee of the National People’s Congress, or the SCNPC, has enacted the Decisions on Maintaining Internet Security on December 28, 2000 and further amended on August 27, 2009, which may subject violators to criminal punishment in Chinese Mainland for any effort to: (i) gain improper entry into a computer or system of strategic importance; (ii) disseminate politically disruptive information; (iii) leak state secrets; (iv) spread false commercial information; or (v) infringe intellectual property rights.
As the first systematic and comprehensive law specifically for the protection of personal information in the PRC, the Personal Information Protection Law provides, among others, that (i) an individual’s consent shall be obtained to use sensitive personal information, (ii) personal information operators using sensitive personal information shall notify individuals of the necessity of such use and impact on the individual’s rights, and (iii) where it is necessary for personal information to be provided by a personal information processor to a recipient outside the territory of the PRC due to any business need or any other need, a security assessment organized by the national cyberspace authority shall be passed.
As the first systematic and comprehensive law specifically for the protection of personal information in the Chinese Mainland, the Personal Information Protection Law provides, among others, that (i) an individual’s consent shall be obtained to use sensitive personal information, (ii) personal information operators using sensitive personal information shall notify individuals of the necessity of such use and impact on the individual’s rights, and (iii) where it is necessary for personal information to be provided by a personal information processor to a recipient outside the territory of the Chinese Mainland due to any business need or any other need, a security assessment organized by the national cyberspace authority shall be passed.
As the first systematic and comprehensive law specifically for the protection of personal information in the PRC, the Personal Information Protection Law provides, among others, that (i) an individual’s consent shall be obtained to use sensitive personal information, (ii) personal information operators using sensitive personal information shall notify individuals of the necessity of such use and impact on the individual’s rights, and (iii) where it is necessary for personal information to be provided by a personal information processor to a recipient outside the territory of the PRC due to any business need or any other need, a security assessment organized by the national cyberspace authority shall be passed.
As the first systematic and comprehensive law specifically for the protection of personal information in the Chinese Mainland, the Personal Information Protection Law provides, among others, that (i) an individual’s consent shall be obtained to use sensitive personal information, (ii) personal information operators using sensitive personal information shall notify individuals of the necessity of such use and impact on the individual’s rights, and (iii) where it is necessary for personal information to be provided by a personal information processor to a recipient outside the territory of the Chinese Mainland due to any business need or any other need, a security assessment organized by the national cyberspace authority shall be passed.
All of our net income is denominated in Renminbi. The Renminbi is currently convertible under the “current account,” which includes dividends, trade and service-related foreign exchange transactions, but not under the “capital account,” which includes foreign direct investment and loans, including loans we may secure from our onshore subsidiaries or consolidated VIE.
All of our net income is denominated in Renminbi. The Renminbi is currently convertible under the “current account,” which includes dividends, trade and service-related foreign exchange transactions, but not under the “capital account,” which includes foreign direct investment and loans, including loans we may secure from our onshore subsidiaries or consolidated VIEs.
The trading performances of other Chinese companies’ securities after their offerings, including Internet companies, online retail and mobile commerce platforms and consumer finance service providers, may affect the attitudes of investors toward Chinese companies listed in the United States, which consequently may impact the trading performance of the ADSs, regardless of our actual operating performance.
The trading performances of other Chinese companies’ securities after their offerings, including Internet companies, online retail and mobile commerce platforms and consumer finance service providers, may affect the attitudes of investors towards Chinese companies listed in the United States, which consequently may impact the trading performance of the ADSs, regardless of our actual operating performance.
YTZ (HK) Limited entered into a subscription agreement dated February 23, 2022, and an amended and restated exempted limited partnership agreement dated January 28, 2022, for subscribing certain limited partnership interests in Dragonfly HF (Parallel) L.P., a limited partnership governed under the laws of the Cayman Islands and managed by Dragonfly GP III, LLC.
YZT (HK) Limited entered into a subscription agreement dated February 23, 2022, and an amended and restated exempted limited partnership agreement dated January 28, 2022, for subscribing certain limited partnership interests in Dragonfly HF (Parallel) L.P., a limited partnership governed under the laws of the Cayman Islands and managed by Dragonfly GP III, LLC.
According to the 2018 Institutional Reform Plan, the anti-monopoly functions performed by the NDRC, the SAIC, and the MOFCOM were consolidated into the SAMR, which may place a profound impact on the PRC anti-monopoly law enforcement practice. 103 Table of Contents In addition, on February 3, 2011, the General Office of the State Council promulgated a Notice on Establishing the Security Review System for Mergers and Acquisitions of Domestic Enterprises by Foreign Investors , or Circular 6, which officially established a security review system for mergers and acquisitions of domestic enterprises by foreign investors.
According to the 2018 Institutional Reform Plan, the anti-monopoly functions performed by the NDRC, the SAIC, and the MOFCOM were consolidated into the SAMR, which may place a profound impact on the Chinese Mainland anti-monopoly law enforcement practice. 103 Table of Contents In addition, on February 3, 2011, the General Office of the State Council promulgated a Notice on Establishing the Security Review System for Mergers and Acquisitions of Domestic Enterprises by Foreign Investors , or Circular 6, which officially established a security review system for mergers and acquisitions of domestic enterprises by foreign investors.
Risk Factors—Risks Relating to Our Business and Industry—Any failure by us, institutional funding partners or payment service providers to comply with applicable anti-money laundering and anti-terrorist financing laws and regulations could damage our reputation, expose us to significant penalties, and decrease our revenues and profitability. ” Regulations Relating to Illegal Fund-Raising Raising funds by entities or individuals from the general public must be conducted in strict compliance with applicable PRC laws and regulations to avoid administrative and criminal liabilities.
Risk Factors—Risks Relating to Our Business and Industry—Any failure by us, or institutional funding partners or payment service providers to comply with applicable anti-money laundering and anti-terrorist financing laws and regulations could damage our reputation, expose us to significant penalties, and decrease our revenues and profitability. ” Regulations Relating to Illegal Fund-Raising Raising funds by entities or individuals from the general public must be conducted in strict compliance with applicable Chinese Mainland laws and regulations to avoid administrative and criminal liabilities.
YTZ (HK) Limited entered into a subscription agreement dated January 28, 2022, and an amended and restated exempted limited partnership agreement dated January 28, 2022, for subscribing certain limited partnership interests in Dragonfly Ventrues III Feeder, L.P., a limited partnership governed under the laws of the Cayman Islands and managed by Dragonfly GP III, LLC.
YZT (HK) Limited entered into a subscription agreement dated January 28, 2022, and an amended and restated exempted limited partnership agreement dated January 28, 2022, for subscribing certain limited partnership interests in Dragonfly Ventrues III Feeder, L.P., a limited partnership governed under the laws of the Cayman Islands and managed by Dragonfly GP III, LLC.
Furthermore, a PRC domestic company that plans to, either directly or through its overseas listed entity, publicly disclose or provide to relevant indivuduals or entities including securities companies, seceurities service providers and overseas regulators, any document and materials that contain state secrets or working secrets of government agencies, shall first obtain approval from competent authorities according to law, and file with the secrecy administrative department at the same level.
Furthermore, a Chinese Mainland domestic company that plans to, either directly or through its overseas listed entity, publicly disclose or provide to relevant indivuduals or entities including securities companies, seceurities service providers and overseas regulators, any document and materials that contain state secrets or working secrets of government agencies, shall first obtain approval from competent authorities according to law, and file with the secrecy administrative department at the same level.
On December 15, 2022, the PCAOB removed mainland China and Hong Kong from the list of jurisdictions where it is unable to inspect or investigate completely registered public accounting firms. Each year, the PCAOB will determine whether it can inspect and investigate completely audit firms in mainland China and Hong Kong, among other jurisdictions.
On December 15, 2022, the PCAOB removed Chinese Mainland and Hong Kong from the list of jurisdictions where it is unable to inspect or investigate completely registered public accounting firms. Each year, the PCAOB will determine whether it can inspect and investigate completely audit firms in Chinese Mainland and Hong Kong, among other jurisdictions.
Yue (Justin) Tang and two other individuals who are his business partners, while the capital contribution of Shenzhen Xintang paid by Xi’an Bailu was borrowed from Shenzhen Xiaoying. We control Shenzhen Xintang and receive the economic benefits of Shenzhen Xintang’ business operation through the VIE Agreements entered with Xi’an Bailu.
Yue (Justin) Tang and two other individuals who are his business partners, while the capital contribution of Shenzhen Xintang (VIE) paid by Xi’an Bailu was borrowed from Shenzhen Xiaoying (VIE). We control Shenzhen Xintang (VIE) and receive the economic benefits of Shenzhen Xintang (VIE)’s business operation through the VIE Agreements entered with Xi’an Bailu.
The PRC Copyright Law , adopted in 1990 and most recently revised on June 1, 2021 respectively, with its implementation rules adopted on August 8, 2002 and revised in 2011 and 2013 respectively, and the Regulations for the Protection of Computer Software as promulgated on December 20, 2001 and amended in 2011 and 2013 provide protection for copyright of computer software in the PRC.
The PRC Copyright Law , adopted in 1990 and most recently revised on June 1, 2021 respectively, with its implementation rules adopted on August 8, 2002 and revised in 2011 and 2013 respectively, and the Regulations for the Protection of Computer Software as promulgated on December 20, 2001 and amended in 2011 and 2013 provide protection for copyright of computer software in the Chinese Mainland.
The Wholly Foreign-owned Enterprise Law was replaced by the PRC Foreign Investment Law on January 1, 2020. Under these regulations, foreign investment enterprises in the PRC may distribute dividends only out of their accumulative profits, if any, determined in accordance with PRC accounting standards and regulations.
The Wholly Foreign-owned Enterprise Law was replaced by the PRC Foreign Investment Law on January 1, 2020. Under these regulations, foreign investment enterprises in the Chinese Mainland may distribute dividends only out of their accumulative profits, if any, determined in accordance with PRC accounting standards and regulations.
The Guidelines jointly released by ten PRC regulatory agencies in July 2015, purport, among other things, to require Internet finance service providers to comply with certain anti-money laundering requirements, including the establishment of a user identification program, the monitoring and reporting of suspicious transactions, the preservation of user information and transaction records, and the provision of assistance to the public security department and judicial authority in investigations and proceedings in relation to anti-money laundering matters.
The Guidelines jointly released by ten Chinese Mainland regulatory agencies in July 2015, purport, among other things, to require Internet finance service providers to comply with certain anti-money laundering requirements, including the establishment of a user identification program, the monitoring and reporting of suspicious transactions, the preservation of user information and transaction records, and the provision of assistance to the public security department and judicial authority in investigations and proceedings in relation to anti-money laundering matters.
We may face material and adverse tax consequences if the PRC tax authorities determine that the contractual arrangements among our PRC subsidiaries, our variable interest entities and their shareholders were not entered into on an arm’s length basis in such a way as to result in an impermissible reduction in taxes under applicable PRC laws, regulations and rules, and adjust income of our variable interest entities in the form of a transfer pricing adjustment.
We may face material and adverse tax consequences if the Chinese Mainland tax authorities determine that the contractual arrangements among our Chinese Mainland subsidiaries, our variable interest entities and their shareholders were not entered into on an arm’s length basis in such a way as to result in an impermissible reduction in taxes under applicable Chinese Mainland laws, regulations and rules, and adjust income of our variable interest entities in the form of a transfer pricing adjustment.
When determining whether there is a “reasonable commercial purpose” of the transaction arrangement, features to be taken into consideration include: whether the main value of the equity interest of the relevant offshore enterprise derives from PRC taxable assets; whether the assets of the relevant offshore enterprise mainly consists of direct or indirect investment in China or if its income mainly derives from China; whether the offshore enterprise and its subsidiaries directly or indirectly holding PRC taxable assets have real commercial nature which is evidenced by their actual function and risk exposure; the duration of existence of the business model and organizational structure; the replicability of the transaction by direct transfer of PRC taxable assets; and the tax situation of such indirect transfer and applicable tax treaties or similar arrangements.
When determining whether there is a “reasonable commercial purpose” of the transaction arrangement, features to be taken into consideration include: whether the main value of the equity interest of the relevant offshore enterprise derives from Chinese Mainland taxable assets; whether the assets of the relevant offshore enterprise mainly consists of direct or indirect investment in Chinese Mainland or if its income mainly derives from Chinese Mainland; whether the offshore enterprise and its subsidiaries directly or indirectly holding Chinese Mainland taxable assets have real commercial nature which is evidenced by their actual function and risk exposure; the duration of existence of the business model and organizational structure; the replicability of the transaction by direct transfer of Chinese Mainland taxable assets; and the tax situation of such indirect transfer and applicable tax treaties or similar arrangements.
In respect of an indirect offshore transfer of assets of a PRC establishment, the relevant gain is to be regarded as effectively connected with the PRC establishment and therefore included in its enterprise income tax filing, and would consequently be subject to PRC enterprise income tax at a rate of 25%.
In respect of an indirect offshore transfer of assets of a Chinese Mainland establishment, the relevant gain is to be regarded as effectively connected with the Chinese Mainland establishment and therefore included in its enterprise income tax filing, and would consequently be subject to PRC enterprise income tax at a rate of 25%.
We rely on the shareholders of our consolidated VIEs to comply with PRC laws and regulations, which protect contracts, and to provide that directors and executive officers owe a duty of loyalty to our company and require them to avoid conflicts of interest and not to take advantage of their positions for personal gains, and with the laws of the Cayman Islands, which provide that directors have a duty of care and a duty of loyalty to act honestly in good faith with a view to our best interests.
We rely on the shareholders of our consolidated VIEs to comply with Chinese Mainland laws and regulations, which protect contracts, and to provide that directors and executive officers owe a duty of loyalty to the Company and require them to avoid conflicts of interest and not to take advantage of their positions for personal gains, and with the laws of the Cayman Islands, which provide that directors have a duty of care and a duty of loyalty to act honestly in good faith with a view to our best interests.
Before the institutional reform plan of the State Council approved by the National People’s Congress on March 17, 2018, or the 2018 Institutional Reform Plan, the National Development and Reform Commission, or the NDRC, the SAIC, and the MOFCOM were the three PRC anti-monopoly enforcement authorities and the NDRC and the SAIC, had in recent years strengthened enforcement actions, including levying significant fines, with respect to cartel activity as well as abusive behavior of companies having market dominance.
Before the institutional reform plan of the State Council approved by the National People’s Congress on March 17, 2018, or the 2018 Institutional Reform Plan, the National Development and Reform Commission, or the NDRC, the SAIC, and the MOFCOM were the three Chinese Mainland anti-monopoly enforcement authorities and the NDRC and the SAIC, had in recent years strengthened enforcement actions, including levying significant fines, with respect to cartel activity as well as abusive behavior of companies having market dominance.
The most updated negative list, issued on December 27, 2021 and became effective on January 1, 2022, stipulates that any PRC domestic enterprise engaging in the fields prohibited by the negative list shall obtain the consent of the relevant competent PRC authorities for overseas listing, and the foreign investors shall not participate in the operation and management of such enterprise, and the shareholding percentage of the foreign investors in such enterprise shall be subject to the relevant administrative provisions of PRC domestic securities investment by foreign investors.
The most updated Negative List, issued on December 27, 2021 and became effective on January 1, 2022, stipulates that any Chinese Mainland domestic enterprise engaging in the fields prohibited by the Negative List shall obtain the consent of the relevant competent Chinese Mainland authorities for overseas listing, and the foreign investors shall not participate in the operation and management of such enterprise, and the shareholding percentage of the foreign investors in such enterprise shall be subject to the relevant administrative provisions of Chinese Mainland domestic securities investment by foreign investors.
Since a significant amount of our future net income and cash flow will be denominated in Renminbi, any existing and future restrictions on currency exchange may limit our ability to utilize cash generated in Renminbi to fund our business activities outside of the PRC or pay dividends in foreign currencies to our shareholders, including holders of our ADSs, and may limit our ability to obtain foreign currency through debt or equity financing for our subsidiaries and consolidated VIEs.
Since a significant amount of our future net income and cash flow will be denominated in Renminbi, any existing and future restrictions on currency exchange may limit our ability to utilize cash generated in Renminbi to fund our business activities outside of the Chinese Mainland or pay dividends in foreign currencies to our shareholders, including holders of our ADSs, and may limit our ability to obtain foreign currency through debt or equity financing for our subsidiaries and consolidated VIEs.
Risk Factors—Risks Relating to Our Business and Industry—If we are unable to protect the confidential information of our users and adapt to the relevant regulatory framework regarding protection of such information, our business and operations may be adversely affected. ” 95 Table of Contents Regulations Related to Credit Information On September 27, 2021, the PBOC promulgated the Administrative Measures for Credit Information Services, or the Credit Information Services Measures, which took effect on January 1, 2022.
Risk Factors—Risks Relating to Our Business and Industry—If we are unable to protect the confidential information of our users and adapt to the relevant regulatory framework regarding protection of such information, our business and operations may be adversely affected. ” Regulations Related to Credit Information On September 27, 2021, the PBOC promulgated the Administrative Measures for Credit Information Services, or the Credit Information Services Measures, which took effect on January 1, 2022.
In addition, market conditions and regulatory environment can also delay our exit and realization of investments. 65 Table of Contents The investigation process that we undertake in connection with our investments may not reveal all facts that may be relevant in connection with an investment.
In addition, market conditions and regulatory environment can also delay our exit and realization of investments. 68 Table of Contents The investigation process that we undertake in connection with our investments may not reveal all facts that may be relevant in connection with an investment.
In February 2012, SAFE promulgated the Notice on Issues Concerning the Foreign Exchange Administration for Domestic Individuals Participating in Stock Incentive Plan of Overseas Publicly Listed Company, according to which, employees, directors, supervisors and other management members who are PRC residents and non-PRC citizens who reside in China for a continuous period of not less than one year participating in any stock incentive plan of an overseas publicly listed company , subject to a few exceptions, are required to register with SAFE through a domestic qualified agent, which could be a PRC subsidiary of such overseas listed company, and complete certain other procedures.
In February 2012, SAFE promulgated the Notice on Issues Concerning the Foreign Exchange Administration for Domestic Individuals Participating in Stock Incentive Plan of Overseas Publicly Listed Company, according to which, employees, directors, supervisors and other management members who are Chinese Mainland residents and non-Chinese Mainland citizens who reside in Chinese Mainland for a continuous period of not less than one year participating in any stock incentive plan of an overseas publicly listed company, subject to a few exceptions, are required to register with SAFE through a domestic qualified agent, which could be a Chinese Mainland subsidiary of such overseas listed company, and complete certain other procedures.
Moreover, a PRC domestic company that plans to, either directly or through its overseas listed entity, publicly disclose or provide to relevant individuals and entities including securities companies, securities service providers and overseas regulators, any other documents and materials that, if leaked, will be detrimental to national security or public interest, shall strictly fulfill relevant procedures stipulated by applicable national regulations.
Moreover, a Chinese Mainland domestic company that plans to, either directly or through its overseas listed entity, publicly disclose or provide to relevant individuals and entities including securities companies, securities service providers and overseas regulators, any other documents and materials that, if leaked, will be detrimental to national security or public interest, shall strictly fulfill relevant procedures stipulated by applicable national regulations.
Under the Enterprise Income Tax Law and its implementation regulations issued by the State Council, a 10% PRC withholding tax is applicable to dividends paid to investors that are non-resident enterprises, which do not have an establishment or place of business in the PRC or which have such establishment or place of business but the dividends are not effectively connected with such establishment or place of business, to the extent such dividends are derived from sources within the PRC.
Under the Enterprise Income Tax Law and its implementation regulations issued by the State Council, a 10% Chinese Mainland withholding tax is applicable to dividends paid to investors that are non-resident enterprises, which do not have an establishment or place of business in the Chinese Mainland or which have such establishment or place of business but the dividends are not effectively connected with such establishment or place of business, to the extent such dividends are derived from sources within the Chinese Mainland.
In October 2017, the State Administration of Taxation issued the Bulletin on Issues Concerning the Withholding of Non-PRC Resident Enterprise Income Tax at Source, or Bulletin 37, which replaced the Notice on Strengthening Administration of Enterprise Income Tax for Share Transfers by Non-PRC Resident Enterprises, or Circular 698, issued by the State Administration of Taxation, on December 10, 2009, and partially replaced and supplemented rules under the Bulletin on Issues of Enterprise Income Tax on Indirect Transfers of Assets by Non-PRC Resident Enterprises or Bulletin 7, issued by the State Administration of Taxation, on February 3, 2015 and amended in December 2017.
In October 2017, the State Administration of Taxation issued the Bulletin on Issues Concerning the Withholding of Non-Chinese Mainland Resident Enterprise Income Tax at Source, or Bulletin 37, which replaced the Notice on Strengthening Administration of Enterprise Income Tax for Share Transfers by Non-Chinese Mainland Resident Enterprises, or Circular 698, issued by the State Administration of Taxation, on December 10, 2009, and partially replaced and supplemented rules under the Bulletin on Issues of Enterprise Income Tax on Indirect Transfers of Assets by Non-Chinese Mainland Resident Enterprises or Bulletin 7, issued by the State Administration of Taxation, on February 3, 2015 and amended in December 2017.
Pursuant to Bulletin 7, an “indirect transfer” of PRC assets, including a transfer of equity interests in an unlisted non-PRC holding company of a PRC resident enterprise, by non-PRC resident enterprises may be re-characterized and treated as a direct transfer of the underlying PRC assets, if such arrangement does not have a reasonable commercial purpose and was established for the purpose of avoiding payment of PRC enterprise income tax.
Pursuant to Bulletin 7, an “indirect transfer” of Chinese Mainland assets, including a transfer of equity interests in an unlisted non-Chinese Mainland holding company of a Chinese Mainland resident enterprise, by non-Chinese Mainland resident enterprises may be re-characterized and treated as a direct transfer of the underlying Chinese Mainland assets, if such arrangement does not have a reasonable commercial purpose and was established for the purpose of avoiding payment of Chinese Mainland enterprise income tax.
Moreover, any negative news about the proceedings against these audit firms may cause investor uncertainty regarding PRC-based, United States-listed companies and the market price of our ADSs may be adversely affected. If the accounting firms are subject to additional remedial measures, our ability to file our financial statements in compliance with SEC requirements could be impacted.
Moreover, any negative news about the proceedings against these audit firms may cause investor uncertainty regarding Chinese Mainland-based, United States-listed companies and the market price of our ADSs may be adversely affected. If the accounting firms are subject to additional remedial measures, our ability to file our financial statements in compliance with SEC requirements could be impacted.
Although we do not believe we are a critical information infrastructure provider, and as the date of this annual report, we have not been involved in any investigations on cybersecurity review made by the CAC on such basis and we have not received any inquiry, notice, warning, or sanctions from any other PRC government authorities in this regard, the PRC authorities could interpret such term broadly.
Although we do not believe we are a critical information infrastructure provider, and as the date of this annual report, we have not been involved in any investigations on cybersecurity review made by the CAC on such basis and we have not received any inquiry, notice, warning, or sanctions from any other Chinese Mainland government authorities in this regard, the Chinese Mainland authorities could interpret such term broadly.

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Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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We collaborate with various external financing guarantee companies and insurance company who provide guarantee/insurance services to protect institutional funding partners from losses. See “Item 4. Information on the Company—4.B.
We collaborate with various external financing guarantee companies and insurance companies who provide guarantee/insurance services to protect institutional funding partners from losses. See “Item 4. Information on the Company—4.B.
We made a gradual shift with respect to funding sources from individual investors to institutional funding partners since early 2019 in response to the enhanced regulatory restrictions in the online consumer financing industry.
We made a gradual shift with respect to funding sources from individual investors to institutional funding partners since early 2019 in response to the enhanced regulatory restrictions in the online consumer financing industry.
In late December 2019, the government began to implement a regulatory policy encouraging companies that previously applied for the online lending information intermediary registration to obtain an online microcredit company permit instead. This change in policy has an implication that we will be no longer legally allowed to provide intermediary service to individual investors directly.
In late December 2019, the government began to implement a regulatory policy encouraging companies that previously applied for the online lending information intermediary registration to obtain an online microcredit company permit instead. This change in policy has an implication that we will be no longer legally allowed to provide intermediary service to individual investors directly.
At the end of 2019, we ceased funding our loan products from our individual investors through Xiaoying Wealth Management platform. We actively expanded institutional funding, such as banks, consumer finance companies, trust companies and other institutions, and achieved 100% institutional funding for the new loans facilitated by the end of the second quarter of 2020.
At the end of 2019, we ceased funding our loan products from our individual investors through Xiaoying Wealth Management platform. We actively expanded institutional funding, such as banks, consumer finance companies, trust companies and other institutions, and achieved 100% institutional funding for the new loans facilitated by the end of the second quarter of 2020.
Business Overview—Regulations—Regulations Relating to Microcredit,” we cannot assure you that we would not be subject to any rectification requirements or administrative penalties due to any non-compliance, nor can we assure you that we will be able to satisfy rectification requirements, if any, and maintain such license or renew the license.
Business Overview—Regulations—Regulations Relating to Microcredit,” we cannot assure you that we would not be subject to any rectification requirements or administrative penalties due to any non-compliance, nor can we assure you that we will be able to satisfy rectification requirements, if any, and maintain such license or renew the license.
The registered capital of a company operating a network microcredit business within a province shall not be less than RMB1 billion and shall be a one-time paid-in monetary capital. The registered capital of a company operating a network microcredit cross-provinces shall not be less than RMB5 billion and shall be a one-time paid-in monetary capital.
The registered capital of a company operating a network microcredit business within a province shall not be less than RMB1 billion and shall be a one-time paid-in monetary capital. The registered capital of a company operating a network microcredit cross-provinces shall not be less than RMB5 billion and shall be a one-time paid-in monetary capital.
On June 10, 2021, the Standing Committee of the National People’s Congress promulgated the Data Security Law of the PRC, or Data Security Law, which took effect on September 1, 2021. The Data Security Law imposes data security and privacy obligations on entities and individuals carrying out data activities, and introduces a data classification and hierarchical protection system.
On June 10, 2021, the Standing Committee of the National People’s Congress promulgated the Data Security Law of PRC, or Data Security Law, which took effect on September 1, 2021. The Data Security Law imposes data security and privacy obligations on entities and individuals carrying out data activities, and introduces a data classification and hierarchical protection system.
On July 7, 2022, the CAC published the Outbound Data Transfer Security Assessment Measures that took effect on September 1, 2022 and outline the potential security assessment process for outbound data transfer.
On July 7, 2022, the CAC published the Outbound Data Transfer Security Assessment Measures that took effect on September 1, 2022 and outline the potential security assessment process for outbound data transfer.
Under the Outbound Data Transfer Security Assessment Measures, data processors providing outbound data shall apply for outbound data transfer security assessment with the CAC in any of the following circumstances: (i) where a data processor provides important data abroad; (ii) where a critical information infrastructure operator or a data processor processing the personal information of more than one million individuals provides personal information abroad; (iii) where a data processor has provided personal information of 100,000 individuals or sensitive personal information of 10,000 individuals in total abroad since January 1 of the previous year; and (iv) other circumstances prescribed by the CAC for which declaration for security assessment for outbound data transfers is required.
Under the Outbound Data Transfer Security Assessment Measures, data processors providing outbound data shall apply for outbound data transfer security assessment with the CAC in any of the following circumstances: (i) where a data processor provides important data abroad; (ii) where a critical information infrastructure operator or a data processor processing the personal information of more than one million individuals provides personal information abroad; (iii) where a data processor has provided personal information of 100,000 individuals or sensitive personal information of 10,000 individuals in total abroad since January 1 of the previous year; and (iv) other circumstances prescribed by the CAC for which declaration for security assessment for outbound data transfers is required.
Any deficiency in these VIE Agreements may result in our loss of control over the management and operations of VIEs, which will result in a significant loss in the value of an investment in our company.
Any deficiency in these VIE Agreements may result in our loss of control over the management and operations of VIEs, which will result in a significant loss in the value of an investment in the Company.
These risks and challenges include, among other things, our ability to: ● offer personalized and competitive products and services; ● increase the utilization of our products and services by existing borrowers and institutional funding partners as well as new borrowers and institutional funding partners; ● offer attractive service fee rates while driving growth in size and profitability of our business; ● maintain low delinquency rates of loans facilitated by us; ● develop sufficient, diversified, cost-efficient and reputable funding sources; ● maintain and enhance our relationships with our institutional funding partners; ● broaden our prospective borrower base; ● navigate a complex and evolving regulatory environment; ● improve our operational efficiency; ● attract, retain and motivate talented employees to support our business growth; ● enhance our technology infrastructure to support the growth of our business and maintain the security of our system and the confidentiality of the information provided and utilized across our system; ● navigate economic condition and fluctuation; and ● defend ourselves against legal and regulatory actions, such as actions involving intellectual property or privacy claims. 14 Table of Contents Failure of other online lending platforms or damage to the reputation of the online consumer finance industry may materially and adversely affect our business and results of operations.
These risks and challenges include, among other things, our ability to: ● offer personalized and competitive products and services; ● increase the utilization of our products and services by existing borrowers and institutional funding partners as well as new borrowers and institutional funding partners; ● offer attractive service fee rates while driving growth in size and profitability of our business; ● maintain low delinquency rates of loans facilitated by us; ● develop sufficient, diversified, cost-efficient and reputable funding sources; ● maintain and enhance our relationships with our institutional funding partners; ● broaden our prospective borrower base; ● navigate a complex and evolving regulatory environment; ● improve our operational efficiency; ● attract, retain and motivate talented employees to support our business growth; ● enhance our technology infrastructure to support the growth of our business and maintain the security of our system and the confidentiality of the information provided and utilized across our system; ● navigate economic condition and fluctuation; and ● defend ourselves against legal and regulatory actions, such as actions involving intellectual property or privacy claims. 16 Table of Contents Failure of other online lending platforms or damage to the reputation of the online consumer finance industry may materially and adversely affect our business and results of operations.
Although we believe that Xiaoying Microcredit is only a supplementary funding source and we do not intend to rely on it as a major source for funding, if we need to obtain funding through Xiaoying Microcredit but are unable to maintain or renew the business qualification for microcredit business,or to obtain any other requisite approvals, licenses or permits, our business, financial condition and results of operations would be materially and adversely affected.
Although we believe that Xiaoying Microcredit (VIE) is only a supplementary funding source and we do not intend to rely on it as a major source for funding, if we need to obtain funding through Xiaoying Microcredit (VIE) but are unable to maintain or renew the business qualification for microcredit business,or to obtain any other requisite approvals, licenses or permits, our business, financial condition and results of operations would be materially and adversely affected.
Although we believe that Xiaoying Microcredit is only a supplementary funding source and we do not intend to rely on it as a major source for funding, if we need to obtain funding from Xiaoying Microcredit but are unable to maintain or renew the business qualification for microcredit business or obtain any other requisite approvals, licenses or permits, our business, financial condition and results of operations would be materially and adversely affected.
Although we believe that Xiaoying Microcredit (VIE) is only a supplementary funding source and we do not intend to rely on it as a major source for funding, if we need to obtain funding from Xiaoying Microcredit but are unable to maintain or renew the business qualification for microcredit business or obtain any other requisite approvals, licenses or permits, our business, financial condition and results of operations would be materially and adversely affected.
We regard our trademarks, domain names, copyrights, know-how, proprietary technologies and similar intellectual properties as critical to our success, and we rely on trademark and trade secret law, confidentiality agreement, invention assignment and non-compete agreements with our employees and others to protect our proprietary rights. See “Item 4. Information on the Company—4.B. Business Overview—Intellectual Property” and ”Item 4.
We regard our trademarks, domain names, copyrights, know-how, proprietary technologies and similar intellectual properties as critical factors to our success, and we rely on trademark and trade secret law, confidentiality agreement, invention assignment and non-compete agreements with our employees and others to protect our proprietary rights. See “Item 4. Information on the Company—4.B. Business Overview—Intellectual Property” and ”Item 4.
The draft measures would establish a three-year transition period, and those operating cross-provincial network microcredit businesses without approval will be phased-out. We cannot assure you that Xiaoying Microcredit will be able to maintain or renew its business qualification for microcredit business if the draft measures are implemented.
The draft measures would establish a three-year transition period, and those operating cross-provincial network microcredit businesses without approval will be phased-out. We cannot assure you that Xiaoying Microcredit (VIE) will be able to maintain or renew its business qualification for microcredit business if the draft measures are implemented.
The Draft Interim Administrative Measures would establish a three-year transition period, and those operating cross-provincial network microcredit businesses without approval will be phased-out. 12 Table of Contents Further, pursuant to Regulations on Local Financial Supervision and Administration (Draft for Public Comments), or the Draft Local Financial Supervision and Administration Regulation promulgated on December 31, 2021, “Local Financial Organizations” refers to microcredit companies, financing guarantee companies, regional equity markets, pawn shops, financial leasing companies, commercial factoring companies, local asset management companies, and other institutions engaged in local financial business that are supervised and managed by laws, administrative regulations, and provincial-level people’s governments authorized by the State Council.
The Draft Interim Administrative Measures would establish a three-year transition period, and those operating cross-provincial network microcredit businesses without approval will be phased-out. 14 Table of Contents Further, pursuant to Regulations on Local Financial Supervision and Administration (Draft for Public Comments), or the Draft Local Financial Supervision and Administration Regulation promulgated on December 31, 2021, “Local Financial Organizations” refers to microcredit companies, financing guarantee companies, regional equity markets, pawn shops, financial leasing companies, commercial factoring companies, local asset management companies, and other institutions engaged in local financial business that are supervised and managed by laws, administrative regulations, and provincial-level people’s governments authorized by the State Council.
After we filed our annual report on Form 20-F for the fiscal year ended December 31, 2021 that included an audit report issued by KPMG Huazhen LLP on April 28, 2022, the SEC conclusively identified us as an SEC-identified issuer on May 26, 2022.
After we filed our annual report on Form 20-F for the fiscal year ended December 31, 2021 that included an audit report issued by KPMG Huazhen on April 28, 2022, the SEC conclusively identified us as an SEC-identified issuer on May 26, 2022.
Any malicious or otherwise negative allegation made by the media or other parties about our company, including our management, business, compliance with law, financial condition, prospects or our historical business operations, whether with or without merit, could severely hurt our reputation and harm our business and results of operations.
Any malicious or otherwise negative allegation made by the media or other parties about our company group, including our management, business, compliance with law, financial condition, prospects or our historical business operations, whether with or without merit, could severely hurt our reputation and harm our business and results of operations.
While we believe such investments and the nominee arrangements reflect the true intentions of us and the respective business partners, and are therefore legal and valid under PRC Civil Code, we cannot assure you that the PRC courts or other regulators would hold the same view as ours, and such investments may not have the same effect as direct shareholding ownership in the investee companies where our nominee shareholders may fail to perform their respective obligations under the nominee arrangements, such as, among others, to vote on the shareholders’ meetings per our instructions, or to transfer all dividends obtained from such companies to us on a timely manner.
While we believe such investments and the nominee arrangements reflect the true intentions of us and the respective business partners, and are therefore legal and valid under PRC Civil Code, we cannot assure you that the Chinese Mainland courts or other regulators would hold the same view as ours, and such investments may not have the same effect as direct shareholding ownership in the investee companies where our nominee shareholders may fail to perform their respective obligations under the nominee arrangements, such as, among others, to vote on the shareholders’ meetings per our instructions, or to transfer all dividends obtained from such companies to us on a timely manner.
In addition, we have obtained a letter from the Local Financial Regulatory Bureau of Shenzhen Municipality on May 12, 2021, stating the approval of the business qualification of Xiaoying Microcredit for microcredit business from the relevant local authority and have started our microcredit business in July 2021.
In addition, we have obtained a letter from the Local Financial Regulatory Bureau of Shenzhen Municipality on May 12, 2021, stating the approval of the business qualification of Xiaoying Microcredit (VIE) for microcredit business from the relevant local authority and have started our microcredit business in July 2021.
Pursuant to the Inspection Notice and the Compliance Checklist, we have further submitted a self-inspection report and certain self-inspection documents to the Shenzhen financial regulatory authority and the Shenzhen Head Office for Special Rectification of Online Finance in October and November 2018 respectively. 11 Table of Contents As of December 17, 2020, Xiaoying Wealth Management platform’s P2P operation business had been cleared and ceased, and the principal and earnings of all individual investors had been fully settled.
Pursuant to the Inspection Notice and the Compliance Checklist, we have further submitted a self-inspection report and certain self-inspection documents to the Shenzhen financial regulatory authority and the Shenzhen Head Office for Special Rectification of Online Finance in October and November 2018 respectively. 13 Table of Contents As of December 17, 2020, Xiaoying Wealth Management platform’s P2P operation business had been cleared and ceased, and the principal and earnings of all individual investors had been fully settled.
While it is unknown how long these conditions will last and what the complete financial effect will be to our company, we are closely monitoring its impact on us.
While it is unknown how long these conditions will last and what the complete financial effect will be to our company group, we are closely monitoring its impact on us.
The data provided directly by an applicant to us may become outdated and inaccurate, as he or she may have, after providing the data to us: ● become delinquent in the payment of an outstanding obligation; ● defaulted on a pre-existing debt obligation; ● taken on additional debt; or ● sustained other adverse financial events. 23 Table of Contents We conduct data screening to detect inaccurate information and improve the quality of the data input for our credit analysis model.
The data provided directly by an applicant to us may become outdated and inaccurate, as he or she may have, after providing the data to us: ● become delinquent in the payment of an outstanding obligation; ● defaulted on a pre-existing debt obligation; ● taken on additional debt; or ● sustained other adverse financial events. 25 Table of Contents We conduct data screening to detect inaccurate information and improve the quality of the data input for our credit analysis model.
If the service fees we collect from borrowers decrease significantly due to factors beyond our control, our business, financial condition and results of operations will be materially and adversely affected. 15 Table of Contents Our service fees, to the extent that they are fully or partially deemed as loan interest, may also be subject to the restrictions on interest rates as specified in applicable rules on private lending.
If the service fees we collect from borrowers decrease significantly due to factors beyond our control, our business, financial condition and results of operations will be materially and adversely affected. 17 Table of Contents Our service fees, to the extent that they are fully or partially deemed as loan interest, may also be subject to the restrictions on interest rates as specified in applicable rules on private lending.
If we are found to have violated the PRC Cybersecurity Law, Data Security Law and Outbound Data Transfer Security Assessment Measures in a government enforcement action, we may face severe penalties that may result in monetary losses, losses of access to assets essential for daily operation of our business or for the continuance of service provision, and temporary or total disruption of our business for an extended period of time.
If we are found to have violated the Cybersecurity Law of the PRC, Data Security Law, Outbound Data Transfer Security Assessment Measures, and Measures for the Standard Contract in a government enforcement action, we may face severe penalties that may result in monetary losses, losses of access to assets essential for daily operation of our business or for the continuance of service provision, and temporary or total disruption of our business for an extended period of time.
We have responded with our rectification plan with a schedule in March 2017 and have undertaken effective measures in response to the authority’s request. 10 Table of Contents Meanwhile, the Guidelines and the Interim Measures prohibit online lending information intermediaries from certain activities, including but not limited to, credit enhancement, illegal fund-raising, and setting up capital pool.
We have responded with our rectification plan with a schedule in March 2017 and have undertaken effective measures in response to the authority’s request. 12 Table of Contents Meanwhile, the Guidelines and the Interim Measures prohibit online lending information intermediaries from certain activities, including but not limited to, credit enhancement, illegal fund-raising, and setting up capital pool.
We cannot assure you that Xiaoying Microcredit will be able to maintain or renew its business qualification for microcredit business if the draft measures are implemented.
We cannot assure you that Xiaoying Microcredit (VIE) will be able to maintain or renew its business qualification for microcredit business if the draft measures are implemented.
Pursuant to the Provisions on Several Issues Concerning Laws Applicable to Trials of Private Lending Cases issued by the Supreme People’s Court on August 6, 2015 (as further amended on August 19, 2020 and December 29, 2020), or the Private Lending Judicial Interpretations, if the services fees that we charge borrowers are considered as loan interest and we are deemed as a lender, and if the sum of the annual interest that lenders charge and our service fees exceed 36%, the portion of the service fees that exceeds the 36% limit is invalid, and even if the borrower has paid the portion of the service fees that exceeds the 36% limit, such borrower may request us to refund the portion of the service fees that exceeds the 36% limit and the PRC courts will uphold such request.
Pursuant to the Provisions on Several Issues Concerning Laws Applicable to Trials of Private Lending Cases issued by the Supreme People’s Court on August 6, 2015 (as further amended on August 19, 2020 and December 29, 2020), or the Private Lending Judicial Interpretations, if the services fees that we charge borrowers are considered as loan interest and we are deemed as a lender, and if the sum of the annual interest that lenders charge and our service fees exceed 36%, the portion of the service fees that exceeds the 36% limit is invalid, and even if the borrower has paid the portion of the service fees that exceeds the 36% limit, such borrower may request us to refund the portion of the service fees that exceeds the 36% limit and the Chinese Mainland courts will uphold such request.
Although we selectively establish collaboration relationships with reliable third parties, we cannot assure you that they will not conduct any unsatisfactory, inappropriate or illegal actions that will damage our reputation and brand, which consequently could cause our business to be harmed. 26 Table of Contents We have obligations to verify information relating to borrowers and detecting fraud.
Although we selectively establish collaboration relationships with reliable third parties, we cannot assure you that they will not conduct any unsatisfactory, inappropriate or illegal actions that will damage our reputation and brand, which consequently could cause our business to be harmed. 28 Table of Contents We have obligations to verify information relating to borrowers and detecting fraud.
Uncertainty still remains on how such rules will be interpreted and implemented, including the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&A Rules, the Trial Measures, and the Telecommunications Regulations and the relevant regulatory measures concerning the telecommunications industry, there can be no assurance that how the PRC government authorities, such as the Ministry of Commerce, or the MOFCOM, the MIIT, the CSRC or other authorities that regulate online consumer finance platforms and other participants in the telecommunications industry, would ultimately take a view of our corporate structure or any of the above contractual arrangements, with existing policies or with requirements or policies that may be adopted in the future.
Uncertainty still remains on how such rules will be interpreted and implemented, including the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&A Rules, the Trial Measures, and the Telecommunications Regulations and the relevant regulatory measures concerning the telecommunications industry, there can be no assurance that how the Chinese Mainland government authorities, such as the Ministry of Commerce, or the MOFCOM, the MIIT, the CSRC or other authorities that regulate online consumer finance platforms and other participants in the telecommunications industry, would ultimately take a view of our corporate structure or any of the above contractual arrangements, with existing policies or with requirements or policies that may be adopted in the future.
In addition, any future changes on APR ceiling may affect our profitability. If such situations were to occur, our business, financial condition, results of operations and prospects would be materially and adversely affected. 16 Table of Contents We face competition in the online consumer finance industry, and, if we do not compete effectively, our results of operations could be harmed.
In addition, any future changes on APR ceiling may affect our profitability. If such situations were to occur, our business, financial condition, results of operations and prospects would be materially and adversely affected. 18 Table of Contents We face competition in the online consumer finance industry, and, if we do not compete effectively, our results of operations could be harmed.
We may not make any investments, acquisitions or international expansion, or, alternatively, any future investments, acquisitions or international expansion may not be successful, may not benefit our business strategy, may not generate sufficient revenues to offset the associated acquisition costs or may not otherwise result in the intended benefits. 37 Table of Contents Our business depends on the continued efforts of our senior management and key technology development personnel.
We may not make any investments, acquisitions or international expansion, or, alternatively, any future investments, acquisitions or international expansion may not be successful, may not benefit our business strategy, may not generate sufficient revenues to offset the associated acquisition costs or may not otherwise result in the intended benefits. 39 Table of Contents Our business depends on the continued efforts of our senior management and key technology development personnel.
Business Overview—Regulation—Regulations Relating to Online Lending Information Services.” Since July 2015, the PRC government and relevant regulatory authorities have issued various laws and regulations governing the online consumer finance industry, including, among others, (i) the Guidelines on Promoting the Healthy Development of Online Finance Industry, or the Guidelines, (ii) the Interim Measures on Administration of Business Activities of Online Lending Information Intermediaries, or the Interim Measures, (iii) the Guidelines on Online Lending Funds Custodian Business, or the Custodian Guidelines, (iv) Guidelines on Information Disclosure of the Business Activities of Online Lending Information Intermediaries, or the Disclosure Guidelines, (v) Notice on Rectification of Cash Loan Business, or Circular 141, (vi) the Notice on the Special Rectification and Inspection of Risk of Online Lending Intermediaries, or Circular 57, (vii) the Notice on Conducting Compliance Inspections of Online Lending Intermediaries, or the Inspection Notice, and (viii) the Compliance Checklist of Online Lending Information Intermediaries, or the Compliance Checklist.
Business Overview—Regulation—Regulations Relating to Online Lending Information Services.” Since July 2015, the Chinese Mainland government and relevant regulatory authorities have issued various laws and regulations governing the online consumer finance industry, including, among others, (i) the Guidelines on Promoting the Healthy Development of Online Finance Industry, or the Guidelines, (ii) the Interim Measures on Administration of Business Activities of Online Lending Information Intermediaries, or the Interim Measures, (iii) the Guidelines on Online Lending Funds Custodian Business, or the Custodian Guidelines, (iv) Guidelines on Information Disclosure of the Business Activities of Online Lending Information Intermediaries, or the Disclosure Guidelines, (v) Notice on Rectification of Cash Loan Business, or Circular 141, (vi) the Notice on the Special Rectification and Inspection of Risk of Online Lending Intermediaries, or Circular 57, (vii) the Notice on Conducting Compliance Inspections of Online Lending Intermediaries, or the Inspection Notice, and (viii) the Compliance Checklist of Online Lending Information Intermediaries, or the Compliance Checklist.
The amended Measures of Cybersecurity Review provide that, among others, an application for cybersecurity review must be made by an issuer that is a “critical information infrastructure operator” or a “data processing operator” as defined therein before such issuer’s securities become listed in a foreign country, if the issuer possesses personal information of more than one million users, and that the relevant governmental authorities in the PRC may initiate cybersecurity review if such governmental authorities determine an operator’s cyber products or services, data processing or potential listing in a foreign country affect or may affect China’s national security.
The amended Measures of Cybersecurity Review provide that, among others, an application for cybersecurity review must be made by an issuer that is a “critical information infrastructure operator” or a “data processing operator” as defined therein before such issuer’s securities become listed in a foreign country, if the issuer possesses personal information of more than one million users, and that the relevant governmental authorities in the Chinese Mainland may initiate cybersecurity review if such governmental authorities determine an operator’s cyber products or services, data processing or potential listing in a foreign country affect or may affect China’s national security.
The Guideline No.2 on the Application of Regulatory Rules on Overseas Securities Offerings and Listings, or the Guideline No.2, as one of the supporting guidelines for the Trial Measures, provides that the filing documents submitted to the CSRC shall specify, among other things: (i) whether the issuer’s business, licenses or qualifications are not allowed to be controlled by way of contractual arrangements by PRC laws, administrative regulations or relevant provisions; (ii) whether the domestic operating entities controlled by way of contractual arrangements are subject to any restricted or prohibited industries for foreign investments.
The Guideline No.2 on the Application of Regulatory Rules on Overseas Securities Offerings and Listings, or the Guideline No.2, as one of the supporting guidelines for the Trial Measures, provides that the filing documents submitted to the CSRC shall specify, among other things: (i) whether the issuer’s business, licenses or qualifications are not allowed to be controlled by way of contractual arrangements by Chinese Mainland laws, administrative regulations or relevant provisions; (ii) whether the domestic operating entities controlled by way of contractual arrangements are subject to any restricted or prohibited industries for foreign investments.
The Personal Information Protection Law also provides that critical information infrastructure operators and personal information processing entities who process personal information meeting a volume threshold to be set by Chinese cyberspace regulators are also required to store in China the personal information generated or collected in China, and to pass a security assessment administered by Chinese cyberspace regulators for any export of such personal information.
The Personal Information Protection Law also provides that critical information infrastructure operators and personal information processing entities who process personal information meeting a volume threshold to be set by Chinese cyberspace regulators are also required to store in Chinese Mainland the personal information generated or collected in Chinese Mainland, and to pass a security assessment administered by Chinese cyberspace regulators for any export of such personal information.
As the first systematic and comprehensive law specifically for the protection of personal information in the PRC, the Personal Information Protection Law provides, among others, that (i) an individual’s consent shall be obtained to use sensitive personal information, (ii) personal information operators using sensitive personal information shall notify individuals of the necessity of such use and impact on the individual’s rights, and (iii) where it is necessary for personal information to be provided by a personal information processor to a recipient outside the territory of the PRC due to any business need or any other need, a security assessment organized by the national cyberspace authority shall be passed.
As the first systematic and comprehensive law specifically for the protection of personal information in the Chinese Mainland, the Personal Information Protection Law provides, among others, that (i) an individual’s consent shall be obtained to use sensitive personal information, (ii) personal information operators using sensitive personal information shall notify individuals of the necessity of such use and impact on the individual’s rights, and (iii) where it is necessary for personal information to be provided by a personal information processor to a recipient outside the territory of the Chinese Mainland due to any business need or any other need, a security assessment organized by the national cyberspace authority shall be passed.
Further, if our corporate structure and contractual arrangements are found to be in violation of any existing or future PRC laws or regulations, the relevant regulatory authorities would have broad discretion in dealing with such violations, including: ● revoking our business and operating licenses; ● levying fines on us; ● confiscating any of our income that they deem to be obtained through illegal operations; ● shutting down our services; ● discontinuing or restricting our operations in China; ● imposing conditions or requirements with which we may not be able to comply; ● requiring us to change our corporate structure and contractual arrangements; ● restricting or prohibiting our use of the proceeds from overseas offerings to finance our PRC consolidated VIEs’ business and operations; ● requiring us to delist from the NYSE; and ● taking other regulatory or enforcement actions that could be harmful to our business.
Further, if our corporate structure and contractual arrangements are found to be in violation of any existing or future Chinese Mainland laws or regulations, the relevant regulatory authorities would have broad discretion in dealing with such violations, including: ● revoking our business and operating licenses; ● levying fines on us; ● confiscating any of our income that they deem to be obtained through illegal operations; ● shutting down our services; ● discontinuing or restricting our operations in Chinese Mainland; ● imposing conditions or requirements with which we may not be able to comply; ● requiring us to change our corporate structure and contractual arrangements; ● restricting or prohibiting our use of the proceeds from overseas offerings to finance our Chinese Mainland consolidated VIEs’ business and operations; ● requiring us to delist from the NYSE; and ● taking other regulatory or enforcement actions that could be harmful to our business.
However, due to the lack of the specific and clear regulatory guidance on the loan interest ceiling and the calculation method, if our current fee level is deemed to be excessive or constitutes usurious loans under any existing or future relevant PRC laws, regulations and rules, parts or all of the fees we collected may be ruled as invalid by the PRC courts, and we may face, among others, regulatory warning, correction order, or be required to reduce the fees and annual interest rate we charge our borrowers.
However, due to the lack of the specific and clear regulatory guidance on the loan interest ceiling and the calculation method, if our current fee level is deemed to be excessive or constitutes usurious loans under any existing or future relevant Chinese Mainland laws, regulations and rules, parts or all of the fees we collected may be ruled as invalid by the Chinese Mainland courts, and we may face, among others, regulatory warning, correction order, or be required to reduce the fees and annual interest rate we charge our borrowers.
To maintain and increase the amount of loans we facilitate, we must continue to engage our existing borrowers and attract new borrowers, which may be affected by several factors, including our brand recognition and reputation, our products and services offered, our efficiency in engaging prospective borrowers, our ability to convert registered users to borrowers, the effectiveness of our credit analysis and risk management system, our ability to secure sufficient and cost-efficient funding, the service fees we charge borrowers, our borrower experience, the PRC regulatory environment governing our industry and the macroeconomic environment.
To maintain and increase the amount of loans we facilitate, we must continue to engage our existing borrowers and attract new borrowers, which may be affected by several factors, including our brand recognition and reputation, our products and services offered, our efficiency in engaging prospective borrowers, our ability to convert registered users to borrowers, the effectiveness of our credit analysis and risk management system, our ability to secure sufficient and cost-efficient funding, the service fees we charge borrowers, our borrower experience, the Chinese Mainland regulatory environment governing our industry and the macroeconomic environment.
If we are unable to control our labor costs or pass such increased labor costs on to our users by increasing the fees of our services, our financial condition and results of operations may be adversely affected. 38 Table of Contents We do not have any business insurance coverage for our operations.
If we are unable to control our labor costs or pass such increased labor costs on to our users by increasing the fees of our services, our financial condition and results of operations may be adversely affected. 40 Table of Contents We do not have any business insurance coverage for our operations.
Due to the relatively new nature of the PRC Cybersecurity Law, Data Security Law and Outbound Data Transfer Security Assessment Measures as well as the lack of clarification in the statutory law itself as to the circumstances and standard under which the law should apply and violations be found, there are great uncertainties as to the interpretation and application of the law.
Due to the relatively new nature of the Cybersecurity Law of the PRC, Data Security Law, Outbound Data Transfer Security Assessment Measures, and Measures for the Standard Contract as well as the lack of clarification in the statutory law itself as to the circumstances and standard under which the law should apply and violations be found, there are great uncertainties as to the interpretation and application of the law.
Furthermore, a PRC domestic company that plans to, either directly or through its overseas listed entity, publicly disclose or provide to relevant indivuduals or entities including securities companies, seceurities service providers and overseas regulators, any document and materials that contain state secrets or working secrets of government agencies, shall first obtain approval from competent authorities according to law, and file with the secrecy administrative department at the same level.
Furthermore, a Chinese Mainland domestic company that plans to, either directly or through its overseas listed entity, publicly disclose or provide to relevant indivuduals or entities including securities companies, seceurities service providers and overseas regulators, any document and materials that contain state secrets or working secrets of government agencies, shall first obtain approval from competent authorities according to law, and file with the secrecy administrative department at the same level.
The financing guarantee companies that we cooperate charge borrowers a guarantee fee, a portion of which will be subsequently paid to us by the financing guarantee companies as the service fee for the intermediary service we provide. We cooperated with Shenzhen Xintang, our consolidated VIE, to provide guarantees for certain loan products that we facilitate in the past.
The financing guarantee companies that we cooperate charge borrowers a guarantee fee, a portion of which will be subsequently paid to us by the financing guarantee companies as the service fee for the intermediary service we provide. We cooperated with Shenzhen Xintang(VIE) to provide guarantees for certain loan products that we facilitate in the past.
The law requires network products and services providers as we are, among other things, to strictly preserve the secrecy of user information they collect and to store within mainland China data that is gathered or produced by such network products and services provider in the country.
The law requires network products and services providers as we are, among other things, to strictly preserve the secrecy of user information they collect and to store within Chinese Mainland data that is gathered or produced by such network products and services provider in the country.
Given the evolving regulatory environment of the consumer finance industry and value-added telecommunication business, we cannot rule out the possibility that the PRC communication administration authority or other government authorities will explicitly require any of our consolidated VIEs or subsidiaries of our consolidated VIEs to obtain Internet content provider licenses, or ICP licenses, online data processing and transaction processing licenses, or ODPTP licenses or other value-added telecommunication business licenses, or issue new regulatory requirements to institute a new licensing regime for our industry.
Given the evolving regulatory environment of the consumer finance industry and value-added telecommunication business, we cannot rule out the possibility that the Chinese Mainland communication administration authority or other government authorities will explicitly require any of our consolidated VIEs or subsidiaries of our consolidated VIEs to obtain Internet content provider licenses, or ICP licenses, online data processing and transaction processing licenses, or ODPTP licenses or other value-added telecommunication business licenses, or issue new regulatory requirements to institute a new licensing regime for our industry.
Our existing or new products and services could fail to attain sufficient market acceptance for many reasons, including: ● our failure to predict market demand accurately and supply attractive and increasingly personalized products and services at appropriate prices and in amount that meet this demand in a timely fashion; 25 Table of Contents ● our existing products and services may cease to be popular among current borrowers and institutional funding partners or prove to be unattractive to prospective borrowers and institutional funding partners; ● our failure to assess risk associated with new products and services and to properly price such products and services; ● negative publicity about our products and services or mobile applications’ performance or effectiveness; ● critical assessment taken by regulatory authorities that the launch of new products and services and changes to our existing products and services do not comply with PRC laws, regulations or rules applicable to us; and ● the introduction or anticipated introduction of competing offerings by competitors.
Our existing or new products and services could fail to attain sufficient market acceptance for many reasons, including: ● our failure to predict market demand accurately and supply attractive and increasingly personalized products and services at appropriate prices and in amount that meet this demand in a timely fashion; 27 Table of Contents ● our existing products and services may cease to be popular among current borrowers and institutional funding partners or prove to be unattractive to prospective borrowers and institutional funding partners; ● our failure to assess risk associated with new products and services and to properly price such products and services; ● negative publicity about our products and services or mobile applications’ performance or effectiveness; ● critical assessment taken by regulatory authorities that the launch of new products and services and changes to our existing products and services do not comply with Chinese Mainland laws, regulations or rules applicable to us; and ● the introduction or anticipated introduction of competing offerings by competitors.
For the risks related to the HFCA Act, see “-Risks Associated with the Holding Foreign Companies Accountable Act” as set forth at the outset of Part I and “-Risk Factors-Risks Relating to Doing Business in China- Our ADSs may be prohibited from trading in the United States under the HFCA Act in the future if the PCAOB is unable to inspect or investigate completely auditors located in China.
For the risks related to the HFCA Act, see “-Risks Associated with the Holding Foreign Companies Accountable Act” as set forth at the outset of Part I and “-Risk Factors-Risks Relating to Doing Business in Chinese Mainland- Our ADSs may be prohibited from trading in the United States under the HFCA Act in the future if the PCAOB is unable to inspect or investigate completely auditors located in Chinese Mainland.
On August 19, 2020 and December 29, 2020, the Private Lending Judicial Interpretations was amended by the Supreme People’s Court, where a lender claims that corresponding borrower shall pay interest as per the interest rate contractually stipulated, relevant people’s court shall uphold such claim, except where the interest rate agreed on by both parties concerned exceeds four times the loan prime rate (“LPR”), for one-year loan when the contract is concluded.
On August 19, 2020, the Private Lending Judicial Interpretations was amended by the Supreme People’s Court, where a lender claims that corresponding borrower shall pay interest as per the interest rate contractually stipulated, relevant people’s court shall uphold such claim, except where the interest rate agreed on by both parties concerned exceeds four times the loan prime rate (“LPR”), for one-year loan when the contract is concluded.
The calculation method is not clearly defined, and we are not sure whether our APR calculation method has fully complied with the regulatory requirements. None of the loans we provided or facilitated in 2022, had an annualized fee rate exceeding 36%.
The calculation method is not clearly defined, and we are not sure whether our APR calculation method has fully complied with the regulatory requirements. None of the loans we provided or facilitated in 2023, had an annualized fee rate exceeding 36%.
Specifically, foreign investors are not allowed to own more than 50% equity interest in any PRC company engaging in value-added telecommunications businesses (except for e-commerce, domestic multi-party communication, store-and-forward and call center services). The primary foreign investor must also have operating experience and a good track record in providing value-added telecommunications services, or VATS, overseas.
Specifically, foreign investors are not allowed to own more than 50% equity interest in any Chinese Mainland company engaging in value-added telecommunications businesses (except for e-commerce, domestic multi-party communication, store-and-forward and call center services). The primary foreign investor must also have operating experience and a good track record in providing value-added telecommunications services, or VATS, overseas.
As a holding company with no material operations, our operations were conducted in China by our subsidiaries and through the VIE Agreements with our VIEs in China, the equity of which is owned by Xiaoying (Beijing) Information Technology Co., Ltd., or Beijing WFOE, through the VIE Agreements, as a result of which, under United States generally accepted accounting principles, the assets and liabilities of the VIEs are treated as our assets and liabilities and the results of operations of VIEs are treated in all respects as if they were the results of our operations.
As a holding company with no material operations, our operations were conducted in Chinese Mainland by our subsidiaries and through the VIE Agreements with our VIEs in Chinese Mainland, the equity of which is owned by Xiaoying (Beijing) Information Technology Co., Ltd., or Beijing WFOE, through the VIE Agreements, as a result of which, under United States generally accepted accounting principles, the assets and liabilities of the VIEs are treated as our assets and liabilities and the results of operations of VIEs are treated in all respects as if they were the results of our operations.
Moreover, a PRC domestic company that plans to, either directly or through its overseas listed entity, publicly disclose or provide to relevant individuals and entities including securities companies, securities service providers and overseas regulators, any other documents and materials that, if leaked, will be detrimental to national security or public interest, shall strictly fulfill relevant procedures stipulated by applicable national regulations.
Moreover, a Chinese Mainland domestic company that plans to, either directly or through its overseas listed entity, publicly disclose or provide to relevant individuals and entities including securities companies, securities service providers and overseas regulators, any other documents and materials that, if leaked, will be detrimental to national security or public interest, shall strictly fulfill relevant procedures stipulated by applicable national regulations.
Even if we have obtained the telecommunication business license, we may also be subject to monetary penalty or suspension of operation and rectification by the telecommunication administrations if we fail to operate the business as prescribed in the telecommunication operating licenses, or fail to operate the business as regulated by the telecommunications administration or other regulatory authorities. 24 Table of Contents Given the evolving regulatory environment of the consumer finance industry and value-added telecommunication business, we cannot rule out the possibility that the PRC communication administration authority or other government authorities will explicitly require any of our consolidated VIEs or subsidiaries of our consolidated VIEs to obtain Internet content provider licenses, or ICP licenses, online data processing and transaction processing licenses, or ODPTP licenses or other value-added telecommunication business licenses, or issue new regulatory requirements to institute a new licensing regime for our industry.
Even if we have obtained the telecommunication business license, we may also be subject to monetary penalty or suspension of operation and rectification by the telecommunication administrations if we fail to operate the business as prescribed in the telecommunication operating licenses, or fail to operate the business as regulated by the telecommunications administration or other regulatory authorities. 26 Table of Contents Given the evolving regulatory environment of the consumer finance industry and value-added telecommunication business, we cannot rule out the possibility that the Chinese Mainland communication administration authority or other government authorities will explicitly require any of our consolidated VIEs or subsidiaries of our consolidated VIEs to obtain Internet content provider licenses, or ICP licenses, online data processing and transaction processing licenses, or ODPTP licenses or other value-added telecommunication business licenses, or issue new regulatory requirements to institute a new licensing regime for our industry.
Although we do not believe such consumer financing solutions currently compete with our products or target the same underserved consumers in China, such traditional financial institutions may decide to do so in the future, which may have a material adverse effect as to the service fees that we will be able to charge borrowers or institutional funding partners.
Although we do not believe such consumer financing solutions currently compete with our products or target the same underserved consumers in Chinese Mainland, such traditional financial institutions may decide to do so in the future, which may have a material adverse effect as to the service fees that we will be able to charge borrowers or institutional funding partners.
However, the 5% withholding tax rate does not automatically apply and certain requirements must be satisfied, including without limitation that (a) the Hong Kong project must be the beneficial owner of the relevant dividends; and (b) the Hong Kong project must directly hold no less than 25% share ownership in the PRC project during the 12 consecutive months preceding its receipt of the dividends.
However, the 5% withholding tax rate does not automatically apply and certain requirements must be satisfied, including without limitation that (a) the Hong Kong project must be the beneficial owner of the relevant dividends; and (b) the Hong Kong project must directly hold no less than 25% share ownership in the Chinese Mainland project during the 12 consecutive months preceding its receipt of the dividends.
These may materially and adversely affect its business, financial condition, results of operations and reputation. In addition, according to the institutional reform plan of the State Council approved by the National People’s Congress on March 10, 2023, the China Banking and Insurance Regulatory Commission, or the CBIRC, will no longer be retained.
These may materially and adversely affect its business, financial condition, results of operations and reputation. 6 Table of Contents In addition, according to the institutional reform plan of the State Council approved by the National People’s Congress on March 10, 2023, the China Banking and Insurance Regulatory Commission, or the CBIRC, will no longer be retained.
In 2021 and 2022, both our operational and financial results continued to show progress against our strategic objectives. In January, 2023, China officially started to manage COVID-19 as a Class-B infectious disease. The implementation of Class-B management of COVID-19 emphasizes more scientific, precise and efficient epidemic prevention and minimizes its disruptions in the economy and society.
In 2021, 2022 and 2023, both our operational and financial results continued to show progress against our strategic objectives. In January, 2023, Chinese Mainland officially started to manage COVID-19 as a Class-B infectious disease. The implementation of Class-B management of COVID-19 emphasizes more scientific, precise and efficient epidemic prevention and minimizes its disruptions in the economy and society.
While we do not believe that such acquired loans from existing lenders are prohibited under the Interim Measures, we cannot assure you that such practice would not be deemed by the PRC authorities as illegal provision of loans to the general public or illegally granting loans without the PBOC’s permit, which are prohibited by relevant PRC laws and regulations.
While we do not believe that such acquired loans from existing lenders are prohibited under the Interim Measures, we cannot assure you that such practice would not be deemed by the Chinese Mainland authorities as illegal provision of loans to the general public or illegally granting loans without the PBOC’s permit, which are prohibited by relevant Chinese Mainland laws and regulations.
As of December 31, 2022, we have not been subject to fines or other penalties, or suffered business or other reputational harm, as a result of actual or alleged money laundering or terrorist financing activities in the past.
As of December 31, 2023, we have not been subject to fines or other penalties, or suffered business or other reputational harm, as a result of actual or alleged money laundering or terrorist financing activities in the past.
Risks Relating to Our Corporate Structure We do not have direct ownership of some of our operating entities in China, but exercise control over the operating activities that most impact the economic performance, bear the risks of, enjoys the rewards normally associated with ownership of the entity, and consolidate the financial results of the VIEs in our consolidated financial statements in accordance with U.S.
Risks Relating to Our Corporate Structure We do not have direct ownership of some of our operating entities in Chinese Mainland, but exercise control over the operating activities that most impact the economic performance, bear the risks of, enjoys the rewards normally associated with ownership of the entity, and consolidate the financial results of the VIEs in our consolidated financial statements in accordance with U.S.
Almost all access to the Internet in China is maintained through state-owned telecommunication operators under the administrative control and regulatory supervision of the MIIT. We primarily rely on a limited number of telecommunication service providers to provide it with data communications capacity through local telecommunications lines and Internet data centers to host its servers.
Almost all access to the Internet in Chinese Mainland is maintained through state-owned telecommunication operators under the administrative control and regulatory supervision of the MIIT. We primarily rely on a limited number of telecommunication service providers to provide it with data communications capacity through local telecommunications lines and Internet data centers to host its servers.
If the PRC government determines that the VIE Agreements do not comply with PRC regulations, or if these regulations change or are interpreted differently in the future, our ADSs may decline in value or become worthless if the determinations, changes, or interpretations result in our inability to assert contractual control over the assets of our VIEs that conduct all or substantially all of our operations.
If the Chinese Mainland government determines that the VIE Agreements do not comply with Chinese Mainland regulations, or if these regulations change or are interpreted differently in the future, our ADSs may decline in value or become worthless if the determinations, changes, or interpretations result in our inability to assert contractual control over the assets of our VIEs that conduct all or substantially all of our operations.
Our business, results of operations, financial conditions and prospects could be materially adversely affected to the extent that COVID-19 harms the Chinese and global economy in general, and the trading price of our ADSs may be adversely affected. 18 Table of Contents Our platform requires adequate funding and access to adequate lending capital on terms acceptable to us cannot be assured.
Our business, results of operations, financial conditions and prospects could be materially adversely affected to the extent that COVID-19 harms the Chinese and global economy in general, and the trading price of our ADSs may be adversely affected. Our platform requires adequate funding and access to adequate lending capital on terms acceptable to us cannot be assured.
To comply with Circular 141, we cooperate with certain qualified institutional partners with the financing guarantee license to provide guarantees for certain loan products we facilitate. We cooperated with Shenzhen Xintang, our consolidated VIE, to provide guarantees for certain loan products that we facilitate in the past.
To comply with Circular 141, we cooperate with certain qualified institutional partners with the financing guarantee license to provide guarantees for certain loan products we facilitate. We cooperated with Shenzhen Xintang (VIE) to provide guarantees for certain loan products that we facilitate in the past.
In addition, the finding of a violation of the PRC Cybersecurity Law, Data Security Law and Outbound Data Transfer Security Assessment Measures, even if later repealed, may cause damages to our reputation and our brand name, causing users to lose confidence in our service and to refrain from choosing or continuing to use our products and services.
In addition, the finding of a violation of the Cybersecurity Law of the PRC, Data Security Law, Outbound Data Transfer Security Assessment Measures, and Measures for the Standard Contract, even if later repealed, may cause damages to our reputation and our brand name, causing users to lose confidence in our service and to refrain from choosing or continuing to use our products and services.
Holders of such intellectual property rights may seek to enforce such intellectual property rights against us in China, the United States or other jurisdictions. If any infringement claims are brought against us, we may be forced to divert management’s time and other resources from our business and operations to defend against these claims, regardless of their merits.
Holders of such intellectual property rights may seek to enforce such intellectual property rights against us in Chinese Mainland, the United States or other jurisdictions. If any infringement claims are brought against us, we may be forced to divert management’s time and other resources from our business and operations to defend against these claims, regardless of their merits.
These remedies may not always be effective, particularly in light of uncertainties in the PRC legal system. Furthermore, in connection with litigation, arbitration or other judicial or dispute resolution proceedings, assets under the name of any of the record holders of equity interest in our consolidated VIEs, including such equity interest, may be put under court custody.
These remedies may not always be effective, particularly in light of uncertainties in the Chinese Mainland legal system. Furthermore, in connection with litigation, arbitration or other judicial or dispute resolution proceedings, assets under the name of any of the record holders of equity interest in our consolidated VIEs, including such equity interest, may be put under court custody.
Further, at the press conference held for the Trial Measures on February 17, 2023, officials from the CSRC clarified that the PRC domestic companies that have already been listed overseas on or before the effective date of the Trial Measures (i.e. March 31, 2021) shall be deemed as existing issuers, or the Existing Issuers.
Further, at the press conference held for the Trial Measures on February 17, 2023, officials from the CSRC clarified that the Chinese Mainland domestic companies that have already been listed overseas on or before the effective date of the Trial Measures (i.e. March 31, 2021) shall be deemed as existing issuers, or the Existing Issuers.
To comply with PRC laws and regulations, we do not have an equity ownership interest in our VIEs but rely on the VIE Agreements with VIEs to control and operate their businesses. However, as discussed below, these VIE Agreements may not be effective from PRC laws in providing us with the necessary control over VIEs and their operations.
To comply with Chinese Mainland laws and regulations, we do not have an equity ownership interest in our VIEs but rely on the VIE Agreements with VIEs to control and operate their businesses. However, as discussed below, these VIE Agreements may not be effective from Chinese Mainland laws in providing us with the necessary control over VIEs and their operations.
If our consolidated VIEs or their shareholders fail to perform their respective obligations under these contractual arrangements, our recourse to the assets held by our consolidated VIEs is indirect and we may have to incur substantial costs and expend significant resources to enforce such arrangements in reliance on legal remedies under PRC law.
If our consolidated VIEs or their shareholders fail to perform their respective obligations under these contractual arrangements, our recourse to the assets held by our consolidated VIEs is indirect and we may have to incur substantial costs and expend significant resources to enforce such arrangements in reliance on legal remedies under Chinese Mainland law.
We are also subject to the risks and uncertainties about any future actions of the PRC government that could disallow our VIE structure, which would likely result in a material change in our operations and/or a material change in the value of our securities, including causing the value of such securities to significantly decline or become worthless.
We are also subject to the risks and uncertainties about any future actions of the Chinese Mainland government that could disallow the VIE structure, which would likely result in a material change in our operations and/or a material change in the value of our securities, including causing the value of such securities to significantly decline or become worthless.
The Personal Information Protection Law provides a comprehensive set of data privacy and protection requirements that apply to the processing of personal information and expands data protection compliance obligations to cover the processing of personal information of persons by organizations and individuals in China, and the processing of personal information of persons outside of China if such processing is for purposes of providing products and services to, or analyzing and evaluating the behavior of, persons in China.
The Personal Information Protection Law provides a comprehensive set of data privacy and protection requirements that apply to the processing of personal information and expands data protection compliance obligations to cover the processing of personal information of persons by organizations and individuals in Chinese Mainland, and the processing of personal information of persons outside of Chinese Mainland if such processing is for purposes of providing products and services to, or analyzing and evaluating the behavior of, persons in Chinese Mainland.
As these opinions were recently issued, official guidance and related implementation rules have not been issued yet and the interpretation of these opinions remains unclear at this stage. As of the date of this annual report, we have not received any inquiry, notice, warning, or sanctions from the CSRC or any other PRC government authorities.
As these opinions were recently issued, official guidance and related implementation rules have not been issued yet and the interpretation of these opinions remains unclear at this stage. As of the date of this annual report, we have not received any inquiry, notice, warning, or sanctions from the CSRC or any other Chinese Mainland government authorities.
The reliability, availability and satisfactory performance of our technology and our underlying network infrastructure are critical to our operations, user service, reputation and our ability to attract new and retain existing borrowers and institutional funding partners. Our information technology systems infrastructure is currently deployed and our data is currently maintained on customized computing services in China.
The reliability, availability and satisfactory performance of our technology and our underlying network infrastructure are critical to our operations, user service, reputation and our ability to attract new and retain existing borrowers and institutional funding partners. Our information technology systems infrastructure is currently deployed and our data is currently maintained on customized computing services in Chinese Mainland.
We may have limited access to alternative networks or services in the event of disruptions, failures or other problems with China’s Internet infrastructure or the fixed telecommunications networks provided by telecommunication service providers. With the expansion of our business, we may be required to upgrade our technology and infrastructure to keep up with increasing traffic.
We may have limited access to alternative networks or services in the event of disruptions, failures or other problems with Chinese Mainland’s Internet infrastructure or the fixed telecommunications networks provided by telecommunication service providers. With the expansion of our business, we may be required to upgrade our technology and infrastructure to keep up with increasing traffic.
Recently, the PRC government initiated a series of regulatory actions and statements to regulate business operations in China with little advance notice, including cracking down on illegal activities in the securities market, enhancing supervision over China-based companies listed overseas, adopting new measures to extend the scope of cybersecurity reviews and new laws and regulations related to data security, and expanding the efforts in anti-monopoly enforcement.
Recently, the Chinese Mainland government initiated a series of regulatory actions and statements to regulate business operations in Chinese Mainland with little advance notice, including cracking down on illegal activities in the securities market, enhancing supervision over Chinese Mainland-based companies listed overseas, adopting new measures to extend the scope of cybersecurity reviews and new laws and regulations related to data security, and expanding the efforts in anti-monopoly enforcement.
Pursuant to the Archives Rules, PRC domestic companies that seek overseas offering and listing shall strictly abide by applicable laws and regulations of the PRC and the Archives Rules, enhance legal awareness of keeping state secrets and strengthening archives administration, institute a sound confidentiality and archives administration system, and take necessary measures to fulfill confidentiality and archives administration obligations.
Pursuant to the Archives Rules, Chinese Mainland domestic companies that seek overseas offering and listing shall strictly abide by applicable laws and regulations of the Chinese Mainland and the Archives Rules, enhance legal awareness of keeping state secrets and strengthening archives administration, institute a sound confidentiality and archives administration system, and take necessary measures to fulfill confidentiality and archives administration obligations.
These opinions emphasized the need to strengthen the administration over illegal securities activities and the supervision on overseas listings by China-based companies and proposed to take effective measures, such as promoting the construction of relevant regulatory systems to deal with the risks and incidents faced by China-based overseas-listed companies.
These opinions emphasized the need to strengthen the administration over illegal securities activities and the supervision on overseas listings by Chinese Mainland-based companies and proposed to take effective measures, such as promoting the construction of relevant regulatory systems to deal with the risks and incidents faced by Chinese Mainland-based overseas-listed companies.
See “Item 4. Information on the Company—4.B. Business Overview—Regulation—Regulations Relating to Online Lending Information Services.” In December 2018, the relevant PRC regulatory authorities of the P2P lending industry issued the Circular on Making Efforts to Prevent Risk and Classify Online Lending Institutions, or the Circular 175.
See “Item 4. Information on the Company—4.B. Business Overview—Regulation—Regulations Relating to Online Lending Information Services.” In December 2018, the relevant Chinese Mainland regulatory authorities of the P2P lending industry issued the Circular on Making Efforts to Prevent Risk and Classify Online Lending Institutions, or the Circular 175.

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Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

99 edited+41 added−194 removed19 unchanged
Fair Value Adjustment Related to Consolidated Trusts Fair value adjustment related to the Consolidated Trusts consists of the net change in the fair value of loans and payables to investors in the Consolidated Trusts.
Fair Value Adjustment Related to Consolidated Trusts Fair value adjustment related to the Consolidated Trusts consists of the net change in the fair value of loans and payables to investors in the Consolidated Trusts.
Investing Activities Cash used in investing activities was RMB913.4 million (US$132.4 million) in 2022, which was primarily attributable to (i) an aggregate amount of RMB8,281.1 million (US$1,200.7 million) for the principal payment of loans at fair value and loans receivables under Consolidated trust and partnership model, and (ii) purchase of financial investments of RMB90.5 million (US$13.1 million), which partially offset by (i) an aggregate amount of RMB7,352.7 million (US$1066.0 million) for principal collection of loans at fair value and loans receivables under Consolidated trust and partnership model, and (ii) the collection of loans’ earnings rights from a related party of RMB100.0 million (US$14.5 million).
Cash used in investing activities was RMB913.4 million (US$132.4 million) in 2022, which was primarily attributable to (i) an aggregate amount of RMB8,281.1 million (US$1,200.7 million) for the principal payment of loans at fair value and loans receivables under Consolidated trust and partnership model, and (ii) purchase of financial investments of RMB90.5 million (US$13.1 million), which partially offset by (i) an aggregate amount of RMB7,352.7 million (US$1066.0 million) for principal collection of loans at fair value and loans receivables under Consolidated trust and partnership model, and (ii) the collection of loans’ earnings rights from a related party of RMB100.0 million (US$14.5 million).
In 2022, the difference between our cash provided by operating activities and our net income of RMB812.0 million (US$117.7 million) in 2022 resulted mainly from (i) the increase of accounts receivable and contract assets of RMB436.3 million (US$63.3 million),and (ii) the change of financial guarantee derivatives due to the lag between payments to the financing guarantee companies and the collection of monthly guarantee derivative of RMB223.9 million (US$32.5 million) , which were partially offsets by (i) the deferred tax benefits of RMB195.6 million (US$28.4 million), (ii) provisions for loans receivable from Xiaoying Credit Loans and other loans of RMB164.6 million (US$23.9 million), and(iii) the decrease in prepaid expenses and other current assets of RMB121.8 million (US$17.7 million) due to the decrease of prepaid expenses to various service providers in 2022.
In 2022, the difference between our cash provided by operating activities and our net income of RMB812.0 million (US$117.7 million) in 2022 resulted mainly from (i) the increase of accounts receivable and contract assets of RMB436.3 million (US$63.3 million),and (ii) the change of financial guarantee derivatives due to the lag between payments to the financing guarantee companies and the collection of monthly guarantee derivative of RMB223.9 million (US$32.5 million), which were partially offsets by (i) the deferred tax expenses of RMB195.6 million (US$28.4 million), (ii) provisions for loans receivable from Xiaoying Credit Loans and other loans of RMB164.6 million (US$23.9 million), and(iii) the decrease in prepaid expenses and other current assets of RMB121.8 million (US$17.7 million) due to the decrease of prepaid expenses to various service providers in 2022.
Cash used in investing activities was RMB2,347.6 million (US$368.4 million) in 2021, which was primarily attributable to (i) an aggregate amount of RMB6,531.7 million (US$1,025.0 million) for the principal payment of loans at fair value and loans receivables under Consolidated partnership model, and origination of loans receivables from Xiaoying Credit Loans and Xiaoying Revolving Loans which have been transferred but such transaction does not qualify for sale accounting, (ii) purchase of long-term investment of RMB315.0 million (US$49.4 million), (iii) purchase of financial investments of RMB112.8 million (US$17.7 million), and (iv) loan to a related party of RMB150.0 million (US$23.5 million), which partially offset by (i) an aggregate amount of RMB4,378.3 million (US$687.1 million) for principal collection of loans at fair value and loans receivables under Consolidated partnership model, sale and collection of loans receivables from Xiaoying Credit Loans and Xiaoying Revolving Loans of which have been transferred but such transaction does not qualify for sale accounting, (ii) the collection of loans’ earnings rights from a related party of RMB160.0 million (US$25.1 million), and (iii) loan repayment from a related party of RMB150.0 million (US$23.5 million).
Cash used in investing activities was RMB2,347.6 million (US$368.4 million) in 2021, which was primarily attributable to (i) an aggregate amount of RMB6,531.7 million (US$1,025.0 million) for the principal payment of loans at fair value and loans receivables under Consolidated partnership model, and origination of loans receivables from Xiaoying Credit Loans and other loans which have been transferred but such transaction does not qualify for sale accounting, (ii) purchase of long-term investment of RMB315.0 million (US$49.4 million), (iii) purchase of financial investments of RMB112.8 million (US$17.7 million), and (iv) loan to a related party of RMB150.0 million (US$23.5 million), which partially offset by (i) an aggregate amount of RMB4,378.3 million (US$687.1 million) for principal collection of loans at fair value and loans receivables under Consolidated partnership model, sale and collection of loans receivables from Xiaoying Credit Loans and other loans of which have been transferred but such transaction does not qualify for sale accounting, (ii) the collection of loans’ earnings rights from a related party of RMB160.0 million (US$25.1 million), and (iii) loan repayment from a related party of RMB150.0 million (US$23.5 million).
Loan facilitation service fees under the intermediary model decreased from RMB0.2 million in 2021 to nil in 2022, due to the fact that all of the institutional funding partners invested their funds in the loans facilitated under the direct model and/or the trust model, depending on their investment strategies.
Loan facilitation service fees under the intermediary model decreased from RMB0.2 million in 2021 to nil in 2022, due to the fact that all of the institutional funding partners invested their funds in the loans facilitated and/or the trust model, depending on their investment strategies.
We will continue to diversify our funding sources, expand our loan product mix and enhance our risk management to support our business growth. Size of Borrower Base and Engagement Our revenues are dependent on our ability to acquire new borrowers and retain existing borrowers.
We will continue to diversify our funding sources, expand our loan product and service mix, and enhance our risk management to support our business growth. Size of Borrower Base and Engagement Our revenues are dependent on our ability to acquire new borrowers and retain existing borrowers.
Trend Information Other than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events for the year ended December 31, 2022 that are reasonably likely to have a material and adverse effect on our net revenues, income, profitability, liquidity or capital resources, or that would cause the disclosed financial information to be not necessarily indicative of future results of operations or financial condition. 5.E.
Trend Information Other than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events for the year ended December 31, 2023 that are reasonably likely to have a material and adverse effect on our net revenues, income, profitability, liquidity or capital resources, or that would cause the disclosed financial information to be not necessarily indicative of future results of operations or financial condition. 5.E.
In 2021, the difference between our cash provided by operating activities and our net income of RMB825.4 million (US$129.5 million) in 2021 resulted mainly from (i) the increase in loans receivable from Xiaoying Credit Loans and Xiaoying Revolving Loans of RMB890.4 million (US$139.7 million) provided by our own fund from our microcredit business, (ii) the increase of deposits to institutional cooperators of RMB584.2 million (US$91.7 million), and (iii) the increase of accounts receivable and contract assets of RMB411.4 million (US$64.6 million), which were partially offsets by (i) the change of financial guarantee derivatives due to the lag between payments to the financing guarantee companies and the collection of monthly guarantee derivative of RMB551.3 million (US$86.5 million), (ii) the deferred tax benefits of RMB333.4 million (US$52.3 million), and (iii) the change in fair value of financial guarantee derivative of RMB170.3 million (US$26.7 million).
In 2021, the difference between our cash provided by operating activities and our net income of RMB825.4 million (US$129.5 million) in 2021 resulted mainly from (i) the increase in loans receivable from Xiaoying Credit Loans and other loans of RMB890.4 million (US$139.7 million) provided by our own fund from our microcredit business, (ii) the increase of deposits to institutional cooperators of RMB584.2 million (US$91.7 million), and (iii) the increase of accounts receivable and contract assets of RMB411.4 million (US$64.6 million), which were partially offsets by (i) the change of financial guarantee derivatives due to the lag between payments to the financing guarantee companies and the collection of monthly guarantee derivative of RMB551.3 million (US$86.5 million), (ii) the deferred tax expenses of RMB333.4 million (US$52.3 million), and (iii) the change in fair value of financial guarantee derivative of RMB170.3 million (US$26.7 million).
Loan Performance Delinquency Rate by Balance We define delinquency rate as the balance of the outstanding principal and accrued outstanding interest for loans that were 31 to 60 days past due as a percentage of the total balance of outstanding principal and accrued outstanding interest for the loans we facilitated as of a specific date.
Loan Performance Delinquency Rate by Balance of Xiaoying Credit Loan We define delinquency rate as the balance of the outstanding principal and accrued outstanding interest for loans that were 31 to 60 days past due as a percentage of the total balance of outstanding principal and accrued outstanding interest for the loans we facilitated as of a specific date.
Key Factors Affecting Our Results of Operations Economic Conditions and Regulatory Environment in China The demand for personal finance services from prime borrowers depends on the overall economic conditions in China. General economic factors, including the interest rate environment and unemployment rates, may have impacts on borrowers’ willingness to seek loans.
Operating Results Key Factors Affecting Our Results of Operations Economic Conditions and Regulatory Environment in China The demand for personal finance services from prime borrowers depends on the overall economic conditions in Chinese Mainland. General economic factors, including the interest rate environment and unemployment rates, may have impacts on borrowers’ willingness to seek loans.
Our actual results may differ materially from those we currently anticipate as a result of many factors, including those we describe under “Item 3.D. Risk Factors” and elsewhere in this annual report on Form 20-F. 107 Table of Contents 5.A.
Our actual results may differ materially from those we currently anticipate as a result of many factors, including those we describe under “Item 3.D. Risk Factors” and elsewhere in this annual report on Form 20-F. 5.A.
Under PRC law, each of our subsidiaries and variable interest entities is required to set aside at least 10% of its after-tax profits each year, if any, to fund certain statutory reserve funds until such reserve funds reach 50% of its registered capital.
Under Chinese Mainland’s law, each of our subsidiaries and variable interest entities is required to set aside at least 10% of its after-tax profits each year, if any, to fund certain statutory reserve funds until such reserve funds reach 50% of its registered capital.
For the loans facilitated that we collected service fee indirectly through external financing guarantee company or directly from institutional funding partner,our transaction price includes variable consideration in the form of default risk of the borrowers and prepayment risk of the borrowers.
Variable considerations of revenue recognition For the loans facilitated that we collected service fee indirectly through external financing guarantee company or directly from institutional funding partner, our transaction price includes variable consideration in the form of default risk of the borrowers and prepayment risk of the borrowers.
In addition, each of our subsidiaries may allocate a portion of its after-tax profits based on PRC accounting standards to enterprise expansion funds and staff bonus and welfare funds at its discretion, and our variable interest entity may allocate a portion of its after-tax profits based on PRC accounting standards to a discretionary surplus fund at its discretion.
In addition, each of our subsidiaries may allocate a portion of its after-tax profits based on Chinese Mainland’s accounting standards to enterprise expansion funds and staff bonus and welfare funds at its discretion, and our variable interest entity may allocate a portion of its after-tax profits based on Chinese Mainland’s accounting standards to a discretionary surplus fund at its discretion.
Due to the relatively short history of online personal finance industry in China, a comprehensive regulatory framework governing our industry is under development by the PRC government. See “ Item 3. Key Information—3.D. Risk Factors—Risks Relating to Our Business and Industry ” for details.
Due to the relatively short history of online personal finance industry in Chinese Mainland, a comprehensive regulatory framework governing our industry is under development by the Chinese Mainland government. See “ Item 3. Key Information—3.D. Risk Factors—Risks Relating to Our Business and Industry ” for details.
The statutory reserve funds and the discretionary funds are not distributable as cash dividends. Remittance of dividends by a wholly foreign-owned company out of China is subject to examination by the banks designated by SAFE.
The statutory reserve funds and the discretionary funds are not distributable as cash dividends. Remittance of dividends by a wholly foreign-owned company out of Chinese Mainland is subject to examination by the banks designated by SAFE.
In 2020, 2021 and 2022, we have facilitated RMB29,676 million, RMB51,859 million and RMB73,655 million of loans on our platform, respectively. We are a leading player in the online personal finance industry. To date, we rely on attractive fee rates, products and services to acquire new borrowers. We also utilize various marketing efforts to attract and retain borrowers.
In 2021, 2022 and 2023, we have facilitated RMB51,859 million, RMB73,655 million and RMB105,557 million of loans on our platform, respectively. We are a leading player in the online personal finance industry. To date, we rely on attractive fee rates, products and services to acquire new borrowers. We also utilize various marketing efforts to attract and retain borrowers.
Our loans at fair value decreased from RMB1,585.7 million as of December 31, 2020 to RMB389.7 million as of December 31, 2021. Deposits to institutional cooperator,net. Deposits to cooperators relate to the pledged cash to our financial institutional cooperators and the amount of deposit is separately agreed with each institutional cooperator.
Our loans at fair value decreased from RMB389.7 million as of December 31, 2021 to RMB120.3 million as of December 31. Deposits to institutional cooperator,net. Deposits to cooperators relate to the pledged cash to our financial institutional cooperators and the amount of deposit is separately agreed with each institutional cooperator.
We intend to optimize our fraud detection capabilities, improve accuracy of our credit scoring model and enhance our collection effectiveness on a continuing basis through the combination of our big-data analytical capabilities and the increasing amount of data we accumulate through our operations. See “Item 4. Information on the Company—4.B.
We intend to optimize our fraud detection capabilities, improve accuracy of our credit scoring model and enhance our collection effectiveness on a continuing basis through the combination of our big-data analytical capabilities and the increasing amount of data we accumulate through our operations. See “Item 4. Information on the Company—4.B. Business Overview—Risk Management” for details.
The delinquency rate for all outstanding loans on our platform that were 31-60 days past due increased from 0.79% as of December 31, 2020 to 1.48% as of December 31, 2021, and then decreased to 1.02% as of December 31, 2022.
The delinquency rate for all outstanding loans on our platform that were 31-60 days past due decreased from 1.48% as of December 31, 2021 to 1.02% as of December 31, 2022, and then increased to 1.57% as of December 31, 2023.
Financing Income Financing income increased from RMB671.9 million in 2021 to RMB966.3 million (US$140.1 million) in 2022, primarily due to an increase in average loan balances compared with 2021 Other Revenue Other revenue increased from RMB93.4 million in 2021 to RMB179.9 million (US$26.1 million) in 2022, primarily due to an increase in referral service fee for introducing borrowers to other platforms and an increase in technology service fees received for providing assistant technology development services. 115 Table of Contents Operating Expenses The following table sets forth our operating expenses, both in absolute amount and as a percentage of our total revenues, for the periods presented. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, ​ ​ 2021 ​ 2022 ​ RMB % RMB US$ % ​ ​ (in thousands, except for percentages) Operating costs and expenses: ​ Origination and servicing 1,963,006 54.1 % 2,126,742 308,349 59.7 % General and administrative 187,858 5.2 % 171,524 24,869 4.8 % Sales and marketing 20,830 0.6 % 15,448 2,240 0.4 % (Reversal of) provision for contingent guarantee liabilities (24) (0.0) % (14,000) (2,030) (0.4) % Provision for accounts receivable and contract assets 77,248 2.1 % 21,836 3,166 0.6 % (Reversal of) provision for loan receivable from Xiaoying Housing Loans (378) (0.0) % (6,066) (879) (0.2) % Provision for loans receivable from Xiaoying Credit Loans and other loans 76,395 2.1 % 164,642 23,871 4.6 % (Reversal of) provision for credit losses on deposits to institutional cooperators (8,291) (0.2) % 1,296 188 0.0 % Reversal of provision for credit losses for other financial assets (1,223) (0.0) % (765) (111) (0.0) % Total operating expenses 2,315,421 63.9 % 2,480,657 359,663 69.5 % ​ Origination and servicing expenses Origination and servicing expenses increased from RMB1,963.0 million in 2021 to RMB2,126.7 million (US$308.3 million) in 2022, primarily due to the following factors: (i) an increase in commission fees resulting from the increase in total loan amount facilitated and originated this year, (ii) an increase in interest expenses as a result of an increase in payable to institutional funding partners and investors, and (iii) partially offset by a decrease in insurance fee paid to insurance company.
Operating Expenses The following table sets forth our operating expenses, both in absolute amount and as a percentage of our total revenues, for the periods presented. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, ​ ​ 2021 2022 ​ RMB % RMB US$ % ​ ​ (in thousands, except for percentages) Operating costs and expenses: Origination and servicing 1,963,006 ​ 54.1 % 2,126,742 ​ 308,349 ​ 59.7 % General and administrative 187,858 ​ 5.2 % 171,524 ​ 24,869 ​ 4.8 % Sales and marketing 20,830 ​ 0.6 % 15,448 ​ 2,240 ​ 0.4 % (Reversal of) provision for contingent guarantee liabilities (24) ​ (0.0) % (14,000) ​ (2,030) ​ (0.4) % Provision for accounts receivable and contract assets 77,248 ​ 2.1 % 21,836 ​ 3,166 ​ 0.6 % (Reversal of) provision for loan receivable from Xiaoying Housing Loans (378) ​ (0.0) % (6,066) ​ (879) ​ (0.2) % Provision for loans receivable from Xiaoying Credit Loans and other loans 76,395 ​ 2.1 % 164,642 ​ 23,871 ​ 4.6 % (Reversal of) provision for credit losses on deposits to institutional cooperators (8,291) ​ (0.2) % 1,296 ​ 188 ​ 0.0 % Reversal of provision for credit losses for other financial assets (1,223) ​ (0.0) % (765) ​ (111) ​ (0.0) % Total operating expenses 2,315,421 ​ 63.9 % 2,480,657 ​ 359,663 ​ 69.5 % ​ ​ 120 Table of Contents Origination and Servicing Expenses Origination and servicing expenses increased from RMB1,963.0 million in 2021 to RMB2,126.7 million (US$308.3 million) in 2022, primarily due to the following factors: (i) an increase in commission fees resulting from the increase in total loan amount facilitated and originated this year, (ii) an increase in interest expenses as a result of an increase in payable to institutional funding partners and investors, and (iii) partially offset by a decrease in insurance fee paid to insurance company.
In addition, our wholly foreign-owned subsidiary in China is permitted to pay dividends to us only out of its retained earnings, if any, as determined in accordance with PRC accounting standards and regulations.
In addition, our wholly foreign-owned subsidiary in Chinese Mainland is permitted to pay dividends to us only out of its retained earnings, if any, as determined in accordance with Chinese Mainland’s accounting standards and regulations.
Liquidity and Capital Resources To date, we have financed our operations primarily through cash generated by operating activities and proceeds from issuance and sales of our shares. As of December 31, 2020, 2021 and 2022, we had RMB746.4 million, RMB584.8 million and RMB602.3 million (US$87.3 million), respectively, in cash and cash equivalents.
Liquidity and Capital Resources To date, we have financed our operations primarily through cash generated by operating activities and proceeds from issuance and sales of our shares. As of December 31, 2021, 2022 and 2023, we had RMB584.8 million, RMB602.3 million and RMB1,195.4 million (US$168.4 million), respectively, in cash and cash equivalents.
This may affect borrowers’ repayment capability and their willingness to seek loans, which may potentially affect the delinquency rates. 108 Table of Contents The regulatory environment for the online personal finance industry in China is developing and evolving, creating both challenges and opportunities that could affect our financial performance.
This may affect borrowers’ repayment capability and their willingness to seek loans, which may potentially affect the delinquency rates. The regulatory environment for the online personal finance industry in Chinese Mainland is developing and evolving, creating both challenges and opportunities that could affect our financial performance.
The incurrence of indebtedness would result in increased fixed obligations and could result in operating covenants that might restrict our operations. We cannot assure you that financing will be available in amounts or on terms acceptable to us, if at all.
The issuance and sale of additional equity would result in further dilution to our shareholders. The incurrence of indebtedness would result in increased fixed obligations and could result in operating covenants that might restrict our operations. We cannot assure you that financing will be available in amounts or on terms acceptable to us, if at all.
Loans that are delinquent for more than 60 days are charged-off and excluded in the calculation of delinquency rate by balance, except for Xiaoying Housing Loan.
Loans that are delinquent for more than 60 days are charged-off and excluded in the calculation of delinquency rate by balance.
In September 2018, we completed an initial public offering of 11,763,478 ADSs (including the ADSs sold upon the exercise of the over-allotment option granted to the underwriters), representing 23,526,956 Class A ordinary shares, resulting in net proceeds to us of approximately US$103.9 million. Our cash and cash equivalents solely consist of cash on hand.
In September 2018, we completed an initial public offering of 11,763,478 ADSs (including the ADSs sold upon the exercise of the over-allotment option granted to the underwriters), representing 23,526,956 Class A ordinary shares, resulting in net proceeds to us of approximately US$103.9 million.
China Our subsidiaries, VIEs and subsdiaries of the VIEs established in the PRC are subject to an income tax rate of 25% in the years presented.
Chinese Mainland Our subsidiaries, VIEs and subsdiaries of the VIEs established in the Chinese Mainland are subject to an income tax rate of 25% in the years presented.
Our payable to investors at fair value were RMB1,914.2 million and RMB462.7 million as of December 31, 2020 and 2021 respectively. Payable to investors and institutional funding partners at amortized cost. Payable to investors and institutional funding partners at amortized cost consist primarily of the proceeds received from the trust partners and investors through consolidated trust and partnerhips.
Our payable to investors at fair value were RMB462.7 million and RMB141.3 million as of December 31, 2021 and 2022, respectively. Payable to investors and institutional funding partners at amortized cost. Payable to investors and institutional funding partners at amortized cost consist primarily of the proceeds received from the trust partners and investors through consolidated trust and partnerhips.
Accounts receivable and contract assets consist primarily of the service fees earned from our customers. Our accounts receivable and contract assets increased from RMB747.5 million as of December 31, 2021 to RMB1,161.9 million (US$168.5 million) as of December 31, 2022, primarily due to an increase in the total loan amount facilitated of Xiaoying Card Loan in 2022 compared with 2021.
Accounts receivable and contract assets consist primarily of the service fees earned from our customers. Our accounts receivable and contract assets increased from RMB1,161.9 million as of December 31, 2022 to RMB1,659.6 million (US$233.7 million) as of December 31, 2023, primarily due to an increase in the total loan amount facilitated of Xiaoying Card Loan in 2023 compared with 2022.
For most of newly facilitated Xiaoying Card Loans and other loans, our exposure is limited to the contractual guarantee fee that we cannot collect under the agreement from the borrower as a result of default or prepayment but are still obligated to compensate our financial institutional cooperators based on the contractual guarantee fee up to the pre-agreed cap.
From September 2017, our exposure for loans newly facilitated is limited to the contractual guarantee fee that we cannot collect under the agreement from the borrower, through Shenzhen Xintang (VIE), as a result of default or prepayment but are still obligated to compensate our financial institutional cooperators based on the contractual guarantee fee up to the pre-agreed cap.
We are also subject to surcharges on VAT payments in accordance with PRC law. VAT has been phased in since May 2012 to replace the business tax that was previously applicable to the services we provide.
We are also subject to surcharges on VAT payments in accordance with Chinese Mainland law. VAT has been phased in since May 2012 to replace the business tax that was previously applicable to the services we provide. During the periods presented, we were not subject to business tax on the services we provide.
Our loans at fair value decreased from RMB389.7 million as of December 31, 2021 to RMB120.3 million (US$17.4 million) as of December 31, 2022, primarily due to the termination of a portion of the Consolidated Trusts administered by unrelated third party trust companies that were offered to investors through our Consolidated Trust business.
Our loans at fair value decreased from RMB120.3 million as of December 31, 2022 to nil as of December 31, 2023, primarily due to the termination of the Consolidated Trusts administered by unrelated third party trust companies that were offered to investors through our Consolidated Trust business.
During the periods presented, we were not subject to business tax on the services we provide. 122 Table of Contents Dividends paid by our wholly foreign-owned subsidiary in China to our intermediary holding company in Hong Kong will be subject to a withholding tax rate of 10%, unless the relevant Hong Kong entity satisfies all the requirements under the Arrangement between the PRC and the Hong Kong Special Administrative Region on the Avoidance of Double Taxation and Prevention of Fiscal Evasion with respect to Taxes on Income and Capital and receives approval from the relevant tax authority.
Dividends paid by our wholly foreign-owned subsidiary in Chinese Mainland to our intermediary holding company in Hong Kong will be subject to a withholding tax rate of 10%, unless the relevant Hong Kong entity satisfies all the requirements under the Arrangement between the Chinese Mainland and the Hong Kong Special Administrative Region on the Avoidance of Double Taxation and Prevention of Fiscal Evasion with respect to Taxes on Income and Capital and receives approval from the relevant tax authority.
In 2020, 4.7% of the total funding for loans we facilitated were provided by individual investors, 95.3% were provided by institutional funding partners. In 2021, 98.0% of the total funding for loans we facilitated were provided by institutional funding partners, 2.0% were provided by our own funds.
In 2021, 98.0% of the total funding for loans we facilitated were provided by institutional funding partners, 2.0% were provided by our own funds. In 2022, 97.3% of the total funding for loans we facilitated were provided by institutional funding partners, 2.7% were provided by our own funds.
Our payable to investors and institutional funding partners at amortized cost was RMB1,487.4 million and RMB2,627.9 million (US$381.0 million) as of December 31, 2021 and 2022 respectively, primarily due to an increase in the transaction volume in 2022.
Our payable to investors and institutional funding partners at amortized cost was RMB2,627.9 million and RMB3,584.0 million (US$504.8 million) as of December 31, 2022 and 2023 respectively, primarily due to an increase in the transaction volume in 2023.
Hong Kong Our subsidiary incorporated in Hong Kong is subject to Hong Kong profit tax at a rate of 16.5%. No Hong Kong profit tax has been levied as we did not have assessable profit that was earned in or derived from the Hong Kong subsidiary during the periods presented. Hong Kong does not impose a withholding tax on dividends.
No Hong Kong profit tax has been levied as we did not have assessable profit that was earned in or derived from the Hong Kong subsidiary during the periods presented. Hong Kong does not impose a withholding tax on dividends.
Substantially all of our financing guarantee partners have at least AA+ credit rating issued by rating companies including China Lianhe Credit Rating Co., Ltd., China Chengxin Credit Management Co., Ltd., Shenzhen Lianhe Credit Information Service Co., Ltd and Fujian China Chengxin Credit Rating Consulting Co., Ltd.
Substantially all of our financial institutional cooperators have at least AA credit rating issued by rating companies including China Lianhe Credit Rating Co., Ltd., China Chengxin Credit Management Co., Ltd., Xiamen Lianhe Credit Information Service Co., Ltd and Fujian China Chengxin Credit Rating Consulting Co., Ltd.
Other Revenue Other revenue increased from RMB68.3 million in 2020 to RMB93.4 million (US$14.7 million) in 2021, primarily due to an increase in technology service fees received for providing assistant technology development services and referral service fee for introducing borrowers to other platforms.
Other Revenue Other revenue increased from RMB93.4 million in 2021 to RMB179.9 million (US$26.1 million) in 2022, primarily due to an increase in referral service fee for introducing borrowers to other platforms and an increase in technology service fees received for providing assistant technology development services.
Our loans receivable from Xiaoying Credit Loans and other loans increased from RMB2,484.1million as of December 31, 2021 to RMB3,810.4 million (US$552.5 million) as of December 31, 2022, primarily due to an increase in loans facilitated through Consolidated Trusts and Partnerships and an increase in loans provided by our own fund from our microcredit business.
Our loans receivable from Xiaoying Credit Loans and other loans increased from RMB3,810.4 million as of December 31, 2022 to RMB4,947.8 million (US$696.9 million) as of December 31, 2023, primarily due to an increase in loans facilitated through Consolidated Trusts and Partnerships and an increase in loans provided by our own fund from our microcredit business.
Our payable to investors at fair value were RMB462.7 million and RMB141.3 million (US$20.5 million) as of December 31, 2021 and 2022 respectively, primarily due to the termination of a portion of the Consolidated Trusts administered by unrelated third party trust companies that were offered to investors and institutional funding partners through our Consolidated Trust business.
Payable to investors at fair value decreased from RMB141.3 million as of December 31, 2022 to nil as of December 31, 2023, primarily due to the termination of the Consolidated Trusts administered by unrelated third party trust companies that were offered to investors and institutional funding partners through our Consolidated Trust business.
The number of active borrowers on our platform increased from 1,663,737 borrowers in 2020 to 2,371,537 borrowers in 2021, and then further increased to 3,326,774 borrowers in 2022, of which 1,000,714 or 60.1% , 1,543,794 or 65.1% , and 2,100,641 or 63.1% were new borrowers, respectively.
The number of active borrowers on our platform increased from 2,371,537 borrowers in 2021 to 3,326,774 borrowers in 2022, and then further increased to 4,495,997 borrowers in 2023, of which 1,543,794 or 65.1%, 2,100,641 or 63.1%, and 2,853,149 or 63.5% were new borrowers, respectively.
Our loans receivable from Xiaoying Credit Loans and other loans increased from RMB1,236.0 million as of December 31, 2020 to RMB2,484.1 million as of December 31, 2021. Loans at fair value . Loans at fair value consist primarily of the loans underlying our Consolidated Trusts.
Our loans receivable from Xiaoying Credit Loans and other loans increased from RMB2,484.1 million as of December 31, 2021 to RMB3,810.4 million as of December 31, 2022. 122 Table of Contents Loans at fair value. Loans at fair value consist primarily of the loans underlying our Consolidated Trusts.
If we determine that our cash requirements exceed the amount of cash and cash equivalents we have on hand at the time, we may seek to issue equity or debt securities or obtain credit facilities. The issuance and sale of additional equity would result in further dilution to our shareholders.
We may, however, need additional capital in the future to fund our continued operations. If we determine that our cash requirements exceed the amount of cash and cash equivalents we have on hand at the time, we may seek to issue equity or debt securities or obtain credit facilities.
Our payable to investors and institutional funding partners at amortized cost were RMB1,460.4 million and RMB1,487.4 million as of December 31, 2020 and 2021 respectively. 121 Table of Contents Financial Guarantee Derivative.
Our payable to investors and institutional funding partners at amortized cost was RMB1,487.4 million and RMB2,627.9 million as of December 31, 2021 and 2022 respectively. Financial Guarantee Derivative.
The derivative liability is increased by the guarantee fees collected from the borrowers upon receipt as we expect all the fees to be ultimately paid to our financial institutional cooperators. When we settle the guarantee liability through performance of the guarantee by making payments to our financial institutional cooperators, we record a corresponding deduction to the derivative liability.
The financial guarantee is accounted for as a derivative. The derivative liability is increased by the guarantee fees collected from the borrowers upon receipt as we expect all the fees to be ultimately paid to our financial institutional cooperators.
Holding Company Structure X Financial is a holding company with no material operations of its own. We conduct our operations primarily through our Beijing WFOE and its subsidiaries, variable interest entities and its subsidiaries in China. As a result, X Financial’s ability to pay dividends depends upon dividends paid by Beijing WFOE.
We conduct our operations primarily through our Beijing WFOE and its subsidiaries, variable interest entities and its subsidiaries in Chinese Mainland. As a result, X Financial’s ability to pay dividends depends upon dividends paid by Beijing WFOE.
Taxation Cayman Islands We are incorporated in the Cayman Islands. The Cayman Islands currently have no income, corporation or capital gains tax and no estate duty, inheritance tax or gift tax. The Cayman Islands does not impose a withholding tax on payments of dividends to shareholders.
The Cayman Islands currently have no income, corporation or capital gains tax and no estate duty, inheritance tax or gift tax. The Cayman Islands does not impose a withholding tax on payments of dividends to shareholders. Hong Kong Our subsidiary incorporated in Hong Kong is subject to Hong Kong profit tax at a rate of 16.5%.
Provision for loans receivable from Xiaoying Credit Loans and other loans Provision for loan receivables from Xiaoying Credit Loans and other loans increased from RMB76.4 million in 2021 to RMB164.6 million (US$23.9 million) in 2022, primarily due to an increase in loans receivable held by us as a result of the increase in the total loan amount facilitated and originated this year compared with 2021. 116 Table of Contents Change in Fair Value of Financial Guarantee Derivative Change in fair value of financial guarantee derivative in 2022 was a fair value gain of RMB137.7 million (US$20.0 million), compared with a fair value loss of RMB170.3 million in 2021, primarily due to the fair value gain realized as a result of the release of guarantee obligation in 2022.
Provision for loans receivable from Xiaoying Credit Loans and other loans Provision for loan receivables from Xiaoying Credit Loans and other loans increased from RMB76.4 million in 2021 to RMB164.6 million (US$23.9 million) in 2022, primarily due to an increase in loans receivable held by us as a result of the increase in the total loan amount facilitated and originated this year compared with 2021.
At the end of 2019, we ceased funding our loan products from our individual investors through Xiaoying Wealth Management platform. We actively expanded institutional funding, such as banks, consumer finance companies, trust companies and other institutions, and achieved 100% institutional funding for the new loans facilitated by the end of the second quarter of 2020.
We actively expanded institutional funding, such as banks, consumer finance companies, trust companies and other institutions, and achieved 100% institutional funding for the new loans facilitated by the end of the second quarter of 2020.
The delinquency rate for all outstanding loans on our platform that were 31-90 days past due increased from 1.50% as of December 31, 2020 to 2.65% as of December 31, 2021, and then decreased to 1.79% as of December 31, 2022.
The delinquency rate for Xiaoying Credit Loan that were 31-90 days past due decreased from 2.65% as of December 31, 2021 to 1.79% as of December 31, 2022, and then increased to 2.81% as of December 31, 2023.
As of December 31, 2020, 2021 and 2022, financial guarantee derivatives has an asset position of RMB297.9 million, RMB11.8 million and nil,respectively, primarily due to the time lag between the payments to certain financial institutional cooperators and the collection of monthly guarantee service fees from borrowers.
As of December 31, 2021, financial guarantee derivatives had an asset position of RMB11.8 million, primarily due to the time lag between the payments to certain financial institutional cooperators and the collection of monthly guarantee service fees from borrowers. The cumulative amount paid to those financial institutional cooperators was greater than the cumulative monthly guarantee service fees collected from borrowers.
Financial guarantee derivatives Starting from September 2017, for newly facilitated Xiaoying Credit Loans and Xiaoying Revolving Loans, we entered into a series of arrangements with various financial institutional cooperators in which it has agreed that our exposure is limited to the contractual guarantee fee that we cannot collect under the agreement from the borrower as a result of default or prepayment but are still obligated to compensate those financial institutional cooperators based on the contractual guarantee fee up to the pre-agreed cap.
Change in Fair Value of Financial Guarantee Derivative From September 2017, our exposure for loans newly facilitated is limited to the contractual guarantee fee that we cannot collect under the agreement from the borrower, through Shenzhen Xintang (VIE), as a result of default or prepayment but are still obligated to compensate our financial institutional cooperators based on the contractual guarantee fee up to the pre-agreed cap.
The delinquency rate for Xiaoying Revolving Loan that were 31-60 days past due was 100% as of December 31, 2021, which is because the total balance of outstanding principal and accrued outstanding interest for loans that were 31 to 60 days past due equals the total balance of outstanding principal and accrued outstanding interest for the loans we facilitated. 111 Table of Contents To make the delinquency rate by balance comparable to our peers, we also define the delinquency rate as the balance of the outstanding principal and accrued outstanding interest for loans that were 31 to 90 and 91 to 180 days past due as a percentage of the total balance of outstanding principal and accrued outstanding interest for the loans we facilitated as of a specific date.
The following table provides the delinquency rates for Xiaoying Credit Loan as of the respective dates indicated. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ 2021 2022 2023 Delinquent for 31-60 days 1.48 % 1.02 % 1.57 % ​ To make the delinquency rate by balance comparable to our peers, we also define the delinquency rate as the balance of the outstanding principal and accrued outstanding interest for loans that were 31 to 90 and 91 to 180 days past due as a percentage of the total balance of outstanding principal and accrued outstanding interest for the loans we facilitated as of a specific date.
A portion of guarantee fees will be subsequently paid to us by the external financing guarantee companies as the service fee. We may consider introducing other funding protection arrangements. We cannot assure you that new arrangements would be perceived by our financial institutional cooperators or institutional funding partners, which may have adverse impact on our business operations.
We may consider introducing other funding protection arrangements. We cannot assure you that new arrangements would be perceived by our financial institutional cooperators or institutional funding partners, which may have adverse impact on our business operations.
Loan Pricing Our revenue and profitability are subject to the terms of our loan products, including the rate of service fees or interest fees charged, loan durations and the size of loan products.
A change in our ability to attract or retain borrowers, or a change in the acquisition cost of such borrowers, may potentially affect our revenue and profitability. Loan Pricing Our revenue and profitability are subject to the terms of our loan products, including the rate of service fees or interest fees charged, loan durations and the size of loan products.
The delinquency rate for all outstanding loans on our platform that were 91-180 days past due increased from 2.53% as of December 31, 2020 to 2.62% as of December 31, 2021, and then decreased to 1.93% as of December 31, 2022.
The delinquency rate for Xiaoying Credit Loan that were 91-180 days past due decreased from 2.62% as of December 31, 2021 to 1.94% as of December 31, 2022, and then increased to 3.12% as of December 31, 2023.
Tabular Disclosure of Contractual Obligations The following table sets forth our contractual obligations, including interest payments, as of December 31, 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Payment Due by Period ​ ​ ​ ​ Less than 1 ​ ​ ​ ​ ​ More than 3 ​ Total year 1-2 years 2-3 years years ​ ​ (RMB in thousands) Contractual Obligations: Operating lease obligations (1) 74,284,767 ​ 16,425,020 ​ 16,829,056 ​ 15,561,821 ​ 25,468,870 Short-term borrowings ​ 71,938,127 ​ 71,938,127 ​ — ​ — ​ — Note: (1) Operating lease obligations represent our obligations for office premises, which include all future cash outflows under ASC Topic 842, Leases.
The following table sets forth our contractual obligations, including interest payments, as of December 31, 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Payment Due by Period ​ ​ ​ Less than 1 ​ ​ More than 3 ​ Total year 1-2 years 2-3 years years ​ ​ (RMB in thousands) Contractual Obligations: Operating lease obligations (1) 57,144,872 ​ 15,666,317 ​ 16,009,686 ​ 9,572,584 ​ 15,896,285 Short-term borrowings ​ 591,770,972 ​ 591,770,972 ​ — ​ — ​ — Note: (1) Operating lease obligations represent our obligations for office premises, which include all future cash outflows under ASC Topic 842, Leases.
We benefit from the protection of credit insurance or guarantee service which is provided by our financial institutional cooperators, including ZhongAn and external financing guarantee companies, to investors or institutional funding in the event of borrower’s default. ZhongAn is a listed company on Hong Kong Stock Exchange since September 2017.
We benefit from the protection of credit insurance or guarantee service which is provided by our financial institutional cooperators to investors or institutional funding in the event of borrower’s default.
Shenzhen Xintang will continue to guarantee the current outstanding loan products until their terms expire. We have expanded our cooperation with high-quality external financing guarantee companies that provide guarantee services to protect institutional funding partners from losses incurred from borrowers’ defaults and charge guarantee fees from borrowers.
We have expanded our cooperation with high-quality external financing guarantee companies that provide guarantee services to protect institutional funding partners from losses incurred from borrowers’ defaults and charge guarantee fees from borrowers. A portion of guarantee fees will be subsequently paid to us by the external financing guarantee companies as the service fee.
The following chart displays the historical cumulative 91-day plus past due delinquency rates by loan origination vintage for all continuing Xiaoying Credit Loan facilitated through our platform up to December 31, 2022, excluding the Xiaoying Professional Loan with a term of two to three years and the Xiaoying Preferred Loan with a term of three years.
Loans that have been charged-off are included in the calculation of vintage delinquency rates. The following chart displays the historical cumulative 91-day plus past due delinquency rates by loan origination vintage for all continuing Xiaoying Credit Loan facilitated through our platform up to December 31, 2023.
The results of operations in any period are not necessarily indicative of our future trends. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, ​ ​ 2020 ​ 2021 ​ 2022 ​ RMB % RMB % RMB US$ % ​ ​ (in thousands, except for percentages) Net revenues ​ Loan facilitation service—Direct Model 1,266,533 57.8 % 2,545,432 ​ 70.2 % 2,044,344 296,402 57.4 % Loan facilitation service- Intermediary Model 41,373 1.9 % 161 ​ 0.0 % — — — ​ Post-origination service 203,842 9.3 % 315,590 ​ 8.7 % 372,451 54,000 10.5 % Financing income 612,863 27.9 % 671,901 ​ 18.5 % 966,277 140,097 27.1 % Other revenue 68,346 3.1 % 93,381 ​ 2.6 % 179,878 26,080 5.0 % Total net revenue 2,192,957 100.0 % 3,626,465 ​ 100 % 3,562,950 516,579 100.0 % Operating costs and expenses: ​ ​ ​ ​ ​ ​ ​ Origination and servicing 2,071,506 94.4 % 1,963,006 ​ 54.1 % 2,126,742 308,349 59.7 % General and administrative 179,226 8.2 % 187,858 ​ 5.2 % 171,524 24,869 4.8 % Sales and marketing 35,629 1.6 % 20,830 ​ 0.6 % 15,448 2,240 0.4 % (Reversal of) provision for contingent guarantee liabilities 881 0.0 % (24) ​ (0.0) % (14,000) (2,030) (0.4) % Provision for accounts receivable and contract assets 121,485 5.5 % 77,248 ​ 2.1 % 21,836 3,166 0.6 % (Reversal of) provision for loan receivable from Xiaoying Housing Loans 17,994 0.8 % (378) ​ (0.0) % (6,066) (879) (0.2) % Provision for loans receivable from Xiaoying Credit Loans and other loans 227,210 10.4 % 76,395 ​ 2.1 % 164,642 23,871 4.6 % Impairment losses on deposits to institutional cooperators: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (Reversal of) provision for credit losses on deposits to institutional cooperators 10,318 0.5 % (8,291) ​ (0.2) % 1,296 188 0.0 % Impairment loss on deposits to institutional cooperators 960,000 43.8 % — ​ — ​ — — — ​ Reversal of provision of credit losses for other financial assets (975) 0.0 % (1,223) ​ (0.0) % (765) (111) (0.0) % Total operating expenses 3,623,274 165.2 % 2,315,421 ​ 63.9 % 2,480,657 359,663 69.5 % Income (loss) from operations (1,430,317) (65.2) % 1,311,044 ​ 36.1 % 1,082,293 156,916 30.5 % Interest income (expense), net 21,724 1.0 % 19,709 ​ 0.5 % 3,756 545 0.1 % Foreign exchange gain(loss) 15,399 0.7 % 5,147 ​ 0.1 % (19,963) (2,894) (0.6) % Income from financial investments — — ​ — ​ — ​ 20,900 3,030 0.6 % Impairment losses on financial investments — — ​ — ​ — ​ (8,875) (1,287) (0.2) % Impairment losses on long-term investments — — ​ — ​ — ​ (26,866) (3,895) (0.8) % Change in fair value of financial guarantee derivative (163,670) (7.5) % (170,339) ​ (4.7) % 137,654 19,958 3.9 % Fair value adjustments related to Consolidated Trusts (57,380) (2.6) % (7,267) ​ (0.2) % (6,168) (894) (0.2) % Other income (loss), net 12,710 0.6 % 32,506 ​ 1.0 % 40,724 5,904 1.1 % Income (Loss) before income taxes and gain (loss) from equity in affiliates (1,601,534) (73.0) % 1,190,800 ​ 32.8 % 1,223,455 177,383 34.4 % Income tax benefit (expense) ​ 299,879 ​ 13.7 % (368,735) ​ (10.2) % (389,358) ​ (56,452) ​ (10.9) % Gain (loss) from equity in affiliates, net of tax ​ (6,806) ​ (0.3) % 3,342 ​ 0.1 % (22,102) ​ (3,204) ​ (0.6) % Net income (loss) (1,308,461) (59.6) % 825,407 ​ 22.7 % 811,995 117,727 22.9 % 114 Table of Contents Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 Net Revenues The following table sets forth the breakdown of our net revenues, both in absolute amount and as a percentage of our total net revenues, for the periods presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, ​ ​ ​ 2021 ​ 2022 ​ ​ RMB % RMB US$ % ​ ​ ​ (in thousands, except for percentages) ​ Net revenues ​ Loan facilitation service—Direct Model 2,545,432 70.2 % 2,044,344 296,402 57.4 % Loan facilitation service—Intermediary Model 161 0.0 % — — — % Post-origination service 315,590 8.7 % 372,451 54,000 10.5 % Financing income 671,901 18.5 % 966,277 140,097 27.1 % Other revenue 93,381 2.6 % 179,878 26,080 5.0 % Total net revenue 3,626,465 100 % 3,562,950 516,579 100.0 % ​ Loan Facilitation Service-Direct Model and Loan Facilitation Service-Intermediary Model Loan facilitation service fees under the direct model decreased from RMB2,545.4 million in 2021 to RMB2,044.3 million (US$296.4 million) in 2022, primarily due to a decrease in average total borrowing cost of the borrowers; and also partially offset by an increase in the total loan amount facilitated this year compared with 2021.
The results of operations in any period are not necessarily indicative of our future trends. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, ​ ​ 2021 2022 2023 ​ RMB % RMB % RMB US$ % ​ ​ (in thousands, except for percentages) Net revenues ​ Loan facilitation service 2,545,593 ​ 70.2 % 2,044,344 ​ 57.4 % 2,740,974 ​ 386,058 ​ 56.9 % Post-origination service 315,590 ​ 8.7 % 372,451 ​ 10.5 % 596,582 ​ 84,027 ​ 12.4 % Financing income 671,901 ​ 18.5 % 966,277 ​ 27.1 % 1,137,336 ​ 160,190 ​ 23.6 % Guarantee income ​ — ​ — ​ — ​ — ​ 24,497 ​ 3,450 ​ 0.5 % Other revenue 93,381 ​ 2.6 % 179,878 ​ 5.0 % 315,495 ​ 44,436 ​ 6.6 % Total net revenue 3,626,465 ​ 100.0 % 3,562,950 ​ 100.0 % 4,814,884 ​ 678,161 ​ 100.0 % Operating costs and expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Origination and servicing 1,963,006 ​ 54.1 % 2,126,742 ​ 59.7 % 2,869,845 ​ 404,209 ​ 59.6 % General and administrative 187,858 ​ 5.2 % 171,524 ​ 4.8 % 186,515 ​ 26,270 ​ 3.9 % Sales and marketing 20,830 ​ 0.6 % 15,448 ​ 0.4 % 12,539 ​ 1,766 ​ 0.3 % (Reversal of) provision for contingent guarantee liabilities (24) ​ (0.0) % (14,000) ​ (0.4) % 67,520 ​ 9,510 ​ 1.4 % Provision for accounts receivable and contract assets 77,248 ​ 2.1 % 21,836 ​ 0.6 % 12,234 ​ 1,723 ​ 0.3 % Reversal of provision for loan receivable from Xiaoying Housing Loans (378) ​ (0.0) % (6,066) ​ (0.2) % (4,213) ​ (593) ​ (0.1) % Provision for loans receivable from Xiaoying Credit Loans and other loans 76,395 ​ 2.1 % 164,642 ​ 4.6 % 233,350 ​ 32,867 ​ 4.8 % Impairment losses on deposits to institutional cooperators: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (Reversal of) provision for credit losses on deposits to institutional cooperators (8,291) ​ (0.2) % 1,296 ​ 0.0 % (674) ​ (95) ​ (0.0) % (Reversal of) provision of credit losses for other financial assets (1,223) ​ (0.0) % (765) ​ (0.0) % 86 ​ 12 ​ 0.0 % Total operating expenses 2,315,421 ​ 63.9 % 2,480,657 ​ 69.5 % 3,377,202 ​ 475,669 ​ 70.1 % Income (loss) from operations 1,311,044 ​ 36.1 % 1,082,293 ​ 30.5 % 1,437,682 ​ 202,492 ​ 29.9 % Interest income (expense), net 19,709 ​ 0.5 % 3,756 ​ 0.1 % (20,365) ​ (2,868) ​ (0.4) % Foreign exchange gain(loss) 5,147 ​ 0.1 % (19,963) ​ (0.6) % (4,023) ​ (567) ​ (0.1) % Income (loss) from financial investments — ​ — ​ 20,900 ​ 0.6 % (12,225) ​ (1,722) ​ (0.3) % Impairment losses on financial investments — ​ — ​ (8,875) ​ (0.2) % — ​ — ​ — ​ Impairment losses on long-term investments — ​ — ​ (26,866) ​ (0.8) % (46,771) ​ (6,588) ​ (1.0) % Change in fair value of financial guarantee derivative (170,339) ​ (4.7) % 137,654 ​ 3.9 % 24,966 ​ 3,516 ​ 0.5 % Fair value adjustments related to Consolidated Trusts (7,267) ​ (0.2) % (6,168) ​ (0.2) % (531) ​ (75) ​ (0.0) % Other income, net 32,506 ​ 1.0 % 40,724 ​ 1.1 % 24,351 ​ 3,430 ​ 0.5 % Income before income taxes and gain (loss) from equity in affiliates 1,190,800 ​ 32.8 % 1,223,455 ​ 34.4 % 1,403,084 ​ 197,618 ​ 29.1 % Income tax expense ​ (368,735) ​ (10.2) % (389,358) ​ (10.9) % (249,438) ​ (35,133) ​ (5.2) % Gain (loss) from equity in affiliates, net of tax ​ 3,342 ​ 0.1 % (22,102) ​ (0.6) % 33,148 ​ 4,669 ​ 0.7 % Net income 825,407 ​ 22.7 % 811,995 ​ 22.9 % 1,186,794 ​ 167,154 ​ 24.6 % ​ ​ 116 Table of Contents Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 Net Revenues The following table sets forth the breakdown of our net revenues, both in absolute amount and as a percentage of our total net revenues, for the periods presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, ​ ​ ​ 2022 ​ 2023 ​ ​ RMB % RMB US$ % ​ ​ ​ (in thousands, except for percentages) ​ Net revenues ​ Loan facilitation service 2,044,344 ​ 57.4 % 2,740,974 ​ 386,058 ​ 56.9 % Post-origination service 372,451 ​ 10.5 % 596,582 ​ 84,027 ​ 12.4 % Financing income 966,277 ​ 27.1 % 1,137,336 ​ 160,190 ​ 23.6 % Guarantee income — ​ — ​ 24,497 ​ 3,450 ​ 0.5 % Other revenue 179,878 ​ 5.0 % 315,495 ​ 44,436 ​ 6.6 % Total net revenue 3,562,950 ​ 100.0 % 4,814,884 ​ 678,161 ​ 100.0 % ​ Loan Facilitation Service Loan facilitation service fees increased from RMB2,044.3 million in 2022 to RMB2,741.0 million (US$386.1 million) in 2023, primarily due to an increase in the total loan amount facilitated this year compared with 2022.
Risk Factors—Risks Relating to Doing Business in China—We may be treated as a resident enterprise for PRC tax purposes under the PRC Enterprise Income Tax Law, and we may therefore be subject to PRC income tax on our global income. ” Critical Accounting Policies, Judgments and Estimates We prepare our consolidated financial statements in accordance with U.S.
See “ Item 3. Key Information—3.D. Risk Factors—Risks Relating to Doing Business in China—We may be treated as a resident enterprise for Chinese Mainland tax purposes under the PRC Enterprise Income Tax Law, and we may therefore be subject to Chinese Mainland income tax on our global income. ” 5.B.
This information should be read together with our consolidated financial statements and related notes included elsewhere in this annual report. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, ​ ​ 2020 ​ 2021 ​ 2022 ​ RMB RMB RMB US$ ​ ​ (in thousands) Assets Cash and cash equivalents 746,388 ​ 584,762 ​ 602,271 ​ 87,321 Restricted cash 852,134 ​ 407,276 ​ 404,689 ​ 58,674 Accounts receivable and contract assets, net 413,307 ​ 747,480 ​ 1,161,912 ​ 168,461 Loans receivable from Xiaoying Credit Loans and other loans, net 1,236,026 ​ 2,484,073 ​ 3,810,393 ​ 552,455 Loan receivable from Xiaoying Housing Loans, net 47,490 ​ 12,083 ​ 10,061 ​ 1,459 Loans at fair value 1,585,732 ​ 389,679 ​ 120,280 ​ 17,439 Deposits to institutional cooperators, net 907,923 ​ 1,500,407 ​ 1,770,317 ​ 256,672 Prepaid expenses and other current assets, net 403,776 ​ 213,127 ​ 71,082 ​ 10,306 Financial guarantee derivative 297,928 ​ 11,817 ​ — ​ — Deferred tax assets, net 605,656 ​ 274,869 ​ 88,428 ​ 12,821 Long-term investments 295,615 ​ 560,038 ​ 495,995 ​ 71,913 Financial investments ​ 6,000 ​ 82,844 ​ 192,620 ​ 27,927 Property and equipment, net 11,137 ​ 6,188 ​ 5,861 ​ 850 Intangible assets, net 37,440 ​ 36,817 ​ 36,550 ​ 5,299 Other non-current assets 51,458 ​ 31,279 ​ 67,204 ​ 9,744 Total Assets 7,498,010 ​ 7,342,739 ​ 8,837,663 ​ 1,281,341 Liabilities ​ ​ ​ ​ ​ ​ ​ Payable to investors at fair value 1,914,184 ​ 462,714 ​ 141,289 ​ 20,485 Payable to investors and institutional funding partners at amortized cost 1,460,395 ​ 1,487,379 ​ 2,627,910 ​ 381,011 Guarantee liabilities 9,790 ​ — ​ — ​ — Financial guarantee derivative 130,442 ​ 565,953 ​ 107,890 ​ 15,643 Short-term borrowings 350,545 ​ 166,500 ​ 70,209 ​ 10,179 Accrued payroll and welfare 34,781 ​ 44,605 ​ 63,681 ​ 9,233 Other taxes payable 73,077 ​ 219,544 ​ 255,691 ​ 37,072 Income taxes payable 75,917 ​ 117,148 ​ 270,089 ​ 39,159 Deposit payable to channel cooperators 21,472 ​ 21,012 ​ 19,700 ​ 2,856 Accrued expenses and other current liabilities 323,748 ​ 268,967 ​ 476,035 ​ 69,019 Other non-current liabilities 27,615 ​ 12,022 ​ 51,193 ​ 7,422 Deferred tax liabilities — ​ — ​ 722 ​ 105 Total Liabilities 4,421,966 ​ 3,365,844 ​ 4,084,409 ​ 592,184 ​ Accounts receivable and contract assets, net.
This information should be read together with our consolidated financial statements and related notes included elsewhere in this annual report. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, ​ ​ 2021 ​ 2022 ​ 2023 ​ RMB RMB RMB ​ US$ ​ ​ (in thousands) Assets Cash and cash equivalents 584,762 ​ 602,271 ​ 1,195,352 ​ 168,362 Restricted cash 407,276 ​ 404,689 ​ 749,070 ​ 105,504 Accounts receivable and contract assets, net 747,480 ​ 1,161,912 ​ 1,659,588 ​ 233,748 Loans receivable from Xiaoying Credit Loans and other loans, net 2,484,073 ​ 3,810,393 ​ 4,947,833 ​ 696,888 Loan receivable from Xiaoying Housing Loans, net 12,083 ​ 10,061 ​ 8,657 ​ 1,219 Loans at fair value 389,679 ​ 120,280 ​ — ​ — Deposits to institutional cooperators, net 1,500,407 ​ 1,770,317 ​ 1,702,472 ​ 239,788 Prepaid expenses and other current assets, net 213,127 ​ 71,082 ​ 48,768 ​ 6,869 Financial guarantee derivative 11,817 ​ — ​ — ​ — Deferred tax assets, net 274,869 ​ 88,428 ​ 135,958 ​ 19,149 Long-term investments 560,038 ​ 495,995 ​ 493,411 ​ 69,496 Financial investments ​ 82,844 ​ 192,620 ​ 608,198 ​ 85,663 Property and equipment, net 6,188 ​ 5,861 ​ 8,642 ​ 1,217 Intangible assets, net 36,817 ​ 36,550 ​ 36,810 ​ 5,185 Other non-current assets 31,279 ​ 67,204 ​ 55,265 ​ 7,784 Total Assets 7,342,739 ​ 8,837,663 ​ 11,650,024 ​ 1,640,872 Liabilities ​ ​ ​ ​ ​ ​ ​ Payable to investors at fair value 462,714 ​ 141,289 ​ — ​ — Payable to investors and institutional funding partners at amortized cost 1,487,379 ​ 2,627,910 ​ 3,584,041 ​ 504,802 Guarantee liabilities — ​ — ​ 61,907 ​ 8,719 Financial guarantee derivative 565,953 ​ 107,890 ​ — ​ — Deferred guarantee income ​ — ​ — ​ 46,597 ​ 6,563 Short-term borrowings 166,500 ​ 70,209 ​ 565,000 ​ 79,579 Accrued payroll and welfare 44,605 ​ 63,681 ​ 86,771 ​ 12,221 Other taxes payable 219,544 ​ 255,691 ​ 289,821 ​ 40,820 Income taxes payable 117,148 ​ 270,089 ​ 446,500 ​ 62,888 Deposit payable to channel cooperators 21,012 ​ 19,700 ​ 19,700 ​ 2,775 Dividend payable ​ — ​ — ​ 59,226 ​ 8,342 Accrued expenses and other current liabilities 268,967 ​ 476,035 ​ 575,727 ​ 81,089 Other non-current liabilities 12,022 ​ 51,193 ​ 37,571 ​ 5,292 Deferred tax liabilities — ​ 722 ​ 30,040 ​ 4,231 Total Liabilities 3,365,844 ​ 4,084,409 ​ 5,802,901 ​ 817,321 ​ Accounts receivable and contract assets, net.
Net Income (Loss) As a result of the foregoing, our net income decreased from RMB825.4 million in 2021 to RMB812.0 million (US$117.7 million) in 2022.
Net Income (Loss) As a result of the foregoing, our net income decreased from RMB825.4 million in 2021 to RMB812.0 million (US$117.7 million) in 2022. 121 Table of Contents Discussion of Key Balance Sheet Items The following table sets forth selected information from our consolidated balance sheet as of December 31, 2021, 2022 and 2023.
Prepaid expenses and other current assets, net. Prepaid expenses and other current assets decreased from RMB213.1 million as of December 31, 2021 to RMB71.1 million (US$10.3 million) as of December 31, 2022, primarily due to the repayment of earnings rights associated with loan assets, amounting to RMB99.2 million and the decrease of prepaid expenses to various service providers in 2022.
Prepaid expenses and other current assets decreased from RMB71.1 million as of December 31, 2022 to RMB48.8 million (US$6.9 million) as of December 31, 2023, primarily due to the decrease of dividend receivable amounting to RMB15 million and the decrease of prepaid expenses to various service providers in 2023.
According to the National Bureau of Statistics of China, the year-over-year percent changes in the consumer price index for December 2020, 2021 and 2022 were increases of 0.2%, 1.5% and 1.8%, respectively. Although we have not been materially affected by inflation in the past, we may be affected if China experiences higher rates of inflation in the future.
According to the National Bureau of Statistics of China, the year-over-year percent changes in the consumer price index were increases of 1.5% and 1.8% for December 2021 and 2022, respectively, and decrease of 0.3% for December 2023.
We believe that our current cash and cash equivalents and our anticipated cash flows from operations and financing activities will be sufficient to meet our anticipated working capital requirements and capital expenditures for next 12 months. We may, however, need additional capital in the future to fund our continued operations.
Our cash and cash equivalents primarily consist of cash on hand, term deposits in banks and three-month U.S. treasury bills. We believe that our current cash and cash equivalents and our anticipated cash flows from operations and financing activities will be sufficient to meet our anticipated working capital requirements and capital expenditures for next 12 months.
Cash used in investing activities was RMB3,704.8 million (US$567.8 million) in 2020, which was primarily attributable to sale and collection of loans receivables from Xiaoying Credit Loans and Xiaoying Revolving Loans and principal collection of loans at fair value of RMB9,762.5 million (US$1,496.2 million) and the collection of loans’ earnings rights from a related party, partially offset by principal payment of loans at fair value and origination of loans receivables from Xiaoying Credit Loans and Xiaoying Revolving Loans of RMB5,952.5 million (US$912.3 million). 135 Table of Contents Financing Activities Cash provided by financing activities was RMB576.4 million (US$83.6 million) in 2022, which was attributable to by cash receipt from investors and institutional funding partners of RMB2,595.8 million (US$376.4 million) and proceeds from short-term borrowings of RMB70.2 million (US$10.2 million) , which was partially offset by (i) cash paid to repurchase common stocks of RMB146.7 milllion (US$21.3 million), (ii) cash paid to investors and institutional funding partners of RMB1,776.7 million (US$257.6 million) and (iii) repayment of short-term borrowings of RMB166.5 million (US$24.1 million).
Financing Activities Cash provided by financing activities was RMB1,227.5 million (US$172.9 million) in 2023, which was attributable to by cash receipt from investors and institutional funding partners of RMB3,252.0 million (US$458.0 million) and proceeds from short-term borrowings of RMB802.5 million (US$113.0 million), which was partially offset by (i) cash paid to investors and institutional funding partners of RMB2,437.2 million (US$343.3 million), (ii) repayment of short-term borrowings of RMB307.7 million (US$43.3 million) and (iii) cash paid to repurchase common stocks of RMB24.9 milllion (US$3.5 million). 126 Table of Contents Cash provided by financing activities was RMB576.4 million (US$83.6 million) in 2022, which was attributable to by cash receipt from investors and institutional funding partners of RMB2,595.8 million (US$376.4 million) and proceeds from short-term borrowings of RMB70.2 million (US$10.2 million), which was partially offset by (i) cash paid to repurchase common stocks of RMB146.7 milllion (US$21.3 million), (ii) cash paid to investors and institutional funding partners of RMB1,776.7 million (US$257.6 million) and (iii) repayment of short-term borrowings of RMB166.5 million (US$24.1 million).
Ability to Maintain Effective Risk Management Our ability to effectively assess the credit risk of borrowers and classify borrowers into appropriate risk profiles impacts our ability to attract and retain borrowers and institutional funding partners, both of which directly relate to users’ confidence in our platform.
The fee rate variation depends on various factors in the competitive market and our adjustment in pricing will impact our revenues and profitability, as our revenues are generated from the service fees or interest fees. 112 Table of Contents Ability to Maintain Effective Risk Management Our ability to effectively assess the credit risk of borrowers and classify borrowers into appropriate risk profiles impacts our ability to attract and retain borrowers and institutional funding partners, both of which directly relate to users’ confidence in our platform.
As stipulated by the Taxation Law of PRC, (i) one VIE in Shenzhen was a qualified enterprise eligible to enjoy the preferential income tax rate of 15% from 2020 to 2022; and (ii) one of our major consolidated subsidiaries was recognized as a software enterprise and thereby entitled to a full exemption from EIT in 2017 and 2018, and a 50% reduction from 2019 to 2021.
As stipulated by the Taxation Law of PRC, (i) one of our major consolidated subsidiaries was recognized as a qualified enterprise eligible to enjoy the preferential income tax rate of 15% from 2020 to 2022 and renewed its qualification until 2025; and (ii) one VIE and one subsidiary of us operated in a specific preferential tax jurisdiction and were thereby eligible to be levied at the reduced income tax rate of 15% from 2020 to 2025 and from 2023 to 2025, respectively.
Our financial institutional cooperators’ credit assessment models are based on information from various databases, including PBOC CRC that is only available to licensed financial institutions. In addition to our financial institutional cooperators’ decision and input, we also factor in many layers of other decision variables to create a more comprehensive and accurate profile of the borrowers’ creditworthiness. See “Item 4.
In addition to our financial institutional cooperators’ decision and input, we also factor in many layers of other decision variables to create a more comprehensive and accurate profile of the borrowers’ creditworthiness. See “Item 4. Information on the Company—4.B. Business Overview—Our Partnership with Financial Institutional Cooperators “ for details.
When we settle the guarantee through performance of the guarantee by making payments to those financial institutional cooperators, we record a corresponding deduction to the derivative. We use discounted cash flow model to value these financial guarantee derivatives at inception and subsequent valuation dates.
When we settle the guarantee liability through performance of the guarantee by making payments to our financial institutional cooperators, we record a corresponding deduction to the derivative liability.
Our financing guarantee partners provide guarantee services covering both the North China and South China areas, most of which have a registered capital of more than RMB1 billion.
Our financial institutional cooperators provide services covering both the North China and South China areas, most of which have a registered capital of more than RMB1 billion. Our financial institutional cooperators’ strong brand recognition in China assists us in expanding our institutional funding base at reasonable expenses.
Information on the Company—4.B. Business Overview—Our Partnership with Financial Institutional Cooperators “ for details. Changes to our arrangement with financial institutional cooperators in credit insurance or guarantee services, credit assessment and other aspects of our business could affect our investors’ confidence, the growth of our business and our profitability.
Changes to our arrangement with financial institutional cooperators in credit insurance or guarantee services, credit assessment and other aspects of our business could affect our investors’ confidence, the growth of our business and our profitability. 113 Table of Contents We cooperated with Shenzhen Xintang (VIE) to provide guarantees for certain loan products that we facilitate in the past.
If our Hong Kong subsidiary satisfies all the requirements under the tax arrangement and receives approval from the relevant tax authority, then the dividends paid to the Hong Kong subsidiary would be subject to withholding tax at the standard rate of 5%.
If our Hong Kong subsidiary satisfies all the requirements under the tax arrangement and receives approval from the relevant tax authority, then the dividends paid to the Hong Kong subsidiary would be subject to withholding tax at the standard rate of 5%. 124 Table of Contents If our holding company in the Cayman Islands or any of our subsidiaries outside of Chinese Mainland were deemed to be a “resident enterprise” under the Law of the PRC on Enterprise Income Tax, it would be subject to enterprise income tax on its worldwide income at a rate of 25%.
Cash Flows and Working Capital The following table sets forth a summary of our cash flows for the periods presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, ​ ​ 2020 ​ 2021 ​ 2022 ​ RMB RMB RMB US$ ​ ​ (in thousands) Summary Consolidated Cash Flows Data: ​ ​ ​ ​ ​ ​ ​ ​ Cash provided by (used in) operating activities (679,235) ​ 449,171 ​ 322,702 ​ 46,787 Cash used in investing activities (3,704,848) ​ (2,347,594) ​ (913,388) ​ (132,429) Cash provided by (used in) financing activities 4,490,712 ​ (1,301,312) ​ 576,351 ​ 83,563 Net increase (decrease) in cash and cash equivalents, and restricted cash 78,220 ​ (606,484) ​ 14,921 ​ 2,163 Cash and cash equivalents, and restricted cash at beginning of year 1,520,303 ​ 1,598,523 ​ 992,039 ​ 143,832 Cash and cash equivalents, and restricted cash at year end 1,598,523 ​ 992,039 ​ 1,006,960 ​ 145,995 ​ 134 Table of Contents Operating Activities Cash provided by operating activities was RMB322.7 million (US$46.8 million) in 2022.
Organizational Structure— Contractual Arrangements with Consolidated VIEs and Their Shareholders (“VIE Agreements”).” For restrictions and limitations on liquidity and capital resources as a result of our corporate structure, see “—Holding Company Structure.” Cash Flows and Working Capital The following table sets forth a summary of our cash flows for the periods presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, ​ ​ 2021 2022 2023 ​ RMB RMB RMB US$ ​ ​ (in thousands) Summary Consolidated Cash Flows Data: ​ ​ ​ ​ ​ ​ ​ ​ Cash provided by operating activities 449,171 ​ 322,702 ​ 814,137 ​ 114,669 Cash used in investing activities (2,347,594) ​ (913,388) ​ (1,106,334) ​ (155,824) Cash provided by financing activities 1,301,312 ​ 576,351 ​ 1,227,458 ​ 172,884 Net increase (decrease) in cash and cash equivalents, and restricted cash (606,484) ​ 14,921 ​ 937,548 ​ 132,051 Cash and cash equivalents, and restricted cash at beginning of year 1,598,523 ​ 992,039 ​ 1,006,960 ​ 141,827 Cash and cash equivalents, and restricted cash at year end 992,039 ​ 1,006,960 ​ 1,944,508 ​ 273,878 ​ Operating Activities Cash provided by operating activities was RMB814.4 million (US$114.7 million) in 2023.
Year Ended December 31, 2021 Compared to Year Ended December 31, 2020 Net Revenues The following table sets forth the breakdown of our net revenues, both in absolute amount and as a percentage of our total net revenues, for the periods presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, ​ ​ 2020 ​ 2021 ​ RMB % RMB US$ % ​ ​ (in thousands, except for percentages) Net revenues ​ Loan facilitation service—Direct Model 1,266,533 57.8 % 2,545,432 399,434 70.2 % Loan facilitation service—Intermediary Model 41,373 1.9 % 161 25 0.0 % Post-origination service 203,842 9.3 % 315,590 49,523 8.7 % Financing income 612,863 27.9 % 671,901 105,436 18.5 % Other revenue 68,346 3.1 % 93,381 14,654 2.6 % Total net revenue 2,192,957 100.0 % 3,626,465 569,072 100 % ​ Loan Facilitation Service-Direct Model and Loan Facilitation Service-Intermediary Model Loan facilitation service fees under the direct model increased from RMB1,266.5 million in 2020 to RMB2,545.4 million (US$399.4 million) in 2020, primarily due to an increase in the amount of Xiaoying Card Loan facilitated through the direct model in 2021.
Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 Net Revenues The following table sets forth the breakdown of our net revenues, both in absolute amount and as a percentage of our total net revenues, for the periods presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, ​ ​ 2021 2022 ​ RMB % RMB US$ % ​ ​ (in thousands, except for percentages) Net revenues ​ Loan facilitation service 2,545,593 ​ 70.2 % 2,044,344 ​ 296,402 ​ 57.4 % Post-origination service 315,590 ​ 8.7 % 372,451 ​ 54,000 ​ 10.5 % Financing income 671,901 ​ 18.5 % 966,277 ​ 140,097 ​ 27.1 % Other revenue 93,381 ​ 2.6 % 179,878 ​ 26,080 ​ 5.0 % Total net revenue 3,626,465 ​ 100 % 3,562,950 ​ 516,579 ​ 100.0 % ​ 119 Table of Contents Loan Facilitation Service Loan facilitation service fees decreased from RMB2,545.4 million in 2021 to RMB2,044.3 million (US$296.4 million) in 2022, primarily due to a decrease in average total borrowing cost of the borrowers; and also partially offset by an increase in the total loan amount facilitated this year compared with 2021.
Our accounts receivable and contract assets increased from RMB413.3 million as of December 31, 2020 to RMB747.5 million as of December 31, 2021. 120 Table of Contents Loans receivable from Xiaoying Credit Loans and other loans , net.
Our accounts receivable and contract assets increased from RMB747.5 million as of December 31, 2021 to RMB1,161.9 million as of December 31, 2022. Loans receivable from Xiaoying Credit Loans and other loans, net. Loans receivable from Xiaoying Credit Loans and other loans consist primarily of loans facilited through the Consolidated Trusts and Partnerships and loans provided by Xiaoying Microcredit (VIE).
The deposits paid to our financial institutional cooperators increased from RMB907.9 million as of December 31, 2020 to RMB1,500.4 million as of December 31, 2021. Financial investment. Financial investment mainly consists of investments in Venture captial funds whose strategies are research driven and long-term investment preference.
Prepaid expenses and other current assets decreased from RMB213.1 million as of December 31, 2021 to RMB71.1 million as of December 31, 2022. Financial investment. Financial investment mainly consists of investments in Venture captial funds whose strategies are research driven and long-term investment preference, and investments in several U.S.

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Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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The Share Incentive Plan will be administered by (A) our board of directors; or (B) where a committee has been established in our company, the committee (in either event, the “Administrator”).
The Share Incentive Plan will be administered by (A) our board of directors; or (B) where a committee has been established in the Company, the committee (in either event, the “Administrator”).
Our board of directors may exercise all the powers of our company to borrow money, mortgage or charge its undertaking, property and uncalled capital, and to issue debentures, bonds and other securities whenever money is borrowed or as security for any debt, liability or obligation of the company or of any third party.
Our board of directors may exercise all the powers of the Company to borrow money, mortgage or charge its undertaking, property and uncalled capital, and to issue debentures, bonds and other securities whenever money is borrowed or as security for any debt, liability or obligation of the company or of any third party.
A director who is in any way, whether directly or indirectly, interested in a contract or proposed contract with our company is required to declare the nature of his interest at a meeting of our directors.
A director who is in any way, whether directly or indirectly, interested in a contract or proposed contract with the Company is required to declare the nature of his interest at a meeting of our directors.
Our board of directors has determined that each of the three directors satisfy the “independence” requirements of Rule 10A-3 under the Securities Exchange Act of 1934, as amended, and Section 303A of the Corporate Governance Rules of the NYSE. The audit committee oversees our accounting and financial reporting processes and the audits of the financial statements of our company.
Our board of directors has determined that each of the three directors satisfy the “independence” requirements of Rule 10A-3 under the Securities Exchange Act of 1934, as amended, and Section 303A of the Corporate Governance Rules of the NYSE. The audit committee oversees our accounting and financial reporting processes and the audits of the financial statements of the Company.
Our board of Directors has determined that each of the three directors satisfy the “independence” requirements of Rule 10A-3 under the Securities Exchange Act of 1934, as amended, and Section 303A of the Corporate Governance Rules of the NYSE.
Our board of Directors has determined that each of the three directors satisfy the “independence” requirements of Rule 10A-3 under the Securities Exchange Act of 1934, as amended, and Section 303A of the Corporate Governance Rules of the NYSE.
In fulfilling their duty of care to us, our directors must ensure compliance with our second amended and restated memorandum and articles of association, as amended and re-stated from time to time. Our company has the right to seek damages if a duty owed by our directors is breached.
In fulfilling their duty of care to us, our directors must ensure compliance with our second amended and restated memorandum and articles of association, as amended and re-stated from time to time. The Company has the right to seek damages if a duty owed by our directors is breached.
A director who is in any way, whether directly or indirectly, interested in a contract or proposed contract with our company is required to declare the nature of his interest at a meeting of our directors.
A director who is in any way, whether directly or indirectly, interested in a contract or proposed contract with the Company is required to declare the nature of his interest at a meeting of our directors.
A director may vote in respect of any contract, proposed contract, or arrangement notwithstanding that he may be interested therein, and if he does so his vote shall be counted and he may be counted in the quorum at any meeting of our directors at which any such contract or proposed contract or arrangement is considered.
A director may vote in respect of any contract, proposed contract, or arrangement notwithstanding that he may be interested therein, and if he does so his vote shall be counted and he may be counted in the quorum at any meeting of our directors at which any such contract or proposed contract or arrangement is considered.
Our directors may exercise all the powers of our company to borrow money, and to mortgage or charge its undertaking, property and uncalled capital, and issue debentures, debenture stock or other securities whenever money is borrowed or as security for any debt, liability or obligation of the company or of any third party.
Our directors may exercise all the powers of the Company to borrow money, and to mortgage or charge its undertaking, property and uncalled capital, and issue debentures, debenture stock or other securities whenever money is borrowed or as security for any debt, liability or obligation of the company or of any third party.
The functions and powers of our board of directors include, among others: ● convening shareholders’ annual general meetings and reporting its work to shareholders at such meetings; ● declaring dividends and distributions; ● appointing officers and determining the term of office of officers; ● exercising the borrowing powers of our company and mortgaging the property of our company; and ● approving the transfer of shares of our company, including the registering of such shares in our share register.
The functions and powers of our board of directors include, among others: ● convening shareholders’ annual general meetings and reporting its work to shareholders at such meetings; ● declaring dividends and distributions; ● appointing officers and determining the term of office of officers; ● exercising the borrowing powers of the Company and mortgaging the property of the Company; and ● approving the transfer of shares of the Company, including the registering of such shares in our share register.
If a Management Director (as defined in our second amended and restated memorandum and articles of association), Mr Yue (Justin) Tang shall have the right to appoint another person as a director (such director shall be a Managing Director) by delivering a written notice to our company and such replacement shall become effective automatically upon the delivery of such notice without any further action or resolution of the board or the shareholders, provided that Mr.
If a Management Director (as defined in our second amended and restated memorandum and articles of association), Mr Yue (Justin) Tang shall have the right to appoint another person as a director (such director shall be a Managing Director) by delivering a written notice to the Company and such replacement shall become effective automatically upon the delivery of such notice without any further action or resolution of the board or the shareholders, provided that Mr.
Each executive officer has also agreed to assign to our company all his or her inventions, improvements, designs, original works of authorship, formulas, processes, compositions of matter, computer software programs, databases, mask works, concepts and trade secrets which the executive officer may solely or jointly conceive or develop or reduce to practice, or cause to be conceived or developed or reduced to practice, during the period of the executive officer’s employment with us that are either related to the scope of the employment or make use of the resources of the company.
Each executive officer has also agreed to assign to our company group all his or her inventions, improvements, designs, original works of authorship, formulas, processes, compositions of matter, computer software programs, databases, mask works, concepts and trade secrets which the executive officer may solely or jointly conceive or develop or reduce to practice, or cause to be conceived or developed or reduced to practice, during the period of the executive officer’s employment with us that are either related to the scope of the employment or make use of the resources of the company.
The audit committee is responsible for, among other things: selecting the independent auditors and pre-approving all auditing and non-auditing services permitted to be performed by the independent auditors; ● setting clear hiring policies for employees or former employees of the independent auditors; ● reviewing with the independent auditors any audit problems or difficulties and management’s response; ● reviewing and approving all related-party transactions; ● discussing the annual audited financial statements with management and the independent auditors; ● discussing with management and the independent auditors major issues regarding accounting principles and financial statement presentations; ● reviewing reports prepared by management or the independent auditors relating to significant financial reporting issues and judgments; 143 Table of Contents ● reviewing with management and the independent auditors related-party transactions and off-balance sheet transactions and structures; ● reviewing with management and the independent auditors the effect of regulatory and accounting initiatives; ● reviewing policies with respect to risk assessment and risk management; ● reviewing our disclosure controls and procedures and internal control over financial reporting; ● reviewing reports from the independent auditors regarding all critical accounting policies and practices to be used by our company; ● establishing procedures for the receipt, retention and treatment of complaints we received regarding accounting, internal accounting controls or auditing matters and the confidential, anonymous submission by our employees of concerns regarding questionable accounting or auditing matters; ● periodically reviewing and reassessing the adequacy of our audit committee charter; ● such other matters that are specifically delegated to our audit committee by our board of directors from time to time; and ● meeting separately, periodically, with management, the internal auditors and the independent auditors.
The audit committee is responsible for, among other things: selecting the independent auditors and pre-approving all auditing and non-auditing services permitted to be performed by the independent auditors; ● setting clear hiring policies for employees or former employees of the independent auditors; ● reviewing with the independent auditors any audit problems or difficulties and management’s response; ● reviewing and approving all related-party transactions; ● discussing the annual audited financial statements with management and the independent auditors; ● discussing with management and the independent auditors major issues regarding accounting principles and financial statement presentations; ● reviewing reports prepared by management or the independent auditors relating to significant financial reporting issues and judgments; ● reviewing with management and the independent auditors related-party transactions and off-balance sheet transactions and structures; ● reviewing with management and the independent auditors the effect of regulatory and accounting initiatives; 136 Table of Contents ● reviewing policies with respect to risk assessment and risk management; ● reviewing our disclosure controls and procedures and internal control over financial reporting; ● reviewing reports from the independent auditors regarding all critical accounting policies and practices to be used by the Company; ● establishing procedures for the receipt, retention and treatment of complaints we received regarding accounting, internal accounting controls or auditing matters and the confidential, anonymous submission by our employees of concerns regarding questionable accounting or auditing matters; ● periodically reviewing and reassessing the adequacy of our audit committee charter; ● such other matters that are specifically delegated to our audit committee by our board of directors from time to time; and ● meeting separately, periodically, with management, the internal auditors and the independent auditors.
Yue (Justin) Tang is our founder, Chief Executive Officer and Chairman of our board of directors. Mr. Tang is responsible for our overall business strategies and operation. Before starting our company, Mr. Tang co-founded eLong.com, an online travel service company in China in 1999. From 2006 to 2014, Mr.
Yue (Justin) Tang is our founder, Chief Executive Officer and Chairman of our board of directors. Mr. Tang is responsible for our overall business strategies and operation. Before starting our company group, Mr. Tang co-founded eLong.com, an online travel service company in China in 1999. From 2006 to 2014, Mr.
In the event of a merger or a change of control, except as otherwise provided in the applicable award agreement, the Administrator may provide for the treatment of each outstanding award without a Plan participant’s consent, including without limitation, that ● Awards will be assumed, or substantially equivalent awards be substituted, by the acquiring or succeeding corporation (or an affiliate thereof) with appropriate adjustments as to the number and kind of shares and prices; ● Upon written notice to a participant, the participant’s awards will terminate upon or immediately prior to the consummation of such merger or change in control; ● Outstanding awards will vest and become exercisable, realizable or payable, or restrictions applicable to an award will lapse, in whole or in part prior to or upon consummation of such merger or change in control; ● The awards will terminate in exchange for an amount of cash and/or property, if any, equal to the amount that would have been attained upon the exercise of such awards or realization of the participant’s rights as of the date of the occurrence of the transaction (and, for the avoidance of doubt, if as of the date of the occurrence of the transaction the Administrator determines in good faith that no amount would have been attained upon the exercise of such awards or realization of the participant’s rights, then such award may be terminated by the company without payment), or such awards will be replaced with other rights or property selected by the Administrator in its sole discretion; or ● Any combination of the foregoing.
In the event of a merger or a change of control, except as otherwise provided in the applicable award agreement, the Administrator may provide for the treatment of each outstanding award without a Plan participant’s consent, including without limitation, that ● Awards will be assumed, or substantially equivalent awards be substituted, by the acquiring or succeeding corporation (or an affiliate thereof) with appropriate adjustments as to the number and kind of shares and prices; ● Upon written notice to a participant, the participant’s awards will terminate upon or immediately prior to the consummation of such merger or change in control; ● Outstanding awards will vest and become exercisable, realizable or payable, or restrictions applicable to an award will lapse, in whole or in part prior to or upon consummation of such merger or change in control; 133 Table of Contents ● The awards will terminate in exchange for an amount of cash and/or property, if any, equal to the amount that would have been attained upon the exercise of such awards or realization of the participant’s rights as of the date of the occurrence of the transaction (and, for the avoidance of doubt, if as of the date of the occurrence of the transaction the Administrator determines in good faith that no amount would have been attained upon the exercise of such awards or realization of the participant’s rights, then such award may be terminated by the company without payment), or such awards will be replaced with other rights or property selected by the Administrator in its sole discretion; or ● Any combination of the foregoing.
A director will be removed from office automatically if, among other thing, the director (i) dies; (ii) becomes bankrupt or makes any arrangement or composition with his creditors generally; (iii) is found to be or becomes of unsound mind; (iv) resigns his office by notice in writing to our company; (v) is prohibited by law from being a director; and (vi) is removed from the office pursuant to any other provisions of our second amended and restated memorandum and articles of association. 145 Table of Contents 6.D.
A director will be removed from office automatically if, among other thing, the director (i) dies; (ii) becomes bankrupt or makes any arrangement or composition with his creditors generally; (iii) is found to be or becomes of unsound mind; (iv) resigns his office by notice in writing to the Company; (v) is prohibited by law from being a director; and (vi) is removed from the office pursuant to any other provisions of our second amended and restated memorandum and articles of association. 138 Table of Contents 6.D.
Duties of Directors Under Cayman Islands law, our directors have a fiduciary duty to our company to act honestly, in good faith and with a view to our best interests. Our directors also owe to our company a duty to act with skill and care.
Duties of Directors Under Cayman Islands law, our directors have a fiduciary duty to the Company to act honestly, in good faith and with a view to our best interests. Our directors also owe to the Company a duty to act with skill and care.
The nominating and corporate governance committee is responsible for, among other things: ● identifying and recommending to the board of directors qualified individuals for membership on the board of directors and its committees; 144 Table of Contents ● evaluating, at least annually, its own performance and reporting to the board of directors on such evaluation; ● overseeing compliance with the corporate governance guidelines and code of business conduct and ethics and reporting on such compliance to the board of directors; and ● reviewing and assessing periodically the adequacy of its charter and recommending any proposed changes to the board of directors for approval.
The nominating and corporate governance committee is responsible for, among other things: ● identifying and recommending to the board of directors qualified individuals for membership on the board of directors and its committees; ● evaluating, at least annually, its own performance and reporting to the board of directors on such evaluation; ● overseeing compliance with the corporate governance guidelines and code of business conduct and ethics and reporting on such compliance to the board of directors; and 137 Table of Contents ● reviewing and assessing periodically the adequacy of its charter and recommending any proposed changes to the board of directors for approval.
In the case of an incentive stock option granted to an employee who has owned ordinary shares representing more than ten percent of the voting power of all classes of ordinary shares of the company or any parent or subsidiary, the per share exercise price will be no less than one hundred ten percent of the fair market value per ordinary share on the date of grant, and the term of the incentive stock option will be five years from the date of grant or such shorter term as may be provided in the award document. ● SARs.
In the case of an incentive stock option granted to an employee who has owned ordinary shares representing more than ten percent of the voting power of all classes of ordinary shares of the company or any parent or subsidiary, the per share exercise price will be no less than one hundred ten percent of the fair market value per ordinary share on the date of grant, and the term of the incentive stock option will be five years from the date of grant or such shorter term as may be provided in the award document. 132 Table of Contents ● SARs.
Share Ownership The following table sets forth information with respect to the beneficial ownership of our ordinary shares, as of March 31, 2023, by: ● each of our directors and executive officers; ● all of our directors and executive officers as a group; and ● each person known to us to own beneficially more than 5% of our ordinary shares.
Share Ownership The following table sets forth information with respect to the beneficial ownership of our ordinary shares, as of March 31, 2024, by: ● each of our directors and executive officers; ● all of our directors and executive officers as a group; and ● each person known to us to own beneficially more than 5% of our ordinary shares.
The Administrator may specify that any other award shall constitute a performance award by conditioning the right of a participant to exercise the award or have it settled, and the timing thereof, upon achievement or satisfaction of such performance conditions as may be specified by the Administrator. 140 Table of Contents ● Deferred Awards.
The Administrator may specify that any other award shall constitute a performance award by conditioning the right of a participant to exercise the award or have it settled, and the timing thereof, upon achievement or satisfaction of such performance conditions as may be specified by the Administrator. ● Deferred Awards.
We are required under PRC law to contribute to social security plans at specified percentages of the salaries, bonuses and certain allowances of our employees up to a maximum amount specified by the local government from time to time.
We are required under Chinese Mainland law to contribute to social security plans at specified percentages of the salaries, bonuses and certain allowances of our employees up to a maximum amount specified by the local government from time to time.
Mr Rong is a Certified Public Accountant in the United States. Mr. Rong received a bachelor’s degree in international finance from Renmin University, a master’s degree in accounting from West Virginia University and an MBA degree from University of Chicago Booth School of Business. Mr. Zheng Xue has served as our independent director since September 2018. Since August 2011, Mr.
Mr Rong is a Certified Public Accountant in the United States. Mr. Rong received a bachelor’s degree in international finance from Renmin University, a master’s degree in accounting from West Virginia University and an MBA degree from University of Chicago Booth School of Business. 130 Table of Contents Mr. Zheng Xue has served as our independent director since September 2018.
Yue (Justin) Tang, and (iii) 1,562,024 Class A ordinary shares in the form of 260,337 ADSs and 2,519,527 Class A ordinary shares held by Purple Mountain Holding Ltd., which is ultimately controlled by Mr. Yue (Justin) Tang. The registered address of Mangrove Coast Investment Limited is Geneva Place, Waterfront Drive, P.O. Box 3469, Road Town, Tortola, British Virgin Islands.
Yue (Justin) Tang, and (iii) 1,645,298 Class A ordinary shares in the form of 274,216 ADSs and 2,519,527 Class A ordinary shares held by Purple Mountain Holding Ltd., which is ultimately controlled by Mr. Yue (Justin) Tang. The registered address of Mangrove Coast Investment Limited is Geneva Place, Waterfront Drive, P.O. Box 3469, Road Town, Tortola, British Virgin Islands.
On November 10, 2021, the Board of Directors decided to cancel 9,429,984 of unvested share options granted to certain senior management. On March 3, 2022, the Board of Directors of granted 810,000 restricted stock units to certain directors.
On November 10, 2021, the Board of Directors decided to cancel 9,429,984 of unvested share options granted to certain senior management. On March 3, 2022, the Board of Directors of granted 810,000 restricted stock units to certain directors. On December 1, 2023, the Board of Directors of X Financial granted 180,000 restricted stock units to certain directors.
However, subject to the adjustment provision and change in control provision, any such action by the Administrator that would materially adversely affect the rights of a holder of an outstanding award may not be taken without the holder’s consent, except to the extent that such action is taken to cause the Share Incentive Plan to comply with applicable laws, stock market or exchange rules and regulations, or accounting or tax rules and regulations, or to impose any “clawback” or recoupment provisions on any awards in accordance with the Share Incentive Plan. 141 Table of Contents On January 25, 2015, we granted 13,843,645 stock options to employees and executives.
However, subject to the adjustment provision and change in control provision, any such action by the Administrator that would materially adversely affect the rights of a holder of an outstanding award may not be taken without the holder’s consent, except to the extent that such action is taken to cause the Share Incentive Plan to comply with applicable laws, stock market or exchange rules and regulations, or accounting or tax rules and regulations, or to impose any “clawback” or recoupment provisions on any awards in accordance with the Share Incentive Plan.
Xue has served as an independent director at Yingli Solor (YGE). Mr.
Since August 2011, Mr. Xue has served as an independent director at Yingli Solor (YGE). Mr.
Moreover, each executive officer has agreed not to, for a certain period following termination of his or her employment or expiration of the employment agreement: (i) carry on or be engaged, concerned or interested directly or indirectly whether as shareholder, director, employee, partner, agent or otherwise carry on any business in direct competition with us, (ii) solicit or entice away any of our user, client, representative or agent, or (iii) employ, solicit or entice away or attempt to employ, solicit or entice away any of our officer, manager, consultant or employee.
Moreover, each executive officer has agreed not to, for a certain period following termination of his or her employment or expiration of the employment agreement: (i) carry on or be engaged, concerned or interested directly or indirectly whether as shareholder, director, employee, partner, agent or otherwise carry on any business in direct competition with us, (ii) solicit or entice away any of our user, client, representative or agent, or (iii) employ, solicit or entice away or attempt to employ, solicit or entice away any of our officer, manager, consultant or employee. 131 Table of Contents In addition, each executive officer has agreed to be bound by non-competition and non-solicitation restrictions during the term of his or her employment and typically for two years following the last date of employment.
Class A ordinary shares are not convertible into Class B ordinary shares under any circumstances. (1) Represents (i) 97,600,000 Class B ordinary shares held by Mangrove Coast Investment Limited, a British Virgin Islands company controlled by Mangrove Coast Trust, (ii) 5,303,645 Class A ordinary shares held by Mr.
Class A ordinary shares are not convertible into Class B ordinary shares under any circumstances. (1) Represents (i) 97,600,000 Class B ordinary shares held by Mangrove Coast Investment Limited, a British Virgin Islands company controlled by Mangrove Coast Trust, (ii) 3,000,000 Class A shares in form of 50,000 ADS and 3,803,645 Class A ordinary shares held by Mr.
These shares, however, are not included in the computation of the percentage ownership of any other person, except with respect to the percentage ownership of all executive officers and directors as a group. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Ordinary Shares Beneficially Owned as of March 31, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Percentage of ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ total ordinary ​ Percentage of ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ shares on an as ​ aggregate ​ ​ ​ Class A ordinary share ​ Class B ordinary share converted basis ​ voting power** ​ ​ Number % Number % ​ ​ ​ Directors and Executive Officers: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Yue (Justin) Tang(1) ​ 9,385,196 ​ 4.91 % 97,600,000 ​ 100.00 % 37.03 % 91.51 % Shaoyong (Simon) Cheng ​ * ​ * ​ — ​ — ​ * ​ * ​ Ding (Gardon) Gao * * — — * * Frank Fuya Zheng * * — — * * Kan (Kent) Li * * — — * * Shengwen Rong * * — — * * Zheng Xue * * — — * * Longgen Zhang * * — — * * All directors and executive officers as a group 9,385,196 ​ 4.91 % 97,600,000 ​ 100.00 % 37.03 % 91.51 % Principal Shareholders: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Mangrove Coast Investment Limited(1) 9,385,196 ​ 4.91 % 97,600,000 ​ 100.00 % 37.03 % 91.51 % Dragon Destiny Limited(2) 27,113,806 ​ 14.17 % — ​ — ​ 9.39 % 1.27 % Pine Cove Global Limited(3) 20,000,000 ​ 10.45 % — ​ — ​ 6.92 % 0.93 % * Less than 1% of our total outstanding shares. ** For each person and group included in this column, percentage of voting power is calculated by dividing the voting power beneficially owned by such person or group by the voting power of all of our Class A and Class B ordinary shares as a single class.
These shares, however, are not included in the computation of the percentage ownership of any other person, except with respect to the percentage ownership of all executive officers and directors as a group. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Ordinary Shares Beneficially Owned as of March 31, 2024 ​ ​ ​ ​ ​ ​ ​ Percentage of ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ total ordinary ​ Percentage of ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ shares on an as ​ aggregate ​ ​ ​ Class A ordinary share ​ Class B ordinary share converted basis ​ voting power** ​ ​ Number % Number % ​ ​ ​ Directors and Executive Officers: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Yue (Justin) Tang(1) ​ 10,968,470 ​ 5.55 % 97,600,000 ​ 100.00 % 36.79 % 91.32 % Shaoyong (Simon) Cheng ​ * ​ * ​ — ​ — ​ * ​ * ​ Frank Fuya Zheng * ​ * ​ — ​ — ​ * ​ * ​ Kan (Kent) Li * ​ * ​ — ​ — ​ * ​ * ​ Yufan (Jason) Jiang ​ * ​ * ​ — ​ — ​ * ​ * ​ Shengwen Rong * ​ * ​ — ​ — ​ * ​ * ​ Zheng Xue * ​ * ​ — ​ — ​ * ​ * ​ Longgen Zhang * ​ * ​ — ​ — ​ * ​ * ​ All directors and executive officers as a group 10,968,470 ​ 5.55 % 97,600,000 ​ 100.00 % 36.79 % 91.32 % Principal Shareholders: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Mangrove Coast Investment Limited(1) 10,968,470 ​ 5.55 % 97,600,000 ​ 100.00 % 36.79 % 91.32 % Dragon Destiny Limited(2) 27,113,806 ​ 13.73 % — ​ — ​ 9.19 % 1.26 % Pine Cove Global Limited(3) 20,000,000 ​ 10.12 % — ​ — ​ 6.78 % 0.93 % * Less than 1% of our total outstanding shares. ** For each person and group included in this column, percentage of voting power is calculated by dividing the voting power beneficially owned by such person or group by the voting power of all of our Class A and Class B ordinary shares as a single class.
The table below summarizes, as of the date of this annual report, the awards we have granted (excluding those cancelled, forfeited or expired) to our directors and executive officers. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Ordinary Shares ​ ​ ​ ​ ​ ​ ​ Option ​ ​ ​ ​ Underlying ​ Option Exercise ​ ​ ​ Expiration Name ​ Position ​ Options Awarded ​ Price ​ Grant Date ​ Date Yue (Justin) Tang Chief Executive 3,803,645 US$ 0.04 January 25, 2015 January 24, 2025 ​ Officer and ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Director ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 24,000,000 ​ US$ 4.75 ​ May 9, 2018 ​ May 8, 2023 ​ ​ ​ ​ 6,000,000 ​ US$ ​ 0 ​ November 10, 2021 ​ November 10, 2031 Shaoyong (Simon) Cheng Vice Chairman and * ​ US$ 0.04 ​ May 3,2016 ​ May 2, 2026 ​ ​ Director ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ * ​ US$ 0.04 ​ October 11,2017 ​ October 10,2027 ​ ​ ​ * ​ US$ 4.75 ​ May 9,2018 ​ May 8,2023 ​ ​ ​ ​ * ​ US$ 0 ​ January 21,2020 ​ January 19,2030 Ding (Gardon) Gao Chief Technology * ​ US$ 0.04 ​ January 25,2015 ​ January 24,2025 ​ ​ Officer ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ * ​ US$ 0.04 ​ October 11,2017 ​ October 10,2027 ​ ​ ​ * ​ US$ 4.75 ​ May 9,2018 ​ May 8,2023 Frank Fuya Zheng Chief Financial Officer * ​ US$ 0 ​ October 31,2020 ​ October 30,2030 ​ ​ ​ ​ * ​ US$ ​ 0 ​ November 10, 2021 ​ November 10, 2031 Kan (Kent) Li President, * ​ US$ 0.04 ​ May 3,2016 ​ May 2,2026 ​ ​ Chief Risk Officer and * ​ US$ 1.575 ​ October 11,2017 ​ October 10,2027 ​ ​ Director * ​ US$ 4.75 ​ May 9,2018 ​ May 8,2023 ​ ​ ​ ​ * ​ US$ 0 ​ January 21,2020 ​ January 19,2030 ​ ​ ​ ​ * ​ US$ ​ 0 ​ November 10, 2021 ​ November 10, 2031 Shengwen Rong Independent Director * ​ US$ 0 ​ April 15,2019 ​ — ​ ​ ​ ​ * ​ US$ ​ 0 ​ March 3, 2022 ​ — Zheng Xue Independent Director * ​ US$ 0 ​ April 15,2019 ​ — ​ ​ ​ ​ * ​ US$ ​ 0 ​ March 3, 2022 ​ — Longgen Zhang Independent Director * ​ US$ 0 ​ April 15,2019 ​ — ​ ​ ​ ​ * ​ US$ ​ 0 ​ March 3, 2022 ​ — * Less than 1% of our total outstanding shares. 142 Table of Contents For discussions of our accounting policies and estimates for awards granted pursuant to the Share Incentive Plan, see “Item 5.
The restricted stock units shall vest over a period of three years. 134 Table of Contents The table below summarizes, as of the date of this annual report, the awards we have granted (excluding those cancelled, forfeited or expired) to our directors and executive officers. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Ordinary Shares ​ ​ ​ ​ ​ ​ ​ Option ​ ​ ​ ​ Underlying ​ Option Exercise ​ ​ ​ Expiration Name Position Options Awarded Price Grant Date Date Yue (Justin) Tang ​ Chief Executive ​ 3,803,645 ​ US$ ​ 0.04 ​ January 25, 2015 ​ January 24, 2025 ​ ​ Officer and ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Chairman ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 24,000,000 ​ US$ ​ 4.75 ​ May 9, 2018 ​ May 8, 2023 ​ ​ ​ ​ 6,000,000 ​ US$ ​ 0 ​ November 10, 2021 ​ November 10, 2031 Shaoyong (Simon) Cheng ​ Non-execeutive ​ * ​ US$ ​ 0.04 ​ May 3, 2016 ​ May 2, 2026 ​ ​ Director ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ * ​ US$ ​ 0.04 ​ October 11,2017 ​ October 10,2027 ​ ​ ​ ​ * ​ US$ ​ 4.75 ​ May 9, 2018 ​ May 8,2023 ​ ​ ​ ​ * ​ US$ ​ 0 ​ January 21,2020 ​ January 19,2030 Frank Fuya Zheng Chief Financial Officer ​ * ​ US$ ​ 0 ​ October 31,2020 ​ October 30,2030 ​ ​ ​ ​ * ​ US$ ​ 0 ​ November 10, 2021 ​ November 10, 2031 Kan (Kent) Li President and ​ * ​ US$ ​ 0.04 ​ May 3, 2016 ​ May 2,2026 ​ ​ Director ​ * ​ US$ ​ 1.575 ​ October 11, 2017 ​ October 10, 2027 ​ ​ ​ ​ * ​ US$ ​ 4.75 ​ May 9, 2018 ​ May 8, 2023 ​ ​ ​ ​ * ​ US$ ​ 0 ​ January 21, 2020 ​ January 19, 2030 ​ ​ ​ ​ * ​ US$ ​ 0 ​ November 10, 2021 ​ November 10, 2031 Yufan (Jason) Jiang ​ Chief Risk Officer ​ * ​ US$ ​ 0.04 ​ May 3, 2016 ​ May 2, 2026 ​ ​ ​ ​ * ​ US$ ​ 0.04 ​ October 11, 2017 ​ October 10, 2027 ​ ​ ​ ​ * ​ US$ ​ 0 ​ November 20, 2019 ​ November 20, 2029 ​ ​ ​ ​ * ​ US$ ​ 0 ​ April 30, 2020 ​ April 30, 2030 ​ ​ ​ ​ * ​ US$ ​ 0 ​ November 10, 2021 ​ November 10, 2031 Shengwen Rong ​ Independent Director ​ * ​ US$ ​ 0 ​ April 15,2019 ​ — ​ ​ ​ ​ * ​ US$ ​ 0 ​ March 3, 2022 ​ — Zheng Xue ​ Independent Director ​ * ​ US$ ​ 0 ​ April 15,2019 ​ — ​ ​ ​ ​ * ​ US$ ​ 0 ​ March 3, 2022 ​ — Longgen Zhang ​ Independent Director ​ * ​ US$ ​ 0 ​ April 15,2019 ​ — ​ ​ ​ ​ * ​ US$ ​ 0 ​ March 3, 2022 ​ — * Less than 1% of our total outstanding shares.
Employees As of December 31, 2022, we had a total of 461 employees based in China.
Employees As of December 31, 2023, we had a total of 521 employees based in China.
The following table sets forth the breakdown of our employees as of December 31, 2022 by function: ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, 2022 ​ ​ Number of Employee ​ % of Total Employees Technology Development 206 ​ 45 % Financial Products 140 ​ 30 % Risk Management 38 ​ 8 % General Management 72 ​ 16 % Marketing 5 ​ 1 % Total 461 ​ 100 % ​ We have entered into individual employment contracts with our employees to cover matters such as salaries, benefits, and grounds for termination.
The following table sets forth the breakdown of our employees as of December 31, 2023 by function: ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, 2023 ​ Number of Employee % of Total Employees Technology Development 234 ​ 45 % Financial Products 155 ​ 30 % Risk Management 47 ​ 9 % General Management 80 ​ 15 % Marketing 5 ​ 1 % Total 521 ​ 100 % ​ We have entered into individual employment contracts with our employees to cover matters such as salaries, benefits, and grounds for termination.
The calculations in the table below are based on 288,900,553 ordinary shares issued and outstanding as of March 31, 2023 comprised of 191,300,553 Class A ordinary shares and 97,600,000 Class B ordinary shares. 146 Table of Contents Beneficial ownership is determined in accordance with the rules and regulations of the SEC and includes voting or investment power with respect to the ordinary shares.
The calculations in the table below are based on 295,132,135 ordinary shares issued and outstanding as of March 31, 2024 comprised of 197,532,135 Class A ordinary shares and 97,600,000 Class B ordinary shares. 139 Table of Contents Beneficial ownership is determined in accordance with the rules and regulations of the SEC and includes voting or investment power with respect to the ordinary shares.
We have no service contracts with any of our directors providing for benefits upon termination of employment. Employment Agreements and Indemnification Agreements We have entered into employment agreements with our executive officers.
No pension, retirement or similar benefits have been set aside or accrued for our executive officers or directors. We have no service contracts with any of our directors providing for benefits upon termination of employment. Employment Agreements and Indemnification Agreements We have entered into employment agreements with our executive officers.
Directors and Senior Management The following table sets forth the name, age and position of each of our directors and executive officers as of the date of this annual report. ​ ​ ​ ​ ​ Name Age Position/Title Yue (Justin) Tang 52 Chief Executive Officer, Chairman Shaoyong (Simon) Cheng 53 Vice Chairman, Director Kan (Kent) Li 49 President, Director, Chief Risk Officer Ding (Gardon) Gao 36 Chief Technology Officer Frank Fuya Zheng 56 Chief Financial Officer Shengwen Rong 54 Independent Director Zheng Xue 52 Independent Director Longgen Zhang 58 Independent Director ​ Mr.
Directors and Senior Management The following table sets forth the name, age and position of each of our directors and executive officers as of the date of this annual report. ​ ​ ​ ​ ​ Name Age Position/Title Yue (Justin) Tang 53 Chief Executive Officer, Chairman Kan (Kent) Li 50 President, Director Frank Fuya Zheng 57 Chief Financial Officer Yufan (Jason) Jiang 40 Chief Risk Officer Shaoyong (Simon) Cheng 54 Non-executive Director Shengwen Rong 55 Independent Director Zheng Xue 53 Independent Director Longgen Zhang 59 Independent Director ​ Mr.
On June 29, 2015, we granted 630,000 stock options to certain employees, directors and officers. On May 3, 2016, we granted 7,425,000 stock options to certain employees, directors and officers. On October 11, 2017, we granted 16,616,000 stock options to certain employees and senior management. On April 30, 2018, we granted 841,054 stock options to certain employees and senior management.
On January 25, 2015, we granted 13,843,645 stock options to employees and executives. On June 29, 2015, we granted 630,000 stock options to certain employees, directors and officers. On May 3, 2016, we granted 7,425,000 stock options to certain employees, directors and officers. On October 11, 2017, we granted 16,616,000 stock options to certain employees and senior management.
On May 9, 2018, we granted 40,000,000 stock options to certain senior management.
On April 30, 2018, we granted 841,054 stock options to certain employees and senior management. On May 9, 2018, we granted 40,000,000 stock options to certain senior management.
Rong served as the Senior Vice President and then the Chief Financial Officer at Yixia Technology Co., Ltd. Prior to that, Mr.
Mr. Shengwen Rong has served as our independent director since September 2018. From February 2017 to September 2018, Mr. Rong served as the Senior Vice President and then the Chief Financial Officer at Yixia Technology Co., Ltd. Prior to that, Mr.
Frank Fuya Zheng has served as our Chief Financial Officer since August 24, 2020. From 2008 to 2012, Mr. Zheng was the Chief Financial Officer of Cogo Group, Inc., a company previously listed on NASDAQ that provided customized module design solutions and manufactured electronic products in China. Mr.
Zheng was the Chief Financial Officer of Cogo Group, Inc., a company previously listed on NASDAQ that provided customized module design solutions and manufactured electronic products in China. Mr. Zheng was also a director of the same company from 2005 to 2012. From 2000 to 2007, Mr.
The registered address of Pine Cove Global Limited is Vistra Corporate Services Centre, Wickhams Cay II, Road Town, Tortola, VG1110, British Virgin Islands. 147 Table of Contents
The registered address of Pine Cove Global Limited is Vistra Corporate Services Centre, Wickhams Cay II, Road Town, Tortola, VG1110, British Virgin Islands. 140 Table of Contents 6.F. Disclosure of a registrant’s action to recover erroneously awarded compensation. None.
Tang was the founder and managing partner of Blue Ridge China, an investment and consulting company. Mr. Tang received a bachelor’s degree in business administration from Concordia College. 137 Table of Contents Mr. Shaoyong (Simon) Cheng has served as our Vice Chairman since May, 2021 and our Director since December 2017. Mr. Cheng joined us in 2015.
Tang was the founder and managing partner of Blue Ridge China, an investment and consulting company. Mr. Tang received a bachelor’s degree in business administration from Concordia College. Mr. Kan (Kent) Li has served as our President since May 2021, Director since December 2021 and our Chief Risk Officer from November 2017 to November 2023. Mr.
Share Incentive Plan The 2015 Global Share Option Plan (the “Share Incentive Plan”) was adopted by our then sole director on January 25, 2015, and amended and restated as the Amended and Restated 2015 Global Share Incentive Plan by our board of directors on May 9, 2018. 139 Table of Contents The purpose of the Share Incentive Plan is to enhance our ability to attract and retain the best available personnel for positions of substantial responsibility and to promote the value of our company, by providing such persons an opportunity to acquire or increase a direct interest in our operations and future success.
The purpose of the Share Incentive Plan is to enhance our ability to attract and retain the best available personnel for positions of substantial responsibility and to promote the value of the Company, by providing such persons an opportunity to acquire or increase a direct interest in our operations and future success.
From September 2008 to November 2015, he served as a manager at Capital One from September 2008 to November 2015. Mr. Li received his bachelor’s degree and master’s degree in economics from Southwestern University of Economics and Finance. Mr. Ding (Gardon) Gao is a co-founder of the Company.
Li joined us in 2015. Prior to that, Mr. Li served as a division director in charge of unsecured loan risk from 2015 to 2017. From September 2008 to November 2015, he served as a manager at Capital One. Mr. Li received his bachelor’s degree and master’s degree in economics from Southwestern University of Economics and Finance. Mr.
The Corporate Governance Rules of the NYSE generally require that a majority of an issuer’s board of directors must consist of independent directors. However, the Corporate Governance Rules of the NYSE permit foreign private issuers like us to follow “home country practice” in certain corporate governance matters.
However, the Corporate Governance Rules of the NYSE permit foreign private issuers like us to follow “home country practice” in certain corporate governance matters. We rely on this “home country practice” exception and do not have a majority of independent directors serving on our board of directors.
Mr. Kan (Kent) Li has served as our President since May, 2021, our Chief Risk Officer since November 2017 and Director since December, 2021. Mr. Li joined us in 2015. Prior to that, Mr. Li served as a division director in charge of unsecured loan risk from 2015 to 2017.
Jiang received a bachelor’s degree in Science from University of Shanghai for Science and Technology. Mr. Shaoyong (Simon) Cheng has served as our Non-executive Director since November 2023, our Executive Director from December 2017 to November 2023 and our Vice Chairman from May 2021 to November, 2023. Mr. Cheng joined us in 2015.
Mr. Zheng also served as an independent director of Yingde Gases Group Company (02168.HK) from 2009 to 2017. Mr. Zheng received a bachelor’s degree in Business Administration majoring in accounting from the City University of New York in 1994. Mr. Shengwen Rong has served as our independent director since September 2018. From February 2017 to September 2018, Mr.
From 2018 to 2019, Mr. Zheng was an independent director of ChinaCache International Holdings Ltd. Mr. Zheng also served as an independent director of Yingde Gases Group Company (02168.HK) from 2009 to 2017. From 2008 to 2012, Mr.
Compensation Compensation For the fiscal year ended December 31, 2022, the aggregate cash compensation and benefits that we paid to our directors and executive officers was approximately RMB6.0 million (US$0.8 million). No pension, retirement or similar benefits have been set aside or accrued for our executive officers or directors.
Zhang received a master’s degree in professional accounting from New Texas A&M University and a master’s degree in business administration from New Texas A&M University. 6.B. Compensation Compensation For the fiscal year ended December 31, 2023, the aggregate cash compensation and benefits that we paid to our directors and executive officers was approximately RMB10.7 million (US$1.5 million).
Operating and Financial Review and Prospects—5.A. Operating Results—Critical Accounting Policies, Judgments and Estimates—Share-based compensation.” 6.C. Board Practices Board of Directors Our board of directors consists of six directors. A director is not required to hold any shares in our company to qualify to serve as a director.
Board Practices Board of Directors Our board of directors consists of six directors. A director is not required to hold any shares in the Company to qualify to serve as a director. The Corporate Governance Rules of the NYSE generally require that a majority of an issuer’s board of directors must consist of independent directors.
Removed
He has served as our Chief Technology Officer since April 2014 and was our Director from December 2017 to December 2021. Mr. Gao joined us in 2014. Prior to that, Mr. Gao served as software architect from 2010 to 2014 at Tencent Holdings Limited. Mr. Gao received a bachelor’s degree in management of information system from Dalian Maritime University. Mr.
Added
Frank Fuya Zheng has served as our Chief Financial Officer since August 2020. Since May 2021, Mr. Zheng has served as an Independent Non-executive Director at Newegg Commerce, Inc. (NASDAQ: NEGG). From April 2020 to May 2021, Mr. Zheng was an independent director of Lianluo Smart Limited (NASDAQ: LLIT) which changed its name to Newegg Commerce, Inc.
Removed
Zheng was also a director of the same company from 2005 to 2012. Since April 2020, Mr. Zheng was an independent director of Lianluo Smart Limited (NASDAQ: LLIT), as well as chairman of the audit committee and a member of the compensation and nomination committee. From 2018 to 2019, Mr. Zheng was an independent director of ChinaCache International Holdings Ltd.
Added
Zheng was Vice President of online travel services at eLong.com, a company previously listed on NASDAQ. Mr. Zheng received a bachelor’s degree in Business Administration majoring in accounting from Baruch College of the City University of New York in 1994. Mr.Yufan (Jason) Jiang has served as our Chief Risk Officer since November 2023. Mr. Jiang joined us in 2015. Mr.
Removed
Zhang received a master’s degree in professional accounting from New Texas A&M University and a master’s degree in business administration from New Texas A&M University. 138 Table of Contents 6.B.
Added
Jiang Yufan has more than 10 years of working experience in the field of personal credit and is proficient in database management and risk strategy development. Before joining us, Mr. Jiang worked in the Credit Card Center of Bank of Communications, responsible for fraud risk management. Mr.
Removed
In addition, each executive officer has agreed to be bound by non-competition and non-solicitation restrictions during the term of his or her employment and typically for two years following the last date of employment.
Added
Share Incentive Plan The 2015 Global Share Option Plan (the “Share Incentive Plan”) was adopted by our then sole director on January 25, 2015, and amended and restated as the Amended and Restated 2015 Global Share Incentive Plan by our board of directors on May 9, 2018.
Removed
We rely on this “home country practice” exception and do not have a majority of independent directors serving on our board of directors.
Added
For discussions of our accounting policies and estimates for awards granted pursuant to the Share Incentive Plan, see “Item 5. Operating and Financial Review and Prospects—5.A.
Added
Operating Results—Critical Accounting Policies, Judgments and Estimates—Share-based compensation.” Clawback Policy On November 22, 2023, our board of directors adopted a clawback policy (the “Clawback Policy”) permitting the Company to seek the recoupment of incentive compensation received by any of the Company’s current and former executive officers (as determined by the board in accordance with Section 10D of the Exchange Act and the NYSE rules) and such other senior executives/employees who may from time to time be deemed subject to the Clawback Policy by the board (collectively, the “Covered Executives”).
Added
The amount to be recovered will be the excess of the incentive compensation paid to the Covered Executive based on the erroneous data over the incentive compensation that would have been paid to the Covered Executive had it been based on the restated results, as determined by the board.
Added
If the board cannot determine the amount of excess incentive compensation received by the Covered Executive directly from the information in the accounting restatement, then it will make its determination based on a reasonable estimate of the effect of the accounting restatement. Refer to Exhibit 97.1 of this Annual Report for the Company’s Clawback Policy. 135 Table of Contents 6.C.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

8 edited+0 added−0 removed5 unchanged
We recognized total net revenue of RMB78.8 million and RMB542.7 million (US$78.7 million) during the year of 2021 and 2022 in connection with the service fees of facilitation service for loans that covered by this financing guarantee company. As of December 31, 2021 and 2022, contract assets balance amounted to RMB66.8 million and RMB314.0 million (US$45.5 million), respectively.
We recognized total net revenue of RMB78.8 million and RMB542.7 million during the year of 2021 and 2022 in connection with the service fees of facilitation service for loans that covered by this financing guarantee company. As of December 31, 2021 and 2022, contract assets balance amounted to RMB66.8 million and RMB314.0 million (US$45.5 million), respectively.
Transactions with Shenyang Tianxinhao Technology Limited In 2021, we provided a loan of RMB150.0 million to an associate of us, Shenyang Tianxinhao Technology Limited. The loan had been fully repaid in 2021, and the monthly interest rate applied is 0.5%. The associated interest income amounted to RMB0.75 million in 2022.
Transactions with Shenyang Tianxinhao Technology Limited In 2021, we provided a loan of RMB150.0 million to an associate of us, Shenyang Tianxinhao Technology Limited. The loan had been fully repaid in 2021, and the monthly interest rate applied is 0.5%. The associated interest income amounted to RMB0.75 million in 2021.
As a result, we operate our relevant business through contractual arrangements among Xiaoying Beijing, our wholly-owned PRC subsidiary, VIEs, our consolidated VIE, and their shareholders. For a description of these contractual arrangements, see “Item 4. Information on the Company—C. Organizational Structure—Contractual Arrangements with Consolidated VIEs and their Shareholders” Employment Agreements and Indemnification Agreements See “Item 6.
As a result, we operate our relevant business through contractual arrangements among Beijing WFOE, our wholly-owned Chinese Mainland subsidiary, VIEs, our consolidated VIEs, and their shareholders. For a description of these contractual arrangements, see “Item 4. Information on the Company—C. Organizational Structure—Contractual Arrangements with Consolidated VIEs and their Shareholders” Employment Agreements and Indemnification Agreements See “Item 6.
The associated interest income amounted to RMB28.8 million, RMB17.3 million and RMB0.4 million (US$0.06 million) in 2020, 2021 and 2022, respectively. Transactions with a financing guarantee company In 2021, we entered into agreements with a financing guarantee company, which is a wholly-owned subsidiary of our equity investee obtained in 2020 and disposed in 2022.
The associated interest income amounted to RMB17.3 million, RMB0.4 million and nil in 2021, 2022 and 2023, respectively. Transactions with a financing guarantee company In 2021, we entered into agreements with a financing guarantee company, which is a wholly-owned subsidiary of our equity investee obtained in 2020 and disposed in 2022.
Transactions with a controlled entity of Mr. Yue (Justin)Tang As of December 31, 2021 and 2022, dividend receivable of RMB15.0 million and RMB15.0 million (US$2.2 million) will be subsequently collected from the nominal shareholder of Jiangxi Ruijing, the nominal shareholder is controlled by Mr. Yue (Justin) Tang.
Transactions with a controlled entity of Mr. Yue (Justin)Tang As of December 31, 2021, 2022 and 2023, dividend receivables of RMB15.0 million, RMB15.0 million and nil were subsequently collected from the nominal shareholder of Jiangxi Ruijing, the nominal shareholder is controlled by Mr. Yue (Justin) Tang.
As of December 31, 2022, contract assets balance amounted to RMB13.9 million (US$2.0 million). 148 Table of Contents Contractual Arrangement with our VIEs and their Shareholders PRC laws and regulations currently restrict foreign ownership and foreign investment in VIE in China.
As of December 31, 2022 and 2023, contract assets balance amounted to RMB13.9 million and RMB1.1 million (US$0.2 million), respectively. 141 Table of Contents Contractual Arrangement with our VIEs and their Shareholders Chinese Mainland’s laws and regulations currently restrict foreign ownership and foreign investment in VIE in Chinese Mainland.
We recognized total net revenue of RMB13.1 million (US$1.9 million) during the year of 2022 in connection with the service fees of facilitation service for loans.
We recognized total net revenue of RMB13.1 million and RMB11.4 million (US$1.6 million), respectively, during the year of 2022 and 2023 in connection with the service fees of facilitation service for loans.
The equity investee is controlled by our senior management’s family member. This financing guarantee company provides guarantee service for an identified portfolio of loans we facilitated and charges borrowers a guarantee fee, a portion of which will be subsequently paid to us as the service fee for the intermediary service we provide.
Following the disposal, it no longer constitutes a related party to us. This financing guarantee company provides guarantee service for an identified portfolio of loans we facilitated and charges borrowers a guarantee fee, a portion of which will be subsequently paid to us as the service fee for the intermediary service we provide.

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