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CNFinance Holdings Ltd.

CNFinance Holdings Ltd.CNF财报

NYSE · Financials

CNFinance Holdings Ltd is a China-based financial services provider focused on serving micro, small and medium enterprises and individual customers across tier 2 to 4 Chinese cities. It offers secured lending products, credit evaluation, and risk management services, mainly operating in the residential property-backed lending segment for groups with limited access to traditional banking services.

What changed in CNFinance Holdings Ltd.'s 20-F — 2023 vs 2024

Top changes in CNFinance Holdings Ltd.'s 2024 20-F

637 paragraphs added · 625 removed · 525 edited across 5 sections

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

192 edited+40 added−22 removed614 unchanged
On May 26, 2022, we were conclusively identified by the SEC under the HFCAA as having filed audit reports issued by a registered public accounting firm that cannot be inspected or investigated completely by the PCAOB in connection with the filing of our 2021 Form 20-F.
On May 26, 2022, we were conclusively identified by the SEC under the HFCAA as having filed audit reports issued by a registered public accounting firm that cannot be inspected or investigated completely by the PCAOB in connection with the filing of our 2021 Form 20-F.
As a result, we do not believe we are at risk of having our securities subject to a trading prohibition under the HFCAA unless a new determination is made by the PCAOB.
As a result, we do not believe we are at risk of having our securities subject to a trading prohibition under the HFCAA unless a new determination is made by the PCAOB.
However, whether the PCAOB will continue to conduct inspections and investigations completely to its satisfaction of PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong is subject to uncertainty and depends on a number of factors out of our, and our auditor’s, control, including positions taken by authorities of the PRC.
However, whether the PCAOB will continue to conduct inspections and investigations completely to its satisfaction of PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong is subject to uncertainty and depends on a number of factors out of our, and our auditor’s, control, including positions taken by authorities of the PRC.
The Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&A Rules, require an overseas special purpose vehicle formed for listing purposes through acquisitions of PRC domestic companies and controlled by PRC companies or individuals to obtain the approval of the CSRC prior to the listing and trading of such special purpose vehicle’s securities on an overseas stock exchange.
The Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&A Rules, require an overseas special purpose vehicle formed for listing purposes through acquisitions of PRC domestic companies and controlled by PRC companies or individuals to obtain the approval of the CSRC prior to the listing and trading of such special purpose vehicle’s securities on an overseas stock exchange.
However, the application of the M&A Rules remains unclear.
However, the application of the M&A Rules remains unclear.
These opinions call for strengthened regulation over illegal securities activities and supervision on overseas listings by China-based companies and propose to take effective measures, such as promoting the development of relevant regulatory systems to deal with the risks and incidents faced by China-based overseas-listed companies.
These opinions call for strengthened regulation over illegal securities activities and supervision on overseas listings by China-based companies and propose to take effective measures, such as promoting the development of relevant regulatory systems to deal with the risks and incidents faced by China-based overseas-listed companies.
According to the Overseas Listing Trial Measures, PRC domestic companies that seek to offer and list securities in overseas markets, either in direct or indirect means, are required to fulfill the filing procedure with the CSRC and report relevant information.
According to the Overseas Listing Trial Measures, PRC domestic companies that seek to offer and list securities in overseas markets, either in direct or indirect means, are required to fulfill the filing procedure with the CSRC and report relevant information.
If a company fails to complete the filing procedure or conceals any material fact or falsifies any major content in its filing documents, it may be subject to administrative penalties, such as order to rectify, warnings, 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.
If a company fails to complete the filing procedure or conceals any material fact or falsifies any major content in its filing documents, it may be subject to administrative penalties, such as order to rectify, warnings, 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.
The Overseas Listing Trial Measures also provide that a company in mainland China must file with the CSRC within three business days for its follow-on offering of securities after it is listed in an overseas market.
The Overseas Listing Trial Measures also provide that a company in mainland China must file with the CSRC within three business days for its follow-on offering of securities after it is listed in an overseas market.
On February 17, 2023, the CSRC also issued the Notice on Administration of the Filing of Overseas Offering and Listing by Domestic Companies and held a press conference for the release of the Overseas Listing Trial Measures, which, among others, clarified that the companies in mainland China that have been listed overseas before March 31, 2023 are not required to file with the CSRC immediately, but these companies should complete filing with the CSRC for their financing activities in accordance with the Overseas Listing Trial Measures.
On February 17, 2023, the CSRC also issued the Notice on Administration of the Filing of Overseas Offering and Listing by Domestic Companies and held a press conference for the release of the Overseas Listing Trial Measures, which, among others, clarified that the companies in mainland China that have been listed overseas before March 31, 2023 are not required to file with the CSRC immediately, but these companies should complete filing with the CSRC for their financing activities in accordance with the Overseas Listing Trial Measures.
During such cybersecurity review, we may be required to stop providing services to our customers.
During such cybersecurity review, we may be required to stop providing services to our customers.
In any such event, these regulatory agencies may impose fines and penalties on our operations in China, limit our operating privileges in China, delay or restrict the repatriation of the proceeds from future offerings of securities overseas into the PRC or take other actions that could have a material adverse effect on our business, financial condition, results of operations, reputation and prospects, as well as our ability to complete future offerings of securities overseas or to maintain the listing status of our ADSs.
In any such event, these regulatory agencies may impose fines and penalties on our operations in China, limit our operating privileges in China, delay or restrict the repatriation of the proceeds from future offerings of securities overseas into the PRC or take other actions that could have a material adverse effect on our business, financial condition, results of operations, reputation and prospects, as well as our ability to complete future offerings of securities overseas or to maintain the listing status of our ADSs.
We also cannot rule out the possibility that certain of our customers may be deemed as CII operators, in which case our products or services or data processing activities, if being deemed as related to national security, will need to be submitted for cybersecurity review before we can enter into agreements with such customers, and before the conclusion of such procedure, the customers will not be allowed to use our products or services.
We also cannot rule out the possibility that certain of our customers may be deemed as CII operators, in which case our products or services or data processing activities, if being deemed as related to national security, will need to be submitted for cybersecurity review before we can enter into agreements with such customers, and before the conclusion of such procedure, the customers will not be allowed to use our products or services.
If the reviewing authority considers that the use of our services by certain of our customers involves risk of disruption, is vulnerable to external attacks, or may negatively affect, compromise, or weaken the protection of national security, we may not be able to provide our products or services to such customers, which could have a material adverse effect on our results of operations and prospects.
If the reviewing authority considers that the use of our services by certain of our customers involves risk of disruption, is vulnerable to external attacks, or may negatively affect, compromise, or weaken the protection of national security, we may not be able to provide our products or services to such customers, which could have a material adverse effect on our results of operations and prospects.
On March 15, 2019, the National People’s Congress approved the Foreign Investment Law of the People’s Republic of China (“PRC Foreign Investment Law”),and the State Council promulgated the Implementing Regulations to the PRC Foreign Investment Law (“Implementing Regulations”) on December 26, 2019, both of which came into effect on January 1, 2020.
On March 15, 2019, the National People’s Congress approved the Foreign Investment Law of the People’s Republic of China (“PRC Foreign Investment Law”),and the State Council promulgated the Implementing Regulations to the PRC Foreign Investment Law (“Implementing Regulations”) on December 26, 2019, both of which came into effect on January 1, 2020.
If a foreign investment enterprise (the “FIE”) proposes to conduct business in an industry subject to foreign investment “restrictions” in the negative list, the FIE must meet certain conditions under the negative list before being established.
If a foreign investment enterprise (the “FIE”) proposes to conduct business in an industry subject to foreign investment “restrictions” in the negative list, the FIE must meet certain conditions under the negative list before being established.
If an FIE proposes to conduct business in an industry subject to foreign investment “prohibitions” in the “negative list,” it must not engage in the business. Investments made in Mainland China by investors from the Hong Kong Special Administrative Region and the Macao Special Administrative Region shall be governed by the PRC Foreign Investment Law and its Implementing Regulations.
If an FIE proposes to conduct business in an industry subject to foreign investment “prohibitions” in the “negative list,” it must not engage in the business. Investments made in Mainland China by investors from the Hong Kong Special Administrative Region and the Macao Special Administrative Region shall be governed by the PRC Foreign Investment Law and its Implementing Regulations.
Therefore, if the industry of loan service is subject to the foreign investment restrictions or prohibitions under the negative list issued subsequently, our failure to take timely and appropriate measures to cope with any of these or similar regulatory compliance challenges could materially and adversely affect our current corporate structure, corporate governance, and business operations.
Therefore, if the industry of loan service is subject to the foreign investment restrictions or prohibitions under the negative list issued subsequently, our failure to take timely and appropriate measures to cope with any of these or similar regulatory compliance challenges could materially and adversely affect our current corporate structure, corporate governance, and business operations.
Trading in our securities may be prohibited under the HFCAA if the PCAOB determines that it is unable to inspect or investigate completely our auditor, and as a result, U.S. national securities exchanges, such as the NYSE, may determine to delist our securities.
Trading in our securities may be prohibited under the HFCAA if the PCAOB determines that it is unable to inspect or investigate completely our auditor, and as a result, U.S. national securities exchanges, such as the NYSE, may determine to delist our securities.
More recently, as part of a continued regulatory focus in the United States on access to audit and other information currently protected by national law, in particular China’s, the United States enacted the Holding Foreign Companies Accountable Act, or the HFCAA, in December 2020.
More recently, as part of a continued regulatory focus in the United States on access to audit and other information currently protected by national law, in particular China’s, the United States enacted the Holding Foreign Companies Accountable Act, or the HFCAA, in December 2020.
Trading in our securities on U.S. markets, including the NYSE, may be prohibited under the HFCAA if the PCAOB determines that it is unable to inspect or investigate completely our auditor for two consecutive years.
Trading in our securities on U.S. markets, including the NYSE, may be prohibited under the HFCAA if the PCAOB determines that it is unable to inspect or investigate completely our auditor for two consecutive years.
On May 26, 2022, we were conclusively identified by the SEC under the HFCAA as having filed audit reports issued by a registered public accounting firm that cannot be inspected or investigated completely by the PCAOB in connection with the filing of our 2021 Form 20-F.
On May 26, 2022, we were conclusively identified by the SEC under the HFCAA as having filed audit reports issued by a registered public accounting firm that cannot be inspected or investigated completely by the PCAOB in connection with the filing of our 2021 Form 20-F.
The inability of the PCAOB to conduct inspections in the past also deprived our investors of the benefits of such inspections. On December 15, 2022, the PCAOB announced that it was able to conduct inspections and investigations completely of PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong in 2022. The PCAOB vacated its previous 2021 Determinations accordingly.
The inability of the PCAOB to conduct inspections in the past also deprived our investors of the benefits of such inspections. On December 15, 2022, the PCAOB announced that it was able to conduct inspections and investigations completely of PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong in 2022. The PCAOB vacated its previous 2021 Determinations accordingly.
However, whether the PCAOB will continue to conduct inspections and investigations completely to its satisfaction of PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong is subject to uncertainty and depends on a number of factors out of our, and our auditor’s, control, including positions taken by authorities of the PRC.
However, whether the PCAOB will continue to conduct inspections and investigations completely to its satisfaction of PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong is subject to uncertainty and depends on a number of factors out of our, and our auditor’s, control, including positions taken by authorities of the PRC.
The PCAOB is expected to continue to demand complete access to inspections and investigations against accounting firms headquartered in mainland China and Hong Kong in the future.
The PCAOB is expected to continue to demand complete access to inspections and investigations against accounting firms headquartered in mainland China and Hong Kong in the future.
The PCAOB is required under the HFCAA to make its determination on an annual basis with regards to its ability to inspect and investigate completely accounting firms based in the mainland China and Hong Kong. The possibility of being a Commission-Identified Issuer and risk of delisting could continue to adversely affect the trading price of our securities.
The PCAOB is required under the HFCAA to make its determination on an annual basis with regards to its ability to inspect and investigate completely accounting firms based in the mainland China and Hong Kong. The possibility of being a Commission-Identified Issuer and risk of delisting could continue to adversely affect the trading price of our securities.
These risks and challenges include, among other things, our ability to: ● offer customized and competitive loan services and products; ● increase the utilization of our loan services by existing borrowers as well as new borrowers; ● maintain low delinquency ratio of loans originated by us; ● achieve an effective and efficient collection and foreclosure process to assist our trust company partners to recover delinquent loans in the event of loan default; 24 ● develop sufficient, diversified, cost-efficient and reputable funding sources; ● broaden our prospective borrower base; ● navigate through a complex and evolving regulatory environment; ● improve our operational efficiency; ● promote standardized and disciplined operational procedures in local offices; ● attract, retain and motivate talented employees to support our business growth; ● maintain and enhance relationships with our business partners; ● 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.
These risks and challenges include, among other things, our ability to: ● offer customized and competitive loan services and products; ● increase the utilization of our loan services by existing borrowers as well as new borrowers; ● maintain low delinquency ratio of loans originated by us; ● achieve an effective and efficient collection and foreclosure process to assist our trust company partners to recover delinquent loans in the event of loan default; ● develop sufficient, diversified, cost-efficient and reputable funding sources; ● broaden our prospective borrower base; ● navigate through a complex and evolving regulatory environment; ● improve our operational efficiency; ● promote standardized and disciplined operational procedures in local offices; ● attract, retain and motivate talented employees to support our business growth; ● maintain and enhance relationships with our business partners; 24 ● 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.
As of the date of this annual report, we have not been subject to any fines or penalties under the aforementioned regulations with respect to our collaboration model with sales partners.
As of the date of this annual report, we have not been subject to any fines or penalties under the aforementioned regulations with respect to our collaboration model with sales partners.
Service of court documents on a Cayman Islands company can be effected by serving the documents at the Company’s registered office and it may be possible to enforce foreign judgments in the Cayman Islands against a Cayman Islands company, subject to some exceptions.
Service of court documents on a Cayman Islands company can be effected by serving the documents at the Company’s registered office and it may be possible to enforce foreign judgments in the Cayman Islands against a Cayman Islands company, subject to some exceptions.
However, if investors wish to serve documents on and/or enforce foreign judgments against our directors and officers, they will need to ensure that they comply with the rules of the jurisdiction where the directors and officers are located.
However, if investors wish to serve documents on and/or enforce foreign judgments against our directors and officers, they will need to ensure that they comply with the rules of the jurisdiction where the directors and officers are located.
The incurrence of debt could have a variety of negative effects, including: ● default and foreclosure on our assets if our operating income is insufficient to repay debt obligations; ● acceleration of obligations to repay the indebtedness (or other outstanding indebtedness), even if we make all principal and interest payments when due, if we breach any covenants that require the maintenance of certain financial ratios or reserves without a waiver or renegotiation of that covenant; 41 ● our inability to obtain necessary additional financing if the debt security contains covenants restricting our ability to obtain such financing while the debt security is outstanding; ● diverting a substantial portion of cash flow to pay principal and interest on such debt, which would reduce the funds available for expenses, capital expenditures, acquisitions and other general corporate purposes; and ● creating potential limitations on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate.
The incurrence of debt could have a variety of negative effects, including: ● default and foreclosure on our assets if our operating income is insufficient to repay debt obligations; ● acceleration of obligations to repay the indebtedness (or other outstanding indebtedness), even if we make all principal and interest payments when due, if we breach any covenants that require the maintenance of certain financial ratios or reserves without a waiver or renegotiation of that covenant; ● our inability to obtain necessary additional financing if the debt security contains covenants restricting our ability to obtain such financing while the debt security is outstanding; ● diverting a substantial portion of cash flow to pay principal and interest on such debt, which would reduce the funds available for expenses, capital expenditures, acquisitions and other general corporate purposes; and ● creating potential limitations on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate.
If the PCAOB determines in the future that it no longer has full access to inspect and investigate accounting firms headquartered in mainland China and Hong Kong and we continue to use such accounting firm to conduct audit work, we would be identified as a Commission-Identified Issuer under the HFCAA following the filing of the annual report for the relevant fiscal year, and if we were so identified for two consecutive years, trading in our securities on U.S. markets would be prohibited.
If the PCAOB determines in the future that it no longer has full access to inspect and investigate accounting firms headquartered in mainland China and Hong Kong and we use such accounting firm to conduct audit work, we would be identified as a Commission-Identified Issuer under the HFCAA following the filing of the annual report for the relevant fiscal year, and if we were so identified for two consecutive years, trading in our securities on U.S. markets would be prohibited.
If the PCAOB determines in the future that it no longer has full access to inspect and investigate accounting firms headquartered in mainland China and Hong Kong and we continue to use such accounting firm to conduct audit work, we would be identified as a Commission-Identified Issuer under the HFCAA following the filing of the annual report for the relevant fiscal year.
If the PCAOB determines in the future that it no longer has full access to inspect and investigate accounting firms headquartered in mainland China and Hong Kong and we use such accounting firm to conduct audit work, we would be identified as a Commission-Identified Issuer under the HFCAA following the filing of the annual report for the relevant fiscal year.
These uncertainties may impede our ability to enforce contracts in China and could materially and adversely affect our business and results of operations. 9 Furthermore, the PRC legal system is based in part on government policies and internal rules, some of which are not published on a timely basis, or at all, and may have retroactive effect.
These uncertainties may impede our ability to enforce contracts in China and could materially and adversely affect our business and results of operations. Furthermore, the PRC legal system is based in part on government policies and internal rules, some of which are not published on a timely basis, or at all, and may have retroactive effect.
In addition, we ceased to be an “emerging growth company” as such term is defined in the JOBS Act on December 31, 2023. Our independent registered public accounting firm must attest to and report on the effectiveness of our internal control over financial reporting beginning with this annual report for the fiscal year ending December 31, 2023.
In addition, we ceased to be an “emerging growth company” as such term is defined in the JOBS Act on December 31, 2023. Our independent registered public accounting firm must attest to and report on the effectiveness of our internal control over financial reporting beginning with the annual report for the fiscal year ending December 31, 2023.
Any of these occurrences could result in our diminished ability to operate our business, potential liability to third parties, inability to attract third parties, reputational damage, regulatory intervention or financial harm, which could negatively impact our business, financial condition and results of operations. 39 If we do not compete effectively in our target markets, our operating results could be harmed.
Any of these occurrences could result in our diminished ability to operate our business, potential liability to third parties, inability to attract third parties, reputational damage, regulatory intervention or financial harm, which could negatively impact our business, financial condition and results of operations. If we do not compete effectively in our target markets, our operating results could be harmed.
If the adjustments and the rectification cannot be completed within the prescribed period, we may face administrative penalties such as being banned in accordance with the law, confiscation of illegal gains, fines, etc. 38 If we are unable to maintain relationships with our third-party service providers, our business will suffer.
If the adjustments and the rectification cannot be completed within the prescribed period, we may face administrative penalties such as being banned in accordance with the law, confiscation of illegal gains, fines, etc. If we are unable to maintain relationships with our third-party service providers, our business will suffer.
We are currently evaluating and monitoring developments with respect to these rules and regulations, and we cannot predict or estimate with any degree of certainty the amount of additional costs we may incur or the timing of such costs. 44 We have granted, and may continue to grant, share incentives, which may result in increased share-based compensation expenses.
We are currently evaluating and monitoring developments with respect to these rules and regulations, and we cannot predict or estimate with any degree of certainty the amount of additional costs we may incur or the timing of such costs. We have granted, and may continue to grant, share incentives, which may result in increased share-based compensation expenses.
Strategic alliances will also divert the management’s time and resources from our normal operations and we may have to incur unexpected liabilities or expenses. Risks Related to Our American Depositary Shares The trading price of our ADSs may be volatile, which could result in substantial losses to investors.
Strategic alliances will also divert the management’s time and resources from our normal operations and we may have to incur unexpected liabilities or expenses. 46 Risks Related to Our American Depositary Shares The trading price of our ADSs may be volatile, which could result in substantial losses to investors.
Business Overview—Regulation—Regulations on Foreign Exchange—Regulations on Stock Incentive Plans.” If we are classified as a PRC resident enterprise for PRC enterprise income tax purposes, such classification could result in unfavorable tax consequences to us and our non-PRC shareholders and ADS holders.
Business Overview—Regulation—Regulations on Foreign Exchange—Regulations on Stock Incentive Plans.” 19 If we are classified as a PRC resident enterprise for PRC enterprise income tax purposes, such classification could result in unfavorable tax consequences to us and our non-PRC shareholders and ADS holders.
The occurrence of any of these risks could adversely affect our operations or financial condition. Our business depends on the continued efforts of our senior management. If one or more of our key executives were unable or unwilling to continue in their present positions, our business may be severely disrupted.
The occurrence of any of these risks could adversely affect our operations or financial condition. 42 Our business depends on the continued efforts of our senior management. If one or more of our key executives were unable or unwilling to continue in their present positions, our business may be severely disrupted.
As a result, investors were deprived of the benefits of such PCAOB inspections. In recent years, U.S. regulatory authorities have continued to express their concerns about challenges in their oversight of financial statement audits of U.S.-listed companies with significant operations in China.
As a result, investors were deprived of the benefits of such PCAOB inspections. 21 In recent years, U.S. regulatory authorities have continued to express their concerns about challenges in their oversight of financial statement audits of U.S.-listed companies with significant operations in China.
This may restrict our ability to implement our acquisition strategy and could adversely affect our business and prospects. Uncertainties exist regarding the interpretation and implementation of the newly enacted PRC Foreign Investment Law and how it may impact the viability of our current corporate structure and the viability of business operation.
This may restrict our ability to implement our acquisition strategy and could adversely affect our business and prospects. 18 Uncertainties exist regarding the interpretation and implementation of the newly enacted PRC Foreign Investment Law and how it may impact the viability of our current corporate structure and the viability of business operation.
The definition above stipulates the three features of illegal fundraising, which are illegal, with pecuniary interest, and targeting unspecified audiences. It is unclear whether the CRMP we received would be deemed as absorbing funds illegally under PRC laws and regulations.
The definition above stipulates the three features of illegal fundraising, which are illegal, with pecuniary interest, and targeting unspecified audiences. 27 It is unclear whether the CRMP we received would be deemed as absorbing funds illegally under PRC laws and regulations.
Therefore, our reputation, and as a result, our business and results of operations could be materially and adversely affected. 34 Our business operations may be negatively impacted if borrowers use loan proceeds to engage in activities prohibited or not encouraged by regulators.
Therefore, our reputation, and as a result, our business and results of operations could be materially and adversely affected. Our business operations may be negatively impacted if borrowers use loan proceeds to engage in activities prohibited or not encouraged by regulators.
The depositary may refuse to deliver, transfer or register transfers of our ADSs generally when our share register or the books of the depositary are closed, or at any time if we or the depositary thinks it is advisable to do so because of any requirement of law or of any government or governmental body, or under any provision of the deposit agreement, or for any other reason. 51 We are a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt from certain provisions applicable to U.S. domestic public companies.
The depositary may refuse to deliver, transfer or register transfers of our ADSs generally when our share register or the books of the depositary are closed, or at any time if we or the depositary thinks it is advisable to do so because of any requirement of law or of any government or governmental body, or under any provision of the deposit agreement, or for any other reason. 52 We are a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt from certain provisions applicable to U.S. domestic public companies.
The rights of shareholders to take action against our directors, actions by our minority shareholders and the fiduciary duties of our directors to us under Cayman Islands law are governed by our amended and restated memorandum and articles of association, the Companies Act (as amended) of the Cayman Islands and the common law of the Cayman Islands.
The rights of shareholders to take action against our directors, actions by our minority shareholders and the fiduciary duties of our directors to us under Cayman Islands law are governed by our second amended and restated memorandum and articles of association, the Companies Act (as amended) of the Cayman Islands and the common law of the Cayman Islands.
Our directors have discretion under our amended and restated memorandum and articles of association to determine whether or not, and under what conditions, our corporate records may be inspected by our shareholders, but are not obliged to make them available to our shareholders.
Our directors have discretion under our second amended and restated memorandum and articles of association to determine whether or not, and under what conditions, our corporate records may be inspected by our shareholders, but are not obliged to make them available to our shareholders.
This in turn may lead to higher delinquency ratio and adverse impacts on our reputation, business, results of operations and financial positions. Our current business model has a relatively large exposure to second lien mortgage.
This in turn may lead to higher delinquency ratio and adverse impacts on our reputation, business, results of operations and financial positions. 35 Our current business model has a relatively large exposure to second lien mortgage.
We are an exempted company with limited liability incorporated under the laws of the Cayman Islands. Our corporate affairs are governed by our amended and restated memorandum and articles of association, the Companies Act (as amended) of the Cayman Islands and the common law of the Cayman Islands.
We are an exempted company with limited liability incorporated under the laws of the Cayman Islands. Our corporate affairs are governed by our second amended and restated memorandum and articles of association, the Companies Act (as amended) of the Cayman Islands and the common law of the Cayman Islands.
If CSRC approval is required, it is uncertain whether it would be possible for us to obtain the approval, and any failure to obtain or delay in obtaining CSRC approval for future offerings of securities overseas or maintenance of the listing status of our ADSs would subject us to sanctions imposed by the CSRC and other PRC regulatory agencies. 10 On July 6, 2021, certain PRC regulatory authorities issued Opinions on Strictly Cracking Down on Illegal Securities Activities in Accordance with the Law.
If CSRC approval is required, it is uncertain whether it would be possible for us to obtain the approval, and any failure to obtain or delay in obtaining CSRC approval for future offerings of securities overseas or maintenance of the listing status of our ADSs would subject us to sanctions imposed by the CSRC and other PRC regulatory agencies. 11 On July 6, 2021, certain PRC regulatory authorities issued Opinions on Strictly Cracking Down on Illegal Securities Activities in Accordance with the Law.
For example, in recent years, regulatory actions undertaken by China’s government , including the enactment of China’s new Data Security Law, amended Cybersecurity Review Measures, Personal Information Protection Law, and any other future laws and regulations may require us to incur significant expenses and could materially affect our ability to conduct our business, accept foreign investments or list on a U.S. or foreign exchange.
For example, in recent years, regulatory actions undertaken by China’s government , including the enactment of China’s new Data Security Law, amended Cybersecurity Review Measures, Personal Information Protection Law, Regulations for the Administration of Network Data Security, and any other future laws and regulations may require us to incur significant expenses and could materially affect our ability to conduct our business, accept foreign investments or list on a U.S. or foreign exchange.
In addition, our shareholders may, subject to the provisions of our amended and restated memorandum and articles of association, by ordinary resolution, declare a dividend, but no dividend may exceed the amount recommended by our directors.
In addition, our shareholders may, subject to the provisions of our second amended and restated memorandum and articles of association, by ordinary resolution, declare a dividend, but no dividend may exceed the amount recommended by our directors.
Although our PFIC status for any taxable year is not entirely clear, based on the composition of our income and assets and the manner in which we currently operate our business, we were likely a PFIC for our 2023 and prior taxable years, and will likely be a PFIC for our 2024 taxable year and future taxable years, subject to the discussion in the subsequent paragraph regarding the Active Financing Exception, as defined below.
Although our PFIC status for any taxable year is not entirely clear, based on the composition of our income and assets and the manner in which we currently operate our business, we were likely a PFIC for our 2024 and prior taxable years, and will likely be a PFIC for our 2025 taxable year and future taxable years, subject to the discussion in the subsequent paragraph regarding the Active Financing Exception, as defined below.
These short attacks have, in the past, led to selling of shares in the market. Public companies that have substantially all of their operations in China have been the subject of short selling.
These short attacks have, in the past, led to selling of shares in the market. 48 Public companies that have substantially all of their operations in China have been the subject of short selling.
Although the matter is not entirely clear, we were likely a passive foreign investment company (a “PFIC”) for our 2023 taxable year, and we will likely be a PFIC for 2024 and our future taxable years, which could result in adverse U.S. federal income tax consequences to U.S. taxpayers.
Although the matter is not entirely clear, we were likely a passive foreign investment company (a “PFIC”) for our 2024 taxable year, and we will likely be a PFIC for 2025 and our future taxable years, which could result in adverse U.S. federal income tax consequences to U.S. taxpayers.
Risks Related to Doing Business in China ● Changes in China’s economic, political or social conditions or government policies could have a material adverse effect on our business and operations. ● Uncertainties with respect to the PRC legal system, including uncertainties regarding the enforcement of laws, and unexpected changes in laws and regulations in China could adversely affect us and limit the legal protections available to you and us. ● The PRC government has significant oversight over the conduct of our business and as such may influence our operations, which may potentially result in a material adverse effect on our operations. ● The oversight of the China Securities Regulatory Commission, Cybersecurity Administration of China or other governmental authorities may adversely affect our business and their approval may be required in connection with future offerings of securities overseas or to maintain the listing status of our ADSs, and, if required, we cannot predict whether we will be able to obtain such approval. ● We may rely on dividends and other distributions on equity paid by our PRC subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of our PRC subsidiaries to make payments to us could have a material and adverse effect on our ability to conduct our business. ● PRC regulations of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion may delay us from using the proceeds of our public offering to make loans or additional capital contributions to our PRC subsidiaries, which could materially and adversely affect our liquidity and our ability to fund and expand our business. 6 ● The collaboration model we have in place with our sales partners to acquire borrowers might be regarded as financial marketing and might face compliance risks. ● Our auditor, like other independent registered public accounting firms operating in China, was historically not permitted to be subject to inspection by the PCAOB, and consequently, investors were deprived of the benefits of such inspection in the past.
Risks Related to Doing Business in China ● Changes in China’s economic, political or social conditions or government policies could have a material adverse effect on our business and operations. ● Uncertainties with respect to the PRC legal system, including uncertainties regarding the enforcement of laws, and unexpected changes in laws and regulations in China could adversely affect us and limit the legal protections available to you and us. ● The PRC government has significant oversight over the conduct of our business and as such may influence our operations, which may potentially result in a material adverse effect on our operations. ● The oversight of the China Securities Regulatory Commission, Cybersecurity Administration of China or other governmental authorities may adversely affect our business and their approval may be required in connection with future offerings of securities overseas or to maintain the listing status of our ADSs, and, if required, we cannot predict whether we will be able to obtain such approval. 6 ● We may rely on dividends and other distributions on equity paid by our PRC subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of our PRC subsidiaries to make payments to us could have a material and adverse effect on our ability to conduct our business. ● PRC regulations of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion may delay us from using the proceeds of our public offering to make loans or additional capital contributions to our PRC subsidiaries, which could materially and adversely affect our liquidity and our ability to fund and expand our business. ● The collaboration model we have in place with our sales partners to acquire borrowers might be regarded as financial marketing and might face compliance risks. ● The accounting firms that prepared the audit reports included in this annual report, like other independent registered public accounting firms operating in China, was historically not permitted to be subject to inspection by the PCAOB, and consequently, investors were deprived of the benefits of such inspection in the past.
Passive income generally includes interest, income equivalent to interest, rents, dividends, royalties and gains from financial investments. 52 It is not entirely clear how the PFIC rules should apply to a company with a business such as ours.
Passive income generally includes interest, income equivalent to interest, rents, dividends, royalties and gains from financial investments. 53 It is not entirely clear how the PFIC rules should apply to a company with a business such as ours.
If our independent registered public accounting firm was denied, even temporarily, the ability to practice before the SEC and we were unable to timely find another registered public accounting firm to audit and issue an opinion on our financial statements, our financial statements could be determined not to be in compliance with the requirements of the Exchange Act.
If we use any independent registered public accounting firm that was denied, even temporarily, the ability to practice before the SEC and we were unable to timely find another registered public accounting firm to audit and issue an opinion on our financial statements, our financial statements could be determined not to be in compliance with the requirements of the Exchange Act.
According to SAT Circular 82, an offshore incorporated enterprise controlled by a PRC enterprise or a PRC enterprise group will be regarded as a PRC tax resident by virtue of having its “de facto management body” in China, and will be subject to PRC enterprise income tax on its global income only if all of the following conditions are met: (i) the primary location of the day-to-day operational management is in the PRC; (ii) decisions relating to the enterprise’s financial and human resource matters are made or are subject to approval by organizations or personnel in the PRC; (iii) the enterprise’s primary assets, accounting books and records, company seals, and board and shareholder resolutions are located or maintained in the PRC; and (iv) at least 50% of voting board members or senior executives habitually reside in the PRC. 19 We believe our company is not a PRC resident enterprise for PRC tax purposes.
According to SAT Circular 82, an offshore incorporated enterprise controlled by a PRC enterprise or a PRC enterprise group will be regarded as a PRC tax resident by virtue of having its “de facto management body” in China, and will be subject to PRC enterprise income tax on its global income only if all of the following conditions are met: (i) the primary location of the day-to-day operational management is in the PRC; (ii) decisions relating to the enterprise’s financial and human resource matters are made or are subject to approval by organizations or personnel in the PRC; (iii) the enterprise’s primary assets, accounting books and records, company seals, and board and shareholder resolutions are located or maintained in the PRC; and (iv) at least 50% of voting board members or senior executives habitually reside in the PRC.
U.S. taxpayers should consult their tax advisors regarding the proper application of the PFIC rules to us and our PFIC status for any taxable year.
U.S. taxpayers should consult their tax advisers regarding the proper application of the PFIC rules to us and our PFIC status for any taxable year.
Our concentration of funding provided by our trust company partners and our concentration of borrowers introduced by one sales partner may have a material adverse effect on our financial condition, liquidity and results of operations, if we lose any of our trust company partners or such sales partner either as a result of its decision to acquire services from our competitors or otherwise. 99.5%, 82.7% and 70.7% of our total home equity loan origination volume was originated under trust lending model in 2021, 2022 and 2023, respectively.
Our concentration of funding provided by our trust company partners and our concentration of borrowers introduced by one sales partner may have a material adverse effect on our financial condition, liquidity and results of operations, if we lose any of our trust company partners or such sales partner either as a result of its decision to acquire services from our competitors or otherwise. 82.7%, 70.7% and 87.3% of our total home equity loan origination volume was originated under trust lending model in 2022, 2023 and 2024, respectively.
The PRC Anti-money Laundering Law, which became effective in January 2007, sets forth the principal anti-money laundering requirements applicable to financial institutions as well as nonfinancial institutions with anti-money laundering obligations, including the adoption of precautionary and supervisory measures, establishment of various systems for client identification, retention of clients’ identification information and records and reports on large transactions and suspicious transactions.
The PRC Anti-money Laundering Law, which became effective in January 2007 and was amended on November 8, 2024, sets forth the principal anti-money laundering requirements applicable to financial institutions as well as nonfinancial institutions with anti-money laundering obligations, including the adoption of precautionary and supervisory measures, establishment of various systems for client identification, retention of clients’ identification information and records and reports on large transactions and suspicious transactions.
Our PRC legal advisor, Merits & Tree Law Offices, advises us that the CRMP from sales partners is for the purpose of reducing our own risk exposure, not for the purpose of illegally and publicly absorbing other people’s funds; in addition, the CRMP does not belong to the loans or funds raised by issuing bonds as described in the abovementioned regulations.
Our PRC legal advisor, Global Law Office, advises us that the CRMP from sales partners is for the purpose of reducing our own risk exposure, not for the purpose of illegally and publicly absorbing other people’s funds; in addition, the CRMP does not belong to the loans or funds raised by issuing bonds as described in the abovementioned regulations.
We aim to ensure that our collection efforts comply with the relevant laws and regulations in the PRC and we have established strict policies that our employees should not engage in aggressive practices while performing debt collection. Nevertheless, we do not have full control over our employees.
In addition, we rely on our employees for debt collection. We aim to ensure that our collection efforts comply with the relevant laws and regulations in the PRC and we have established strict policies that our employees should not engage in aggressive practices while performing debt collection. Nevertheless, we do not have full control over our employees.
Among the loans originated through our trust lending model, 62.1%, 62.3% and 55.8% were funded through FOTIC trust plans in 2021, 2022 and 2023, respectively. We generally acquire borrowers through the collaboration model where we collaborate with sales partners who introduce borrowers and receive incentives. See “Item 4. Information on the Company—B.
Among the loans originated through our trust lending model, 62.3%, 55.8% and 37.9% were funded through FOTIC trust plans in 2022, 2023 and 2024, respectively. We generally acquire borrowers through the collaboration model where we collaborate with sales partners who introduce borrowers and receive incentives. See “Item 4. Information on the Company—B.
Private equity funds filed before April 1, 2020 may continue to invest in loan business. Our private equity funding sources’ filing of products in collaboration with us were all accepted before April 1, 2020. Our PRC legal advisor, Merits & Tree Law Offices, advises that the instructions shall come into force as of the date of promulgation.
Private equity funds filed before April 1, 2020 may continue to invest in loan business. Our private equity funding sources’ filing of products in collaboration with us were all accepted before April 1, 2020. Our PRC legal advisor, Global Law Office, advises that the instructions shall come into force as of the date of promulgation.
As we are in the process of loan facilitation for trust companies or commercial banks, we may involve the collection and provision of borrowers’ information. Our PRC legal advisor, Merits & Tree Law Offices, believes that we have not arranged or processed the borrower’s credit information while conducting business, and we are not engaged in personal credit investigation business.
As we are in the process of loan facilitation for trust companies or commercial banks, we may involve the collection and provision of borrowers’ information. Our PRC legal advisor, Global Law Office, believes that we have not arranged or processed the borrower’s credit information while conducting business, and we are not engaged in personal credit investigation business.
In order to expand our funding channels, we launched a new funding model in 2021 in collaboration with commercial banks, under which our commercial bank partners are responsible for reviewing and approving the loan while we charge a service fee for our loan facilitation services. 0.3%, 17.2% and 29.0% of our home equity loan origination volume was originated under trust lending model in 2021, 2022 and 2023, respectively.
In order to expand our funding channels, we launched a new funding model in 2021 in collaboration with commercial banks, under which our commercial bank partners are responsible for reviewing and approving the loan while we charge a service fee for our loan facilitation services. 17.2%, 29.0% and 9.8% of our home equity loan origination volume was originated under collaboration with commercial banks in 2022, 2023 and 2024, respectively.
In 2021, 2022 and 2023, CNFinance has not transferred any cash proceeds to any of its PRC subsidiaries.
In 2022, 2023 and 2024, CNFinance has not transferred any cash proceeds to any of its PRC subsidiaries.
Our independent registered public accounting firm that issues the audit report included in this annual report, as an auditor of companies that are traded publicly in the United States and a firm registered with the PCAOB, is required by the laws of the United States to undergo regular inspections by the PCAOB to assess its compliance with the laws of the United States and professional standards.
Independent registered public accounting firms that issue the audit report included in this annual report, as an auditor of companies that are traded publicly in the United States and a firm registered with the PCAOB, are required by the laws of the United States to undergo regular inspections by the PCAOB to assess its compliance with the laws of the United States and professional standards.
In 2021, 2022 and 2023, loans secured by second lien interest accounted for 60.5%, 60.6% and 62.9% of our loan origination volume of home equity loans, respectively. For loans secured by second lien interests, our rights over the collateral will be subordinated to other secured creditors with higher priority.
In 2022, 2023 and 2024, loans secured by second lien interest accounted for 60.6%, 62.9% and 57.1% of our loan origination volume of home equity loans, respectively. For loans secured by second lien interests, our rights over the collateral will be subordinated to other secured creditors with higher priority.
Moreover, the Anti-Monopoly Law promulgated by the Standing Committee of the NPC which became effective in 2008 and was amended on December 29, 2017, requires that transactions which are deemed concentrations and involve parties with specified turnover thresholds must be cleared by the MOFCOM before they can be completed.
Moreover, the Anti-Monopoly Law promulgated by the Standing Committee of the NPC which became effective in 2008 and was amended on October 1, 2022, requires that transactions which are deemed concentrations and involve parties with specified turnover thresholds must be cleared by the MOFCOM before they can be completed.
Business Overview—Our Products—Funding Sources.” In 2021, 2022 and 2023, we transferred our right of earnings in subordinated units to a certain private equity fund and to a certain third party. Our financing costs under such repurchase arrangement ranged from 10.0% to 13.8% per annum of the transfer prices in 2021, 2022 and 2023.
Business Overview—Our Products—Funding Sources.” In 2022, 2023 and 2024, we transferred our right of earnings in subordinated units to a certain private equity fund and to a certain third party. Our financing costs under such repurchase arrangement ranged from 8% to 14% per annum of the transfer prices in 2022, 2023 and 2024.
Our PRC legal advisor, Merits & Tree Law Offices, advises us that according to the PRC Foreign Investment Law and the Implementing Regulations, the PRC regulatory agencies shall, considering the needs for further foreign opening and economic and social development, adjust the Negative List where appropriate.
Our PRC legal advisor, Global Law Office, advises us that according to the PRC Foreign Investment Law and the Implementing Regulations, the PRC regulatory agencies shall, considering the needs for further foreign opening and economic and social development, adjust the Negative List where appropriate.
Our PRC legal advisor, Merits & Tree Law Offices, advises us that according to the PRC Foreign Investment Law and the Implementing Regulations, the PRC regulatory agencies shall, considering the needs for further foreign opening and economic and social development, adjust the Negative List where appropriate.
Our PRC legal advisor, Global Law Office, advises us that according to the PRC Foreign Investment Law and the Implementing Regulations, the PRC regulatory agencies shall, considering the needs for further foreign opening and economic and social development, adjust the Negative List where appropriate.
Business Overview—Regulation.” Our PRC legal advisor, Merits & Tree Law Offices, advises us that our businesses do not need special approvals or licenses, other than our small loan business and subject to “Item 3. Key Information—D.
Business Overview—Regulation.” Our PRC legal advisor, Global Law Office, advises us that our businesses do not need special approvals or licenses, other than our small loan business and subject to “Item 3. Key Information—D.
However, the tax resident status of an enterprise is subject to determination by the PRC tax authorities and uncertainties remain with respect to the interpretation of the term “de facto management body.” If the PRC tax authorities determine that our company is a PRC resident enterprise for enterprise income tax purposes, we will be subject to PRC enterprise income on our worldwide income at the rate of 25%.
However, the tax resident status of an enterprise is subject to determination by the PRC tax authorities and uncertainties remain with respect to the interpretation of the term “de facto management body.” If the PRC tax authorities determine that our company or any of our non-PRC subsidiaries is a PRC resident enterprise for enterprise income tax purposes, we or any such non-PRC subsidiary will be subject to PRC enterprise income on our or such subsidiary’s worldwide income at the rate of 25%.
Business Overview—Our Products—Collaboration Model.” In 2022, we started to collaborate with a sales partner and the balance of outstanding loan principal of the loans issued to borrowers introduced by such sales partner accounted for 28.7% of our total balance of outstanding loan principal as of December 31, 2023.
Business Overview—Our Products—Collaboration Model.” In 2022, we started to collaborate with a sales partner and the balance of outstanding loan principal of the loans issued to borrowers introduced by such sales partner accounted for 95.9% of our total balance of outstanding loan principal as of December 31, 2024.
If additional remedial measures are imposed on the Chinese affiliates of the “big four” accounting firms, including our independent registered public accounting firm, in administrative proceedings brought by the SEC alleging the firms’ failure to meet specific criteria set by the SEC with respect to requests for the production of documents, we could be unable to timely file future financial statements in compliance with the requirements of the Exchange Act.
If additional remedial measures are imposed on the Chinese affiliates of the “big four” accounting firms in administrative proceedings brought by the SEC alleging the firms’ failure to meet specific criteria set by the SEC with respect to requests for the production of documents, we may be unable to timely file future financial statements in compliance with the requirements of the Exchange Act.

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Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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According to Circular 82, a Chinese-controlled offshore-incorporated enterprise will be regarded as a PRC resident enterprise by virtue of having its “de facto management body” in China and will be subject to PRC enterprise income tax on its global income only if all of the following conditions are met: ● the primary location of the day-to-day operational management and the places where they perform their duties are in the PRC; ● decisions relating to the enterprise’s financial and human resource matters are made or are subject to approval of organizations or personnel in the PRC; ● the enterprise’s primary assets, accounting books and records, company seals and board and shareholder resolutions are located or maintained in the PRC; and ● 50% or more of voting board members or senior executives habitually reside in the PRC.
According to Circular 82, a Chinese-controlled offshore-incorporated enterprise will be regarded as a PRC resident enterprise by virtue of having its “de facto management body” in China and will be subject to PRC enterprise income tax on its global income only if all of the following conditions are met: ● the primary location of the day-to-day operational management and the places where they perform their duties are in the PRC; 88 ● decisions relating to the enterprise’s financial and human resource matters are made or are subject to approval of organizations or personnel in the PRC; ● the enterprise’s primary assets, accounting books and records, company seals and board and shareholder resolutions are located or maintained in the PRC; and ● 50% or more of voting board members or senior executives habitually reside in the PRC.
The key regulations of small loan companies in Shenzhen are as follows: ● if a small loan company is a limited liability company, its registered capital must be at least RMB300 million; if it is a company limited by shares, its registered capital must be at least RMB400 million; ● the balance of funds obtained by a small loan company from external legitimate channels may not exceed 200% of its net capital the previous year; ● the main promoter of a small loan company shall (1) have net assets no less than RMB200 million and an asset-liability ratio of no more than 65%, and, in principle, the long-term investment amount after investing in this project shall be no more than 60% of net assets (on a consolidated financial statements basis); and (2) have continuous positive earnings for three years with a total net profit of no less than RMB60 million, and the total tax contribution shall be no less than RMB18 million (on a consolidated financial statements basis); ● enterprise, social organization or economic organization as other contributors shall be divided into two categories: (1) if the ratio of investments is 30% or more, it shall be subject to the approval process as the main promoter; and (2) if the ratio of investments is no more than 30%, it shall be subject to the following conditions: having been incorporated for more than three years with net assets no less than RMB100 million and an asset-liability ratio no more than 65%, and, in principle, the long-term investment amount after investing on this project shall be no more than 60% of net assets, having continuous positive earnings for two years with a total net profit of no less than RMB20 million, and the total tax contribution shall be no less than RMB6 million (on a consolidated financial statement basis); 77 ● if a foreign financial institution or small loan credit company (or other similar entity) is the main promoter, it shall be subject to the following conditions: (1) having total assets no less than RMB2 billion (on a consolidated financial statement basis); (2) having been engaged in financial business and continuously operating for no less than 10 years with sufficient analysis and research on the small loan market in China; and (3) shall obtain the approval of the financial regulation authorities as a bank financing institution; ● the key management personnel may hold no more than 5% of shares of the small loan company, and, as a temporary restriction, no other social natural person may contribute to the small loan company; ● the main promoter shall contribute no less than 30% of the total registered capital and shall control the Company relatively, other contribution by other entities shall be no less than 5% of the total registered capital; and ● the equity interests of a small loan company may be transferred, but no transfer or pledge is allowed in the first three years following the incorporation of the small loan company.
The key regulations of small loan companies in Shenzhen are as follows: ● if a small loan company is a limited liability company, its registered capital must be at least RMB300 million; if it is a company limited by shares, its registered capital must be at least RMB400 million; ● the balance of funds obtained by a small loan company from external legitimate channels may not exceed 200% of its net capital the previous year; ● the main promoter of a small loan company shall (1) have net assets no less than RMB200 million and an asset-liability ratio of no more than 65%, and, in principle, the long-term investment amount after investing in this project shall be no more than 60% of net assets (on a consolidated financial statements basis); and (2) have continuous positive earnings for three years with a total net profit of no less than RMB60 million, and the total tax contribution shall be no less than RMB18 million (on a consolidated financial statements basis); ● enterprise, social organization or economic organization as other contributors shall be divided into two categories: (1) if the ratio of investments is 30% or more, it shall be subject to the approval process as the main promoter; and (2) if the ratio of investments is no more than 30%, it shall be subject to the following conditions: having been incorporated for more than three years with net assets no less than RMB100 million and an asset-liability ratio no more than 65%, and, in principle, the long-term investment amount after investing on this project shall be no more than 60% of net assets, having continuous positive earnings for two years with a total net profit of no less than RMB20 million, and the total tax contribution shall be no less than RMB6 million (on a consolidated financial statement basis); ● if a foreign financial institution or small loan credit company (or other similar entity) is the main promoter, it shall be subject to the following conditions: (1) having total assets no less than RMB2 billion (on a consolidated financial statement basis); (2) having been engaged in financial business and continuously operating for no less than 10 years with sufficient analysis and research on the small loan market in China; and (3) shall obtain the approval of the financial regulation authorities as a bank financing institution; 79 ● the key management personnel may hold no more than 5% of shares of the small loan company, and, as a temporary restriction, no other social natural person may contribute to the small loan company; ● the main promoter shall contribute no less than 30% of the total registered capital and shall control the Company relatively, other contribution by other entities shall be no less than 5% of the total registered capital; and ● the equity interests of a small loan company may be transferred, but no transfer or pledge is allowed in the first three years following the incorporation of the small loan company.
The LTV ratio varies for different types of real properties and is also adjusted pursuant to a borrower’s credit history and quality of the collateral and may be lowered in the event of a past default. We offer home equity loan products that allow borrowers to repay only the interests by installments and repay the full principal amount when due.
The LTV ratio varies for different types of real properties and is also adjusted pursuant to a borrower’s credit history and quality of the collateral and may be lowered in the event of a past default. 68 We offer home equity loan products that allow borrowers to repay only the interests by installments and repay the full principal amount when due.
Business Overview—Our Products—Small Loan Direct Lending.” We generally rely on and will continue to rely primarily on our trust lending model and commercial bank partnership model, which are supplemented with our direct lending model. Our Borrowers Borrower Base We strategically target MSE owners who own properties in Tier 1 and Tier 2 and other major cities in China.
Business Overview—Our Products—Small Loan Direct Lending.” We generally rely on and will continue to rely primarily on our trust lending model and commercial bank partnership model, which are supplemented with our direct lending model. 57 Our Borrowers Borrower Base We strategically target MSE owners who own properties in Tier 1 and Tier 2 and other major cities in China.
After obtaining the list of qualified borrowers, we first perform due diligence on such borrowers and then share those customers’ information with the guarantor company we work with for its own risk assessment. Step 2: Loan application referral After passing the guarantor’s risk assessment, the borrower will be introduced to our commercial bank partner.
After obtaining the list of qualified borrowers, we first perform due diligence on such borrowers and then share those customers’ information with the guarantor company we work with for its own risk assessment. 65 Step 2: Loan application referral After passing the guarantor’s risk assessment, the borrower will be introduced to our commercial bank partner.
If the financing guarantee companies do not comply with the requirement of regulatory authorities, regulatory authorities can exert penalties in compliance with relevant laws and regulations. 80 Regulations Relating to Illegal Fundraising 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.
If the financing guarantee companies do not comply with the requirement of regulatory authorities, regulatory authorities can exert penalties in compliance with relevant laws and regulations. Regulations Relating to Illegal Fundraising 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.
The following chart illustrates a typical arrangement among sales partners, borrowers, trust plans, trust plan investors and us. 60 We provide a convenient and user-friendly transaction process, which is implemented through our standardized home equity loan application procedures across our local offices. Our standardized transaction process under trust lending model is illustrated as below.
The following chart illustrates a typical arrangement among sales partners, borrowers, trust plans, trust plan investors and us. We provide a convenient and user-friendly transaction process, which is implemented through our standardized home equity loan application procedures across our local offices. Our standardized transaction process under trust lending model is illustrated as below.
Upon relinquishing its CRMPs, the sales partner is deemed to be released from its repayment obligations under the collaboration agreement. When a loan defaults, we will inform the sales partner the overdue status of the loan through the mobile app and require the sales partners to choose among the above-mentioned options to perform its repayment obligations within an agreed timetable.
Upon relinquishing its CRMPs, the sales partner is deemed to be released from its repayment obligations under the collaboration agreement. 63 When a loan defaults, we will inform the sales partner the overdue status of the loan through the mobile app and require the sales partners to choose among the above-mentioned options to perform its repayment obligations within an agreed timetable.
Business Overview—Our Borrower—Borrower Acquisition.” Intellectual Property We rely on a combination of patent, copyright, trademark and trade secret laws and restrictions on disclosure to protect our intellectual property rights. We have registered 17 software copyrights in China, including our proprietary loan management software and financial data analytics software. We have registered our domain name, cashchina.cn.
Business Overview—Our Borrower—Borrower Acquisition.” 75 Intellectual Property We rely on a combination of patent, copyright, trademark and trade secret laws and restrictions on disclosure to protect our intellectual property rights. We have registered 17 software copyrights in China, including our proprietary loan management software and financial data analytics software. We have registered our domain name, cashchina.cn.
The applicant typically also consents to access to his or her credit report generated by third parties while submitting the application. Step 2: Risk assessment After an application is submitted, our proprietary risk management system collects credit and valuation data from a number of internal and external sources.
The applicant typically also consents to access to his or her credit report generated by third parties while submitting the application. 62 Step 2: Risk assessment After an application is submitted, our proprietary risk management system collects credit and valuation data from a number of internal and external sources.
Moreover, Circular 16 allows the enterprises to use their foreign exchange capitals under capital accounts allowed by the relevant laws and regulations. 89 In January 2017, the SAFE promulgated the Circular on Further Improving Reform of Foreign Exchange Administration and Optimizing Genuineness and Compliance Verification, or Circular 3, which stipulates several capital control measures with respect to the outbound remittance of profit from domestic entities to offshore entities, including (i) under the principle of genuine transaction, banks shall check board resolutions regarding profit distribution, the original version of tax filing records and audited financial statements; and (ii) domestic entities shall hold income to account for previous years’ losses before remitting profits.
Moreover, Circular 16 allows the enterprises to use their foreign exchange capitals under capital accounts allowed by the relevant laws and regulations. 90 In January 2017, the SAFE promulgated the Circular on Further Improving Reform of Foreign Exchange Administration and Optimizing Genuineness and Compliance Verification, or Circular 3, which stipulates several capital control measures with respect to the outbound remittance of profit from domestic entities to offshore entities, including (i) under the principle of genuine transaction, banks shall check board resolutions regarding profit distribution, the original version of tax filing records and audited financial statements; and (ii) domestic entities shall hold income to account for previous years’ losses before remitting profits.
Upon relinquishing its CRMPs, the sales partner is deemed to be released from its repayment obligations under the collaboration agreement. Small Loan Direct Lending Historically, we supplemented our trust lending model with direct lending by our small loan subsidiaries in Beijing, Shenzhen and Chongqing.
Upon relinquishing its CRMPs, the sales partner is deemed to be released from its repayment obligations under the collaboration agreement. 66 Small Loan Direct Lending Historically, we supplemented our trust lending model with direct lending by our small loan subsidiaries in Beijing, Shenzhen and Chongqing.
In third- and lower-tier cities, the percentage of loan principal as the CRMP charged to this type of sales partners will be raised to 15%. 62 Sales partners who pay 20% of the loan principal as the CRMP are mainly individual and smaller-scale loan service providers in Tier 1 and Tier 2 cities.
In third- and lower-tier cities, the percentage of loan principal as the CRMP charged to this type of sales partners will be raised to 15%. Sales partners who pay 20% of the loan principal as the CRMP are mainly individual and smaller-scale loan service providers in Tier 1 and Tier 2 cities.
Effective post-loan management procedures Under the agreements with our trust company partners, we are responsible for assisting our trust company partners in monitoring collection of overdue principal and interest, and are authorized by our trust company partners to oversee the collection process. Monitoring repayments .
Effective post-loan management procedures Under the agreements with our trust company partners, we are responsible for assisting our trust company partners in monitoring collection of overdue principal and interest, and are authorized by our trust company partners to oversee the collection process. 70 Monitoring repayments .
Funding Partners As of the date of this annual report, we have formed partnerships with well-established trust companies under our trust lending model, including FOTIC, COFCO Trust, Zhonghai Trust, Zhongyuan Trust, Shaanxi International Trust, Bohai Trust, and National Trust.
Funding Partners As of the date of this annual report, we have formed partnerships with well-established trust companies under our trust lending model, including FOTIC, COFCO Trust, Zhonghai Trust, , Shaanxi International Trust, Bohai Trust, and National Trust.
The effect of this law will have an impact on our tax situation. Regulations Relating to Foreign Exchange Regulation on Foreign Currency Exchange The principal regulations governing foreign currency exchange in China are the Foreign Exchange Administration Regulations, most recently amended in August 2008.
The effect of this law will have an impact on our tax situation. 89 Regulations Relating to Foreign Exchange Regulation on Foreign Currency Exchange The principal regulations governing foreign currency exchange in China are the Foreign Exchange Administration Regulations, most recently amended in August 2008.
Such searches are supplemented with online revaluation of collateral through our appraisal company partners and the search results will be shared real-time with sales partners through the mobile app. 69 Debt collection .
Such searches are supplemented with online revaluation of collateral through our appraisal company partners and the search results will be shared real-time with sales partners through the mobile app. Debt collection .
We cannot assure you that we will be able to complete any required filing in a timely manner and fully comply with such rules to maintain the listing status of our ADSs and/or other securities, or to conduct any securities offerings in the future. 92 On April 2, 2022, the CSRC released the revised Provisions on Strengthening Confidentiality and Archives Administration of Overseas Securities Offering and Listing by Domestic Companies (Draft for Comments), or the Draft Archives Rules.
We cannot assure you that we will be able to complete any required filing in a timely manner and fully comply with such rules to maintain the listing status of our ADSs and/or other securities, or to conduct any securities offerings in the future. 93 On April 2, 2022, the CSRC released the revised Provisions on Strengthening Confidentiality and Archives Administration of Overseas Securities Offering and Listing by Domestic Companies (Draft for Comments), or the Draft Archives Rules.
Moreover, unlike in the United States where home equity loans commonly serve as a financing alternative, traditional lenders in China, such as large commercial banks, typically do not grant loans secured by second lien interests and are generally less incentivized to introduce innovative home equity loan products. 54 We aim to serve our target borrowers by facilitating home equity loans and providing tailored services.
Moreover, unlike in the United States where home equity loans commonly serve as a financing alternative, traditional lenders in China, such as large commercial banks, typically do not grant loans secured by second lien interests and are generally less incentivized to introduce innovative home equity loan products. 55 We aim to serve our target borrowers by facilitating home equity loans and providing tailored services.
Credit risk mitigation embedded in product design The home equity loans we facilitate primarily take real properties located in Tier 1 and Tier 2 and other major cities as collateral. Our loan portfolio spreads over 60 cities across China. We believe that such geographic diversification better protects us against deterioration of local housing and economic conditions.
Credit risk mitigation embedded in product design The home equity loans we facilitate primarily take real properties located in Tier 1 and Tier 2 and other major cities as collateral. Our loan portfolio spreads over 50 cities across China. We believe that such geographic diversification better protects us against deterioration of local housing and economic conditions.
In 2021, 2022 and 2023, we transferred our rights to earnings in subordinated units to a private equity fund and to certain third parties. We utilize multiple funding sources to support our business, some of which may be subject to challenges by regulatory authorities from time to time under the evolving legal environment. For details, please refer to “Item 3.
In 2022, 2023 and 2024, we transferred our rights to earnings in subordinated units to a private equity fund and to certain third parties. We utilize multiple funding sources to support our business, some of which may be subject to challenges by regulatory authorities from time to time under the evolving legal environment. For details, please refer to “Item 3.
We receive a performance-based service fee up to 5% per annum of the size of the trust plan charged to the trust plans for the services we provide. 55 In December 2018, we introduced our collaboration model to optimize our collaboration with trust companies. Sales partners recommend borrowers to us by direct cooperation with us or joining limited partnerships.
We receive a performance-based service fee up to 5% per annum of the size of the trust plan charged to the trust plans for the services we provide. 56 In December 2018, we introduced our collaboration model to optimize our collaboration with trust companies. Sales partners recommend borrowers to us by direct cooperation with us or joining limited partnerships.
The trust company partner is responsible for administering the trust plan and is paid a trust administrative fee. 58 We are responsible for maintaining the asset quality and receive a performance-based service fee of up to 5% per annum of the size of the trust plan for the services we provide, which decreases with the growth of percentage of NPLs in the amount of loans we facilitated.
The trust company partner is responsible for administering the trust plan and is paid a trust administrative fee. 59 We are responsible for maintaining the asset quality and receive a performance-based service fee of up to 5% per annum of the size of the trust plan for the services we provide, which decreases with the growth of percentage of NPLs in the amount of loans we facilitated.
Risk Factors—Risks Related to Doing Business in China—Failure to make adequate contributions to various employee benefit plans as required by PRC regulations may subject us to penalties.” Regulations Relating to Tax Enterprise Income Tax PRC enterprise income tax is calculated based on taxable income, which is determined under (i) the PRC Enterprise Income Tax Law, or the EIT Law, promulgated by the NPC and implemented in January 2008, and most recently amended on December 29, 2018, and (ii) the implementation rules to the EIT Law promulgated by the State Council and implemented in January 2008, and most recently amended on April 23, 2019.
Risk Factors—Risks Related to Doing Business in China—Failure to make adequate contributions to various employee benefit plans as required by PRC regulations may subject us to penalties.” Regulations Relating to Tax Enterprise Income Tax PRC enterprise income tax is calculated based on taxable income, which is determined under (i) the PRC Enterprise Income Tax Law, or the EIT Law, promulgated by the NPC and implemented in January 2008, and most recently amended on December 29, 2018, and (ii) the implementation rules to the EIT Law promulgated by the State Council, effective since January 2008, amended on April 23, 2019, and most recently amended on January 20, 2025.
We prioritize expanding into cities that have stable housing market synergetic to our established network. We have carefully selected the geographic location of our offices and had 113 branches and sub-branches in China, with the majority located in Tier 1 or Tier 2 cities. 66 In practice, regulatory regime on property-backed loans and mortgages may differ from region to region.
We prioritize expanding into cities that have stable housing market synergetic to our established network. We have carefully selected the geographic location of our offices and had 120 branches and sub-branches in China, with the majority located in Tier 1 or Tier 2 cities. In practice, regulatory regime on property-backed loans and mortgages may differ from region to region.
As of December 31, 2023, for all of the loans with payment over 60 days past due, our sales partners have either fulfilled or are in the process of fulfilling their obligations under our agreements with them.
As of December 31, 2024, for all of the loans with payment over 60 days past due, our sales partners have either fulfilled or are in the process of fulfilling their obligations under our agreements with them.
Under the 2018 FOTIC Service Fee Structure, our service fee charged to a trust plan is performance-based and up to 5% per annum of the size of the trust plan decreases with the growth of the NPLs in the loans we facilitated.
Under the 2018 FOTIC Service Fee Structure, our service fee charged to a trust plan is performance-based and up to 8% per annum of the size of the trust plan decreases with the growth of the NPLs in the loans we facilitated.
For a complete list of our subsidiaries, please refer to note 1 to our consolidated financial statements as of and for the years ended December 31, 2021, 2022 and 2023 included elsewhere in this annual report.
For a complete list of our subsidiaries, please refer to note 1 to our consolidated financial statements as of and for the years ended December 31, 2022, 2023 and 2024 included elsewhere in this annual report.
The balances of the borrowings that were funded by third parties for the small loan direct lending business were nil, nil and nil, as of December 31, 2021, 2022 and 2023, respectively. 65 Our Funding Model We have explored various funding sources and have focused on collaboration with our trust company partners starting in 2014.
The balances of the borrowings that were funded by third parties for the small loan direct lending business were nil, nil and nil, as of December 31, 2022, 2023 and 2024, respectively. Our Funding Model We have explored various funding sources and have focused on collaboration with our trust company partners starting in 2014.
As of December 31, 2023, we had 46 registered trademarks, including our “CNFH” and company logo. Despite our efforts to protect our intellectual property rights, unauthorized parties may attempt to obtain and use our intellectual property.
As of December 31, 2024, we had 46 registered trademarks, including our “CNFH” and company logo. Despite our efforts to protect our intellectual property rights, unauthorized parties may attempt to obtain and use our intellectual property.
If investment information is not filed in accordance with the Measures, foreign-invested enterprises may be required to make corrections or be subject to fines. 75 Special Administrative Measures for Access of Foreign Investment (Negative List) (2021 Version) The Negative List uniformly lists special administrative measures on foreign investment access such as requirements on equity interest and management.
If investment information is not filed in accordance with the Measures, foreign-invested enterprises may be required to make corrections or be subject to fines. Special Administrative Measures for Access of Foreign Investment (Negative List) (2024 Version) The Negative List uniformly lists special administrative measures on foreign investment access such as requirements on equity interest and management.
To further limit credit risk, we devoted to control home equity loans up to 70% LTV ratio with weighted average LTV ratio of 58.5%, 60.0% and 62.0% for home equity loans originated in 2021, 2022 and 2023, respectively, to ensure recovery in the event of borrower default.
To further limit credit risk, we devoted to control home equity loans up to 70% LTV ratio with weighted average LTV ratio of 60.0%, 62.0% and 60.5% for home equity loans originated in 2022, 2023 and 2024, respectively, to ensure recovery in the event of borrower default.
Due to regulatory financing/net capital ratio constraints and for liquidity reasons, we expect that direct lending will remain a fairly limited and immaterial part of our business in the near future. For the years ended December 31, 2021, 2022 and 2023, our loan origination volume through direct lending was RMB17 million, RMB15 million RMB48 million, respectively.
Due to regulatory financing/net capital ratio constraints and for liquidity reasons, we expect that direct lending will remain a fairly limited and immaterial part of our business in the near future. For the years ended December 31, 2022, 2023 and 2024, our loan origination volume through direct lending was RMB15 million, RMB48 million and RMB28 million, respectively.
The Company allow more sales partners to select option (i)(2) to help increase their liquidity. The percentage of loans on which sales partner refused to fulfill its repayment obligation accounted for only 1.6% and 0.9% of the outstanding loan principal including loans held for sale as of December 31, 2022 and 2023 respectively.
The Company allow more sales partners to select option (i)(2) to help increase their liquidity. The percentage of loans on which sales partner refused to fulfill its repayment obligation accounted for only 0.9% and 1.8% of the outstanding loan principal including loans held for sale as of December 31, 2023 and 2024 respectively.
Business Overview—Our Products—Collaboration Model.” As of the date of this annual report, we have around 2,078 contracted sales partners in total, among which around 1,378 are effective sales partners. In order to diversify our financing channels to better serve the demands of MSE owners with credible funding sources, we started to collaborate with commercial banks in 2021.
Business Overview—Our Products—Collaboration Model.” As of the date of this annual report, we have over 2,100 contracted sales partners in total, among which around 1,480 are effective sales partners. In order to diversify our financing channels to better serve the demands of MSE owners with credible funding sources, we started to collaborate with commercial banks in 2021.
To a lesser extent, we historically utilized a direct lending model through our small loan subsidiaries. In 2021, we launched a new funding model in cooperation with commercial banks to expand our financing channels. In 2021, 2022 and 2023, 99.5%, 82.7% and 70.7% of the total home equity loan origination volume was originated under the trust lending model, respectively.
To a lesser extent, we historically utilized a direct lending model through our small loan subsidiaries. In 2021, we launched a new funding model in cooperation with commercial banks to expand our financing channels. In 2022, 2023 and 2024, 82.7%, 70.7% and 87.3% of the total home equity loan origination volume was originated under the trust lending model, respectively.
As of the date of this annual report, we have 2,078 contracted sales partners in total, among which around 1,378 are effective sales partners. Under such collaboration model, we will pay incentive fees, or collaboration cost, to each sales partner upon a pre-agreed schedule and conditions, which will be re-distributed to the sales partners.
As of the date of this annual report, we have over 2,100 contracted sales partners in total, among which around 1,480 are effective sales partners. Under such collaboration model, we will pay incentive fees, or collaboration cost, to each sales partner upon a pre-agreed schedule and conditions, which will be re-distributed to the sales partners.
As of December 31, 2023, we had 510 employees in our risk management team. We impose strict guidelines on loan approvals and separation of loan approval and risk management. The loans we originated are divided into different categories by amount and are reviewed by various levels of seniority.
As of December 31, 2024, we had 403 employees in our risk management team. We impose strict guidelines on loan approvals and separation of loan approval and risk management. The loans we originated are divided into different categories by amount and are reviewed by various levels of seniority.
We subscribe to the subordinated units of the trust products issued under long-term trust plans through three of our wholly owned subsidiaries, Guangzhou Heze Information Technology Co., Ltd., Guangzhou Chengze Information Technology Co., Ltd., and Shenzhen Fanhua United Investment Group Co., Ltd.
We subscribe to the subordinated units of the trust products issued under long-term trust plans through three of our wholly owned subsidiaries, Guangzhou Heze Information Technology Co., Ltd., Guangzhou Chengze Information Technology Co., Ltd., and Shenfanlian Investment Group Co., Ltd. (formerly known as Shenzhen Fanhua United Investment Group Co., Ltd).
As of December 31, 2021 2022 2023 Amount (RMB in millions) % of total Amount (RMB in millions) % of total Amount (RMB in millions) % of total Outstanding loan principal (excluding loans held for sale) by collateral city tier Tier 1 2,851 30.3 % 3,110 34.6 % 4,479 48.7 % Tier 2 5,992 63.7 % 5,497 61.1 % 4,453 48.5 % Others 565 6.0 % 384 4.3 % 256 2.8 % Total 9,408 100.0 % 8,991 100.0 % 9,188 100.0 % The process for updating collateral values during the period the loan is held includes the following: (i) regular review and reappraisal of collateral value based on the data from multiple external online appraisal firms; (ii) if the difference between the reappraised value and the value at origination exceeds 20%, we will determine whether such difference is due to regional market fluctuations and accept such reappraised value if the difference is determined to result from regional market fluctuations, and (iii) if the value difference is determined to be isolated from regional market fluctuations, we will check with recognized housing agent companies for the latest market sales price for properties with similar conditions such as locations, floorplans and ages, and use the average value of such similar properties as the ultimate reappraised value of the collateral.
As of December 31, 2022 2023 2024 Amount (RMB in millions) % of total Amount (RMB in millions) % of total Amount (RMB in millions) % of total Outstanding loan principal (excluding loans held for sale) by collateral city tier Tier 1 3,110 34.6 % 4,479 48.7 % 3,149 48.5 % Tier 2 5,497 61.1 % 4,453 48.5 % 2,595 40.0 % Others 384 4.3 % 256 2.8 % 752 11.6 % Total 8,991 100.0 % 9,188 100.0 % 6,496 100.0 % The process for updating collateral values during the period the loan is held includes the following: (i) regular review and reappraisal of collateral value based on the data from multiple external online appraisal firms; (ii) if the difference between the reappraised value and the value at origination exceeds 20%, we will determine whether such difference is due to regional market fluctuations and accept such reappraised value if the difference is determined to result from regional market fluctuations, and (iii) if the value difference is determined to be isolated from regional market fluctuations, we will check with recognized housing agent companies for the latest market sales price for properties with similar conditions such as locations, floorplans and ages, and use the average value of such similar properties as the ultimate reappraised value of the collateral.
The key regulations of small loan companies in Chongqing are as follows: ● if a small loan company is a foreign investment company, its registered capital must be at least US$30 million, and the shareholding of the foreign investor must be more than 50%; ● for small loan companies with sound corporate management and strong risk management ability, the balance of the capital borrowed from banking financial institutions can be 100% of its net capital; ● the balance of loans granted to a single borrower by a small loan company must not exceed 10% of the net capital of the Company and the balance of credit limit granted to a single client as a group enterprise must not exceed 15% of the net capital of the small loan company; 78 ● support qualified small loan companies to increase their capital and shares, as well as mergers and acquisitions to enhance their capital strength; and ● support small loan companies to list on domestic and overseas capital markets, and make good use of cross-border financing channels such as cross-border loans and overseas bond issuance under the China-Singapore (Chongqing) Strategic Interconnection Demonstration Project to obtain low-cost and long-term overseas funds.
The key regulations of small loan companies in Chongqing are as follows: ● if a small loan company is a foreign investment company, its registered capital must be at least US$30 million, and the shareholding of the foreign investor must be more than 50%; ● for small loan companies with sound corporate management and strong risk management ability, the balance of the capital borrowed from banking financial institutions can be 100% of its net capital; ● the balance of loans granted to a single borrower by a small loan company must not exceed 10% of the net capital of the Company and the balance of credit limit granted to a single client as a group enterprise must not exceed 15% of the net capital of the small loan company; ● support qualified small loan companies to increase their capital and shares, as well as mergers and acquisitions to enhance their capital strength; and ● support small loan companies to list on domestic and overseas capital markets, and make good use of cross-border financing channels such as cross-border loans and overseas bond issuance under the China-Singapore (Chongqing) Strategic Interconnection Demonstration Project to obtain low-cost and long-term overseas funds. 80 Regulations Relating to Loan Facilitator Circular 141 imposes several requirements on financial institutions engaged in the “cash loan” business.
In 2021, 2022 and 2023, the average tenor of the home equity loans we originated was 15, 12 and 12 months with the weighted average effective interest rate (inclusive of interests and financing service fees, if applicable, payable by the borrowers) of 16.5%, 17.2% and 16.9% per annum, respectively.
In 2022, 2023 and 2024, the average tenor of the home equity loans we originated was 12, 12 and 12 months with the weighted average effective interest rate (inclusive of interests and financing service fees, if applicable, payable by the borrowers) of 17.2%, 16.9% and 16.6% per annum, respectively.
For the years ended December 31, 2021, 2022 and 2023, home equity loans we facilitated under the trust lending model amounted to RMB12.8 billion, RMB12.2 billion and RMB12.3 billion (US$1.7 billion), respectively. Each trust plan issues multiple trust products which are funded with senior and subordinated units at a predetermined ratio.
For the years ended December 31, 2022, 2023 and 2024, home equity loans we facilitated under the trust lending model amounted to RMB12.2 billion, RMB12.3 billion and RMB8.6 billion (US$1.2 billion), respectively. Each trust plan issues multiple trust products which are funded with senior and subordinated units at a predetermined ratio.
In 2023, the Company started to introduce sales partners under the commercial bank partnership model, where we require the sales partners to contribute the CRMP from a range of 5% to 10% of the loan principal they introduced. 77.4% of borrowers introduced to commercial banks were acquired through sales partners in 2023.
In 2023, the Company started to introduce sales partners under the commercial bank partnership model, where we require the sales partners to contribute the CRMP from a range of 5% to 10% of the loan principal they introduced. 99.1% of borrowers introduced to commercial banks were acquired through sales partners in 2024.
Enterprises in China are required by the Social Insurance Law of PRC promulgated by the Standing Committee of the NPC in October 2010, which became effective in July 2011, as most recently amended on December 29, 2018, or the Social Insurance Law, the Regulations on Management of Housing Provident Fund released by the State Council in March 2002, and most recently amended on March 24, 2019 and other related rules and regulations, to participate in certain employee benefit plans, including social insurance funds, namely a pension plan, a medical insurance plan, an unemployment insurance plan, a work-related injury insurance plan and a maternity insurance plan and a housing provident fund, and contribute to the plans or funds in amounts equal to certain percentages of salaries, including bonuses and allowances, of the employees as specified by the local government from time to time at locations where they operate their businesses or where they are located.
Violations of the PRC Labor Law and the Labor Contract Law may result in the imposition of fines and other administrative sanctions, and serious violations may result in criminal liabilities. 87 Enterprises in China are required by the Social Insurance Law of PRC promulgated by the Standing Committee of the NPC in October 2010, which became effective in July 2011, as most recently amended on December 29, 2018, or the Social Insurance Law, the Regulations on Management of Housing Provident Fund released by the State Council in March 2002, and most recently amended on March 24, 2019 and other related rules and regulations, to participate in certain employee benefit plans, including social insurance funds, namely a pension plan, a medical insurance plan, an unemployment insurance plan, a work-related injury insurance plan and a maternity insurance plan and a housing provident fund, and contribute to the plans or funds in amounts equal to certain percentages of salaries, including bonuses and allowances, of the employees as specified by the local government from time to time at locations where they operate their businesses or where they are located.
We help trust companies and commercial banks sign loan agreements with borrowers directly, and assist borrowers in pledging collateral for the benefit of trust companies and commercial banks. In 2021, 2022 and 2023, over 99.7% of our borrowers were introduced to us by our sales partners under the trust lending model. For details, please refer to “Item 4.
We help trust companies and commercial banks sign loan agreements with borrowers directly, and assist borrowers in pledging collateral for the benefit of trust companies and commercial banks. In 2022, 2023 and 2024, over 95.0% of our borrowers were introduced to us by our sales partners under the trust lending model. For details, please refer to “Item 4.
For the Year Ended December 31, 2021 2022 2023 Weighted average LTV ratio by collateral type First lien Apartment 55.6 % 56.6 % 56.4 % House 44.1 % 41.0 % 44.7 % Commercial property 36.6 % 21.9 % 46.0 % Total 54.9 % 55.5 % 56.0 % Second lien Apartment 61.4 % 63.6 % 66.6 % House 48.9 % 48.3 % 50.8 % Commercial property 49.4 % 28.5 % - % Total 60.8 % 62.9 % 66.0 % Total 58.5 % 60.0 % 62.0 % On- and off-Balance Sheet Loans For loans disbursed indirectly through trusts plans per the request of our funding partners, we have determined that we are the primary beneficiary of the trusts plans.
For the Year Ended December 31, 2022 2023 2024 Weighted average LTV ratio by collateral type First lien Apartment 56.6 % 56.4 % 54.8 % House 41.0 % 44.7 % 37.6 % Commercial property 21.9 % 46.0 % 46.3 % Total 55.5 % 56.0 % 54.2 % Second lien Apartment 63.6 % 66.6 % 66.6 % House 48.3 % 50.8 % 52.8 % Commercial property 28.5 % – % – % Total 62.9 % 66.0 % 65.2 % Total 60.0 % 62.0 % 60.5 % On- and off-Balance Sheet Loans For loans disbursed indirectly through trusts plans per the request of our funding partners, we have determined that we are the primary beneficiary of the trusts plans.
Such loan products are secured by first or second lien interests on real properties. 60.5%, 60.6% and 62.9%, of our total home equity loan origination volume in 2021, 2022 and 2023, respectively, was secured by second lien interests.
Such loan products are secured by first or second lien interests on real properties. 60.6%, 62.9% and 57.1%, of our total home equity loan origination volume in 2022, 2023 and 2024, respectively, was secured by second lien interests.
The project cost is typically between 9.4%-15.8% of the loan principal, and the percentage varies based on different collaboration model types and the terms of the loan. The project cost in the loan agreement will not change once determined. The collaboration cost is settled monthly as agreed in the collaboration agreement.
The project cost is typically between 7.5%-9.5% of the loan principal, and the percentage varies based on different collaboration model types and the terms of the loan. The project cost in the loan agreement will not change once determined. The collaboration cost is settled monthly as agreed in the collaboration agreement.
Through these collaborative partnerships, we have access to flexible funding of RMB8.1 billion sourced from the senior unit holders as of December 31, 2023. 62.1%, 62.3% and 55.8%, of the loans we originated in 2021, 2022 and 2023, respectively, were funded through FOTIC, mainly due to our familiarity and long-standing relationship with FOTIC.
Through these collaborative partnerships, we have access to flexible funding of RMB5.8 billion sourced from the senior unit holders as of December 31, 2024. 62.3%, 55.8% and 37.9%, of the loans we originated in 2022, 2023 and 2024, respectively, were funded through FOTIC, mainly due to our familiarity and long-standing relationship with FOTIC.
Our financing costs for the senior units, excluding the trust administrative fees, ranged from 8.0% to 9.5% per annum of the issuance number of senior units in 2023, and our financing costs for subordinated units under repurchase arrangements with financial institutions was 10.0% to 13.8% per annum of the transfer prices for such subordinated units in 2023.
Our financing costs for the senior units, excluding the trust administrative fees, ranged from 6.9% to 8.7% per annum of the issuance number of senior units in 2024, and our financing costs for subordinated units under repurchase arrangements with financial institutions was 8.0% to 13.8% per annum of the transfer prices for such subordinated units in 2024.
In 2023, the amount of loans where the Company abandoned the foreclosure process was RMB5.3 million. We abandon foreclosure when the defaulting borrower has regenerated ability to repay its debt by financing efforts or selling the collateral on its own and seeks to settle with the Company.
In 2024, the amount of loans where the Company abandoned the foreclosure process was RMB2.6 million. We abandon foreclosure when the defaulting borrower has regenerated ability to repay its debt by financing efforts or selling the collateral on its own and seeks to settle with the Company.
Our investment return from the subordinated units was RMB578.7 million, RMB381.3 million and RMB495.9 million (US$69.9 million) for the same periods. Credit Strengthening Services We have been working with FOTIC to implement the 2018 FOTIC Funding Arrangements and implementing our credit strengthening services since 2018.
Our investment return from the subordinated units was RMB381.3 million, RMB495.9 million and RMB478.1 million (US$66.3 million) for the same periods. Credit Strengthening Services We have been working with FOTIC to implement the 2018 FOTIC Funding Arrangements and implementing our credit strengthening services since 2018.
We recovered loan principal, interest and penalties which equal to 83.3%, 105.2% and 106.9% of the actual outstanding loan principal of these delinquent loans in 2021, 2022 and 2023, respectively. Transferring default loans to third parties is one of our loan recovery methods.
We recovered loan principal, interest and penalties which equal to 105.2%, 106.9% and 109.1% of the actual outstanding loan principal of these delinquent loans in 2022, 2023 and 2024, respectively. Transferring default loans to third parties is one of our loan recovery methods.
As of December 31, 2023, the percentage of options (i)(1), (i)(2), (ii) and (iii) selected by the sales partners on defaulting loans accounted for 0.6%, 81.8%, 0.1% and 17.5% respectively. As of December 31, 2022, the above percentage of options accounted for 8.3%, 73.9%, 3.7% and 14.1% respectively.
As of December 31, 2024, the percentage of options (i)(1), (i)(2), (ii) and (iii) selected by the sales partners on defaulting loans accounted for 9.2%, 84.9%, 2.0% and 3.9% respectively. As of December 31, 2023, the above percentage of options accounted for 0.6%, 81.8%, 0.1% and 17.5% respectively.
Our business is currently not listed in the Negative List (2021 Version).
Our business is currently not listed in the Negative List (2024 Version).
Commercial Bank Partnership In order to diversify our financing channels to better serve the demands of MSE owners with credible funding sources, we started to collaborate with commercial banks in 2021, under which our commercial bank partners are responsible for reviewing and approving the loan while we charge a service fee for loan facilitation services including introducing borrowers, initial credit assessment, facilitating loans from the banks to borrowers, and providing technical assistance, and assist commercial banks with post-loan managements.
Besides, the CRMPs from sales partners, by their nature, will also mitigate our exposure to credit losses. 64 Commercial Bank Partnership In order to diversify our financing channels to better serve the demands of MSE owners with credible funding sources, we started to collaborate with commercial banks in 2021, under which our commercial bank partners are responsible for reviewing and approving the loan while we charge a service fee for loan facilitation services including introducing borrowers, initial credit assessment, facilitating loans from the banks to borrowers, and providing technical assistance, and assist commercial banks with post-loan managements.
For the Year Ended December 31, 2021 2022 2023 Amount % of total Amount % of total Amount % of total (RMB in millions) Loan origination volume by first/second lien First lien 5,084 39.5 % 5,790 39.4 % 6,412 37.1 % Second lien 7,789 60.5 % 8,922 60.6 % 10,883 62.9 % Total 12,873 100.0 % 14,712 100.0 % 17,295 100.0 % The following table illustrates distribution of our outstanding on-balance sheet loan principal (excluding loans held for sale) generated by first lien and second lien in the periods indicated.
For the Year Ended December 31, 2022 2023 2024 Amount % of total Amount % of total Amount % of total (RMB in millions) Loan origination volume by first/second lien First lien 5,790 39.4 % 6,412 37.1 % 4,051 41.3 % Second lien 8,922 60.6 % 10,883 62.9 % 5,759 58.7 % Total 14,712 100.0 % 17,295 100.0 % 9,810 100.0 % 73 The following table illustrates distribution of our outstanding on-balance sheet loan principal (excluding loans held for sale) generated by first lien and second lien in the periods indicated.
Our primary target borrower segment is MSE owners who own real properties in Tier 1 and Tier 2 and other major cities in China. We originated home equity loans for 22,060, 23,923 and 23,910 (including 7,117 under the commercial bank partnership model) borrowers in 2021, 2022 and 2023, respectively.
Our primary target borrower segment is MSE owners who own real properties in Tier 1 and Tier 2 and other major cities in China. We originated home equity loans for 23,923, 23,910 and 12,912 (including 1,566 under the commercial bank partnership model) borrowers in 2022, 2023 and 2024, respectively.
In 2023, loan origination volume originated under the commercial bank partnership accounted for 29.0% of our total loan origination volume. The following table illustrates the breakdown of the home equity loan origination volume by funding sources in the periods indicated.
In 2024, loan origination volume originated under the commercial bank partnership accounted for 9.8% of our total loan origination volume. The following table illustrates the breakdown of the home equity loan origination volume by funding sources in the periods indicated.
Local office staff together with sales partners visit the property that a loan applicant intends to pledge. As part of the collateral assessment, we cross-check the preliminary valuation provided by our appraisal company partners with local real estate agents and bank mortgage documents.
Step 4: Verification of collateral condition We also take measures to verify the condition of proposed collateral. Local office staff together with sales partners visit the property that a loan applicant intends to pledge. As part of the collateral assessment, we cross-check the preliminary valuation provided by our appraisal company partners with local real estate agents and bank mortgage documents.
As of December 31, 2021 2022 2023 Amount (RMB in millions) % of total Amount (RMB in millions) % of total Amount (RMB in millions) % of total Funding capital by sources Trust lending Senior tranche 7,985 73.0 % 7,667 59.8 % 8,107 53.0 % Subordinated tranche Own funds 2,874 26.3 % 2,515 19.5 % 2,377 15.5 % Transferred to third parties 45 0.4 % 112 1.0 % 682 4.5 % Bank lending Commercial banks 35 0.3 2,533 19.7 % 4,128 27.0 % Total 10,939 100.0 % 12,827 100.0 % 15,294 100.0 % Business Infrastructure Since our inception, we have strategically developed a network of branches and sub-branches in over 50 cities in China.
As of December 31, 2022 2023 2024 Amount (RMB in millions) % of total Amount (RMB in millions) % of total Amount (RMB in millions) % of total Funding capital by sources Trust lending Senior tranche 7,667 59.8 % 8,107 53.0 % 5,814 60.4 % Subordinated tranche Own funds 2,515 19.5 % 2,377 15.5 % 1,176 12.2 % Transferred to third parties 112 1.0 % 682 4.5 % 1,663 17.3 % Bank lending Commercial banks 2,533 19.7 % 4,128 27.0 % 966 10.0 % Total 12,827 100.0 % 15,294 100.0 % 9,619 100.0 % Business Infrastructure Since our inception, we have strategically developed a network of branches and sub-branches in over 50 cities in China.
The Circular allows the domestic equity transferor to directly receive the foreign currency funds for equity transfer consideration paid by domestic entities, as well as foreign exchange funds raised by domestic companies through overseas listing, into the capital account settlement account. Funds within the capital account settlement account can be freely converted and used.
The Circular allows the domestic equity transferor to directly receive the foreign currency funds for equity transfer consideration paid by domestic entities, as well as foreign exchange funds raised by domestic companies through overseas listing, into the capital account settlement account.
Our financing costs for the senior units, excluding the trust administrative fees, ranged from 8.0% to 9.5% per annum of the issuance number of senior units in 2023. 59 Each trust plan sets a predetermined contractual structural leverage ratio between senior units and subordinated units.
Our financing costs for the senior units, excluding the trust administrative fees, ranged from 6.0% to 8.7% per annum of the issuance number of senior units in 2024. 60 Each trust plan sets a predetermined contractual structural leverage ratio between senior units and subordinated units.
We believe such collaboration model will decrease our risk exposure. Since in the event that loans issued under the collaboration model are in default, the respective sales partners will share the credit risks with us by choosing from the above-mentioned options. Besides, the CRMPs from sales partners, by their nature, will also mitigate our exposure to credit losses.
We believe such collaboration model will decrease our risk exposure. Since in the event that loans issued under the collaboration model are in default, the respective sales partners will share the credit risks with us by choosing from the above-mentioned options.
In 2023, 77.4% of borrowers introduced to commercial banks were acquired through our sales partners, and 22.6% of borrowers introduced to commercial banks were acquired through local channel partners including corporate and individual offline channels and telemarketing companies. For details, please refer to “Item 4. Information on the Company—B.
In 2024, 99.1% of borrowers introduced to commercial banks were acquired through our sales partners, and 0.9% of borrowers introduced to commercial banks were acquired through local channel partners including corporate and individual offline channels and telemarketing companies. For details, please refer to “Item 4. Information on the Company—B.
For the Year Ended December 31, 2021 2022 2023 Amount (RMB in millions) % of total Amount (RMB in millions) % of total Amount (RMB in millions) % of total Loan origination volume by funding model Trust lending 12,816 99.5 % 12,163 82.7 % 12,222 70.7 % Bank lending 35 0.3 % 2,533 17.2 % 5,017 29.0 % Direct lending 22 0.2 % 15 0.1 % 56 0.3 % Total 12,873 100.0 % 14,712 100.0 % 17,295 100.0 % The following table illustrates our funding capital from different sources as of December 31, 2021, 2022 and 2023, respectively.
For the Year Ended December 31, 2022 2023 2024 Amount (RMB in millions) % of total Amount (RMB in millions) % of total Amount (RMB in millions) % of total Loan origination volume by funding model Trust lending 12,163 82.7 % 12,222 70.7 % 8,567 87.3 % Bank lending 2,533 17.2 % 5,017 29.0 % 966 9.8 % Direct lending 15 0.1 % 56 0.3 % 277 2.8 % Total 14,712 100.0 % 17,295 100.0 % 9,810 100.0 % 67 The following table illustrates our funding capital from different sources as of December 31, 2022, 2023 and 2024, respectively.
Regulations on Foreign Exchange Registration of Overseas Investment by PRC Residents The SAFE issued the SAFE Circular on Relevant Issues Relating to Domestic Resident’s Investment and Financing and Round Trip Investment through Special Purpose Vehicles, or SAFE Circular 37, that became effective in July 2014, replacing the previous SAFE Circular 75.
Funds within the capital account settlement account can be freely converted and used. 91 Regulations on Foreign Exchange Registration of Overseas Investment by PRC Residents The SAFE issued the SAFE Circular on Relevant Issues Relating to Domestic Resident’s Investment and Financing and Round Trip Investment through Special Purpose Vehicles, or SAFE Circular 37, that became effective in July 2014, replacing the previous SAFE Circular 75.
The qualified banks, under the supervision of the SAFE, will directly examine the applications and conduct the registration. 88 In August 2008, SAFE issued the Circular on the Relevant Operating Issues Concerning the Improvement of the Administration of the Payment and Settlement of Foreign Currency Capital of Foreign-Invested Enterprises, or SAFE Circular 142, regulating the conversion by a foreign-invested enterprise of foreign currency-registered capital into RMB by restricting how the converted RMB may be used.
In August 2008, SAFE issued the Circular on the Relevant Operating Issues Concerning the Improvement of the Administration of the Payment and Settlement of Foreign Currency Capital of Foreign-Invested Enterprises, or SAFE Circular 142, regulating the conversion by a foreign-invested enterprise of foreign currency-registered capital into RMB by restricting how the converted RMB may be used.
Our financing costs for the senior units, excluding the trust administrative fees, ranged from 8.0% to 9.5% per annum of the issuance number of senior units in 2023. We received performance-based fee payments of RMB440.1 million, RMB446.0 million and RMB409.0 million (US$57.6 million) in 2021, 2022 and 2023, respectively.
Our financing costs for the senior units, excluding the trust administrative fees, ranged from 6.0% to 8.7% per annum of the issuance number of senior units in 2024. We received performance-based fee payments of RMB446.0 million, RMB409.0 million and RMB300.2 million (US$42.0 million) in 2022, 2023 and 2024, respectively.
The M&A Rules purport, among other things, to require offshore special purpose vehicles formed for overseas listing purposes through acquisitions of PRC domestic companies and controlled by PRC companies or individuals, to obtain approval from the CSRC prior to publicly listing their securities on an overseas stock exchange. 91 On March 1, 2020, Securities Law of the People’s Republic of China (Revised in 2019) became effective.
The M&A Rules purport, among other things, to require offshore special purpose vehicles formed for overseas listing purposes through acquisitions of PRC domestic companies and controlled by PRC companies or individuals, to obtain approval from the CSRC prior to publicly listing their securities on an overseas stock exchange.
Risk Factors—Risks Related to Our Business—If our or our trust company partners’ or our commercial bank partners’ risk management system fails to perform effectively, such failure may materially and adversely impact our operating results.” 63 The loan origination volume in 2023 under the commercial bank partnership model was RMB5.0 billion and the outstanding loan principal recorded at the end of 2023 was RMB41.3 million.
Risk Factors—Risks Related to Our Business—If our or our trust company partners’ or our commercial bank partners’ risk management system fails to perform effectively, such failure may materially and adversely impact our operating results.” The loan origination volume in 2024 under the commercial bank partnership model was RMB966.2 m illion and the outstanding loan principal recorded at the end of 2024 was RMB2.4 billion.
Our cost of the subordinated units as measured by the investment amount was RMB2,919.4 million, RMB2,627.4 million and RMB2,377.2 million (US$334.8 million), as of December 31, 2021, 2022 and 2023, respectively.
Our cost of the subordinated units as measured by the investment amount was RMB2,627.4 million, RMB2,377.2 million and RMB1,776.2 million (US$246.2 million), as of December 31, 2022, 2023 and 2024, respectively.
Under different collaboration arrangements, the borrower could pay such service fee directly to us on the due date of each installment or submit both the service fee and installment to the commercial bank and the commercial bank will disburse such service fee to us.
Step 8: Service fee We will receive facilitation service fee for our loan facilitation services. Under different collaboration arrangements, the borrower could pay such service fee directly to us on the due date of each installment or submit both the service fee and installment to the commercial bank and the commercial bank will disburse such service fee to us.
The principal laws and regulations governing the distribution of dividends of foreign-invested enterprises include the PRC Foreign Investment Law and its Implementing Regulations, both of which came into effect on January 1, 2020, and other applicable laws, according to which a foreign investor may, in accordance with the law, freely transfer into or out of the PRC its contributions, profits, capital earnings, income from asset disposal, intellectual property rights royalties acquired, compensation or indemnity legally obtained, income from liquidation, etc., made or derived within the territory of the PRC in RMB or any foreign currency, subject to no illegal restriction by any entity or individual in terms of the currency, amount, frequency of such transfer into or out of the PRC, etc.
The principal laws and regulations governing the distribution of dividends of foreign-invested enterprises include the PRC Foreign Investment Law and its Implementing Regulations, both of which came into effect on January 1, 2020, and other applicable laws, according to which a foreign investor may, in accordance with the law, freely transfer into or out of the PRC its contributions, profits, capital earnings, income from asset disposal, intellectual property rights royalties acquired, compensation or indemnity legally obtained, income from liquidation, etc., made or derived within the territory of the PRC in RMB or any foreign currency, subject to no illegal restriction by any entity or individual in terms of the currency, amount, frequency of such transfer into or out of the PRC, etc. 92 Regulations on Overseas Listing On August 8, 2006, six PRC regulatory agencies, including the CSRC, adopted the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors (the “M&A Rules”), which became effective on September 8, 2006 and were amended on June 22, 2009.
We have established a national network of 113 branches and sub-branches in over 50 cities in China. In 2021, 2022 and 2023, we originated home equity loans with an aggregate principal amount of RMB12.8 billion, RMB14.7 billion and RMB17.3 billion, representing an increase of 14.8% and 17.7% as compared to 2021 and 2022, respectively.
We have established a national network of 52 branches and sub-branches in over 50 cities in China. In 2022, 2023 and 2024, we originated home equity loans with an aggregate principal amount of RMB14.7 billion, RMB17.3 billion and RMB9.8 billion, representing a decrease of 33.3% and 43.4% as compared to 2022 and 2023, respectively.
The proposed real property collateral is appraised by independent leading online property appraisers and refined by us on specifics such as liquidity value, location, neighborhood, type, facing direction, floor plan and size. Step 4: Verification of collateral condition We also take measures to verify the condition of proposed collateral.
Step 3: Valuation of proposed collateral We also perform risk assessment on the proposed real property collateral. The proposed real property collateral is appraised by independent leading online property appraisers and refined by us on specifics such as liquidity value, location, neighborhood, type, facing direction, floor plan and size.
We offer home equity loan products that allow borrowers to repay only the interests by installments and repay the full principal amount when due. In addition, we also provide home equity loan products that require monthly payments comprising principal and interests repayments, making it easier for borrowers to manage their cash flow and for us to timely monitor borrowers’ creditworthiness.
In addition, we also provide home equity loan products that require monthly payments comprising principal and interests repayments, making it easier for borrowers to manage their cash flow and for us to timely monitor borrowers’ creditworthiness. Borrowers are obligated to pay directly to the trust plans in full the principal amount plus interest when due.
According to the Regulations on Management of Housing Fund, an enterprise that fails to make housing fund contributions may be ordered to rectify the noncompliance and pay the required contributions within a stipulated deadline; otherwise, an application may be made to a local court for compulsory enforcement. 86 We have not made adequate contributions to employee benefit plans as required by applicable PRC laws and regulations.
According to the Regulations on Management of Housing Fund, an enterprise that fails to make housing fund contributions may be ordered to rectify the noncompliance and pay the required contributions within a stipulated deadline; otherwise, an application may be made to a local court for compulsory enforcement.
We have developed detailed guidelines for real property collateral. The LTV ratios are also adjusted based on the type of property (residential or commercial), floor plan, age and credit history of property owners.
The LTV ratios are also adjusted based on the type of property (residential or commercial), floor plan, age and credit history of property owners.

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Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

146 edited+31 added−46 removed169 unchanged
As sale partners will provide guarantee of the entire loan to the Group, collection for loss is probable and estimable when a loss on an insured loan is incurred and recognized.
As sale partners will provide guarantee of the entire loan to the Group, collection for loss is probable and estimable when a loss on an insured loan is incurred and recognized.
In this case, the Group will recognize guarantee loss recoverable asset in the amount that the Group determines is probable to receive from the guarantor with an offsetting entry to “provision for credit losses” when the Group concludes that the loss recovery is collectible.
In this case, the Group will recognize guarantee loss recoverable asset in the amount that the Group determines is probable to receive from the guarantor with an offsetting entry to “provision for credit losses” when the Group concludes that the loss recovery is collectible.
However, potential recovery that exceeds the recognized loss, if any, (gain contingency) will not be recognized until cash is received. Therefore, the amounts estimated to be recoverable from the proceeds of guarantees will be reported as a separate asset (guarantee asset) in the balance sheet.
However, potential recovery that exceeds the recognized loss, if any, (gain contingency) will not be recognized until cash is received. Therefore, the amounts estimated to be recoverable from the proceeds of guarantees will be reported as a separate asset (guarantee asset) in the balance sheet.
Once the loan is approved by and originated by the third-party commercial bank, the fund is provided by the third-party commercial bank to the borrower and a lending relationship between the borrower and the third-party commercial bank is established through a loan agreement.
Once the loan is approved by and originated by the third-party commercial bank, the fund is provided by the third-party commercial bank to the borrower and a lending relationship between the borrower and the third-party commercial bank is established through a loan agreement.
Key Information—Risk Factors—Risks Related to Our Business—We face risks related to natural disasters, health epidemics and other outbreaks of contagious diseases.” Government regulations and policies The regulatory environment for China’s financial market is developing and evolving, creating both challenges and opportunities that could affect our financial performance.
Key Information—Risk Factors—Risks Related to Our Business—We face risks related to natural disasters, health epidemics and other outbreaks of contagious diseases.” 97 Government regulations and policies The regulatory environment for China’s financial market is developing and evolving, creating both challenges and opportunities that could affect our financial performance.
The income statement caption was disclosed as “Provision for credit losses, net of increase in increase in guaranteed recoverable assets”. Loans held-for-sale Loans held-for-sale are measured at the lower of cost or fair value, with valuation changes recorded in noninterest revenue. The valuation is performed on an individual loan basis.
The income statement caption was disclosed as “Provision for credit losses, net of increase in increase in guaranteed recoverable assets”. 112 Loans held-for-sale Loans held-for-sale are measured at the lower of cost or fair value, with valuation changes recorded in noninterest revenue. The valuation is performed on an individual loan basis.
The incremental borrowing rates determined for computing the lease liabilities are based on the People’s Bank of China (PBOC) Benchmark Rates for terms of loans ranging from zero (exclusive) to five years and above. 125 The following tables present the operating lease cost and other supplemental information.
The incremental borrowing rates determined for computing the lease liabilities are based on the People’s Bank of China (PBOC) Benchmark Rates for terms of loans ranging from zero (exclusive) to five years and above. The following tables present the operating lease cost and other supplemental information.
Other gains, net Other gains, net mainly consists of gains of confiscating CRMPs. Particularly, in the event of a loan defaults and the sales partner chooses to repurchase such loan in installments, the Company charges certain percentage of the loan as the interest income charged to sales partners.
Other gains/(losses), net Other gains/(losses), net mainly consists of gains of confiscating CRMPs. Particularly, in the event of a loan defaults and the sales partner chooses to repurchase such loan in installments, the Company charges certain percentage of the loan as the interest income charged to sales partners.
All other entities not deemed to be VIEs with which the Group has involvement are evaluated for consolidation under other subtopics of ASC 810. In the normal course of business, the Group engages in a variety of activities with VIEs.
All other entities not deemed to be VIEs with which the Group has involvement are evaluated for consolidation under other subtopics of ASC 810. 108 In the normal course of business, the Group engages in a variety of activities with VIEs.
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.
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, 2024 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.
Net cash used in investing activities was RMB1,098.2 million (US$159.2 million) in 2022, which was attributable to (i) purchase of investment securities of RMB8,567.3 million, (ii) purchases of property, equipment and intangible assets of RMB89.9 million, (iii) loans originated, net of principal collected of RMB2,556.9 million, and (iv) purchases of non-marketable equity securities of RMB25.0 million offset by (i) proceeds from sales of investment securities of RMB9,002.2 million, (ii) proceeds from disposal of property, equipment and intangible assets of RMB0.3 million, and (iii) proceeds from sales of loans of RMB1,088.4 million. and.
Net cash used in investing activities was RMB1,098.2 million in 2022, which was attributable to (i) purchase of investment securities of RMB8,567.3 million, (ii) purchases of property, equipment and intangible assets of RMB89.9 million, (iii) loans originated, net of principal collected of RMB2,556.9 million, and (iv) purchases of non-marketable equity securities of RMB25.0 million offset by (i) proceeds from sales of investment securities of RMB9,002.2 million, (ii) proceeds from disposal of property, equipment and intangible assets of RMB0.3 million, and (iii) proceeds from sales of loans of RMB1,088.4 million.
Commencing January 1, 2020, CNFinance adopted ASC 326, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”, which replaced the incurred loss methodology for determining the provision for credit losses and allowance for credit losses with a current expected credit loss methodology (“ACL”), which is based on past events, current conditions and reasonable and supportable forecasts over the life of the loans.
Commencing January 1, 2020, the Group adopted ASC 326, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”, which replaced the incurred loss methodology for determining the provision for credit losses and allowance for credit losses with a current expected credit loss methodology (“ACL”) , which is based on past events, current conditions and reasonable and supportable forecasts over the life of the loans.
Net cash provided by operating activities in 2022 was RMB919.3 million (US$133.3 million) due to net income of RMB135.4 million (US$19.6 million), mainly adjusted for (i) provision for credit losses of RMB238.1 million, (ii) share-based compensation expenses of RMB5.8 million, (iii) depreciation and amortization of RMB2.2 million, (iv) losses on sale of loans of RMB44.6 million, (v) the utilized of loans held-for-sale for originations and purchase was RMB585.4 million and (vi) the increase of proceeds from sales and paydowns of loans originally classified as held for sale was RMB1,550.0 million.
Net cash provided by operating activities in 2022 was RMB919.3 million due to net income of RMB135.4 million, mainly adjusted for (i) provision for credit losses of RMB238.1 million, (ii) share-based compensation expenses of RMB5.8 million, (iii) depreciation and amortization of RMB2.2 million, (iv) losses on sale of loans of RMB44.6 million, (v) the utilized of loans held-for-sale for originations and purchase was RMB585.4 million and (vi) the increase of proceeds from sales and paydowns of loans originally classified as held for sale was RMB1,550.0 million.
Taxes and surcharges Taxes and surcharges decreased by 12.8% to RMB31.3 million (US$4.4 million) for the fiscal year of 2023 as compared to RMB35.9 million for the same period of 2022. primarily attributable to the decrease of “service fees charged to trust plans” which is a non-deductible item in value added tax (“VAT”).
Taxes and surcharges Taxes and surcharges decreased by 12.8% to RMB31.3 million for the fiscal year of 2023 as compared to RMB35.9 million for the same period of 2022. primarily attributable to the decrease of “service fees charged to trust plans” which is a non-deductible item in value added tax (“VAT”).
Net cash used in financing activities was RMB288.2 million (US$41.8 million) in 2022, which was attributable to (i) repayment of interest-bearing borrowings of RMB6,333.6 million, and (ii) repurchase of ordinary shares of RMB87.6 million, partially offset by (i) proceeds from interest-bearing borrowings of RMB6,082.3 million and (ii) proceeds from contributions from non-controlling shareholders of RMB50.8 million.
Net cash used in financing activities was RMB288.2 million in 2022, which was attributable to (i) repayment of interest-bearing borrowings of RMB6,333.6 million, and (ii) repurchase of ordinary shares of RMB87.6 million, partially offset by (i) proceeds from interest-bearing borrowings of RMB6,082.3 million and (ii) proceeds from contributions from non-controlling shareholders of RMB50.8 million.
Date of options grant Options granted Exercise price Fair value of option Fair value of ordinary shares January 3, 2017 75,173,492 RMB0.50 RMB1.26 RMB1.72 Date of options grant Options granted Exercise price Fair value of option Fair value of ordinary shares January 3, 2017 112,760,238 RMB0.50 RMB1.27 RMB1.72 December 31, 2019 83,772,346 RMB1.00 RMB0.71 RMB1.40 December 31, 2019 35,902,434 RMB1.00 RMB0.75 RMB1.40 December 31, 2023 150,346,984 RMB0.50 RMB0.34 RMB0.29 For the 2018 Option, the Group recognized compensation expenses of RMB39,715,168 and RMB15,886,067 in year 2018 and 2019, respectively.
Date of options grant Options granted Exercise price Fair value of option Fair value of ordinary shares January 3, 2017 75,173,492 RMB0.50 RMB1.26 RMB1.72 January 3, 2017 112,760,238 RMB0.50 RMB1.27 RMB1.72 December 31, 2019 83,772,346 RMB1.00 RMB0.71 RMB1.40 December 31, 2019 35,902,434 RMB1.00 RMB0.75 RMB1.40 December 31, 2023 150,346,984 RMB0.50 RMB0.34 RMB0.29 December 31, 2024 150,346,984 RMB0.50 RMB0.08 RMB0.35 115 For the 2018 Option, the Group recognized compensation expenses of RMB39,715,168 and RMB15,886,067 in year 2018 and 2019, respectively.
We facilitate loans by connecting MSE owners with our funding partners. Our primary target borrower segment is MSE owners who own real properties in Tier 1 and Tier 2 and other major cities in China. We have established a national network of 113 branches and sub-branches in over 50 cities in China.
We facilitate loans by connecting MSE owners with our funding partners. Our primary target borrower segment is MSE owners who own real properties in Tier 1 and Tier 2 and other major cities in China. We have established a national network of 120 branches and sub-branches in over 50 cities in China.
Excluding the options containing service vesting conditions, we calculated the estimated fair value of the options on the respective grant dates using a binomial option pricing model with assistance from independent valuation firms, with the following assumptions: Share awards granted on January 3, 2017 (“2018 Option”) Share awards granted on January 3, 2019 (“2019 Option”) Share awards granted on December 31, 2023 (“Extend 2018 Option”) Expected volatility 40.00 % 41.52 % 59.27 % Expected dividends — — — Risk-free interest rate 3.10 % 3.12 % 2.08 % Expected term (in years) 5 5 — Expected life (in years) 6 8 1 114 The contractual life of the share option is used as an input into the binomial option pricing model.
Excluding the options containing service vesting conditions, we calculated the estimated fair value of the options on the respective grant dates using a binomial option pricing model with assistance from independent valuation firms, with the following assumptions: Share awards granted on January 3, 2017 (“2018 Option”) Share awards granted on January 3, 2019 (“2019 Option”) Share awards granted on December 31, 2023 (“Extend 2018 Option”) Share awards granted on December 31, 2024 Expected volatility 40.00 % 41.52 % 59.27 % 48.52 % Expected dividends – – – - Risk-free interest rate 3.10 % 3.12 % 2.08 % 1.65 % Expected term (in years) 5 5 – - Expected life (in years) 6 8 1 3 The contractual life of the share option is used as an input into the binomial option pricing model.
Besides, in the fiscal year of 2023, some sales partners who forfeited their Credit Risk Mitigation Positions (CRMPs) due to the inability to fulfil their obligations to repurchase delinquent loans during the first half of 2023 were able to recommence their payments, in addition, we started to involve sales partners under the commercial bank partnership since the beginning of 2023, which has jointly led to an increase of guarantee assets and also provided more protection to the loans Realized gains on sales of investments, net Realized gains on sales of investments, net representing realized gains from the sales of investment securities was RMB6.5 million(US$0.9 million) for the fiscal year of 2023, as compared to RMB20.6 million in the same period of 2022.
Besides, in the fiscal year of 2023, some sales partners who forfeited their Credit Risk Mitigation Positions (CRMPs) due to the inability to fulfil their obligations to repurchase delinquent loans during the first half of 2023 were able to recommence their payments, in addition, we started to involve sales partners under the commercial bank partnership since the beginning of 2023, which has jointly led to an increase of guarantee assets and also provided more protection to the loans 121 Realized gains on sales of investments, net Realized gains on sales of investments, net representing realized gains from the sales of investment securities was RMB6.5 million for the fiscal year of 2023, as compared to RMB20.6 million in the same period of 2022.
Under the contractual arrangements with our trust company partners, we subscribe to subordinated units of the trust plans and also provide services to trust plans.
Under the contractual arrangements with our trust company partners, we subscribe to subordinated units of trust plans and provide services to trust plans.
Interest and fees expenses Total interest and fees expenses refer to interest expenses on interest-bearing borrowings and decreased by 7.9% to RMB723.1 million (US$101.8 million) for the fiscal year of 2023 as compared to RMB784.8 million for the same period of 2022, primarily due to the lower funding cost of trust company partners.
Interest and fees expenses Total interest and fees expenses refer to interest expenses on interest-bearing borrowings and decreased by 7.9% to RMB723.1 million for the fiscal year of 2023 as compared to RMB784.8 million for the same period of 2022, primarily due to the lower funding cost of trust company partners.
This ASU 2023-09 is to be adopted on a prospective basis and will be effective for the Group on January 1, 2025, although early adoption is permitted. The ASU is currently not expected to have a significant impact on the Group’s consolidated financial statements. 5.C.
This ASU 2023-09 is to be adopted on a prospective basis and will be effective for the Group on January 1, 2025, although early adoption is permitted. The ASU is currently not expected to have a significant impact on the Group’s consolidated financial statements.
Net revenue under the commercial bank partnership model Net revenue under the commercial bank partnership model, representing fees charged to commercial banks for services including introducing borrowers, initial credit assessment, facilitating loans from the banks to the borrowers and providing technical assistance to the borrowers and banks, net of fees paid to third-party guarantor and commissions paid to sales channels, increased by 52.6% to RMB87.9 million (US$12.4 million) for the fiscal year of 2023 from RMB57.6 million in the same period of 2022.
Net revenue under the commercial bank partnership model Net revenue under the commercial bank partnership model, representing fees charged to commercial banks for services including introducing borrowers, initial credit assessment, facilitating loans from the banks to the borrowers and providing technical assistance to the borrowers and banks, net of fees paid to third-party guarantor and commissions paid to sales channels, increased by 52.6% to RMB87.9 million for the fiscal year of 2023 from RMB57.6 million in the same period of 2022.
Collaboration cost for sales partners Collaboration cost for sales partners representing sales incentives paid to sales partners increased by 7.1% to RMB343.5 million (US$48.4 million) for the fiscal year of 2023 as compared to RMB320.8 million for the same period of 2022, primarily attributable to an increase of daily average outstanding loan principal under the trust lending model in 2023 as compared to 2022, and also the involvement of sales partners in the commercial bank partnership model since the beginning of 2023.
Collaboration cost for sales partners Collaboration cost for sales partners representing sales incentives paid to sales partners increased by 7.1% to RMB343.5 million for the fiscal year of 2023 as compared to RMB320.8 million for the same period of 2022, primarily attributable to an increase of daily average outstanding loan principal under the trust lending model in 2023 as compared to 2022, and also the involvement of sales partners in the commercial bank partnership model since the beginning of 2023.
These variables include, but are not limited to, gross-domestic product rates and consumer price indexes. 128
These variables include, but are not limited to, gross-domestic product rates and consumer price indexes.
Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 Interest and fees income Total interest and fees income for fiscal year 2023 increased by 1.3% to RMB1,754.6 million (US$247.1 million) as compared to RMB1,731.4 million for the same period of 2022.
Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 Interest and fees income Total interest and fees income for fiscal year 2023 increased by 1.3% to RMB1,754.6 million as compared to RMB1,731.4 million for the same period of 2022.
Employee compensation and benefits Employee compensation and benefits increased by 3.9% to RMB204.6 million (US$28.8 million) for the fiscal year of 2023 as compared to RMB197.0 million for the same period of 2022, primarily due to an increase in the performance-based bonuses as a result of an increase in loan origination volume in 2023.
Employee compensation and benefits Employee compensation and benefits increased by 3.9% to RMB204.6 million for the fiscal year of 2023 as compared to RMB197.0 million for the same period of 2022, primarily due to an increase in the performance-based bonuses as a result of an increase in loan origination volume in 2023.
Share-based compensation expenses Share-based compensation expenses increased by 29.3% to RMB7.5 million (US$1.1 million) for the fiscal year of 2023 as compared to RMB5.8 million for the same period of 2022.
Share-based compensation expenses Share-based compensation expenses increased by 29.3% to RMB7.5 million for the fiscal year of 2023 as compared to RMB5.8 million for the same period of 2022.
Interest on deposit with banks Interest on deposits with banks increased by 49.6% to RMB19.6 million (US$2.8 million) for the fiscal year of 2023 as compared to RMB13.1 million for the same period of 2022, primarily due to the higher daily average amount of time deposits during the year.
Interest on deposit with banks Interest on deposits with banks increased by 49.6% to RMB19.6 million for the fiscal year of 2023 as compared to RMB13.1 million for the same period of 2022, primarily due to the higher daily average amount of time deposits during the year.
Interest and financing service fees on loans Interest and financing service fees on loans increased by 0.3% to RMB1,580.0 million (US$222.5 million) for the fiscal year of 2023 as compared to RMB1,574.7 million for the same period of 2022, primarily attributable to combined effect of increase in the balance of average daily outstanding loan principal and decrease of weighted average interest rate of loans outstanding in 2023. 117 Interest income charged to sales partners Interest income charged to sales partners, representing interest charged to sales partners who choose to repurchase default loans in installments, increased by 10.2% to RMB134.5 million (US$18.9 million) for the fiscal year of 2023 from RMB122.0 million in the same period of 2022, primarily attributable to an increase in the delinquent loans that were repurchased by the sales partners in installments.
Interest and financing service fees on loans Interest and financing service fees on loans increased by 0.3% to RMB1,580.0 million for the fiscal year of 2023 as compared to RMB1,574.7 million for the same period of 2022, primarily attributable to combined effect of increase in the balance of average daily outstanding loan principal and decrease of weighted average interest rate of loans outstanding in 2023. 120 Interest income charged to sales partners Interest income charged to sales partners, representing interest charged to sales partners who choose to repurchase default loans in installments, increased by 10.2% to RMB134.5 million for the fiscal year of 2023 from RMB122.0 million in the same period of 2022, primarily attributable to an increase in the delinquent loans that were repurchased by the sales partners in installments.
Net interest and fees income As a result of the foregoing, net interest and fees income increased by 9.0% to RMB1,031.5 million (US$145.3 million) for the fiscal year of 2023 as compared to RMB946.6 million for the same period of 2022.
Net interest and fees income As a result of the foregoing, net interest and fees income increased by 9.0% to RMB1,031.5 million for the fiscal year of 2023 as compared to RMB946.6 million for the same period of 2022.
Income tax expenses Income tax expenses increased by 10.2% to RMB41.0 million (US$5.8 million) for the fiscal year of 2023 as compared to RMB37.2 million for the same period of 2022 primarily due to an increase in the amount of taxable income.
Income tax expenses Income tax expenses increased by 10.2% to RMB41.0 million for the fiscal year of 2023 as compared to RMB37.2 million for the same period of 2022 primarily due to an increase in the amount of taxable income.
The revised charge-off policies are presented as follows: Loans principal, interest and financing service fee receivables are charged down to net realizable value (fair value of collaterals, less estimated costs to sell) when the Group has determined the remaining balance is uncollectable after exhausting all collection efforts.
Charge-off policies Loans principal, interest and financing service fee receivables are charged down to net realizable value (fair value of collaterals, less estimated costs to sell) when the Group has determined the remaining balance is uncollectable after exhausting all collection efforts.
The interest rates of our loan products under commercial bank partnership ranged from 13.2% to 16.8%. 95 Our practical risk assessment procedure focuses on both credit risks of borrowers and quality of the collateral. We have also established guidelines on characteristics and quality of collateral, including, among others, an LTV ratio capped at 70%.
The interest rates of our loan products under commercial bank partnership ranged from 7.0% to 16.2%. Our practical risk assessment procedure focuses on both credit risks of borrowers and quality of the collateral. We have also established guidelines on characteristics and quality of collateral, including, among others, an LTV ratio capped at 70%.
Total operating expenses Our total operating expenses increased by 12.6% to RMB381.4 million (US$53.7 million) for the fiscal year of 2023 as compared to RMB338.6 million for the same period of 2022.
Total operating expenses Our total operating expenses increased by 12.6% to RMB381.4 million for the fiscal year of 2023 as compared to RMB338.6 million for the same period of 2022.
In 2021, 2022 and 2023, CNFinance has not transferred any cash proceeds to any of its PRC subsidiaries.
In 2022, 2023 and 2024, CNFinance has not transferred any cash proceeds to any of its PRC subsidiaries.
These variables include, but are not limited to, gross-domestic product, total retail sales of consumer goods and urban per capita disposable income. The LGD model considers historical loss experience period.
These variables include, but are not limited to, gross-domestic product, total retail sales of consumer goods and urban per capita disposable income and are updated at least quarterly. The LGD model considers historical loss experience period.
In 2021, 2022 and 2023, the average tenor of the home equity loans we originated was 15, 12 and 12 months with the weighted average effective interest rate (inclusive of interests and financing service fees, if applicable, payable by the borrowers) of 16.5%, 17.2% and 16.9% per annum, respectively.
In 2022, 2023 and 2024, the average tenor of the home equity loans we originated was 12, 12 and 12 months with the weighted average effective interest rate (inclusive of interests and financing service fees, if applicable, payable by the borrowers) of 17.2%, 16.9% and 16.6% per annum, respectively.
In order to comply with ASC 310 and ASC 326, the Group considers loans principal, interest and financing service fee receivables meeting any of the following conditions as uncollectable and charged-off: (i) death of the borrower; (ii) identification of fraud, and the fraud is officially reported to and filed with relevant law enforcement departments; (iii) sales of loans to third parties; (iv) settlement with the borrower, where the Group releases irrecoverable loans through private negotiations with the borrower where the borrower cannot repay the loan in full through self-funding or voluntary sale of the collateral; (v) disposal through legal proceedings, including but not limited to online arbitrations, judicial auctions and court enforcements; or (vi) loans are 180 days past due unless both well-secured and in the process of collection.
In order to comply with ASC 310 and ASC 326, the Group considers loans principal, interest and financing service fee receivables meeting any of the following conditions as uncollectable and charged-off: (i) death of the borrower; (ii) identification of fraud, and the fraud is officially reported to and filed with relevant law enforcement departments; (iii) sales of loans to third parties; (iv) settlement with the borrower, where the Group releases irrecoverable loans through private negotiations with the borrower where the borrower cannot repay the loan in full through self-funding or voluntary sale of the collateral; (v) disposal through legal proceedings, including but not limited to online arbitrations, judicial auctions and court enforcements; or (vi) loans are 180 days past due unless both well-secured and in the process of collection. 111 Allowance for credit losses Allowance for credit losses represents management’s best estimate of probable losses inherent in the portfolio.
According to the PRC tax regulations, “service fees charged to trust plans” incur a 6% VAT on the subsidiary level, but are not recorded as an input VAT on a consolidated trust plan level.
According to the PRC tax regulations, “service fees charged to trust plans” incur a 6% VAT on the subsidiary level, but are not recorded as an input VAT on a consolidated trust plan level. The Company lowered the “Service fees charged to trust plans” in 2024.
We acquire our borrowers primarily through our sales partners under trust lending model. In 2021, 2022 and 2023, over 99.7% of our borrowers who obtained loans from trust companies were introduced to us by our sales partners under the collaboration model. For details, please refer to “Item 4. Information on the Company—B.
We acquire our borrowers primarily through our sales partners under trust lending model. In 2022, 2023 and 2024, over 95.0% of our borrowers who obtained loans from trust companies were introduced to us by our sales partners under the collaboration model. For details, please refer to “Item 4. Information on the Company—B.
Business Overview—Risk Management.” 96 Relationship with our funding partners Our collaborative relationships with our funding partners are critical to our operations. We mainly collaborate with our trust company partners through trust lending model. In 2021, 2022 and 2023, 99.5%, 82.7% and 70.7% of our total home equity loan origination volume was originated under trust lending model, respectively.
Business Overview—Risk Management.” Relationship with our funding partners Our collaborative relationships with our funding partners are critical to our operations. We mainly collaborate with our trust company partners through trust lending model. In 2022, 2023 and 2024, 82.7%, 70.7% and 90.2% of our total home equity loan origination volume was originated under trust lending model, respectively.
The aggregate amounts of the transaction price allocated to performance obligations that are unsatisfied pertaining to post-origination services were RMB67.08million and RMB17.53 million as of December 31, 2022 and 2023, respectively. 64.6% and 100% of the remaining performance obligations will be recognized over the following 12 months for the years ended December 31, 2022 and 2023, respectively.
The aggregate amounts of the transaction price allocated to performance obligations that are unsatisfied pertaining to post-origination services were RMB67.08 million, RMB17.53 million and RMB6.3 million (US$0.9 million) as of December 31, 2022, 2023 and 2024, respectively. 64.6%, 100% and 100% of the remaining performance obligations will be recognized over the following 12 months for the years ended December 31, 2022, 2023 and 2024, respectively.
Interest income on debt securities Interest income on debt securities decreased to RMB20.5 million (US$2.9 million) in 2023 from RMB21.6 million in 2022.
Interest income on debt securities Interest income on debt securities decreased to RMB20.5 million in 2023 from RMB21.6 million in 2022.
Our financing costs for senior units excluding the trust administrative fees, ranged from 8.0% to 9.5% per annum of the issuance number of senior units in 2023. The interest charged by trust company partners to our borrowers affects our profitability.
Our financing costs for senior units excluding the trust administrative fees, ranged from 6.0% to 8.7% per annum of the issuance number of senior units in 2024. The interest charged by trust company partners to our borrowers affects our profitability.
As of December 31, 2023, we had cash and cash equivalents of RMB2.0 billion (US$0.3 million), as compared to cash and cash equivalents of RMB1.8 billion as of December 31, 2022, substantially all of which were held by our PRC subsidiaries. Our cash and cash equivalents consist primarily of bank deposits and are primarily denominated in Renminbi.
As of December 31, 2024, we had cash and cash equivalents of RMB1.2 billion (US$161.1 million), as compared to cash and cash equivalents of RMB2.0 billion as of December 31, 2023, substantially all of which were held by our PRC subsidiaries. Our cash and cash equivalents consist primarily of bank deposits and are primarily denominated in Renminbi.
The following table sets forth our charge-off ratio for the periods indicated. For the Year Ended December 31, 2021 2022 2023 Charge-off ratio 0.85 % 0.43 % 0.82 % Our charge-off ratio was 0.85%, 0.43% and 0.82% in 2021, 2022 and 2023.
The following table sets forth our charge-off ratio for the periods indicated. For the Year Ended December 31, 2022 2023 2024 Charge-off ratio 0.43 % 0.82 % 2.09 % 101 Our charge-off ratio was 0.43%, 0.82% and 2.09% in 2022, 2023 and 2024.
The weighted average LTV ratio of the home equity loan origination volume was 58.5%, 60.0% and 62.0% in 2021, 2022 and 2023, respectively. As of December 31, 2021, 2022 and 2023, our NPL ratio (including loans held for sale) was 11.93%, 16.95% and 21.25%, respectively. Charge-off ratio in 2021, 2022 and 2023 was 0.85%, 0.43% and 0.82%, respectively.
The weighted average LTV ratio of the home equity loan origination volume was 60.0%, 62.0% and 60.5% in 2022, 2023 and 2024, respectively. As of December 31, 2022, 2023 and 2024, our NPL ratio (including loans held for sale) was 16.95%, 21.25% and 40.86%, respectively. Charge-off ratio in 2022, 2023 and 2024 was 0.43%, 0.82% and 2.09%, respectively.
Business Overview—Our Products—Collaboration Model.” Under trust lending model, we originated home equity loans with an aggregate principal amount of RMB12.8 billion, RMB 12.2 billion and RMB12.2 billion (US$1.7 billion) in 2021, 2022 and 2023, respectively.
Business Overview—Our Products—Collaboration Model.” Under trust lending model, we originated home equity loans with an aggregate principal amount of RMB12.2 billion, RMB12.2 billion and RMB8.6 billion (US$1.2 billion) in 2022, 2023 and 2024, respectively.
When a collateral-dependent financial asset is probable of foreclosure, the Group will utilize the discounted cash flow (“DCF”) model, and is determined by comparing the amortized cost with the present value of the projected cashflow for the underlying collateral.
When a collateral-dependent financial asset is probable of foreclosure, the Group will utilize the discounted cash flow (“DCF”) model to determine the expected credit loss for the loan by comparing the amortized cost of the loan with the present value of the projected cashflow for the underlying collateral.
Other expenses Other expenses increased by 41.6% to RMB121.6 million (US$17.1 million) for the fiscal year of 2023 as compared to RMB85.9 million for the same period of 2022, primarily due to (a) the increase in fees paid to local channels.
Operating lease cost Operating lease cost increased by 17.1% to RMB16.4 million for the fiscal year of 2023 as compared to RMB14.0 million for the same period of 2022. 122 Other expenses Other expenses increased by 41.6% to RMB121.6 million for the fiscal year of 2023 as compared to RMB85.9 million for the same period of 2022, primarily due to (a) the increase in fees paid to local channels.
There were no market conditions associated with the share option grants. The fair value of options granted to employees is determined based on a number of factors including valuations. In determining the fair value of our equity instruments, we referred to valuation reports prepared by an independent third-party appraisal firm, based on data we provided.
The fair value of options granted to employees is determined based on a number of factors including valuations. In determining the fair value of our equity instruments, we referred to valuation reports prepared by an independent third-party appraisal firm, based on data we provided.
Our delinquency ratio (excluding loans held for sale) has increased from 16.17% as of December 31, 2021 to 18.26% as of December 31, 2022, and decreased to 15.54% as of December 31, 2023.
Our delinquency ratio (excluding loans held for sale) has decreased from 18.26% as of December 31, 2022 to 15.54% as of December 31, 2023, and subsequently increased to 29.72% as of December 31, 2024.
As of and for the Year Ended December 31, Loan performance metrics (including loans held for sale)* 2021 2022 2023 Delinquency ratio (1) 26.22 % 33.22 % 34.36 % NPL ratio (2) 11.93 % 16.95 % 21.25 % Allowance ratio (3) 10.98 % 9.23 % 7.56 % NPL provision coverage ratio (4) 92.03 % 52.27 % 35.56 % 97 As of and for the Year Ended December 31, Loan performance metrics (excluding loans held for sale) 2021 2022 2023 Delinquency ratio (1) 16.17 % 18.26 % 15.54 % NPL ratio (2) 2.13 % 1.12 % 1.11 % Allowance ratio (3) 10.36 % 8.22 % 7.90 % NPL provision coverage ratio (4) 487.21 % 720.38 % 713.25 % Notes: (1) Delinquency ratio represents total balance of outstanding loan principal for which any installment payment is one or more days past-due as a percentage of the outstanding loan principal as of the date.
As of and for the Year Ended December 31, Loan performance metrics (including loans held for sale) 2022 2023 2024 Delinquency ratio (1) 33.22 % 34.36 % 55.29 % NPL ratio (2) 16.95 % 21.25 % 40.86 % Allowance ratio (3) 9.23 % 7.56 % 7.96 % NPL provision coverage ratio (4) 52.27 % 35.56 % 19.52 % As of and for the Year Ended December 31, Loan performance metrics (excluding loans held for sale) 2022 2023 2024 Delinquency ratio (1) 18.26 % 15.54 % 29.72 % NPL ratio (2) 1.12 % 1.11 % 8.50 % Allowance ratio (3) 8.22 % 7.90 % 9.64 % NPL provision coverage ratio (4) 720.38 % 713.25 % 113.74 % Notes: (1) Delinquency ratio represents total balance of outstanding loan principal for which any installment payment is one or more days past-due as a percentage of the outstanding loan principal as of the date.
In 2021, 2022 and 2023, the interest expenses on interest-bearing borrowings was RMB775.6 million, RMB784.8 million and RMB723.1 million (US$101.8 million), accounting for 100%, 100% and 100%, respectively, of our total interest and fees expenses for the same periods.
In 2022, 2023 and 2024, the interest expenses on interest-bearing borrowings was RMB784.8 million, RMB723.1 million and RMB794.5 million (US$108.8 million), accounting for 100%, 100% and 100%, respectively, of our total interest and fees expenses for the same periods.
It conducts substantially all of its operations in China primarily through its subsidiaries in China, in particular Shenzhen Fanhua United Investment Group Co., Ltd., Guangzhou Heze Information Technology Co., Ltd., and their subsidiaries and consolidated affiliated entities, and substantially all of its assets and operations are located in China.
(formerly known as Shenzhen Fanhua United Investment Group Co., Ltd.), Guangzhou Heze Information Technology Co., Ltd., and their subsidiaries and consolidated affiliated entities, and substantially all of its assets and operations are located in China.
Unless terminated earlier, the 2017 Plan will terminate automatically in 2022 to 2024, respectively. 113 On August 27, 2018, we adopted our 2018 CNFinance Holdings Limit Share Incentive Plan, or the 2018 Plan to replace the 2017 Plan and granted 187,933,730 options to certain management members and employees to purchase up to 187,933,730 of our ordinary shares under this 2018 Plan to replace the granted and outstanding options under the 2017 Plan.
On August 27, 2018, we adopted our 2018 CNFinance Holdings Limit Share Incentive Plan, or the 2018 Plan to replace the 2017 Plan and granted 187,933,730 options to certain management members and employees to purchase up to 187,933,730 of our ordinary shares under this 2018 Plan to replace the granted and outstanding options under the 2017 Plan.
As of December 31, 2023* (Including loans held for sale) Total First lien Delinquency Ratio 38.51 % NPL Ratio 24.90 % Second lien Delinquency Ratio 31.65 % NPL Ratio 18.88 % 98 As of December 31, 2023* (Excluding loans held for sale) Total First lien Delinquency Ratio 17.41 % NPL Ratio 1.38 % Second lien Delinquency Ratio 14.40 % NPL Ratio 0.94 % As of December 31, 2022 (Including loans held for sale) The traditional facilitation model The collaboration model Total First lien Delinquency Ratio 94.87 % 39.77 % 40.08 % NPL Ratio 87.44 % 21.15 % 21.59 % Second lien Delinquency Ratio 36.43 % 30.92 % 30.98 % NPL Ratio 36.41 % 14.86 % 15.09 % As of December 31, 2022 (Excluding loans held for sale) The traditional facilitation model The collaboration model Total First lien Delinquency Ratio 71.82 % 21.83 % 21.84 % NPL Ratio 30.99 % 1.06 % 1.11 % Second lien Delinquency Ratio 2.92 % 17.69 % 17.57 % NPL Ratio 2.89 % 1.14 % 1.16 % As of December 31, 2021 (Including loans held for sale)** The traditional facilitation model The collaboration model Total First lien Delinquency Ratio 76.88 % 31.65 % 32.62 % NPL Ratio 60.67 % 15.62 % 16.59 % Second lien Delinquency Ratio 77.87 % 21.23 % 22.07 % NPL Ratio 67.30 % 8.04 % 8.92 % * As of December 31, 2023, we ceased calculating and providing delinquency and NPL ratio under the traditional facilitation model separately because the balance of outstanding loan principal under the traditional facilitation model was small and immaterial to the overall loan portfolio. ** Certain December 31, 2021 amounts in loans held-for-sale have been corrected for an immaterial error identified.
As of December 31, 2024* (Including loans held for sale) Total First lien Delinquency Ratio 57.10 % NPL Ratio 43.84 % Second lien Delinquency Ratio 54.08 % NPL Ratio 38.89 % As of December 31, 2024* (Excluding loans held for sale) Total First lien Delinquency Ratio 29.42 % NPL Ratio 9.05 % Second lien Delinquency Ratio 29.90 % NPL Ratio 8.16 % As of December 31, 2023* (Including loans held for sale) Total First lien Delinquency Ratio 38.51 % NPL Ratio 24.90 % Second lien Delinquency Ratio 31.65 % NPL Ratio 18.88 % 99 As of December 31, 2023* (Excluding loans held for sale) Total First lien Delinquency Ratio 17.41 % NPL Ratio 1.38 % Second lien Delinquency Ratio 14.40 % NPL Ratio 0.94 % As of December 31, 2022 (Including loans held for sale) The traditional facilitation model The collaboration model Total First lien Delinquency Ratio 94.87 % 39.77 % 40.08 % NPL Ratio 87.44 % 21.15 % 21.59 % Second lien Delinquency Ratio 36.43 % 30.92 % 30.98 % NPL Ratio 36.41 % 14.86 % 15.09 % As of December 31, 2022 (Excluding loans held for sale) The traditional facilitation model The collaboration model Total First lien Delinquency Ratio 71.82 % 21.83 % 21.84 % NPL Ratio 30.99 % 1.06 % 1.11 % Second lien Delinquency Ratio 2.92 % 17.69 % 17.57 % NPL Ratio 2.89 % 1.14 % 1.16 % * As of December 31, 2023, we ceased calculating and providing delinquency and NPL ratio under the traditional facilitation model separately because the balance of outstanding loan principal under the traditional facilitation model was small and immaterial to the overall loan portfolio.
When CRMPs deposited by sales partners are confiscated by the Company, the Company will recognize the amount forfeited in other gain. In the fourth quarter of 2023, some sales partners who forfeited their CRMPs were able to continue to fulfil their guarantee responsibility, and associated CRMPs will not be deemed as confiscated.
In the fourth quarter of 2023, some sales partners who forfeited their CRMPs were able to continue to fulfil their guarantee responsibility, and associated CRMPs will not be deemed as confiscated.
The income statement caption was disclosed as “Provision for credit losses, net of increase in increase in guaranteed recoverable assets”. Guarantee liabilities Starting from 2021, the Group started to cooperate with third-party financing guarantee corporations that provides guarantee services to commercial banks. According to relevant financial guarantee arrangements, third-party financing guarantee corporations will fulfil its obligations to purchase defaulted loans.
The income statement caption was disclosed as “Provision for credit losses, net of increase in increase in guaranteed recoverable assets”. 113 Guarantee liabilities Starting from 2021, the Group started to cooperate with third-party financing guarantee corporations that provides guarantee services to commercial banks.
The term of the options will not exceed ten years from the date of the grant. Accordingly, 60%, 20% and 20% of the award options shall vest on December 31 of each of the years 2017 to 2019, respectively.
The term of the options will not exceed ten years from the date of the grant. Accordingly, 60%, 20% and 20% of the award options shall vest on December 31 of each of the years 2017 to 2019, respectively. Unless terminated earlier, the 2017 Plan will terminate automatically in 2022 to 2024, respectively.
For the Year Ended December 31 2019 2020 2021 2022 2023 RMB RMB RMB RMB RMB US$ Adjusted net income 550,530,009 176,925,893 83,973,831 141,125,677 172,134,910 24,244,695 Adjusted net income is not defined under U.S. GAAP and is not presented in accordance with U.S. GAAP.
For the Year Ended December 31 2020 2021 2022 2023 2024 RMB RMB RMB RMB RMB US$ Adjusted net income 176,925,893 83,973,831 141,125,677 172,134,910 52,682,980 7,217,539 Adjusted net income is not defined under U.S. GAAP and is not presented in accordance with U.S. GAAP.
Off-Balance Sheet Commitments and Arrangements We launched in 2021 a new funding model in cooperation with commercial banks, under which our commercial bank partners are responsible for reviewing and approving the loan while we charge a service fee for our loan facilitation services.
The notable increase in 2023 was primarily driven by the procurement of a new office building in Guangzhou. 125 Off-Balance Sheet Commitments and Arrangements We launched in 2021 a new funding model in cooperation with commercial banks, under which our commercial bank partners are responsible for reviewing and approving the loan while we charge a service fee for our loan facilitation services.
Interest income charged to sales partners refers to the cost of and interest on the partner’s 40% repayment and instalment repurchase options under collaboration model. Interest on deposits with banks Our interest on deposits with banks represents interest generated from our cash deposits with banks.
Interest income charged to sales partners refers to the cost of and interest on the partner’s 40% repayment and instalment repurchase options under collaboration model.
Net losses on sales of loans Net losses on sales of loans was RMB17.1 million (US$2.4 million) for the fiscal year of 2023 as compared to RMB44.6 million in the same period of 2022.
Net losses on sales of loans Net losses on sales of loans was RMB17.1 million for the fiscal year of 2023 as compared to RMB44.6 million in the same period of 2022. Other gains, net Other gains, net was RMB4.8 million for the fiscal year of 2023, compared with RMB89.9 million in the same period of 2022.
The Group considers loan facilitation services under commercial bank partnership model (covering matching of commercial banks to borrowers and facilitating the execution of loan agreement between commercial banks and borrowers) and post-facilitation services under commercial bank partnership model (covering cash processing services and collection services) as two distinctive performance obligations in accordance with ASC Topic 606.
The services not within the scope of other Topics should be accounted for in accordance with the remaining provisions of ASC Topic 606 and the applicable revenue recognition guidance. 109 The Group considers loan facilitation services under commercial bank partnership model (covering matching of commercial banks to borrowers and facilitating the execution of loan agreement between commercial banks and borrowers) and post-facilitation services under commercial bank partnership model (covering cash processing services and collection services) as two distinctive performance obligations in accordance with ASC Topic 606.
The ability of our subsidiaries in China to make dividends or other cash payments to us is subject to various restrictions under PRC laws and regulations. For details, please refer to “Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Holding Company Structure.” The following table sets forth a summary of our cash flows for the periods indicated.
The ability of our subsidiaries in China to make dividends or other cash payments to us is subject to various restrictions under PRC laws and regulations. For details, please refer to “Item 5. Operating and Financial Review and Prospects—B.
For the Year Ended December 31 2019 2020 2021 2022 2023 RMB RMB RMB RMB RMB US$ Net Income 534,643,942 114,852,526 65,207,464 135,351,411 164,617,561 23,185,899 Add: share-based compensation expenses 15,886,067 62,073,367 18,766,367 5,774,266 7,517,349 1,058,796 Adjusted net income 550,530,009 176,925,893 83,973,831 141,125,677 172,134,910 24,244,695 116 Results of Operations The following table sets forth a summary of our consolidated statements of comprehensive income for the periods presented.
For the Year Ended December 31 2020 2021 2022 2023 2024 RMB RMB RMB RMB RMB US$ Net Income 114,852,526 65,207,464 135,351,411 164,617,561 37,784,446 5,176,448 Add: share-based compensation expenses 62,073,367 18,766,367 5,774,266 7,517,349 14,898,534 2,041,091 Adjusted net income 176,925,893 83,973,831 141,125,677 172,134,910 52,682,980 7,217,539 116 Results of Operations The following table sets forth a summary of our consolidated statements of comprehensive income for the periods presented.
ASC 326 defines the ACL as a valuation account that is deducted from the amortized cost of a financial asset to present the net amount that management expects to collect on the financial asset over its expected life. All financial assets carried at amortized cost are in the scope of ASC 326, while assets measured at fair value are excluded.
ASC 326 defines the ACL as a valuation account that is deducted from, or added to the amortized cost of a financial asset to present the net amount that management expects to collect on the financial asset over its expected life.
Our cost of the subordinated units as measured by the investment amount was RMB2,919.4 million, RMB2,627.4 million and RMB2,377.2 million (US$334.8 million) as of December 31, 2021, 2022 and 2023, respectively. Our investment return from the subordinated units was RMB578.7 million, RMB381.3 million and RMB495.9 million (US$69.9 million) in 2021, 2022 and 20223, respectively.
Our cost of the subordinated units as measured by the investment amount was RMB2,627.4 million, RMB2,377.2 million and RMB1776.2 million (US$243.3 million) as of December 31, 2022, 2023 and 2024, respectively. Our investment return from the subordinated units was RMB381.3 million, RMB495.9 million and RMB478.1 million (US$65.5 million) in 2022, 2023 and 2024, respectively.
Net cash provided by operating activities in 2021 was RMB689.7 million (US$108.2 million) due to net income of RMB65.2 million (US$10.2 million), mainly adjusted for (i) reversal of provision for credit losses of RMB298.5 million, (ii) share-based compensation expenses of RMB18.8 million, (iii) depreciation and amortization of RMB3.8 million, (iv) losses on sale of loans of RMB479.6 million, (v) the utilized of loans held-for-sale for originations and purchase was RMB453.9 million and (vi) the increase of proceeds from sales and paydowns of loans originally classified as held for sale was RMB1,006.9 million.
Net cash provided by operating activities in 2023 was RMB1,705.8 million due to net income of RMB164.6 million (US$23.2 million), mainly adjusted for (i) provision for credit losses of RMB177.3 million, (ii) share-based compensation expenses of RMB7.5 million, (iii) depreciation and amortization of RMB1.8 million, (iv) losses on sale of loans of RMB17.2 million, (v) the utilized of loans held-for-sale for originations and purchase was RMB629.0 million and (vi) the increase of proceeds from sales and paydowns of loans originally classified as held for sale was RMB1,896.1 million.
As of December 31, 2023 (RMB in thousands) Loan Allowance Allowance Ratio Apartment 93,325 36,620 39.2 % House 8,391 3,294 39.3 % Commercial Property - - - Total 101,716 39,914 39.2 % As of December 31, 2022 (RMB in thousands) Loan Allowance Allowance Ratio Apartment 86,717 12,248 14.1 % House - - - Commercial Property 15,847 - - Total 102,564 12,248 11.9 % As of December 31, 2021 (RMB in thousands) Loan Allowance Allowance Ratio Apartment 193,021 60,308 31.2 % House 3,824 729 19.1 % Commercial Property 3,159 443 14.0 % Total 200,004 61,480 30.7 % 100 We incur losses and charge-off loans when we determine that the loan is uncollectable.
As of December 31, 2024 Loan Allowance Allowance Ratio (RMB in thousands) Apartment 542,842 79,208 14.6 % House 9,219 - - Commercial Property - - - Total 552,061 79,208 14.3 % As of December 31, 2023 Loan Allowance Allowance Ratio (RMB in thousands) Apartment 93,325 36,620 39.2 % House 8,391 3,294 39.3 % Commercial Property – – – Total 101,716 39,914 39.2 % As of December 31, 2022 Loan Allowance Allowance Ratio (RMB in thousands) Apartment 86,717 12,248 14.1 % House – – – Commercial Property 15,847 – – Total 102,564 12,248 11.9 % We incur losses and charge-off loans when we determine that the loan is uncollectable.
The collective ACL utilizes probability of default (PD) and loss given default (LGD) models, and is the product of multiplying PD, LGD, and exposure at default (EAD) for nondelinquent loans, delinquent loans within 90 days.
The collective ACL is measured based on loans that share similar risk characteristics and includes both quantitative and qualitative components. The collective ACL utilizes probability of default (PD) and loss given default (LGD) models, and is the product of multiplying PD, LGD, and exposure at default (EAD) for nondelinquent loans, delinquent loans within 90 days.
Net interest and fees income after collaboration cost Net interest and fees income after collaboration cost was RMB683.4 million (US$99.1 million) for the fiscal year of 2022, representing an increase of 11.2% as compared to RMB614.6 million for the same period of 2021.
Net interest and fees income after collaboration cost Net interest and fees income after collaboration cost was RMB775.9 million for the fiscal year of 2023 representing an increase of 13.5% as compared to RMB683.4 million for the same period of 2022.
We cannot assure you, in light of the restrictions in place, or any amendment to be made from time to time, that our current or future PRC subsidiaries will be able to satisfy their respective payment obligations that are denominated in foreign currencies, including the remittance of dividends out of the PRC. 127 Recent Accounting Pronouncements The ASU 2022-02 was adopted on a prospective basis and was effective for the Group on January 1, 2023.
We cannot assure you, in light of the restrictions in place, or any amendment to be made from time to time, that our current or future PRC subsidiaries will be able to satisfy their respective payment obligations that are denominated in foreign currencies, including the remittance of dividends out of the PRC.
The qualitative component of the collective ACL represents the Group’s judgment of additional considerations to account for external risk factors that are not adequately measured in the quantitative component of the collective ACL, including consideration of idiosyncratic risk factors, conditions that may not be reflected in quantitatively derived results, or other relevant factors. 111 The ACL for financial assets held at amortized cost is a valuation account that is deducted from, or added to, the amortized cost basis of the financial assets to present the net amount expected to be collected.
The qualitative component of the collective ACL represents the Group’s judgment of additional considerations to account for external risk factors that are not adequately measured in the quantitative component of the collective ACL, including consideration of idiosyncratic risk factors, conditions that may not be reflected in quantitatively derived results, or other relevant factors.
We believe that adjusted net income helps identify underlying trends in our business by excluding the impact of share-based compensation expense, which are non-cash charges.
Non-GAAP Financial Measure Adjusted Net Income We use adjusted net income, a non-GAAP financial measure, in evaluating our operating results and for financial and operational decision-making purposes. We believe that adjusted net income helps identify underlying trends in our business by excluding the impact of share-based compensation expense, which are non-cash charges.
Also, asset management revenue and revenue from rendering of services are recognized in accordance with ASC 606 when following conditions are met: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract and (v) recognize revenue when (or as) the entity satisfies a performance obligation. 108 The criteria of revenue recognition as they relate to each of the following major revenue generating activities are described below: Interest and financing service fees on loans Interest and financing service fees on loans, which include financing service fees on loans, are collected from borrowers for loans and related services.
Also, asset management revenue and revenue from rendering of services are recognized in accordance with ASC 606 when following conditions are met: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract and (v) recognize revenue when (or as) the entity satisfies a performance obligation.
We are exposed to credit risks under the trust lending model as a result of subscription of subordinated units and credit strengthening services and being a lender under the direct lending model.
Effective risk management Our operating income and profitability are largely affected by our and our trust company partners’ risk management capabilities. We are exposed to credit risks under the trust lending model as a result of subscription of subordinated units and credit strengthening services and being a lender under the direct lending model.
An offshore holding company is permitted under PRC laws and regulations to provide funding from the proceeds of offshore fund raising activities to its PRC subsidiaries through loans or capital contributions, and to its consolidated affiliated entities only through loans, in each case subject to the satisfaction of the applicable government registration and approval requirements.
In addition, ADS holders may potentially be subject to PRC taxes on dividends paid by CNFinance in the event it is deemed as a PRC resident enterprise for PRC tax purposes. 127 An offshore holding company is permitted under PRC laws and regulations to provide funding from the proceeds of offshore fund raising activities to its PRC subsidiaries through loans or capital contributions, and to its consolidated affiliated entities only through loans, in each case subject to the satisfaction of the applicable government registration and approval requirements.

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Item 6. [Reserved]

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

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Xi Wang is No.66 Xingang Xi Road, Guangzhou, Guangdong Province. The business address for Mr. Ge Yang is 32 Crabtree Ln Tenafly, NJ 07670, the U.S.A.
The business address for Mr. Xi Wang is No.66 Xingang Xi Road, Guangzhou, Guangdong Province. The business address for Mr. Ge Yang is 32 Crabtree Ln Tenafly, NJ 07670, the U.S.A.
Conditions of Award . The board of directors or any entity appointed by the board of directors to administer the 2018 Plan shall determine the provisions, terms, and conditions of each award including, but not limited to, the award vesting schedule, repurchase provisions, rights of first refusal, forfeiture provisions, and form of payment upon settlement of the award.
The board of directors or any entity appointed by the board of directors to administer the 2018 Plan shall determine the provisions, terms, and conditions of each award including, but not limited to, the award vesting schedule, repurchase provisions, rights of first refusal, forfeiture provisions, and form of payment upon settlement of the award. Terms of Award .
The audit committee is responsible for, among other things: ● reviewing and recommending to our board for approval, the appointment, re-appointment or removal of the independent auditor, after considering its annual performance evaluation of the independent auditor; ● approving the remuneration and terms of engagement of the independent auditor and pre-approving all auditing and non-auditing services permitted to be performed by our independent auditors at least annually; ● obtaining a written report from our independent auditor describing matters relating to its independence and quality control procedures; ● reviewing with the independent registered public accounting firm any audit problems or difficulties and management’s response; ● discussing with our independent auditor, among other things, the audits of the financial statements, including whether any material information should be disclosed, issues regarding accounting and auditing principles and practices; ● reviewing and approving all proposed related party transactions, as defined in Item 404 of Regulation S-K under the Securities Act; ● reviewing and recommending the financial statements for inclusion within our quarterly earnings releases and to our board for inclusion in our annual reports; ● discussing the annual audited financial statements with management and the independent registered public accounting firm; ● reviewing the adequacy and effectiveness of our accounting and internal control policies and procedures and any special steps taken to monitor and control major financial risk exposures; ● at least annually, reviewing and reassessing the adequacy of the committee charter; ● approving annual audit plans, and undertaking an annual performance evaluation of the internal audit function; ● establishing and overseeing procedures for the handling of complaints and whistleblowing; ● meeting separately and periodically with management and the independent registered public accounting firm; ● monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of our procedures to ensure proper compliance; and ● reporting regularly to the board.
The audit committee is responsible for, among other things: ● reviewing and recommending to our board for approval, the appointment, re-appointment or removal of the independent auditor, after considering its annual performance evaluation of the independent auditor; ● approving the remuneration and terms of engagement of the independent auditor and pre-approving all auditing and non-auditing services permitted to be performed by our independent auditors at least annually; ● obtaining a written report from our independent auditor describing matters relating to its independence and quality control procedures; ● reviewing with the independent registered public accounting firm any audit problems or difficulties and management’s response; ● discussing with our independent auditor, among other things, the audits of the financial statements, including whether any material information should be disclosed, issues regarding accounting and auditing principles and practices; ● reviewing and approving all proposed related party transactions, as defined in Item 404 of Regulation S-K under the Securities Act; 134 ● reviewing and recommending the financial statements for inclusion within our quarterly earnings releases and to our board for inclusion in our annual reports; ● discussing the annual audited financial statements with management and the independent registered public accounting firm; ● reviewing the adequacy and effectiveness of our accounting and internal control policies and procedures and any special steps taken to monitor and control major financial risk exposures; ● at least annually, reviewing and reassessing the adequacy of the committee charter; ● approving annual audit plans, and undertaking an annual performance evaluation of the internal audit function; ● establishing and overseeing procedures for the handling of complaints and whistleblowing; ● meeting separately and periodically with management and the independent registered public accounting firm; ● monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of our procedures to ensure proper compliance; and ● reporting regularly to the board.
Gao currently also serves as the independent director of China Haisum Engineering Co., Ltd. and Great Wall Movie and Television Co. Ltd. Mr. Gao received both his bachelor’s degree and master’s degree in finance from Nankai University in China. 129 Lin Xu has served as our Independent Director since our initial public offering. Mr.
Gao currently also serves as the independent director of China Haisum Engineering Co., Ltd. and Great Wall Movie and Television Co. Ltd. Mr. Gao received both his bachelor’s degree and master’s degree in finance from Nankai University in China. Lin Xu has served as our Independent Director since our initial public offering. Mr.
Operating Results—Critical Accounting Policies, Judgments and Estimates—Share-based compensation expenses.” 6.C. Board Practices Board of Directors Our Board of Directors consists of six directors, including four independent directors. A director is not required to hold any shares in our company to qualify to serve as a director.
Operating Results—Critical Accounting Policies, Judgments and Estimates—Share-based compensation expenses.” 133 6.C. Board Practices Board of Directors Our Board of Directors consists of six directors, including four independent directors. A director is not required to hold any shares in our company to qualify to serve as a director.
In fulfilling their duty of care to us, our directors must ensure compliance with our amended and restated memorandum and articles of association, as amended and restated 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 restated from time to time. Our company has the right to seek damages if a duty owed by our directors is breached.
Jing Li has served as our Acting Chief Financial Officer, Assistant President of the Company and the Head of Department of Finance and Internal Control since the fourth quarter of 2021. Ms. Li has 20 years of experience in the financial industry and holds the certificate of ACCA and IPA.
Jing Li has served as our Chief Financial Officer, Assistant President of the Company and the Head of Department of Finance and Internal Control since the fourth quarter of 2021. Ms. Li has 20 years of experience in the financial industry and holds the certificate of ACCA and IPA.
We have adopted a charter for each of the three committees. Each committee’s members and functions are described below. 133 Audit Committee Our audit committee consists of Mr. Fengyong Gao, Mr. Lin Xu and Mr. Xi Wang, and is chaired by Mr. Fengyong Gao. We have determined that Mr. Fengyong Gao, Mr. Lin Xu and Mr.
We have adopted a charter for each of the three committees. Each committee’s members and functions are described below. Audit Committee Our audit committee consists of Mr. Fengyong Gao, Mr. Lin Xu and Mr. Xi Wang, and is chaired by Mr. Fengyong Gao. We have determined that Mr. Fengyong Gao, Mr. Lin Xu and Mr.
For share incentive grants to our directors and executive officers, please refer to “Item 6. Directors, Senior Management and Employees—B. Compensation—Share Incentive Plan.” 130 Employment Agreements and Indemnification Agreements We have entered into employment agreements with each of our executive officers.
For share incentive grants to our directors and executive officers, please refer to “Item 6. Directors, Senior Management and Employees—B. Compensation—Share Incentive Plan.” Employment Agreements and Indemnification Agreements We have entered into employment agreements with each of our executive officers.
Donald Sussman is 888 E Las Olas Blvd, Suite 710, Fort Lauderdale, Florida 33301-2395, U.S.A. 6.F. Disclosure of a Registrant’s Action to Recover Erroneously Awarded Compensation Not applicable
Donald Sussman is 888 E Las Olas Blvd, Suite 710, Fort Lauderdale, Florida 33301-2395, U.S.A. 138 6.F. Disclosure of a Registrant’s Action to Recover Erroneously Awarded Compensation Not applicable
Ordinary Shares Beneficially Owned as of March 31, 2024 Functions Number %* Directors and Executive Officers:† Bin Zhai (1) 283,949,380 20.1 % Jun Qian (2) 20,000,000 1.4 % Zehui Zhang (3) 20,000,000 1.4 % Huiling Jiang — — Jing Li — — Fengyong Gao — — Lin Xu — — Xi Wang — — Ge Yang — — Principal Shareholders: Kylin Investment Holdings Limited (4) 243,949,380 17.8 % S.
Ordinary Shares Beneficially Owned as of March 31, 2025 Functions Number %* Directors and Executive Officers:† Bin Zhai (1) 283,949,380 20.1 % Jun Qian (2) 20,000,000 1.4 % Zehui Zhang (3) 20,000,000 1.4 % Huiling Jiang – – Jing Li – – Fengyong Gao – – Lin Xu – – Xi Wang – – Ge Yang – – Principal Shareholders: Kylin Investment Holdings Limited (4) 243,949,380 17.8 % S.
Terms of Award . The term of each award is stated in the award agreement between the Company and the grantee of such award. Amendment, Modification, Suspension or Termination of the 2018 Plan .
The term of each award is stated in the award agreement between the Company and the grantee of such award. Amendment, Modification, Suspension or Termination of the 2018 Plan .
Share Ownership The following table sets forth information concerning the beneficial ownership of our ordinary shares, as of March 31, 2024, by: ● each of our directors and executive officers; and ● each person known to us to beneficially own more than 5% of our ordinary shares.
Share Ownership The following table sets forth information concerning the beneficial ownership of our ordinary shares, as of March 31, 2025, by: ● each of our directors and executive officers; and ● each person known to us to beneficially own more than 5% of our ordinary shares.
The compensation committee is responsible for, among other things: ● overseeing the development and implementation of compensation programs in consultation with our management; ● at least annually, reviewing and approving, or recommending to the board for its approval, the compensation for our executive officers; 134 ● at least annually, reviewing and recommending to the board for determination with respect to the compensation of our non-executive directors; ● at least annually, reviewing periodically and approving any incentive compensation or equity plans, programs or other similar arrangements; ● reviewing executive officer and director indemnification and insurance matters; ● overseeing our regulatory compliance with respect to compensation matters, including our policies on restrictions on compensation plans and loans to directors and executive officers; ● at least annually, reviewing and reassessing the adequacy of the committee charter; ● selecting compensation consultant, legal counsel or other adviser only after taking into consideration all factors relevant to that person’s independence from management; and ● reporting regularly to the board.
The compensation committee is responsible for, among other things: ● overseeing the development and implementation of compensation programs in consultation with our management; ● at least annually, reviewing and approving, or recommending to the board for its approval, the compensation for our executive officers; ● at least annually, reviewing and recommending to the board for determination with respect to the compensation of our non-executive directors; ● at least annually, reviewing periodically and approving any incentive compensation or equity plans, programs or other similar arrangements; ● reviewing executive officer and director indemnification and insurance matters; ● overseeing our regulatory compliance with respect to compensation matters, including our policies on restrictions on compensation plans and loans to directors and executive officers; ● at least annually, reviewing and reassessing the adequacy of the committee charter; ● selecting compensation consultant, legal counsel or other adviser only after taking into consideration all factors relevant to that person’s independence from management; and ● reporting regularly to the board. 135 Nominating and Corporate Governance Committee Our nominating and corporate governance committee consists of Mr.
The calculations in the table below are based on 1,371,643,240 ordinary shares issued and outstanding as of the date of March 31, 2024. Beneficial ownership is determined in accordance with the rules and regulations of the SEC.
The calculations in the table below are based on 1,371,643,240 ordinary shares issued and outstanding as of the date of March 31, 2025. 137 Beneficial ownership is determined in accordance with the rules and regulations of the SEC.
Employees We had 897 employees as of December 31, 2023. Our employees are based in our headquarters in Guangzhou, Guangdong province and various local offices over 50 cities across China. The following table sets forth the breakdown of our employees by function as of December 31, 2023.
Employees We had 691 employees as of December 31, 2024. Our employees are based in our headquarters in Guangzhou, Guangdong province and various local offices over 50 cities across China. The following table sets forth the breakdown of our employees by function as of December 31, 2024.
We have entered into indemnification agreements with each of our directors and executive officers. Under these agreements, we may agree to indemnify our directors and executive officers against certain liabilities and expenses incurred by such persons in connection with claims made by reason of their being a director or officer of our company.
Under these agreements, we may agree to indemnify our directors and executive officers against certain liabilities and expenses incurred by such persons in connection with claims made by reason of their being a director or officer of our company.
Specifically, each executive officer has agreed not to (i) carry out or otherwise be concerned or interested, directly or indirectly, in certain businesses in direct or indirect competition with us; (ii) assume employment with or provide services to certain of our competitors or engage, whether as principal, partner, licensor or otherwise, with such competitors; or (iii) seek directly or indirectly, by the offer of alternative employment or other inducement whatsoever, to solicit the services of any of our employees, agents or consultants who are employed or engaged by us at any time in the one year preceding the last date of his or her employment.
Specifically, each executive officer has agreed not to (i) carry out or otherwise be concerned or interested, directly or indirectly, in certain businesses in direct or indirect competition with us; (ii) assume employment with or provide services to certain of our competitors or engage, whether as principal, partner, licensor or otherwise, with such competitors; or (iii) seek directly or indirectly, by the offer of alternative employment or other inducement whatsoever, to solicit the services of any of our employees, agents or consultants who are employed or engaged by us at any time in the one year preceding the last date of his or her employment. 131 We have entered into indemnification agreements with each of our directors and executive officers.
Donald Sussman (5) 139,187,000 10.1 % Notes: * For each person and group included in this table, percentage ownership is calculated by dividing the number of shares beneficially owned by such person or group by the sum of (i) 1,371,643,240, being the number of ordinary shares as of March 31, 2024 and (ii) the number of ordinary shares underlying share options held by such person or group that are exercisable within 60 days after March 31, 2024. 137 † The business address of our directors and executive officers except for Mr.
Donald Sussman (5) 139,187,000 10.1 % Notes: * For each person and group included in this table, percentage ownership is calculated by dividing the number of shares beneficially owned by such person or group by the sum of (i) 1,559,576,960, being the number of ordinary shares as of March 31, 2025 and (ii) the number of ordinary shares underlying share options held by such person or group that are exercisable within 60 days after March 31, 2025. † The business address of our directors and executive officers except for Mr.
Nominating and Corporate Governance Committee Our nominating and corporate governance committee consists of Mr. Bin Zhai, Mr. Jun Qian and Mr. Xi Wang, and is chaired by Mr. Bin Zhai. We have determined that Mr. Xi Wang satisfies the “independence” requirements of Section 303A of the Corporate Governance Rules of the NYSE.
Bin Zhai, Mr. Jun Qian and Mr. Xi Wang, and is chaired by Mr. Bin Zhai. We have determined that Mr. Xi Wang satisfies the “independence” requirements of Section 303A of the Corporate Governance Rules of the NYSE.
S. Donald Sussman, which may be held, in part, in the forms of ADS, with each ADS representing 20 ordinary shares. The foregoing beneficial ownership information of Mr. S. Donald Sussman is based on the Amendment No.3 to the Schedule 13G filed by Mr. S. Donald Sussman with the SEC on February 14, 2024. The business address of Mr. S.
S. Donald Sussman, which may be held, in part, in the forms of ADS, with each ADS representing 20 ordinary shares. The foregoing beneficial ownership information of Mr. S. Donald Sussman is based on the Amendment No.4 to the Schedule 13G filed by Mr. S. Donald Sussman with the SEC on February 13, 2025. The business address of Mr. S.
The administrator of the 2018 Plan may amend, alter, suspend, discontinue or terminate this 2018 Plan, or any Award Agreement hereunder or any portion hereof or thereof at any time; provided, however, that (a) to the extent necessary and desirable to comply with applicable laws defined therein, or stock exchange rules, the Company shall obtain shareholder approval of any Plan amendment in such a manner and to such a degree as required, and (b) shareholder approval is required for any amendment to the 2018 Plan that (i) increases the number of shares available under the 2018 Plan (other than any adjustment as provided by Article 8 of the 2018 Plan), (ii) permits the Committee to extend the term of the 2018 Plan or the exercise period for an option beyond ten years from the date of grant, or (iii) results in a material increase in benefits or a change in eligibility requirements. 132 The following table summarizes, as of the date of this annual report, the outstanding equity awards granted to our directors and executive officers under the 2018 Plan, which replaced the 2017 Plan.
The administrator of the 2018 Plan may amend, alter, suspend, discontinue or terminate this 2018 Plan, or any Award Agreement hereunder or any portion hereof or thereof at any time; provided, however, that (a) to the extent necessary and desirable to comply with applicable laws defined therein, or stock exchange rules, the Company shall obtain shareholder approval of any Plan amendment in such a manner and to such a degree as required, and (b) shareholder approval is required for any amendment to the 2018 Plan that (i) increases the number of shares available under the 2018 Plan (other than any adjustment as provided by Article 8 of the 2018 Plan), (ii) permits the Committee to extend the term of the 2018 Plan or the exercise period for an option beyond ten years from the date of grant, or (iii) results in a material increase in benefits or a change in eligibility requirements.
Directors and Executive Officers Age Position/Title Bin Zhai 54 Chairman, Director, Chief Executive Officer Jun Qian 51 Director and Vice President Fengyong Gao 54 Independent Director Lin Xu 62 Independent Director Xi Wang 55 Independent Director Ge Yang 53 Independent Director Zehui Zhang 51 Vice President Huiling Jiang 44 Vice President Jing Li 43 Acting Chief Financial Officer Bin Zhai has served as our Chairman of the Board of Directors since 2017 and our Chief Executive Officer since 2010.
Directors and Executive Officers Age Position/Title Bin Zhai 55 Chairman, Director, Chief Executive Officer Jun Qian 52 Director and Vice President Fengyong Gao 55 Independent Director Lin Xu 63 Independent Director Xi Wang 56 Independent Director Ge Yang 54 Independent Director Zehui Zhang 52 Vice President Huiling Jiang 45 Vice President Jing Li 44 Chief Financial Officer 129 Bin Zhai has served as our Chairman of the Board of Directors since 2017 and our Chief Executive Officer since 2010.
The nominating and corporate governance committee is responsible for, among other things: ● recommending nominees to the board for election or re-election to the board, or for appointment to fill any vacancy on the board; ● reviewing annually with the board the current composition of the board with regards to characteristics such as independence, knowledge, skills, experience, expertise, diversity and availability of service to us; ● developing and recommending to our board such policies and procedures with respect to nomination or appointment of members of our board and chairs and members of its committees or other corporate governance matters as may be required pursuant to any SEC or NYSE rules, or otherwise considered desirable and appropriate; ● selecting and recommending to the board the names of directors to serve as members of the audit committee and the compensation committee, as well as of the nominating and corporate governance committee itself; ● at least annually, reviewing and reassessing the adequacy of the committee charter; ● developing and reviewing at least annually the corporate governance principles adopted by the board and advising the board with respect to significant developments in the law and practice of corporate governance and our compliance with such laws and practices; and ● evaluating the performance and effectiveness of the board as a whole. 135 Duties and Functions of Directors Under Cayman Islands law, our directors owe fiduciary duties to our company, including a duty of loyalty, a duty to act honestly and a duty to act in what they consider in good faith to be in our best interests.
The nominating and corporate governance committee is responsible for, among other things: ● recommending nominees to the board for election or re-election to the board, or for appointment to fill any vacancy on the board; ● reviewing annually with the board the current composition of the board with regards to characteristics such as independence, knowledge, skills, experience, expertise, diversity and availability of service to us; ● developing and recommending to our board such policies and procedures with respect to nomination or appointment of members of our board and chairs and members of its committees or other corporate governance matters as may be required pursuant to any SEC or NYSE rules, or otherwise considered desirable and appropriate; ● selecting and recommending to the board the names of directors to serve as members of the audit committee and the compensation committee, as well as of the nominating and corporate governance committee itself; ● at least annually, reviewing and reassessing the adequacy of the committee charter; ● developing and reviewing at least annually the corporate governance principles adopted by the board and advising the board with respect to significant developments in the law and practice of corporate governance and our compliance with such laws and practices; and ● evaluating the performance and effectiveness of the board as a whole.
Our directors must also exercise their powers only for a proper purpose. Our directors also owe to our company a duty to exercise the skill they actually possess and such care and diligence that a reasonable prudent person would exercise in comparable circumstances.
Our directors also owe to our company a duty to exercise the skill they actually possess and such care and diligence that a reasonable prudent person would exercise in comparable circumstances.
For the fiscal year ended December 31, 2023, we paid for our executive officers (including our executive directors) an aggregate of RMB430,686 (US$60,661) of social insurance plans and housing provident funds required by PRC law. We did not pay such insurance or housing fund for our non-executive directors.
For the fiscal year ended December 31, 2024, we paid for our executive officers (including our executive directors) an aggregate of RMB412,737 (US$56,545) of social insurance plans and housing provident funds required by PRC law. We did not pay such insurance or housing fund for our non-executive directors.
Ge Yang has served as our Independent Director since November 2022. Mr. Yang has over 30 years of experiences in corporate finance, non-bank financial institution, and wealth and asset management, having worked with public companies both in China and in the U.S. He currently serves as financial controller in Noah Gopher Capital Advisors LLC in charge of asser management.
Ge Yang has served as our Independent Director since November 2022. Mr. Yang has over 30 years of experiences in corporate finance, non-bank financial institution, and wealth and asset management, having worked with public companies both in China and in the U.S. Mr.
Compensation Compensation For the fiscal year ended December 31, 2023, we paid an aggregate of RMB5.7 million (US$0.8 million) in cash to our executive officers (including our executive directors), and we did not pay any cash compensation to our non-executive directors.
Compensation Compensation For the fiscal year ended December 31, 2024, we paid an aggregate of RMB4.8 million (US$0.7 million) in cash to our executive officers (including our executive directors), and we paid US$0.12 million to our non-executive directors.
Ge Yang is 44/F Tower G, No. 16 Zhujiang Dong Road, Tianhe District, Guangzhou City, Guangdong, People’s Republic of China. The business address for Mr. Fengyong Gao is Room 703A, No.1518 Minsheng Road, Pudong New District, Shanghai. The business address for Mr. Lin Xu is No.1405, Building 4, No.3 Courtyard, Sanlihe Yiqu, Xicheng District, Beijing. The business address for Mr.
Ge Yang is 22/F, South Finance Center, No. 6 Wuheng Road Tianhe District, Guangzhou City, Guangdong Province, People’s Republic of China. The business address for Mr. Fengyong Gao is Room 703A, No.1518 Minsheng Road, Pudong New District, Shanghai. The business address for Mr. Lin Xu is No.1405, Building 4, No.3 Courtyard, Sanlihe Yiqu, Xicheng District, Beijing.
Fengyong Gao, Mr. Lin Xu, Mr. Xi Wang and Mr. Ge Yang is 44/F Tower G, No. 16 Zhujiang Dong Road, Tianhe District, Guangzhou City, Guangdong, People’s Republic of China. The business address for Mr. Fengyong Gao is Room 703A, No.1518 Minsheng Road, Pudong New District, Shanghai. The business address for Mr.
Fengyong Gao, Mr. Lin Xu, Mr. Xi Wang and Mr. Ge Yang is 22/F, South Finance Center, No. 6 Wuheng Road Tianhe District, Guangzhou City, Guangdong Province, People’s Republic of China. The business address for Mr. Fengyong Gao is Room 703A, No.1518 Minsheng Road, Pudong New District, Shanghai. The business address for Mr.
The Board authorized the Company to extend the expiration date of the expired portion from December 31, 2023 to December 31, 2024. On December 31, 2019, we granted 119,674,780 options to certain management members and employees to purchase up to 119,674,780 of our ordinary shares under the 2018 Plan.
The Group extended the expiration date of 100% of the 2018 Option to from December 31. 024 to December 31, 2027. On December 31, 2019, we granted 119,674,780 options to certain management members and employees to purchase up to 119,674,780 of our ordinary shares under the 2018 Plan.
Pursuant to the terms of 2018 Plan, 50%, 30% and 20% of the award options shall vest on December 31 of each of the years of 2021, 2022 and 2023, respectively. 131 The purpose of the 2018 Plan is to promote the success and enhance the value of the Company by linking the personal interests of the members of the board of directors, employees and consultants to those of the Company shareholders and by providing such individuals with an incentive for outstanding performance to generate superior returns to the Company shareholders.
The purpose of the 2018 Plan is to promote the success and enhance the value of the Company by linking the personal interests of the members of the board of directors, employees and consultants to those of the Company shareholders and by providing such individuals with an incentive for outstanding performance to generate superior returns to the Company shareholders.
A director will be removed from office automatically if, among other things, the director (i) becomes bankrupt or makes any arrangement or composition with his creditors; (ii) dies or is found by our company to be of unsound mind; (iii) resigns by notice in writing to our company; (iv) without special leave of absence from our Board of Directors, is absent from three consecutive meetings of the board and the board resolves that his office be vacated; (v) is prohibited by law from being a director; or (vi) is removed from office pursuant to any other provisions of our post-offering amended and restated memorandum and articles of association.
A director will be removed from office automatically if, among other things, the director (i) becomes bankrupt or makes any arrangement or composition with his creditors; (ii) dies or is found by our company to be of unsound mind; (iii) resigns by notice in writing to our company; (iv) without special leave of absence from our Board of Directors, is absent from three consecutive meetings of the board and the board resolves that his office be vacated; (v) is prohibited by law from being a director; or (vi) is removed from office pursuant to any other provisions of our second amended and restated memorandum and articles of association. 136 Interested Transactions A director may, subject to approval of the chairman of the relevant board meeting and under applicable law or applicable NYSE rules, vote in respect of any contract or transaction in which he or she is interested, provided that the nature of the interest of any directors in such contract or transaction is disclosed by him or her at or prior to its consideration and any vote in that matter. 6.D.
As of December 31, 2023 Functions Number % of Total Employees Risk Management 510 50 % Sales and Marketing 191 21 % General and Administration 89 10 % Finance 48 12 % Others 59 7 % Total 897 100 % 136 As required by laws and regulations in China, we participate in various employee social security plans that are organized by municipal and provincial governments, including, among other things, housing, pension, medical insurance and unemployment insurance.
As of December 31, 2024 Functions Number % of Total Employees Risk Management 403 58.3 % Sales and Marketing 138 20.0 % General and Administration 66 9.6 % Finance 38 5.5 % Others 46 6.7 % Total 691 100 % As required by laws and regulations in China, we participate in various employee social security plans that are organized by municipal and provincial governments, including, among other things, housing, pension, medical insurance and unemployment insurance.
Prior to that, he held the positions of vice president and chief financial officer in Minmetals Inc. from 2003 to 2019. Mr. Yang received his bachelor’s degree in international finance from Nankai University, his MBA degree from Tsinghua University, and a second master’s degree in Accounting from Seton Hall University. Zehui Zhang has served as our Vice President since 2010.
Yang received his bachelor’s degree in international finance from Nankai University, his MBA degree from Tsinghua University, and a second master’s degree in accounting from Seton Hall University. 130 Zehui Zhang has served as our Vice President since 2010.
An employee or consultant who has been granted an award may, if he or she is otherwise eligible, be granted additional awards. Designation of Award . Each award under the 2018 Plan is designated in an award agreement, which is a written agreement evidencing the grant of an award executed by the company and the grantee, including any amendments thereto.
Each award under the 2018 Plan is designated in an award agreement, which is a written agreement evidencing the grant of an award executed by the company and the grantee, including any amendments thereto. 132 Conditions of Award .
Removed
Interested Transactions A director may, subject to approval of the chairman of the relevant board meeting and under applicable law or applicable NYSE rules, vote in respect of any contract or transaction in which he or she is interested, provided that the nature of the interest of any directors in such contract or transaction is disclosed by him or her at or prior to its consideration and any vote in that matter. 6.D.
Added
The Board authorized the Company to extend the expiration date of the expired portion from December 31, 2023 to December 31, 2024. On December 31, 2024, 100% of the 2018 Option (including the 80% which was postponed on December 31, 2023 to December 31, 2024) has expired.
Added
Pursuant to the terms of 2018 Plan, 50%, 30% and 20% of the award options shall vest on December 31 of each of the years of 2021, 2022 and 2023, respectively.
Added
An employee or consultant who has been granted an award may, if he or she is otherwise eligible, be granted additional awards. Designation of Award .
Added
The following table summarizes, as of the date of this annual report, the outstanding equity awards granted to our directors and executive officers under the 2018 Plan, which replaced the 2017 Plan.
Added
Duties and Functions of Directors Under Cayman Islands law, our directors owe fiduciary duties to our company, including a duty of loyalty, a duty to act honestly and a duty to act in what they consider in good faith to be in our best interests. Our directors must also exercise their powers only for a proper purpose.

Item 7. Management's Discussion & Analysis

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

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ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS 7.A. Major Shareholders Please refer to “Item 6. Directors, Senior Management and Employees—E. Share Ownership.” 7.B. Related Party Transactions Employment Agreements See “Item 6. Directors, Senior Management and Employees—6.B.
Item 7. Major Shareholders and Related Party Transactions 7.A. Major Shareholders Please refer to “Item 6. Directors, Senior Management and Employees—E. Share Ownership.” 7.B. Related Party Transactions Employment Agreements See “Item 6. Directors, Senior Management and Employees—6.B. Compensation—Employment Agreements and Indemnification Agreements” for a description of the employment agreements we have entered into with our senior executive officers.
Compensation—Employment Agreements and Indemnification Agreements” for a description of the employment agreements we have entered into with our senior executive officers. 138 Share Incentives See “Item 6. Directors, Senior Management and Employees—6.B. Compensation—Share Incentive Plan” for a description of share options we have granted to our directors, officers and other individuals as a group.
Share Incentives See “Item 6. Directors, Senior Management and Employees—6.B. Compensation—Share Incentive Plan” for a description of share options we have granted to our directors, officers and other individuals as a group. Other Related Party Transactions The Group did not have any other related party transactions in the year ended December 31, 2024. 7.C.
Removed
Other Related Party Transactions The Group did not have any other related party transactions in the year ended December 31, 2023. 7.C. Interests of Experts and Counsel Not applicable.

Other CNF 10-K year-over-year comparisons