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What changed in ZTO Express (Cayman) Inc.'s 20-F — 2022 vs 2023

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Paragraph-level year-over-year comparison of ZTO Express (Cayman) Inc.'s 2022 and 2023 20-F annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+837 added−887 removedSource: 20-F (2024-04-19) vs 20-F (2023-04-20)

Top changes in ZTO Express (Cayman) Inc.'s 2023 20-F

837 paragraphs added · 887 removed · 702 edited across 5 sections

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

310 edited+65 added−87 removed393 unchanged
Biggest changeSubsidiaries subsidiaries Elimination Total ​ ​ RMB ​ ​ (in thousands) Assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Current assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ 70,937 ​ 8,869,361 ​ 2,752,475 ​ — 11,692,773 Restricted cash ​ — ​ 895,483 ​ — ​ — 895,483 Accounts receivable, net ​ — ​ 197,573 ​ 621,395 ​ — 818,968 Financing receivables, net ​ — 104,295 847,054 — 951,349 Short-term investment ​ 2,487,775 2,995,363 270,345 — 5,753,483 Inventories ​ — 12,386 28,151 — 40,537 Advances to suppliers ​ — 810,023 51,550 — 861,573 Prepayments and other current assets ​ — 1,948,516 1,197,862 — 3,146,378 Amounts due from related parties outside the consolidated group ​ — 288,745 25,738 — 314,483 Amounts due from related parties within the consolidated group ​ 5,810,721 — 6,554,502 (12,365,223) — Total current assets ​ 8,369,433 16,121,745 12,349,072 (12,365,223) 24,475,027 Investments in consolidated subsidiaries, VIE and other equity investees ​ 52,512,859 15,626,982 343,692 (64,532,989) 3,950,544 Property and equipment, net ​ — 22,897,182 5,916,022 — 28,813,204 Land use rights, net ​ — 4,225,420 1,217,531 — 5,442,951 Intangible assets, net ​ — 29,437 — — 29,437 Operating lease right-of-use assets ​ — 101,696 706,810 — 808,506 Goodwill ​ — 84,430 4,157,111 — 4,241,541 Deferred tax assets ​ — 313,539 436,558 — 750,097 Long-term investment ​ — 6,622,660 699,885 — 7,322,545 Long-term financing receivables, net ​ — 166,948 1,128,807 — 1,295,755 Other non-current assets ​ — 434,390 382,449 — 816,839 Amounts due from related parties outside the consolidated groups-non-current ​ — 577,140 — — 577,140 TOTAL ASSETS ​ 60,882,292 ​ 67,201,569 ​ 27,337,937 ​ (76,898,212) ​ 78,523,586 Liabilities ​ ​ ​ ​ ​ ​ Current liabilities ​ ​ ​ ​ ​ ​ Short-term bank borrowings ​ — — 5,394,423 — 5,394,423 Accounts payable ​ — 594,928 1,607,764 — 2,202,692 Notes payable ​ — 200,000 — — 200,000 Advances from customers ​ — 18,781 1,355,910 — 1,374,691 Income tax payable ​ — 62,449 165,973 — 228,422 Amounts due to related parties outside the consolidated group ​ — 9,368 39,770 — 49,138 Amounts due to related parties within the consolidated group ​ — 12,365,223 — (12,365,223) — Operating lease liabilities, current ​ — 12,919 216,799 — 229,718 Dividends payable ​ 1,497 — — — 1,497 Other current liabilities ​ 63,273 1,752,693 4,908,777 — 6,724,743 Total current liabilities ​ 64,770 15,016,361 13,689,416 (12,365,223) 16,405,324 Non-current operating lease liabilities ​ — 87,720 422,629 — 510,349 Deferred tax liabilities ​ — 254,128 92,344 — 346,472 Convertible senior bond ​ 6,788,971 — — — 6,788,971 TOTAL LIABILITIES ​ 6,853,741 ​ 15,358,209 ​ 14,204,389 ​ (12,365,223) ​ 24,051,116 Equity ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Ordinary shares ​ 535 ​ 17,155,492 ​ 600,000 ​ (17,755,492) ​ 535 Additional paid-in capital ​ 26,717,727 ​ 600,000 ​ 3,918,356 ​ (4,518,356) ​ 26,717,727 Treasury shares, at cost ​ (2,062,530) ​ — ​ — ​ — ​ (2,062,530) Retained earnings ​ 29,459,491 ​ 32,950,608 ​ 8,617,859 ​ (41,568,467) ​ 29,459,491 Accumulated other comprehensive loss ​ (86,672) ​ 690,674 ​ — ​ (690,674) ​ (86,672) Non-controlling interests ​ — ​ 446,586 ​ (2,667) ​ — ​ 443,919 Total Equity ​ 54,028,551 ​ 51,843,360 ​ 13,133,548 ​ (64,532,989) ​ 54,472,470 TOTAL LIABILITIES AND EQUITY ​ 60,882,292 ​ 67,201,569 ​ 27,337,937 ​ (76,898,212) ​ 78,523,586 ​ 14 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, 2021 ​ ​ ZTO Express ​ ​ ​ VIE and VIE’s ​ ​ ​ Consolidated ​ (Cayman) Inc.
Biggest changeSubsidiaries subsidiaries Elimination Total ​ ​ RMB ​ ​ (in thousands) Assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Current assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ 70,937 ​ 8,869,361 ​ 2,752,475 ​ — ​ 11,692,773 Restricted cash ​ — ​ 895,483 ​ — ​ — ​ 895,483 Accounts receivable, net ​ — ​ 197,573 ​ 621,395 ​ — ​ 818,968 Financing receivables, net ​ — ​ 104,295 ​ 847,054 ​ — ​ 951,349 Short-term investment ​ 2,487,775 ​ 2,995,363 ​ 270,345 ​ — ​ 5,753,483 Inventories ​ — ​ 12,386 ​ 28,151 ​ — ​ 40,537 Advances to suppliers ​ — ​ 810,023 ​ 51,550 ​ — ​ 861,573 Prepayments and other current assets ​ — ​ 1,948,516 ​ 1,197,862 ​ — ​ 3,146,378 Amounts due from related parties outside the consolidated group ​ — ​ 288,745 ​ 25,738 ​ — ​ 314,483 Investments in equity investees including subsidiaries and VIE, and amounts due from subsidiaries and VIE ​ 57,207,495 ​ 13,136,215 ​ 6,554,502 ​ (76,898,212) ​ — Investment in equity investees ​ 1,116,085 ​ 2,490,767 ​ 343,692 ​ — ​ 3,950,544 Property and equipment, net ​ — ​ 22,897,182 ​ 5,916,022 ​ — ​ 28,813,204 Land use rights, net ​ — ​ 4,225,420 ​ 1,217,531 ​ — ​ 5,442,951 Intangible assets, net ​ — ​ 29,437 ​ — ​ — ​ 29,437 Operating lease right-of-use assets ​ — ​ 101,696 ​ 706,810 ​ — ​ 808,506 Goodwill ​ — ​ 84,430 ​ 4,157,111 ​ — ​ 4,241,541 Deferred tax assets ​ — ​ 313,539 ​ 436,558 ​ — ​ 750,097 Long-term investment ​ — ​ 6,622,660 ​ 699,885 ​ — ​ 7,322,545 Long-term financing receivables, net ​ — ​ 166,948 ​ 1,128,807 ​ — ​ 1,295,755 Other non-current assets ​ — ​ 434,390 ​ 382,449 ​ — ​ 816,839 Amounts due from related parties outside the consolidated groups-non-current ​ — ​ 577,140 ​ — ​ — ​ 577,140 TOTAL ASSETS ​ 60,882,292 ​ 67,201,569 ​ 27,337,937 ​ (76,898,212) ​ 78,523,586 Liabilities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Current liabilities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Short-term bank borrowings ​ — ​ — ​ 5,394,423 ​ — ​ 5,394,423 Accounts payable ​ — ​ 594,928 ​ 1,607,764 ​ — ​ 2,202,692 Notes payable ​ — ​ 200,000 ​ — ​ — ​ 200,000 Advances from customers ​ — ​ 18,781 ​ 1,355,910 ​ — ​ 1,374,691 Income tax payable ​ — ​ 62,449 ​ 165,973 ​ — ​ 228,422 Amounts due to related parties outside the consolidated group ​ — ​ 9,368 ​ 39,770 ​ — ​ 49,138 Amounts due to related parties within the consolidated group ​ — ​ 12,365,223 ​ — ​ (12,365,223) ​ — Operating lease liabilities, current ​ — ​ 12,919 ​ 216,799 ​ — ​ 229,718 Dividends payable ​ 1,497 ​ — ​ — ​ — ​ 1,497 Other current liabilities ​ 63,273 ​ 1,752,693 ​ 4,908,777 ​ — ​ 6,724,743 Non-current operating lease liabilities ​ — ​ 87,720 ​ 422,629 ​ — ​ 510,349 Deferred tax liabilities ​ — ​ 254,128 ​ 92,344 ​ — ​ 346,472 Convertible senior bond ​ 6,788,971 ​ — ​ — ​ — ​ 6,788,971 TOTAL LIABILITIES ​ 6,853,741 ​ 15,358,209 ​ 14,204,389 ​ (12,365,223) ​ 24,051,116 Equity ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Ordinary shares ​ 535 ​ 17,155,492 ​ 600,000 ​ (17,755,492) ​ 535 Additional paid-in capital ​ 26,717,727 ​ 600,000 ​ 3,918,356 ​ (4,518,356) ​ 26,717,727 Treasury shares, at cost ​ (2,062,530) ​ — ​ — ​ — ​ (2,062,530) Retained earnings ​ 29,459,491 ​ 32,950,608 ​ 8,617,859 ​ (41,568,467) ​ 29,459,491 Accumulated other comprehensive loss ​ (86,672) ​ 690,674 ​ — ​ (690,674) ​ (86,672) Non-controlling interests ​ — ​ 446,586 ​ (2,667) ​ — ​ 443,919 Total Equity ​ 54,028,551 ​ 51,843,360 ​ 13,133,548 ​ (64,532,989) ​ 54,472,470 TOTAL LIABILITIES AND EQUITY ​ 60,882,292 ​ 67,201,569 ​ 27,337,937 ​ (76,898,212) ​ 78,523,586 ​ 14 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, 2021 ​ ZTO Express ​ VIE and VIE’s ​ Consolidated ​ ​ (Cayman) Inc. ​ Subsidiaries ​ subsidiaries ​ Elimination ​ Total ​ ​ RMB ​ ​ (in thousands) Assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Current assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ 621,034 ​ 8,169,249 ​ 930,942 ​ — ​ 9,721,225 Restricted cash ​ — ​ 27,736 ​ — ​ — ​ 27,736 Accounts receivable, net ​ — ​ 262,167 ​ 671,277 ​ — ​ 933,444 Financing receivables, net ​ — ​ 133,541 ​ 977,920 ​ — ​ 1,111,461 Short-term investment ​ 196,462 ​ 2,328,857 ​ 320,000 ​ — ​ 2,845,319 Inventories ​ — ​ 52,747 ​ 30,214 ​ — ​ 82,961 Advances to suppliers ​ — ​ 612,842 ​ 55,013 ​ — ​ 667,855 Prepayments and other current assets ​ — ​ 1,218,172 ​ 1,924,196 ​ — ​ 3,142,368 Amounts due from related parties outside the consolidated group ​ — ​ 96,288 ​ 37,702 ​ — ​ 133,990 Investments in equity investees including subsidiaries and VIE, and amounts due from subsidiaries and VIE ​ 47,472,836 ​ 10,685,659 ​ 402,488 ​ (58,560,983) ​ — Investment in equity investees ​ 1,027,241 ​ 2,402,827 ​ 300,380 ​ — ​ 3,730,448 Property and equipment, net ​ — ​ 19,063,363 ​ 5,866,534 ​ — ​ 24,929,897 Land use rights, net ​ — ​ 4,141,241 ​ 1,194,308 ​ — ​ 5,335,549 Intangible assets, net ​ — ​ 35,634 ​ — ​ — ​ 35,634 Operating lease right-of-use assets ​ — ​ 26,407 ​ 870,831 ​ — ​ 897,238 Goodwill ​ — ​ 84,430 ​ 4,157,111 ​ — ​ 4,241,541 Deferred tax assets ​ — ​ 284,139 ​ 650,709 ​ — ​ 934,848 Long-term investment ​ — ​ 1,214,500 ​ — ​ — ​ 1,214,500 Long-term financing receivables, net ​ — ​ 295,953 ​ 1,117,003 ​ — ​ 1,412,956 Other non-current assets ​ — ​ 377,643 ​ 384,630 ​ — ​ 762,273 Amounts due from related parties outside the consolidated groups-non-current ​ — ​ 611,100 ​ — ​ — ​ 611,100 TOTAL ASSETS ​ 49,317,573 ​ 52,124,495 ​ 19,891,258 ​ (58,560,983) ​ 62,772,343 Liabilities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Current liabilities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Short-term bank borrowings ​ 637,260 ​ — ​ 2,821,457 ​ — ​ 3,458,717 Accounts payable ​ — ​ 400,880 ​ 1,556,649 ​ — ​ 1,957,529 Notes payable ​ — ​ 45,000 ​ 129,920 ​ — ​ 174,920 Advances from customers ​ — ​ 12,752 ​ 1,213,797 ​ — ​ 1,226,549 Income tax payable ​ — ​ 86,789 ​ — ​ — ​ 86,789 Amounts due to related parties outside the consolidated group ​ — ​ 8,352 ​ 14,434 ​ — ​ 22,786 Amounts due to related parties within the consolidated group ​ — ​ 3,095,386 ​ — ​ (3,095,386) ​ — Operating lease liabilities, current ​ — ​ 12,022 ​ 238,973 ​ — ​ 250,995 Acquisition consideration payables ​ — ​ 22,942 ​ — ​ — ​ 22,942 Dividends payable ​ 708 ​ — ​ — ​ — ​ 708 Other current liabilities ​ 42,358 ​ 3,196,742 ​ 2,555,280 ​ — ​ 5,794,380 Non-current operating lease liabilities ​ — ​ 22,351 ​ 533,740 ​ — ​ 556,091 Deferred tax liabilities ​ — ​ 179,813 ​ 112,543 ​ — ​ 292,356 TOTAL LIABILITIES ​ 680,326 ​ 7,083,029 ​ 9,176,793 ​ (3,095,386) ​ 13,844,762 Equity ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Ordinary shares ​ 535 ​ 15,084,658 ​ 600,000 ​ (15,684,658) ​ 535 Additional paid-in capital ​ 28,229,026 ​ 600,000 ​ 3,923,412 ​ (4,523,412) ​ 28,229,026 Treasury shares, at cost ​ (2,067,009) ​ — ​ — ​ — ​ (2,067,009) Retained earnings ​ 22,716,799 ​ 28,414,359 ​ 6,162,247 ​ (34,576,606) ​ 22,716,799 Accumulated other comprehensive loss ​ (242,104) ​ 680,921 ​ — ​ (680,921) ​ (242,104) Non-controlling interests ​ — ​ 261,528 ​ 28,806 ​ — ​ 290,334 Total Equity ​ 48,637,247 ​ 45,041,466 ​ 10,714,465 ​ (55,465,597) ​ 48,927,581 TOTAL LIABILITIES AND EQUITY ​ 49,317,573 ​ 52,124,495 ​ 19,891,258 ​ (58,560,983) ​ 62,772,343 ​ ​ 15 Table of Contents The following table presents the condensed consolidating operations data for ZTO Express (Cayman) Inc., the VIE and VIE’s subsidiaries, and other entities for the periods presented.
As a result, we may incur legal liability, and our market reputation, brand image as well as our business, financial condition and results of operations could be materially and adversely affected. We face risks associated with parcels handled and transported through our network and risks associated with transportation.
As a result, we may incur legal liability, and our market reputation and brand image as well as our business, financial condition and results of operations could be materially and adversely affected. We face risks associated with parcels handled and transported through our network and risks associated with transportation.
Pursuant to the Administrative Provisions concerning the Running of Cargo Vehicles with Out-of-Gauge Goods, which were promulgated by the PRC Ministry of Transport on August 19, 2016, took effect on September 21, 2016 and amended on August 11, 2021, cargo vehicles running on public roads shall not carry cargo weighing more than the limits prescribed by this regulation and their dimensions shall not exceed those as set forth by the same regulation.
Pursuant to the Administrative Provisions concerning the Running of Cargo Vehicles with Out-of-Gauge Goods, which were promulgated by the PRC Ministry of Transport on August 19, 2016, took effect on September 21, 2016 and were amended on August 11, 2021, cargo vehicles running on public roads shall not carry cargo weighing more than the limits prescribed by this regulation and their dimensions shall not exceed those as set forth by the same regulation.
If the PRC government requires additional approvals or licenses, imposes additional restrictions on our or our network partners’ operations, or tightens enforcements of existing or new laws or regulations, it has the authority, among other things, to levy fines, confiscate income, revoke business licenses, and require us or our network partners to discontinue relevant business operations.
If the PRC government requires additional approvals or licenses, imposes additional restrictions on our or our network partners’ operations, or tightens enforcements of existing or new laws or regulations, it has the authority, among other things, to levy fines, confiscate income, revoke business licenses, and require us or our network partners to discontinue the relevant business operations.
If investors make investment decisions based on operating metrics we disclose that are inaccurate, we may also face potential lawsuits or disputes. Our business is also subject to complex and evolving laws and regulations regarding cybersecurity, privacy, data protection and information security in China.
If investors make investment decisions based on operating metrics we disclose that are inaccurate, we may also face potential lawsuits or disputes. Our business is subject to complex and evolving laws and regulations regarding cybersecurity, privacy, data protection and information security in China.
According to the Circular of Overseas Listing and Offering, issuers that have already been listed in an overseas market by March 31, 2023, such as our company, are not required to make any immediate filing.
According to the Circular of Overseas Listing and Offering, issuers that have already been listed in an overseas market by March 31, 2023, such as our company, are not required to make any immediate filing.
However, under the Overseas Listing Trial Measures, such issuers will be required to complete certain filing procedures with the CSRC in connection with future securities offerings and listings outside of mainland China, including follow-on offerings, issuance of convertible bonds, offshore relisting after going-private transactions, and other equivalent offering activities.
However, under the Overseas Listing Trial Measures, such issuers will be required to complete certain filing procedures with the CSRC in connection with future securities offerings and listings outside of mainland China, including follow-on offerings, issuance of convertible bonds, offshore relisting after going-private transactions, and other equivalent offering activities.
In addition, such issuers are required to file a report to the CSRC after the occurrence and public disclosure of certain material corporate events, including but not limited to conversion of listing status in overseas markets (such as switching from secondary listing to dual primary listing).
In addition, such issuers are required to file a report to the CSRC after the occurrence and public disclosure of certain material corporate events, including but not limited to conversion of listing status in overseas markets (such as switching from secondary listing to dual primary listing).
The CSRC or other PRC regulatory authorities also may take actions requiring us, or making it advisable for us, to halt our offshore offerings before settlement and delivery of the shares offered.
The CSRC or other PRC regulatory authorities may also take actions requiring us, or making it advisable for us, to halt our offshore offerings before settlement and delivery of the shares offered.
Furthermore, according to Article 177 of the PRC Securities Law, or Article 177, which became effective on March 1, 2020, no overseas securities regulator may directly conduct investigations or collect evidence and no entities or individuals may provide documents or materials in connection with securities activities without proper authorization as stipulated under Article 177.
Furthermore, according to Article 177 of the PRC Securities Law, which became effective on March 1, 2020, no overseas securities regulator may directly conduct investigations or collect evidence and no entities or individuals may provide documents or materials in connection with securities activities without proper authorization as stipulated under Article 177.
Short selling is the practice of selling securities that the seller does not own but rather has borrowed from a third party with the intention of buying identical securities back at a later date to return to the lender.
Short selling is the practice of selling securities that a seller does not own but rather has borrowed from a third party with the intention of buying identical securities back at a later date to return to the lender.
Negative publicity about us, including our services, management, business model and practices, compliance with applicable rules, regulations and policies, or our network partners may materially and adversely harm our brand and reputation and have a material adverse effect on our business.
Negative publicity may harm our brand and reputation and have a material adverse effect on our business. Negative publicity about us, including our services, management, business model and practices, compliance with applicable rules, regulations and policies, or our network partners may materially and adversely harm our brand and reputation and have a material adverse effect on our business.
Fluctuations in the market price of our Class A ordinary shares and/or ADSs may cause us to become a PFIC for the current or future taxable years because the value of our assets for purposes of the asset test, including the value of our goodwill and other unbooked intangibles, may be determined by reference to the market price of our Class A ordinary shares and/or ADSs from time to time (which may be volatile).
Fluctuations in the market price of our Class A ordinary shares and/or ADSs may cause us to be or become a PFIC for the current or future taxable years because the value of our assets for purposes of the asset test, including the value of our goodwill and other unbooked intangibles, may be determined by reference to the market price of our Class A ordinary shares and/or ADSs from time to time (which may be volatile).
In the meantime, our directors, executive officers and other employees who are PRC citizens or who are non-PRC residents residing in the PRC for a continuous period of not less than one year, subject to limited exceptions, and who have been granted incentive share awards by us, may follow the Notices on Issues Concerning the Foreign Exchange Administration for Domestic Individuals Participating in Stock Incentive Plan of Overseas Publicly-Listed Company, promulgated by SAFE on February 15, 2012, or the 2012 SAFE Notices.
In the meantime, our directors, executive officers and other employees who are PRC citizens or who are non-PRC residents residing in the PRC for a continuous period of not less than one year, subject to limited exceptions, and who have been granted incentive share awards by us, may follow the Notices on Issues Concerning the Foreign Exchange Administration for Domestic Individuals Participating in Stock Incentive Plan of Overseas Publicly-Listed Company, promulgated by the State Administration of Foreign Exchange on February 15, 2012, or the 2012 SAFE Notices.
We may be required to go through these approval, filing and reporting procedures with the CSRC and other regulatory authorities for our offshore offerings and future capital raising activities, including the cybersecurity review under the 2021 Measures and declaration of security assessment on data cross-border transfer under the Measures on Security Assessment of Cross-Border Data Transfer, it is uncertain whether we can or how long it will take us to obtain such approval or complete such procedures and any such approval could be rescinded.
We may be required to go through these approval, filing and reporting procedures with the CSRC and other regulatory authorities for our offshore offerings and future capital raising activities, including the cybersecurity review under the Cybersecurity Review Measures and declaration of security assessment on data cross-border transfer under the Measures on Security Assessment of Cross-Border Data Transfer, it is uncertain whether we can or how long it will take us to obtain such approval or complete such procedures and any such approval could be rescinded.
Pursuant to the “Reply to the Reporter’s Question by the CSRC Responsible Officers” which was published on February 17, 2023, for the overseas listing of VIE-structured enterprises, the filing management will adhere to the principles of marketization and legalization, and strengthen regulatory coordination, and the CSRC will seek the opinions of relevant competent authorities, put the overseas listing of VIE-structured enterprises which meet the compliance requirements on file, and support the development and growth of enterprises using two markets and two resources.
Pursuant to the “Reply to the Reporter’s Question by the CSRC Responsible Officers” which was published on February 17, 2023, for the overseas listing of VIE-structured enterprises, the filing management will adhere to the principles of marketization and legalization, and strengthen regulatory coordination, and the CSRC will seek the opinions of the competent authorities, put the overseas listing of VIE-structured enterprises which meet the compliance requirements on file, and support the development and growth of enterprises using two markets and two resources.
If the PRC government considers that we or our network partners were operating without the proper approvals, licenses or permits or promulgates new laws and regulations that require additional approvals or licenses or imposes additional restrictions on the operation of any part of our business, it has the authority, among other things, to levy fines, confiscate our income, revoke our business licenses, and require us to discontinue our relevant business or impose restrictions on the affected portion of our business.
If the PRC government considers that we or our network partners were operating without the proper approvals, licenses or permits or promulgates new laws and regulations that require additional approvals or licenses or imposes additional restrictions on the operation of any part of our business, it has the authority, among other things, to levy fines, confiscate our income, revoke our business licenses, and require us to discontinue our that business or impose restrictions on the affected portion of our business.
Subsidiaries subsidiaries Elimination Total ​ ​ RMB ​ ​ (in thousands) Revenue ​ — 17,157,364 31,981,790 (13,762,158) 35,376,996 Cost of revenues ​ — (12,735,655) (28,097,911) 14,495,845 (26,337,721) Gross profit ​ — ​ 4,421,709 ​ 3,883,879 ​ 733,687 ​ 9,039,275 Operating (expenses)/income ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Selling, general and administrative ​ (197,209) ​ (1,285,856) ​ (685,546) ​ 91,239 ​ (2,077,372) Other operating income, net ​ 59,881 ​ 1,411,343 ​ 128,280 ​ (824,926) ​ 774,578 Other income/(expenses) ​ (25,490) ​ 685,980 ​ (110,519) ​ — ​ 549,971 Income before income tax and share of profit/(loss) in subsidiaries, consolidated VIE, and equity method investments ​ (162,818) ​ 5,233,176 ​ 3,216,094 ​ — ​ 8,286,452 Income tax expense ​ (19,987) ​ (855,788) ​ (757,555) ​ — ​ (1,633,330) Share of profit/(loss) in subsidiaries, consolidated VIE, and equity method investments ​ 6,991,861 ​ 10,742 ​ (4,898) ​ (6,991,861) ​ 5,844 Net income ​ 6,809,056 ​ 4,388,130 ​ 2,453,641 ​ (6,991,861) ​ 6,658,966 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, 2021 ​ ​ ZTO Express ​ ​ ​ VIE and VIE’s ​ ​ ​ Consolidated ​ (Cayman) Inc.
Subsidiaries subsidiaries Elimination Total ​ ​ RMB ​ ​ (in thousands) Revenue ​ — 17,157,364 31,981,790 (13,762,158) 35,376,996 Cost of revenues ​ — (12,735,655) (28,097,911) 14,495,845 (26,337,721) Gross profit ​ — ​ 4,421,709 ​ 3,883,879 ​ 733,687 ​ 9,039,275 Operating (expenses)/income ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Selling, general and administrative ​ (197,209) ​ (1,285,856) ​ (685,546) ​ 91,239 ​ (2,077,372) Other operating income, net ​ 59,881 ​ 1,411,343 ​ 128,280 ​ (824,926) ​ 774,578 Other income/(expenses) ​ (25,490) ​ 685,980 ​ (110,519) ​ — ​ 549,971 Income before income tax and share of profit/(loss) in subsidiaries, consolidated VIE, and equity method investments ​ (162,818) ​ 5,233,176 ​ 3,216,094 ​ — ​ 8,286,452 Income tax expense ​ (19,987) ​ (855,788) ​ (757,555) ​ — ​ (1,633,330) Share of profit/(loss) in subsidiaries, consolidated VIE, and equity method investments ​ 6,991,861 ​ 10,742 ​ (4,898) ​ (6,991,861) ​ 5,844 Net income ​ 6,809,056 ​ 4,388,130 ​ 2,453,641 ​ (6,991,861) ​ 6,658,966 ​ 16 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, 2021 ​ ​ ZTO Express ​ ​ ​ VIE and VIE’s ​ ​ ​ Consolidated ​ (Cayman) Inc.
If our network partners were to find replacement premises for their outlets due to any lease deficiencies, the daily operations of such outlets may be negatively affected. In addition, a substantial portion of our leasehold interests in leased properties have not been registered with the relevant PRC governmental authorities as required by relevant PRC laws.
If our network partners were to find replacement premises for their outlets due to any lease deficiencies, the daily operations of such outlets may be negatively affected. In addition, a substantial portion of our leasehold interests in leased properties have not been registered with the PRC governmental authorities as required by PRC laws.
Pursuant to the transaction terms, certain investors led by Alibaba and Cainiao Network invested US$1.38 billion in our company in exchange for approximately 10% of our equity interest at that time and obtained certain shareholder rights in our company. The transaction was completed in June 2018. Alibaba has also invested, and may invest in the future, in our competitors.
Pursuant to the transaction terms, certain investors led by Alibaba and Cainiao Network invested US$1.38 billion in our company in exchange for approximately 10% of our equity interest at that time and obtained certain shareholder rights in our company. The transaction was completed in June 2018. However, Alibaba has also invested, and may invest in the future, in our competitors.
If we are not able to comply with the requirements under relevant laws, administrative regulations and rules concerning national security in spheres of foreign investment, cybersecurity, data security and other aspects in a timely manner, or at all, our future capital raising activities may be materially and adversely affected.
If we are not able to comply with the requirements under the laws, administrative regulations and rules concerning national security in spheres of foreign investment, cybersecurity, data security and other aspects in a timely manner, or at all, our future capital raising activities may be materially and adversely affected.
If we fail to comply with the relevant competition laws, regulations, rules and other regulatory requirements, we may also be subject to investigations, penalties, sanctions, claims, lawsuits and other legal and regulatory proceedings, which could materially and adversely affect our business, operations, reputation, brand, the trading prices of our ADSs, Shares and/or other securities.
If we fail to comply with the competition laws, regulations, rules and other regulatory requirements, we may also be subject to investigations, penalties, sanctions, claims, lawsuits and other legal and regulatory proceedings, which could materially and adversely affect our business, operations, reputation, brand, the trading prices of our ADSs, Shares and/or other securities.
On February 17, 2023, the CSRC issued the Overseas Listing Trial Measures, which became effective on March 31, 2023, under which 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.
On February 17, 2023, the CSRC issued the Overseas Listing Trial Measures, which became effective on March 31, 2023, under which 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 the required information.
Even if we have sufficient funding, assets that best suit our needs may not be available at reasonable prices or at all. For example, land resources may be scarce in an area that best fits our network expansion plan due to local zoning plans or other regulatory controls.
Even if we have sufficient funding, the assets that best suit our needs may not be available at reasonable prices or at all. For example, land resources may be scarce in an area that best fits our network expansion plan due to local zoning plans or other regulatory controls.
On July 4, 2014, SAFE has promulgated the Circular on Relevant Issues Concerning Foreign Exchange Control on Domestic Residents’ Offshore Investment and Financing and Roundtrip Investment Through Special Purpose Vehicles, or SAFE Circular 37, to replace the Notice on Relevant Issues Concerning Foreign Exchange Administration for Domestic Residents’ Financing and Roundtrip Investment Through Offshore Special Purpose Vehicles, or SAFE Circular 75, which ceased to be effective upon the promulgation of SAFE Circular 37.
On July 4, 2014, the State Administration of Foreign Exchange has promulgated the Circular on Relevant Issues Concerning Foreign Exchange Control on Domestic Residents’ Offshore Investment and Financing and Roundtrip Investment Through Special Purpose Vehicles, or SAFE Circular 37, to replace the Notice on Relevant Issues Concerning Foreign Exchange Administration for Domestic Residents’ Financing and Roundtrip Investment Through Offshore Special Purpose Vehicles, or SAFE Circular 75, which ceased to be effective upon the promulgation of SAFE Circular 37.
We have limited control over these personnel and may be liable for violations of applicable PRC labor laws and regulations accordingly. ● We face risks associated with parcels handled and transported through our network and risks associated with transportation. ● Our past growth rates may not be indicative of our future growth, and if we are unable to manage our growth or execute our strategies effectively, our business and prospects may be materially and adversely affected. ​ 19 Table of Contents Risks Related to Our Corporate Structure ● ZTO is a Cayman Islands holding company with no equity ownership in the VIE and we conduct our operations in China primarily through (i) our PRC subsidiaries and (ii) the VIE, with which we have maintained contractual arrangements.
We have limited control over these personnel and may be liable for violations of applicable PRC labor laws and regulations accordingly. ● We face risks associated with parcels handled and transported through our network and risks associated with transportation. ● Our past growth rates may not be indicative of our future growth, and if we are unable to manage our growth or execute our strategies effectively, our business and prospects may be materially and adversely affected. ​ 18 Table of Contents Risks Related to Our Corporate Structure ● ZTO is a Cayman Islands holding company with no equity ownership in the VIE and we conduct our operations in China primarily through (i) our PRC subsidiaries and (ii) the VIE, with which we have maintained contractual arrangements.
If we fail to comply with the Anti-Monopoly Law and other relevant rules and provisions related to mergers and acquisitions in PRC, we may be subject to investigations, penalties and sanctions, including fines and termination of the mergers and acquisitions. Historically, certain subsidiaries commenced merger and acquisition transactions prior to filing a declaration.
If we fail to comply with the Anti-Monopoly Law and other rules and provisions related to mergers and acquisitions in PRC, we may be subject to investigations, penalties and sanctions, including fines and termination of the mergers and acquisitions. Historically, certain subsidiaries commenced merger and acquisition transactions prior to filing a declaration.
There can be no assurance that we will not be a passive foreign investment company, or PFIC, for U.S. federal income tax purposes for any taxable year, which could result in adverse U.S. federal income tax consequences to U.S. Holders of our ADSs, notes or Class A ordinary shares.
There can be no assurance that we will not be a passive foreign investment company, or PFIC, for U.S. federal income tax purposes for any taxable year, which could result in adverse U.S. federal income tax consequences to U.S. Holders of our ADSs or Class A ordinary shares.
As it is in short sellers’ interest for the price of the security to decline, many short sellers publish, or arrange for the publication of, negative opinions and allegations regarding the relevant issuer and its business prospects in order to create negative market momentum and generate profits for themselves after selling a security short.
As it is in short sellers’ interest for the price of the security to decline, many short sellers publish, or arrange for the publication of, negative opinions and allegations regarding the issuer and its business prospects in order to create negative market momentum and generate profits for themselves after selling a security short.
Where a non-resident enterprise transfers taxable assets indirectly by disposing of the equity interests of an overseas holding company, which is an indirect transfer, the non-resident enterprise as either the transferor or the transferee, or the PRC entity that directly owns the taxable assets, may report such indirect transfer to the relevant tax authority.
Where a non-resident enterprise transfers taxable assets indirectly by disposing of the equity interests of an overseas holding company, which is an indirect transfer, the non-resident enterprise as either the transferor or the transferee, or the PRC entity that directly owns the taxable assets, may report such indirect transfer to the tax authority.
For instance, one of our business outlets in Chengdu, Sichuan province, was found to have transported puppies and kittens in inhumane way as part of pet blind box sales on e-commerce sites in May 2021, which caused damage to our brand image.
For instance, one of our business outlets in Chengdu, Sichuan province, was found to have transported puppies and kittens in an inhumane way as part of pet blind box sales on e-commerce sites in May 2021, which caused damage to our brand image.
These opinions emphasized the need to strengthen the administration over illegal securities activities and the supervision on overseas listings by China-based companies and proposed to take effective measures, such as promoting the construction of relevant regulatory systems to deal with the risks and incidents faced by China-based overseas-listed companies.
These opinions emphasized the need to strengthen the administration over illegal securities activities and the supervision on overseas listings by China-based companies and proposed to take effective measures, such as promoting the construction of regulatory systems to deal with the risks and incidents faced by China-based overseas-listed companies.
The Overseas Listing Trial Measures also stipulates that overseas offering and listing by domestic companies shall strictly abide by relevant laws, administrative regulations and state rules concerning national security in the areas of foreign investment, cybersecurity, data security and etc., and duly fulfill their obligations to protect national security.
The Overseas Listing Trial Measures also stipulates that overseas offering and listing by domestic companies shall strictly abide by the laws, administrative regulations and state rules concerning national security in the areas of foreign investment, cybersecurity, data security and etc., and duly fulfill their obligations to protect national security.
If the PRC regulatory authorities determine that we are in violation of the relevant laws and regulations, we may be subject to penalties, including fines, confiscation of income and suspension of operation. If we become subject to these penalties, our business, results of operations, financial condition and prospects could be adversely affected.
If the PRC regulatory authorities determine that we are in violation of the laws and regulations, we may be subject to penalties, including fines, confiscation of income and suspension of operation. If we become subject to these penalties, our business, results of operations, financial condition and prospects could be adversely affected.
Practices regarding the collection, use, storage, transmission and security of personal information have recently come under increased public scrutiny. On June 10, 2021, the Standing Committee of the National People’s Congress promulgated the PRC Data Security Law, or the Data Security Law, which took effect on September 1, 2021.
Practices regarding the collection, use, storage, transmission and security of personal information have recently come under increased public scrutiny. On June 10, 2021, the Standing Committee of the National People’s Congress promulgated the PRC Data Security Law, which took effect on September 1, 2021.
Pursuant to the Overseas Listing Trial Measures, overseas offering and listing by domestic companies shall strictly abide by relevant laws, administrative regulations and state rules concerning national security in the areas of foreign investment, cybersecurity, data security and etc., and duly fulfill their obligations to protect national security.
Pursuant to the Overseas Listing Trial Measures, overseas offering and listing by domestic companies shall strictly abide by the laws, administrative regulations and state rules concerning national security in the areas of foreign investment, cybersecurity, data security and etc., and duly fulfill their obligations to protect national security.
Risk Factors⸺Risks Related to Doing Business in China⸺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” on page 50 of this annual report. ● The PCAOB had historically been unable to inspect our auditor in relation to their audit work performed for our financial statements and the inability of the PCAOB to conduct inspections of our auditor in the past has deprived our investors with the benefits of such inspections.
Risk Factors⸺Risks Related to Doing Business in China⸺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” on page 48 of this annual report. ● The PCAOB had historically been unable to inspect our auditor in relation to their audit work performed for our financial statements and the inability of the PCAOB to conduct inspections of our auditor in the past has deprived our investors with the benefits of such inspections.
If our employees fail to pay or we fail to withhold their income taxes according to relevant laws and regulations, we may face sanctions imposed by the tax authorities or other PRC governmental authorities. See “Item 4. Information on the Company—B.
If our employees fail to pay or we fail to withhold their income taxes according to the laws and regulations, we may face sanctions imposed by the tax authorities or other PRC governmental authorities. See “Item 4. Information on the Company—B.
While detailed interpretation of or implementation rules under Article 177 have yet to be promulgated, the inability of an overseas securities regulator to directly conduct investigations or collect evidence within China may further increase difficulties faced by you in protecting your interests. 54 Table of Contents If we are classified as a PRC resident enterprise for PRC income tax purposes, such classification could result in unfavorable tax consequences to us and our non-PRC shareholders or ADS holders.
While detailed interpretation of or implementation rules under Article 177 have yet to be promulgated, the inability of an overseas securities regulator to directly conduct investigations or collect evidence within China may further increase difficulties faced by you in protecting your interests. ​ 53 Table of Contents If we are classified as a PRC resident enterprise for PRC income tax purposes, such classification could result in unfavorable tax consequences to us and our non-PRC shareholders or ADS holders.
In June 2018, we made a strategic investment of approximately US$168 million to acquire approximately 15% of equity stake in Cainiao Post, Cainiao Network’s network of last-mile delivery stations. We have recorded goodwill as a result of certain acquisitions.
In June 2018, we made a strategic investment of approximately US$168 million to acquire an approximately 15% equity stake in Cainiao Post, Cainiao Network’s network of last-mile delivery stations. We have recorded goodwill as a result of certain acquisitions.
While we would strongly defend against any such short seller attacks, we may be constrained in the manner in which we can proceed against the relevant short sellers by principles of freedom of speech, applicable state law or issues of commercial confidentiality.
While we would strongly defend against any such short seller attacks, we may be constrained in the manner in which we can proceed against the short sellers by principles of freedom of speech, applicable state law or issues of commercial confidentiality.
However, if the outsourcing firms violate any relevant PRC labor laws, regulations or their employment agreements with the personnel, such personnel may file a claim against us as they provide their services at our network facilities.
However, if the outsourcing firms violate any PRC labor laws or regulations or their employment agreements with the personnel, such personnel may file a claim against us as they provide their services at our network facilities.
The 2021 Measures further stipulate that the network platform operators holding over one million users’ personal information shall declare to the Cybersecurity Review Office for a cybersecurity review before any public offering at a foreign stock exchange.
The Cybersecurity Review Measures further stipulate that the network platform operators holding over one million users’ personal information shall declare to the Cybersecurity Review Office for a cybersecurity review before any public offering at a foreign stock exchange.
Although relevant authorities have not mandated the owner to dismantle the property, our use of the leased property may be affected in the future. In the event that our use of properties is successfully challenged, we may be subject to fines and forced to relocate.
Although the authorities have not mandated the owner to dismantle the property, our use of the leased property may be affected in the future. In the event that our use of properties is successfully challenged, we may be subject to fines and forced to relocate.
We may selectively pursue strategic alliances and potential strategic acquisitions that are complementary to our business and operations, including opportunities that can help us further expand our service offering and improve our technology systems. 36 Table of Contents Strategic alliances with third parties could subject us to a number of risks, including risks associated with sharing proprietary information, non-performance or default by counterparties, and increased expenses in establishing these new alliances, any of which may materially and adversely affect our business.
We may selectively pursue strategic alliances and potential strategic acquisitions that are complementary to our business and operations, including opportunities that can help us further expand our service offering and improve our technology systems. 35 Table of Contents Strategic alliances with third parties could subject us to a number of risks, including risks associated with sharing proprietary information, non-performance or default by counterparties, and increased expenses in establishing these new alliances, any of which may materially and adversely affect our business.
In addition, there is no assurance that any exchange of Class A ordinary shares into ADSs (and vice versa) will be completed in accordance with the timelines that investors may anticipate. 66 Table of Contents Furthermore, the depositary for the ADSs is entitled to charge holders fees for various services including for the issuance of ADSs upon deposit of Class A ordinary shares, cancelation of ADSs, distributions of cash dividends or other cash distributions, distributions of ADSs pursuant to share dividends or other free share distributions, distributions of securities other than ADSs and annual service fees.
In addition, there is no assurance that any exchange of Class A ordinary shares into ADSs (and vice versa) will be completed in accordance with the timelines that investors may anticipate. 65 Table of Contents Furthermore, the depositary for the ADSs is entitled to charge holders fees for various services including for the issuance of ADSs upon deposit of Class A ordinary shares, cancelation of ADSs, distributions of cash dividends or other cash distributions, distributions of ADSs pursuant to share dividends or other free share distributions, distributions of securities other than ADSs and annual service fees.
If the PRC government finds that our contractual arrangements do not comply with its restrictions on foreign investment in domestic express delivery services of mail, or if the PRC government otherwise finds that we, ZTO Express, or any of its subsidiaries are in violation of PRC laws or regulations or lack the necessary permits or licenses to operate our business, the relevant PRC regulatory authorities, would have broad discretion in dealing with such violations or failures, including, without limitation: ● revoking the business licenses and/or operating licenses of such entities; ● discontinuing or placing restrictions or onerous conditions on our operation through any transactions between our PRC subsidiaries and the consolidated affiliated entities; 43 Table of Contents ● imposing fines, confiscating the income from our PRC subsidiaries or the consolidated affiliated entities, or imposing other requirements with which such entities may not be able to comply; ● requiring us to restructure our ownership structure or operations, including terminating the contractual arrangements with the VIE and deregistering the equity pledges of the VIE, which in turn would affect our ability to consolidate, derive economic interests from, or direct the activities of the VIE; ● restricting or prohibiting our use of the proceeds of any of our financing outside China to fund our business and operations in China; or ● restricting or prohibiting our future capital raising activities by the CSRC.
If the PRC government finds that our contractual arrangements do not comply with its restrictions on foreign investment in domestic express delivery services of mail, or if the PRC government otherwise finds that we, ZTO Express, or any of its subsidiaries are in violation of PRC laws or regulations or lack the necessary permits or licenses to operate our business, the PRC regulatory authorities would have broad discretion in dealing with such violations or failures, including, without limitation: ● revoking the business licenses and/or operating licenses of such entities; ● discontinuing or placing restrictions or onerous conditions on our operation through any transactions between our PRC subsidiaries and the consolidated affiliated entities; ● imposing fines, confiscating the income from our PRC subsidiaries or the consolidated affiliated entities, or imposing other requirements with which such entities may not be able to comply; ● requiring us to restructure our ownership structure or operations, including terminating the contractual arrangements with the VIE and deregistering the equity pledges of the VIE, which in turn would affect our ability to consolidate, derive economic interests from, or direct the activities of the VIE; ● restricting or prohibiting our use of the proceeds of any of our financing outside China to fund our business and operations in China; or ● restricting or prohibiting our future capital raising activities by the CSRC.
Such demands and requirements may increase the cost of our business or weaken our connection with our end customers. Furthermore, in May 2018, Alibaba and Cainiao Network entered into a strategic transaction with us.
Such demands and requirements may increase the cost of our business or weaken our connection with our end customers. In May 2018, Alibaba and Cainiao Network entered into a strategic transaction with us.
Existing and new laws and regulations may be enforced from time to time and substantial uncertainties exist regarding the interpretation and implementation of current and any future PRC laws and regulations applicable to us and/or our network partners.
Existing and new laws and regulations may be enforced from time to time and uncertainties exist regarding the interpretation and implementation of current and any future PRC laws and regulations applicable to us and/or our network partners.
We entered into agreements with such qualified network partners and have committed and will continue to commit our own capital, which has had, and may continue to have, a negative impact on our cash flow.
We have entered into agreements with qualified network partners and have committed and will continue to commit our own capital, which has had, and may continue to have, a negative impact on our cash flow.
Any uncertainties or negative publicity regarding such approval requirement could materially and adversely affect our business, prospects, financial condition, reputation, and the trading price of the shares. ​ 49 Table of Contents 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.
Any uncertainties or negative publicity regarding such approval requirement could materially and adversely affect our business, prospects, financial condition, reputation, and the trading price of the shares. ​ 47 Table of Contents 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.
Such enterprise needs to make a filing with the relevant postal authority to update or renew its Courier Service Operation Permit to include any additional regions it plans to expand into.
Such enterprise needs to make a filing with the postal authority to update or renew its Courier Service Operation Permit to include any additional regions it plans to expand into.
In connection with the financial services we provide to qualified network partners, we have obtained requisite business licenses and/or approvals under relevant PRC laws and regulations through various PRC subsidiaries.
In connection with the financial services we provide to qualified network partners, we have obtained the requisite business licenses and/or approvals under PRC laws and regulations through various PRC subsidiaries.
The FIL replaced the existing laws regulating foreign investment in China, namely, the PRC Equity Joint Venture Law, the PRC Cooperative Joint Venture Law and the PRC Wholly Foreign-owned Enterprise Law, together with their implementation rules and ancillary regulations.
The PRC Foreign Investment Law replaced the existing laws regulating foreign investment in China, namely, the PRC Equity Joint Venture Law, the PRC Cooperative Joint Venture Law and the PRC Wholly Foreign-owned Enterprise Law, together with their implementation rules and ancillary regulations.
Such regulation requires, among other things, that the MOFCOM be notified in advance of any change-of-control transaction in which a foreign investor acquires control of a PRC domestic enterprise or a foreign company with substantial PRC operations, if (i) any important industry is concerned, (ii) such transaction involves factors that have or may have impact on the national economic security; (iii) such transaction will lead to a change in control of a domestic enterprise which holds famous trademarks or PRC time-honored brands; or (iv) certain thresholds under the Provisions on Thresholds for Prior Notification of Concentrations of Undertakings, issued by the State Council on August 3, 2008 with latest amendment released on September 18, 2018, were triggered.
Such regulation requires, among other things, that the PRC Ministry of Commerce be notified in advance of any change-of-control transaction in which a foreign investor acquires control of a PRC domestic enterprise or a foreign company with substantial PRC operations, if (i) any important industry is concerned, (ii) such transaction involves factors that have or may have impact on the national economic security; (iii) such transaction will lead to a change in control of a domestic enterprise which holds famous trademarks or PRC time-honored brands; or (iv) certain thresholds under the Provisions on Thresholds for Prior Notification of Concentrations of Undertakings, issued by the State Council on August 3, 2008 with latest amendment released on September 18, 2018, were triggered.
We will be considered a passive foreign investment company, or PFIC, for any taxable year if either (i) 75% or more of its gross income for such year consists of certain types of “passive” income (the “income test”); or (ii) 50% or more of the value of its assets (generally determined on the basis of a quarterly average) during such year is attributable to assets that produce or are held for the production of passive income (the “asset test”).
We will be considered a passive foreign investment company, or PFIC, for any taxable year if either (i) 75% or more of our gross income for such year consists of certain types of “passive” income (the “income test”); or (ii) 50% or more of the value of our assets (generally determined on the basis of a quarterly average) during such year is attributable to assets that produce or are held for the production of passive income (the “asset test”).
If we are subject to late fees or fines in relation to the underpaid employee benefits, our financial condition and results of operations may be adversely affected. 57 Table of Contents The PCAOB had historically been unable to inspect our auditor in relation to their audit work performed for our financial statements and the inability of the PCAOB to conduct inspections of our auditor in the past has deprived our investors with the benefits of such inspections.
If we are subject to late fees or fines in relation to the underpaid employee benefits, our financial condition and results of operations may be adversely affected. 56 Table of Contents The PCAOB had historically been unable to inspect our auditor in relation to their audit work performed for our financial statements and the inability of the PCAOB to conduct inspections of our auditor in the past has deprived our investors with the benefits of such inspections.
Our gross profit per parcel is also affected by a variety of other factors, such as a decline in the average weight of parcels handled by us, an increase in the adoption of digital waybills, which have a lower charge rate than traditional paper waybills, an increase in delivery services directly provided to certain enterprise customers, and changes in our operating model.
Our gross profit per parcel is also affected by a variety of other factors, such as an increase or decline in the average weight of parcels handled by us, an increase in the adoption of digital waybills, which have a lower charge rate than traditional paper waybills, an increase or a decrease in delivery services directly provided to certain enterprise customers, and changes in our operating model.
Any failure to obtain or delay in obtaining the CSRC approval for any of our offshore offerings, or a rescission of such approval if obtained by us, would subject us to sanctions imposed by the CSRC or other PRC regulatory authorities, which could include fines and penalties on our operations in China, restrictions or limitations on our ability to pay dividends outside of China, and other forms of sanctions that may materially and adversely affect our business, financial condition, and results of operations. 48 Table of Contents On July 6, 2021, the relevant PRC government authorities issued Opinions on Strictly Cracking Down Illegal Securities Activities in Accordance with the Law.
Any failure to obtain or delay in obtaining the CSRC approval for any of our offshore offerings, or a rescission of such approval if obtained by us, would subject us to sanctions imposed by the CSRC or other PRC regulatory authorities, which could include fines and penalties on our operations in China, restrictions or limitations on our ability to pay dividends outside of China, and other forms of sanctions that may materially and adversely affect our business, financial condition, and results of operations. 46 Table of Contents On July 6, 2021, the PRC government authorities issued Opinions on Strictly Cracking Down Illegal Securities Activities in Accordance with the Law.
In addition to market and industry factors, the price and trading volume for our listed securities may be highly volatile for factors specific to our own operations, including the following: ● variations in our revenues, earnings and cash flow; ● announcements of new investments, acquisitions, strategic partnerships or joint ventures by us or our competitors; ● announcements of new offerings, solutions and expansions by us or our competitors; ● changes in financial estimates by securities analysts; 59 Table of Contents ● detrimental adverse publicity about us, our services or our industry; ● additions or departures of key personnel; ● release of lock-up or other transfer restrictions on our outstanding equity securities or sales of additional equity securities; and ● potential litigation or regulatory investigations.
In addition to market and industry factors, the price and trading volume for our listed securities may be highly volatile for factors specific to our own operations, including the following: ● variations in our revenues, earnings and cash flow; ● announcements of new investments, acquisitions, strategic partnerships or joint ventures by us or our competitors; ● announcements of new offerings, solutions and expansions by us or our competitors; ● changes in financial estimates by securities analysts; ● detrimental adverse publicity about us, our services or our industry; ● additions or departures of key personnel; ● release of lock-up or other transfer restrictions on our outstanding equity securities or sales of additional equity securities; and ● potential litigation or regulatory investigations.
If our lessors are not the owners of the properties and they have not obtained consents from the owners or their lessors or permits from the relevant governmental authorities, our leases could be invalidated.
If our lessors are not the owners of the properties and they have not obtained consents from the owners or their lessors or permits from the governmental authorities, our leases could be invalidated.
We have not made any accruals for the interest on underpayments and penalties that may be imposed by the relevant PRC government authorities in the financial statements.
We have not made any accruals for the interest on underpayments and penalties that may be imposed by the PRC government authorities in the financial statements.
If any outsourced personnel fail to operate in accordance with instructions, policies and business guidelines set forth by outsourcing firms based on our requirements, our market reputation, brand image and results of operations could be materially and adversely affected. 25 Table of Contents Our agreements with the outsourcing firms may provide that we are not liable to the outsourced personnel.
If any outsourced personnel fail to operate in accordance with instructions, policies and business guidelines set forth by outsourcing firms based on our requirements, our market reputation, brand image and results of operations could be materially and adversely affected. 24 Table of Contents Our agreements with the outsourcing firms may provide that we are not liable to the outsourced personnel.
This may restrict our ability to implement our acquisition strategy and could adversely affect our business and prospects. 53 Table of Contents Any failure to comply with PRC regulations regarding the registration requirements for employee stock incentive plans of overseas publicly listed companies may subject the PRC plan participants or us to fines and other legal or administrative sanctions.
This may restrict our ability to implement our acquisition strategy and could adversely affect our business and prospects. 52 Table of Contents Any failure to comply with PRC regulations regarding the registration requirements for employee stock incentive plans of overseas publicly listed companies may subject the PRC plan participants or us to fines and other legal or administrative sanctions.
We and our network partners cannot predict or control any labor unrest, especially those involving labor not directly employed by us. Further, labor unrest may have a negative effect on general labor market conditions or result in changes to labor laws, which in turn could materially and adversely affect our business, financial condition and results of operations.
We and our network partners cannot always predict or control labor unrest, especially those involving labor not directly employed by us. Further, labor unrest may have a negative effect on general labor market conditions or result in changes to labor laws, which in turn could materially and adversely affect our business, financial condition and results of operations.
We may also incur significant liabilities and penalties arising from such unethical conduct and may be required to allocate significant resources and incur material expenses to prevent such unethical or anticompetitive conduct in the future. 38 Table of Contents We are regularly subject to claims, lawsuits and other proceedings that may adversely affect our reputation, business and results of operations.
We may also incur significant liabilities and penalties arising from such unethical conduct and may be required to allocate significant resources and incur material expenses to prevent such unethical or anticompetitive conduct in the future. 37 Table of Contents We are regularly subject to claims, lawsuits and other proceedings that may adversely affect our reputation, business and results of operations.
If we are not able to manage our growth or execute our strategies effectively due to any of the foregoing reasons, our expansion may not be successful, and our business and prospects may be materially and adversely affected. 26 Table of Contents Our long-term growth and competitiveness are highly dependent on our ability to control costs and maintain or raise prices.
If we are not able to manage our growth or execute our strategies effectively due to any of the foregoing reasons, our expansion may not be successful, and our business and prospects may be materially and adversely affected. 25 Table of Contents Our long-term growth and competitiveness are highly dependent on our ability to control costs and maintain or raise prices.
These measures may cause decreased economic activity in China, which may adversely affect our business and operating results. 47 Table of Contents The PRC government’s significant oversight and discretion over our business operation could result in a material adverse change in our operations and the value of our ADSs and ordinary shares. We conduct our business primarily in China.
These measures may cause decreased economic activity in China, which may adversely affect our business and operating results. 45 Table of Contents The PRC government’s significant oversight and discretion over our business operation could result in a material adverse change in our operations and the value of our ADSs and ordinary shares. We conduct our business primarily in China.
As a result, we may be required to expend valuable resources to comply with STA Public Notice 7 and STA Announcement 37 or to request the relevant transferors from whom we purchase taxable assets to comply with these circulars, or to establish that our company should not be taxed under these circulars, which may have a material adverse effect on our financial condition and results of operations. 56 Table of Contents Discontinuation of any of the preferential tax treatments or imposition of any additional taxes could adversely affect our financial condition and results of operations.
As a result, we may be required to expend valuable resources to comply with STA Public Notice 7 and STA Announcement 37 or to request the transferors from whom we purchase taxable assets to comply with these circulars, or to establish that our company should not be taxed under these circulars, which may have a material adverse effect on our financial condition and results of operations. 55 Table of Contents Discontinuation of any of the preferential tax treatments or imposition of any additional taxes could adversely affect our financial condition and results of operations.
Reasons for the Offer and Use of Proceeds Not applicable. 18 Table of Contents D. Risk Factors SUMMARY OF RISK FACTORS Investing in our Class A ordinary shares and/or ADSs involves significant risks. You should carefully consider all of the information in this annual report before making an investment in our Class A ordinary shares and/or ADSs.
Reasons for the Offer and Use of Proceeds Not applicable. 17 Table of Contents D. Risk Factors SUMMARY OF RISK FACTORS Investing in our Class A ordinary shares and/or ADSs involves significant risks. You should carefully consider all of the information in this annual report before making an investment in our Class A ordinary shares and/or ADSs.
Our business is subject to governmental supervision and regulation by the relevant PRC governmental authorities, including but not limited to, the State Post Bureau and the Ministry of Transportation. Together, these governmental authorities promulgate and enforce regulations that cover many aspects of our day-to-day operations. See also “Item 4. Information on the Company—B.
Our business is subject to governmental supervision and regulation by the PRC governmental authorities, including but not limited to, the State Post Bureau and the Ministry of Transportation. Together, these governmental authorities promulgate and enforce regulations that cover many aspects of our day-to-day operations. See “Item 4. Information on the Company—B.
We face risks associated with the financial services we provide to network partners. We provide financial services to qualified network partners. A qualified network partner shall meet certain criteria set by us, such as having a legal and stable income or source of income and engaging in operation activities that are legal and meet the national industrial policies and requirements.
We face risks associated with the financial services we provide to network partners. We provide financial services to qualified network partners. A qualified network partner must meet certain criteria set by us, such as having a legal and stable income or source of income and engaging in operation activities that are legal and meet the national industrial policies and requirements.
No impairment charge for the goodwill was recognized for the years ended December 31, 2020, 2021 and 2022. Furthermore, we continually review our equity method investments in equity investees to determine whether a decline in fair value below the carrying value is “other-than-temporary” and impairment loss needs to be recognized.
No impairment charge for the goodwill was recognized for the years ended December 31, 2021, 2022 and 2023. Furthermore, we continually review our equity method investments in equity investees to determine whether a decline in fair value below the carrying value is “other-than-temporary” and impairment loss needs to be recognized.
The Overseas Listing Trial Measures was recently promulgated and became effective on March 31, 2023, under which 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.
The Overseas Listing Trial Measures was promulgated and became effective on March 31, 2023, under which 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 the required information.
See “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations Relating to Express Delivery Services.” The operation of our express delivery service is subject to this regulation. Failure to comply with these regulations result in requirement to rectify, fines, suspension of business for remediation or revocation of Courier Service Operation Permit.
See “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations Relating to Express Delivery Services.” The operation of our express delivery service is subject to this regulation. Failure to comply with these regulations result in requirement to rectify, fines, suspension of business for remediation or revocation of Courier Service Operation Permits.
We generate a significant portion of our parcel volume by serving end customers that conduct business on various e-commerce platforms in China, and our end customers rely on our services to fulfill orders placed by consumers on such platforms. In December 2022, more than 90% of our total parcel volume was attributable to e-commerce platforms.
We generate a significant portion of our parcel volume by serving end customers that conduct business on various e-commerce platforms in China, and our end customers rely on our services to fulfill orders placed by consumers on such platforms. In December 2023, more than 90% of our total parcel volume was attributable to e-commerce platforms.
If we are unable to promote our brand image and protect our corporate reputation, we may not be able to maintain and grow our customer base and our business and our growth prospects may be adversely affected. 27 Table of Contents Our business and the business of our network partners are subject to a broad range of PRC laws and regulations.
If we are unable to promote our brand image and protect our corporate reputation, we may not be able to maintain and grow our customer base and our business and our growth prospects may be adversely affected. 26 Table of Contents Our business and the business of our network partners are subject to a broad range of PRC laws and regulations.
On April 22, 2009, the STA issued the Circular of the STA on Issues Concerning the Identification of Chinese-Controlled Overseas Registered Enterprises as Resident Enterprises in Accordance with the Actual Standards of Organizational Management, as amended on November 8, 2013 and December 29, 2017 and partially invalid, known as STA Circular 82, which provides certain specific criteria for determining whether the “de facto management body” of a PRC-controlled enterprise that is incorporated offshore is located in China.
On April 22, 2009, the State Taxation Administration of the PRC issued the Circular of the State Taxation Administration on Issues Concerning the Identification of Chinese-Controlled Overseas Registered Enterprises as Resident Enterprises in Accordance with the Actual Standards of Organizational Management, as amended on November 8, 2013 and December 29, 2017 and partially invalid, known as STA Circular 82, which provides certain specific criteria for determining whether the “de facto management body” of a PRC-controlled enterprise that is incorporated offshore is located in China.
Although such third-party e-commerce platforms are not our direct customers, they have significant influence over how transactions take place on their e-commerce platforms, including how purchase orders are fulfilled by indicating to consumers the preferred express delivery companies for orders placed.
Although such third-party e-commerce platforms are not our direct customers or end customers, they have significant influence over how transactions take place on their e-commerce platforms, including how purchase orders are fulfilled by indicating to consumers the preferred express delivery companies for orders placed.
The content of the parcel may also constitute or reveal confidential information. The proper use and protection of confidential information is essential to maintaining customer trust in us and our services. 34 Table of Contents Our technology systems also process and store a significant amount of confidential information and data for the proper functioning of our network.
The content of the parcel may also constitute or reveal confidential information. The proper use and protection of confidential information is essential to maintaining customer trust in us and our services. 33 Table of Contents Our technology systems also process and store a significant amount of confidential information and data for the proper functioning of our network.

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Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeForeign investors or the foreign investment enterprise shall submit investment information to the competent commerce department through the enterprise registration system and the enterprise credit information publicity system and the foreign investors or the foreign investment enterprise could be imposed a fine ranging from RMB100,000 to RMB500,000 by the competent commerce department for failing to report investment information as required to the foreign investment information report system. 81 Table of Contents Pursuant to the Measures for Information Reporting on Foreign Investment, promulgated by the MOFCOM and the State Administration for Market Regulation, or the SAMR, and became effective on January 1, 2020, where a foreign investor carries out investment activities in China directly or indirectly, the foreign investor or the foreign investment enterprise shall submit the investment information to the competent commerce department.
Biggest changePursuant to the Measures for Information Reporting on Foreign Investment, promulgated by the PRC Ministry of Commerce and the State Administration for Market Regulation, and became effective on January 1, 2020, where a foreign investor carries out investment activities in China directly or indirectly, the foreign investor or the foreign investment enterprise shall submit the investment information to the competent commerce department.
A pickup outlet operated by our network partner arranges for a courier to collect the parcel from the sender (such as a merchant on e-commerce platform or an enterprise customer) once the pickup outlet has received a delivery order.
A pickup outlet operated by our network partner arranges for a courier to collect the parcel from the sender (such as a merchant on an e-commerce platform or an enterprise customer) once the pickup outlet has received a delivery order.
Merchants can therefore seamlessly place delivery orders to the outlets via our Zhongtian system. ● Mobile application . The Zhongtian system also supports our mobile application so that pickup and delivery personnel are able to handle functions such as digital waybill printing, order pickup, parcel tracking, receipt signing on mobile devices.
Merchants can therefore seamlessly place delivery orders to the outlets via the Zhongtian system. ● Mobile application . The Zhongtian system also supports our mobile application so that pickup and delivery personnel are able to handle functions such as digital waybill printing, order pickup, parcel tracking, receipt signing on mobile devices.
Risk Factors—Risks Related to Our Business and Industry—Our business and the business of our network partners are subject to a broad range of PRC laws and regulations.
Risk Factors—Risks Related to Our Business and Industry—Our business and the business of our network partners are subject to a broad range of PRC laws and regulations.
The Civil Code superseded the PRC Contract Law and became effective on January 1, 2021. According to the foregoing regulations, the lessee may sublease the leased premises to a third party, subject to the consent of the lessor. Where the lessee subleases the premises, the lease contract between the lessee and the lessor remains valid.
The PRC Civil Code superseded the PRC Contract Law and became effective on January 1, 2021. According to the foregoing regulations, the lessee may sublease the leased premises to a third party, subject to the consent of the lessor. Where the lessee subleases the premises, the lease contract between the lessee and the lessor remains valid.
The lessor is entitled to terminate the lease contract if the lessee subleases the premises without the consent of the lessor. In addition, if the lessor transfers the premises, the lease contract between the lessee and the lessor will still remain valid. The Civil Code superseded the PRC Property Law and became effective on January 1, 2021.
The lessor is entitled to terminate the lease contract if the lessee subleases the premises without the consent of the lessor. In addition, if the lessor transfers the premises, the lease contract between the lessee and the lessor will still remain valid. The PRC Civil Code superseded the PRC Property Law and became effective on January 1, 2021.
Pursuant to the PRC Land Administration Law promulgated on June 25, 1986 with the latest amendment on August 26, 2019, which became effective on January 1, 2020, and the PRC Property Law which has been superseded by the Civil Code since January 1, 2021, any entity that needs land for the purposes of construction must obtain land use right and must register with local counterparts of Ministry of Natural Resources.
Pursuant to the PRC Land Administration Law promulgated on June 25, 1986 with the latest amendment on August 26, 2019, which became effective on January 1, 2020, and the PRC Property Law which has been superseded by the PRC Civil Code since January 1, 2021, any entity that needs land for the purposes of construction must obtain land use right and must register with local counterparts of Ministry of Natural Resources.
On January 26, 2017, SAFE issued the Notice of State Administration of Foreign Exchange on Improving the Review of Authenticity and Compliance to Further Promoting the Reform of Foreign Exchange Administration, or SAFE Circular 3, which stipulates several capital control measures with respect to the outbound remittance of profit from domestic entities to offshore entities.
On January 26, 2017, the State Administration of Foreign Exchange issued the Notice of State Administration of Foreign Exchange on Improving the Review of Authenticity and Compliance to Further Promoting the Reform of Foreign Exchange Administration, or SAFE Circular 3, which stipulates several capital control measures with respect to the outbound remittance of profit from domestic entities to offshore entities.
Further, an enterprise shall, within ten business days after borrowing each foreign debt, report the information to the review and registration authority via the network system; and report the corresponding information about the foreign debt borrowed within ten business days after the expiration of Certificate of Review and Registration. See “Item 3. Key Information—D.
Further, an enterprise shall, within ten business days after borrowing each foreign debt, report the information to the review and registration authority via the network system; and report the corresponding information about the foreign debt borrowed within ten business days after the expiration of Certificate of Review and Registration of Enterprise Borrowing Foreign Debt. See “Item 3. Key Information—D.
Furthermore, the Administrative Measures for Convention Treatment for Non-resident Taxpayers, which became effective on January 1, 2020, require that non-resident taxpayers claiming treaty benefits shall be handled in accordance with the principles of “self-assessment, claiming benefits, retention of the relevant materials for future inspection.” Where a non-resident taxpayer self-assesses and concludes that it satisfies the criteria for claiming treaty benefits, it may enjoy treaty benefits at the time of tax declaration or at the time of withholding through a withholding agent, simultaneously gather and retain the relevant materials pursuant to the provisions of these Measures for future inspection, and subject to subsequent administration by tax authorities.
Furthermore, the Administrative Measures for Convention Treatment for Non-resident Taxpayers, which became effective on January 1, 2020, require that non-resident taxpayers claiming treaty benefits shall be handled in accordance with the principles of “self-assessment, claiming benefits, retention of the relevant materials for future inspection.” Where a non-resident taxpayer self-assesses and concludes that it satisfies the criteria for claiming treaty benefits, it may enjoy treaty benefits at the time of tax declaration or at the time of withholding through a withholding agent, simultaneously gather and retain the materials pursuant to the provisions of these Measures for future inspection, and subject to subsequent administration by tax authorities.
Exclusive Call Option Agreement. On August 18, 2015, Shanghai Zhongtongji Network, ZTO Express and the shareholders of ZTO Express entered into an exclusive call option agreement.
On August 18, 2015, Shanghai Zhongtongji Network, ZTO Express and the shareholders of ZTO Express entered into an exclusive call option agreement.
Any documents executed by Shanghai Zhongtongji Network or Meisong Lai in connection with ZTO Express will be deemed to be executed by the shareholders of ZTO Express. Each of the shareholders of ZTO Express agreed to acknowledge, accept and approve such conduct of or execution by Shanghai Zhongtongji Network and Meisong Lai.
Any documents executed by Shanghai Zhongtongji Network or Meisong Lai in connection with ZTO Express will be deemed to be executed by the shareholders of ZTO Express. Each of the shareholders of ZTO Express agreed to acknowledge, accept and approve such conduct of or execution by Shanghai Zhongtongji Network and Meisong Lai.
Risk Factors—Risks Related to Our Business and Industry—The title defects with respect to or encumbrances on certain land and buildings or failure to obtain requisite approvals, licenses or permits in carrying out our property construction may cause interruptions to our business operations.” According to the Measures for Control and Administration of Grant and Assignment of Right to Use Urban State-owned Land promulgated by the Ministry of Housing and Urban-Rural Development on December 4, 1992 with the amendment on January 26, 2011, and the PRC Law on Urban and Rural Planning promulgated by the National People’s Congress on October 28, 2007 and became effective on January 1, 2008 with the latest amendment on April 23, 2019, the Measures for Administration of Permission for Commencement of Construction Works promulgated by the Ministry of Housing Construction and Urban-Rural Development with the latest amendment on March 30, 2021, the Administrative Measures for Archival Filing on Inspection Upon Completion of Buildings and Municipal Infrastructure promulgated by the Ministry of Housing and Urban-Rural Development with the latest amendment on October 19, 2009, and the Regulations on the Quality Management of Construction Engineering promulgated by the State Council on January 30, 2000 and most recently amended on April 23, 2019, after obtaining land use right, the owner of land use right must obtain construction land planning permit, construction works planning permit from the relevant municipal planning authority, and a construction permit from relevant construction authority in order to commence construction.
Risk Factors—Risks Related to Our Business and Industry—The title defects with respect to or encumbrances on certain land and buildings or failure to obtain requisite approvals, licenses or permits in carrying out our property construction may cause interruptions to our business operations.” According to the Measures for Control and Administration of Grant and Assignment of Right to Use Urban State-owned Land promulgated by the Ministry of Housing and Urban-Rural Development on December 4, 1992 with the amendment on January 26, 2011, and the PRC Law on Urban and Rural Planning promulgated by the National People’s Congress on October 28, 2007 and became effective on January 1, 2008 with the latest amendment on April 23, 2019, the Measures for Administration of Permission for Commencement of Construction Works promulgated by the Ministry of Housing Construction and Urban-Rural Development with the latest amendment on March 30, 2021, the Administrative Measures for Archival Filing on Inspection Upon Completion of Buildings and Municipal Infrastructure promulgated by the Ministry of Housing and Urban-Rural Development with the latest amendment on October 19, 2009, and the Regulations on the Quality Management of Construction Engineering promulgated by the State Council on January 30, 2000 and most recently amended on April 23, 2019, after obtaining land use right, the owner of land use right must obtain construction land planning permit, construction works planning permit from the municipal planning authority, and a construction permit from the construction authority in order to commence construction.
Risk Factors—Risks Related to Our Business and Industry—The title defects with respect to or encumbrances on certain land and buildings or failure to obtain requisite approvals, licenses or permits in carrying out our property construction may cause interruptions to our business operations.” Regulations Relating To Environmental Protection Pursuant to the PRC Law on Environment Impact Assessment promulgated on October 28, 2002 and most recently amended on December 29, 2018, and the Administrative Regulations on the Environmental Protection of Construction Projects promulgated on November 29, 1998 with the latest amendment on July 16, 2017, each construction project is required to undergo an environmental impact assessment, and an environmental impact assessment report must be submitted to the relevant governmental authorities in charge of ecological environment for approval before the commencement of construction.
Risk Factors—Risks Related to Our Business and Industry—The title defects with respect to or encumbrances on certain land and buildings or failure to obtain requisite approvals, licenses or permits in carrying out our property construction may cause interruptions to our business operations.” Regulations Relating To Environmental Protection Pursuant to the PRC Law on Environment Impact Assessment promulgated on October 28, 2002 and most recently amended on December 29, 2018, and the Administrative Regulations on the Environmental Protection of Construction Projects promulgated on November 29, 1998 with the latest amendment on July 16, 2017, each construction project is required to undergo an environmental impact assessment, and an environmental impact assessment report must be submitted to the governmental authorities in charge of ecological environment for approval before the commencement of construction.
According to the APP Provisions, app providers shall strictly fulfill their responsibilities of information security management, and perform the duties including but not limited to: (i) conduct real identity information authentication based on mobile phone numbers, ID numbers or unified social credit codes for users who apply for registration when app providers provide users with services such as information release, instant messaging, etc.; (ii) be responsible for the results of the presentation of information, shall not produce or disseminate illegal information, and shall consciously prevent and resist harmful information; (iii) not induce users to download apps by means of false advertisement, bundled downloads, or other acts, or via machine or manual click farming and comment control, or by using illegal and harmful information; (iv) immediately take remedial measures, promptly notify users and report to the relevant competent authorities in accordance with regulations when an app has risks such as security defects and vulnerabilities; (v) perform the obligation of ensuring data security, establish a sound whole-process data security management system, take technical measures to ensure data security and other security measures, strengthen risk monitoring, and shall not endanger national security or public interests, or damage the legitimate rights and interests of others when carrying out app data processing activities; and (vi) formulate and disclose management rules, and sign service agreements with registered users to clarify the relevant rights and obligations of both parties.
According to these provisions, app providers shall strictly fulfill their responsibilities of information security management, and perform the duties including but not limited to: (i) conduct real identity information authentication based on mobile phone numbers, ID numbers or unified social credit codes for users who apply for registration when app providers provide users with services such as information release, instant messaging, etc.; (ii) be responsible for the results of the presentation of information, shall not produce or disseminate illegal information, and shall consciously prevent and resist harmful information; (iii) not induce users to download apps by means of false advertisement, bundled downloads, or other acts, or via machine or manual click farming and comment control, or by using illegal and harmful information; (iv) immediately take remedial measures, promptly notify users and report to the competent authorities in accordance with regulations when an app has risks such as security defects and vulnerabilities; (v) perform the obligation of ensuring data security, establish a sound whole-process data security management system, take technical measures to ensure data security and other security measures, strengthen risk monitoring, and shall not endanger national security or public interests, or damage the legitimate rights and interests of others when carrying out app data processing activities; and (vi) formulate and disclose management rules, and sign service agreements with registered users to clarify the rights and obligations of both parties.
Without the prior written consent of Shanghai Zhongtongji Network, among other applicable issues, the shareholders of ZTO Express may not increase or decrease the registered capital, dispose or cause the management of ZTO Express to dispose of its material assets (other than those disposal during ordinary operation), terminate or cause the management of ZTO Express to terminate any material contract or enter into any contract that is in conflict with its existing material contracts, appoint or remove any directors, supervisors or other relevant management members, cause ZTO Express to distribute or announce to distribute dividends to the shareholders, amend its articles of association, provide any loans or guarantees to any third parties or acquire any loans or guarantees from any third parties, and shall guarantee the continuance of ZTO Express.
Without the prior written consent of Shanghai Zhongtongji Network, among other applicable issues, the shareholders of ZTO Express may not increase or decrease the registered capital, dispose or cause the management of ZTO Express to dispose of its material assets (other than those disposal during ordinary operation), terminate or cause the management of ZTO Express to terminate any material contract or enter into any contract that is in conflict with its existing material contracts, appoint or remove any directors, supervisors or other management members, cause ZTO Express to distribute or announce to distribute dividends to the shareholders, amend its articles of association, provide any loans or guarantees to any third parties or acquire any loans or guarantees from any third parties, and shall guarantee the continuance of ZTO Express.
The Implementation Regulation for the FIL, promulgated by the State Council and became effective on January 1, 2020, provides that foreign investment enterprises established in accordance with the PRC Equity Joint Venture Law, the PRC Wholly Foreign-owned Enterprise Law, and the PRC Cooperative Joint Venture Law prior to implementation of the FIL shall, within the five-year period following the implementation of the FIL, adjust their organization form, organization structure pursuant to the provisions of the PRC Company Law, the PRC Partnership Enterprise Law and related laws, and complete change registration in accordance with the law.
The Implementation Regulation for the PRC Foreign Investment Law, promulgated by the State Council and became effective on January 1, 2020, provides that foreign investment enterprises established in accordance with the PRC Equity Joint Venture Law, the PRC Wholly Foreign-owned Enterprise Law, and the PRC Cooperative Joint Venture Law prior to implementation of the PRC Foreign Investment Law shall, within the five-year period following the implementation of the PRC Foreign Investment Law, adjust their organization form, organization structure pursuant to the provisions of the PRC Company Law, the PRC Partnership Enterprise Law and related laws, and complete change registration in accordance with the law.
A domestic company that plans to, either directly or through its overseas listed entity, publicly disclose or provide to relevant individuals or entities including securities companies, securities service providers and overseas regulators, any documents and materials that contain state secrets or working secrets of government agencies, shall first obtain approval from competent authorities according to law, and file with the secrecy administrative department at the same level.
A domestic company that plans to, either directly or through its overseas listed entity, publicly disclose or provide to individuals or entities including securities companies, securities service providers and overseas regulators, any documents and materials that contain state secrets or working secrets of government agencies, shall first obtain approval from competent authorities according to law, and file with the secrecy administrative department at the same level.
The Overseas Listing Trial Measures provides that no overseas offering and listing shall be made under any of the following circumstances: (i) such securities offering and listing is explicitly prohibited by provisions in laws, administrative regulations and relevant state rules; (ii) the intended securities offering and listing may endanger national security as reviewed and determined by competent authorities under the State Council in accordance with law; (iii) the domestic company intending to make the securities offering and listing, or its controlling shareholder(s) and the actual controller, have committed relevant crimes such as corruption, bribery, embezzlement, misappropriation of property or undermining the order of the socialist market economy during the latest three years; (iv) the domestic company intending to make the securities offering and listing is currently under investigations for suspicion of criminal offenses or major violations of laws and regulations, and no conclusion has yet been made thereof; or (v) there are material ownership disputes over equity held by the domestic company’s controlling shareholder(s) or by other shareholder(s) that are controlled by the controlling shareholder(s) and/or actual controller. 90 Table of Contents The Overseas Listing Trial Measures also provides that if the issuer both meets the following criteria, the overseas securities offering and listing conducted by such issuer will be deemed as indirect overseas offering by PRC domestic companies: (i) 50% or more of any of the issuer’s operating revenue, total profit, total assets or net assets as documented in its audited consolidated financial statements for the most recent fiscal year is accounted for by domestic companies; and (ii) the main parts of the issuer’s business activities are conducted in mainland China, or its main place(s) of business are located in mainland China, or the majority of senior management staff in charge of its business operations and management are PRC citizens or have their usual place(s) of residence located in mainland China.
The Overseas Listing Trial Measures provides that no overseas offering and listing shall be made under any of the following circumstances: (i) such securities offering and listing is explicitly prohibited by provisions in laws, administrative regulations and state rules; (ii) the intended securities offering and listing may endanger national security as reviewed and determined by competent authorities under the State Council in accordance with law; (iii) the domestic company intending to make the securities offering and listing, or its controlling shareholder(s) and the actual controller, have committed crimes such as corruption, bribery, embezzlement, misappropriation of property or undermining the order of the socialist market economy during the latest three years; (iv) the domestic company intending to make the securities offering and listing is currently under investigations for suspicion of criminal offenses or major violations of laws and regulations, and no conclusion has yet been made thereof; or (v) there are material ownership disputes over equity held by the domestic company’s controlling shareholder(s) or by other shareholder(s) that are controlled by the controlling shareholder(s) and/or actual controller. 88 Table of Contents The Overseas Listing Trial Measures also provides that If the issuer both meets the following criteria, the overseas securities offering and listing conducted by such issuer will be deemed as indirect overseas offering by PRC domestic companies: (i) 50% or more of any of the issuer’s operating revenue, total profit, total assets or net assets as documented in its audited consolidated financial statements for the most recent fiscal year is accounted for by domestic companies; and (ii) the main parts of the issuer’s business activities are conducted in mainland China, or its main place(s) of business are located in mainland China, or the majority of senior management staff in charge of its business operations and management are PRC citizens or have their usual place(s) of residence located in mainland China.
Any entities or individuals that violate the Law of the People’s Republic of China on Guarding State Secrets, the Archives Law of the People’s Republic of China and other applicable laws and regulations in the process of overseas offering and listing shall be held legally liable by competent authorities, and referred to the judicial organ to be investigated for criminal liability if suspected of committing a crime. 91 Table of Contents Regulations Relating To Financial Services Pursuant to the Guiding Opinions of the China Banking Regulatory Commission and the People’s Bank of China on the Pilot Operation of Microcredit Loan Enterprises promulgated by the China Banking Regulatory Commission and the People’s Bank of China on May 4, 2008, to apply for the establishment of a microcredit loan enterprise, the applicant shall submit a formal application to the competent administrative departments at the provincial level, and upon the approval, the applicant shall register with the local branch of the industrial and commercial administration to obtain the business license.
Any entities or individuals that violate the Law of the People’s Republic of China on Guarding State Secrets, the Archives Law of the People’s Republic of China and other applicable laws and regulations in the process of overseas offering and listing shall be held legally liable by competent authorities, and referred to the judicial organ to be investigated for criminal liability if suspected of committing a crime. 89 Table of Contents Regulations Relating To Financial Services Pursuant to the Guiding Opinions of the China Banking Regulatory Commission and the People’s Bank of China on the Pilot Operation of Microcredit Loan Enterprises promulgated by the China Banking Regulatory Commission and the People’s Bank of China on May 4, 2008, to apply for the establishment of a microcredit loan enterprise, the applicant shall submit a formal application to the competent administrative departments at the provincial level, and upon the approval, the applicant shall register with the local branch of the industrial and commercial administration to obtain the business license.
Express logistics service providers shall use environmental-friendly packaging materials in accordance with the relevant provisions in an effort to reduce the consumption of packaging materials and implement the recycling measures. While offering express logistics services, the providers thereof may agree to be entrusted by e-commerce operators to collect payments for goods on a commission basis.
Express logistics service providers shall use environmental-friendly packaging materials in accordance with the provisions in an effort to reduce the consumption of packaging materials and implement the recycling measures. While offering express logistics services, the providers thereof may agree to be entrusted by e-commerce operators to collect payments for goods on a commission basis.
In the event that a PRC shareholder holding interests in a special purpose vehicle fails to fulfill the required SAFE registration, the PRC subsidiaries of that special purpose vehicle may be prohibited from making profit distributions to the offshore parent and from carrying out subsequent cross-border foreign exchange activities, and the special purpose vehicle may be restricted in its ability to contribute additional capital into its PRC subsidiary.
In the event that a PRC shareholder holding interests in a special purpose vehicle fails to fulfill the required registration, the PRC subsidiaries of that special purpose vehicle may be prohibited from making profit distributions to the offshore parent and from carrying out subsequent cross-border foreign exchange activities, and the special purpose vehicle may be restricted in its ability to contribute additional capital into its PRC subsidiary.
Each of our line-haul vehicles is equipped with positioning equipment to monitor if there is any abnormality in the transportation process together with GIS (Geographic Information System) to help plan proper transportation routes. We have also used high-capacity trailers in order to improve energy efficiency and reduce pollutant emissions.
Each of our line-haul vehicles is equipped with positioning equipment to monitor if there is any abnormality in the transportation process together with Geographic Information System to help plan proper transportation routes. We have also used high-capacity trailers in order to improve energy efficiency and reduce pollutant emissions.
The Anti-Monopoly Law provides, among others, that business operators shall not use data, algorithms, technology, capital advantages and platform rules to exclude or limit competition, and also requires relevant government authorities to strengthen the examination of concentration of undertakings in areas related to national welfare and people’s well-being.
The Anti-Monopoly Law provides, among others, that business operators shall not use data, algorithms, technology, capital advantages and platform rules to exclude or limit competition, and also requires the government authorities to strengthen the examination of concentration of undertakings in areas related to national welfare and people’s well-being.
On February 13, 2015, SAFE released Circular of the State Administration of Foreign Exchange on Further Simplifying and Improving the Direct Investment-related Foreign Exchange Administration Policies, which was partially abolished on December 30, 2019, under which local banks will examine and handle foreign exchange registration for overseas direct investment, including the initial foreign exchange registration and amendment registration, starting from June 1, 2015.
On February 13, 2015, the State Administration of Foreign Exchange released Circular of the State Administration of Foreign Exchange on Further Simplifying and Improving the Direct Investment-related Foreign Exchange Administration Policies, which was partially abolished on December 30, 2019, under which local banks will examine and handle foreign exchange registration for overseas direct investment, including the initial foreign exchange registration and amendment registration, starting from June 1, 2015.
We also contract other independent third-party transportation companies to fulfil additional capacity needs, most of which are single trip transportation when we foresee a low return trip truckload. We carefully review the operating history, fleet condition, reliability and other comprehensive criteria of the bidders to select only suitable providers.
We also contract other independent third-party transportation companies to fulfil additional capacity needs, most of which are single trip transportation when we foresee a low return trip truckload. We carefully review the operating history, fleet condition, reliability and other criteria of the bidders to select only suitable providers.
We have published our annual ESG report since 2019, detailing our key initiatives and development in areas pertaining to environmental, social and corporate governance issues. The ESG reports are available at http://zto.investorroom.com/. We are subject to a number of regulations on environmental protection in China.
We have published an annual ESG report since 2019, detailing our key initiatives and development in areas pertaining to environmental, social and corporate governance issues. The ESG reports are available at http://zto.investorroom.com/. We are subject to a number of regulations on environmental protection in China.
Vehicle operators who violate this regulation may be subject to a fine of up to RMB30,000 for each violation. In the event of more than three violations in any year, the regulatory authority may suspend the operating license of the vehicle operator and/or revoke the business operation registration of the relevant vehicle.
Vehicle operators who violate this regulation may be subject to a fine of up to RMB30,000 for each violation. In the event of more than three violations in any year, the regulatory authority may suspend the operating license of the vehicle operator and/or revoke the business operation registration of the vehicle.
Risk Factors—Risks Related to Our Business and Industry—Any lack of requisite approvals, licenses or permits applicable to the business operation of us or our network partners may have a material and adverse impact on our business, financial condition and results of operations.” Regulations Relating To Cargo Vehicles Pursuant to the Administrative Provisions concerning the Running of Cargo Vehicles with Out-of-Gauge Goods promulgated on August 19, 2016, took effect on September 21, 2016 and amended on August 11, 2021, cargo vehicles running on public roads shall not carry cargo weighing more than the limits prescribed by this regulation and their dimensions shall not exceed those as set forth by the same regulation.
Risk Factors—Risks Related to Our Business and Industry—Any lack of requisite approvals, licenses or permits applicable to our business operations or those of our network partners may have a material and adverse impact on our business, financial condition and results of operations.” Regulations Relating To Cargo Vehicles Pursuant to the Administrative Provisions concerning the Running of Cargo Vehicles with Out-of-Gauge Goods promulgated on August 19, 2016, took effect on September 21, 2016 and amended on August 11, 2021, cargo vehicles running on public roads shall not carry cargo weighing more than the limits prescribed by this regulation and their dimensions shall not exceed those as set forth by the same regulation.
If STA Public Notice 7 or STA Announcement 37 was determined to be applicable to some of our transactions involving PRC taxable assets, our offshore subsidiaries conducting the relevant transactions might be required to spend valuable resources to comply with STA Public Notice 7 and STA Announcement 37 or to establish that the relevant transactions should not be taxed under STA Public Notice 7 or STA Announcement 37.
If STA Public Notice 7 or STA Announcement 37 was determined to be applicable to some of our transactions involving PRC taxable assets, our offshore subsidiaries conducting the transactions might be required to spend valuable resources to comply with STA Public Notice 7 and STA Announcement 37 or to establish that the transactions should not be taxed under STA Public Notice 7 or STA Announcement 37.
The Zhongtian System tracks each delivery order and, according to pre-set formulae, calculates the network transit fees payable to us as well as last-mile delivery fees payable to the network partners. ● Platform integration . Our Zhongtian system is connected to the order systems of major e-commerce platforms and vertical e-commerce websites in China.
The Zhongtian System tracks each delivery order and, according to pre-set formulae, calculates the network transit fees payable to us as well as last-mile delivery fees payable to the network partners. ● Platform integration . The Zhongtian system is connected to the order systems of major e-commerce platforms and vertical e-commerce websites in China.
The PRC Civil Code, or the Civil Code, promulgated on May 28, 2020 and became effective on January 1, 2021, also provides specific provisions regarding the protection of personal information. On June 10, 2021, the Standing Committee of the National People’s Congress promulgated the PRC Data Security Law, or the Data Security Law, which took effect on September 1, 2021.
The PRC Civil Code, promulgated on May 28, 2020 and became effective on January 1, 2021, also provides specific provisions regarding the protection of personal information. On June 10, 2021, the Standing Committee of the National People’s Congress promulgated the PRC Data Security Law, which took effect on September 1, 2021.
These opinions emphasized the need to strengthen the administration over illegal securities activities and the supervision on overseas listings by China-based companies and proposed to take effective measures, such as promoting the construction of relevant regulatory systems to deal with the risks and incidents faced by China-based overseas-listed companies.
These opinions emphasized the need to strengthen the administration over illegal securities activities and the supervision on overseas listings by China-based companies and proposed to take effective measures, such as promoting the construction of regulatory systems to deal with the risks and incidents faced by China-based overseas-listed companies.
Violation of the PRC Labor Law and the PRC Labor Contract Law may result in the imposition of fines and other administrative and criminal liability in the case of serious violation. 94 Table of Contents Enterprises in China are required by PRC laws 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 such 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.
Violation of the PRC Labor Law and the PRC Labor Contract Law may result in the imposition of fines and other administrative and criminal liability in the case of serious violation. 92 Table of Contents Enterprises in China are required by PRC laws 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 such 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.
As a result, gains derived from such indirect transfer may be subject to PRC enterprise income tax. In respect of an indirect offshore transfer of assets of a PRC establishment, the relevant gain is to be regarded as effectively connected with the PRC establishment and would consequently be subject to PRC enterprise income tax at a rate of 25%.
As a result, gains derived from such indirect transfer may be subject to PRC enterprise income tax. In respect of an indirect offshore transfer of assets of a PRC establishment, the gain is to be regarded as effectively connected with the PRC establishment and would consequently be subject to PRC enterprise income tax at a rate of 25%.
On August 18, 2015, Shanghai Zhongtongji Network, ZTO Express and the shareholders of ZTO Express entered into an equity pledge agreement and this agreement shall be binding on the legal assignees or heirs of all parties subject to relevant laws and regulations applicable at that time.
On August 18, 2015, Shanghai Zhongtongji Network, ZTO Express and the shareholders of ZTO Express entered into an equity pledge agreement and this agreement shall be binding on the legal assignees or heirs of all parties subject to the laws and regulations applicable at that time.
As to Reverse Logistics service, the senders, such as the merchants on e-commerce platforms, may entrust us to pick up goods from the designated addresses, such as consumer’s home and retail stores, and deliver the goods to the designated addresses, such as factories and warehouses. 70 Table of Contents Express delivery service process The following diagram illustrates the process for the completion of a typical domestic delivery order in our network. ​ The full delivery fees collected by pickup outlets upfront from the senders typically comprise of (i) the pickup service fees, (ii) the network transit fees payable to our company; and (iii) the last-mile delivery fees payable to network partners who operate the delivery outlets, and individual couriers.
As to Reverse Logistics service, the senders, such as the merchants on e-commerce platforms, may entrust us to pick up goods from the designated addresses, such as consumer’s home and retail stores, and deliver the goods to the designated addresses, such as factories and warehouses. 68 Table of Contents Express delivery service process The following diagram illustrates the process for the completion of a typical domestic delivery order in our network. ​ The full delivery fees collected by pickup outlets upfront from the senders typically comprise (i) the pickup service fees, (ii) the network transit fees payable to our company; and (iii) the last-mile delivery fees payable to network partners who operate the delivery outlets, and individual couriers.
To provide such financial services, we enter into relevant agreements with qualified network partners under which the material terms (e.g. loan amount, maturity date, guarantee or pledge and event of default (as applicable)) of such financial services are stipulated.
To provide such financial services, we enter into agreements with qualified network partners under which the material terms (e.g. loan amount, maturity date, guarantee or pledge and event of default (as applicable)) of such financial services are stipulated.
For example, pursuant to the PRC Law on Environment Impact Assessment, our construction project is required to undergo an environmental impact assessment, and an environmental impact assessment report must be submitted to the relevant governmental authorities in charge of ecological environment for approval before the commencement of construction, as applicable.
For example, pursuant to the PRC Law on Environment Impact Assessment, our construction project is required to undergo an environmental impact assessment, and an environmental impact assessment report must be submitted to the governmental authorities in charge of ecological environment for approval before the commencement of construction, as applicable.
Where an express delivery service company fails to submit its annual report to the relevant postal administrative authority in a timely manner, it may be ordered by the postal administrative authorities to make correction, and may be subject to a fine of up to RMB10,000.
Where an express delivery service company fails to submit its annual report to the postal administrative authority in a timely manner, it may be ordered by the postal administrative authorities to make correction, and may be subject to a fine of up to RMB10,000.
Pursuant to the 2021 Measures, critical information infrastructure operators that procure internet products and services, and network platform operators engaging in data processing activities, must be subject to the cybersecurity review under 2021 Measures if their activities affect or may affect national security.
Pursuant to the Cybersecurity Review Measures, critical information infrastructure operators that procure internet products and services, and network platform operators engaging in data processing activities, must be subject to the cybersecurity review under the Cybersecurity Review Measures if their activities affect or may affect national security.
Furthermore, overseas offering and listing by domestic companies shall strictly abide by relevant laws, administrative regulations and state rules concerning national security in the areas of foreign investment, cybersecurity, data security and etc., and duly fulfill their obligations to protect national security.
Furthermore, overseas offering and listing by domestic companies shall strictly abide by the laws, administrative regulations and state rules concerning national security in the areas of foreign investment, cybersecurity, data security and etc., and duly fulfill their obligations to protect national security.
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 the required information.
The operation of our business is subject to the E-commerce Law. If our express delivery services are not in compliance with the law, we may be required to rectify. See “Item 3. Key Information—D.
The operation of our business is subject to the PRC E-commerce Law. If our express delivery services are not in compliance with the law, we may be required to rectify. See “Item 3. Key Information—D.
The 2021 Measures further stipulate that network platform operators holding over one million users’ personal information shall declare to the Cybersecurity Review Office for a cybersecurity review before any public offering at a foreign stock exchange.
The Cybersecurity Review Measures further stipulate that network platform operators holding over one million users’ personal information shall declare to the Cybersecurity Review Office for a cybersecurity review before any public offering at a foreign stock exchange.
Pursuant to the foregoing regulations, if the mortgaged property is leased before the mortgage contract is executed, the previously established tenancy will not be affected by the subsequent mortgage, but where the mortgaged property is leased after the creation and registration of the mortgage interest, the tenancy cannot challenge the registered mortgage. 92 Table of Contents Regulations Relating To Land Use Right And Construction Certain of our offices, sorting hubs and other facilities, together with the land use rights attached, are obtained or built by us or bought from third parties.
Pursuant to the foregoing regulations, if the mortgaged property is leased before the mortgage contract is executed, the previously established tenancy will not be affected by the subsequent mortgage, but where the mortgaged property is leased after the creation and registration of the mortgage interest, the tenancy cannot challenge the registered mortgage. 90 Table of Contents Regulations Relating To Land Use Right And Construction Certain of our offices, sorting hubs and other facilities, together with the land use rights attached, are obtained or built by us or bought from third parties.
The exclusive call option agreement shall be binding on the legal assignees or heirs of all parties subject to relevant laws and regulations applicable at that time. Irrevocable Powers of Attorney.
The exclusive call option agreement shall be binding on the legal assignees or heirs of all parties subject to the laws and regulations applicable at that time. Irrevocable Powers of Attorney.
Risk Factors—Risks Related to Doing Business in China—If we are classified as a PRC resident enterprise for PRC income tax purposes, such classification could result in unfavorable tax consequences to us and our non-PRC shareholders or ADS holders.” Under STA Public Notice 7, issued by the STA on February 3, 2015, and was recently amended on December 29, 2017, an “indirect transfer” of assets, including equity interests in a PRC resident enterprise, by non-PRC resident enterprises may be re-characterized and treated as a direct transfer of PRC taxable assets, if such arrangement does not have a reasonable commercial purpose and was established for the purpose of avoiding payment of PRC enterprise income tax.
Risk Factors—Risks Related to Doing Business in China—If we are classified as a PRC resident enterprise for PRC income tax purposes, such classification could result in unfavorable tax consequences to us and our non-PRC shareholders or ADS holders.” Under STA Public Notice 7, issued by the State Taxation Administration on February 3, 2015, and was recently amended on December 29, 2017, an “indirect transfer” of assets, including equity interests in a PRC resident enterprise, by non-PRC resident enterprises may be re-characterized and treated as a direct transfer of PRC taxable assets, if such arrangement does not have a reasonable commercial purpose and was established for the purpose of avoiding payment of PRC enterprise income tax.
ITEM 4. INFORMATION ON THE COMPANY A. History and Development of the Company We commenced our express delivery service business through Shanghai Zhongtongji Express Service Co., Ltd., or Shanghai Zhongtongji, in Shanghai, China in January 2009.
ITEM 4. INFORMATION ON THE COMPANY A. History and Development of the Company We commenced our express delivery service business through Shanghai Zhongtongji Express Service Co., Ltd. in Shanghai, China in January 2009.
We have authorized our direct network partners to conduct their express delivery business exclusively under our “Zhongtong” or “ZTO” brand and mandate the unified application of our logos on outlets, personnel uniforms, transportation vehicles and packaging materials. 74 Table of Contents Each of our direct network partners is authorized by us to operate within a designated area, the size of which ranges from a township to an entire province.
We have authorized our direct network partners to conduct their express delivery business exclusively under our “Zhongtong” or “ZTO” brand and mandate the unified application of our logos on outlets, personnel uniforms, transportation vehicles and packaging materials. 72 Table of Contents Each of our direct network partners is authorized by us to operate within a designated area, the size of which ranges from a township to an entire province.
Pursuant to the Regulations on the Security Protection of Critical Information Infrastructure, critical information infrastructure shall mean any important network facilities or information systems of the important industry or field such as public communication and information service, energy, transportation, water conservancy, finance, public services, e-government affairs and national defense science, technology and industry, as well as other important network facilities and information systems which, in case of destruction, loss of function or leak of data, may result in serious damage to national security, the national economy and the people’s livelihood and public interests. 88 Table of Contents On July 6, 2021, the relevant PRC government authorities made public the Opinions on Strictly Cracking Down Illegal Securities Activities in Accordance with the Law.
Pursuant to the Regulations on the Security Protection of Critical Information Infrastructure, critical information infrastructure shall mean any important network facilities or information systems of the important industry or field such as public communication and information service, energy, transportation, water conservancy, finance, public services, e-government affairs and national defense science, technology and industry, as well as other important network facilities and information systems which, in case of destruction, loss of function or leak of data, may result in serious damage to national security, the national economy and the people’s livelihood and public interests. 86 Table of Contents On July 6, 2021, the PRC government authorities made public the Opinions on Strictly Cracking Down Illegal Securities Activities in Accordance with the Law.
In particular, we utilize an image-based learning algorithm in our safety inspection of packages to recognize prohibited illegal items during our inspection process and to reduce human error.
In particular, we utilize an image-based learning algorithm in our safety inspection of packages to recognize prohibited or illegal items during our inspection process and to reduce human error.
Where an issuer submits an application for initial public offering to competent overseas regulators, such issuer must file with the CSRC within three business days after such application is submitted.
Where an issuer submits an application for initial public offering to overseas regulators, such issuer must file with the CSRC within three business days after such application is submitted.
In contrast, if a business operator violates the provisions of the PRC Anti-Unfair Competition Law, engages in unfair competition and causes damage to another business operator, it shall be liable for damages. 96 Table of Contents The Anti-Monopoly Law was promulgated by the Standing Committee of the National People’s Congress, which took effect on August 1, 2008 and most recently amended and took effect on August 1, 2022.
In contrast, if a business operator violates the provisions of the PRC Anti-Unfair Competition Law, engages in unfair competition and causes damage to another business operator, it shall be liable for damages. 94 Table of Contents The Anti-Monopoly Law was promulgated by the Standing Committee of the National People’s Congress, which took effect on August 1, 2008 and most recently amended and took effect on August 1, 2022.
Risk Factors—Risks Related to Doing Business in China—The approval of or filing to the CSRC or other PRC government authorities may be required in connection with our offshore offerings and future capital raising activities under PRC law, and, if required, we cannot predict whether or for how long we will be able to obtain such approval.” On February 24, 2023, the CSRC, MOF, the National Administration of State Secret Protection and the National Archives Administration of China promulgated the Provisions on Strengthening Confidentiality and Archives Administration of Overseas Securities Offering and Listing by Domestic Companies, or the Overseas Listing Confidentiality Provisions, which became effective on March 31, 2023.
Risk Factors—Risks Related to Doing Business in China—The approval of or filing to the CSRC or other PRC government authorities may be required in connection with our offshore offerings and future capital raising activities under PRC law, and, if required, we cannot predict whether or for how long we will be able to obtain such approval.” On February 24, 2023, the CSRC, PRC Ministry of Finance, the National Administration of State Secret Protection and the National Archives Administration of China promulgated the Provisions on Strengthening Confidentiality and Archives Administration of Overseas Securities Offering and Listing by Domestic Companies, which became effective on March 31, 2023.
For example, our proprietary patented design of curved aluminum trailer is not only lighter but also more aerodynamic compared with traditional square-shaped steel containers.
For example, our patented design of curved aluminum trailer is not only lighter but also more aerodynamic compared with traditional square-shaped steel containers.
Risk Factors—Risks Related to Our Business and Industry—Our business is also subject to complex and evolving laws and regulations regarding cybersecurity, privacy, data protection and information security in China.
Risk Factors—Risks Related to Our Business and Industry—Our business is subject to complex and evolving laws and regulations regarding cybersecurity, privacy, data protection and information security in China.
A domestic company that plans to, either directly or through its overseas listed entity, publicly disclose or provide to relevant individuals and entities including securities companies, securities service providers and overseas regulators, any other documents and materials that, if leaked, will be detrimental to national security or public interest, shall strictly fulfill relevant procedures stipulated by applicable national regulations.
A domestic company that plans to, either directly or through its overseas listed entity, publicly disclose or provide to individuals and entities including securities companies, securities service providers and overseas regulators, any other documents and materials that, if leaked, will be detrimental to national security or public interest, shall strictly fulfill the procedures stipulated by applicable national regulations.
In addition, the STA issued the Bulletin of the STA on Printing and Distributing the Administrative Measures for Income Tax on Chinese-controlled Resident Enterprises Incorporated Overseas (Trial Implementation) on July 27, 2011 and amended on June 15, 2018 by the Announcement of the STA on Revising Certain Taxation Normative Documents, providing more guidance on the implementation of STA Circular 82.
In addition, the State Taxation Administration issued the Bulletin of the State Taxation Administration on Printing and Distributing the Administrative Measures for Income Tax on Chinese-controlled Resident Enterprises Incorporated Overseas (Trial Implementation) on July 27, 2011 and amended on June 15, 2018 by the Announcement of the State Taxation Administration on Revising Certain Taxation Normative Documents, providing more guidance on the implementation of STA Circular 82.
For example, we successfully collaborated with the Chinese Academy of Sciences in the Academy’s development of several variations of automated sorting equipment since 2015.
For example, we have successfully collaborated with the Chinese Academy of Sciences in the Academy’s development of several variations of automated sorting equipment since 2015.
Before borrowing foreign debt, an enterprise shall obtain the Certificate of Review and Registration of Enterprise Borrowing Foreign Debt, or the Certificate of Review and Registration, and complete the review and registration procedures. No borrowing of foreign debts shall be allowed without review and registration.
Before borrowing foreign debt, an enterprise shall obtain the Certificate of Review and Registration of Enterprise Borrowing Foreign Debt and complete the review and registration procedures. No borrowing of foreign debts shall be allowed without review and registration.
Our network partners directly interact with our end customers, and we provide ongoing training and conduct regular performance reviews to ensure they provide quality customer services. 76 Table of Contents We also operate a call center network providing real-time assistance during business hours, seven days a week.
Our network partners directly interact with our end customers, and we provide ongoing training and conduct regular performance reviews to ensure they provide quality customer services. 74 Table of Contents We also operate a call center network providing real-time assistance during business hours, seven days a week.
Failure to comply with the above-mentioned regulations may subject an enterprise to fines, suspension of the construction and other administrative liabilities. Regulations Relating To Intellectual Property Rights The PRC government has adopted comprehensive governing laws for intellectual property rights, including copyrights, patents, trademarks and domain names. 93 Table of Contents Copyright.
Failure to comply with the above-mentioned regulations may subject an enterprise to fines, suspension of the construction and other administrative liabilities. Regulations Relating To Intellectual Property Rights The PRC government has adopted comprehensive governing laws for intellectual property rights, including copyrights, patents, trademarks and domain names. 91 Table of Contents Copyright.
If our employees fail to pay or we fail to withhold their income taxes according to relevant laws and regulations, we may face sanctions imposed by the tax authorities or other PRC governmental authorities. 98 Table of Contents Regulations Relating To Tax Dividend Withholding Tax Pursuant to the PRC Enterprise Income Tax Law, or the EIT Law, which was recently amended on December 29, 2018, and its implementation rules, which became effective on January 1, 2008 and was amended on April 23, 2019, if a non-resident enterprise has not set up an organization or establishment in China, or has set up an organization or establishment but the income derived has no actual connection with such organization or establishment, it will be subject to a withholding tax on its PRC-sourced income at a rate of 10%.
If our employees fail to pay or we fail to withhold their income taxes according to the laws and regulations, we may face sanctions imposed by the tax authorities or other PRC governmental authorities. 96 Table of Contents Regulations Relating To Tax Dividend Withholding Tax Pursuant to the PRC Enterprise Income Tax Law which was recently amended on December 29, 2018, and its implementation rules, which became effective on January 1, 2008 and was amended on April 23, 2019, if a non-resident enterprise has not set up an organization or establishment in China, or has set up an organization or establishment but the income derived has no actual connection with such organization or establishment, it will be subject to a withholding tax on its PRC-sourced income at a rate of 10%.
The 2021 Measures took effect on February 15, 2022, and has replaced the 2020 Measures and further restated and expanded the applicable scope of the cybersecurity review.
The Cybersecurity Review Measures took effect on February 15, 2022, and has replaced the 2020 Measures and further restated and expanded the applicable scope of the cybersecurity review.
Under these circulars, our employees working in China who exercise share options or are granted restricted shares will be subject to PRC individual income tax. Our PRC subsidiaries have obligations to file documents related to employee share options or restricted shares with relevant tax authorities and to withhold individual income taxes of those employees who exercise their share options.
Under these circulars, our employees working in China who exercise share options or are granted restricted shares will be subject to PRC individual income tax. Our PRC subsidiaries have obligations to file documents related to employee share options or restricted shares with the tax authorities and to withhold individual income taxes of those employees who exercise their share options.
We evaluate our pricing and make adjustments from time to time based on our operating costs, market conditions and competitions as well as our service quality. For our direct network partners at the provincial level, we provide fee discounts to those who significantly outperform the performance targets that we set.
We evaluate our pricing and make adjustments from time to time based on our operating costs, market conditions and competition as well as our service quality. For our direct network partners at the provincial level, we provide fee discounts to those who significantly outperform the performance targets that we set.
According to the Provisions on Thresholds for Prior Notification of Concentrations of Undertakings, issued by the State Council on August 3, 2008 with latest amendment released on September 18, 2018, where the concentration of business operators satisfies any of the following threshold, the business operators shall file a declaration to the anti-monopoly enforcement authority of the State Council in advance, otherwise, no concentration shall be carried out: (i) the total amount of the global turnover realized by all business operators participating in the concentration during the last fiscal year exceeds RMB10 billion with at least two business operators each achieving a turnover of more than RMB 400 million within China during the last fiscal year; (ii) the total amount of the turnover within China achieved by all business operators participating in the concentration during the last fiscal year exceeds RMB 2 billion with at least two business operators each achieving a turnover of more than RMB400 million within China during the last fiscal year.
According to the Provisions on Thresholds for Prior Notification of Concentrations of Undertakings, issued by the State Council on August 3, 2008 with latest amendment released on September 18, 2018, where the concentration of business operators satisfies any of the following threshold, the business operators shall file a declaration to the anti-monopoly enforcement authority of the State Council in advance, otherwise, no concentration shall be carried out: (i) the total amount of the global turnover realized by all business operators participating in the concentration during the last fiscal year exceeds RMB10 billion with at least two business operators each achieving a turnover of more than RMB400 million within China during the last fiscal year; (ii) the total amount of the turnover within China achieved by all business operators participating in the concentration during the last fiscal year exceeds RMB2 billion with at least two business operators each achieving a turnover of more than RMB400 million within China during the last fiscal year.
These shareholders are Messrs. Meisong Lai, Jianfa Lai, Jilei Wang, Xiangliang Hu, Shunchang Zhang and Xuebing Shang, collectively holding 73.8% of equity interest in ZTO Express. As a result of these contractual arrangements, we are able to direct the activities of, and are the primary beneficiary of, ZTO Express.
These shareholders are Messrs. Meisong Lai, Jianfa Lai, Jilei Wang, Xiangliang Hu, Shunchang Zhang and Xuebing Shang, collectively holding 73.8% of the equity interests in ZTO Express. As a result of these contractual arrangements, we are able to direct the activities of, and are the primary beneficiary of, ZTO Express.
Copyright in China, including copyrighted software, is principally protected under the PRC Copyright Law and its implementation rules and the Regulations on the Protection of Computer Software. The PRC Copyright Law was promulgated by the Standing Committee of the National People’s Congress on September 7, 1990 and was most recently amended on November 11, 2022.
Copyright in China, including copyrighted software, is principally protected under the PRC Copyright Law and its implementation rules and the Regulations on the Protection of Computer Software. The PRC Copyright Law was promulgated by the Standing Committee of the National People’s Congress on September 7, 1990 and was most recently amended on November 11, 2020.
By utilizing the dashboard, our management can monitor and evaluate our business in real-time. 77 Table of Contents We have leased a high-grade data center in Zhejiang province to support our core operational systems, such as Zhongtian, and our transportation management system.
By utilizing the dashboard, our management can monitor and evaluate our business in real-time. 75 Table of Contents We have leased a high-grade data center in Zhejiang province to support our core operational systems, such as Zhongtian, and our transportation management system.
Historically, the delivery service fees our network partners are able to charge have declined over time, partially as a result of competitive pressure. Other logistics services Building on our core express delivery business, we strive to become an integrated logistics service provider.
Historically, the delivery service fees our network partners are able to charge have declined over time, partially as a result of competitive pressure. Other logistics services Building on our core express delivery business, we are striving to become an integrated logistics service provider.
Moreover, we have established a systematic data and technology driven program to optimize trailer designs to reduce costs as well as enable digital tracking for real-time analytics of our vehicles. Further, we also helped develop improved vehicle parts and patented trailer designs.
Moreover, we have established a systematic data- and technology-driven program to improve trailer designs to reduce costs as well as enable digital tracking for real-time analytics of our vehicles. Further, we also helped develop improved vehicle parts and patented trailer designs.
We also leverage the scale of our network and assist our network partners to negotiate better procurement terms with their suppliers. 78 Table of Contents Security and Safety We have established parcel security screening protocols to inspect parcels before we accept them for sorting and delivery.
We also leverage the scale of our network and assist our network partners to negotiate better procurement terms with their suppliers. 76 Table of Contents Security and Safety We have established parcel security screening protocols to inspect parcels before we accept them for sorting and delivery.
Upon its incorporation, ZTO Express (Cayman) Inc. issued 600,000,000 ordinary shares to the British Virgin Islands holding vehicles of the then shareholders of ZTO Express, in proportion to these shareholders’ then respective share percentage in ZTO Express. ZTO Express (Cayman) Inc. established ZTO Express Limited in British Virgin Islands as its wholly-owned subsidiary in April 2015.
Upon its incorporation, ZTO issued 600,000,000 ordinary shares to the British Virgin Islands holding vehicles of the then shareholders of ZTO Express, in proportion to these shareholders’ then respective share percentage in ZTO Express. ZTO established ZTO Express Limited in British Virgin Islands as its wholly-owned subsidiary in April 2015.
We have also developed and continuously re-engineered sophisticated software (including data-enabled algorithm, real-time analytics and recalibration) to support high-speed sorting in order to ensure fast and reliable package data capturing and dispatch, and to reduce sorting errors and costs of re-work.
We have also developed and continually re-engineered sophisticated software (including data-enabled algorithm, real-time analytics and recalibration) to support high-speed sorting in order to ensure fast and reliable package data capturing and dispatch, and to reduce sorting errors and costs of re-work.
As of December 31, 2022, we owned over 200 computer software copyrights in China for various aspects of our operations, maintained over 600 trademark registrations and over 200 patents inside China. As of December 31, 2022, we had registered nine domain names, including zto.cn, among others.
As of December 31, 2023, we owned over 200 computer software copyrights in China for various aspects of our operations, maintained over 600 trademark registrations and 200 patents inside China. As of December 31, 2023, we had registered nine domain names, including zto.cn, among others.
Risk Factors—Risks Related to Our Business and Industry—Any lack of requisite approvals, licenses or permits applicable to the business operation of us or our network partners may have a material and adverse impact on our business, financial condition and results of operations.” Pursuant to the E-commerce Law, we are subject to certain requirements in e-commerce business, including but not limit to the following: while handing over commodities, express logistics service providers shall remind consignees to examine the commodities immediately on the spot; where the commodities are received by others for consignees, such providers shall obtain the consent of consignees.
Risk Factors—Risks Related to Our Business and Industry—Any lack of requisite approvals, licenses or permits applicable to our business operations or those of our network partners may have a material and adverse impact on our business, financial condition and results of operations.” Pursuant to the PRC E-commerce Law, we are subject to certain requirements in e-commerce business, including but not limit to the following: while handing over commodities, express logistics service providers shall remind consignees to examine the commodities immediately on the spot; where the commodities are received by others for consignees, such providers shall obtain the consent of consignees.
The communication administrations of provinces, autonomous regions and municipalities shall supervise and administer domain name services within their respective administrative area. Our domain name registration is handled through domain name service agencies established under the relevant regulations, and we become domain name holders upon successful registration.
The communication administrations of provinces, autonomous regions and municipalities shall supervise and administer domain name services within their respective administrative area. Our domain name registration is handled through domain name service agencies established under the applicable regulations, and we become domain name holders upon successful registration.
No material default occurred as of December 31, 2022. Our Customers The following chart illustrates parcel and fund flows to and from our direct and end customers. ​ ​ Our direct customers are our direct network partners, who, along with our indirect partners, own and operate pickup and delivery outlets.
No material default occurred as of December 31, 2023. Our Customers The following chart illustrates parcel and fund flows to and from our direct and end customers. ​ ​ Our direct customers are our direct network partners, who, along with our indirect partners, own and operate pickup and delivery outlets.

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Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe operating results in any period are not necessarily indicative of the results that may be expected for any future period. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2020 ​ 2021 ​ 2022 ​ RMB % RMB % RMB US$ % ​ ​ (in thousands except percentages) Revenues ​ 25,214,290 ​ 100.0 ​ 30,405,839 ​ 100.0 ​ 35,376,996 ​ 5,129,182 ​ 100.0 Cost of revenues ​ (19,377,184) ​ (76.9) ​ (23,816,462) ​ (78.3) ​ (26,337,721) ​ (3,818,611) ​ (74.4) Gross profit ​ 5,837,106 ​ 23.1 ​ 6,589,377 ​ 21.7 ​ 9,039,275 ​ 1,310,571 ​ 25.6 Operating income (expenses) (1) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Selling, general and administrative ​ (1,663,712) ​ (6.6) ​ (1,875,869) ​ (6.2) ​ (2,077,372) ​ (301,191) ​ (5.9) Other operating income, net ​ 580,973 ​ 2.3 ​ 789,503 ​ 2.6 ​ 774,578 ​ 112,303 ​ 2.2 Total operating expenses ​ (1,082,739) ​ (4.3) ​ (1,086,366) ​ (3.6) ​ (1,302,794) ​ (188,888) ​ (3.7) Income from operations ​ 4,754,367 ​ 18.8 ​ 5,503,011 ​ 18.1 ​ 7,736,481 ​ 1,121,683 ​ 21.9 Other income (expenses) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest income ​ 442,697 ​ 1.8 ​ 363,890 ​ 1.2 ​ 503,722 ​ 73,033 ​ 1.4 Interest expense ​ (35,307) ​ (0.1) ​ (126,503) ​ (0.4) ​ (190,521) ​ (27,623) ​ (0.5) (Loss) / gain from fair value changes of financial instruments ​ (877) ​ — ​ 52,909 ​ 0.2 ​ 46,246 ​ 6,705 ​ 0.1 Gain on disposal of equity investees and subsidiary ​ 1,086 ​ — ​ 2,357 ​ — ​ 69,598 ​ 10,091 ​ 0.2 Impairment of investment in equity investee ​ — ​ — ​ — ​ — ​ (26,328) ​ (3,817) ​ (0.1) Foreign currency exchange (loss)/gain, before tax ​ (127,180) ​ (0.5) ​ (56,467) ​ (0.2) ​ 147,254 ​ 21,350 ​ 0.4 Income before income tax, and share of loss in equity method investments ​ 5,034,786 ​ 20.0 ​ 5,739,197 ​ 18.9 ​ 8,286,452 ​ 1,201,422 ​ 23.4 Income tax expense ​ (689,833) ​ (2.7) ​ (1,005,451) ​ (3.3) ​ (1,633,330) ​ (236,811) ​ (4.6) Share of (loss)/gain in equity method investments ​ (18,507) ​ (0.1) ​ (32,419) ​ (0.1) ​ 5,844 ​ 847 ​ 0.0 Net Income ​ 4,326,446 ​ 17.2 ​ 4,701,327 ​ 15.5 ​ 6,658,966 ​ 965,458 ​ 18.8 Net loss/(income) attributable to noncontrolling interests ​ (14,233) ​ (0.1) ​ 53,500 ​ 0.2 ​ 150,090 ​ 21,761 ​ 0.4 Net income attributable to ZTO Express (Cayman) Inc. ​ 4,312,213 ​ 17.1 ​ 4,754,827 ​ 15.6 ​ 6,809,056 ​ 987,219 ​ 19.2 (1) Our operating income (expenses) in 2020, 2021 and 2022 includes RMB264.2, RMB248.0 and RMB179.0 million (US$26.0 million), respectively, of share-based compensation expenses, accounting for 1.0%, 0.8% and 0.5% of our total revenues in the same periods, respectively. ​ 109 Table of Contents Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 Revenues Our revenues increased by 16.3% to RMB35.4 billion (US$5.1 billion) in 2022 from RMB30.4 billion in 2021.
Biggest changeThe operating results in any period are not necessarily indicative of the results that may be expected for any future period. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2021 ​ 2022 ​ 2023 ​ RMB % RMB % RMB US$ % ​ ​ (in thousands except percentages) Revenues ​ 30,405,839 ​ 100.0 ​ 35,376,996 ​ 100.0 ​ 38,418,915 ​ 5,411,191 ​ 100.0 Cost of revenues ​ (23,816,462) ​ (78.3) ​ (26,337,721) ​ (74.4) ​ (26,756,389) ​ (3,768,559) ​ (69.6) Gross profit ​ 6,589,377 ​ 21.7 ​ 9,039,275 ​ 25.6 ​ 11,662,526 ​ 1,642,632 ​ 30.4 Operating income (expenses) (1) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Selling, general and administrative ​ (1,875,869) ​ (6.2) ​ (2,077,372) ​ (5.9) ​ (2,425,253) ​ (341,590) ​ (6.3) Other operating income, net ​ 789,503 ​ 2.6 ​ 774,578 ​ 2.2 ​ 770,651 ​ 108,544 ​ 2.0 Total operating expenses ​ (1,086,366) ​ (3.6) ​ (1,302,794) ​ (3.7) ​ (1,654,602) ​ (233,046) ​ (4.3) Income from operations ​ 5,503,011 ​ 18.1 ​ 7,736,481 ​ 21.9 ​ 10,007,924 ​ 1,409,586 ​ 26.1 Other income (expenses) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest income ​ 363,890 ​ 1.2 ​ 503,722 ​ 1.4 ​ 706,765 ​ 99,546 ​ 1.9 Interest expense ​ (126,503) ​ (0.4) ​ (190,521) ​ (0.5) ​ (289,533) ​ (40,780) ​ (0.8) Gain from fair value changes of financial instruments ​ 52,909 ​ 0.2 ​ 46,246 ​ 0.1 ​ 164,517 ​ 23,172 ​ 0.4 Gain on disposal of equity investees and subsidiary ​ 2,357 ​ — ​ 69,598 ​ 0.2 ​ 5,485 ​ 773 ​ 0.0 Impairment of investment in equity investee ​ — ​ — ​ (26,328) ​ (0.1) ​ — ​ — ​ — Foreign currency exchange (loss)/gain, before tax ​ (56,467) ​ (0.2) ​ 147,254 ​ 0.4 ​ 93,543 ​ 13,175 ​ 0.2 Income before income tax, and share of loss in equity method investments ​ 5,739,197 ​ 18.9 ​ 8,286,452 ​ 23.4 ​ 10,688,701 ​ 1,505,472 ​ 27.8 Income tax expense ​ (1,005,451) ​ (3.3) ​ (1,633,330) ​ (4.6) ​ (1,938,600) ​ (273,046) ​ (5.0) Share of (loss)/gain in equity method investments ​ (32,419) ​ (0.1) ​ 5,844 ​ 0.0 ​ 4,356 ​ 614 ​ 0.0 Net Income ​ 4,701,327 ​ 15.5 ​ 6,658,966 ​ 18.8 ​ 8,754,457 ​ 1,233,040 ​ 22.8 Net loss/(income) attributable to noncontrolling interests ​ 53,500 ​ 0.2 ​ 150,090 ​ 0.4 ​ (5,453) ​ (768) ​ 0.0 Net income attributable to ZTO Express (Cayman) Inc. ​ 4,754,827 ​ 15.6 ​ 6,809,056 ​ 19.2 ​ 8,749,004 ​ 1,232,272 ​ 22.8 (1) Our operating income (expenses) in 2021, 2022 and 2023 includes RMB248.0, RMB179.0 million and RMB255.0 (US$35.9 million), respectively, of share-based compensation expenses, accounting for 0.8%, 0.5% and 0.7% of our total revenues in the same periods, respectively. ​ 107 Table of Contents Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 Revenues Our revenues increased by 8.6% to RMB38.4 billion (US$5.4 billion) in 2023 from RMB35.4 billion in 2022.
We anticipate that the demand for express delivery services will continue to grow. Market conditions and our market position The market conditions, competitive landscape and our market position in the express delivery industry will affect the pricing of our services and in turn, our revenue and operating income.
We anticipate that the demand for express delivery services will continue to grow. Market conditions and our market position The market conditions, the competitive landscape and our market position in the express delivery industry will affect the pricing of our services and in turn, our revenue and operating income.
Net cash provided by operating activities in 2021 was RMB7.2 billion, which was mainly attributable to the following factors: (i) our express delivery services and other revenue streams generated net cash inflow of RMB30.0 billion, while the aggregate cash outflow for transportation cost, sorting hubs operation cost, cost of accessories sold and other costs amounted to RMB13.8 billion; (ii) cash flow in interest income of RMB321.1 million; (iii) cash in subsidy of RMB683.2 million; (iv) RMB8.4 billion paid for labor related costs, including salaries, social insurances and other benefits; (v) income tax of RMB1.1 billion; and (vi) RMB487.0 million as other administrative costs.
Net cash provided by operating activities in 2021 was RMB7.2 billion, which was mainly attributable to the following factors: (i) our express delivery services and other revenue streams generated net cash inflow of RMB30.0 billion, while the aggregate cash outflow for transportation cost, sorting hubs operation cost, cost of accessories sold and other costs amounted to RMB13.8 billion; (ii) cash inflow of interest income of RMB321.1 million; (iii) cash inflow of subsidy of RMB683.2 million; (iv) RMB8.4 billion paid for labor related costs, including salaries, social insurances and other benefits; (v) cash outflow of income tax of RMB1.1 billion; and (vi) cash outflow of RMB487.0 million as other administrative costs.
In utilizing the proceeds we receive from the public offering of Class A ordinary shares in relation to our listing on the Main Board of the Hong Kong Stock Exchange and other cash received from subsequent transactions that we hold offshore, we may make additional capital contributions to our PRC subsidiaries, establish new PRC operating entities, make loans to our PRC operating entities, or acquire offshore entities with business operations in China in offshore transactions.
In utilizing the proceeds we receive from the public offering of Class A ordinary shares in relation to our secondary listing on the Main Board of the Hong Kong Stock Exchange and other cash received from subsequent transactions that we hold offshore, we may make additional capital contributions to our PRC subsidiaries, establish new PRC operating entities, make loans to our PRC operating entities, or acquire offshore entities with business operations in China in offshore transactions.
We determine and periodically review and adjust our fee levels based on the prevailing market conditions, operating costs and service level. 107 Table of Contents Cost of Revenues In addition to the level of network transit fees we charge our network partners, our profitability also depends on our ability to control our costs as we expand.
We determine and periodically review and adjust our fee levels based on the prevailing market conditions, operating costs and service level. 105 Table of Contents Cost of Revenues In addition to the level of network transit fees we charge our network partners, our profitability also depends on our ability to control our costs as we expand.
Cost of accessories sold, which mainly includes cost of accessories that we sell to our network partners, such as (i) portable bar code readers, (ii) thermal paper used for digital waybill printing, and (iii) ZTO-branded packing materials and uniforms, accounted for 1.6%, 1.1% and 1.3% of our revenues in 2020, 2021 and 2022, respectively.
Cost of accessories sold, which mainly includes cost of accessories that we sell to our network partners, such as (i) portable bar code readers, (ii) thermal paper used for digital waybill printing, and (iii) ZTO-branded packing materials and uniforms, accounted for 1.1%, 1.3% and 1.3% of our revenues in 2021, 2022 and 2023, respectively.
Year Ended December 31, 2021 Compared to Year Ended December 31, 2020 For a detailed description of the comparison of our operating results for the year ended December 31, 2021 to the year ended December 31, 2020, see “Item 5. Operating and Financial Review and Prospects—A.
Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 For a detailed description of the comparison of our operating results for the year ended December 31, 2022 to the year ended December 31, 2021, see “Item 5. Operating and Financial Review and Prospects—A.
For example, fuel cost can be reduced through the use of more fuel-efficient vehicles, and unit transportation cost can be reduced by adding cost efficient, high-capacity line-haul trucks to our self-owned fleet and a gradual shift to a direct shipping model by selected network partners, and labor costs can be contained through wider implementation of automated sorting equipment. 108 Table of Contents Selling, General and Administrative Expenses Our selling, general and administrative expenses, which consist primarily of (i) salaries and other benefits for management and employees, (ii) depreciation and rental costs for office facilities, and (iii) legal, finance, and other corporate overhead costs, accounted for 6.6%, 6.2% and 5.9% of our revenues in 2020, 2021 and 2022, respectively.
For example, fuel cost can be reduced through the use of more fuel-efficient vehicles, and unit transportation cost can be reduced by adding cost efficient, high-capacity line-haul trucks to our fleet and a gradual shift to a direct shipping model by selected network partners, and labor costs can be contained through wider implementation of automated sorting equipment. 106 Table of Contents Selling, General and Administrative Expenses Our selling, general and administrative expenses, which consist primarily of (i) salaries and other benefits for management and employees, (ii) depreciation and rental costs for office facilities, and (iii) legal, finance, and other corporate overhead costs, accounted for 6.2%, 5.9% and 6.3% of our revenues in 2021, 2022 and 2023, respectively.
In addition, we also directly provide express delivery services to certain enterprise customers, including vertical e-commerce and traditional merchants, in connection with the delivery of their products to end consumers. Revenues from our express delivery services to such enterprise customers accounted for 16.3%, 16.8% and 14.9% of our total express delivery services revenues in 2020, 2021 and 2022, respectively.
In addition, we also directly provide express delivery services to certain enterprise customers, including vertical e-commerce and traditional merchants, in connection with the delivery of their products to end consumers. Revenues from our express delivery services to such enterprise customers accounted for 16.8%, 14.9% and 8.6% of our total express delivery services revenues in 2021, 2022 and 2023, respectively.
Investing Activities Net cash used in investing activities in 2022 was RMB16.0 billion (US$2.3 billion), primarily due to (i) purchase of short-term investment products of RMB9.6 billion (US$1.4 billion), while maturity of short-term investment products amounted to RMB6.7 billion (US$1.0 billion); (ii) purchase of property and equipment of RMB7.1 billion (US$1.1 billion), including the purchase of sorting hub facilities, office furnishing and furniture, trucks and sorting equipment; (iii) purchase of long-term investment products of RMB6.4 billion (US$926.3 million), while maturity of long-term investment products amounted to RMB284 million (US$41.2 million); (iv) purchase of land use rights in an amount of RMB345.0 million (US$50.0 million); and (v) cash received from disposal of equity investees and subsidiaries of RMB330.8 million (US$48.0 million), while payment for investments in equity investees amounted to RMB94.4 million (US$13.7 million). 115 Table of Contents Net cash used in investing activities in 2021 was RMB8.8 billion, primarily due to (i) purchase of short-term investment products of RMB13.2 billion, while maturity of short-term investment products amounted to RMB14.1 billion; (ii) purchase of property and equipment of RMB8.4 billion, including the purchase of sorting hub facilities, office furnishing and furniture, trucks and sorting equipment; (iii) purchase of land use rights in an amount of RMB967.3 million; and (iv) payment for investments in equity investees of RMB569.8 million, while disposal of equity investees and subsidiaries amounted to RMB100.5 million.
Net cash used in investing activities in 2022 was RMB16.0 billion, primarily due to (i) purchase of short-term investment products of RMB9.6 billion, while maturity of short-term investment products amounted to RMB6.7 billion; (ii) purchase of property and equipment of RMB7.1 billion, including the purchase of sorting hub facilities, office furnishing and furniture, trucks and sorting equipment; (iii) purchase of long-term investment products of RMB6.4 billion, while maturity of long-term investment products amounted to RMB284 million; (iv) purchase of land use rights in an amount of RMB345.0 million; and (v) cash received from disposal of equity investees and subsidiaries of RMB330.8 million, while payment for investments in equity investees amounted to RMB94.4 million. 113 Table of Contents Net cash used in investing activities in 2021 was RMB8.8 billion, primarily due to (i) purchase of short-term investment products of RMB13.2 billion, while maturity of short-term investment products amounted to RMB14.1 billion; (ii) purchase of property and equipment of RMB8.4 billion, including the purchase of sorting hub facilities, office furnishing and furniture, trucks and sorting equipment; (iii) purchase of land use rights in an amount of RMB967.3 million; and (iv) payment for investments in equity investees of RMB569.8 million, while disposal of equity investees and subsidiaries amounted to RMB100.5 million.
Other than as discussed above, we did not have any significant capital and other commitments, long-term obligations or guarantees as of December 31, 2022. Holding Company Structure ZTO Express (Cayman) Inc. is a holding company with no material operations of its own. We conduct our operations primarily through our wholly owned subsidiaries and the consolidated affiliated entities in China.
Other than as discussed above, we did not have any significant capital and other commitments, long-term obligations or guarantees as of December 31, 2023. Holding Company Structure ZTO is a holding company with no material operations of its own. We conduct our operations primarily through our wholly owned subsidiaries and the consolidated affiliated entities in China.
In addition, payments of dividends from our Hong Kong subsidiary to us are not subject to any Hong Kong withholding tax. 111 Table of Contents PRC Under the EIT Law, our PRC subsidiaries and the consolidated affiliated entities are in principle subject to enterprise income tax at a statutory rate of 25%.
In addition, payments of dividends from our Hong Kong subsidiary to us are not subject to any Hong Kong withholding tax. PRC Under the PRC Enterprise Income Tax Law, our PRC subsidiaries and the consolidated affiliated entities are in principle subject to enterprise income tax at a statutory rate of 25%.
Financing Activities Net cash provided by financing activities in 2022 was RMB7.1 billion (US$1.0 billion), which was mainly attributable to the following factors: (i) issuance of convertible bonds net of issuance cost paid and capped call option of RMB6.4 billion (US$930.3 million); (ii) payment of dividends of RMB1.3 billion (US$191.8 million); (iii) proceeds from short-term borrowings in an amount of RMB7.7 billion (US$1.1 billion), partially offset by the repayment of short-term borrowings of RMB5.9 billion (US$853.0 million); and (iv) share repurchase of RMB84.5 million (US$12.3 million).
Net cash provided by financing activities in 2022 was RMB7.1 billion, which was mainly attributable to the following factors: (i) issuance of convertible bonds net of issuance cost paid and capped call option of RMB6.4 billion; (ii) payment of dividends of RMB1.3 billion; (iii) proceeds from short-term borrowings in an amount of RMB7.7 billion, partially offset by the repayment of short-term borrowings of RMB5.9 billion; and (iv) share repurchase of RMB84.5 million.
Operating Activities Net cash provided by operating activities in 2022 was RMB11.5 billion (US$1.7 billion), which was mainly attributable to the following factors: (i) our express delivery services and other revenue streams generated net cash inflow of RMB35.9 billion (US$5.2 billion), while the aggregate cash outflow for transportation cost, sorting hubs operation cost, cost of accessories sold and other costs amounted to RMB14.5 billion (US$2.1 billion); (ii) cash flow in interest income of RMB306.2 million (US$44.4 million); (iii) cash in subsidy of RMB619.5 million (US$89.8 million); (iv) RMB9.1 billion (US$1.3 billion) paid for labor related costs, including salaries, social insurances and other benefits; (v) income tax of RMB1.3 billion (US$181.6 million); and (vi) RMB521.2 million (US$75.6 million) as other administrative costs.
Net cash provided by operating activities in 2022 was RMB11.5 billion, which was mainly attributable to the following factors: (i) our express delivery services and other revenue streams generated net cash inflow of RMB35.9 billion, while the aggregate cash outflow for transportation cost, sorting hubs operation cost, cost of accessories sold and other costs amounted to RMB14.5 billion; (ii) cash inflow of interest income of RMB306.2 million; (iii) cash inflow of subsidy of RMB619.5 million; (iv) RMB9.1 billion paid for labor related costs, including salaries, social insurances and other benefits; (v) cash outflow of income tax of RMB1.3 billion; and (vi) cash outflow of RMB521.2 million as other administrative costs.
E. Critical Accounting Estimates For our critical accounting estimates, see “Item 5. Operating And Financial Review And Prospects—Critical Accounting Estimates.” F. Safe Harbor See “Forward-Looking Statements” on page 4 of this annual report. ​ 117 Table of Contents
E. Critical Accounting Estimates For our critical accounting estimates, see “Item 5. Operating And Financial Review And Prospects—A. Operating Results—Critical Accounting Estimates.” F. Safe Harbor See “Forward-Looking Statements” on page 4 of this annual report. ​ 115 Table of Contents
Pursuant to the Announcement to Further Step up the Application of End-of-Period Excess Input Value-Added Tax Credit Refund Policies and the Announcement on Expanding the Scope of Industries Eligible for the Policy of Full Refund of Incremental VAT Credits, promulgated by the MOF and the STA respectively on March 21, 2022 and June 7, 2022, the end-of-period VAT credit refund policy shall be enhanced for “transport, warehousing and postal” and “residential services, repairs and other services” sectors.
Pursuant to the Announcement to Further Step up the Application of End-of-Period Excess Input Value-Added Tax Credit Refund Policies and the Announcement on Expanding the Scope of Industries Eligible for the Policy of Full Refund of Incremental VAT Credits, promulgated by the Ministry of Finance and the State Taxation Administration respectively on March 21, 2022 and June 7, 2022, the end-of-period VAT credit refund policy shall be enhanced for “transport, warehousing and postal” and “residential services, repairs and other services” sectors.
We charge our network partners a network transit fee for each parcel that is processed through our network. Such fees represented 83.7%, 83.2% and 85.1% of our total express delivery services revenues in 2020, 2021 and 2022, respectively.
We charge our network partners a network transit fee for each parcel that is processed through our network. Such fees represented 83.2%, 85.1% and 91.4% of our total express delivery services revenues in 2021, 2022 and 2023, respectively.
Operating Results—Results of Operations—Year Ended December 31, 2021 Compared to Year Ended December 31, 2020” of our annual report on Form 20-F filed with the Securities and Exchange Commission on April 28, 2022. Taxation We generate the majority of our operating income from our PRC operations.
Operating Results—Results of Operations—Year Ended December 31, 2022 Compared to Year Ended December 31, 2021” of our annual report on Form 20-F filed with the Securities and Exchange Commission on April 20, 2023. Taxation We generate the majority of our operating income from our PRC operations.
Our operating lease commitments consist of the commitments under the lease agreements for our office space, sorting hubs and warehouse facilities. We lease office space, sorting hubs and warehouse facilities under non-cancellable operating lease agreements that expire at various dates through December 2034.
Our operating lease commitments consist of the commitments under the lease agreements for our office space, sorting hubs and warehouse facilities. We lease office space, sorting hubs and warehouse facilities under non-cancellable operating lease agreements that expire at various dates through October 2037.
Other costs, which mainly include (i) information technology related cost, (ii) dispatching costs paid to network partners associated with serving enterprise customers, and (iii) business tax surcharges, accounted for 13.3%, 12.7% and 12.4% of our revenues in 2020, 2021 and 2022, respectively.
Other costs, which mainly include (i) information technology related cost, (ii) dispatching costs paid to network partners associated with serving enterprise customers, and (iii) business tax surcharges, accounted for 12.7%, 12.4% and 9.2% of our revenues in 2021, 2022 and 2023, respectively.
Under the Announcement on Clarifying the Value-added Tax Reduction and Exemption Policy for Small-scale VAT Taxpayers and Other Policies issued by the MOF and the STA on January 9, 2023, taxpayers in productive service industries are allowed to deduct the tax payable by 5% of the deductible input tax from January 1, 2023 to December 31, 2023.
Under the Announcement on Clarifying the Value-added Tax Reduction and Exemption Policy for Small-scale VAT Taxpayers and Other Policies issued by the Ministry of Finance and the State Taxation Administration on January 9, 2023, taxpayers in productive service industries are allowed to deduct the tax payable by 5% of the deductible input tax from January 1, 2023 to December 31, 2023.
Trend Information Other than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events since January 1, 2022 that are reasonably likely to have a material adverse effect on our net revenues, income, profitability, liquidity or capital resources, or that caused the disclosed financial information to be not necessarily indicative of future operating results or financial conditions.
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 period since January 1, 2024 that are reasonably likely to have a material effect on our revenues, income, profitability, liquidity or capital resources, or that would cause the disclosed financial information to be not necessarily indicative of future operating results or financial conditions.
Sorting hub cost includes (i) labor costs, (ii) land lease costs, (iii) depreciation of property and equipment and amortization of land use rights and (iv) other operating costs. Total sorting hub cost accounted for 20.7%, 22.3% and 22.2% of our revenues 2020, 2021 and 2022, respectively.
Sorting hub cost includes (i) labor costs, (ii) land lease costs, (iii) depreciation of property and equipment and amortization of land use rights and (iv) other operating costs. Total sorting hub cost accounted for 22.3%, 22.2% and 21.5% of our revenues 2021, 2022 and 2023, respectively.
Material cash requirements Our material cash requirements as of December 31, 2022 and any subsequent interim period primarily include our capital expenditures, capital commitments, operating lease commitments, investment commitments, short-term debt obligations and dividend payment.
Material Cash Requirements Our material cash requirements as of December 31, 2023 and any subsequent interim period primarily include our capital expenditures, capital commitments, operating lease commitments, investment commitments, short-term debt obligations, convertible senior notes obligations and dividend payment.
Such 25% EIT rate applies to most of our subsidiaries and consolidated affiliated entities established in China.
This 25% rate applies to most of our subsidiaries and consolidated affiliated entities established in China.
We intend to fund our future capital expenditures with our existing cash balance, proceeds from our public offering of Class A ordinary shares in relation to our listing on the Main Board of the Hong Kong Stock Exchange and other financing alternatives. We will continue to make capital expenditures to support the growth of our business.
We intend to fund our future capital expenditures with our existing cash balance, proceeds from our public offering of Class A ordinary shares in relation to our listing on the Main Board of the Hong Kong Stock Exchange, issuance of the 2027 Notes and other financing alternatives.
As of December 31, 2022, we also had operating lease liabilities amounting to RMB740.1 million (US$107.3 million), certain of which were secured by the rental deposits and all of which were unguaranteed. Our investment commitments primarily consist of our commitment to make capital contributions to certain equity investees.
As of December 31, 2023, we also had operating lease liabilities amounting to RMB714.9 million (US$100.7 million), certain of which were secured by the rental deposits and all of which were unguaranteed. Our investment commitments primarily consist of our commitment to make capital contributions to certain equity investees.
In connection with the purchases of property and equipment, purchases of land use rights and the expansion of our self-owned truck fleet and upgrade of our equipment and facilities, we incurred capital expenditures of an aggregate of approximately RMB9.2 billion and RMB9.3 billion and RMB7.4 billion (US$1.1 billion) in 2020, 2021 and 2022, respectively.
In connection with the purchases of property and equipment, purchases of land use rights, the expansion of our truck fleet and the upgrade of our equipment and facilities, we incurred capital expenditures of an aggregate of approximately RMB9.3 billion, RMB7.4 billion, and RMB6.7 billion (US$939.4 million) in 2021, 2022 and 2023, respectively.
Total line-haul transportation cost accounted for 34.5%, 37.8% and 35.3% of our revenues in 2020, 2021 and 2022, respectively. Since 2019, we increased usage of self-owned fleet with an increasing number of higher-capacity trailer trucks, especially during the peak season, resulting in improved transportation cost efficiencies.
Total line-haul transportation cost accounted for 37.8%, 35.3% and 35.4% of our revenues in 2021, 2022 and 2023, respectively. Since 2019, we increased usage of the vehicles that we own ourselves with an increasing number of higher-capacity trailer trucks, especially during the peak season, resulting in improved transportation cost efficiencies.
As of December 31, 2020, 2021 and 2022, our cash and cash equivalents, restricted cash and short-term investments were RMB18.0 billion, RMB12.6 billion and RMB18.3 billion (US$2.7 billion), respectively.
As of December 31, 2021, 2022 and 2023, our cash and cash equivalents, restricted cash and short-term investments were RMB12.6 billion, RMB18.3 billion, and RMB20.5 billion (US$2.9 billion), respectively.
Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Holding Company Structure.” In addition, we would need to accrue and pay withholding taxes currently at the rate of 10% if we were to distribute funds from our subsidiaries and the consolidated affiliated entities in China to our offshore subsidiaries.
Liquidity and Capital Resources—Holding Company Structure.” In addition, we would need to accrue and pay withholding taxes if we were to distribute funds from our subsidiaries and the consolidated affiliated entities in China to our offshore subsidiaries.
Pursuant to the Announcement on the VAT Exemption Policy for Express Courier Services promulgated by the MOF and the STA on April 29, 2022, from May 1, 2022 to December 31, 2022, taxpayers are exempt from value-added tax on income derived from providing express collection and delivery services for essential daily necessities to residents.
Pursuant to the then effective Announcement on the VAT Exemption Policy for Express Courier Services promulgated by the Ministry of Finance and the State Taxation Administration on April 29, 2022, from May 1, 2022 to December 31, 2022, taxpayers were exempt from value-added tax on income derived from providing express collection and delivery services for essential daily necessities to residents.
Our parcel volume is also affected by our ability to scale our network to meet increases in demand and the ability of our network partners and us to provide high-quality services to our end customers at a competitive price. Our annual parcel volume increased from 22,289 million in 2021 to 24,389 million in 2022.
Our parcel volume is also affected by our ability to scale our network to meet increases in demand and the ability of our network partners and us to provide high-quality services to our end customers at a competitive price.
Our selling, general and administrative expenses also included share-based compensation expenses of RMB264.2 million, RMB248.0 million and RMB179.0 million (US$26.0 million) in 2020, 2021 and 2022, respectively, which accounted for 1.0%, 0.8% and 0.5% of our revenues in the corresponding periods.
Our selling, general and administrative expenses also included share-based compensation expenses of RMB248.0 million, RMB179.0 million and RMB255.0 million (US$35.9 million) in 2021, 2022 and 2023, respectively, which accounted for 0.8%, 0.5% and 0.7% of our revenues in the corresponding periods.
Under Circular 39 and the Announcement on Relevant Value-added Tax Policies for Promoting the Relief and Development of Stranded Industries in Service Sector issued by the MOF and the STA on March 3, 2022, during the period from April 1, 2019 to December 31, 2022, certain qualified service industry taxpayers can enjoy an extra 10% for deduction of the tax payable, which is calculated based on the input VAT filed with the tax bureau.
Under Circular 39 and the then effective Announcement on Relevant Value-added Tax Policies for Promoting the Relief and Development of Stranded Industries in Service Sector issued by the Ministry of Finance and the State Taxation Administration on March 3, 2022, during the period from April 1, 2019 to December 31, 2022, taxpayers of manufacturing and living service industries enjoyed an extra 10% for deduction of the tax payable, which is calculated based on the input VAT filed with the tax bureau.
The expected credit loss recognized for financing receivables was RMB20.6 million, RMB19.7 million and RMB35.5 million (US$5.1 million) for the years ended December 31, 2020, 2021 and 2022, respectively.
The expected credit loss recognized for financing receivables was RMB19.7 million, RMB35.5 million and RMB50.9 million (US$7.2 million) for the years ended December 31, 2021, 2022 and 2023, respectively.
In addition, the Cayman Islands and the British Virgin Islands do not impose withholding tax on dividend payments. Hong Kong Under the current Hong Kong Inland Revenue Ordinance, our subsidiaries domiciled in Hong Kong have introduced a two-tiered profits tax rate regime which is applicable to any year of assessment commencing on or after April 1, 2018.
The Cayman Islands and the British Virgin Islands Under the current laws of the Cayman Islands and the British Virgin Islands, we are not subject to tax on our income or capital gains. 109 Table of Contents Hong Kong Under the current Hong Kong Inland Revenue Ordinance, our subsidiaries domiciled in Hong Kong have introduced a two-tiered profits tax rate regime which is applicable to any year of assessment commencing on or after April 1, 2018.
Net cash provided by operating activities in 2020 was RMB5.0 billion, which was mainly attributable to the following factors: (i) our express delivery services and other revenue streams generated net cash inflow of RMB23.5 billion, while the aggregate cash outflow for transportation cost, sorting hubs operation cost, cost of accessories sold and other costs amounted to RMB11.8 billion; (ii) cash flow in interest income of RMB521.0 million; (iii) cash in subsidy of RMB409.4 million; (iv) RMB6.3 billion paid for labor related costs, including salaries, social insurances and other benefits; (v) income tax of RMB1.0 billion; and (vi) RMB410.8 million as other administrative costs.
Operating Activities Net cash provided by operating activities in 2023 was RMB13.4 billion (US$1.9 billion), which was mainly attributable to the following factors: (i) our express delivery services and other revenue streams generated net cash inflow of RMB38.8 billion (US$5.5 billion), while the aggregate cash outflow for transportation cost, sorting hubs operation cost, cost of accessories sold and other costs amounted to RMB15.8 billion (US$2.2 billion); (ii) RMB8.8 billion (US$1.2 billion) paid for labor related costs, including salaries, social insurances and other benefits; (iii) cash outflow of income tax of RMB1.7 billion (US$235.5 million); (iv) cash inflow of interest income of RMB899.5 million (US$126.7 million); (v) cash inflow of subsidy of RMB674.4 million (US$95.0 million); and (vi) cash outflow of RMB594.0 million (US$83.7 million) as other administrative costs.
We had a financing receivables balance of RMB2,524.4 million and RMB2,247.1 million (US$325.8 million) as of December 31, 2021 and 2022. No material default occurred in 2020, 2021 and 2022. RMB63.6 million and RMB99.1 million (US$14.4 million) of allowance of credit losses relating to financing receivables were recorded as of December 31, 2021 and 2022, respectively.
We had a financing receivables balance of RMB2,247.1 million and RMB2,100.2 million (US$295.8 million) as of December 31, 2022 and 2023. No material default occurred in 2021, 2022 and 2023. RMB99.1 million and RMB150.0 million (US$21.1 million) of allowance of credit losses relating to financing receivables were recorded as of December 31, 2022 and 2023, respectively.
We were obligated to pay RMB25.6 million (US$3.7 million) for certain investment in equity investees as of December 31, 2022 with payment due within three years. 116 Table of Contents As of December 31, 2022, we had outstanding principal amount of short-term bank borrowings of RMB5.4 billion (US$782.1 million), among which RMB3.4 billion (US$493.0 million) were unsecured and unguaranteed.
We were obligated to pay RMB20.2 million (US$2.8 million) for certain investment in equity investees as of December 31, 2023 with payment due within three years. As of December 31, 2023, we had outstanding principal amount of short-term bank borrowings of RMB7.8 billion (US$1.1 billion), among which RMB6.7 billion (US$937.8 million) were unsecured and unguaranteed.
The table below sets forth the maturity profiles of our financing receivables before provision of credit losses as of December 31, 2022. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December Within One to Two to Over three ​ ​ 31, 2022 ​ one year ​ two years ​ three years ​ years ​ Total Balance (RMB in thousands) 2,346,212 1,010,117 763,024 506,124 66,947 ​ Percentage of Total Balance 100 ​ 43.0 ​ 32.5 ​ 21.6 ​ 2.9 ​ ​ Recently Issued Accounting Pronouncement A list of recently issued accounting pronouncements that are relevant to us is included in Note 2(aa) “Recently issued accounting pronouncement” to our audited consolidated financial statements included elsewhere in this annual report.
The table below sets forth the maturity profiles of our financing receivables before provision of credit losses as of December 31, 2023. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Within One to Two to Over three ​ ​ December 31, 2023 ​ one year ​ two years ​ three years ​ years ​ Total Balance (RMB in thousands) 2,250,274 1,228,630 585,654 435,990 — ​ Percentage of Total Balance 100.0 ​ 54.6 ​ 26.0 ​ 19.4 ​ — ​ ​ Recently Issued Accounting Pronouncement A list of recently issued accounting pronouncements that are relevant to us is included in Note 2(aa) “Recently issued accounting pronouncement” to our audited consolidated financial statements included elsewhere in this annual report. 111 Table of Contents B.
Our capital commitments primarily relate to commitments on construction of office building, sorting hubs and warehouse facilities. Our capital commitments as of December 31, 2022 amounted to RMB5.2 billion (US$0.8 billion). All of these capital commitments will be fulfilled based on the construction progress.
We will continue to make capital expenditures to support the growth of our business. Our capital commitments primarily relate to commitments on construction of office building, sorting hubs and warehouse facilities. Our capital commitments as of December 31, 2023 amounted to RMB4.6 billion (US$647.0 million). All of these capital commitments will be fulfilled based on the construction progress.
The following table sets forth the components of our cost of revenues, in absolute amounts and as percentages of our revenues for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2020 ​ 2021 ​ 2022 ​ RMB % RMB % RMB US$ % ​ ​ (in thousands) Line-haul transportation cost ​ 8,697,081 34.5 11,487,810 37.8 12,480,170 1,809,454 35.3 Sorting hub cost ​ 5,224,544 20.7 6,774,595 22.3 7,845,491 1,137,489 22.2 Freight forwarding cost ​ 1,712,592 6.8 1,326,557 4.4 1,137,140 164,870 3.2 Cost of accessories sold ​ 391,253 1.6 349,647 1.1 463,448 67,194 1.3 Other costs ​ 3,351,714 13.3 3,877,853 12.7 4,411,472 639,604 12.4 Total cost of revenues ​ 19,377,184 76.9 23,816,462 78.3 26,337,721 3,818,611 74.4 ​ Line-haul transportation cost primarily includes (i) payment for services by outsourced fleets, (ii) truck fuel costs and tolls incurred by self-owned fleet, (iii) employee compensation and other benefits for drivers of self-owned fleet, (iv) air transportation cost and (v) depreciation and maintenance costs of self-owned fleet.
The following table sets forth the components of our cost of revenues, in absolute amounts and as percentages of our revenues for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2021 ​ 2022 ​ 2023 ​ RMB % RMB % RMB US$ % ​ ​ (in thousands) Line-haul transportation cost ​ 11,487,810 37.8 12,480,170 35.3 13,591,627 1,914,341 35.4 Sorting hub cost ​ 6,774,595 22.3 7,845,491 22.2 8,253,522 1,162,484 21.5 Freight forwarding cost ​ 1,326,557 4.4 1,137,140 3.2 854,533 120,358 2.2 Cost of accessories sold ​ 349,647 1.1 463,448 1.3 513,391 72,310 1.3 Other costs ​ 3,877,853 12.7 4,411,472 12.4 3,543,316 499,066 9.2 Total cost of revenues ​ 23,816,462 78.3 26,337,721 74.4 26,756,389 3,768,559 69.6 ​ Line-haul transportation cost primarily includes (i) payment for services by outsourced fleets, (ii) truck fuel costs and tolls incurred by the vehicles we own, (iii) employee compensation and other benefits for drivers of the vehicles we own, (iv) air transportation cost and (v) depreciation and maintenance costs of the vehicles we own.
Our sorting hub cost increased by 15.8% to RMB7.8 billion (US$1.1 billion) in 2022 from RMB6.8 billion in 2021.
Our sorting hub cost increased by 5.2% to RMB8.3 billion (US$1.2 billion) in 2023 from RMB7.8 billion in 2022.
Our foreign currency exchange gain or loss increased from the loss of RMB56.5 million in 2021 to the gain of RMB147.3 million (US$21.4 million) in 2022, mainly due to the appreciation of the onshore U.S. dollar-denominated bank deposits against the Chinese Renminbi.
Our foreign currency exchange gain decreased from the gain of RMB147.3 million in 2022 to the gain of RMB93.5 million (US$13.2 million) in 2023, mainly due to the decrease in the onshore U.S. dollar-denominated bank deposits, partially offset by the appreciation of U.S. dollar against Renminbi.
We determine the level of pricing of our network transit fee based on the operating costs of our business while also considering other factors, including market conditions and competition as well as our service quality.
Our annual parcel volume increased from 22,289 million in 2021 to 24,389 million in 2022 and further to 30,202 million in 2023. We determine the level of pricing of our network transit fee based on the operating costs of our business while also considering other factors, including market conditions and competition as well as our service quality.
Net cash used in investing activities in 2020 was RMB3.5 billion, primarily due to (i) purchase of short-term investment products of RMB9.7 billion, while maturity of short-term investment products amounted to RMB17.0 billion; (ii) purchase of property and equipment of RMB7.2 billion, including the purchase of sorting hub facilities, office furnishing and furniture, trucks and sorting equipment; (iii) purchase of land use rights in an amount of RMB2.0 billion; and (iv) payment for investments in equity investees of RMB238.4 million, while disposal of equity investees amounted to RMB6.3 million.
Investing Activities Net cash used in investing activities in 2023 was RMB12.3 billion (US$1.7 billion), primarily due to (i) purchase of short-term investment products of RMB11.3 billion (US$1.6 billion), while maturity of short-term investment products amounted to RMB9.8 billion (US$1.4 billion); (ii) purchase of long-term investment products of RMB10.1 billion (US$1.4 billion), while maturity of long-term investment products amounted to RMB5,240.7 million (US$738.1 million); (iii) purchase of property and equipment of RMB6.5 billion (US$919.6 million), including the purchase of sorting hub facilities, office furnishing and furniture, trucks and sorting equipment; (iv) cash received from disposal of equity investees and subsidiaries and others of RMB476.9 million (US$67.2 million); and (v) purchase of land use rights in an amount of RMB140.9 million (US$19.9 million).
In 2022, we entered into bank loan contracts and discounted notes arrangements with several banks with an aggregate amount of RMB7.7 billion (US$1.1 billion). The weighted average interest rate of borrowings drawn was 2.21% in 2022.
In 2023, we entered into bank loan contracts and discounted notes arrangements with several banks with an aggregate amount of RMB12.3 billion (US$1.7 billion). The weighted average interest rate of borrowings drawn was 1.6% in 2023. ​ 114 Table of Contents Our convertible senior notes obligations represent the principal amount and cash interests in connection with our 2027 Notes.
Judgment is required to determine the allowance amounts and whether such amounts are adequate to cover potential credit losses, and periodic reviews are performed to ensure such amounts continue to reflect the best estimate of the losses inherent in the outstanding portfolio of loans. 113 Table of Contents We have developed a forward looking CECL model based on the conditions of collaterals and guarantees for financing receivables, historical experiences, credit quality of the borrowers, current economic conditions and the borrowers’ operating results, reasonable and supportable forecasts of future economic conditions, and other factors that may affect its ability to collect from the borrowers.
We have developed a forward looking current expected credit loss model based on the conditions of collaterals and guarantees for financing receivables, historical experiences, credit quality of the borrowers, current economic conditions and the borrowers’ operating results, reasonable and supportable forecasts of future economic conditions, and other factors that may affect its ability to collect from the borrowers.
Income tax liability is calculated based on a separate return basis as if we had filed separate tax returns for all the periods presented. The Cayman Islands and the British Virgin Islands Under the current laws of the Cayman Islands and the British Virgin Islands, we are not subject to tax on our income or capital gains.
Income tax liability is calculated based on a separate return basis as if we had filed separate tax returns for all the periods presented.
Net cash provided by financing activities in 2020 was RMB8.3 billion, which was mainly attributable to the following factors: (i) proceeds of RMB9.8 billion from issuance of ordinary shares in connection with our secondary listing in Hong Kong; (ii) payment of dividends of RMB1.6 billion; (iii) share repurchase of RMB1.2 billion; and (iv) proceeds from short-term borrowings in an amount of RMB2.3 billion, partially offset by the repayment of short-term borrowings of RMB870.0 million.
Financing Activities Net cash used in financing activities in 2023 was RMB769.8 million (US$108.4 million), which was mainly attributable to the following factors: (i) payment of dividends of RMB2.1 billion (US$291.9 million); and (ii) proceeds from short-term borrowings in an amount of RMB12.3 billion (US$1.7 billion), partially offset by the repayment of short-term borrowings of RMB9.9 billion (US$1.4 billion); and (iii) share repurchase of RMB1,006.5 million (US$141.8 million).
Our effective tax rate in 2022 was 19.7%, compared to 17.5% in 2021. Net Income Our net income increased to RMB6,659.0 million (US$965.5 million) in 2022 from RMB4.7 billion in 2021 primarily as a result of the foregoing.
Net Income Our net income increased to RMB8,754.5 million (US$1,233.0 million) in 2023 from RMB6,659.0 million in 2022 primarily as a result of the foregoing.
We are exploring new service offerings to capture existing and new market growth opportunities, including cross-border e-commerce, less-than-truckload logistics and backhaul trucking logistics of agricultural products. We also plan to expand our customer base across different segments and industries. IMPACT OF COVID-19 ON OUR OPERATIONS AND FINANCIAL PERFORMANCE Substantially all of our revenues and workforce are concentrated in China.
Our ability to broaden service offerings and diversify customer base Our results of operations are also affected by our ability to introduce new service offerings and expand and further penetrate our customer base. We are exploring new service offerings to capture existing and new market growth opportunities, including cross-border e-commerce, less-than-truckload logistics and backhaul trucking logistics of agricultural products.
This increase primarily resulted from increases in line-haul transportation cost by 8.6% to RMB12.5 billion (US$1.8 billion), sorting hub operating cost by 15.8% to RMB7.8 billion (US$1.1 billion), other costs by 13.8% to RMB4.4 billion (US$0.6 billion), and cost of accessories sold by 32.5% to RMB 463.4 million (US$67.2 million) Line-haul transportation cost.
This increase primarily resulted from increases in line-haul transportation cost by 8.9% to RMB13.6 billion (US$1.9 billion), sorting hub operating cost by 5.2% to RMB8.3 billion (US$1.2 billion), and cost of accessories sold by 10.8% to RMB513.4 million (US$72.3 million), partially offset by the decrease in other costs by 19.7% to RMB3,543.3 million (US$499.1 million). Line-haul transportation cost.
The specific scope of express collection and delivery services shall be implemented in accordance with the Notes on Sales Services, Intangible Assets and Real Estate (Cai Shui [2016] No. 36). Critical Accounting Estimates We prepare our consolidated financial statements in conformity with U.S.
The specific scope of express collection and delivery services shall be implemented in accordance with the Notice on Comprehensively Implementing the Pilot Program of Replacing Business Tax with Valued-Added Tax. 110 Table of Contents Critical Accounting Estimates We prepare our consolidated financial statements in conformity with U.S.
Our line-haul transportation cost was RMB12.5 billion (US$1.8 billion) in 2022, an increase from RMB11.5 billion in 2021. The line-haul transportation cost per parcel decreased RMB1.0 cent to RMB0.51. The decrease was primarily due to improved operating efficiency through increased usage of high-capacity vehicles and better route planning offset by the increase of diesel price. Sorting hub cost.
Our line-haul transportation cost was RMB13.6 billion (US$1.9 billion) in 2023, an increase from RMB12.5 billion in 2022. The line-haul transportation cost per parcel decreased 6 cents to RMB0.45. The decrease was primarily due to better economies of scale, optimized line-haul route planning and decreased fuel price. Sorting hub cost.
Gross Profit Our gross profit increased by 37.2% to RMB9.0 billion (US$1.3 billion) in 2022 from RMB6.6 billion in 2021, primarily attributable to the combined effect of 9.4% parcel volume growth and 8.1% parcel unit price increase, offsetting 1.1% unit cost increase.
Gross Profit Our gross profit increased by 29.0% to RMB11.7 billion (US$1.6 billion) in 2023 from RMB9.0 billion in 2022, primarily attributable to 23.8% parcel volume growth and 18.0% unit cost productivity gain partially offsetting overall unit price per parcel decline of 11.3% due to competition. The parcel volume growth resulted mainly from an increase in our market share.
Short-term investments consist primarily of dual currency notes and deposits, investments in fixed deposits with maturities between three months and one year and wealth management products which we have the intent and the ability to hold to maturity within one year.
Short-term investment primarily comprises of interest rate swaps, dual currency notes/deposits, time deposits with maturities between three months and one year, and investments in wealth management products with variable interest rates.
The incurrence of indebtedness would result in increased fixed obligations and could result in operating covenants that may restrict our operations and ability to make distributions. However, financing may not be available in amounts or on terms acceptable to us, if at all.
The issuance and sale of additional equity would result in further dilution to our existing shareholders. The incurrence of indebtedness would result in increased fixed obligations and could result in operating covenants that may restrict our operations and ability to make distributions.
Liquidity and Capital Resources The following table sets forth the movements of our cash, cash equivalents and restricted cash for the periods presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2020 ​ 2021 ​ 2022 ​ RMB RMB RMB US$ ​ ​ (in thousands) Summary Consolidated Cash Flow Data: Net cash provided by operating activities 4,950,749 7,220,217 11,479,308 1,664,343 Net cash used in investing activities (3,549,341) (8,756,533) (16,041,890) (2,325,855) Net cash provided by/(used in) financing activities 8,337,407 (2,903,985) 7,058,202 1,023,343 Effect of exchange rate changes on cash, cash equivalents and restricted cash (656,137) (150,430) 338,106 49,021 Net increase/(decrease) in cash, cash equivalents and restricted cash ​ 9,082,678 (4,590,731) 2,833,726 410,852 Cash, cash equivalents and restricted cash at beginning of year 5,277,414 14,360,092 9,769,361 1,416,424 Cash, cash equivalents and restricted cash at end of year 14,360,092 9,769,361 12,603,087 1,827,276 ​ Our principal sources of liquidity have been proceeds from cash flows from operating activities and financing activities.
Liquidity and Capital Resources The following table sets forth the movements of our cash, cash equivalents and restricted cash for the periods presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2021 ​ 2022 ​ 2023 ​ RMB RMB RMB US$ ​ ​ (in thousands) Summary Consolidated Cash Flow Data: Net cash provided by operating activities 7,220,217 11,479,308 13,360,967 1,881,851 Net cash used in investing activities (8,756,533) (16,041,890) (12,252,751) (1,725,762) Net cash (used in)/provided by financing activities (2,903,985) 7,058,202 (769,836) (108,429) Effect of exchange rate changes on cash, cash equivalents and restricted cash (150,430) 338,106 109,843 15,471 Net increase/(decrease) in cash, cash equivalents and restricted cash ​ (4,590,731) 2,833,726 448,223 63,131 Cash, cash equivalents and restricted cash at beginning of year 14,360,092 9,769,361 12,603,087 1,775,107 Cash, cash equivalents and restricted cash at end of year 9,769,361 12,603,087 13,051,310 1,838,238 ​ Our principal sources of liquidity have been proceeds from cash flows from operating activities and financing activities in the past three years. ● In September 2020, we raised approximately HK$11.1 billion (US$1.4 billion) from the public offering of Class A ordinary shares in connection with our secondary listing in Hong Kong, after deducting underwriting commissions and the offering expenses payable by us. ● In September 2022, we completed an offering of US$1 billion in aggregate principal amount of convertible senior notes due 2027, or the 2027 Notes.
Interest income increased to RMB503.7 million (US$73.0 million) in 2022 from RMB363.9 million in 2021, primarily due to the increased average daily balance of cash and interest-earning bank deposits. Interest expense. Our interest expense increased to RMB190.5 million (US$27.6 million) in 2022 from RMB126.5 million in 2021, primarily due to increased short-term bank borrowings during 2022. Foreign currency exchange gain.
Other Income and Expenses Interest income. Interest income increased to RMB706.8 million (US$99.5 million) in 2023 from RMB503.7 million in 2022, primarily due to the increased average daily balance of cash and interest-earning bank deposits. Interest expense.
Risk Factors—Risks Related to Our Business and Industry—We face risks related to severe weather conditions and other natural disasters, health epidemics and other outbreaks, such as the outbreak of COVID-19, which could significantly disrupt our operations and adversely affect our business, financial condition or results of operations.” 106 Table of Contents Key Line Items and Specific Factors Affecting Our Results of Operations Revenues Revenues ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2020 ​ 2021 ​ 2022 ​ RMB % RMB % RMB US$ % ​ ​ (in thousands) Express delivery services ​ 21,900,201 86.9 27,450,922 90.3 32,575,698 4,723,032 92.1 Freight forwarding services ​ 1,862,689 7.4 1,529,601 5.0 1,212,677 175,822 3.4 Sale of accessories ​ 1,133,712 4.5 1,231,283 4.0 1,384,674 200,759 3.9 Others ​ 317,688 1.2 194,033 0.7 203,947 29,569 0.6 Total revenues ​ 25,214,290 100.0 30,405,839 100.0 35,376,996 5,129,182 100.0 ​ We derive a substantial part of our revenues from express delivery services that we provide to our network partners, which mainly include parcel sorting and line-haul transportation.
We also plan to expand our customer base across different segments and industries. 104 Table of Contents Key Line Items and Specific Factors Affecting Our Results of Operations Revenues Revenues ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2021 ​ 2022 ​ 2023 ​ RMB % RMB % RMB US$ % ​ ​ (in thousands) Express delivery services ​ 27,450,922 90.3 32,575,698 92.1 35,488,060 4,998,389 92.4 Freight forwarding services ​ 1,529,601 5.0 1,212,677 3.4 906,802 127,720 2.4 Sale of accessories ​ 1,231,283 4.0 1,384,674 3.9 1,876,624 264,317 4.9 Others ​ 194,033 0.7 203,947 0.6 147,429 20,765 0.3 Total revenues ​ 30,405,839 100.0 35,376,996 100.0 38,418,915 5,411,191 100.0 ​ We derive a substantial part of our revenues from express delivery services that we provide to our network partners, which mainly include parcel sorting and line-haul transportation.
For instance, we have the ability to allocate sorting capacity among adjacent sorting hubs, and our network partners have flexibility to add temporary workers.
For instance, we have the ability to allocate sorting capacity among adjacent sorting hubs, and our network partners have flexibility to add temporary workers. The scalability of our business model has helped us expand geographic coverage and capture incremental growth in parcel volume, as well as improve operating efficiencies.
Cost of accessories sold as a percentage of our revenues from sale of accessories was 34.5%, 28.4% and 33.5% in 2020, 2021 and 2022, respectively. The decrease from 2020 to 2021 was mainly due to the increased use of lower-cost single-sheet thermal waybill paper starting in the second half of 2019.
Cost of accessories sold as a percentage of our revenues from sale of accessories was 28.4%, 33.5% and 27.4% in 2021, 2022 and 2023, respectively.
Remittance of dividends by a wholly foreign-owned company out of China is subject to examination by the banks designated by SAFE. We currently plan to reinvest all earnings from our PRC subsidiaries to their business development and do not plan to request dividend distributions from them. C. Research and Development, Patents and Licenses, Etc. See “Item 4.
Remittance of dividends by a wholly foreign-owned company out of China is subject to examination by the banks designated by the State Administration of Foreign Exchange. C. Research and Development, Patents and Licenses, Etc. See “Item 4. Information on the Company—B. Business Overview—Information Technology and Intellectual Property.” D.
The increase was mainly driven by a 9.4% increase in parcel volume to 24,389 million in 2022 from 22,289 million in 2021 and an 8.1% increase in parcel unit price as a result of stabilized industry pricing, improved product mix, and an increase in our market share.
The increase was mainly driven by a 23.8% increase in parcel volume to 30,202 million in 2023 from 24,389 million in 2022 as a result of an increase in our market share. It was also largely offset by a 11.3% decrease in unit price per parcel mainly resulting from increase in volume incentives.
Operating Expenses Our total operating expenses increased by 19.92% to RMB1,302.8 million (US$188.9 million) in 2022 from RMB1,086.4 million in 2021. Selling, general and administrative expenses. Our selling, general and administrative expenses increased by 10.7% to RMB2,077.4 million (US$301.2 million) in 2022 from RMB1,875.9 million in 2021.
Operating Expenses Our total operating expenses increased by 27.0% to RMB1,654.6 million (US$233.0 million) in 2023 from RMB1,302.8 million in 2022. ​ 108 Table of Contents Selling, general and administrative expenses. Our selling, general and administrative expenses increased by 16.7% to RMB2,425.3 million (US$341.6 million) in 2023 from RMB2,077.4 million in 2022.
Although we consolidate the results of the consolidated affiliated entities, we only have access to the assets or earnings of the consolidated affiliated entities through our contractual arrangements with ZTO Express. See “Item 4. Information on the Company—C. Organizational Structure.” For restrictions and limitations on our liquidity and capital resources as a result of our corporate structure, see “Item 5.
However, financing may not be available in amounts or on terms acceptable to us, if at all. ​ 112 Table of Contents Although we consolidate the results of the consolidated affiliated entities, we only have access to the assets or earnings of the consolidated affiliated entities through our contractual arrangements with ZTO Express. See “Item 4. Information on the Company—C.
The scalability of our business model has helped us expand geographic coverage and capture incremental growth in parcel volume, as well as improve operating efficiencies. 105 Table of Contents Our continued investment in infrastructure, technology and people We continue to invest in our sorting hubs and line-haul fleets, as well as technology infrastructure and people, particularly talent in overall management, business operation and information technology.
Our continued investment in infrastructure, technology and people We continue to invest in our sorting hubs and line-haul fleets, as well as technology infrastructure and people, particularly talent in overall management, business operation and information technology. We expect our continued investments to further improve our parcel handling capacity, increase market penetration, and enhance customer services and operational efficiency.
The increase was mainly due to (i) an increase of RMB537.9 million (US$78.0 million) in labor-associated costs as a result of wage and headcount increases, and (ii) an increase of RMB344.1 million (US$49.9 million) in depreciation and amortization costs from increased number of installed automated sorting equipment and facilities.
The increase was mainly due to (i) RMB242.3 million (US$34.1 million) increase in labor-associated costs, a net result of wage increases partially offset by automation-driven efficiency improvement, and (ii)RMB245.7 million (US$34.6 million) increase in depreciation and amortization costs associated with automated equipment and other facilities.
However, we may decide to enhance our liquidity position or increase our cash reserve for future expansions and acquisitions through additional financing activities. The issuance and sale of additional equity would result in further dilution to our existing shareholders.
We believe that our existing cash and cash equivalents and anticipated cash flow from operations are sufficient to fund our operating activities, capital expenditures and other obligations for at least the next 12 months. However, we may decide to enhance our liquidity position or increase our cash reserve for future expansions and acquisitions through additional financing activities.
According to the Circular of Taxation on the Preferential Enterprise Income Tax Policies and Catalogue for Hengqin New Area of Guangdong Province, Pingtan Comprehensive Experimental Area of Fujian Province and Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone of Shenzhen City issued by the MOF and the STA on March 25, 2014, enterprise income tax is reduced to 15% for enterprises registered in Hengqin New Area of Guangdong Province, Pingtan Comprehensive Experimental Area of Fujian Province and Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone of Shenzhen City if their primary businesses fall within the “encouraged” category of the policy. 112 Table of Contents Under Circular 36, our PRC subsidiaries and the consolidated affiliated entities are subject to VAT, at a rate of 6% to 17% (which has been reduced to 13% after April 1, 2019 pursuant to Circular 39) on proceeds received from customers and are entitled to a refund for VAT already paid or borne on the goods or services purchased by it and utilized in the production of goods or provisions of services that have generated the gross sales proceeds.
Under Circular 36, our PRC subsidiaries and the consolidated affiliated entities are subject to VAT, at a rate of 6% to 17% on proceeds received from customers and are entitled to a refund for VAT already paid or borne on the goods or services purchased by it and utilized in the production of goods or provisions of services that have generated the gross sales proceeds.
Cost of Revenues Our total cost of revenues increased by 10.6% to RMB26.3 billion (US$3.8 billion) in 2022 from RMB23.8 billion in 2021.
Revenue from sales of accessories, largely consisting of the sales of thermal paper used for digital waybills, increased by 35.5% in line with parcel volume growth. Cost of Revenues Our total cost of revenues increased by 1.6% to RMB26.8 billion (US$3.8 billion) in 2023 from RMB26.3 billion in 2022.
As of December 31, 2022, approximately 71.6% of our cash and cash equivalents, restricted cash and short-term investments were held by subsidiaries and affiliated entities incorporated in China, and approximately 62.8% of our cash and cash equivalents, restricted cash and short-term investments were denominated in Renminbi. 114 Table of Contents We believe that our existing cash and cash equivalents and anticipated cash flow from operations are sufficient to fund our operating activities, capital expenditures and other obligations for at least the next 12 months.
As of December 31, 2023, approximately 91.8% of our cash and cash equivalents, restricted cash and short-term investments were held by subsidiaries and affiliated entities incorporated in China, and approximately 85.4% of our cash and cash equivalents, restricted cash and short-term investments were denominated in Renminbi.
Other operating income mainly consisted of (i) government subsidies and tax rebate of RMB346.1 million (US$50.2 million), (ii) RMB273.4 million (US$39.6 million) of VAT super deduction, and (iii) RMB95.2 million (US$ 13.8 million) of rental income from self-owned facilities. Other Income and Expenses Interest income.
Other operating income, net. We had a net other operating income of RMB770.7 million (US$108.5 million) in 2023, compared with RMB774.6 million in 2022. Other operating income mainly consisted of (i) RMB397.0 million (US$55.9 million) of government subsidies and tax rebates, (ii) RMB277.4 million (US$39.1 million) of VAT super deduction, and (iii) RMB122.0 million (US$17.2 million) of rental income.
Our cost of accessories sold increased by 32.5% to RMB463.4 million (US$67.2 million) in 2022 from RMB349.6 million in 2021. Other costs.
With standardization in operating procedures, improved performance evaluation system, the unit sorting cost decreased 15.0% or 5 cents. Cost of accessories sold. Our cost of accessories sold increased by 10.8% to RMB513.4 million (US$72.3 million) in 2023 from RMB463.4 million in 2022. Other costs.
On March 14, 2023, our board of directors approved a special dividend of US$0.37 per ADS or share for 2022, and will be paid to shareholders of record as of the close of business on April 6, 2023 with a total payment amount of US$299.3 million.
Risk Factors—Risks Related to Our Business and Industry—If we cannot obtain sufficient cash when we need it, we may not be able to meet our payment obligations under our notes.” On March 19, 2024, our board of directors approved a cash dividend of US$0.62 per ADS or share for 2023 to holders of ADSs and ordinary shares of record as of the close of business on April 10, 2024.
On the other hand, our cost productivity decreased during the year primarily due to lower-than-expected volume growth triggered mainly by the recurring pandemic, resulting in underutilized labor, equipment and facilities resources. As a result, our gross profit margin increased to 25.6% in 2022 from 21.7% in 2021.
On the other hand, our cost productivity improved during the period primarily because of the continued adoption of cost efficient and innovative measures in transportation and sorting, such as the use of high-capacity trucks and automated sorting equipment. As a result, our gross profit margin increased to 30.4% in 2023 from 25.6% in 2022.
Removed
We expect our continued investments to further improve our parcel handling capacity, increase market penetration, and enhance customer services and operational efficiency. Our ability to broaden service offerings and diversify customer base Our results of operations are also affected by our ability to introduce new service offerings and expand and further penetrate our customer base.
Added
KA revenue including delivery fees from direct sales organizations, established to serve core express KA customers, decreased by 37.3% through either re-engagement of partner outlets for fulfilment or rationalization due to loss-making. Revenue from freight forwarding services decreased by 25.2% compared to 2022, mainly due to post-pandemic e-commerce price decline.

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Biggest changeOther individuals as a group were granted outstanding restricted share units representing a total of 1,146,966 Class A ordinary shares as of March 31, 2023. ​ ​ ​ ​ ​ ​ Ordinary Shares ​ ​ ​ Underlying Restricted ​ ​ Name ​ Share Units Awarded ​ Date of Grant Meisong Lai ​ * ​ March 28, 2017 ​ ​ ​ ​ March 7, 2018 ​ ​ ​ ​ March 11, 2019 ​ ​ ​ March 13, 2020 ​ ​ ​ ​ March 16, 2021 ​ ​ ​ ​ March 15,2022 ​ ​ ​ ​ March 14, 2023 Jianfa Lai ​ * ​ March 28, 2017 ​ ​ ​ ​ March 7, 2018 ​ ​ ​ March 11, 2019 ​ ​ ​ ​ March 13, 2020 ​ ​ ​ ​ March 16, 2021 ​ ​ ​ ​ March 15, 2022 ​ ​ ​ ​ March 14, 2023 Jilei Wang ​ * ​ March 28, 2017 ​ ​ ​ March 7, 2018 ​ ​ ​ ​ March 11, 2019 ​ ​ ​ ​ March 13, 2020 ​ ​ ​ ​ March 16, 2021 ​ ​ ​ ​ March 15, 2022 ​ ​ ​ ​ March 14, 2023 Jianchang Lai * ​ March 28, 2017 ​ ​ ​ March 7, 2018 ​ ​ ​ ​ March 11, 2019 ​ ​ ​ March 13, 2020 ​ ​ ​ ​ March 16, 2021 ​ ​ ​ ​ March 15, 2022 ​ ​ ​ ​ March 14, 2023 Huiping Yan ​ * ​ March 11, 2019 ​ ​ ​ March 13, 2020 ​ ​ ​ ​ March 16, 2021 ​ ​ ​ ​ March 15, 2022 ​ ​ ​ ​ March 14, 2023 Herman Yu ​ * ​ March 7, 2018 ​ ​ ​ March 11, 2019 ​ ​ ​ ​ March 13, 2020 ​ ​ ​ ​ March 16, 2021 ​ ​ ​ ​ March 15, 2022 ​ ​ ​ ​ March 14, 2023 Xing Liu * ​ March 7, 2018 ​ ​ ​ ​ March 11, 2019 ​ ​ ​ ​ March 13, 2020 ​ ​ ​ ​ March 16, 2021 ​ ​ ​ ​ March 15, 2022 ​ ​ ​ ​ March 14, 2023 Frank Zhen Wei ​ * ​ March 7, 2018 ​ ​ ​ ​ March 11, 2019 ​ ​ ​ ​ March 13, 2020 ​ ​ ​ ​ March 16, 2021 ​ ​ ​ ​ March 15, 2022 ​ ​ ​ ​ March 14, 2023 Qin Charles Huang ​ * ​ March 7, 2018 ​ ​ ​ ​ March 11, 2019 ​ ​ ​ ​ March 13, 2020 ​ ​ ​ ​ March 16, 2021 ​ ​ ​ ​ March 15, 2022 ​ ​ ​ ​ March 14, 2023 Tsun-Ming (Daniel) Kao ​ * ​ March 7, 2018 ​ ​ ​ ​ March 11, 2019 ​ ​ ​ ​ March 13, 2020 ​ ​ ​ ​ March 16, 2021 ​ ​ ​ ​ March 14, 2023 Fang Xie ​ ​ ​ March 14, 2023 Total 3,702,168 ​ * Less than 1% of our total outstanding shares. 123 Table of Contents Employee Shareholding Platform In June 2016, we issued 16,000,000 ordinary shares to Zto Es Holding Limited, or ZTO ES, to establish an employee shareholding platform to allow our employees in China to receive share incentives.
Biggest changeOther individuals as a group were granted restricted share units representing a total of 1,943,531 Class A ordinary shares as of March 31, 2024. ​ ​ ​ ​ ​ ​ Ordinary Shares ​ ​ ​ Underlying Restricted ​ ​ Name ​ Share Units Awarded ​ Date of Grant Meisong Lai ​ * ​ March 28, 2017 ​ ​ ​ ​ March 7, 2018 ​ ​ ​ ​ March 11, 2019 ​ ​ ​ March 13, 2020 ​ ​ ​ ​ March 16, 2021 ​ ​ ​ ​ March 15,2022 ​ ​ ​ ​ March 14, 2023 ​ ​ ​ ​ March 22, 2024 Jilei Wang ​ * ​ March 28, 2017 ​ ​ ​ March 7, 2018 ​ ​ ​ ​ March 11, 2019 ​ ​ ​ ​ March 13, 2020 ​ ​ ​ ​ March 16, 2021 ​ ​ ​ ​ March 15, 2022 ​ ​ ​ ​ March 14, 2023 ​ ​ ​ ​ March 22, 2024 Xing Liu * ​ March 7, 2018 ​ ​ ​ ​ March 11, 2019 ​ ​ ​ ​ March 13, 2020 ​ ​ ​ ​ March 16, 2021 ​ ​ ​ ​ March 15, 2022 ​ ​ ​ ​ March 14, 2023 Frank Zhen Wei ​ * ​ March 7, 2018 ​ ​ ​ ​ March 11, 2019 ​ ​ ​ ​ March 13, 2020 ​ ​ ​ ​ March 16, 2021 ​ ​ ​ ​ March 15, 2022 ​ ​ ​ ​ March 14, 2023 Qin Charles Huang ​ * ​ March 7, 2018 ​ ​ ​ ​ March 11, 2019 ​ ​ ​ ​ March 13, 2020 ​ ​ ​ ​ March 16, 2021 ​ ​ ​ ​ March 15, 2022 ​ ​ ​ ​ March 14, 2023 Herman Yu ​ * ​ March 7, 2018 ​ ​ ​ ​ March 11, 2019 ​ ​ ​ ​ March 13, 2020 ​ ​ ​ ​ March 16, 2021 ​ ​ ​ ​ March 15, 2022 ​ ​ ​ ​ March 14, 2023 Tsun-Ming (Daniel) Kao ​ * ​ March 7, 2018 ​ ​ ​ ​ March 11, 2019 ​ ​ ​ ​ March 13, 2020 ​ ​ ​ ​ March 16, 2021 ​ ​ ​ ​ March 15, 2022 ​ ​ ​ ​ March 14, 2023 Fang Xie ​ * ​ March 14, 2023 Huiping Yan ​ * ​ March 11, 2019 ​ ​ ​ ​ March 13, 2020 ​ ​ ​ ​ March 16, 2021 ​ ​ ​ ​ March 15, 2022 ​ ​ ​ ​ March 14, 2023 ​ ​ ​ ​ March 22, 2024 Jianchang Lai ​ * ​ March 28, 2017 ​ ​ ​ ​ March 7, 2018 ​ ​ ​ ​ March 11, 2019 ​ ​ ​ ​ March 13, 2020 ​ ​ ​ ​ March 16, 2021 ​ ​ ​ ​ March 15, 2022 ​ ​ ​ ​ March 14, 2023 ​ ​ ​ ​ March 22, 2024 Total 3,648,969 ​ * Less than 1% of our total outstanding shares. 2024 Share Incentive Plan The board of directors approved and adopted a share incentive plan on March 19, 2024 that became effective on March 19, 2024, or the 2024 Plan.
Compensation Committee. Our compensation committee consists of Xing Liu, Frank Zhen Wei and Qin Charles Huang. Mr. Liu is the chairman of our compensation committee. We have determined that Xing Liu, Frank Zhen Wei and Qin Charles Huang each satisfies the “independence” requirements of Section 303A of the Corporate Governance Rules of the New York Stock Exchange.
Our compensation committee consists of Xing Liu, Frank Zhen Wei and Qin Charles Huang. Mr. Liu is the chairman of our compensation committee. We have determined that Xing Liu, Frank Zhen Wei and Qin Charles Huang each satisfies the “independence” requirements of Section 303A of the Corporate Governance Rules of the New York Stock Exchange.
Lai is a prominent figure in China’s express delivery industry and has been deeply involved in the industry for over 20 years. Mr. Lai has attended the “Lakeside University” in China, a senior executive training program founded by Jack Ma, founder and chairman of Alibaba. Mr. Meisong Lai is a brother-in-law to Mr. Jianchang Lai. Mr.
Lai is a prominent figure in China’s express delivery industry and has been deeply involved in the industry for over 20 years. Mr. Lai has attended the “Lakeside University” in China, a senior executive training program founded by Jack Ma, founder and then chairman of Alibaba. Mr. Meisong Lai is a brother-in-law to Mr. Jianchang Lai. Mr.
The executive officers have also agreed to disclose in confidence to us all inventions, designs and trade secrets which they conceive, develop or reduce to practice during the executive officer’s employment with us and to assign all right, title and interest in them to us, and assist us in obtaining and enforcing patents, copyrights and other legal rights for these inventions, designs and trade secrets. 120 Table of Contents In addition, each executive officer has agreed to be bound by non-competition and non-solicitation restrictions during the term of his or her employment and typically for one year following the last date of employment.
The executive officers have also agreed to disclose in confidence to us all inventions, designs and trade secrets which they conceive, develop or reduce to practice during the executive officer’s employment with us and to assign all right, title and interest in them to us, and assist us in obtaining and enforcing patents, copyrights and other legal rights for these inventions, designs and trade secrets. 118 Table of Contents In addition, each executive officer has agreed to be bound by non-competition and non-solicitation restrictions during the term of his or her employment and typically for one year following the last date of employment.
The audit committee is responsible for, among other things: ● appointing the independent auditors and pre-approving all auditing and non-auditing services permitted to be performed by the independent auditors; 126 Table of Contents ● reviewing with the independent auditors any audit problems or difficulties and management’s response; ● discussing the annual audited financial statements with management and the independent auditors; ● reviewing the adequacy and effectiveness of our accounting and internal control policies and procedures and any steps taken to monitor and control major financial risk exposures; ● reviewing and approving all proposed related party transactions; ● meeting separately and periodically with management and the independent auditors; and ● monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of our procedures to ensure proper compliance.
The audit committee is responsible for, among other things: ● appointing the independent auditors and pre-approving all auditing and non-auditing services permitted to be performed by the independent auditors; ● reviewing with the independent auditors any audit problems or difficulties and management’s response; ● discussing the annual audited financial statements with management and the independent auditors; ● reviewing the adequacy and effectiveness of our accounting and internal control policies and procedures and any steps taken to monitor and control major financial risk exposures; ● reviewing and approving all proposed related party transactions; ● meeting separately and periodically with management and the independent auditors; and ● monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of our procedures to ensure proper compliance. 124 Table of Contents Compensation Committee.
Meisong Lai. Mr. Meisong Lai has the power to direct the disposition of those 964,765 Class A ordinary shares held by ZTO ES.
Meisong Lai has the power to direct the disposition of those 964,765 Class A ordinary shares held by ZTO ES.
Kao received a bachelor’s degree in computer science from Iowa State University in August 1995. 119 Table of Contents Ms. Fang Xie, also known as Heather Xie, has been our director since November 2021. Ms. Xie has been a director and portfolio investment manager at Seres Capital since May 2021. Ms.
Kao received a bachelor’s degree in computer science from Iowa State University in August 1995. 117 Table of Contents Ms. Fang Xie, also known as Heather Xie, has been our director since November 2021. Ms. Xie has been a director and portfolio investment manager at Seres Capital since May 2021. Ms.
Terms of Directors and Officers Our directors are appointed by ordinary resolution of our shareholder. The directors may, by the affirmative vote of a simple majority of the remaining directors present and voting at a board meeting, appoint any person as a director, to fill a casual vacancy on the board or as an addition to the existing board.
Terms of Directors and Officers Our directors are appointed by ordinary resolution of our shareholders. The directors may, by the affirmative vote of a simple majority of the remaining directors present and voting at a board meeting, appoint any person as a director, to fill a casual vacancy on the board or as an addition to the existing board.
Transfer Restrictions. Awards may not be transferred in any manner by the recipient other than by will or the laws of descent and distribution, except as otherwise provided by the plan administrator. Termination and amendment of the 2016 Plan. Unless terminated earlier, the 2016 Plan has a term of ten years.
Awards may not be transferred in any manner by the recipient other than by will or the laws of descent and distribution, except as otherwise provided by the plan administrator. Termination and amendment of the 2016 Plan. Unless terminated earlier, the 2016 Plan has a term of ten years.
Subject to the New York Stock Exchange rules and disqualification by the chairman of the relevant board meeting, a director may vote in respect of any contract or transaction or proposed contract or transaction notwithstanding that he may be interested therein and if he does so his vote shall be counted and he may be counted in the quorum at any meeting of the directors at which any such contract or transaction or proposed contract or transaction is considered.
Subject to the New York Stock Exchange rules, the Hong Kong Listing Rules, and disqualification by the chairman of the relevant board meeting, a director may vote in respect of any contract or transaction or proposed contract or transaction notwithstanding that he may be interested therein and if he does so his vote shall be counted and he may be counted in the quorum at any meeting of the directors at which any such contract or transaction or proposed contract or transaction is considered.
Huang is the chairman and chief executive officer of CEG (Asia) Limited (also known as China Education Group), an education services provider for students, executives and professionals in Greater China and has been a director since its inception in 1999. Mr. Huang served on the board of directors of Sohu.com Inc. (NASDAQ: SOHU) from 2001 to 2015. Mr.
Huang is the chairman and chief executive officer of CEG (Asia) Limited (also known as China Education Group), an education services provider for students, executives and professionals in Greater China and has been a director since its inception in 1999. Mr. Huang has served on the board of directors of Sohu.com Inc. (NASDAQ: SOHU) since 2001. Mr.
The functions and powers of our board of directors include, among others: ● convening shareholders’ annual general meetings and reporting its work to shareholders at such meetings; ● declaring dividends and distributions; ● appointing officers and determining the term of office of the officers; ● exercising the borrowing powers of our company and mortgaging the property of our company; and ● approving the transfer of shares in our company, including the registration of such shares in our share register.
The functions and powers of our board of directors include, among others: ● convening shareholders’ annual general meetings and reporting its work to shareholders at such meetings; ● declaring dividends and distributions; 125 Table of Contents ● appointing officers and determining the term of office of the officers; ● exercising the borrowing powers of our company and mortgaging the property of our company; and ● approving the transfer of shares in our company, including the registration of such shares in our share register.
The committee or the full board of directors, as applicable, will determine the participants to receive awards, the type and number of awards to be granted to each participant, and the terms and conditions of each award grant. ​ 121 Table of Contents Award Agreement.
The committee or the full board of directors, as applicable, will determine the participants to receive awards, the type and number of awards to be granted to each participant, and the terms and conditions of each award grant. ​ 119 Table of Contents Award Agreement.
Jilei Wang, and (iv) 120,000 Class A Ordinary Shares held by ZTO ES. Mr. Jilei Wang is the sole director of Zto Wjl Holding Limited. Mr. Jilei Wang has the power to direct the disposition of those 120,000 Class A Ordinary Shares held by ZTO ES.
Mr. Jilei Wang is the sole director of Zto Wjl Holding Limited. Mr. Jilei Wang has the power to direct the disposition of those 120,000 Class A ordinary shares held by ZTO ES.
Exercise of Options. The plan administrator determines the exercise price for each award, which is stated in the award agreement. The vested portion of option will expire if not exercised prior to the time as the plan administrator determines at the time of its grant. However, the maximum exercisable term is ten years from the date of a grant.
The plan administrator determines the exercise price for each award, which is stated in the award agreement. The vested portion of option will expire if not exercised prior to the time as the plan administrator determines at the time of its grant. However, the maximum exercisable term is ten years from the date of a grant. Transfer Restrictions.
We may grant awards to our employees, directors and consultants of our company. However, we may grant options that are intended to qualify as incentive share options only to our employees and employees of our parent companies and subsidiaries. Vesting Schedule. In general, the plan administrator determines the vesting schedule, which is specified in the relevant award agreement.
We may grant awards to our employees, directors and consultants. However, we may grant options that are intended to qualify as incentive share options only to our employees and employees of our parent companies and subsidiaries. Vesting Schedule. In general, the plan administrator determines the vesting schedule, which is specified in the award agreement. Exercise of Options.
It will be, however, difficult for U.S. shareholders to originate actions against us in the PRC in accordance with PRC laws because we are incorporated under the laws of the Cayman Islands and it will be difficult for U.S. shareholders, by virtue only of holding the ADSs or Class A ordinary shares, to establish a connection to the PRC for a PRC court to have jurisdiction as required under the PRC Civil Procedures Law. ​ 129 Table of Contents D.
It will be, however, difficult for U.S. shareholders to originate actions against us in the PRC in accordance with PRC laws because we are incorporated under the laws of the Cayman Islands and it will be difficult for U.S. shareholders, by virtue only of holding the ADSs or Class A ordinary shares, to establish a connection to the PRC for a PRC court to have jurisdiction as required under the PRC Civil Procedures Law.
Notwithstanding the above, such shares held by ZTO ES were included in the column for calculation of beneficial ownership as a percentage of our total ordinary shares.
Notwithstanding the above, such shares held by ZTO ES and the trustee were included in the column for calculation of beneficial ownership as a percentage of our total ordinary shares.
Hu served as the chairman of Zhejiang Tonglu Rural Commercial Bank from March 2016 to May 2017, and the governor and chairman of Zhejiang Tonglu Rural Cooperation Bank from March 2008 to March 2016, respectively. Mr.
Hu served as the chairman of Zhejiang Tonglu Rural Commercial Bank from March 2016 to February 2017, and the governor and chairman of Zhejiang Tonglu Rural Cooperation Bank from March 2008 to March 2016, respectively. Mr.
Frank Zhen Wei, has been our director since August 2015. Mr. Wei joined Warburg Pincus Asia LLC in November 2002, and has been serving as a managing director since January 2010. Mr. Wei is currently Head of Warburg Pincus China and leads overall strategy and investment. Mr.
Frank Zhen Wei, has been our director since August 2015. Mr. Wei joined Warburg Pincus Asia LLC in November 2002, and has been serving as a managing director since January 2010. Mr. Wei is currently Managing Director at Warburg Pincus China and leads overall strategy and investment. Mr.
Our Class B ordinary shares are convertible at any time by the holder thereof into Class A ordinary shares on a one-for-one basis. * Less than 1% of our total outstanding ordinary shares. ** Except for Messrs.
Our Class B ordinary shares are convertible at any time by the holder thereof into Class A ordinary shares on a one-for-one basis. * Less than 1% of our total outstanding ordinary shares. 128 Table of Contents ** Except for Messrs.
Directors and Senior Management The following table sets forth information regarding our directors and executive officers as of the date of this annual report. ​ ​ ​ ​ ​ Directors and E xecutive Officers Age Position/Title Meisong Lai ​ 52 ​ Founder, Chairman of the Board of Directors and Chief Executive Officer Jilei Wang ​ 57 ​ Director and Vice President of Infrastructure Management Hongqun Hu ​ 54 ​ Director and Chief Operating Officer Zheng Liu* ​ 44 ​ Director Xing Liu ​ 52 ​ Director Frank Zhen Wei ​ 51 ​ Director Qin Charles Huang ​ 53 ​ Director Herman Yu ​ 52 ​ Director Tsun-Ming (Daniel) Kao ​ 57 ​ Director Fang Xie ​ 58 ​ Director Huiping Yan ​ 56 ​ Chief Financial Officer Jianchang Lai ​ 52 ​ Vice President of Overseas Operations Jingxi Zhu ​ 42 ​ Vice President of Information Technology Jianfeng Zhang ​ 40 ​ Vice President of Public Relations * Pursuant to the investment agreement we entered into with Alibaba and Cainiao Network, Mr.
Directors and Senior Management The following table sets forth information regarding our directors and executive officers as of the date of this annual report. ​ ​ ​ ​ ​ Directors and E xecutive Officers Age Position/Title Meisong Lai ​ 53 ​ Founder, Chairman of the Board of Directors and Chief Executive Officer Jilei Wang ​ 58 ​ Director and Vice President of Infrastructure Management Hongqun Hu ​ 55 ​ Director and Chief Operating Officer Xudong Chen * ​ 40 ​ Director Xing Liu ​ 53 ​ Director Frank Zhen Wei ​ 52 ​ Director Qin Charles Huang ​ 54 ​ Director Herman Yu ​ 53 ​ Director Tsun-Ming (Daniel) Kao ​ 58 ​ Director Fang Xie ​ 59 ​ Director Huiping Yan ​ 57 ​ Chief Financial Officer Jianchang Lai ​ 53 ​ Vice President of Overseas Operations Jingxi Zhu ​ 43 ​ Vice President of Information Technology Jianfeng Zhang ​ 41 ​ Vice President of Public Relations * Pursuant to the investment agreement we entered into with Alibaba and Cainiao Network, Mr.
The following table summarizes, as of March 31, 2023, the number of our ordinary shares held by ZTO ES over which our directors and officers had been awarded such rights. ​ ​ ​ ​ ​ ​ Class A ​ Name ​ Ordinary Shares ​ Date of Grant Meisong Lai * ​ June 28, 2016 ​ ​ ​ ​ March 11, 2019 ​ ​ ​ March 13, 2020 Jianfa Lai * ​ June 28, 2016 ​ ​ ​ March 13, 2020 Jilei Wang ​ * ​ June 28, 2016 Jianchang Lai ​ * ​ June 28, 2016 Jingxi Zhu ​ * ​ June 28, 2016, ​ ​ ​ March 28, 2017 ​ ​ ​ ​ March 7, 2018 ​ ​ ​ March 11, 2019 ​ ​ ​ ​ March 13, 2020 ​ ​ ​ ​ March 16, 2021 ​ ​ ​ ​ March 15, 2022 ​ ​ ​ ​ March 14, 2023 Hongqun Hu ​ * ​ March 7, 2018 ​ ​ ​ ​ March 11, 2019 ​ ​ ​ ​ March 13, 2020 ​ ​ ​ ​ March 16, 2021 ​ ​ ​ ​ March 15, 2022 ​ ​ ​ ​ March 14, 2023 Jianfeng Zhang ​ * ​ March 28, 2017 ​ ​ ​ ​ March 7, 2018 ​ ​ ​ ​ March 11, 2019 ​ ​ ​ ​ March 13, 2020 ​ ​ ​ ​ March 16, 2021 ​ ​ ​ ​ March 15, 2022 ​ ​ ​ ​ March 14, 2023 Total 2,112,783 ​ * Less than 1% of our total outstanding shares.
The following table summarizes, as of March 31, 2024, the number of our ordinary shares held by ZTO ES over which our directors and officers had been awarded such rights. ​ ​ ​ ​ ​ ​ Class A ​ Name ​ Ordinary Shares ​ Date of Grant Meisong Lai * ​ June 28, 2016 ​ ​ ​ ​ March 11, 2019 ​ ​ ​ March 13, 2020 Jilei Wang ​ * ​ June 28, 2016 Hongqun Hu * ​ March 7, 2018 ​ ​ ​ ​ March 11, 2019 ​ ​ ​ ​ March 13, 2020 ​ ​ ​ ​ March 16, 2021 ​ ​ ​ ​ March 15, 2022 ​ ​ ​ ​ March 14, 2023 ​ ​ ​ March 22, 2024 Jianchang Lai ​ * ​ June 28, 2016 Jingxi Zhu ​ * ​ June 28, 2016, ​ ​ ​ March 28, 2017 ​ ​ ​ ​ March 7, 2018 ​ ​ ​ March 11, 2019 ​ ​ ​ ​ March 13, 2020 ​ ​ ​ ​ March 16, 2021 ​ ​ ​ ​ March 15, 2022 ​ ​ ​ ​ March 14, 2023 ​ ​ ​ ​ March 22, 2024 Jianfeng Zhang ​ * ​ March 28, 2017 ​ ​ ​ ​ March 7, 2018 ​ ​ ​ ​ March 11, 2019 ​ ​ ​ ​ March 13, 2020 ​ ​ ​ ​ March 16, 2021 ​ ​ ​ ​ March 15, 2022 ​ ​ ​ ​ March 14, 2023 ​ ​ ​ ​ March 22, 2024 Total 1,792,851 ​ * Less than 1% of our total outstanding shares.
Zheng Liu was appointed as our director. Mr. Meisong Lai is our founder and has served as chairman of our board of directors since May 2013 and chief executive officer since our inception. Mr. Lai is the deputy chairman of the China Express Delivery Association. Mr.
Xudong Chen was appointed as our director. Mr. Meisong Lai is our founder and has served as chairman of our board of directors since May 2013 and chief executive officer since our inception. Mr. Lai is the deputy chairman of the China Express Delivery Association. Mr.
Xing Liu, Frank Zhen Wei, Qin Charles Huang and Zheng Liu, the business address of our directors and executive officers is to No.1685 Huazhi Road, Qingpu District, Shanghai, 201708, People’s Republic of China. The business address of Mr. Xing Liu is Suite 3613, 36/F, Two Pacific Place, 88 Queensway, Hong Kong. The business address of Mr.
Xing Liu, Frank Zhen Wei and Xudong Chen, the business address of our directors and executive officers is to No.1685 Huazhi Road, Qingpu District, Shanghai, 201708, People’s Republic of China. The business address of Mr. Xing Liu is Suite 3613, 36/F, Two Pacific Place, 88 Queensway, Hong Kong. The business address of Mr.
Jianfa Lai, and (v) 33,598 Class A ordinary shares held by ZTO ES. Mr. Jianfa Lai is the sole director of Zto Ljf Holding Limited. Mr. Jianfa Lai has the power to direct the sale of those 33,598 Class A ordinary shares held by ZTO ES.
Mr. Jianfa Lai is the sole director of Zto Ljf Holding Limited. Mr. Jianfa Lai has the power to direct the disposition of those 33,598 Class A ordinary shares held by ZTO ES.
(3) Represents (i) 206,100,000 Class B ordinary shares directly held by Zto Lms Holding Limited, a British Virgin Islands company wholly owned by Mr. Meisong Lai, (ii) 4,025,182 ADSs (representing the same number of Class A Ordinary Shares) held by Zto Lms Holding Limited, 2,348,428 of which were vested from restricted share units held by Mr. Meisong Lai.
(3) Represents (i) 206,100,000 Class B ordinary shares directly held by Zto Lms Holding Limited, a British Virgin Islands company wholly owned by Mr. Meisong Lai, (ii) 4,608,920 ADSs (representing the same number of Class A ordinary shares) held by Zto Lms Holding Limited, 2,932,166 of which were vested from restricted share units held by Mr. Meisong Lai.
Yu, a California Certified Public Accountant, received his B.A. in economics from the University of California, Santa Cruz, in June 1992, and his Master of Accountancy (MAcc) from the University of Southern California, in May 1993. Mr. Tsun-Ming Kao, also known as Mr. Tsun-Ming (Daniel) Kao has been our director since October 2017. Mr.
Yu is a California Certified Public Accountant and holds a B.A. in economics from the University of California, Santa Cruz and a Master of Accountancy (MAcc) from the University of Southern California. Mr. Tsun-Ming Kao, also known as Mr. Tsun-Ming (Daniel) Kao has been our director since October 2017. Mr.
Lai to periodically review the performance of our employees, and reward selected employees by directing the general partner of the relevant partnerships to transfer limited partnership interests in those partnerships to the selected employees.
Our board of directors review the performance of our employees, and reward selected employees by directing the general partner of the partnerships to transfer limited partnership interests in those partnerships to the selected employees.
These shares, however, are not included in the computation of the percentage ownership of any other person. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Ordinary Shares Beneficially Owned ​ ​ ​ ​ ​ ​ ​ ​ Percentage ​ Percentage ​ Class A Class B Total of total of ​ ​ ordinary ​ ordinary ​ ordinary ​ ordinary ​ aggregate ​ ​ shares ​ shares ​ shares ​ shares ​ voting power† Directors and Executive Officers:** ​ ​ ​ ​ ​ ​ Meisong Lai (1) ​ 4,989,947 ​ 206,100,000 ​ 211,089,947 ​ 25.9 ​ 77.6 Jilei Wang (2) ​ 42,207,263 ​ — 42,207,263 5.2 1.6 Hongqun Hu ​ * ​ — ​ * ​ * ​ * Zheng Liu ​ — ​ — — — — Xing Liu ​ * ​ — * * * Frank Zhen Wei ​ * ​ — * * * Qin Charles Huang ​ * ​ — * * * Herman Yu ​ * ​ — * * * Tsun-Ming (Daniel) Kao ​ * ​ — * * * Fang Xie ​ * ​ — ​ — ​ * ​ * Huiping Yan ​ * ​ — * * * Jianchang Lai ​ * ​ — * * * Jingxi Zhu ​ * ​ — * * * Jianfeng Zhang ​ * ​ — * * * All Directors and Executive Officers as a Group ​ 52,135,009 ​ 206,100,000 ​ 258,235,009 ​ 31.7 ​ 79.4 Principal Shareholders: ​ ​ ​ ​ ​ ​ ​ Zto Lms Holding Limited (3) ​ 4,025,182 ​ 206,100,000 210,125,182 25.8 77.6 Alibaba Group Holding Limited (4) ​ 71,941,287 ​ — ​ 71,941,287 ​ 8.8 ​ 2.7 Jianfa Lai and Zto Ljf Holding Limited (5) ​ 66,252,639 ​ — 66,252,639 8.1 2.5 Zto Wjl Holding Limited (6) ​ 42,087,263 — 42,087,263 5.2 1.6 † For each person and group included in this column, percentage of voting power is calculated by dividing the voting power beneficially owned by such person or group by the voting power of our Class A ordinary shares and Class B ordinary shares as a single class.
These shares, however, are not included in the computation of the percentage ownership of any other person. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Ordinary Shares Beneficially Owned ​ Class A Class B ​ Percentage of Percentage of ​ ​ ordinary ​ ordinary ​ Total ordinary ​ total ordinary ​ aggregate ​ ​ shares ​ shares ​ shares ​ shares ​ voting power † Directors and Executive Officers:** ​ ​ ​ ​ ​ ​ Meisong Lai (1) ​ 5,573,685 ​ 206,100,000 ​ 211,673,685 ​ 26.0 ​ 77.7 Jilei Wang (2) ​ 42,208,065 ​ — 42,208,065 5.2 1.6 Hongqun Hu ​ * ​ — ​ * ​ * ​ * Xudong Chen ​ — ​ — — — — Xing Liu ​ * ​ — * * * Frank Zhen Wei ​ * ​ — * * * Qin Charles Huang ​ * ​ — * * * Herman Yu ​ * ​ — * * * Tsun-Ming (Daniel) Kao ​ * ​ — * * * Fang Xie ​ * ​ — ​ * ​ * ​ * Huiping Yan ​ * ​ — * * * Jianchang Lai ​ * ​ — * * * Jingxi Zhu ​ * ​ — * * * Jianfeng Zhang ​ * ​ — * * * All Directors and Executive Officers as a Group ​ 52,815,262 ​ 206,100,000 ​ 258,915,262 ​ 31.9 ​ 79.5 Principal Shareholders: ​ ​ ​ ​ ​ ​ ​ Zto Lms Holding Limited (3) ​ 4,608,920 ​ 206,100,000 210,708,920 25.9 77.7 Alibaba Group Holding Limited (4) ​ 71,941,287 ​ — ​ 71,941,287 ​ 8.9 ​ 2.7 Jianfa Lai and Zto Ljf Holding Limited (5) ​ 65,252,639 ​ — 65,252,639 8.0 2.5 Zto Wjl Holding Limited (6) ​ 42,088,065 — 42,088,065 5.2 1.6 † For each person and group included in this column, percentage of voting power is calculated by dividing the voting power beneficially owned by such person or group by the voting power of our Class A ordinary shares and Class B ordinary shares as a single class.
The compensation committee is responsible for, among other things: ● reviewing and approving, or recommending to the board for its approval, the compensation for our chief executive officer and other executive officers; ● reviewing and recommending to the board for determination with respect to the compensation of our non-employee directors; ● reviewing periodically and approving any incentive compensation or equity plans, programs or similar arrangements; and ● selecting compensation consultant, legal counsel or other adviser only after taking into consideration all factors relevant to that person’s independence from management.
The compensation committee is responsible for, among other things: ● making recommendations to the board on the Company’s policy and structure for all directors’ and senior management’s remuneration and on the establishment of a formal and transparent procedure for developing remuneration policy; ● reviewing and approving, or recommending to the board for its approval, the compensation for our chief executive officer and other executive officers; ● reviewing and recommending to the board for determination with respect to the compensation of our non-employee directors; ● reviewing periodically and approving any incentive compensation or equity plans, programs or similar arrangements; and ● selecting compensation consultant, legal counsel or other adviser only after taking into consideration all factors relevant to that person’s independence from management.
Information regarding beneficial ownership is reported as of June 12, 2018, based on information contained in the Schedule 13D filed by Alibaba Group Holding Limited, among other reporting persons, with the SEC on June 21, 2018. 132 Table of Contents (5) Represents (i) 55,000,000 Class A Ordinary Shares held by Zto Ljf Holding Limited, among which, 48,250,000 Class A Ordinary Shares are recorded on our Cayman share register, and the remaining 6,750,000 Class A Ordinary Shares are recorded under the name of HKSCC Nominees Limited on our Hong Kong share register and are deposited into the Central Clearing and Settlement System established and operated by Hong Kong Securities Clearing Company Limited, (ii) 6,000,000 restricted ADSs held by JPMorgan Chase Bank, N.A., as depositary bank, underlying 6,000,000 Class A Ordinary Shares held by Zto Ljf Holding Limited pledged to Citibank, N.A., Singapore, as lender under a loan agreement dated December 6, 2019, to secure Zto Ljf Holding Limited’s obligations under the loan agreement, (iii) 5,000,000 ADSs held by Zto Ljf Holding Limited, underlying 5,000,000 Class A Ordinary Shares held by JPMorgan Chase Bank, N.A., as depositary bank, pledged to Citibank, N.A., as counterparty under the share forward transaction pursuant to a master terms and conditions for prepaid variable share forward transactions (the “Master Confirmation”, and as supplemented by any Supplemental Confirmations or Trade Notifications, each as defined in the Master Confirmation, the “Forward Contract”) dated June 6, 2022, to secure Zto Ljf Holding Limited’s obligations under the Forward Contract, (iv) 219,041 Class A Ordinary Shares, in the form of ADSs, held by Zto Ljf Holding Limited and vested from restricted share units held by Mr.
Information regarding beneficial ownership is reported as of June 12, 2018, based on information contained in the Schedule 13D filed by Alibaba Group Holding Limited, among other reporting persons, with the SEC on June 21, 2018. 129 Table of Contents (5) Represents (i) 39,000,000 Class A ordinary shares held by Zto Ljf Holding Limited, among which, 32,250,000 Class A ordinary shares are recorded on our Cayman share register, and the remaining 6,750,000 Class A ordinary shares are recorded under the name of HKSCC Nominees Limited on our Hong Kong share register and are deposited into the Central Clearing and Settlement System established and operated by Hong Kong Securities Clearing Company Limited, (ii) 6,000,000 ADSs registered in the name of Citibank, N.A., Singapore, underlying 6,000,000 Class A ordinary shares held by JPMorgan Chase Bank, N.A., as depositary bank, which Zto Ljf Holding Limited pledged to Citibank, N.A., Singapore, as lender under a loan agreement dated December 6, 2019, to secure Zto Ljf Holding Limited’s obligations under the loan agreement, (iii) 10,000,000 ADSs held by Zto Ljf Holding Limited, underlying 10,000,000 Class A ordinary shares held by JPMorgan Chase Bank, N.A., as depositary bank, pledged to Citibank, N.A., as counterparty under the share forward transaction pursuant to the Master Terms and Conditions for Prepaid Variable Share Forward Transactions dated June 6, 2022 and as amended by the Supplemental Confirmation dated June 8, 2023 and the Amended and Restated Supplemental Confirmation dated September 8, 2023 (and as may be further amended and supplemented from time to time, the “Forward Contract”), to secure Zto Ljf Holding Limited’s obligations under the Forward Contract, (iv) 10,219,041 Class A ordinary shares, in the form of ADSs, held by Zto Ljf Holding Limited, and (v) 33,598 Class A ordinary shares held by ZTO ES.
Hu graduated from the advanced class in modern executive business administration from Zhejiang University in China in January 2006 and graduated from Ningbo University in China with a major in finance in July 2003. 118 Table of Contents Mr. Zheng Liu has been our director since March 2021. Mr.
Hu graduated from the advanced class in modern executive business administration from Zhejiang University in China in January 2006 and graduated from Ningbo University in China with a major in finance in July 2003. 116 Table of Contents Mr. Xudong Chen has been our director since June 2023. Mr.
Our PRC legal counsel has advised us that there is uncertainty as to whether the courts of China would: ● recognize or enforce judgments of United States courts obtained against us or our directors or officers predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States; or ● entertain original actions brought in each respective jurisdiction against us or our directors or officers predicated upon the securities laws of the United States or any state in the United States.
Our PRC legal counsel has advised us that there is uncertainty as to whether the courts of China would: ● recognize or enforce judgments of United States courts obtained against us or our directors or officers predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States; or ● entertain original actions brought in each respective jurisdiction against us or our directors or officers predicated upon the securities laws of the United States or any state in the United States. 126 Table of Contents Our PRC legal counsel has further advised us that the recognition and enforcement of foreign judgments are provided for under the PRC Civil Procedures Law.
Jianfeng Zhang has served as our vice president of public relations since February 2016. Mr. Zhang served as Assistant Director of the News & Information Center of Xinhua News Agency Shanghai Bureau from June 2012 to February 2016 and Deputy Director of the Image Center of Xinhua News Agency Shanghai Bureau from August 2010 to February 2016. Mr.
Zhang served as Assistant Director of the News & Information Center of Xinhua News Agency Shanghai Bureau from June 2012 to February 2016 and Deputy Director of the Image Center of Xinhua News Agency Shanghai Bureau from August 2010 to February 2016. Mr.
Jianchang Lai has been our vice president of overseas operations since September 2016. Mr. Lai was our director from January 2014 to September 2016 and our head of network partner management since our inception to September 2016. Mr. Jianchang Lai is a brother-in-law to Mr. Meisong Lai. Mr.
Lai was our director from January 2014 to September 2016 and our head of network partner management since our inception to September 2016. Mr. Jianchang Lai is a brother-in-law to Mr. Meisong Lai. Mr. Jingxi Zhu has been our head of information technology since July 2003 and has served as a vice president of information technology since September 2016.
As of March 31, 2023, restricted share units representing a total of 4,849,134 Class A ordinary shares have been granted and outstanding, excluding awards that were forfeited or cancelled after the relevant grant dates. 122 Table of Contents The following table summarizes, as of March 31, 2023, the outstanding restricted share units we granted to our directors and executive officers under our 2016 Plan to our executive officer, excluding awards that were forfeited or cancelled after the relevant grant dates.
As of March 31, 2024, restricted share units representing a total of 5,592,500 Class A ordinary shares have been granted under the 2016 Plan, excluding awards that were forfeited or cancelled after their grant dates. 120 Table of Contents The following table summarizes, as of March 31, 2024, the restricted share units we granted to our directors and executive officers under our 2016 Plan, excluding awards that were forfeited or cancelled after their grant dates.
(6) Represents (i) 36,635,000 Class A Ordinary Shares held by Zto Wjl Holding Limited, (ii) 5,200,000 restricted ADSs held by JPMorgan Chase Bank, N.A., as depositary bank, underlying 5,200,000 Class A Ordinary Shares held by Zto Wjl Holding Limited pledged to Morgan Stanley Bank Asia Limited, as lender under a loan agreement dated December 19, 2019, to secure Zto Wjl Holding Limited’s obligations under the loan agreement, and (iii) 252,263 Class A Ordinary Shares, in the form of ADSs, held by Zto Wjl Holding Limited and vested from restricted share units held by Mr.
(6) Represents (i) 35,635,000 Class A ordinary shares held by Zto Wjl Holding Limited, (ii) 5,200,000 restricted ADSs held by JPMorgan Chase Bank, N.A., as depositary bank, underlying 5,200,000 Class A ordinary shares held by Zto Wjl Holding Limited pledged to Morgan Stanley Bank Asia Limited, as lender under a loan agreement dated December 19, 2019, to secure Zto Wjl Holding Limited’s obligations under the loan agreement, and (iii) 1,253,065 Class A ordinary shares, in the form of ADSs, held by Zto Wjl Holding Limited, among which 974,236 are restricted ADSs.
Employees As of December 31, 2020, 2021 and 2022, we had a total of 22,536, 23,865 and 24,888 employees, respectively.
D. Employees As of December 31, 2021, 2022 and 2023, we had a total of 23,865, 24,888 and 23,554 employees, respectively.
The nominating and corporate governance committee is responsible for, among other things: ● selecting and recommending to the board nominees for election by the shareholders or appointment by the board; ● reviewing annually with the board the current composition of the board with regards to characteristics such as independence, knowledge, skills, experience and diversity; ● making recommendations on the frequency and structure of board meetings and monitoring the functioning of the committees of the board; and ● advising the board periodically with regards to significant developments in the law and practice of corporate governance as well as our compliance with applicable laws and regulations, and making recommendations to the board on all matters of corporate governance and on any remedial action to be taken. 127 Table of Contents Duties 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: ● selecting and recommending to the board nominees for election by the shareholders or appointment by the board; ● reviewing annually with the board the current composition of the board with regards to characteristics such as independence, knowledge, skills, experience and diversity; ● making recommendations on the frequency and structure of board meetings and monitoring the functioning of the committees of the board; and ● advising the board periodically with regards to significant developments in the law and practice of corporate governance as well as our compliance with applicable laws and regulations, and making recommendations to the board on all matters of corporate governance and on any remedial action to be taken.
(2) Represents (i) 36,635,000 Class A Ordinary Shares held by Zto Wjl Holding Limited, (ii) 5,200,000 restricted ADSs held by JPMorgan Chase Bank, N.A., as depositary bank, underlying 5,200,000 Class A Ordinary Shares held by Zto Wjl Holding Limited pledged to Morgan Stanley Bank Asia Limited, as lender under a loan agreement dated December 19, 2019, to secure Zto Wjl Holding Limited’s obligations under the loan agreement, (iii) 252,263 Class A Ordinary Shares, in the form of ADSs, held by Zto Wjl Holding Limited and vested from restricted share units held by Mr.
(2) Represents (i) 35,635,000 Class A ordinary shares held by Zto Wjl Holding Limited, (ii) 5,200,000 restricted ADSs held by JPMorgan Chase Bank, N.A., as depositary bank, underlying 5,200,000 Class A ordinary shares held by Zto Wjl Holding Limited pledged to Morgan Stanley Bank Asia Limited, as lender under a loan agreement dated December 19, 2019, to secure Zto Wjl Holding Limited’s obligations under the loan agreement, (iii) 1,253,065 Class A ordinary shares, in the form of ADSs, held by Zto Wjl Holding Limited, among which 974,236 are restricted ADSs, and (iv) 120,000 Class A ordinary shares held by ZTO ES.
Compensation of Directors and Executive Officers For the year ended December 31, 2022, we paid an aggregate of approximately RMB15.3 million (US$2.2 million) in cash to our executive officers, and we paid cash compensation to our non-executive directors of US$50,000.
Compensation of Directors and Executive Officers For the year ended December 31, 2023, we paid an aggregate of approximately RMB100.3 million (US$14.1 million) in cash to our executive officers and directors.
We have appointed Cogency Global Inc., located at 122 East 42nd Street, 18th Floor, New York, NY 10168, as our agent upon whom process may be served in any action brought against us under the securities laws of the United States. 128 Table of Contents We have been informed by our Cayman Islands legal counsel that the United States and the Cayman Islands do not have a treaty providing for reciprocal recognition and enforcement of judgments of U.S. courts in civil and commercial matters and that there is uncertainty as to whether the courts of the Cayman Islands would (i) recognize or enforce judgments of U.S. courts obtained against us or our directors or officers, predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States, or (ii) entertain original actions brought in the Cayman Islands against us or our directors or officers, predicated upon the securities laws of the United States or any state in the United States.
We have been informed by our Cayman Islands legal counsel that the United States and the Cayman Islands do not have a treaty providing for reciprocal recognition and enforcement of judgments of U.S. courts in civil and commercial matters and that there is uncertainty as to whether the courts of the Cayman Islands would (i) recognize or enforce judgments of U.S. courts obtained against us or our directors or officers, predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States, or (ii) entertain original actions brought in the Cayman Islands against us or our directors or officers, predicated upon the securities laws of the United States or any state in the United States.
Yan spent 11 years at General Electric Company (GE) in both the U.S. and Asia, serving in various key roles in corporate and operational financial management. Prior to that, Ms. Yan spent over six years at Deloitte & Touche in the U.S. in tax services. Ms.
Yan spent 11 years at GE in both the U.S. and Asia, serving in various key roles in corporate and operational financial management. Prior to that, Ms. Yan spent over six years at Deloitte & Touche in the U.S. in tax services. Ms. Yan has served as the independent non-executive director of TUHU Car Inc.
The following table sets forth the breakdown of our own employees as of December 31, 2022 by function: ​ ​ ​ ​ ​ Functional Area Number of Employees % of Total Sorting 8,198 32.9 Transportation 4,142 16.6 Management and Administration 4,569 18.4 Customer Service 2,047 8.2 Operation Support 3,991 16.0 Technology and Engineering 1,538 6.2 Sales and Marketing 403 1.6 Total 24,888 100.0 ​ In addition to our own employees, our workforce also includes over 59,000 outsourced workers, as of December 31, 2022.
The following table sets forth the breakdown of our own employees as of December 31, 2023 by function: ​ ​ ​ ​ ​ Functional Area Number of Employees % of Total Sorting 7,857 33.4 Transportation 3,612 15.3 Management and Administration 4,386 18.6 Customer Service 2,001 8.5 Operation Support 3,958 16.8 Technology and Engineering 1,383 5.9 Sales and Marketing 357 1.5 Total 23,554 100.0 ​ In addition to our employees, our workforce also includes over 63,000 outsourced workers, as of December 31, 2023.
The non-compete restricted period typically expires two years after the termination of employment, and we agree to compensate the key employee with a certain percentage of his or her pre-departure salary during the restricted period. We believe that we maintain a good working relationship with our employees, and we have not experienced any major labor disputes. E.
The non-compete restricted period typically expires two years after the termination of employment, and we agree to compensate the key employee with a certain percentage of his or her pre-departure salary during the restricted period.
Jingxi Zhu has been our head of information technology since July 2003 and has served as a vice president of information technology since September 2016. From January 2014 to September 2016, Mr. Zhu was also our director. Mr. Zhu received an EMBA from Renmin University of China in 2021. Mr.
From January 2014 to September 2016, Mr. Zhu was also our director. Mr. Zhu received an EMBA from Renmin University of China in 2021. Mr. Jianfeng Zhang has served as our vice president of public relations since February 2016. Mr.
The consideration for those shares was US12.0 million. All ordinary shares issued for purpose of this employee shareholding platform were re-designated as Class A ordinary shares of our company upon the completion of our initial public offering. Historically, ZTO ES had been held by Mr. Meisong Lai and four limited partnerships formed in China. Mr.
All ordinary shares issued for purpose of this employee shareholding platform were re-designated as Class A ordinary shares of our company upon the completion of our initial public offering in 2016. ZTO ES is directly held by four limited partnerships.
Liu is currently a partner of Sequoia Capital China, which he joined in May 2007. Mr. Liu has served as an independent director of Vipshop Holdings Limited (NYSE: VIPS) (“Vipshop”) since January 2011 and as a non-executive director of China Renaissance Holdings Limited (HKEX: 1911) since June 2020. Mr.
Liu has served as an independent director of Vipshop Holdings Limited (NYSE: VIPS) (“Vipshop”) since January 2011 and served as a non-executive director of China Renaissance Holdings Limited (HKEX: 1911) from 2020 to 2023. Mr.
We have not set aside or accrued any amount to provide pension, retirement or other similar benefits to our executive officers and directors.
For share incentive grants to our officers and directors, see “—2016 Share Incentive Plan,” “—2024 Share Incentive Plan” and “—Employee Shareholding Platform.” We have not set aside or accrued any amount to provide pension, retirement or other similar benefits to our executive officers and directors.
Further, ZTO ES shall abstain from voting on matters that require shareholders’ approval under the Hong Kong Listing Rules for all the shares of our company held by ZTO ES in light of the Primary Conversion. ​ 124 Table of Contents As of March 31, 2023, we have awarded certain rights associated with 10,252,589 Class A ordinary shares through the platform as share incentives.
ZTO ES abstains from voting on matters that require shareholders’ approval for all the shares of our company held by ZTO ES. As of March 31, 2024, we have awarded certain rights associated with 11,458,072 Class A ordinary shares through the platform as share incentives.
Jilei Wang. To our knowledge, as of March 31, 2023, 129,474,646 (15.9%) of our ordinary shares in the form of ADSs (including 10,655,198 Class A ordinary shares in the form of ADSs repurchased by us) were held by one record holder in the United States, which was JPMorgan Chase Bank, N.A., the depositary of our ADS program.
To our knowledge, as of March 31, 2024, 136,095,789 (16.7%) of our ordinary shares in the form of ADSs were held by one record holder in the United States, which was JPMorgan Chase Bank, N.A., the depositary of our ADS program.
Share Ownership The following table sets forth information with respect to the beneficial ownership of our ordinary shares as of March 31, 2023 by: ● each of our directors and executive officers; and ● each person known to us to own beneficially more than 5% of our total outstanding shares. 130 Table of Contents We had 608,011,904 Class A ordinary shares, excluding our repurchase of 10,655,198 Class A ordinary shares in the form of ADSs, and 206,100,000 Class B ordinary shares, issued and outstanding as of March 31, 2023.
Share Ownership The following table sets forth information with respect to the beneficial ownership of our ordinary shares as of March 31, 2024 by: ● each of our directors and executive officers; and ● each person known to us to own beneficially more than 5% of our total outstanding shares.
Any director so appointed shall hold office only until the first annual general meeting of our company after his or her appointment and shall then be eligible for re-election at that meeting. Our officers are elected by and serve at the discretion of the board of directors.
Any director so appointed shall hold office only until the first annual general meeting of our company after his or her appointment and shall then be eligible for re-election at that meeting. Every director, including those appointed for a specific term, should be subject to retirement by rotation at least once every three years.
We did not include 9,437,496 Class A ordinary shares held by ZTO ES for the purpose of our employee shareholding platform in the calculation of voting power as ZTO ES shall abstain from voting on matters that require shareholders’ approval under the Hong Kong Listing Rules for all the shares of our company held by ZTO ES in light of the Primary Conversion.
We did not include 8,700,914 Class A ordinary shares held by ZTO ES for the purpose of our employee shareholding platform and 2,256,634 Class A ordinary shares held by the trustee in connection with the trust for the 2016 Plan in the calculation of voting power as ZTO ES and the trustee shall abstain from voting on matters that require shareholders’ approval for all the shares of our company held by them following our voluntary conversion to a dual-primary listed company on the Hong Kong Stock Exchange.
Zheng Liu is Block Bl, Xixi Center, 588 West Wenyi Road, Xihu District, Hangzhou 310000, China. 131 Table of Contents (1) Represents (i) 206,100,000 Class B ordinary shares directly held by Zto Lms Holding Limited, (ii) 964,765 Class A Ordinary Shares held by ZTO ES and (iii) 4,025,182 ADSs (representing the same number of Class A Ordinary Shares) held by Zto Lms Holding Limited, 2,348,428 of which were vested from restricted share units held by Mr.
(1) Represents (i) 206,100,000 Class B ordinary shares directly held by Zto Lms Holding Limited, (ii) 964,765 Class A ordinary shares held by ZTO ES and (iii) 4,608,920 ADSs (representing the same number of Class A ordinary shares) held by Zto Lms Holding Limited, 2,932,166 of which were vested from restricted share units held by Mr. Meisong Lai. Mr.
Yu served as Baidu’s chief financial officer, overseeing its finance and purchasing functions. Prior to joining Baidu, Mr. Yu served as the chief financial officer of Weibo Corporation, a social media company (NASDAQ: WB), from 2015 to 2017. Prior to joining Weibo, Mr.
Yu served as the chief financial officer of Weibo Corporation (NASDAQ: WB, HKEX: 9898), a social media company from 2015 to 2017, and as the chief financial officer of SINA Corporation, an internet portal, from 2006 to 2015. Mr.
A director is not required to hold any shares in our company by way of qualification.
These rights vested immediately upon grant. C. Board Practices Our board of directors consists of ten directors. A director is not required to hold any shares in our company by way of qualification.
Yan studied at Shanghai International Studies University, where she majored in English literature and linguistics and received a bachelor’s degree in business administration with an accounting major from Hawaii Pacific University in August 1991. Ms. Yan graduated from the GE experienced financial leadership program in September 2003 and is a U.S.-certified public accountant with a CGMA designation (AICPA). Mr.
(HKEX: 9690), a leading integrated online and offline platform for automotive service in China since September 2023. Ms. Yan studied at Shanghai International Studies University, where she majored in English literature and linguistics and received a bachelor’s degree in business administration with an accounting major from Hawaii Pacific University in August 1991. Ms.
Frank Zhen Wei is Suite 6703, Two IFC, 8 Finance Street, Hong Kong. The business address of Mr. Qin Charles Huang is Suite 1804, Tower 1, Admiralty Centre, Hong Kong. The business address of Mr.
Frank Zhen Wei is Suite 6703, Two IFC, 8 Finance Street, Hong Kong. The business address of Mr. Xudong Chen is No. 618, Waima Road, Huangpu District, Shanghai, 200010, China.
As of March 31, 2023, other employees as a group were granted the same rights associated with 8,139,806 Class A ordinary shares held by ZTO ES through our employee shareholding platform. Certain of our employees paid subscription consideration of RMB58.4 million in February 2015 relating to the issuance of 584,000 redeemable and contingently convertible share units.
As of March 31, 2024, other employees as a group were granted the same rights associated with 9,665,221 Class A ordinary shares held by ZTO ES through our employee shareholding platform. 123 Table of Contents On March 22, 2024, we agreed to award rights associated with 1,205,483 Class A ordinary shares through the platform as share incentives to certain executive officers and employees.
Huang is also a Chartered Financial Analyst. Mr. Herman Yu became our director in October 2016. Mr. Yu has served as the chief strategy officer of Baidu, Inc., a leading AI company with a strong Internet foundation (NASDAQ: BIDU, HKEX: 9888), from August 2021 to March 2023. From September 2017 to November 2021, Mr.
(NASDAQ: BIDU, HKEX: 9888), an AI and internet company, serving as its chief strategy officer from August 2021 to March 2023 and as its chief financial officer from September 2017 to November 2021. Prior to joining Baidu, Mr.
Our PRC subsidiaries and the VIE are required by law to make contributions equal to certain percentages of each employee’s salary for his or her pension insurance, medical insurance, unemployment insurance and other statutory benefits and a housing provident fund. 2016 Share Incentive Plan Under our 2016 Share Incentive Plan (as amended and restated), or the 2016 Plan, the maximum aggregate number of shares which may be issued pursuant to all awards under the 2016 Plan is initially 3,000,000, plus an annual increase on the first day of each of our fiscal year during the term of the 2016 Plan commencing with the fiscal year beginning January 1, 2017, by an amount equal to the least of (i) 0.5% of the total number of shares issued and outstanding on the last day of the immediately preceding fiscal year; (ii) 3,000,000 shares; or (iii) such number of shares as may be determined by our board of directors.
Our PRC subsidiaries and the VIE are required by law to make contributions equal to certain percentages of each employee’s salary for his or her pension insurance, medical insurance, unemployment insurance and other statutory benefits and a housing provident fund. 2016 Share Incentive Plan Following our conversion to a dual-primary listed company on the Hong Kong Stock Exchange, the scheme limit under our 2016 Share Incentive Plan (as amended and restated), or the 2016 Plan, is capped at 21,000,000 Class A ordinary shares.
Beneficial ownership is determined in accordance with the rules and regulations of the SEC.
We had 606,766,663 Class A ordinary shares, and 206,100,000 Class B ordinary shares, issued and outstanding as of March 31, 2024. Beneficial ownership is determined in accordance with the rules and regulations of the SEC.
Liu received his bachelor’s degree in Business English from Beijing Foreign Studies University in July 2001. Mr. Liu is a member of the American Institute of Certified Public Accountants (AICPA) and a Certified Internal Auditor (CIA). Mr. Xing Liu has served as our director since May 2013. Mr.
Mr. Chen received his MBA degree from Ross School of Business at University of Michigan in 2012, and his bachelor’s degree in economics from Fudan University in 2006. Mr. Xing Liu has served as our director since May 2013. Mr. Liu is currently a partner of HongShan, which he joined in May 2007. Mr.
Removed
Zheng Liu has also been a non-executive director of Alibaba Pictures Group Limited (SEHK: 1060) since October 2021 and a non-executive director of AGTech Holdings Limited (SEHK: 8279) since December 2021. Mr. Zheng Liu has been the Chief Financial Officer of Cainiao Network since February 2016. From June 2010 to February 2016, Mr.
Added
Chen has been a Director for Strategic Investment at Alibaba Group since May 2023. From November 2019 to April 2023, Mr. Chen was a Director for Strategic Investment at Cainiao Network. From September 2013 to November 2019, Mr. Chen successively served as an associate, senior associate, vice president, and executive director for private equity investment at HOPU Investments.
Removed
Liu served as Senior Finance Director with Alibaba Group and was responsible for financial operations of TMall, Taobao and Alibaba.com. From January 2005 to May 2010, Mr. Liu held senior positions in corporate finance management in Vimicro, Sky Flying Media and Hurray Holding. From July 2001 to December 2004, Mr. Liu worked at PwC’s audit division. Mr.
Added
From July 2012 to August 2013, Mr. Chen served as an associate at investment banking department of Deutsche Bank Securities in New York. From July 2006 to October 2008, Mr. Chen worked at investment banking department of China International Capital Corporation as an analyst. Mr. Chen has been a non-executive director of Quantium Solutions International Pte. Ltd. since June 2022.
Removed
Yu worked at SINA Corporation, an Internet portal, from 2004 to 2015, beginning as the vice president of finance, and in 2006 became the chief financial officer. Mr.
Added
Huang is also a Chartered Financial Analyst. Mr. Herman Yu has been our director since October 2016. Mr. Yu advises and invests in high tech companies in the AI, internet, Web3, fintech and green energy sectors. Previously, Mr. Yu worked at Baidu, Inc.
Removed
Yan is also an independent non-executive director appointee of TUHU Car Inc., a leading integrated online and offline platform for automotive service in China and submitted an application for listing on the Hong Kong Stock Exchange in January 2022. Ms.
Added
Yan graduated from the GE experienced financial leadership program in September 2003 and is a U.S.-certified public accountant with a CGMA designation (AICPA). Mr. Jianchang Lai has been our vice president of overseas operations since September 2016. Mr.
Removed
Following the annual increases in from 2017 to 2022, the award pool under the 2016 Plan is 21,000,000 shares as of December 31, 2022.
Added
For administrative convenience purposes, we have established a trust administered by an independent trustee for transferring, as directed by an authorized representative of our company, the shares or ADSs to the grantees upon the exercise or vesting of awards granted under the 2016 Plan. The following paragraphs describe the principal terms of the 2016 Plan. Types of Awards.
Removed
After the Primary Conversion, we will no longer make annual increases to the scheme limit of the 2016 Plan for the remaining term of the 2016 Plan, and the scheme limit of the 2016 Plan will be capped at 21,000,000 shares.
Added
The maximum aggregate number of shares underlying the awards under the 2024 Plan is 30,000,000 Class A ordinary shares.
Removed
Further, after the Primary Conversion, we will continue to use the 2016 Plan for granting share options and awards, and such options and awards will be satisfied by our existing shares issued and reserved for the administration of the 2016 Plan. The following paragraphs describe the principal terms of the 2016 Plan. Types of Awards.
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The shares that may be issued pursuant to the awards under the 2024 Plan will be from shares or ADSs purchased in the open market by us or a third party trust. 2024 Plan does not involve the issuance of new shares of our company. 121 Table of Contents The following paragraphs describe the principal terms of the 2024 Plan.
Removed
Meisong Lai had been the sole director of ZTO ES. An entity controlled by Mr. Meisong Lai, our chairman and chief executive officer, was the general partner of each of those limited partnerships and Ms. Yufeng Lai, wife of Mr. Lai, was the sole limited partner of each of those limited partnerships upon their formation.

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Item 7. Management's Discussion & Analysis

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

16 edited+9 added−4 removed17 unchanged
Biggest changeIn November 2016, we invested RMB54.0 million in ZTO Supply Chain Management Co., Ltd., or ZTO LTL, for 18% equity interest. ZTO LTL is engaged in provision of less-than-truckload transportation services in China. ZTO LTL is our investee. In September 2017, we increased investment in ZTO LTL by RMB36.0 million to maintain our equity interest in ZTO LTL at 18%.
Biggest changeAs of December 31, 2023, we had approximately RMB28.9 million (US$4.1 million) due to this company. 132 Table of Contents ZTO LTL . In November 2016, we invested RMB54.0 million in ZTO Supply Chain Management Co., Ltd., or ZTO LTL, for 18% equity interest. ZTO LTL is engaged in provision of less-than-truckload transportation services in China.
The company agrees to take all Necessary Action (as defined in the investor rights agreement), and the Founding Shareholders (as defined in the investor rights agreement) agree to take all Necessary Action to cause the company, to ensure that (i) one (1) incumbent member of the Board shall resign his or her directorship, and (ii) the vacancy so caused by such resignation shall be filled by the appointment of one (1) director who shall be designated by Ali ZT (the “Investor Director”).
The company agrees to take all Necessary Action (as defined in the investor rights agreement), and the Founding Shareholders (as defined in the investor rights agreement) agree to take all Necessary Action to cause the company, to ensure that (i) one (1) incumbent member of the Board shall resign his or her directorship, and (ii) the vacancy so caused by such resignation shall be filled by the appointment of one (1) director who shall be designated by Ali ZT.
Pursuant to this shareholders agreement, we have granted certain registration rights to our shareholders. Set forth below is a description of the registration rights granted under the agreement. 133 Table of Contents Demand Registration Rights.
Pursuant to this shareholders agreement, we have granted certain registration rights to our shareholders. Set forth below is a description of the registration rights granted under the agreement. 130 Table of Contents Demand Registration Rights.
Ali ZT may, at its election, appoint a designated representative to serve as a non-voting observer to the Board (the “Investor Observer”) and appoint the Investor Director or Investor Observer to any committee of the board of directors, subject to compliance with independence requirements under applicable laws and listing rules.
Ali ZT may, at its election, appoint a designated representative to serve as a non-voting observer to the Board and appoint the director or observer it designated to any committee of the board of directors, subject to compliance with independence requirements under applicable laws and listing rules.
We incurred approximately RMB56.6 million and approximately RMB459.0 million (US$66.6 million) of transportation service fees to ZTO LTL and derived approximately RMB29.7 million and approximately RMB45.9 million (US$6.7 million) of rental income from ZTO LTL in 2021 and 2022, respectively.
We incurred approximately RMB56.6 million, RMB459.0 million and RMB862.9 million (US$121.5 million) of transportation service fees to ZTO LTL and derived approximately RMB29.7 million, RMB45.9 million and RMB45.9 million (US$6.5 million) of property leasing income from ZTO LTL in 2021, 2022 and 2023, respectively.
The registration rights agreement contains customary indemnification provisions. Employment Agreements and Indemnification Agreements See “Item 6. Directors, Senior Management and Employees — A. Directors and Senior Management—Employment Agreements and Indemnification Agreements.” Share Incentive Plan See “Item 6. Directors, Senior Management and Employees — B.
The registration rights agreement contains customary indemnification provisions. Employment Agreements and Indemnification Agreements See “Item 6. Directors, Senior Management and Employees—A. Directors and Senior Management—Employment Agreements and Indemnification Agreements.” Share Incentive Plan See “Item 6. Directors, Senior Management and Employees—B. Compensation of Directors and Executive Officers—2016 Share Incentive Plan.” Employee Shareholding Platform See “Item 6. Directors, Senior Management and Employees—B.
Ali ZT and Cainiao Smart may elect to exercise their Right of First Offer rights to purchase the securities, or exercise their tagalong rights to sell their securities, at the price and on the terms offered by the Founder. Preemptive Rights.
Lai shall first make an offer of such securities to Ali ZT and Cainiao Smart. Ali ZT and Cainiao Smart may elect to exercise their rights to accept Mr. Lai’s offer to purchase the securities, or exercise their tagalong rights to sell their securities, at the price and on the terms offered by Mr. Lai. Preemptive Rights.
In addition, certain existing shareholders of the company are not permitted to transfer any securities of the company to a competitor of Alibaba without the prior written consent of Ali ZT and the Founder is not permitted to transfer any Class B ordinary shares beneficially owned by him without the prior written consent of Ali ZT prior to the second anniversary of the date of the investor rights agreement. 134 Table of Contents Additional Agreements.
Lai is not permitted to transfer any Class B ordinary shares beneficially owned by him without the prior written consent of Ali ZT prior to the second anniversary of the date of the investor rights agreement. 131 Table of Contents Additional Agreements.
Zhongkuai (Tonglu) Future City Industrial Development Co., Ltd, or Zhongkuai Future City, is controlled by our chairman. In 2020, we extend a three-year loan with a principal amount of RMB500.0 million with a 7.2% annualized interest rate to Zhongkuai Future City. As of December 31, 2022, we had amounts due from Zhongkuai Future City of RMB575.0 million (US$83.4 million).
Zhongkuai (Tonglu) Future City Industrial Development Co., Ltd, or Zhongkuai Future City, is controlled by our chairman and chief executive officer. In 2020, we provided a three-year loan with a principal amount of RMB500.0 million with a 7.2% annualized interest rate to Zhongkuai Future City.
Among other things, the investor rights agreement contains the following rights of Alibaba and Cainiao Network, as applicable: Right of First Offer. At any time Mr.
Among other things, the investor rights agreement contains the following rights of Alibaba and Cainiao Network, as applicable: Right of First Offer. At any time Mr. Meisong Lai, our Founder, proposes to transfer securities of our company which constitutes a Change of Control (as defined in the investor rights agreement), Mr.
In 2021, we invested RMB80.0 million in ZTO Yun Leng Network Technology (Zhejiang) Co., Ltd., or ZTO Yunleng, for 18% equity interests in it. In December 2021, we sold our 100% equity interests in Zhejiang Xinglian Air Cargo Co., Ltd. to Zhongtong Yunleng at a cash consideration of RMB177.3 million.
In December 2021, we sold our 100% equity interests in Zhejiang Xinglian Air Cargo Co., Ltd. to Zhongtong Yunleng at a cash consideration of RMB177.3 million. We incurred approximately RMB5.9 million, RMB56.3 million and RMB119.0 million (US$16.8 million) of transportation service fees to ZTO Yun Leng in 2021, 2022 and 2023, respectively.
In May 2020, we contributed additional investment in ZTO LTL of RMB90.2 million (US$12.7 million) in cash, jointly with other investors, and our equity interest in ZTO LTL further decreased to 17.3%. In December 2021, we invested US$52,102 (approximate to RMB331,807) in cash to maintain our equity interest in ZTO LTL at 17.3%.
ZTO LTL is our investee. In 2017, 2018 and 2020, we increased our investment in ZTO LTL by RMB256.4 million in aggregate. In December 2021, we invested US$52,102 (approximate to RMB331,807) in cash to maintain our equity interest in ZTO LTL at 17.3%.
Transaction with an executive officer. Mr. Jianchang Lai is a vice president of our company. In 2021, we acquired 20.77% equity interests each in two subsidiaries from Mr. Lai at a total cash consideration of RMB103.7 million. ZTO Yun Leng.
In 2021, we acquired 20.77% equity interests each in two subsidiaries from Mr. Lai at a total cash consideration of RMB103.7 million. ZTO Yun Leng. In 2021, we invested RMB80.0 million in ZTO Yun Leng Network Technology (Zhejiang) Co., Ltd., or ZTO Yunleng, for 18% equity interests in it.
Compensation of Directors and Executive Officers — 2016 Share Incentive Plan.” Employee Shareholding Platform See “Item 6. Directors, Senior Management and Employees — B. Compensation of Directors and Executive Officers—Employee Shareholding Platform.” Other Transactions with Related Parties Shanghai Mingyu . Shanghai Mingyu Barcode Technology Ltd. is controlled by our chairman’s brother.
Compensation of Directors and Executive Officers—Employee Shareholding Platform.” Other Transactions with Related Parties Shanghai Mingyu . Shanghai Mingyu Barcode Technology Ltd. is controlled by our chairman’s brother. We incurred approximately RMB235.8 million, RMB237.3 million and RMB330.2 million (US$46.5 million) for purchases of supplies from this company in 2021, 2022 and 2023, respectively.
We incurred approximately RMB56.3 million (US$8.2 million) of transportation service fees to ZTO Yun Leng. As of December 31, 2022, we had approximately RMB53.5 million (US$7.8 million) of accounts due from this company. C. Interests of Experts and Counsel Not applicable. ​
We generated RMB0.1 million and RMB1.8 million (US$0.3 million) of interest income from ZTO Cloud Warehouse in 2022 and 2023, respectively. As of December 31, 2023, we had amount due from ZTO Cloud Warehouse of RMB72.4 million (US$10.2 million) and RMB16.4 million (US$2.3 million) due to ZTO Cloud Warehouse. C. Interests of Experts and Counsel Not applicable. ​
In 2022, we extend a one-year loan with a principal amount of RMB110.0 (US$15.9 million) million with a 6.96% annualized interest rate to ZTO LTL and its subsidiaries.
We provided some factoring loans to ZTO Cloud Warehouse and its subsidiaries in 2022 and 2023. The balance of the loans was RMB12.5 million and RMB33.0 million (US$4.6 million) as of December 31, 2022 and 2023, respectively. All of the loans were within one year and with a 7.0% annualized interest rate.
Removed
Meisong Lai (the “Founder”), proposes to transfer securities of our company which constitutes a Change of Control (as defined in the investor rights agreement), the Founder shall first make an offer of such securities to Ali ZT and Cainiao Smart (the “Right of First Offer”).
Added
In addition, certain existing shareholders of the company are not permitted to transfer any securities of the company to a competitor of Alibaba without the prior written consent of Ali ZT and Mr.
Removed
We incurred approximately RMB235.8 million and approximately RMB237.3 million (US$34.4 million) for purchases of supplies from this company in 2021 and 2022, respectively. As of December 31, 2022, we had approximately RMB20.2 million (US$2.9 million) due to this company. 135 Table of Contents ZTO LTL .
Added
We provided some factoring loans to ZTO LTL and subsidiaries in 2022 and 2023. The balance of the loans was RMB110.0 million and RMB66.9 million (US$9.4 million) as of December 31, 2022 and 2023, respectively.
Removed
In July 2018, we made an additional investment in ZTO LTL of RMB 130.2 million (US$19.0 million) in cash, jointly with other investors, and our equity interest in ZTO LTL decreased to 17.7%.
Added
All of the loans were within one year and with a 7.0% annualized interest rate.We generated RMB3.5 million (US$0.5 million) of interest income from ZTO LTL in 2023. As of December 31, 2023, we had amount due from ZTO LTL of RMB69.9 million (US$9.8 million) and RMB149.5 million (US$21.1 million) due to ZTO LTL. Zhongkuai Future City .
Removed
As of December 31, 2022, we had amount due from ZTO LTL of RMB101.4 million (US$14.7 million) comprised the loan above and net off account payable generated from the transportation service that this related party and its subsidiaries provided to the Company. Zhongkuai Future City .
Added
On December 1, 2023, our company (through an indirect wholly-owned subsidiary), Zhongkuai Future City, and Mr.
Added
Jilei Wang entered into a loan extension agreement, pursuant to which we agreed to continue to provide Zhongkuai Future City with the loan in the principal amount of RMB500.0 million for a term of 36 months with an interest rate of 5% per annum, with Mr. Jilei Wang as guarantor.
Added
We generated RMB33.0 million (US$4.7 million) of interest income from Zhongkuai Future City in 2023. As of December 31, 2023, we had amounts due from Zhongkuai Future City of RMB502.1 million (US$70.7 million). Transaction with an executive officer. Mr. Jianchang Lai is a vice president of our company.
Added
As of December 31, 2023, we had approximately RMB15.0 million (US$2.1 million) of accounts due to ZTO Yun Leng and RMB1.2 million (US$0.2 million) due from ZTO Yun Leng. ZTO Cloud Warehouse. ZTO Cloud Warehouse Technology Co., Ltd., or ZTO Cloud Warehouse, was held as to approximately 16.36% by us as of December 31, 2023.
Added
ZTO Cloud Warehouse are primarily engaged in the provision of one-stop warehouse solutions including warehouse storage, warehouse management and express delivery services in China.
Added
We generated approximately RMB68.7 million, RMB291.6 million and RMB274.3 million (US$38.6 million) of express delivery service revenue from ZTO Cloud Warehouse and derived approximately RMB33.4 million, RMB53.1 million and RMB64.7 million (US$9.1 million) of property leasing income from ZTO Cloud Warehouse in 2021, 2022 and 2023, respectively.

Other ZTO 10-K year-over-year comparisons