《360数科(QFIN.US)2022年年度报告(英文版)(420页).pdf》由会员分享,可在线阅读,更多相关《360数科(QFIN.US)2022年年度报告(英文版)(420页).pdf(420页珍藏版)》请在三个皮匠报告上搜索。
1、Table of ContentsUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549FORM 20-F(Mark One)REGISTRATION STATEMENT PURSUANT TO SECTION 12(b)OR 12(g)OF THE SECURITIES EXCHANGE ACT OF 1934ORANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal yea
2、r ended December 31,2022.ORTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934ORSHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934Date of event requiring this shell company reportFor the transition period from toCommission f
3、ile number:001-38752Qifu Technology,Inc.(Exact Name of Registrant as Specified in Its Charter)N/A(Translation of Registrants Name Into English)Cayman Islands(Jurisdiction of Incorporation or Organization)7/F Lujiazui Finance PlazaNo.1217 Dongfang RoadPudong New Area,Shanghai 200122Peoples Republic o
4、f China(Address of Principal Executive Offices)Alex Xu,Chief Financial Officer7/F Lujiazui Finance PlazaNo.1217 Dongfang RoadPudong New Area,Shanghai 200122Peoples Republic of ChinaPhone:+86 21 5835-7668Email:(Name,Telephone,Email and/or Facsimile number and Address of Company Contact Person)Securit
5、ies registered or to be registered pursuant to Section 12(b)of the Act:Title of each class Trading Symbol(s)Name of each exchange on which registeredAmerican depositary shares,each representing two Class A ordinary shares,par value US$0.00001 pershareQFINThe Nasdaq Global Select MarketClass A ordina
6、ry shares,par value US$0.00001 per share3660The Stock Exchange of Hong Kong LimitedSecurities registered or to be registered pursuant to Section 12(g)of the Act:None(Title of Class)Securities for which there is a reporting obligation pursuant to Section 15(d)of the Act:None(Title of Class)Indicate t
7、he number of outstanding shares of each of the issuers classes of capital or common stock as of the close of the period covered by the annual report:As of December 31,2022,there were 322,792,063 class A ordinary shares issued and outstanding,par value US$0.00001 per share.Exhibit 1.2Exhibit 2.2Table
8、 of ContentsIndicate by check mark if the registrant is a well-known seasoned issuer,as defined in Rule 405 of the Securities Act.Yes No If this report is an annual or transition report,indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d)of the Sec
9、urities Exchange Act of 1934.Yes No Note Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d)of the Securities Exchange Act of 1934 from their obligations under those Sections.Indicate by check mark whether the registrant:(1)has filed all re
10、ports required to be filed by Section 13 or 15(d)of the Securities Exchange Act of 1934 during the preceding 12 months(or for such shorter period that the registrantwas required to file such reports),and(2)has been subject to such filing requirements for the past 90 days.Yes No Indicate by check mar
11、k whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T(232.405 of this chapter)during the preceding 12 months(orfor such shorter period that the registrant was required to submit such files).Yes No Indicate by
12、 check mark whether the registrant is a large accelerated filer,an accelerated filer,a non-accelerated filer,or an emerging growth company.See the definitions of“large accelerated filer,”“accelerated filer,”and“emerginggrowth company”in Rule 12b-2 of the Exchange Act.Large accelerated filerAccelerat
13、ed filerNon-accelerated filerEmerging growth companyIf an emerging growth company that prepares its financial statements in accordance with U.S.GAAP,indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new orrevised financial accountin
14、g standards provided pursuant to Section 13(a)of the Exchange Act.The term“new or revised financial accounting standard”refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5,2012.Indicate by check mark whether the registrant ha
15、s filed a report on and attestation to its managements assessment of the effectiveness of its internal control over financial reporting under Section 404(b)of the Sarbanes-Oxley Act(15 U.S.C.7262(b)by the registered public accounting firm that prepared or issued its audit report.Yes No If securities
16、 are registered pursuant to Section 12(b)of the Act,indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.Indicate by check mark whether any of those error corrections are restatem
17、ents that required a recovery analysis of incentive-based compensation received by any of the registrants executive officers during the relevant recoveryperiod pursuant to 240.10D-1(b).Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements includ
18、ed in this filing:U.S.GAAP International Financial Reporting Standards as issued by the International Accounting Standards Board Other If“Other”has been checked in response to the previous question,indicate by check mark which financial statement item the registrant has elected to follow.Item 17 Ite
19、m 18If this is an annual report,indicate by check mark whether the registrant is a shell company(as defined in Rule 12b-2 of the Exchange Act).Yes No(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)Indicate by check mark whether the registrant has filed all d
20、ocuments and reports required to be filed by Sections 12,13 or 15(d)of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a planconfirmed by a court.Yes No Table of ContentsTABLE OF CONTENTSPageINTRODUCTION1FORWARD-LOOKING STATEMENTS3PART I.4ITEM 1 IDENTITY OF DIR
21、ECTORS,SENIOR MANAGEMENT AND ADVISERS4ITEM 2 OFFER STATISTICS AND EXPECTED TIMETABLE4ITEM 3 KEY INFORMATION4ITEM 4 INFORMATION ON THE COMPANY75ITEM 4A UNRESOLVED STAFF COMMENTS119ITEM 5 OPERATING AND FINANCIAL REVIEW AND PROSPECTS119ITEM 6 DIRECTORS,SENIOR MANAGEMENT AND EMPLOYEES142ITEM 7 MAJOR SHA
22、REHOLDERS AND RELATED PARTY TRANSACTIONS153ITEM 8 FINANCIAL INFORMATION158ITEM 9 THE OFFER AND LISTING159ITEM 10 ADDITIONAL INFORMATION159ITEM 11 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK170ITEM 12 DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES170PART II.175ITEM 13 DEFAULTS,
23、DIVIDEND ARREARAGES AND DELINQUENCIES175ITEM 14 MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS175ITEM 15 CONTROLS AND PROCEDURES176ITEM 16 Reserved176ITEM 16A AUDIT COMMITTEE FINANCIAL EXPERT176ITEM 16B CODE OF ETHICS176ITEM 16C PRINCIPAL ACCOUNTANT FEES AND SERVICES177
24、ITEM 16D EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES177ITEM 16E PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS177ITEM 16F CHANGE IN REGISTRANTS CERTIFYING ACCOUNTANT177ITEM 16G CORPORATE GOVERNANCE178ITEM 16H MINE SAFETY DISCLOSURE178ITEM 16I DISCLOSURE REGARDI
25、NG FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.178ITEM 16J INSIDER TRADING POLICIES.178PART III.179ITEM 17 FINANCIAL STATEMENTS179ITEM 18 FINANCIAL STATEMENTS179ITEM 19 EXHIBITS179SIGNATURES181Table of Contents1INTRODUCTIONUnless otherwise indicated and except where the context otherwise requires
26、,references in this annual report to:“Qifu Technology,”“we,”“us,”“our,”“our Company”and“our Group”are to Qifu Technology,Inc.and its subsidiaries,and,in the context of describing our operationsand consolidated financial information,our VIEs in China and their respective subsidiaries;“360 Group”is to
27、 360 Security Technology Inc.and its controlled affiliates and predecessors;“ADSs”are to American depositary shares,each of which represents two of our class A ordinary shares;“China”or“the PRC”is to the Peoples Republic of China,excluding,for the purposes of this annual report only,Taiwan and the s
28、pecial administrative regions of HongKong and Macau,except where the context otherwise requires;“class A ordinary shares”are to our class A ordinary shares,par value US$0.00001 per share;“Fuzhou Financing Guarantee”is to Fuzhou 360 Financing Guarantee Co.,Ltd.;“Fuzhou Microcredit”is to Fuzhou 360 On
29、line Microcredit Co.,Ltd.;“HK Qirui”is to HK Qirui International Technology Company Limited;“shares,”or“ordinary shares”are to our class A ordinary shares,and in the context of describing our share capital before March 31,2023,also including class B ordinaryshares,par value US$0.00001 per share,as t
30、he context requires and as applicable;“RMB”or“Renminbi”is to Renminbi,the legal currency of the PRC;“Shanghai Financing Guarantee”is to Shanghai 360 Financing Guarantee Co.,Ltd.(now known as Shanghai Qiyaoxin Technology Co.,Ltd.);“Shanghai Qibutianxia”is to Shanghai Qibutianxia Information Technolog
31、y Co.,Ltd.(formerly known as Beijing Qibutianxia Technology Co.,Ltd.);“Shanghai Qiyu”is to Shanghai Qiyu Information&Technology Co.,Ltd.;“US$”or“U.S.dollars”is to United States dollars,the lawful currency of the United States;“U.S.GAAP”is to accounting principles generally accepted in the United Sta
32、tes;“variable interest entities,”“VIE”or“VIEs”are to Shanghai Qiyu,Fuzhou Financing Guarantee and Shanghai Financing Guarantee;“WFOE”or“Shanghai Qiyue”is to Shanghai Qiyue Information&Technology Co.,Ltd.;andall references to“RMB”or“renminbi”are to the legal currency of China,all references to“$,”“do
33、llars,”“US$”and“U.S.dollars”are to the legal currency of the UnitedStates,and all references to“HK$”or“Hong Kong dollars”are to the legal currency of Hong Kong.Unless otherwise stated,all translations from RMB to U.S.dollars andfrom U.S.dollars to RMB in this annual report were made at a rate of RMB
34、6.8972 to US$1.00,the exchange rate on December 30,2022 set forth in the H.10 statisticalrelease of the U.S.Federal Reserve Board.In addition,unless the context indicates otherwise,for the discussion of our business references,Table of Contents2“180 day+vintage delinquency rate”is to a percentage,wh
35、ich is equal to(i)the total amount of principal for all loans facilitated by our Group in a fiscal quarter thatbecome delinquent for more than 180 days,less the total amount of recovered past due principal for all loans facilitated by our Group that were delinquent for more than180 days in the same
36、fiscal quarter,divided by(ii)the total initial principal amount of loans facilitated by our Group in such fiscal quarter;loans under Intelligent CreditEngine and other technology solutions are not included in the delinquency rate calculation;“30 day collection rate”is to a percentage,which is equal
37、to(i)the amount of principal that is repaid in one month among the total amount of principal that is overdue as ofa specified date,divided by(ii)the total amount of principal that is overdue as of such specified date;“90 day+delinquency rate”is to a percentage,which is equal to(i)the outstanding loa
38、n balance of on-and off-balance sheet loans facilitated by our Group that are 91 to180 calendar days past due,divided by(ii)the total outstanding loan balance of on-and off-balance sheet loans facilitated by our Group across our platform as of a specificdate;loans that are charged-off and loans unde
39、r Intelligent Credit Engine and other technology solutions are not included in the delinquency rate calculation;“capital-light model”is to a comprehensive suite of technology-enabled loan facilitation services spanning the loan lifecycle,from borrower acquisition,technologyempowerment in credit asse
40、ssment to post-facilitation services,under which we currently do not take any credit risk;“Credit-Tech”is to credit technology services,which refer to services using technology solutions to empower and enhance credit services,and are characterized bydistinguished efficiency and quality;“loan facilit
41、ation volume”is to the total principal amount of loans facilitated or originated by,as the context mandates,a Credit-Tech platform,a traditional financialinstitution or other market players in the credit industry;in the context of loan facilitate volume of loans facilitated or originated by us,the t
42、otal principal amount of loansfacilitated or originated during the given period,including loan volume facilitated through Intelligence Credit Engine(ICE)and other technology solutions;“outstanding loan balance”is to the total amount of principal outstanding for loans facilitated or originated by a C
43、redit-Tech platform,as the context mandates,a traditionalfinancial institution or other market players in the credit industry at the end of each period;in the context of the outstanding balance of loans facilitated or originated by us,the total amount of principal outstanding for loans facilitated o
44、r originated at the end of each period,including loan balance for ICE and other technology solutionsexcluding loans delinquent for more than 180 days;“repeat borrower contribution”or“loan origination contributed by repeat borrowers”is to a percentage,the numerator of which is the principal amount of
45、 loans borrowedduring that period by borrowers who had historically made at least one successful drawdown,and the denominator of which is the total loan facilitation volume throughour platform during that period;“SME”is to small-and micro-enterprises and owners of small-and micro-enterprises;and“use
46、rs with approved credit lines”are to users who have submitted their credit applications and are approved with a credit line at the end of each period.Table of Contents3FORWARD-LOOKING STATEMENTSThis annual report contains forward-looking statements that relate to our current expectations and views o
47、f future events.These statements involve known and unknown risks,uncertainties and other factors that may cause our actual results,performance or achievements to be materially different from those expressed or implied by the forward-lookingstatements.These statements are made under the“safe harbor”p
48、rovisions of the U.S.Private Securities Litigations Reform Act of 1995.You can identify some of these forward-looking statements by words or phrases such as“may,”“will,”“expect,”“anticipate,”“aim,”“estimate,”“intend,”“plan,”“believe,”“is/are likely to,”“potential,”“continue”or other similar expressi
49、ons.We have based these forward-looking statements largely on our current expectations and projections about futureevents that we believe may affect our financial condition,results of operations,business strategy and financial needs.These forward-looking statements include statements relating to:our
50、 goals and strategies;our future business development,financial conditions and results of operations;the expected growth of the Credit-Tech industry in China;our expectations regarding demand for and market acceptance of our Credit-Tech products;our expectations regarding keeping and strengthening o
51、ur relationships with borrowers,financial institution partners,data partners and other parties we collaborate with;competition in our industry;andrelevant government policies and regulations relating to our industry.You should read this annual report and the documents that we refer to in this annual
52、 report and have filed as exhibits to this annual report completely and with the understandingthat our actual future results may be materially different from what we expect.Other sections of this annual report discuss factors which could adversely impact our business andfinancial performance.Moreove
53、r,we operate in an evolving environment.New risk factors emerge from time to time and it is not possible for our management to predict all risk factors,nor can we assess the impact of all factors on our business or the extent to which any factor,or combination of factors,may cause actual results to
54、differ materially from those containedin any forward-looking statements.We qualify all of our forward-looking statements by these cautionary statements.You should not rely upon forward-looking statements as predictions of future events.The forward-looking statements made in this annual report relate
55、 only to events orinformation as of the date on which the statements are made in this annual report.Except as required by law,we undertake no obligation to update or revise publicly any forward-lookingstatements,whether as a result of new information,future events or otherwise,after the date on whic
56、h the statements are made or to reflect the occurrence of unanticipated events.Table of Contents4PART I.ITEM 1 IDENTITY OF DIRECTORS,SENIOR MANAGEMENT AND ADVISERSNot applicable.ITEM 2 OFFER STATISTICS AND EXPECTED TIMETABLENot applicable.ITEM 3 KEY INFORMATIONOur Holding Company Structure and Contr
57、actual Arrangements with the VIEs and VIEs subsidiariesQifu Technology,Inc.is not a Chinese operating company but rather a Cayman Islands holding company that does not conduct business directly and has no equity ownership inthe VIEs and VIEs subsidiaries.We conduct our operations in China through(i)
58、our PRC subsidiaries and(ii)our VIEs with which we have maintained contractual arrangements.PRClaws and regulations restrict and impose conditions on foreign investment in internet-based businesses,such as the distribution of online information.For example,foreign investors aregenerally not allowed
59、to own more than 50%of the equity interests in a value-added telecommunications service provider in accordance with the Special Management Measures for theAccess of Foreign Investment(Negative List)and other applicable laws and regulations.We are a Cayman Islands company and our PRC subsidiaries are
60、 considered foreign-investedenterprises.Accordingly,we operate certain of our businesses in China through our VIEs,and rely on contractual arrangements among our PRC subsidiaries,our VIEs and the nomineeshareholders of our VIEs to control the business operations of our VIEs.Revenues contributed by o
61、ur VIEs accounted for 97%,92%and 92%of our total net revenue for the years of2020,2021 and 2022,respectively.As used in this annual report,“we,”“us,”“our Company,”“our,”or“Qifu Technology,”refers to Qifu Technology,Inc.,its subsidiaries,and,in thecontext of describing our operations and consolidated
62、 financial information,our VIEs and their subsidiaries in China,including but not limited to Shanghai Qiyu,Fuzhou FinancingGuarantee and Shanghai Financing Guarantee.Investors in our ADSs are not purchasing equity interest in our VIEs in China but instead are purchasing equity interest in a holdingc
63、ompany incorporated in the Cayman Islands.A series of contractual agreements,including(i)voting proxy agreements,equity interest pledge agreements and loan agreements,which provide us with effective control overour VIEs in China,(ii)exclusive business cooperation agreements,which allow us to receive
64、 economic benefits from our VIEs in China,and(iii)exclusive option agreements,whichprovide us with the option to purchase the equity interests in,and assets of,our VIEs(collectively,“contractual arrangements”).Terms contained in each set of contractual arrangementswith our VIEs and their respective
65、shareholders are substantially similar.For more details of these contractual arrangements,see“Item 4.Information on the CompanyC.Organizational StructureContractual Arrangements with our VIEs and Their Shareholders.”However,the contractual arrangements may not be as effective as direct ownership in
66、providing us with control over our VIEs and we may incur substantial costs to enforce theterms of the arrangements.All of these contractual arrangements are governed by and interpreted in accordance with PRC law,and disputes arising from these contractual arrangementsbetween us and our VIEs will be
67、resolved through arbitration in China.Accordingly,these contracts would be interpreted in accordance with PRC law and any disputes arising fromthese contracts would be resolved in accordance with PRC legal procedures.These arrangements have not been tested in arbitral tribunals or courts.The legal s
68、ystem in the PRC is notas developed as in some other jurisdictions,such as the United States,and the uncertainties involved in it could limit our ability to enforce these contractual arrangements.Further,thereare very few precedents and little formal guidance as to how contractual arrangements in th
69、e context of a VIE should be interpreted or enforced under PRC law.There remain significantuncertainties regarding the ultimate outcome of such arbitration should legal action become necessary.See“Item 3.Key InformationD.Risk FactorsRisks Related to Our CorporateStructureWe rely on contractual arran
70、gements with our VIEs and the shareholders of our VIEs for all of our business operations,which may not be as effective as direct ownership inproviding operational control”and“Item 3.Key InformationD.Risk FactorsRisks Related to Our Corporate StructureAny failure by our VIEs or the shareholders of o
71、ur VIEs toperform their obligations under our contractual arrangements with them would have a material adverse effect on our business.”Table of Contents5There are also substantial uncertainties regarding the interpretation and application of current and future PRC laws,regulations and rules regardin
72、g the status of the rights of ourCayman Islands holding company with respect to its contractual arrangements with our VIEs and its nominee shareholders.It is uncertain whether any new PRC laws or regulationsrelating to variable interest entity structures will be adopted or if adopted,what they would
73、 provide.If we or any of our VIEs is found to be in violation of any existing or future PRClaws or regulations,or fail to obtain or maintain any of the required permits or approvals,the relevant PRC regulatory authorities would have broad discretion to take action in dealingwith such violations or f
74、ailures.If the PRC government deems that our contractual arrangements with our VIEs do not comply with PRC regulatory restrictions on foreign investment inthe relevant industries,or if these regulations or the interpretation of existing regulations change or are interpreted differently in the future
75、,we could be subject to severe penalties or beforced to relinquish our interests in those operations.Our holding company,our PRC subsidiaries and VIEs,and investors of our Company face uncertainty about potential future actionsby the PRC government that could affect the enforceability of the contrac
76、tual arrangements with our VIEs and,consequently,significantly affect the financial performance of the VIEsand VIEs subsidiaries and our Company as a whole.For a detailed description of the risks associated with our corporate structure,please refer to risks disclosed under“Item 3.KeyInformationD.Ris
77、k FactorsRisks Related to Our Corporate Structure.”We face various risks and uncertainties related to doing business in China.Our business operations are primarily conducted in China,and we are subject to complex andevolving PRC laws and regulations.For example,we face risks associated with regulato
78、ry approvals on offshore offerings,anti-monopoly regulatory actions,and oversight oncybersecurity and data privacy,as well as the lack of inspection by the Public Company Accounting Oversight Board,or the PCAOB,on our auditors,which may impact our ability toconduct certain businesses,accept foreign
79、investments,or list on a United States or other foreign exchange.These risks could result in a material adverse change in our operations andthe value of our ADSs,significantly limit or completely hinder our ability to continue to offer securities to investors,or cause the value of such securities to
80、 significantly decline.Pursuant to the Holding Foreign Companies Accountable Act,if the SEC determines that we have filed audit reports issued by a registered public accounting firm that has not beensubject to inspections by the PCAOB for two consecutive years,the SEC will prohibit our shares or the
81、 ADSs from being traded on a national securities exchange or in the over-the-counter trading market in the United States.On December 16,2021,the PCAOB issued a report to notify the SEC of its determination that the PCAOB was unable to inspect orinvestigate completely registered public accounting fir
82、ms headquartered in mainland China and Hong Kong,including our auditor.In May 2022,the SEC conclusively listed us as aCommission-Identified Issuer under the HFCAA following the filing of this annual report on Form 20-F for the fiscal year ended December 31,2021.On December 15,2022,thePCAOB issued a
83、report that vacated its December 16,2021 determination and removed mainland China and Hong Kong from the list of jurisdictions where it is unable to inspect orinvestigate completely registered public accounting firms.For this reason,we do not expect to be identified as a Commission-Identified Issuer
84、 under the HFCAA after we file thisannual report on Form 20-F.Each year,the PCAOB will determine whether it can inspect and investigate completely audit firms in mainland China and Hong Kong,among otherjurisdictions.If PCAOB determines in the future that it no longer has full access to inspect and i
85、nvestigate completely accounting firms in mainland China and Hong Kong and wecontinue to use an accounting firm headquartered in one of these jurisdictions to issue an audit report on our financial statements filed with the Securities and Exchange Commission,wewould be identified as a Commission-Ide
86、ntified Issuer following the filing of the annual report on Form 20-F for the relevant fiscal year.There can be no assurance that we would not beidentified as a Commission-Identified Issuer for any future fiscal year,and if we were so identified for two consecutive years,we would become subject to t
87、he prohibition on tradingunder the HFCAA.See“Item 3.Key InformationD.Risk FactorsRisks Related to Doing Business in ChinaThe PCAOB had historically been unable to inspect our auditor inrelation to their audit work performed for our financial statements and the inability of the PCAOB to conduct inspe
88、ctions of our auditor in the past has deprived our investors with thebenefits of such inspections”and“Item 3.Key InformationD.Risk FactorsRisks Related to Doing Business in ChinaOur ADSs may be prohibited from trading in the UnitedStates under the HFCAA in the future if the PCAOB is unable to inspec
89、t or investigate completely auditors located in China.The delisting of the ADSs,or the threat of their beingdelisted,may materially and adversely affect the value of your investment.”PRC governments significant authority in regulating our operations and its oversight and control over offerings condu
90、cted offshore by,and foreign investment in,China-basedissuers could significantly limit or completely hinder our ability to offer or continue to offer securities to investors.Implementation of industry-wide regulations in this nature may causethe value of such securities to significantly decline or
91、become worthless.For more details,see“Item 3.Key InformationD.Risk FactorsRisks Related to Doing Business in ChinaThe PRC governments significant oversight and discretion over our business operation could result in a material adverse change in our operations and the value of the ADSs.”Risks and unce
92、rtainties arising from the legal system in China,including risks and uncertainties regarding the enforcement of laws and quickly evolving rules and regulations inChina,could result in a material adverse change in our operations and the value of our ADSs.For more details,see“Item 3.Key InformationD.R
93、isk FactorsRisks Related to DoingBusiness in ChinaUncertainties in the interpretation and enforcement of PRC laws and regulations could limit the legal protections available to us.”Table of Contents6Permissions Required from the PRC Government Authorities for Our OperationsWe conduct our business pr
94、imarily through our subsidiaries,our VIEs and their subsidiaries in China.Our operations in China are governed by PRC laws and regulations.As ofthe date of this annual report,our PRC subsidiaries,our VIEs or their subsidiaries have obtained the requisite licenses and permits from the PRC government
95、authorities that are materialfor the business operations of our holding company,our PRC subsidiaries and our VIEs in China,including,among others,financing guarantee business license owned by FuzhouFinancing Guarantee,value-added telecommunications license owned by Shanghai Qiyu,the incorporation ap
96、proval of and the value-added telecommunications license owned byFuzhou Microcredit.Given the uncertainties of interpretation and implementation of relevant laws and regulations and the enforcement practice by relevant government authorities,wemay be required to obtain additional licenses,permits,fi
97、lings or approvals for the functions and services of our platform in the future.For more detailed information,see“Item 3.KeyInformationD.Risk FactorsRisks Related to Doing Business in ChinaWe may be adversely affected by the complexity,uncertainties and changes in PRC regulation of internet-related
98、businesses and companies,and any lack of requisite approvals,licenses or permits applicable to our business may have a material adverse effect on our business and results ofoperations.”Furthermore,we and our VIEs will be required to obtain permissions from or complete the filing procedures with the
99、China Securities Regulatory Commission,or the CSRC,and may be required to go through cybersecurity review by the Cyberspace Administration of China,or the CAC,in case of any future issuance of securities to foreign investors.Anyfailure to obtain or delay in obtaining such approval or completing such
100、 procedures would subject us to sanctions by the CSRC,CAC or other PRC regulatory authorities.Theseregulatory authorities may impose fines and penalties on our operations in China,limit our ability to pay dividends outside of China,limit our operating privileges in China,delay orrestrict the repatri
101、ation of the proceeds from our offshore offerings into China or take other actions that could materially and adversely affect our business,financial condition,results ofoperations,and prospects,as well as the trading price of our ADSs.See“Item 3.Key InformationD.Risk FactorsRisks Related to Doing Bu
102、siness in ChinaThe PRCgovernments significant oversight and discretion over our business operation could result in a material adverse change in our operations and the value of the ADSs”and“Item 3.KeyInformationD.Risk FactorsRisks Related to Doing Business in ChinaThe approval of and filing with the
103、CSRC or other PRC government authorities will be required if weconduct offshore offerings in the future,and we cannot predict whether or for how long we will be able to obtain such approval or complete such filing.”Cash and Asset Flows through Our OrganizationQifu Technology,Inc.is a holding company
104、 with no material operations of its own.We conduct our operations in China primarily through our subsidiaries and VIEs in China.As a result,although other means are available for us to obtain financing at the holding company level,Qifu Technology,Inc.s ability to pay dividends to the shareholders an
105、d to serviceany debt it may incur may depend upon dividends paid by our PRC subsidiaries and service fees paid by our VIEs.If any of our subsidiaries incurs debt on its own behalf in the future,the instruments governing such debt may restrict its ability to pay dividends to Qifu Technology,Inc.Inadd
106、ition,our PRC subsidiaries are permitted to pay dividends to Qifu Technology,Inc.only out of their retained earnings,if any,as determined in accordance with PRC accountingstandards and regulations.Further,our PRC subsidiaries and consolidated variable interest entities are required to make appropria
107、tions to certain statutory reserve funds or may makeappropriations to certain discretionary funds,which are not distributable as cash dividends except in the event of a solvent liquidation of the companies.For more details,see“Item 5.Operating and Financial Review and ProspectsB.Liquidity and Capita
108、l ResourcesHolding Company Structure.”For risks relating to the fund flows of our operations in China,see“Item 3.Key InformationD.Risk FactorsRisks Related to Doing Business in ChinaWe may rely on dividends and other distributions on equity paid by our PRC subsidiaries tofund any cash and financing
109、requirements we may have,and any limitation on the ability of our PRC subsidiaries to make payments to us could have a material adverse effect on ourability to conduct our business.”Table of Contents7Under PRC laws and regulations,our PRC subsidiaries and consolidated variable interest entities are
110、subject to certain restrictions with respect to paying dividends or otherwisetransferring any of their net assets to us.Remittance of dividends by a wholly foreign-owned enterprise out of China is also subject to examination by the banks designated by the StateAdministration of Foreign Exchange,or t
111、he SAFE,and payment of withholding tax.As a result of these PRC laws and regulations,amounts restricted include paid-in capital,capitalreserve and statutory reserves of the PRC entities of our Companys which is RMB2,740.4 million,RMB8,283.6 million and RMB14,436.1 million(US$2,093.0 million)as ofDec
112、ember 31,2020,2021 and 2022,respectively.Our PRC subsidiaries,our VIEs and their subsidiaries generate their revenue primarily in Renminbi,which is not freely convertibleinto other currencies.As a result,any restriction on currency exchange may limit the ability of our PRC subsidiaries to pay divide
113、nds to us.In addition,under the Enterprise Income TaxLaw of the PRC,or the EIT Law,and its implementation rules,profits of a FIE generated in or after 2008 that are distributed to its immediate holding company outside Mainland Chinaare subject to withholding tax at a rate of 10%,unless the foreign h
114、olding companys jurisdiction of incorporation has a tax treaty with China that provides for a reduced rate ofwithholding tax.For example,a holding company in Hong Kong,subject to approval of the PRC local tax authority,will be eligible to a 5%withholding tax rate under the ArrangementBetween the PRC
115、 and the Hong Kong Special Administrative Region on the Avoidance of Double Taxation and Prevention of Fiscal Evasion with Respect to Taxes on Income andCapital if such holding company is considered to be a non-PRC resident enterprise and holds at least 25%of the equity interests in the PRC FIE dist
116、ributing the dividends.However,ifthe Hong Kong holding company is not considered to be the beneficial owner of such dividends under applicable PRC tax regulations,such dividend will remain subject to withholdingtax at a rate of 10%.See also“Item 3.Key InformationD.Risk FactorsRisks Related to Doing
117、Business in ChinaGovernmental control of currency conversion may limit ourability to utilize our net revenue effectively and affect the value of your investment”and“Item 5.Operating and Financial Review and ProspectsB.Liquidity and Capital ResourcesHolding Company Structure.”Our PRC subsidiaries hav
118、e not paid dividends and will not be able to pay dividends until any of them generates accumulated profits and meets therequirements for statutory reserve funds.Under PRC law,Qifu Technology,Inc.may provide funding to our PRC subsidiaries only through capital contributions or loans,and to our VIEs o
119、nly through loans,subject tosatisfaction of applicable government registration and approval requirements.Qifu Technology,Inc.has extended loans to our PRC subsidiaries and VIEs since 2018.The related cashflows include(i)a net funding of RMB67.2 million to PRC subsidiaries in 2020,a net repayment of
120、RMB51.7 million by PRC subsidiaries in 2021,and a net funding of RMB7.7million(US$1.1 million)to PRC subsidiaries in 2022;and(ii)a net funding of RMB3.6 million,RMB205.5 million to VIEs in 2020 and 2021,respectively,and a net repaymentRMB1,588.3 million(US$230.3 million)by VIEs in 2022.Our VIEs may
121、transfer cash to our relevant WFOE by paying service fees according to the exclusive business cooperation agreements.Our VIEs agree to pay our WFOEservice fees,the amount of which are subject to adjustment at our WFOEs sole discretion taking into consideration of the complexity of the services,the a
122、ctual cost that may be incurredfor providing such services,as well as the value and comparable price on the market of the service provided,among others.Our WFOE would have the exclusive ownership of all theintellectual property rights created as a result of the performance of the exclusive business
123、cooperation agreement,to the extent permitted by applicable PRC laws.In 2020,2021 and2022,service fees charged and paid to our WFOE by our VIEs in China amounted to RMB89.7 million,RMB5,001.9 million and RMB420.3 million(US$60.9 million),respectively.In2020,2021 and 2022,service fees charged and pai
124、d to our other PRC subsidiaries by our VIEs in China amounted to RMB286.4 million,RMB616.5 million and RMB3.3 million(US$0.5 million),respectively.In 2020 and 2021,our VIEs in China extended loans to our PRC subsidiaries with a net cash outflow of RMB20.0 million and RMB3,658.3 million,respectively.
125、In 2022,ourPRC subsidiaries paid up the outstanding loans and started to extend loans to our VIEs in China with a net cash outflow of RMB859.9 million(US$124.7 million).In 2020,2021 and2022,the total amount of service fees charged and paid to our VIEs in China by our PRC subsidiaries under the share
126、d service agreement was RMB20.3 million,RMB258.2 million andRMB103.1 million(US$14.9 million),respectively.In 2020,2021 and 2022,no assets other than cash flows discussed above were transferred through our organization.For the years ended December 31,2020,2021 and 2022,dividends of nil,nil and US$14
127、6.4 million were paid to shareholders of record as of designated record dates.We intendto declare and distribute a recurring cash dividend every fiscal quarter,starting from the third fiscal quarter of 2021,at an amount equivalent to approximately 15%to 20%of ourCompanys net income after tax for suc
128、h quarter based upon our operations and financial conditions,and other relevant factors,subject to adjustment and determination by the board ofdirectors of Qifu Technology,Inc.Since we currently have sufficient cash at Qifu Technology,Inc.to pay dividends,we intend to reinvest undistributed profits
129、of our subsidiaries in ouroperations in China.See“Item 8.Financial InformationA.Consolidated Statements and Other Financial InformationDividend Policy.”For PRC and United States federal incometax considerations of an investment in our ADSs,see“Item 10.Additional InformationE.Taxation.”Table of Conte
130、nts8For purposes of illustration,the following discussion reflects the hypothetical taxes that might be required to be paid within Mainland China,assuming that we determine to paya dividend from PRC subsidiaries to overseas entities in the future:Taxation Scenario(1)(Statutory Tax and Standard Rates
131、)Hypothetical pre-tax earnings(2)100%Tax on earnings at statutory rate of 25%(3)(25)%Net earnings available for distribution 75%Withholding tax at standard rate of 10%(7.5)%Net distribution to Parent/Shareholders 67.5%Notes:(1)For purposes of this example,the tax calculation has been simplified.The
132、hypothetical book pre-tax earnings amount,not considering book to tax adjustment,is assumed to equaltaxable income in China.(2)Assume all the profits of VIEs could be distributed to the PRC subsidiaries in a tax free manner.(3)Certain of our subsidiaries and VIEs and their subsidiaries qualifies for
133、 a 15%preferential income tax rate in China.However,such rate is subject to qualification,is temporary innature,and may not be available in a future period when distributions are paid.For purposes of this hypothetical example,the table above reflects a maximum tax scenario underwhich the full statut
134、ory rate would be effective.Selected Financial DataOur Selected Combined and Consolidated Financial DataThe following selected consolidated statements of operations data for the years ended December 31,2020,2021 and 2022,selected consolidated balance sheet data as ofDecember 31,2021 and 2022 and sel
135、ected consolidated cash flow data for the years ended December 31,2020,2021 and 2022 have been derived from our audited consolidated financialstatements included elsewhere in this annual report.Our selected combined and consolidated balance sheets data as of December 31,2018,2019 and 2020 and the se
136、lected combinedand consolidated statements of operations data and cash flow data for the year ended December 31,2018 and 2019 have been derived from our audited combined and consolidatedfinancial statements not included in this annual report.Our combined and consolidated financial statements are pre
137、pared and presented in accordance with U.S.GAAP.Table of Contents9You should read the summary combined and consolidated financial information in conjunction with our combined and consolidated financial statements and related notes and“Item 5.Operating and Financial Review and Prospects”included else
138、where in this annual report.Our historical results are not necessarily indicative of our results expected for futureperiods.Years Ended December 31,200212022 RMB RMB RMB RMB RMB US$(in thousands,except for per share data)Selected Combined and Consolidated Statements of Operations Data:Net
139、 revenue Credit driven services(1)4,170,271 8,013,391 11,403,675 10,189,167 11,586,251 1,679,849Loan facilitation and servicing fees-capital heavy 3,807,242 6,273,131 4,596,555 2,326,027 2,086,414 302,502Financing income 267,844 1,309,616 2,184,180 2,184,128 3,487,951 505,705Revenue from releasing o
140、f guarantee liabilities 25,169 285,407 4,506,935 5,583,135 5,899,153 855,297Other services fees 70,016 145,237 116,005 95,877 112,733 16,345Platform services(1)276,747 1,206,456 2,160,279 6,446,478 4,967,679 720,245Loan facilitation and servicing fees-capital light 58,348 814,581 1,826,654 5,677,941
141、 4,124,726 598,029Referral services fees 211,087 375,551 265,300 620,317 561,372 81,391Other services fees 7,312 16,324 68,325 148,220 281,581 40,825Total net revenue 4,447,018 9,219,847 13,563,954 16,635,645 16,553,930 2,400,094Operating costs and expenses:(2)Facilitation,origination and servicing
142、666,067 1,083,372 1,600,564 2,252,157 2,373,458 344,119Funding costs 71,617 344,999 595,623 337,426 504,448 73,138Sales and marketing 1,321,950 2,851,519 1,079,494 2,090,374 2,206,948 319,977General and administrative 560,702 428,189 455,952 557,295 412,794 59,850Provision for loans receivable 44,47
143、4 486,991 698,701 965,419 1,580,306 229,123Provision for financial assets receivable 53,989 166,176 312,058 243,946 397,951 57,697Provision for accounts receivable and contract assets 83,707 230,280 237,277 324,605 238,065 34,516Provision for contingent liabilities 4,794,127 3,078,224 4,367,776 633,
144、268Expense on guarantee liabilities 734,730Total operating costs and expenses 2,802,506 6,326,256 9,773,796 9,849,446 12,081,746 1,751,688Income from operations 1,644,512 2,893,591 3,790,158 6,786,199 4,472,184 648,406Interest income(expense),net 10,026(41,707)77,169 126,256 182,301 26,431Foreign ex
145、change(loss)gain(2,563)(24,875)101,534 35,549(160,225)(23,230)Investment gain(loss)10,115(19,888)(2,883)Other income,net 7,696 140,278 112,884 64,590 268,000 38,856Income before income tax benefit 1,659,671 2,967,287 4,081,745 7,022,709 4,742,372 687,580Income tax expense(466,360)(465,983)(586,036)(
146、1,258,196)(736,804)(106,827)Net income 1,193,311 2,501,304 3,495,709 5,764,513 4,005,568 580,753Net loss attributable to non-controlling interests 291 897 17,212 18,605 2,697Deemed dividend(3,097,733)Net(loss)income attributable to ordinary shareholders of the Company(1,904,422)2,501,595 3,496,606 5
147、,781,725 4,024,173 583,450Net(loss)income per ordinary share attributable to ordinary shareholders of Qifu Technology,Inc.Basic(9.39)8.66 11.72 18.82 12.87 1.87Diluted(9.39)8.31 11.40 17.99 12.50 1.81Net(loss)income per ADSs attributable to ordinary shareholders of Qifu Technology,Inc.Basic(18.78)17
148、.32 23.4437.64 25.74 3.74Diluted(18.78)16.62 22.8035.98 25.00 3.62Weighted average shares used in calculating net income per ordinary share Basic 202,751,277 288,827,604 298,222,207 307,265,600 312,589,273 312,589,273Diluted 202,751,277 300,938,470 306,665,099 321,397,753 322,018,510 322,018,510Note
149、s:(1)Starting from 2019,we report revenue streams in two categoriescredit driven services and platform services,to provide more relevant information.We also revised thecomparative period presentation to conform to current period classification.Table of Contents10(2)Share-based compensation expenses
150、were allocated as follows:Years Ended December 31,200212022 RMB RMB RMB RMB RMB US$(in thousands,except for per share data)Facilitation origination and servicing 150,177 55,601 72,192 75,20973,945 10,720Sales and marketing 15,700 6,805 8,164 12,3404,328 628General and administrative 441,5
151、04 188,022 220,805 166,373121,464 17,611Total 607,381 250,428 301,161 253,922199,737 28,959The following table presents our selected combined and consolidated balance sheet data as of the dates indicated.As of December 31,200212022 RMB RMB RMB RMB RMB US$(in thousands)Selected Combined an
152、d Consolidated Balance Sheets Data:Current assets:Cash and cash equivalents 1,445,802 2,108,123 4,418,416 6,116,360 7,165,584 1,038,912Restricted cash 567,794 1,727,727 2,355,850 2,643,587 3,346,779 485,237Security deposit prepaid to third-party guarantee companies 795,700 932,983 915,144 874,886 39
153、6,699 57,516Accounts receivable and contract assets,net 1,791,745 2,332,364 2,394,528 3,097,254 2,868,625 415,912Financial assets receivable,net 1,193,621 1,912,554 3,565,482 3,806,243 2,982,076 432,360Loans receivable,net 811,433 9,239,565 7,500,629 9,844,481 15,347,662 2,225,202Total current asset
154、s 7,342,019 19,503,488 21,876,042 27,757,223 34,097,466 4,943,667Land use rights,net 1,018,908 998,185 144,723Total non-current assets 7,716 852,113 2,511,263 5,747,772 6,245,704 905,543Total assets 7,349,735 20,355,601 24,387,305 33,504,995 40,343,170 5,849,210Current liabilities:Payable to investo
155、rs of the consolidated trusts-current 300,341 4,423,717 3,117,634 2,304,518 6,099,520 884,347Guarantee liabilities-stand ready 1,399,174 2,212,125 4,173,497 4,818,144 4,120,346 597,394Guarantee liabilities-contingent 734,730 3,543,454 3,285,081 3,418,391 495,620Income tax payable 432,066 1,056,219 1
156、,227,314 624,112 661,015 95,838Total current liabilities 2,893,781 9,667,187 13,384,508 14,143,186 16,749,918 2,428,510Payable to investors of the consolidated trusts-noncurrent 3,442,500 1,468,890 4,010,597 4,521,600 655,570Total non-current liabilities 15,758 3,473,684 1,521,707 4,145,200 4,661,95
157、5 675,920Total shareholders equity 4,440,196 7,214,730 9,481,090 15,216,609 18,931,297 2,744,780Total liabilities and equity 7,349,735 20,355,601 24,387,305 33,504,995 40,343,170 5,849,210Table of Contents11The following table presents our selected combined and consolidated cash flow data for the ye
158、ars ended December 31,2018,2019,2020,2021 and 2022.Years Ended December 31,200212022 RMB RMB RMB RMB RMB US$(in thousands)Summary Combined and Consolidated Cash Flow Data:Net cash provided by operating activities 285,116 2,973,075 5,325,810 5,789,700 5,922,515 858,683Net cash provided by/
159、(used in)investing activities 327,649 (8,860,441)892,770 (6,064,328)(7,355,975)(1,066,515)Net cash provided by/(used in)financing activities 457,430 7,707,858 (3,282,400)2,263,720 3,204,068 464,548Net increase in cash and cash equivalents 1,057,167 1,822,254 2,938,416 1,985,681 1,752,416 254,076Cash
160、,cash equivalents,and restricted cash at the beginning of year 956,429 2,013,596 3,835,850 6,774,266 8,759,947 1,270,073Cash,cash equivalents,and restricted cash at the end of year 2,013,596 3,835,850 6,774,266 8,759,947 10,512,363 1,524,149We present our financial results in RMB.We make no represen
161、tation that any RMB or U.S.dollar amounts could have been,or could be,converted into U.S.dollars or RMB,asthe case may be,at any particular rate,or at all.The RPC government imposes control over its foreign currency reserves in part through direct regulation of the conversion of RMB intoforeign exch
162、ange and through restrictions on foreign trade.Unless otherwise noted,all translations from Renminbi to U.S.dollars and from U.S.dollars to Renminbi in this annualreport were made at a rate of RMB6.8972 to US$1.00,the noon buying rate as of December 30,2022.Financial Information Related to Our Conso
163、lidated Variable Interest EntitiesThe following table presents the condensed consolidated schedule of financial position,results of operations and cash flow data for our Company,our consolidated VIEs andother subsidiaries as of the dates or for the periods presented,as the case may be.For the Year E
164、nded December 31,2022VIEs The Company Subsidiaries(1)Eliminations Consolidated Total(RMB in thousands)Total net revenues 15,362,636 1,697,675(506,381)16,553,930Total operating costs and expenses 11,681,635 17,468 889,024(506,381)12,081,746Income(loss)from operations 3,681,001(17,468)808,651 4,472,18
165、4Income(loss)before income tax expense 3,856,803(34,045)919,614 4,742,372Equity in earnings of subsidiaries and VIEs 4,058,218 3,249,264(7,307,482)Net income(loss)3,230,659 4,024,173 4,058,218(7,307,482)4,005,568Net income(loss)attributable to ordinary shareholders of the Company 3,249,264 4,024,173
166、 4,058,218(7,307,482)4,024,173For the Year Ended December 31,2021VIEs The Company Subsidiaries(1)Eliminations Consolidated Total (RMB in thousands)Total net revenues 15,657,693 6,646,999(5,669,047)16,635,645Total operating costs and expenses 14,279,287 51,233 1,187,973 (5,669,047)9,849,446Income(los
167、s)from operations 1,378,406 (51,233)5,459,026 6,786,199Income(loss)before income tax expense 1,567,515 (56,749)5,511,943 7,022,709Equity in earnings of subsidiaries and VIEs 5,838,474 1,077,675(6,916,149)Net income(loss)1,060,421 5,781,725 5,838,516 (6,916,149)5,764,513Net income(loss)attributable t
168、o ordinary shareholders of the Company 1,077,675 5,781,725 5,838,474 (6,916,149)5,781,725Table of Contents12For the Year Ended December 31,2020 VIEs The Company Subsidiaries(1)Eliminations Consolidated Total(RMB in thousands)Total net revenues 13,146,052 1,325,097 (907,195)13,563,954Total operating
169、costs and expenses 10,381,827 16,453 282,711 (907,195)9,773,796Income(loss)from operations 2,764,226 (16,453)1,042,387 3,790,160Income(loss)before income tax expense 3,033,487 (4,030)1,052,288 4,081,745Equity in earnings of subsidiaries and VIEs 3,500,636 2,547,806(6,048,442)Net income(loss)2,547,80
170、6 3,496,606 3,499,739 (6,048,442)3,495,709Net income(loss)attributable to ordinary shareholders of the Company 2,547,806 3,496,606 3,500,636 (6,048,442)3,496,606Selected Condensed Consolidated Balance Sheets Information As of December 31,2022 VIEs The Company Subsidiaries(1)Eliminations Consolidated
171、 Total(RMB in thousands)Cash and cash equivalents6,437,420464,323263,8417,165,584Restricted cash3,346,7793,346,779Security deposit prepaid to third-party guarantee companies396,699396,699Account receivables and contract assets,net1,933,2921,196,6523,129,944Financial assets receivable,net3,670,9193,6
172、70,919Loan receivable,net18,484,65618,484,656Land use rights,net998,185998,185Intercompany receivables5,906,972295,1806,085,874(12,288,026)Investments in subsidiaries and VIEs18,275,77216,683,458(34,959,230)Total assets44,093,49319,041,600 24,455,333(47,247,256)40,343,170Payable to investors of the
173、consolidated trusts-current6,099,5206,099,520Guarantee liabilities-stand ready4,120,3464,120,346Guarantee liabilities-contingent3,418,3913,418,391Income tax payable614,68746,328661,015Payable to investors of the consolidated trusts-noncurrent4,521,6004,521,600Intercompany payables6,327,6355,960,391(
174、12,288,026)Total liabilities27,325,894194,4446,179,561(12,288,026)21,411,873Total equity16,767,59918,847,15618,275,772(34,959,230)18,931,297Table of Contents13 As of December 31,2021 VIEs The Company Subsidiaries(1)Eliminations Consolidated Total(RMB in thousands)Cash and cash equivalents 4,605,851
175、7,117 1,503,392 6,116,360Restricted cash 2,643,587 2,643,587Security deposit prepaid to third-party guarantee companies 874,886 874,886Accounts receivable and contract assets,net 2,350,775 969,953 3,320,728Financial assets receivable,net 4,404,208 4,404,208Loans receivable,net 12,703,830 12,703,830L
176、and use rights,net 1,018,908 1,018,908Intercompany receivables 2,493,660 1,711,633 4,823,879 (9,029,172)Investments in subsidiaries and VIEs 14,032,928 9,343,119 (23,376,047)Total assets 33,145,997 15,761,812 17,002,405 (32,405,219)33,504,995Payable to investors of the consolidated trusts-current 2,
177、304,518 2,304,518Guarantee liabilities-stand ready 4,818,144 4,818,144Guarantee liabilities-contingent 3,285,081 3,285,081Income tax payable 449,553 174,559 624,112Payable to investors of the consolidated trusts-noncurrent 4,010,597 4,010,597Intercompany payables 6,493,367 2,535,805 (9,029,172)Total
178、 liabilities 23,790,132 557,949 2,969,477 (9,029,172)18,288,386Total equity 9,355,865 15,203,863 14,032,928(23,376,047)15,216,609 As of December 31,2020VIEs The Company Subsidiaries(1)Eliminations Consolidated Total (RMB in thousands)Cash and cash equivalents 3,709,740 19,560 689,116 4,418,416Restri
179、cted cash 2,355,850 2,355,850Security deposit prepaid to third-party guarantee companies 915,144 915,144Accounts receivable and contract assets,net 2,624,294 78,171 2,702,465Financial assets receivable,net 4,125,931 84,877 4,210,808Loans receivable,net 7,553,042 35,272 7,588,314Intercompany receivab
180、les 1,315,646 1,593,585 912,129 (3,821,360)Investments in subsidiaries and VIEs 7,940,534 7,511,011 (15,451,545)Total assets 24,615,835 9,564,894 9,479,481 (19,272,905)24,387,305Payable to investors of the consolidated trusts-current 3,117,634 3,117,634Guarantee liabilities-stand ready 4,173,497 4,1
181、73,497Guarantee liabilities-contingent 3,543,454 3,543,454Income tax payable 1,151,275 76,039 1,227,314Payable to investors of the consolidated trusts-noncurrent 1,468,890 1,468,890Intercompany payables 2,411,185 1,410,175 (3,821,360)Total liabilities 17,104,312 84,316 1,538,947 (3,821,360)14,906,21
182、5Total equity 7,511,523 9,480,578 7,940,534 (15,451,545)9,481,090Table of Contents14Selected Condensed Consolidated Cash Flows Information For the Year Ended December 31,2022VIEs The Company Subsidiaries(1)Eliminations Consolidated Total(RMB in thousands)Net cash provided by(used in)operating activi
183、ties2,475,105(66,836)3,514,246 5,922,515Net cash(used in)provided by investing activities(7,360,063)1,583,956(4,762,234)3,182,366(7,355,975)Net cash provided by(used in)financing activities7,419,720(1,039,580)6,294(3,182,366)3,204,068 For the Year Ended December 31,2021VIEs The Company Subsidiaries(
184、1)Eliminations Consolidated Total(RMB in thousands)Net cash provided by(used in)operating activities 1,273,002 (25,552)4,542,250 5,789,700Net cash(used in)provided by investing activities(6,047,434)(153,778)(3,675,260)3,812,144 (6,064,328)Net cash provided by(used in)financing activities 5,958,279 1
185、69,291 (51,706)(3,812,144)2,263,720 For the Year Ended December 31,2020VIEs The Company Subsidiaries Eliminations Consolidated Total(RMB in thousands)Net cash provided by(used in)operating activities 4,935,904 (1,679)391,585 5,325,810Net cash provided by(used in)investing activities 932,141 (70,776)
186、(59,350)90,755 892,770Net cash(used in)provided by financing activities(3,364,319)86,305 86,369 (90,755)(3,282,400)Note:(1)The financial statement amounts for our consolidated subsidiaries are prepared using same accounting policies as set out in the consolidated financial statements except that equ
187、itymethod has been used to account for investments in VIEs.A.ReservedB.Capitalization and IndebtednessNot applicable.C.Reasons for the Offer and Use of ProceedsNot applicable.D.Risk FactorsSummary of Risk FactorsAn investment in our ADSs involves significant risks.Below is a summary of material risk
188、s we face,organized under relevant headings.These risks are discussed more fullybelow in this Item 3.Key InformationD.Risk Factors.Risks Related to Our Business and IndustryRisks and uncertainties related to our business include,but not limited to,the following:The Credit-Tech industry is rapidly ev
189、olving,which makes it difficult to effectively assess our future prospects;We have a limited operating history and are subject to credit cycles and the risk of deterioration of credit profiles of borrowers;We are subject to uncertainties surrounding regulations and administrative measures of the loa
190、n facilitation business.If any of our business practices are deemed to be non-compliant with applicable laws and regulations,our business,financial condition and results of operations would be adversely affected;Table of Contents15We are subject to uncertainties surrounding regulations and administr
191、ative measures of micro-lending business and financing guarantee business.If any of our businesspractices are deemed to be non-compliant with such laws and regulations,our business,financial condition and results of operations would be adversely affected;We are subject to uncertainties surrounding r
192、egulations and administrative measures of credit reporting business.If any of our business practices is deemed to be non-compliant with such laws and regulations,our business,financial condition and results of operations would be materially and adversely affected;The pricing of loans facilitated thr
193、ough our platform may be deemed to exceed interest rate limits imposed by regulations;Our transaction process may result in misunderstanding among borrowers;Fraudulent activity on our platform could negatively impact our operating results,brand and reputation and cause the use of loan products facil
194、itated by us and our servicesto decrease;We rely on our proprietary credit profiling model in assessing the creditworthiness of borrowers and the risks associated with loans.If our model is flawed or ineffective,or if we otherwise fail or are perceived to fail to manage the default risks of loans fa
195、cilitated through our platform,our reputation and market share would be materially andadversely affected,which would severely impact our business and results of operations;We rely on our risk management team to establish and execute our risk management policies.If our risk management team or key mem
196、bers of such team were unable orunwilling to continue in their present positions,our business may be severely disrupted;andOur business is subject to complex and evolving PRC laws and regulations regarding data privacy and cybersecurity,many of which are subject to change and uncertaininterpretation
197、.Any changes in these laws and regulations have caused and could continue to cause changes to our business practices and increase costs of operations,andany security breaches or our actual or perceived failure to comply with such laws and regulations could result in claims,penalties,damages to our r
198、eputation and brand,declines in user growth or engagement,or otherwise harm our business,results of operations and financial condition.Risks Related to Our Corporate StructureRisks and uncertainties related to our corporate structure include,but not limited to,the following:We are a Cayman Islands h
199、olding company with no equity ownership in our VIEs and we conduct our operations in China through(i)our PRC subsidiaries and(ii)ourVIEs,with which we have maintained contractual arrangements.Investors in our ADSs thus are not purchasing equity interest in our VIEs in China but instead arepurchasing
200、 equity interest in a Cayman Islands holding company.If the PRC government finds that the agreements that establish the structure for operating our business donot comply with PRC laws and regulations,or if these regulations or their interpretations change in the future,we could be subject to severe
201、penalties or be forced torelinquish our interests in those operations.Our holding company,our PRC subsidiaries,our VIEs,and investors of our Company face uncertainty about potential futureactions by the PRC government that could affect the enforceability of the contractual arrangements with our VIEs
202、 and,consequently,significantly affect the financialperformance of our VIEs and our Company as a whole.The PRC regulatory authorities could disallow the VIEs structure pursuant to the new regulations promulgated bythe PRC government,which would likely result in a material adverse change in our opera
203、tions,and our class A ordinary shares or our ADSs may decline significantly invalue;We rely on contractual arrangements with our VIEs and the shareholders of our VIEs for all of our business operations,which may not be as effective as direct ownershipin providing operational control;andAny failure b
204、y our VIEs or the shareholders of our VIEs to perform their obligations under our contractual arrangements with them would have a material adverse effect onour business.Table of Contents16Risks Related to Doing Business in ChinaWe are also subject to risks and uncertainties relating to doing busines
205、s in China in general,including,but not limited to,the following: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 toconduct inspections of our auditor in the past has deprived our inves
206、tors with the benefits of such inspections;Our ADSs may be prohibited from trading in the United States under the HFCAA in the future if the PCAOB is unable to inspect or investigate completely auditors locatedin China.The delisting of the ADSs,or the threat of their being delisted,may materially an
207、d adversely affect the value of your investment;The PRC governments significant oversight and discretion over our business operation could result in a material adverse change in our operations and the value of theADSs;andUncertainties in the interpretation and enforcement of PRC laws and regulations
208、 could limit the legal protections available to us.Risks Related to the ADSs and our class A ordinary sharesIn addition to the risks described above,we are subject to general risks relating to our ADSs and class A ordinary shares,including,but not limited to,the following:We adopt different practice
209、s as to certain matters as compared with many other companies listed on the Hong Kong Stock Exchange;andThe trading prices for our listed securities have been and are likely to continue to be volatile.Risks Related to Our Business and IndustryThe Credit-Tech industry is rapidly evolving,which makes
210、it difficult to effectively assess our future prospects.The Credit-Tech industry in the PRC is in a developing stage.The regulatory framework for this market is also evolving and may remain uncertain for the foreseeable future.Inaddition,the Credit-Tech industry in China has not witnessed a full cre
211、dit cycle.The market players in the industry,including us,may not be able to respond to the change of marketsituations effectively and maintain steady business growth when the industry enters a different stage.In addition,we cannot assure you that a contraction in the availability of funds willnot h
212、appen at later stages of the credit cycle.As such,we may not be able to sustain our historical growth rate in the future.You should consider our business and prospects in light of the risks and challenges we encounter or may encounter given the rapidly evolving market in which we operate,along with
213、our limited operating history.These risks and challenges include our ability to,among other things:offer competitive products and services;broaden our prospective borrower base;increase the utilization of our products by existing borrowers as well as new borrowers;maintain and enhance our relationsh
214、ip and business collaboration with our partners;maintain low delinquency rates of loans facilitated by us;develop and maintain cooperative relationships with financial institution partners to secure sufficient,diversified,cost-efficient funding to the drawdown requests;Table of Contents17continue to
215、 develop,maintain and scale our platform and sustain our historical growth rates;continue to develop and improve the effectiveness,accuracy and efficiency of our proprietary credit assessment and profiling technologies;navigate through a complex and evolving regulatory environment;improve our operat
216、ional efficiency and profitability;attract,retain and motivate talented employees to support our business growth;enhance our technology infrastructure to support the growth of our business and maintain the security of our system and the confidentiality of the information provided andutilized across
217、our system;navigate through economic conditions and fluctuations;anddefend ourselves against legal and regulatory actions,such as actions involving intellectual property or privacy claims.We have a limited operating history and are subject to credit cycles and the risk of deterioration of credit pro
218、files of borrowers.We were established in 2016 and officially launched the capital-light model in May 2018.Our business is subject to credit cycles associated with the volatility of the generaleconomy and with the trends of the Credit-Tech industry in China.As we have a limited operating history,we
219、have not experienced a full credit cycle in China.As of December 31,2020,2021 and 2022,the 90 day+delinquency rate for all loans facilitated through our platform,including those under credit-driven services and platformservices,was 1.48%,1.54%and 2.03%,respectively.For more details,see“Item 5.Operat
220、ing and Financial Review and ProspectsA.Operating ResultsLoan Performance Data90 day+delinquency rates.”To effectively manage credit risks,we expect to continue focusing on higher quality users and enhancing our technology and credit assessment capabilities.We also expect to fine-tune our services a
221、nd solutions to address financial institution partners evolving needs and risk preferences.However,there can be no assurance that we will beable to successfully manage our risk exposure in an effective manner.If economic conditions deteriorate,we may face an increased risk of default or delinquency
222、of borrowers,which will result in lower returns or even losses.In the event that thecreditworthiness of borrowers deteriorates,or we cannot track the deterioration of their creditworthiness,the criteria we use for the analysis of user credit profiles may be renderedinaccurate,and our credit profilin
223、g system may be subsequently rendered ineffective.This in turn may lead to higher default rates and adversely impact our results of operations.In addition,deterioration in borrowers creditworthiness,or increase in our delinquency rate may discourage our financial institution partners from cooperatin
224、g with us.If ourfinancial institution partners choose to adopt a tight credit approval and drawdown funding policy,our ability to secure funding will be materially restricted.Table of Contents18We are subject to uncertainties surrounding regulations and administrative measures of the loan facilitati
225、on business.If any of our business practices are deemed to be non-compliant with applicable laws and regulations,our business,financial condition and results of operations would be adversely affected.The laws and regulations governing the loan facilitation business are evolving,and substantial uncer
226、tainties exist with respect to their interpretation and implementation.Inaddition,pursuant to the Plan on Reforming State Council Institutions approved by the National Peoples Congress on March 10,2023,the China National Financial RegulatoryAdministration(the“CNRA”)shall be established based upon th
227、e China Banking and Insurance Regulatory Commission(the“CBIRC”),which shall cease to exist,and the localfinancial regulatory system will undergo deep reform and establish a local financial regulatory system with the central financial management departments local agencies as the mainbody,which may le
228、ad to changes and uncertainties in rules and regulations applicable to our business after this restructuring.Uncertainties and changes in regulatory environment mayincrease our cost of operation,limit our options of product offerings or even change our business model fundamentally.We have experience
229、d,and may from time to time be required tomake adjustments to our operations in order to maintain compliance with changes in laws,regulations and policies.An example is the promulgation of the Notice on Regulating andRectifying“Cash Loan”Business,or Circular 141,and related regulations.Circular 141
230、issued by the Special Rectification of Internet Financial Risks Working Group and the P2PCredit Risks Rectification Working Group on December 1,2017,introduces the regulating guidance on cash loan businesses including online micro-lending companies,P2P platformsand banking financial institutions.Cir
231、cular 141 provides that a banking financial institution that offers cash loans through loan facilitation is prohibited from(i)accepting creditenhancement or other similar services from third parties that lack requisite licenses to provide guarantees;(ii)outsourcing credit assessment,risk management
232、and other key functions toa loan facilitation operator;and(iii)allowing the loan facilitation operator to charge any interest or fees from the borrower.If a financial institution violates the aforementioned rules andprovisions,the regulatory authorities may pursue compulsory enforcement,suspend its
233、business,cancel its qualifications,or supervise the rectifications.In extremely seriouscircumstances,such financial institutions business license may be revoked.For a discussion of Circular 141,please see“Item 4.Information on the CompanyB.Business OverviewRegulationRegulation on Online Finance Serv
234、ices IndustryRegulations on the business of loan facilitation.”On the basis of Circular 141,the Interim Measures for Administration of Internet Loans Issued by Commercial Banks,or the Internet Loans Interim Measures,provides formore comprehensive and specific provisions on the cooperation between a
235、banking financial institution and a loan facilitation operator.In addition to prohibiting a banking financialinstitution from outsourcing its credit assessment and risk management functions,the Internet Loans Interim Measures also provide that“core risk management functions such as creditgranting ap
236、proval and contract conclusion shall be independently and effectively carried out by the commercial bank.”For a discussion of Internet Loans Interim Measures,please see“Item 4.Information on the CompanyB.Business OverviewRegulationRegulation on Online Finance Services IndustryRegulations on the busi
237、ness of loan facilitation.”Furthermore,on October 9,2019,nine government authorities including the CBIRC,the National Development and Reform Commission,or the NDRC and the Ministry ofIndustry and Information Technology,or the MIIT,promulgated the Supplementary Provisions on the Supervision and Admin
238、istration of Financing Guarantee Companies,or theSupplementary Financing Guarantee Provisions,which,as advised by our PRC legal counsel,for the first time,explicitly requires that institutions providing services such as borrowerrecommendation and credit assessment for various lending institutions,in
239、cluding us as a Credit-Tech company,shall not provide,directly or in a disguised form,financing guaranteeservices without prior approval.For the companies without the relevant financing guarantee license but actually engaging in financing guarantee business,the regulatory authorities shallcease such
240、 operations and cause these companies to properly settle the existing business contracts.For a discussion of the Supplementary Financing Guarantee Provisions,please see“Item 4.Information on the CompanyB.Business OverviewRegulationRegulations on Financing Guarantee.”Before the promulgation of Circul
241、ar 141,we followed the market practice in preparing agreements used in our loan facilitations.In response to certain requirements underCircular 141,the Supplementary Financing Guarantee Provisions and the Internet Loans Interim Measures,we have made several adjustments to our collaboration model wit
242、h certainfinancial institution partners.However,we may still be deemed non-compliant with Circular 141,the Supplementary Financing Guarantee Provisions,the Internet Loans InterimMeasures or other relevant rules in the following aspects of our business:Table of Contents19Guarantee practice.We neither
243、 collected guarantee fees from our financial institution partners,nor took providing guarantees as our main operating business through ournon-licensed subsidiaries,while historically one of the VIEs that had not obtained the financing guarantee license provided guarantees or other credit enhancement
244、 servicesto certain financial institution partners.Under such model,the non-licensed VIE could be deemed as operating financing guarantee business and therefore non-compliantwith Circular 141 and the Supplementary Financing Guarantee Provisions.We have completely ceased such practice through the non
245、-licensed VIE since September 2020.Currently,third-party guarantee companies or the licensed VIE provides guarantee or other credit enhancement services to our financial institution partners.We engagethird-party guarantee companies to provide guarantee services and we at the same time,provide back-t
246、o-back guarantees for external guarantee companies.As advised byour PRC legal counsel,the back-to-back guarantee model is not prohibited by Circular 141,because we are not directly providing guarantee to banking financialinstitutions.However,in the absence of authoritative interpretation of Circular
247、 141,we cannot assure you that all the PRC regulatory authorities will have the same view asour PRC legal counsel on this issue.Moreover,given the lack of further interpretations,the exact definition and scope of“providing financing guarantee business in adisguised form”under the Supplementary Finan
248、cing Guarantee Provisions is unclear.Therefore,we cannot be certain that our new model will not be determined to be inviolation of the Supplementary Financing Guarantee Provisions.For additional information on potential risk related to compliance with the leverage ratio limits forfinancing guarantee
249、 business,please see“We are subject to uncertainties surrounding regulations and administrative measures of micro-lending business and financingguarantee business.If any of our business practices are deemed to be non-compliant with such laws and regulations,our business,financial condition and resul
250、ts ofoperations would be adversely affected.”Payment.We have adopted a payment model and applied it to our cooperation with all financial institution partners.Under our payment model,we do not charge intereststo borrowers for loans funded by our financial institution partners;instead,we charge servi
251、ce fees to financial institutions.In certain cases,some financial institutionpartners further engage us and a third-party payment system service provider to together arrange payment clearance,pursuant to which borrowers first repay to a third-party payment system and we work together with the paymen
252、t system service provider to split the total repayment amount,including principal,interest and service fees,tothe portions that financial institution partners and we are each entitled to.The third-party payment service providers are engaged per our financial institution partnersrequest and are mainl
253、y for the purpose of general payment processing and clearance.We do not charge any fees from borrowers under our payment model for loans fundedby our financial institution partners.As advised by our PRC legal counsel,such payment model does not violate Circular 141 or the Internet Loans Interim Meas
254、ures.However,in the absence of authoritative interpretation of Circular 141 and given substantial uncertainties regarding the interpretation and application of current or futurePRC laws and regulations,we cannot assure you that PRC regulatory authorities will ultimately take a view that is consisten
255、t with our PRC legal counsel.Product pricing.In accordance with the evolution of regulatory environments,we have lowered our product pricing,which is calculated based on the internal rate of returnmethodology.We may further adjust our product pricing from time to time as a result of changes in regul
256、ations or our business strategies.If we are unable to keep up withthe evolution of regulations and maintain compliance or are deemed to price loans at a rate that exceed the regulatory limits,we could be ordered to suspend,rectify orterminate our practices or operations,subject to cancelation of qua
257、lifications,or ordered to relinquish the excessive portion of the interest income.If any of these occurs,our business,financial condition,results of operations and our cooperation with financial institution partners could be materially and adversely affected as a result.Foradditional information on
258、potential risks associated with product pricing,please see“The pricing of loans facilitated through our platform may be deemed to exceedinterest rate limits imposed by regulations.”As advised by our PRC legal counsel,Circular 141 does not have retrospective effect on the loan facilitation business c
259、onducted prior to the issuance of Circular 141,and webelieve that loans we facilitated prior to the issuance of Circular 141 or under our existing collaboration agreements executed prior to the issuance of Circular 141 are not subject to itsjurisdiction.However,we cannot rule out the possibility tha
260、t government authorities would still consider our guarantee practice,payment model,product pricing or other aspects of ourbusiness to be in violation of Circular 141 and there can be no assurance that the PRC government authorities will ultimately take a view that is consistent with our PRC legal co
261、unsel.To the extent that any aspect of our products or services is deemed to be non-compliant with any requirements of the relevant PRC laws and regulations,we may need to further adjustour current practices within a limited time period and,as a result,our business operations may be negatively impac
262、ted.Table of Contents20In addition,our credit assessments assistance to commercial banks mainly depends on the evaluation of information regarding personal credit status,which may be deemed as a“data-driven risk management model,”a model that regulations such as Circular 141 demand to be adopted wit
263、h care and caution.We may also be deemed to engage in credit reportingbusiness or credit reporting function services by the PRC authorities,and may be required to involve a third-party licensed institution to ensure compliance pursuant to theAdministrative Measures for Credit Reporting Business,or t
264、he Credit Reporting Measures.If such assistance is prohibited,it may affect the subsequent collaboration between us and ourfinancial institution partners.If we are prohibited from conducting our credit assessment,our operation will be adversely affected.See also“We are subject to uncertaintiessurrou
265、nding regulations and administrative measures of credit reporting business.If any of our business practices is deemed to be non-compliant with such laws and regulations,ourbusiness,financial condition and results of operations would be materially and adversely affected.”Further,if our financial inst
266、itution partners cease to fund the loans,either on a temporary basis to await more clarity on the new regulatory environment,or on a permanent basisfor non-compliance concerns,our operation will be adversely impacted.If fewer financial institutions are willing to fund the loans,the competition for f
267、unding may become moreintense,and the cost of funding may increase,which may adversely impact our results of operations.Besides,in April 2021,we and 12 other major financial technology platforms were invited to meet with the Peoples Bank of China,or the PBOC,the CBIRC,the CSRC,theSAFE and other fina
268、ncial regulators to discuss the operations and compliance practice of these platforms internet financial businesses in China.We have been making rectifications andadjustments to our operations to address the issues discussed during the meeting and results of our self-examination according to the gui
269、dance provided by the regulators.As of the dateof this annual report,we have substantially completed the rectification measures based on our self-examination results according to the guidance provided by the relevant authorities.The regulatory authorities have reviewed our rectification measures in
270、general.The regulatory authorities have moved on to the regular regulatory supervision status from the self-examination and rectification status with respect to regulating these major financial technology platforms,including us.Our rectification results remain subject to the regulators regularsuperv
271、ision,and we cannot assure you that the measures we have taken and rectifications we have made will satisfy the requirements from the regulators.To the extent that ourrectification efforts are deemed not sufficient or unsatisfactory to the regulators,we may face further rectification orders or other
272、 administrative actions,in which case our business andoperations may be materially and negatively affected.We are subject to uncertainties surrounding regulations and administrative measures of micro-lending business and financing guarantee business.If any of our business practicesare deemed to be n
273、on-compliant with such laws and regulations,our business,financial condition and results of operations would be adversely affected.A small portion of loans facilitated on our platform are funded by Fuzhou Microcredit,the subsidiary of Shanghai Qiyu,one of our VIEs.We also provide financing guarantee
274、sto our financial institution partners through Fuzhou Financing Guarantee and Shanghai Financing Guarantee(before its financing guarantee license was cancelled upon its voluntaryapplication),for some loans we facilitate.As a result,we are subject to a complex and evolving body of regulations in rela
275、tion to these businesses.On August 2,2017,the PRC State Council promulgated the Regulations on the Supervision and Administration of Financing Guarantee Companies,which became effective onOctober 1,2017.The regulations set forth that the outstanding guarantee liabilities of a financing guarantee com
276、pany shall not exceed ten times its net assets,and that the balance ofoutstanding guarantee liabilities for the same guaranteed party shall not exceed 10%of a financing guarantee companys net assets,while the balance of outstanding guarantee liabilitiesfor the same guaranteed party and its affiliate
277、d parties shall not exceed 15%of a financing guarantee companys net assets.On September 16,2020,the CBIRC issued the Notice on Strengthening the Supervision and Management of Micro-Lending Companies,or Circular 86.Adopted to regulate theoperations of micro-lending companies,Circular 86 provides that
278、 the total funding amount obtained by a micro-lending company through bank loans,shareholder loans and other non-standard financing instruments shall not exceed such companys net assets.In addition,the total funding amount obtained by a micro-lending company through the issuance of bonds,asset secur
279、itization products and other instruments of standardized debt assets shall not exceed four times of its net assets.Local financial regulatory authorities may further lower theleverage limits mentioned above.Table of Contents21On November 2,2020,the CBIRC and the PBOC published the Interim Measures f
280、or the Administration of Online Micro-Lending Business(Draft for Comments),or theOnline Micro-Lending Draft,adding new requirements to online micro-lending business.In particular,the Online Micro-Lending Draft,among other things,strengthens the conditionfor licensing and other approvals for conducti
281、ng online micro-lending business.Pursuant to the Online Micro-Lending Draft,to the extent a micro-lending company engages in onlinemicro-lending business,said business shall mainly be carried out within the provincial-level administrative region to which its place of registration belongs,and shall n
282、ot operate beyondsuch region without the approval of the banking regulator under the State Council.On December 31,2021,the PBOC issued the Regulations on Local Financial Supervision andAdministration(Draft for Comments),which reaffirms that local financial organizations(including micro-lending compa
283、nies and financing guarantee companies)are required to operatebusiness within the area approved by the local financial regulatory authority,and are not allowed to conduct business across provinces in principle.Fuzhou Microcredit has obtained the approval to operate micro-lending businesses from the
284、competent supervising authority,which allows Fuzhou Microcredit to conductmicro-lending businesses through the internet.As of the date of this annual report,Fuzhou Microcredit had increased its registered capital to RMB5 billion,which has been fully paid.Currently,Fuzhou Microcredit can conduct cros
285、s-province business with its valid license.However,if the Online Micro-Lending Draft were to be adopted in its current form,FuzhouMicrocredit may need to obtain the legal approval of the banking regulator under the State Council in order to engage in online micro-lending business across provincial-l
286、eveladministrative regions.The rules for licensing or approvals for cross-province online micro-lending business is yet to be formulated as of the date of this annual report.We cannot assureyou that,if the authorities later promulgate such rules for micro-lending business or other rules imposing lic
287、ensing or approval requirements on financing guarantee business,FuzhouMicrocredit or Fuzhou Financing Guarantee will be qualified for such licenses or approvals in accordance with the requirements thereunder.If we fail to obtain the regulatory approvalsto increase the authorized amounts or to establ
288、ish additional online micro-lending companies,we may not be able to obtain sufficient funding to fulfill our future growth needs.Fromtime to time,we may need additional licenses to operate our business.Failure to obtain,renew,or retain requisite licenses,permits or approvals may adversely affect our
289、 ability toconduct or expand our business.Furthermore,Fuzhou Microcredit is subject to the laws,regulations,policies and measures in Fuzhou in respect of registered capital and of loan-to-capital and other leverageratios,among other things,and our financing guarantee companies are subject to the sup
290、ervision of local financial authorities in Fuzhou,Shanghai and Tianjin where the branch office ofFuzhou Financing Guarantee is located.We may be subject to regulatory warnings,correction orders,condemnation and fines and may be required to further adjust our business if anyof our micro-lending and f
291、inancing guarantee companies is deemed to have violated national,provincial or local laws and regulations or regulatory orders and guidance.We are subject to uncertainties surrounding regulations and administrative measures of credit reporting business.If any of our business practices is deemed to b
292、e non-compliantwith such laws and regulations,our business,financial condition and results of operations would be materially and adversely affected.The PRC government has adopted several regulations governing personal and enterprise credit reporting businesses.These regulations include the Regulatio
293、n for theAdministration of Credit Reporting Industry enacted by the State Council and effective in March 2013,and the Management Rules on Credit Agencies issued by the PBOC,in the sameyear.According to the Regulation for the Administration of Credit Reporting Industry,“credit reporting business”refe
294、rs to the gathering,organizing,preserving and processing of creditinformation on organizations such as enterprises and public service units and individuals,as well as distribution of such information to information users,and a“credit reporting agency”refers to credit reporting entity established in
295、accordance with law and mainly engaged in credit reporting business.Entities engaged in personal/enterprise credit reporting businesswithout such approval/completing filing formality may be subject to fine or criminal liability.Table of Contents22On September 27,2021,the PBOC issued the Credit Repor
296、ting Measures,which took effect on January 1,2022.The Credit Reporting Measures define“credit information”toinclude“basic information,borrowing and lending information and other relevant information legally collected in the offering of services of finance or other activities for purposes ofidentifyi
297、ng and judging the credit standing of businesses and individuals,as well as result of analysis and evaluation based on the aforesaid information,”and define“credit reportingbusiness”as the collection,collation,keeping and processing of credit information and provision of such information to informat
298、ion users.The Credit Reporting Measures applies toentities that carry out credit reporting business and“activities relating to credit reporting business”in China.Separately,entities providing“services of credit reporting function”in thename of“credit information service,credit service,credit evaluat
299、ion,credit rating,credit repair,among others”are also subject to the Credit Reporting Measures.Credit ReportingMeasures provides for an 18-month grace period from its effectiveness date for organizations that engage in credit reporting business to obtain the credit reporting business license andcomp
300、ly with its other provisions.The Credit Reporting Measures is new and significant uncertainties exist with respect to its interpretation and implementation.For example,the CreditReporting Measures does not directly deny the legitimacy of existing data analytics or precision marketing service provide
301、rs in the financial service industry,nor does it provide a clearguidance or implementation rules on how and when these providers,if deemed to be conducting credit reporting business,could apply for required licenses or otherwise comply with theCredit Reporting Measures.Therefore,we cannot rule out t
302、he possibility that some aspects of our business may subsequently be deemed as incompliant and be required to be ceased oradjusted in a way that is adverse to our business and prospects.The lack of clear guidance under,and the uncertainty associated with,the Credit Reporting Measures may also result
303、 insubstantial compliance cost incurred by us.In addition,on July 7,2021,the Credit Information System Bureau of PBOC further issued a notice,or the Notice Relating to Disconnecting Direct Connection,to 13 internetplatforms including us,requiring the internet platforms to achieve a complete“disconne
304、cted direct connection”in terms of personal information with financial institutions,meaning thatthe direct flow of personal information from internet platforms that collect such information to financial institutions is prohibited.According to the relevant laws and regulations and the requirements of
305、 the regulatory authorities,we have involved a licensed credit reporting institution to ensure complianceand have substantially completed our business adjustments with respect to disconnecting direct connection for credit reporting as of the date of this annual report.In particular,we haveentered in
306、to collaboration agreements with a licensed credit reporting institution to ensure the flow of personal information complies with the requirements of the Credit ReportingMeasures and the Notice Relating to Disconnecting Direct Connection.We will closely monitor the regulatory requirements,seek guida
307、nce from relevant regulatory authorities and takeapplicable measures in a timely manner to ensure our compliance with relevant laws and regulations applicable to us.We may incur costs and expenses to ensure compliance and tomake necessary changes to our internal policies and practices to maintain co
308、mpliance with relevant laws and regulations applicable to us in the future.According to the Notice Relatingto Disconnecting Direct Connection,the Credit Reporting Measures and other related laws and regulations,any failure or perceived failure by us to meet the relevant requirements maysubject us to
309、 fine or criminal liability,which could have an adverse effect on our business,financial condition and results of operations.See“Item 4.Information on the CompanyB.Business OverviewRegulationRegulations On Credit Reporting Business”for details.The pricing of loans facilitated through our platform ma
310、y be deemed to exceed interest rate limits imposed by regulations.Circular 141 requires online platforms,micro-lending companies and other entities to charge synthetic fund costs,including the interest and fees paid by the borrowers,incompliance with the rules provided by the Supreme Peoples Court,a
311、nd such costs shall be within the legally allowed annualized interest rate for private lending.According to theProvisions of the Supreme Peoples Court on Several Issues concerning the Application of Law in the Trial of Private Lending Cases promulgated on September 1,2015,in the eventthat the sum of
312、 the annualized interest that lenders charge and the fees we and our financial institution partners charge exceeds the 24%limit,and borrowers refused to pay the portionthat exceeds the 24%limit,PRC courts would not uphold our request to demand the portion of the fees that exceeds the 24%limit from s
313、uch borrowers.If the sum of the annual interestthat lenders charge and the fees we and our financial institution partners charge exceeds 36%,the portion that exceeds the 36%limit is invalid.The Supreme Peoples Court issued theSeveral Opinions on Further Strengthening the Judicial Work in the Finance
314、 Sector in August 2017,if an online lending information intermediary and a lender intentionally collude toevade the interest rate ceiling as set out by the law through disguising loan interest as loan facilitation service fees,then such arrangements shall be declared invalid.On July 22,2020,the Supr
315、eme Peoples Court and the NDRC jointly released the Opinions on Providing Judicial Services and Safeguards for Accelerating the Improvement of the Socialist MarketEconomic System for the New Era,or the Opinions.The Opinions set out that if the interest and fees,including interest,compound interest,p
316、enalty interest,liquidated damages andother fees,claimed by one party to the loan contract exceed the upper limit under judicial protection,the claim will not be supported by the court,and if the parties to the loan disguisethe financing cost in an attempt to circumvent the upper limit,the rights an
317、d obligations of all parties to the loan will be determined by the actual loan relationship.Table of Contents23On August 20,2020,the Supreme Peoples Court issued the Decision on Amending the Provisions of the Supreme Peoples Court on Several Issues Concerning the Applicationof Law in the Trial of Pr
318、ivate Lending Cases,or the Judicial Interpretation Amendment,which was revised on January 1,2021 and amended the upper limit of private lending interestrates under judicial protection.According to the Judicial Interpretation Amendment,if the service fees or other fees that we charge are deemed to be
319、 loan interest or fees related to loans(inclusive of any default rate and default penalty and any other fee),in the event that the sum of the annualized interest that lenders charge and fees we and our financial institutionpartners charge exceeds four times the one-year Loan Prime Rate at the time o
320、f the establishment of the agreement,or the Quadruple LPR Limit,borrowers may refuse to pay the portionthat exceeds the Quadruple LPR Limit.In that case,PRC courts will not uphold our request to demand the payment of fees that exceed the Quadruple LPR Limit from such borrowers.Ifborrowers have paid
321、the fees that exceed the Quadruple LPR Limit,such borrowers may request us to refund the portion exceeding the Quadruple LPR Limit and the PRC courts mayuphold such requests.The aforementioned one-year Loan Prime Rate refers to the one-year loan market quoted interest rate issued by the National Ban
322、k Interbank Funding Center on the20th of each month starting from August 20,2019,and the one-year loan market quoted interest rate issued by the National Bank Interbank Funding Center on March 20,2023 was3.65%.We cannot assure you that the one-year loan market quoted interest rate and the Quadruple
323、LPR Limit will not decrease further in the future.On December 29,2020,the Supreme Peoples Court issued the Reply to Issues Concerning the Scope of Application of the New Judicial Interpretation on Private Lending,orthe Supreme Peoples Court Reply,which clarified that seven types of local financial o
324、rganizations,including micro-lending companies,financing guarantee companies,regional equitymarkets,pawnshops,financing lease companies,commercial factoring companies and local asset management companies under the regulation of local financial regulatory authorities,are financial institutions establ
325、ished upon approval by financial regulatory authorities.The Judicial Interpretation Amendment is not applicable to disputes arising from their engagementin relevant financial businesses.Although the Judicial Interpretation Amendment and the Supreme Peoples Court Reply provide that they do not apply
326、to licensed financial institutions,including micro-lending companies that conduct loan and Credit-Tech business,there remain uncertainties in the interpretation and implementation of the Judicial Interpretation Amendment,includingwhether licensed financial institutions may be subject to its jurisdic
327、tion under Circular 141 or in certain circumstances,the basis of the calculation formula used to determine the interestlimit,the scope of inclusion of related fees and insurance premiums,as well as inconsistencies between the standard and level of enforcement by different PRC courts.We cannot assure
328、you that there will not be interpretations of the Judicial Interpretation Amendment expanding its jurisdiction to cover licensed financial institutions,nor can we guarantee that there willnot be any changes to the detailed calculation formula used to determine the interest limit,that our future fee
329、rates will not be lowered as a result of the Quadruple LPR Limit,or that theQuadruple LPR Limit will not be applied to our historical and legacy products where the related dispute cases are accepted by PRC courts of first instance on or after August 20,2020.In such cases,we and our financial institu
330、tion partners may be required to repay certain borrowers if our historical and legacy loan products are deemed to have violated the applicablelaws and regulations concerning the limit of lending interest and fee rates.Our business,results of operations and financial condition may therefore be materi
331、ally and adversely affectedby the implementation of the Judicial Interpretation Amendment.In addition to rules,opinions and decisions issued by the PRC courts,we and our financial institution partners are also subject to regulatory agencies requirements,supervisionor guidance.We have lowered the pri
332、cing on loans we facilitate and may further adjust the pricing from time to time as a result of changes in regulations or our business strategies.Currently,we adhere to the pricing policy that no loan should have an IRR exceeding 36%.As of December 31,2022,the IRR for all of loans facilitated by us
333、was under 36%.As of thesame date,the outstanding balance of loans with an IRR exceeding 24%amounted to RMB5.4 billion(US$0.8 billion),which was mainly related to loans facilitated prior to June 30,2022 and represented 4.1%of all the outstanding balance of loans1 facilitated by us,compared to RMB62.1 billion and 43.7%,respectively,as of December 31,2021.If we are unable tokeep up with the evolvemen