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1、Table of Contents UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549 FORM 20-F (Mark One)REGISTRATION STATEMENT PURSUANT TO SECTION 12(b)OR(g)OF THE SECURITIES EXCHANGEACT OF 1934OR ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal yea
2、r ended December 31,2022.OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF1934OR SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGEACT OF 1934Date of event requiring this shell company report For the transition period from to Commission
3、 file number:001-38877 Yunji 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)15/F,South BuildingHipark Phase 2,Xiaoshan DistrictHangzhou,Zhejiang,310000Peoples Republic of China(Ad
4、dress of principal executive offices)Peng Zhang,Vice President of Finance15/F,South BuildingHipark Phase 2,Xiaoshan DistrictHangzhou,Zhejiang,310000Peoples Republic of ChinaPhone:86-571-8168 8920Email:(Name,Telephone,Email and/or Facsimile number and Address of Company Contact Person)Securities regi
5、stered or to be registered pursuant to Section 12(b)of the Act:Title of Each Class TradingSymbol Name of Each ExchangeOn Which RegisteredAmerican depositary shares,each Americandepositary share representing ten Class Aordinary shares Class A ordinary shares,parvalue US$0.000005 per share*Not for tra
6、ding,but only in connection with the listing on theNasdaq Global Market of American depositaryshares.YJ The Nasdaq Stock Market LLC(The Nasdaq Global Market)Securities registered or to be registered pursuant to Section 12(g)of the Act:None(Title of Class)Securities for which there is a reporting obl
7、igation pursuant to Section 15(d)of the Act:None(Title of Class)Indicate the 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 annualreport:As of December 31,2022,there were 2,018,397,352 ordinary shares outstanding,pa
8、r value US$0.000005 per share,being the sum of 1,068,437,352Class A ordinary shares(excluding treasury shares),par value US$0.000005 per share and 949,960,000 Class B ordinary shares,par value US$0.000005per share.Indicate by check mark if the registrant is a well-known seasoned issuer,as defined in
9、 Rule 405 of the Securities Act.Yes NoIf 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 theSecurities Exchange Act of 1934.Yes NoIndicate by check mark whether the registrant(1)has filed all rep
10、orts required to be filed by Section 13 or 15(d)of the Securities Exchange Act of 1934during the preceding 12 months(or for such shorter period that the registrant was required to file such reports),and(2)has been subject to such filingrequirements for the past 90 days.Yes NoIndicate by check mark w
11、hether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 ofRegulation S-T(232.405 of this chapter)during the preceding 12 months(or for such shorter period that the registrant was required to submit suchfiles).Yes NoIndicate by chec
12、k 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“emerging growth company”in Rule 12b-2 of the Exchange Act.Large accelerated filer Accelerated
13、filer Non-accelerated filer Emerging growth company If an emerging growth company that prepares its financial statements in accordance with U.S.GAAP,indicate by check mark if the registrant has electednot to use the extended transition period for complying with any new or revised financial accountin
14、g standards provided pursuant to Section 13(a)ofthe Exchange Act.The term“new or revised financial accounting standard”refers to any update issued by the Financial Accounting Standards Board to its AccountingStandards Codification after April 5,2012.Indicate by check mark whether the registrant has
15、filed a report on and attestation to its managements assessment of the effectiveness of its internalcontrol over financial reporting under Section 404(b)of the Sarbanes-Oxley Act(15 U.S.C.7262(b)by the registered public accounting firm thatprepared or issued its audit report.If securities are regist
16、ered pursuant to Section 12(b)of the Act,indicate by check mark whether the financial statements of the registrant included in thefiling reflect the correction of an error to previously issued financial statements.Indicate by check mark whether any of those error corrections are restatements that re
17、quired a recovery analysis of incentive-based compensationreceived by any of the registrants executive officers during the relevant recovery period pursuant to 240.10D-1(b).Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this f
18、iling:U.S.GAAP International Financial Reporting Standards as issued Other by the International Accounting Standards Board If“Other”has been checked in response to the previous question,indicate by check mark which financial statement item the registrant has elected tofollow.Item 17 Item 18If this i
19、s an annual report,indicate by check mark whether the registrant is a shell company(as defined in Rule 12b-2 of the ExchangeAct).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 documents and r
20、eports required to be filed by Sections 12,13 or 15(d)of the SecuritiesExchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.Yes No Table of ContentsTABLE OF CONTENTS INTRODUCTION 1 FORWARD-LOOKING STATEMENTS 3 PART I 4 ITEM 1.IDENTITY OF DIRECTORS,SENIO
21、R MANAGEMENT AND ADVISERS 4 ITEM 2.OFFER STATISTICS AND EXPECTED TIMETABLE 4 ITEM 3.KEY INFORMATION 4 ITEM 4.INFORMATION ON THE COMPANY 71 ITEM 4A.UNRESOLVED STAFF COMMENTS 112 ITEM 5.OPERATING AND FINANCIAL REVIEW AND PROSPECTS 112 ITEM 6.DIRECTORS,SENIOR MANAGEMENT AND EMPLOYEES 133 ITEM 7.MAJOR S
22、HAREHOLDERS AND RELATED PARTY TRANSACTIONS 142 ITEM 8.FINANCIAL INFORMATION 146 ITEM 9.THE OFFER AND LISTING 147 ITEM 10.ADDITIONAL INFORMATION 148 ITEM 11.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 158 ITEM 12.DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES 159 PART II 162 IT
23、EM 13.DEFAULTS,DIVIDEND ARREARAGES AND DELINQUENCIES 162 ITEM 14.MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS 162 ITEM 15.CONTROLS AND PROCEDURES 162 ITEM 16A.AUDIT COMMITTEE FINANCIAL EXPERT 163 ITEM 16B.CODE OF ETHICS 163 ITEM 16C.PRINCIPAL ACCOUNTANT FEES AND SERVI
24、CES 163 ITEM 16D.EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES 164 ITEM 16E.PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS 164 ITEM 16F.CHANGE IN REGISTRANTS CERTIFYING ACCOUNTANT 164 ITEM 16G.CORPORATE GOVERNANCE 164 ITEM 16H.MINE SAFETY DISCLOSURE 165 ITEM 16I.
25、DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS 165 PART III 166 ITEM 17.FINANCIAL STATEMENTS 166 ITEM 18.FINANCIAL STATEMENTS 166 ITEM 19.EXHIBITS 166 iTable of ContentsINTRODUCTIONUnless otherwise indicated or the context otherwise requires,references in this annual report on F
26、orm 20-F to:“ADRs”are to the American depositary receipts which may evidence the ADSs;“ADSs”are to the American depositary shares,each of which represents ten Class A ordinary shares;“Average spending per buyer”in a given period is calculated by dividing total GMV in that period by the number of buy
27、ers in the sameperiod;“buyer”in a given period are to a user who places at least one order on our platform during such period,regardless of whether any productin such order is ultimately sold or delivered or whether any product in such order is returned;“China”or the“PRC”are to the Peoples Republic
28、of China,excluding,for the purposes of this annual report only,Hong Kong,Macauand Taiwan;“Class A ordinary shares”are to our Class A ordinary shares of par value US$0.000005 per share;“Class B ordinary shares”are to our Class B ordinary shares of par value US$0.000005 per share;“GMV”are to the total
29、 value of all orders for merchandise placed in our merchandise business and marketplace business,including thevalue of the merchandise sold as part of the membership packages,as well as the VAT and tax surcharges paid,regardless of whether themerchandises are returned and without taking into conside
30、ration any discounts and incentives.GMV includes the value from orders placedon our mobile apps as well as orders placed on third-party mobile apps and websites that are fulfilled by us,by our third-party merchants,or by our third-party business partners.Our revenues recognized on a gross basis are
31、net of the VAT and related tax surcharges paid,discounts and incentives,the value of the merchandises returned,and any adjustments due to the timing difference between shipping andreceipt,which are included in the above GMV measure.Our revenues recognized on a net basis are net of the corresponding
32、amount to bepaid to the vendor,the principal in the transaction,in addition to the items mentioned above,which are included in the above GMVmeasure;“Jishang Preferred”are to Zhejiang Jishang Preferred E-Commerce Co.,Ltd.;“member”are to an individual who registers an account on our flagship Yunji app
33、 or mini program and satisfies certain requirements;“mini program”or“mini programs”are to services run on third-party platforms,such as WeChat,that provide functions similar to those ofstandalone mobile applications;“ordinary shares”are to our ordinary shares,par value US$0.000005 per share;“our WFO
34、E”or“WFOE”are to Hangzhou Yunchuang Sharing Network Technology Co.,Ltd.or Yunchuang Sharing;“repeat purchase rate”in a given period are calculated as the number of transacting members who purchased not less than twice divided bythe total number of transacting members during such period;“RMB”and“Renm
35、inbi”are to the legal currency of China;“SPUs”are to standard product units offered on our platform.The number of SPUs does not represent the number of distinct productsoffered on our platform.We assign the same SPU to the same type of product without distinguishing product specifics such as colors
36、andsizes;1Table of Contents “transacting member”in a given period are to a member who successfully promotes our products to generate at least one order or places atleast one order on our platform,regardless of whether any product in such order is ultimately sold or delivered or whether any product i
37、nsuch order is returned;“US$,”“U.S.dollars,”“$,”and“dollars”are to the legal currency of the United States;“users”are to individuals who access our platform through our mobile apps or sharing interfaces,including our members;“VIE”are to variable interest entity,and“the VIEs”or“VIEs”are to(i)Yunji Sh
38、aring Technology Co.,Ltd.,or Yunji Sharing,(ii)Zhejiang Yunji Preferred E-Commerce Co.,Ltd.,or Yunji Preferred,(iii)Hangzhou Chuanchou Network Technology Co.,Ltd.,orHangzhou Chuanchou,and(iv)Hangzhou Fengjing Network Technology Co.,Ltd.,or Hangzhou Fengjing;“Yunji,”“we,”“us,”“our company,”“our”and“G
39、roup”are to Yunji Inc.,our Cayman Islands holding company and its subsidiaries,and,in the context of describing our operations and consolidated financial information,including the VIEs and the subsidiaries of the VIEs;and “Zhejiang Jiyuan”are to Zhejiang Jiyuan Network Technology Co.,Ltd.Our reporti
40、ng currency is the Renminbi because our business is mainly conducted in China and all of our revenues are denominated in Renminbi.This annual report contains translations of Renminbi amounts into U.S.dollars at specific rates solely for the convenience of the reader.The conversionof Renminbi into U.
41、S.dollars in this annual report is based on the exchange rate set forth in the H.10 statistical release of the Board of Governors of theFederal Reserve System.Unless otherwise noted,all translations from Renminbi to U.S.dollars and from U.S.dollars to Renminbi in this annual reportare made at a rate
42、 of RMB6.8972 to US$1.00,the exchange rate in effect as of the end of December 30,2022,as set forth in the H.10 statistical releaseof The Board of Governors of the Federal Reserve System.We make no representation that any Renminbi or U.S.dollar amounts could have been,orcould be,converted into U.S.d
43、ollars or Renminbi,as the case may be,at any particular rate,or at all.The PRC government imposes control over itsforeign currency reserves in part through direct regulation of the conversion of Renminbi into foreign exchange and through restrictions on foreigntrade.2Table of ContentsFORWARD-LOOKING
44、 STATEMENTSThis annual report on Form 20-F contains forward-looking statements that relate to our current expectations and views of future events.Thesestatements involve known and unknown risks,uncertainties and other factors that may cause our actual results,performance or achievements to bemateria
45、lly different from those expressed or implied by the forward-looking statements.These statements are made under the“safe harbor”provisions ofthe 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,”“ex
46、pect,”“anticipate,”“aim,”“estimate,”“intend,”“plan,”“believe,”“is/are likely to,”“potential,”“continue”or other similar expressions.We have based these forward-looking statementslargely on our current expectations and projections about future events that we believe may affect our financial condition
47、,results of operations,businessstrategy and financial needs.These forward-looking statements include statements relating to:our mission,goals and strategies;our future business development,financial conditions and results of operations;the expected growth of the online retail industry in China;our e
48、xpectations regarding demand for and market acceptance of our products and services;our expectations regarding our relationships with our members,users,suppliers,third-party merchants and other partners;competition in our industry;and relevant government policies and regulations relating to us,and t
49、heir future development.These forward-looking statements involve various risks and uncertainties.Although we believe that our expectations expressed in these forward-looking statements are reasonable,our expectations may later be found to be incorrect.Our actual results could be materially different
50、 from ourexpectations.Important risks and factors that could cause our actual results to be materially different from our expectations are generally set forth in“Item 3.Key InformationD.Risk Factors,”“Item 4.Information on the CompanyB.Business Overview,”“Item 5.Operating and Financial Reviewand Pro
51、spects,”and other sections in this annual report.You should read thoroughly this annual report and the documents that we refer to with theunderstanding that our actual future results may be materially different from and worse than what we expect.We qualify all of our forward-lookingstatements by the
52、se cautionary statements.This annual report contains certain data and information that we obtained from various government and private publications.Statistical data inthese publications also include projections based on a number of assumptions.The online retail industry may not grow at the rate proj
53、ected by marketdata,or at all.Failure of this market to grow at the projected rate may have a material and adverse effect on our business and the market price of theADSs.In addition,the rapidly evolving nature of this industry results in significant uncertainties for any projections or estimates rel
54、ating to the growthprospects or future condition of our market.Furthermore,if any one or more of the assumptions underlying the market data are later found to beincorrect,actual results may differ from the projections based on these assumptions.You should not place undue reliance on these forward-lo
55、okingstatements.The forward-looking statements made in this annual report relate only to events or information as of the date on which the statements are made inthis annual report.Except as required by law,we undertake no obligation to update or revise publicly any forward-looking statements,whether
56、 as aresult of new information,future events or otherwise,after the date on which the statements are made or to reflect the occurrence of unanticipatedevents.You should read this annual report and the documents that we refer to in this annual report completely and with the understanding that our act
57、ualfuture results may be materially different from what we expect.3Table of ContentsPART 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 Contractual Arrang
58、ements with the VIEsYunji Inc.is not an operating company in China but a Cayman Islands holding company with no equity ownership in the VIEs.We conduct ourbusiness in China through(i)our PRC subsidiaries and(ii)the VIEs with which we have maintained contractual arrangements.PRC laws andregulations r
59、estrict and impose conditions on foreign investment in value-added telecommunication services,audio and video services and certain otherbusinesses.Accordingly,we operate these businesses in China through the VIEs,and rely on contractual arrangements among our PRC subsidiaries,theVIEs and their respe
60、ctive shareholders to direct the business operations of the VIEs.Revenues contributed by the VIEs accounted for 24.4%,23.8%and30.3%of our total revenues for the years of 2020,2021 and 2022,respectively.As used in this annual report,“we,”“us,”“our company”and“our”refers to Yunji Inc.,our Cayman Islan
61、ds holding company and its subsidiaries,and,in the context of describing our operations and consolidated financialinformation,the VIEs and the subsidiaries of the VIEs.Holders of our ADSs hold equity interest in Yunji Inc.,our Cayman Islands holding company,and do not have direct or indirect equity
62、interest in the VIEs.A series of contractual agreements,including proxy agreement and powers of attorney,equity interest pledge agreement,exclusive serviceagreement,and exclusive option agreement,have been entered into by and among our wholly owned PRC subsidiary,Yunchuang Sharing,the VIEs andtheir
63、respective shareholders.Terms contained in each set of contractual arrangements with the VIEs and their respective shareholders are substantiallysimilar.As a result of the contractual arrangements,we are able to direct the activities of and derive economic benefits from the VIEs.We areconsidered the
64、 primary beneficiary of the VIEs for accounting purposes,and we have consolidated the financial results of the VIEs in our consolidatedfinancial statements.Neither we nor our investors has an equity ownership in,direct foreign investment in,or control through such ownership orinvestment of,the varia
65、ble interest entities,and the contractual arrangements are not equivalent to an equity ownership in the business of the variableinterest entities.For more details of these contractual arrangements,see“Item 4.Information on the CompanyC.Organizational Structure.”However,the contractual arrangements m
66、ay not be as effective as direct ownership and we may incur substantial costs to enforce the terms of thearrangements.There are substantial uncertainties regarding the interpretation and application of current and future PRC laws,regulations and rulesregarding the status of the rights of our Cayman
67、Islands holding company with respect to its contractual arrangements with the VIEs and their respectiveshareholders.It is uncertain whether any new PRC laws or regulations relating to VIE structures will be adopted or if adopted,what they would provide.If we or the VIEs are found to be in violation
68、of any existing or future PRC laws or regulations,or fail to obtain or maintain any of the required permitsor approvals,the relevant PRC regulatory authorities would have broad discretion to take action in dealing with such violations or failures.Our holdingcompany,our PRC subsidiaries and the VIEs,
69、and investors of our company face uncertainty about potential future actions by the PRC government thatcould affect the enforceability of the contractual arrangements with the VIEs and,consequently,significantly affect the financial performance of theVIEs and our company as a whole.In addition,these
70、 agreements have not been tested in China courts.For a detailed description of the risks associatedwith our corporate structure,please refer to risks disclosed under“Item 3.Key InformationD.Risk FactorsRisks Related to Our CorporateStructure.”PRC governments significant authority in regulating our o
71、perations and its oversight and control over offerings conducted overseas by,andforeign investment in,China-based issuers could significantly limit or completely hinder our ability to offer or continue to offer securities to investors.Implementation of industry-wide regulations,including data securi
72、ty or anti-monopoly related regulations,in this nature may cause the value of suchsecurities to significantly decline.For more details,see“Item 3.Key InformationD.Risk FactorsRisks Related to Doing Business in ChinaThePRC governments significant oversight over our business operations could result in
73、 a material adverse change in our operations and the value of ourADSs.”Risks and uncertainties arising from the legal system in China,including risks and uncertainties regarding the enforcement of laws and quicklyevolving rules and regulations in China,could result in a material adverse change in ou
74、r operations and the value of our ADSs.For more details,see“Item 3.Key InformationD.Risk FactorsRisks Related to Doing Business in ChinaUncertainties with respect to the PRC legal system andchanges in laws and regulations in China could adversely affect us.”4Table of ContentsThe chart below summariz
75、es our corporate structure,including our principal subsidiaries,the VIEs and the VIEs principal subsidiaries,as of thedate of this annual report:Notes:(1)Daqiao Network Technology(Hangzhou)Co.,Ltd.,Hangzhou Yuepeng Trading Co.,Ltd.,and Deqing Jijie Investment Management Partnership(Limited Partnersh
76、ip)each holds 65.53%,28.09%,and 6.38%of the equity interests in Yunji Sharing,respectively.All of these entities areshareholders or affiliates of shareholders of our company.(2)Mr.Shanglue Xiao and Mr.Huan Hao each holds 99.0099%and 0.9901%of the equity interests in Yunji Preferred,respectively.Mr.S
77、hanglueXiao and Mr.Huan Hao are both beneficial owners of our company.Mr.Shanglue Xiao also serves as the chairman of our board of directors andthe chief executive officer of our company and Mr.Huan Hao is a beneficial owner of the shares of our company and served as the chieftechnology officer of o
78、ur Company until his resignation on April 1,2022.5Table of Contents(3)Mr.Wenwei Shu holds 100%of equity interests in Hangzhou Chuanchou.Mr.Wenwei Shu is a nominee of our company.(4)Mrs.Panyan Ding and Mr.Wenwei Shu each holds 60%and 40%of the equity interests in Hangzhou Fengjing.Mrs.Panyan Ding and
79、Mr.Wenwei Shu are nominees of our company.(5)Yunchuang Sharing holds 10%of the equity interest in Zhejiang Jiyuan,and Zhejiang Fengji Technology Co.,Ltd.,an indirect wholly-ownedforeign-invested enterprise subsidiary of Yunji Inc.,holds 90%of the equity interest in Zhejiang Jiyuan.Permissions Requir
80、ed from the PRC Authorities for Our OperationsOur operations in China are governed by PRC laws and regulations.As of the date of this annual report,our PRC subsidiaries and the VIEs haveobtained the requisite licenses and permits from the PRC government authorities that are material for the business
81、 operations of our holding companyand the VIEs in China,including,among others,the VATS License and the Production and Operation of Broadcasting and Television Programs Permit.Given the uncertainties of interpretation and implementation of relevant laws and regulations and the enforcement practice b
82、y relevant governmentauthorities,we may be required to obtain additional licenses,permits,filings or approvals for the functions and services of our platform in the future.For more detailed information,see“Item 3.Key InformationD.Risk FactorsRisks Related to Our Business and IndustryAny lack of requ
83、isiteapprovals,licenses or permits applicable to our business or failure to comply with any requirements of PRC laws,regulations and policies may have amaterial and adverse impact on our business,financial condition and results of operations,”and“Item 3.Key InformationD.Risk FactorsRisksRelated to D
84、oing Business in ChinaWe and the VIEs may be adversely affected by the complexity,uncertainties and changes in PRC regulation ofinternet-related businesses and companies.”Furthermore,in connection with our historical issuance of securities to foreign investors,we,our PRC subsidiaries and the VIEs,(i
85、)are notrequired to obtain permissions from the China Securities Regulatory Commission,or the CSRC,(ii)are not required to go through cybersecurity reviewby the Cyberspace Administration of China,or the CAC,and(iii)have not been asked to obtain such permissions by any PRC government authority.Meanwh
86、ile,the PRC government has recently indicated an intent to exert more oversight and control over offerings that are conducted overseasand/or foreign investment in China-based issuers.On February 17,2023,the CSRC promulgated the Circular of the Peoples Republic of China onAdministrative Arrangements
87、for Filing of Overseas Offering and Listing of Domestic Enterprises,or the Circular of Overseas Listing and Offering,andthe Trial Administrative Measures of the Overseas Securities Offering and Listing by Domestic Companies and five relevant guidelines,or the OverseasListing Trial Measures.The Overs
88、eas Listing Trial Measures became effective on March 31,2023.Pursuant to the Overseas Listing Trial Measures,PRC domestic companies that seek to offer and list securities in overseas markets,either in direct or indirect means,are required to fulfill the filingprocedure with the CSRC and report relev
89、ant information.According to the Circular of Overseas Listing and Offering,issuers that have already beenlisted in an overseas market by March 31,2023,such as our company,are not required to make any immediate filing.However,under the OverseasListing Trial Measures,such issuers will be required to c
90、omplete certain filing procedures with the CSRC in connection with future securities offeringsand listings outside of mainland China,including follow-on offerings,issuance of convertible bonds,offshore relisting after going-private transactions,and other equivalent offering activities.There remain s
91、ubstantial uncertainties about the interpretation,application and implementation of the OverseasListing Trial Measures.If we fail to obtain required approval or complete other review or filing procedures,under the Overseas Listing Trial Measuresor otherwise,for any future securities offerings and li
92、stings outside of mainland China,we may face sanctions by the CSRC or other PRC regulatoryauthorities,which may include fines and penalties on our operations in mainland China,limitations on our operating privileges in mainland China,restrictions on or prohibition of the payments or remittance of di
93、vidends by our subsidiaries in mainland China,restrictions on or delays to our futurefinancing transactions offshore,or other actions that could have a material and adverse effect on our business,financial condition,results of operations,reputation and prospects,as well as the trading price of our A
94、DSs.For more detailed information,see“Item 3.Key InformationD.Risk FactorsRisks Related to Doing Business in ChinaThe approval and/or other requirements of the CSRC or other PRC governmental authorities may berequired in connection with an offering under PRC rules,regulations or policies,and,if requ
95、ired,we cannot predict whether or how soon we will be ableto obtain such approval or complete such other requirements.”If(i)we do not receive or maintain any permits or approvals required of us,(ii)we inadvertently concluded that certain permits or approvals havebeen acquired or are not required,or(
96、iii)applicable laws,regulations,or interpretations thereof change and we become subject to the requirement ofadditional permits or approvals in the future,we cannot assure you that we will be able to obtain such permissions or approvals in a timely manner,or atall,and such approvals may be rescinded
97、 even if obtained.Any such circumstance could subject us to penalties,including fines,suspension of businessand revocation of required licenses,which could materially and adversely affect our business,financial condition and results of operations.For moredetailed information,see“Item 3.Key Informati
98、onD.Risk FactorsRisks Relating to Doing Business in ChinaUncertainties with respect to thePRC legal system and changes in laws and regulations in China could adversely affect us.”6Table of ContentsThe Holding Foreign Companies Accountable ActPursuant to the Holding Foreign Companies Accountable Act,
99、or the HFCAA,if the Securities and Exchange Commission,or the SEC,determines that we have filed audit reports issued by a registered public accounting firm that has not been subject to inspections by the Public CompanyAccounting Oversight Board,or the PCAOB,for two consecutive years,the SEC will pro
100、hibit our shares or the ADSs from being traded on a nationalsecurities 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 SECof its determination that the PCAOB was unable to inspect or investigate completely registered
101、 public accounting firms headquartered in mainlandChina and Hong Kong,including our auditor.In May 2022,the SEC conclusively listed us as a Commission-Identified Issuer under the HFCAAfollowing the filing of our annual report on Form 20-F for the fiscal year ended December 31,2021.On December 15,202
102、2,the PCAOB issued a reportthat vacated its December 16,2021 determination and removed mainland China and Hong Kong from the list of jurisdictions where it is unable toinspect or investigate completely registered public accounting firms.For this reason,we do not expect to be identified as a Commissi
103、on-Identified Issuerunder the HFCAA after we file this annual report on Form 20-F.Each year,the PCAOB will determine whether it can inspect and investigate completelyaudit firms in mainland China and Hong Kong,among other jurisdictions.If the PCAOB determines in the future that it no longer has full
104、 access toinspect and investigate completely accounting firms in mainland China and Hong Kong and we continue to use an accounting firm headquartered in oneof these jurisdictions to issue an audit report on our financial statements filed with the SEC,we would be identified as a Commission-Identified
105、 Issuerfollowing the filing of the annual report on Form 20-F for the relevant fiscal year.There can be no assurance that we would not be identified as aCommission-Identified Issuer for any future fiscal year,and if we were so identified for two consecutive years,we would become subject to theprohib
106、ition on trading under the HFCAA.For more details,see“Item 3.Key InformationD.Risk FactorsRisks Related to Doing Business in ChinaThe PCAOB had historically been unable to inspect our auditor in relation to their audit work performed for our financial statements and the inabilityof the PCAOB to cond
107、uct inspections of our auditor in the past has deprived our investors with the benefits of such inspections”and“Item 3.KeyInformationD.Risk FactorsRisks Related to Doing Business in ChinaOur ADSs may be prohibited from trading in the United States under theHFCAA in the future if the PCAOB is unable
108、to inspect or investigate completely auditors located in mainland China and Hong Kong.The delisting ofthe ADSs,or the threat of their being delisted,may materially and adversely affect the value of your investment.”Cash Flows through Our OrganizationYunji Inc.is a holding company with no operations
109、of its own.We conduct our business in China through our subsidiaries and the VIEs in China.As a result,although other means are available for us to obtain financing at the holding company level,Yunji Inc.s ability to pay dividends to theshareholders and to service any debt it may incur may depend up
110、on dividends paid by our PRC subsidiaries and license and service fees paid by theVIEs.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 dividendsto Yunji Inc.In addition,our PRC subsidiaries are permitted to pa
111、y dividends to Yunji Inc.only out of their retained earnings,if any,as determined inaccordance with PRC accounting standards and regulations.Further,our PRC subsidiaries and the VIEs are required to make appropriations to certainstatutory reserve funds or may make appropriations to certain discretio
112、nary funds,which are not distributable as cash dividends except in the event of asolvent liquidation of the companies.For more details,see“Item 5.Operating and Financial Review and ProspectsB.Liquidity and Capital ResourcesHolding Company Structure.”Under PRC laws and regulations,our PRC subsidiarie
113、s and the VIEs are subject to certain restrictions with respect to paying dividends orotherwise transferring any of their net assets to us.Remittance of dividends by a wholly foreign-owned enterprise out of China is also subject toexamination by the banks designated by State Administration of Foreig
114、n Exchange,or the SAFE.The amounts restricted include the paid-up capital andthe statutory reserve funds of our PRC subsidiaries and the net assets of the VIEs in which we have no legal ownership,totaling RMB229.5 million,RMB451.4 million and RMB453.4 million(US$65.7 million)as of December 31,2020,2
115、021 and 2022,respectively.Furthermore,cash transfers fromour PRC subsidiaries and the VIEs to entities outside of China are subject to PRC government controls on currency conversion.To the extent cash in ourbusiness is in the PRC or a PRC entity,such cash may not be available to fund operations or f
116、or other use outside of the PRC due to restrictions andlimitations imposed by the governmental authorities on currency conversion,cross-border transactions and cross-border capital flows.Shortages in theavailability of foreign currency may temporarily delay the ability of our PRC subsidiaries and th
117、e VIEs to remit sufficient foreign currency to paydividends or other payments to us,or otherwise satisfy their foreign currency denominated obligations.In view of the foregoing,to the extent cash inour business is held in China or by a PRC entity,such cash may not be available to fund operations or
118、for other use outside of the PRC.For risks relatingto the fund flows of our operations in China,see“Item 3.Key InformationD.Risk FactorsRisks Related to Doing Business in ChinaWe may relyon dividends and other distributions on equity paid by our PRC subsidiaries to fund any cash and financing requir
119、ements we may have,and anylimitation on the ability of our PRC subsidiaries to make payments to us could have a material and adverse effect on our ability to conduct our business”and“Item 3.Key InformationD.Risk FactorsRisks Related to Doing Business in ChinaGovernmental control of currency conversi
120、on may limitour ability to utilize our revenues effectively and affect the value of your investment.”7Table of ContentsUnder PRC law,Yunji Inc.may provide funding to our PRC subsidiaries only through capital contributions or loans,and to the VIEs only throughloans,subject to satisfaction of applicab
121、le government registration and approval requirements.For the years ended December 31,2020,2021 and 2022,Yunji Inc.extended loans with principal amount of RMB91.3 million,nil,and nil respectively,to our intermediate holding companies and subsidiariesand received repayments of nil,RMB294.8 million and
122、 RMB19.7 million(US$2.9 million),respectively.For the years ended December 31,2020,2021and 2022,Yunji Inc.didnt make capital contributions to our intermediate holding companies and subsidiaries.For the years ended December 31,2020,2021 and 2022,the VIEs didnt receive any loans from Yunji Inc.and Yun
123、ji Inc.didnt receive any repayments from the VIEs.The VIEs may transfercash to our WFOE by paying service fees according to the exclusive service agreements.For the years ended December 31,2020,2021 and 2022,noservice fees were paid by the VIEs to our WFOE under the exclusive service agreements.Yunj
124、i Inc.has not declared or paid any cash dividends,nor does it has any present plan to pay any cash dividends on our ordinary shares in theforeseeable future.We currently intend to retain all of our available funds and any future earnings to operate and expand our business.We currently donot have any
125、 plan to require our PRC subsidiaries to distribute their retained earnings and intend to retain them to operate and expand our business in thePRC.See“Item 8.Financial InformationA.Consolidated Statements and Other Financial InformationDividend Policy.”For PRC and United Statesfederal income tax con
126、siderations of an investment in our ADSs,see“Item 10.Additional InformationE.Taxation.”For purposes of illustration,the following discussion reflects the hypothetical taxes that might be required to be paid within mainland China,assuming that:(i)we have taxable earnings,and(ii)we determine to pay a
127、dividend in the future:Tax calculation(1)Hypothetical pre-tax earnings(2)100%Tax on earnings at statutory rate of 25%(3)(25)%Net earnings available for distribution 75%75%Withholding tax at standard rate of 10%(4)(7.5)%Net distribution to Parent/Shareholders 67.5%Notes:(1)For purposes of this exampl
128、e,the tax calculation has been simplified.The hypothetical book pre-tax earnings amount,not considering timingdifferences,is assumed to equal taxable income in China.(2)Under the terms of VIE contractual arrangements,our WFOE may charge the VIEs for services provided to VIEs.These service fees shall
129、 berecognized as expenses of the VIEs,with a corresponding amount as service income by our WFOE and eliminate in consolidation.For income taxpurposes,our WFOE and the VIEs file income tax returns on a separate company basis.The service fees paid are recognized as a tax deduction bythe VIEs and as in
130、come by our WFOE and are tax neutral.(3)Certain of our subsidiaries and the VIEs qualifies for a 15%preferential income tax rate in China.However,such rate is subject to qualification,istemporary in nature,and may not be available in a future period when distributions are paid.For purposes of this h
131、ypothetical example,the tableabove reflects a maximum tax scenario under which the full statutory rate would be effective.(4)The PRC Enterprise Income Tax Law imposes a withholding income tax of 10%on dividends distributed by a foreign invested enterprise,or FIE,to its immediate holding company outs
132、ide of China.A lower withholding income tax rate of 5%is applied if the FIEs immediate holdingcompany is registered in Hong Kong or other jurisdictions that have a tax treaty arrangement with China,subject to a qualification review at thetime of the distribution.For purposes of this hypothetical exa
133、mple,the table above assumes a maximum tax scenario under which the fullwithholding tax would be applied.The table above has been prepared under the assumption that all profits of the VIEs will be distributed as fees to our WFOE under tax neutralcontractual arrangements.If,in the future,the accumula
134、ted earnings of the VIEs exceed the service fees paid to our WFOE(or if the current andcontemplated fee structure between the intercompany entities is determined to be non-substantive and disallowed by Chinese tax authorities),the VIEscould make a non-deductible transfer to our WFOE for the amounts
135、of the stranded cash in the VIEs.This would result in such transfer beingnon-deductible expenses for the VIEs but still taxable income for the WFOE.Such a transfer and the related tax burdens would reduce our after-taxincome to approximately 50.6%of the pre-tax income.Our management believes that th
136、ere is only a remote possibility that this scenario would happen.Financial Information Related to the VIEsThe following tables provide condensed consolidating schedules depicting the financial position,cash flows,and results of operations for YunjiInc.,its subsidiaries,the VIEs and their subsidiarie
137、s,and any eliminating adjustments and consolidated totals(in thousands of RMB)as of and for thedates presented.8Table of ContentsSelected Condensed Consolidating Statements of Comprehensive(Loss)/Income Information For the Year Ended December 31,2022 Yunji Inc.Primary Beneficiary of VIEs VIEs and th
138、eir subsidiaries Other subsidiaries Eliminating adjustments Consolidated Totals (RMB in thousands)Revenues Third-party revenues 349,259 804,855 1,154,114 Intra-Group revenues(3)229,562 179,546 (409,108)Total revenues 578,821 984,401 (409,108)1,154,114 Operating cost and expenses Third-party operatin
139、g cost and expenses (10,706)(2,825)(478,245)(762,504)(1,254,280)Intra-Group operating cost and expenses(3)(178,573)(230,535)409,108 Total operating cost and expenses (10,706)(2,825)(656,818)(993,039)409,108 (1,254,280)Other operating income,net 9,957 11,642 21,599 (Loss)/income from operations (10,7
140、06)(2,825)(68,040)3,004 (78,567)Other non-operating(loss)/income (12,387)(34,347)8,248 10,505 (27,981)Share of loss from investments in VIEs and subsidiaries (115,080)(91,001)(128,815)334,896 Loss before income tax expense,and equity in income of affiliates,net of tax (138,173)(128,173)(59,792)(115,
141、306)334,896 (106,548)Income tax expense (10,216)(14,575)(24,791)Equity in loss of affiliates,net of tax (642)(5,321)(1,088)(7,051)Net loss (138,173)(128,815)(75,329)(130,969)334,896 (138,390)Less:Net loss from operations attributable to non-controllinginterests shareholders (217)(217)Net loss attrib
142、utable to Yunji Inc.(138,173)(128,815)(75,112)(130,969)334,896 (138,173)For the Year Ended December 31,2021 Yunji Inc.Primary Beneficiary of VIEs VIEs and their subsidiaries Other subsidiaries Eliminating adjustments Consolidated Totals (RMB in thousands)Revenues Third-party revenues 513,299 1,642,0
143、62 2,155,361 Intra-Group revenues(3)501,168 122,315 (623,483)Total revenues 1,014,467 1,764,377 (623,483)2,155,361 Operating cost and expenses Third-party operating cost and expenses (19,684)(4,161)(906,559)(1,262,021)(2,192,425)Intra-Group operating cost and expenses(3)(22)(118,456)(505,005)623,483
144、 Total operating cost and expenses (19,684)(4,183)(1,025,015)(1,767,026)623,483 (2,192,425)Other operating income,net 27,953 26,463 54,416 (Loss)/income from operations (19,684)(4,183)17,405 23,814 17,352 Other non-operating(loss)/income (15,794)10,098 196,399 967 191,670 Share of income from invest
145、ments in VIEs and subsidiaries 167,444 183,097 181,454 (531,995)Income before income tax expense,and equity in income ofaffiliates,net of tax 131,966 189,012 213,804 206,235 (531,995)209,022 Income tax expense (1,441)(40,299)(18,761)(60,501)Equity in loss of affiliates,net of tax (6,117)(8,555)(1,56
146、5)(16,237)Net income 131,966 181,454 164,950 185,909 (531,995)132,284 Less:Net income from operations attributable to non-controllinginterests shareholders 59 259 318 Net income attributable to Yunji Inc.131,966 181,454 164,891 185,650 (531,995)131,966 9Table of Contents For the Year Ended December
147、31,2020 Yunji Inc.Primary Beneficiary of VIEs VIEs and their subsidiaries Other subsidiaries Eliminating adjustments Consolidated Totals (RMB in thousands)Revenues Third-party revenues 1,351,842 4,178,415 5,530,257 Intra-Group revenues(3)1,770,244 622,286 (2,392,530)Total revenues 3,122,086 4,800,70
148、1 -(2,392,530)5,530,257 Operating cost and expenses Third-party operating cost and expenses (18,016)(1,022)(2,566,806)(3,075,091)(5,660,935)Intra-Group operating cost and expenses(3)(2,478)(565,409)(1,824,643)2,392,530 Total Operating cost and expenses (18,016)(3,500)(3,132,215)(4,899,734)2,392,530
149、(5,660,935)Other operating income,net 18,316 14,902 33,218 (Loss)/income from operations (18,016)(3,500)8,187 (84,131)(97,460)Other non-operating income/(loss)3,105 (34,086)15,933 (64,224)(11,100)Share of loss from investments in VIEs and subsidiaries (131,435)(36,242)(13,264)180,941 (Loss)/income b
150、efore income tax expense,and equity in incomeof affiliates,net of tax (146,346)(5,656)24,120 (161,619)180,941 (108,560)Income tax expense (7,363)(13,989)(17,946)(39,298)Equity in loss of affiliates,net of tax (245)(3,305)(284)(3,834)Net(loss)/income (146,346)(13,264)6,826 (179,849)180,941 (151,692)L
151、ess:Net loss from operations attributable to non-controllinginterests shareholders (1,312)(4,034)(5,346)Net(loss)/income attributable to Yunji Inc.(146,346)(13,264)8,138 (175,815)180,941 (146,346)10Table of ContentsSelected Condensed Consolidating Balance Sheets Information As of December 31,2022 Yu
152、nji Inc.Primary Beneficiary of VIEs VIEs and their subsidiaries Other Subsidiaries Eliminating adjustments Consolidated Totals (RMB in thousands)Cash and cash equivalents 65,363 4,500 114,265 230,506 414,634 Restricted cash 42,109 42,109 Short-term investments 70,125 141,878 212,003 Inventories,net
153、2,635 52,016 54,651 Amounts due from the Group companies(1)161,124 638,705 719,655 1,845,206 (3,364,690)Prepaid expenses and other current assets 1,516 59,660 81,307 219,582 362,065 Other current assets 29,163 97,888 127,051 Total current assets 298,128 702,865 989,134 2,587,076 (3,364,690)1,212,513
154、 Investment in subsidiaries and VIEs(2)1,020,937 (49,134)268,813 (1,240,616)Long-term investments 39,817 938 214,450 159,120 414,325 Other non-current assets 11,046 10,963 243,564 265,573 Total non-current assets 1,060,754 (37,150)225,413 671,497 (1,240,616)679,898 Total assets 1,358,882 665,715 1,2
155、14,547 3,258,573 (4,605,306)1,892,411 Accounts payable 71,007 67,896 138,903 Deferred revenue 16,398 5,350 21,748 Incentive payables to members 207,331 207,331 Amounts due to the Group companies(1)393,425 900,852 2,070,413 (3,364,690)Other payable and accrued liabilities 3,852 8,477 91,469 41,729 14
156、5,527 Other liabilities 13,080 9,922 23,002 Total liabilities 3,852 401,902 1,300,137 2,195,310 (3,364,690)536,511 Total shareholders equity/(deficit)(2)1,355,030 263,813 (85,590)1,063,263 (1,240,616)1,355,900 Total liabilities and shareholders equity/(deficit)1,358,882 665,715 1,214,547 3,258,573 (
157、4,605,306)1,892,411 As of December 31,2021 Yunji Inc.Primary Beneficiary of VIEs VIEs and their subsidiaries Other Subsidiaries Eliminating adjustments Consolidated Totals (RMB in thousands)Cash and cash equivalents 8,678 8,923 70,599 479,004 567,204 Restricted cash 62,243 285 62,528 Short-term inve
158、stments 195,679 184,373 380,052 Inventories,net 1,694 82,806 84,500 Amounts due from the Group companies(1)110,729 763,134 520,888 1,281,468 (2,676,219)Prepaid expenses and other current assets 4,113 16,662 158,148 251,794 430,717 Other current assets 16,007 164,128 180,135 Total current assets 319,
159、199 788,719 829,579 2,443,858 (2,676,219)1,705,136 Investment in subsidiaries and VIEs(2)1,114,353 12,364 363,124 (1,489,841)Long-term investments 46,562 3,388 215,293 116,158 381,401 Other non-current assets 55,366 32,688 175,379 263,433 Total non-current assets 1,160,915 71,118 247,981 654,661 (1,
160、489,841)644,834 Total assets 1,480,114 859,837 1,077,560 3,098,519 (4,166,060)2,349,970 Accounts payable 121,347 133,492 254,839 Deferred revenue 21,058 84,694 105,752 Incentive payables to members 6,085 259,527 265,612 Amounts due to the Group companies(1)488,223 793,245 1,394,751 (2,676,219)Other
161、payable and accrued liabilities 2,218 8,490 156,509 35,569 202,786 Other liabilities 23,303 19,163 42,466 Total liabilities 2,218 496,713 1,121,547 1,927,196 (2,676,219)871,455 Total shareholders equity/(deficit)(2)1,477,896 363,124 (43,987)1,171,323 (1,489,841)1,478,515 Total liabilities,mezzanine
162、equity and shareholders(deficit)/equity 1,480,114 859,837 1,077,560 3,098,519 (4,166,060)2,349,970 11Table of Contents As of December 31,2020 Yunji Inc.Primary Beneficiary of VIEs VIEs and their subsidiaries Other Subsidiaries Eliminating adjustments Consolidated Totals (RMB in thousands)Cash and ca
163、sh equivalents 3,654 7,172 137,994 915,080 1,063,900 Restricted cash 125,844 125,844 Short-term investments 134,146 134,146 Inventories,net 3,500 131,745 135,245 Amounts due from the Group companies(1)422,980 721,329 3,909,067 4,625,824 (9,679,200)Prepaid expenses and other current assets 8,853 26,1
164、56 195,428 179,986 410,423 Other current assets 480 37,141 238,789 276,410 Total current assets 435,487 755,137 4,408,974 6,225,570 (9,679,200)2,145,968 Investment in subsidiaries and VIEs(2)879,587 (148,786)186,923 (917,724)Long-term investments 16,418 34,625 107,888 158,931 Other non-current asset
165、s 53,612 84,537 107,433 245,582 Total non-current assets 879,587 (78,756)119,162 402,244 (917,724)404,513 Total assets 1,315,074 676,38 4,528,136 6,627,814 (10,596,924)2,550,481 Accounts payable 296,640 204,909 501,549 Deferred revenue 35,412 15,539 50,951 Incentive payables to members 8,212 303,958
166、 312,170 Amounts due to the Group companies(1)482,871 4,142,953 5,053,376 (9,679,200)Other payable and accrued liabilities 3,067 6,587 228,321 42,611 280,586 Other liabilities 71,147 19,210 90,357 Total liabilities 3,067 489,458 4,782,685 5,639,603 (9,679,200)1,235,613 Total shareholders(deficit)/eq
167、uity(2)1,312,007 186,923 (254,549)988,211 (917,724)1,314,868 Total liabilities,mezzanine equity and shareholders(deficit)/equity 1,315,074 676,381 4,528,136 6,627,814 (10,596,924)2,550,481 12Table of ContentsSelected Condensed Consolidating Cash Flows Information For the Year Ended December 31,2022
168、Yunji Inc.Primary Beneficiary of VIEs VIEs and their subsidiaries Other Subsidiaries Eliminating adjustments Consolidated Total (RMB in thousands)Net cash(used in)/provided by transactions with external parties (9,075)1,202 651,432 (860,381)(216,822)Net cash(used in)/provided by transactions with in
169、tra-Groupentities (698,690)698,690 Net cash(used in)/provided by operating activities (9,075)1,202 (47,258)(161,691)(216,822)Net cash provided by/(used in)transactions with external parties 134,871 1,612 5,216 (49,134)92,565 Net cash provided by/(used in)transactions with intra-Groupentities 19,681
170、(7,577)60,000 (4,535)(67,569)Net cash generated from/(used in)investing activities 154,552 (5,965)65,216 (53,669)(67,569)92,565 Net cash(used in)/provided by transactions with external parties (94,752)197 (94,555)Net cash provided by/(used in)transactions with intra-Groupentities 285 4,250 (72,104)6
171、7,569 Net cash(used in)/generated from financing activities (94,752)285 4,447 (72,104)67,569 (94,555)Effect of exchange rate changes on cash and cash equivalents 5,960 55 1,127 38,681 45,823 Net increase/(decrease)in cash,cash equivalents and restrictedcash 56,685 (4,423)23,532 (248,783)(172,989)Cas
172、h,cash equivalents and restricted cash at beginning of the year 8,678 8,923 132,842 479,289 629,732 Cash,cash equivalents and restricted cash at end of the year 65,363 4,500 156,374 230,506 456,743 For the Year Ended December 31,2021 Yunji Inc.Primary Beneficiary of VIEs VIEs and their subsidiaries
173、Other Subsidiaries Eliminating adjustments Consolidated Total (RMB in thousands)Net cash(used in)/provided by transactions with external parties (23,226)23,972 539,673 (566,410)(25,991)Net cash(used in)/provided by transactions with intra-Group entities (497,190)497,190 Net cash(used in)/provided by
174、 operating activities (23,226)23,972 42,483 (69,220)(25,991)Net cash(used in)/provided by transactions with external parties (264,919)13,997 8,102 (270,975)(513,795)Net cash provided by/(used in)transactions with intra-Group entities 294,838 (41,556)(180,000)(5,352)(67,930)Net cash generated from/(u
175、sed in)investing activities 29,919 (27,559)(171,898)(276,327)(67,930)(513,795)Net cash provided by/(used in)transactions with external parties 788 (1,198)(53)(463)Net cash provided by/(used in)transactions with intra-Group entities 5,352 (73,282)67,930 Net cash generated from/(used in)financing acti
176、vities 788 5,352 (1,198)(73,335)67,930 (463)Effect of exchange rate changes on cash and cash equivalents (2,457)(14)(383)(16,909)(19,763)Net increase/(decrease)in cash,cash equivalents and restricted cash 5,024 1,751 (130,996)(435,791)(560,012)Cash,cash equivalents and restricted cash at beginning o
177、f the year 3,654 7,172 263,838 915,080 1,189,744 Cash,cash equivalents and restricted cash at end of the year 8,678 8,923 132,842 479,289 629,732 13Table of Contents For the Year Ended December 31,2020 Yunji Inc.Primary Beneficiary of VIEs VIEs and their subsidiaries Other Subsidiaries Eliminating a
178、djustments Consolidated Totals (RMB in thousands)Net cash(used in)/provided by transactions with external parties (29,257)29,329 2,426,562 (2,688,148)(261,514)Net cash(used in)/provided by transactions with intra-Group entities (2,365,128)2,365,128 Net cash(used in)/generated from operating activiti
179、es (29,257)29,329 61,434 (323,020)(261,514)Net cash provided by/(used in)transactions with external parties 97,666 (8,657)(18,347)480,353 551,015 Net cash(used in)/provided by transactions with intra-Group entities (91,294)(382,847)(361,307)835,448 Net cash generated from/(used in)investing activiti
180、es 6,372 (391,504)(18,347)119,046 835,448 551,015 Net cash(used in)/provided by transactions with external parties (16,176)2,300 (13,876)Net cash provided by/(used in)transactions with intra-Group entities 361,307 474,141 (835,448)Net cash(used in)/generated from financing activities (16,176)361,307
181、 2,300 474,141 (835,448)(13,876)Effect of exchange rate changes on cash and cash equivalents (163)(40)(1,161)(52,260)(53,624)Net(decrease)/increase in cash,cash equivalents and restricted cash (39,224)(908)44,226 217,907 222,001 Cash,cash equivalents and restricted cash at beginning of the year 42,8
182、78 8,080 219,612 697,173 967,743 Cash,cash equivalents and restricted cash at end of the year 3,654 7,172 263,838 915,080 1,189,744 14Table of Contents Notes:(1)Represents the elimination of intercompany balances among Yunji Inc.,the Primary Beneficiary of VIEs,the Other Subsidiaries,and the VIEs an
183、dtheir subsidiaries that we consolidate.(2)Represents the elimination of investments among Yunji Inc.,the Primary Beneficiary of VIEs,the Other Subsidiaries,and VIEs and theirsubsidiaries that we consolidate.(3)Represents the elimination of the intercompany sales of goods and rendering of services a
184、t the consolidation.A.Reserved B.Capitalization and IndebtednessNot applicable.C.Reasons for the Offer and Use of ProceedsNot applicable.D.Risk FactorsSummary of Risk FactorsInvesting in our ADSs involves significant risks.You should carefully consider all of the information in this annual report be
185、fore making aninvestment in our ADSs.Below is a summary of material risks we and the VIEs face,organized under relevant headings.These risks are discussed morefully in Item 3.Key InformationD.Risk Factors.Risks Related to Our Business and IndustryWe and the VIEs are subject to risks and uncertaintie
186、s related to our business and industry,including,but not limited to,the following:Our limited operating history makes it difficult to evaluate our business and prospects.We have experienced revenue declines in recentyears,and we cannot guarantee that we will be able to resume and maintain revenue gr
187、owth in the future.If we fail to maintain membership loyalty or sustain membership growth,or fail to maintain member relationships effectively and retainexisting members,our business and operating results may be materially and adversely affected.If we fail to anticipate user needs and provide produc
188、ts and services attractive to users,or fail to adapt our services or business model tochanging user needs,emerging industry standards or rapid technological evolution,or fail to provide products at a satisfactory quality toour users,our business may be materially and adversely affected.We will not b
189、e able to exert the same level of influence or control over members and service managers as we could if they were ouremployees,and we may be subject to significant costs and reputational harm in the event our members violate any laws or regulationsapplicable to our operations.Any harm to our Yunji b
190、rand or reputation may materially and adversely affect our business and results of operations.If our business model were found to be in violation of applicable laws and regulations,our business,financial condition and results ofoperations would be materially and adversely affected.Any change,disrupt
191、ion or discontinuity in the features and functions of major social networks in China could severely limit our ability tocontinue growing our member and user base,and our business may be materially and adversely affected.15Table of Contents Our and the VIEs business generates and processes a large am
192、ount of data,and we are required to comply with PRC and other applicablelaws relating to data privacy and cybersecurity.Many of these laws and regulations are subject to change and uncertain interpretation,andimproper use or disclosure of data could have a material and adverse effect on our business
193、 and prospects.We face risks related to natural disasters,health epidemics and other outbreaks,which could significantly disrupt our operations.We face intense competition.We may lose market share and users if we fail to compete effectively.If we are unable to successfully manage our relationships w
194、ith third-party service companies or third-party business process outsourcingcompanies(BPOs),we may lose service managers or customer service representatives,or fail to provide superior customer services,whichcould negatively affect our business and operations.Risks Related to Our Corporate Structur
195、eWe and the VIEs are also subject to risks and uncertainties related to our corporate structure,including,but not limited to,the following:Yunji Inc.is a Cayman Islands holding company with no equity ownership in the VIEs,and we conduct our operations in China primarilythrough(i)our PRC subsidiaries
196、 and(ii)the VIEs with which we have maintained contractual arrangements.Holders of our ADSs holdequity interest in Yunji Inc.,our Cayman Islands holding company,and do not have direct or indirect equity interest in the VIEs.If thePRC government finds that the agreements that establish the structure
197、for operating some of our business operations in China do notcomply with PRC regulations relating to the relevant industries,or if these regulations or the interpretation of existing regulations changein the future,we and the VIEs could be subject to severe penalties,or be forced to relinquish our i
198、nterest in those operations.Our holdingcompany in the Cayman Islands,the VIEs,and investors of Yunji face uncertainty about potential future actions by the PRC governmentthat could affect the enforceability of the contractual arrangements with the VIEs and,consequently,significantly affect the finan
199、cialperformance of the VIEs and our company as a whole.We rely on contractual arrangements with the VIEs and their respective shareholders for a large portion of our business operations,whichmay not be as effective as direct ownership.Any failure by the VIEs or their respective shareholders to perfo
200、rm their obligations under our contractual arrangements with them wouldhave a material and adverse effect on our business.The shareholders of the VIEs may have potential conflicts of interest with us,which may materially and adversely affect our business andfinancial condition.Risks Related to Doing
201、 Business in ChinaWe and the VIEs face risks and uncertainties related to doing business in China in general,including,but not limited to,the following:Changes in Chinas economic,political or social conditions or government policies could have a material adverse effect on our businessand operations.
202、Risks and uncertainties arising from the legal system in China,including risks and uncertainties regarding the enforcement of laws andquickly evolving rules and regulations in China,could result in a material adverse change in our operations and the value of our ADSs.Formore details,see“Item 3.Key I
203、nformationD.Risk FactorsRisks Related to Doing Business in ChinaUncertainties with respect tothe PRC legal system and changes in laws and regulations in China could adversely affect us”and“Item 3.Key InformationD.RiskFactorsRisks Related to Doing Business in ChinaWe and the VIEs may be adversely aff
204、ected by the complexity,uncertainties andchanges in PRC regulation of internet-related businesses and companies.”16Table of Contents The PRC governments significant authority in regulating our operations and its oversight and control over offerings conducted overseasby,and foreign investment in,Chin
205、a-based issuers could significantly limit or completely hinder our ability to offer or continue to offersecurities to investors.Implementation of industry-wide regulations in this nature may cause the value of such securities to significantlydecline.For more details,see“Item 3.Key InformationD.Risk
206、FactorsRisks Related to Doing Business in ChinaThe PRCgovernments significant oversight over our business operations could result in a material adverse change in our operations and the value ofour ADSs.”The approval and/or other requirements of the CSRC or other PRC governmental authorities may be r
207、equired in connection with anoffering under PRC rules,regulations or policies,and,if required,we cannot predict whether or how soon we will be able to obtain suchapproval or complete such other requirements.Any failure to obtain or delay in obtaining such approval for this offering,or a rescission o
208、fobtained approval,would subject us to sanctions imposed by the CSRC or other PRC government authorities.For more details,see“Item3.Key InformationD.Risk FactorsRisks Related to Doing Business in ChinaThe approval and/or other requirements of the CSRCor other PRC governmental authorities may be requ
209、ired in connection with an offering under PRC rules,regulations or policies,and,ifrequired,we cannot predict whether or how soon we will be able to obtain such approval or complete such other requirements.”Our ADSs may be prohibited from trading in the United States under the HFCAA in the future if
210、the PCAOB is unable to inspect or fullyinvestigate auditors located in mainland China and Hong Kong.The PCAOB had historically been unable to inspect our auditor in relationto their audit work performed for our financial statements and the inability of the PCAOB to conduct inspections of our auditor
211、 in the pasthas deprived our investors with the benefits of such inspections.The delisting of our ADSs,or the threat of their being delisted,maymaterially and adversely affect the value of your investment.For more details,see“Item 3.Key InformationD.Risk FactorsRisksRelated to Doing Business in Chin
212、aThe PCAOB had historically been unable to inspect our auditor in relation to their audit workperformed for our financial statements and the inability of the PCAOB to conduct inspections of our auditor in the past has deprived ourinvestors with the benefits of such inspections”and“Item 3.Key Informa
213、tionD.Risk FactorsRisks Related to Doing Business inChinaOur ADSs may be prohibited from trading in the United States under the HFCAA in the future if the PCAOB is unable to inspector investigate completely auditors located in mainland China and Hong Kong.The delisting of the ADSs,or the threat of t
214、heir beingdelisted,may materially and adversely affect the value of your investment.”Risks Related to our ADSsWe face risks and uncertainties related to our ADSs,including,but not limited to,the following:Our ADSs may be delisted from the Nasdaq Global Market as a result of our failure of meeting th
215、e Nasdaq Global Market continuedlisting requirements.The trading price of our ADSs may be volatile,which could result in substantial losses to you.The concentration of our share ownership among executive officers,directors,and principal shareholders and their affiliated entities willlikely limit you
216、r ability to influence corporate matters and could discourage others from pursuing any change of control transaction thatholders of our ordinary shares and ADSs may view as beneficial.It is likely that we will be classified as a passive foreign investment company,or PFIC,for U.S.federal income tax p
217、urposes for the taxableyear ended December 31,2022,and possibly for the current taxable year and future taxable years,which could result in adverse U.S.federal income tax consequences to U.S.holders of our ADSs or ordinary shares.17Table of ContentsRisks Related to Our Business and IndustryOur limit
218、ed operating history makes it difficult to evaluate our business and prospects.We have experienced revenue declines in recent years,andwe cannot guarantee that we will be able to resume and maintain revenue growth in the future.We commenced operations in 2015 and have a limited operating history.Our
219、 total revenues decreased from RMB5,530.3 million in 2020 toRMB2,155.4 million in 2021 and further to RMB1,154.1 million(US$167.3 million)in 2022.The decrease in total revenues in 2021 was primarily dueto decreases in revenues from sales of merchandise in each period as a result of continual increas
220、es in the proportion of our business contributed fromour marketplace business platform,which was launched in the first quarter of 2019,whereby third-party merchants can sell products on our platform andpay us commissions on their sales.The decrease in total revenues in 2022 was primarily due to the
221、negative impact of the COVID-19 on our operationsand the continued strategy to refine our product selection across all categories and optimize our selection of suppliers and merchants,causing near-termdecreases in sales.Revenues generated under the marketplace business are recognized on a net basis,
222、while revenues generated under our merchandisesales business are recognized on a gross basis.The decrease in total revenues in 2021 was primarily due to our strategy to refine our product selectionacross all categories and carefully curate products to implement our megahit product pool initiative fo
223、cusing on the development of private labels andexclusive products and our long-term growth strategy to focus on profitability,which lead to optimization of selection of suppliers and merchants duringthis refinement process,causing near-term decreases in both our marketplace business and merchandise
224、sales.Our historical performance may not be indicative of our future growth or financial results.We have experienced revenue declines in recent years,and we cannot guarantee that we will be able to resume and maintain revenue growth in the future.Our growth may slow down or become negative,andrevenu
225、es may continue to decline for a number of possible reasons,some of which are beyond our control,including decreasing consumer spending,increasing competition,declining growth of our overall market or industry,the emergence of alternative business models,changes in rules,regulations,government polic
226、ies or general economic conditions.It is difficult to evaluate our prospects,as we may not have sufficient experience in addressing therisks to which companies operating in rapidly evolving markets may be exposed.If our growth rate declines,investors perceptions of our business andprospects may be m
227、aterially and adversely affected and the market price of the ADSs could decline.You should consider our prospects in light of therisks and uncertainties that companies with a limited operating history may encounter.If we fail to maintain membership loyalty or sustain membership growth,or fail to mai
228、ntain member relationships effectively and retain existingmembers,our business and operating results may be materially and adversely affected.We are a membership-based social e-commerce platform and therefore membership loyalty and growth are essential to our business.Thecumulative number of our mem
229、bers was approximately 29.5 million as of December 31,2022.The growth of our business depends on our ability tomaintain and increase the number of members on our platform and improve the level of their engagement.Our membership system has experiencedvarious changes in the past few years.Currently,on
230、e can become a member of our platform by accepting invitation from existing members in the formof an invitation link or QR code whereby the invitee can register an account on the Yunji app or mini program,and continued membership eligibilitywill be contingent upon meeting a certain cumulative spendi
231、ng threshold or certain other requirements.See“Item 4.Information on the CompanyB.Business OverviewOur Member CommunityMembers”for more details of the previous changes in our membership system.Our recent change inmembership system may not be well received by our members and may negatively impact mem
232、bership loyalty and growth and result in a decline in thelevel of engagement of our members.Damage to our reputation or our failure to anticipate needs of and provide value-added services to our members,among other things,could also diminish membership loyalty and reduce activity of members on our p
233、latform,which could cause our revenue andoperating income to decline and negatively impact our profitability.18Table of ContentsOur membership growth depends on existing members to promote our products and invite new members through their social networks.Ourmembers may decide not to promote our prod
234、ucts or invite new members at any time.To increase our revenue,we must increase the number of,or levelof activity of,our members.However,we may not be able to accurately predict how the number and level of activity of members may fluctuate,becausewe outsource provision of member services to third-pa
235、rty service companies.We work with third-party service companies and enter into agreementswith them on an annual basis or for a longer term.These third-party service companies select service managers based on the standards we provide in ouragreements and they hire,train and compensate service manage
236、rs to provide training to our members.However,we cannot guarantee service managersselected by these third-party service companies will provide satisfactory performance.If the service managers fail to motivate our members or facilitatemembers product sales,we may lose our existing members and the lev
237、el of activity of members may reduce on our platform.Service managers mayvoluntarily terminate their contracts with third-party service companies at any time.The loss of service managers or the loss of a significant number ofmembers for any reason,could negatively impact our business operations and
238、impair our ability to attract new members.In addition,if our existing andnew business opportunities and incentives,products,services and other initiatives do not generate sufficient enthusiasm and economic incentive to retainour existing members or attract new members on a sustained basis,our operat
239、ing results could be adversely affected.As a result,in order to maintain ourbusiness growth in the future,we need to increase our retention of existing members and continue to successfully attract additional members.If we fail to anticipate user needs and provide products and services attractive to
240、users,or fail to adapt our services or business model to changinguser needs,emerging industry standards or rapid technological evolution,or fail to provide products at a satisfactory quality to our users,ourbusiness may be materially and adversely affected.The e-commerce market in which we operate a
241、nd user needs and preferences are constantly evolving.As a result,we must continuously respondto changes in the market and user demand and preferences to remain competitive,grow our business and maintain our market position.We intend tofurther diversify our product and service offerings to contribut
242、e to our revenue sources in the future.We launched our marketplace business in the firstquarter of 2019 whereby third-party merchants can sell products on our platform and pay us commissions on their sales.New products and services,newtypes of customers or new business models may involve risks and c
243、hallenges we do not currently face.We continually introduce new sales format on ourplatform to improve user engagement and our productivity.Any new initiatives may require us to devote significant financial and management resourcesand may not perform as well as expected.Furthermore,we may have diffi
244、culty in anticipating user demand and preferences,and the products offered onour platform may not be accepted by the market or be rendered obsolete or uneconomical.Therefore,any inability to adapt to these changes may resultin a failure to capture new members and other users or retain existing membe
245、rs and other users,the occurrence of which would materially and adverselyaffect our business,financial condition and results of operations.In addition,if we are unable to provide products to users at a satisfactory quality,in atimely manner,in sufficient quantities or at an acceptable cost,our busin
246、ess could be negatively impacted.We may also be subject to claims if our usersare not satisfied with the quality of the products or do not have satisfactory experiences in general.In addition,to remain competitive,we must continue to enhance and improve the responsiveness,functionality and features
247、of our platform.Theinternet and the e-commerce markets are characterized by rapid technological evolution,changes in user requirements and preferences,frequentintroductions of new products,features and services embodying new technologies and the emergence of new industry standards and practices,any
248、ofwhich could render our existing technologies and systems obsolete.Our success will depend,in part,on our ability to identify,develop and adapt to newtechnologies useful in our business,and respond to technological advances and emerging industry standards and practices,in particular with respect to
249、mobile internet,in a cost-effective and timely way.We cannot assure you that we will be successful in these efforts.We will not be able to exert the same level of influence or control over members and service managers as we could if they were our employees,andwe may be subject to significant costs a
250、nd reputational harm in the event our members violate any laws or regulations applicable to our operations.Members and service managers,most of whom are also our members,are not our employees and do not enter into any employment contracts withus.Accordingly,we are not in a position to provide the sa
251、me level of control over and oversight of members and service managers as we would if theywere our employees.However,our members play an important role in promoting our products and inviting new members to our platform,includingpromoting our products via live streaming sessions on our Yunji app,on o
252、ur Yunji Endorsement app and through our official account on other livestreaming platforms.Some members also interact frequently with the users in their social network regarding our products and platform.Therefore,suchusers may associate the members with us and hold us accountable for any misconduct
253、 by our members.Also,service managers provide services to ourmembers and communicate with them on a regular basis.The members they serve may view us as vicariously liable for any misconduct by servicemanagers.We may be subject to lawsuits or reputational harm if,for example,a member misrepresents th
254、e functionality or provides inaccurateinformation of our products through the members social network or via the live streaming sessions they host,or a member or service manager conductsany wrongdoings or otherwise violates applicable laws.While we have implemented policies and procedures designed to
255、 govern conduct of ourmembers to comply with the regulatory regime in China and protect our goodwill,including content control policies and live streaming standards,andthe third-party service companies have adopted policies to regulate the conduct of the service managers,there can be no assurance th
256、at members orservice managers will comply with the policies and procedures.Violations by members or service managers of applicable law or of the policies andprocedures could reflect negatively on our products and operations and harm our business reputation.While we have not experienced any significa
257、ntproblems affecting our products,operations or business reputation caused by violations by members or service managers of the policies and procedures,we cannot assure you that we will not face such problems in the future.19Table of ContentsAny harm to our Yunji brand or reputation may materially an
258、d adversely affect our business and results of operations.We believe that the recognition and reputation of our Yunji(云集)brand among our members,other users,suppliers,third-party merchants andother third-party service providers and partners have contributed significantly to the growth and success of
259、 our business.Maintaining and enhancing therecognition and reputation of our brand are critical to our business and competitiveness.Many factors,some of which are beyond our control,areimportant to maintaining and enhancing our brand and may negatively impact our brand if not properly managed.These
260、factors include our ability to:provide a superior shopping experience to our users;maintain and grow our member and user base and keep our community,members and other users highly engaged;maintain the popularity,attractiveness,diversity,quality and authenticity of our product offerings;maintain the
261、efficiency,reliability and quality of our fulfillment services to our users;maintain or improve users satisfaction with our after-sale services;increase brand awareness through marketing and brand promotion activities;and preserve our reputation and goodwill in the event of any negative publicity on
262、 customer service,product quality,price or authenticity,dataprivacy and security,our industry and other players within the industry or other issues affecting us or other social e-commerce ande-commerce businesses in China.Public perception that non-authentic,counterfeit or defective goods are sold o
263、n our platform or that we or third-party service providers do notprovide satisfactory customer service,even if factually incorrect or based on isolated incidents,could damage our reputation,diminish the value of ourbrand,undermine the trust and credibility we have established and have a negative imp
264、act on our ability to attract new users or retain our current users.If we are unable to maintain our reputation,enhance our brand recognition or increase positive awareness of our platform,products and services,it maybe difficult to maintain and grow our member and user base,and our business and gro
265、wth prospects may be materially and adversely affected.20Table of ContentsIf our business model were found to be in violation of applicable laws and regulations,our business,financial condition and results of operationswould be materially and adversely affected.In August 2005,the State Council promu
266、lgated the Regulations on the Prohibition of Pyramid Selling,which prohibits individuals and entities inChina from engaging in pyramid selling.See“Item 4.Information on the CompanyB.Business OverviewRegulationsRegulations Relating toPyramid Selling in the PRC.”In May 2017,we received a formal notice
267、 from the local Administration for Market Regulation in Hangzhou,which ruledthat our sales and marketing practice prior to February 2016 violated the Regulations on the Prohibition of Pyramid Selling and imposed a fine ofapproximately RMB9.6 million(US$1.4 million).Since the early stage of our opera
268、tions in 2015,the local governmental authorities in Hangzhou hadbeen in discussion with us on potential violation by our then-existing business model of the Regulations on the Prohibition of Pyramid Selling,and wehave adjusted our business practices since February 2016 to comply with the Regulations
269、 on the Prohibition of Pyramid Selling and other applicableregulations.We fully paid the fine in June 2017.In December 2018,we and Han Kun Law Offices,our PRC legal counsel,consulted with the competentgovernment authority in Hangzhou,the district branch of the State Administration for Market Regulat
270、ion,or the SAMR,having direct jurisdiction overour PRC entities that currently operate our membership-based social e-commerce platform,and the government authority verbally confirmed that theseentities have conducted their business operations lawfully and none of these entities are in violation of t
271、he Regulations on the Prohibition of PyramidSelling or any other applicable laws.Based on our discussion with the competent government authorities and the advice of Han Kun Law Offices,webelieve that our current business model is not in violation of applicable PRC laws and regulations,including the
272、Regulations on the Prohibition ofPyramid Selling.However,there is no assurance that the competent governmental authorities in China that we communicated with will not change theirviews,or the other relevant government authorities will share the same view as our PRC legal counsel,or they will find ou
273、r business model not inviolation of any applicable regulations,given the uncertainties in the interpretation and application of existing PRC laws,regulations and policiesrelating to our current business model,including,but not limited to,regulations regulating pyramid selling.Moreover,new laws,regul
274、ations or policiesmay also be promulgated in the future,and there is no assurance that our current business model will be in full compliance with the new laws,regulations or policies.If our business model were to be found in violation in the future,we will have to make adjustment to our business mod
275、el or ceasecertain of our business operations,and the relevant governmental authorities may confiscate any illegal gains and impose a fine,which would have amaterial and adverse impact on our business,financial condition and results of operations.Any change,disruption or discontinuity in the feature
276、s and functions of major social networks in China could severely limit our ability to continuegrowing our member and user base,and our business may be materially and adversely affected.Our success depends on our ability to attract and retain new members and other users and expand our member and user
277、 base.We leverage socialnetworks in China as a tool for member and user acquisition and engagement.For example,we leverage social networks,such as WeChat,QQ andWeibo,to enable members to share product information and their experiences with products on our platform to their friends,family and other s
278、ocialcontacts,who can purchase such products directly via the links shared by the members through social networks.A substantial portion of our memberand user traffic comes from such member recommendation through social networks.To the extent that we are banned from using some or all functionsof such
279、 social networks,or fail to leverage such social networks,our ability to attract or retain members and other users,and maintain an activecommunity may be severely harmed.If WeChat,QQ or Weibo changes its functions or support,such as charging fees for functions or support that iscurrently provided fo
280、r free,or stops offering its functions or support to us or discontinues its functions or support in general,we may not be able tolocate alternative platforms of similar scale to provide similar functions or support in a timely manner,or at all.Furthermore,we may fail to establish ormaintain relation
281、ships with additional social network operators to support the growth of our business on economically viable terms,or at all.Anyinterruption to or discontinuation of our relationships with major social network operators may severely and negatively impact our ability to continuegrowing our user base,a
282、nd any occurrence of the circumstances mentioned above may have a material adverse effect on our business,financialcondition and results of operations.Our and the VIEs business generates and processes a large amount of data,and we are required to comply with PRC and other applicable lawsrelating to
283、data privacy and cybersecurity.Many of these laws and regulations are subject to change and uncertain interpretation,and improper useor disclosure of data could have a material and adverse effect on our business and prospects.Our and the VIEs business generates and processes a large quantity of data
284、.We face risks inherent in handling and protecting large volume ofdata.In particular,we face a number of challenges relating to data from transactions and other activities on our platform,including:protecting the data in and hosted on our system,including against attacks on our system by outside par
285、ties or fraudulent behavior orimproper use by our employees;addressing concerns related to privacy and sharing,safety,security and other factors;and 21Table of Contents complying with applicable laws,rules and regulations relating to the collection,use,storage,transfer,disclosure and security of per
286、sonalinformation,including any requests from regulatory and government authorities relating to this data.In general,we expect that data security and data protection compliance will receive greater attention and focus from regulators,both domesticallyand globally,as well as attract continued or great
287、er public scrutiny and attention going forward,which could increase our compliance costs and subjectus to heightened risks and challenges associated with data security and protection.If we are unable to manage these risks,we could become subject topenalties,including fines,suspension of business and
288、 revocation of required licenses,and our reputation and results of operations could be materiallyand adversely affected.The PRC regulatory and enforcement regime with regard to data security and data protection is evolving and may be subject to differentinterpretations or significant changes.Moreove
289、r,different PRC regulatory bodies,including the Standing Committee of the NPC,the Ministry ofIndustry and Information Technology,or the MIIT,the CAC,the Ministry of Public Security of the PRC,or the MPS,and the SAMR,have enforceddata privacy and protections laws and regulations with varying standard
290、s and applications.See“Item 4.Information on the CompanyB.BusinessOverviewRegulationsRegulations Relating to Cyber Security,Data Security,National Security and Personal Information Protection.”The followingare examples of certain recent PRC regulatory activities in this area:Data Security In June 20
291、21,the Standing Committee of the NPC promulgated the Data Security Law,which took effect in September 2021.The DataSecurity Law,among other things,provides for security review procedure for data-related activities that may affect national security.InJuly 2021,the state council promulgated the Regula
292、tions on Protection of Critical Information Infrastructure,which became effective onSeptember 1,2021.Pursuant to this regulation,critical information infrastructure means key network facilities or information systems ofcritical industries or sectors,such as public communication and information servi
293、ce,energy,transportation,water conservation,finance,public services,e-government affairs and national defense science,the damage,malfunction or data leakage of which may endangernational security,peoples livelihoods and the public interest.In December 2021,the CAC,together with other authorities,joi
294、ntlypromulgated the Cybersecurity Review Measures,which became effective on February 15,2022 and replaces its predecessor regulation.Pursuant to the Cybersecurity Review Measures,critical information infrastructure operators that procure internet products and servicesmust be subject to the cybersecu
295、rity review if their activities affect or may affect national security.The Cybersecurity Review Measuresfurther stipulates that critical information infrastructure operators or network platform operators that hold personal information of over onemillion users shall apply with the Cybersecurity Revie
296、w Office for a cybersecurity review before any public offering at a foreign stockexchange.Based on an expert interpretation published on the CSRCs official website in connection with the implementation of theCybersecurity Review Measures,a CSRC official indicated that relevant operators that have be
297、en listed abroad before the implementationof the Cybersecurity Review Measures do not need to apply for the cybersecurity review;however,the secondary listing and the dualprimary listing of a listed company in foreign countries belong to newly launched“foreign listing”activities,and if it meets the
298、applicationrequirements,it shall take the initiative to apply for the cybersecurity review.As of the date of this annual report,no detailed rules orimplementation rules have been issued by any authority and we have not been informed that we are a critical information infrastructureoperator by any go
299、vernment authorities.Furthermore,the exact definition,scope or criteria of“critical information infrastructureoperators”,“network platform operators”and“users personal information”under the current regulatory regime remains unclear,and thePRC government authorities may have wide discretion in the in
300、terpretation and enforcement of the applicable laws.Therefore,it isuncertain whether we would be deemed to be a critical information infrastructure operator or network platform operator under PRC law.Ifwe are deemed to be a critical information infrastructure operator or network platform operator un
301、der the PRC cybersecurity laws andregulations,we may be subject to obligations in addition to what we have fulfilled under the PRC cybersecurity laws and regulations.22Table of Contents In November 2021,the CAC released the Regulations on the Network Data Security Management(Draft for Comments),or t
302、he DraftRegulations.The Draft Regulations provide that data processors refer to individuals or organizations that,during their data processingactivities such as data collection,storage,utilization,transmission,publication and deletion,have autonomy over the purpose and themanner of data processing.I
303、n accordance with the Draft Regulations,data processors shall apply for a cybersecurity review for certainactivities,including,among other things,(i)the listing abroad of data processors that process the personal information of more than onemillion users and(ii)any data processing activity that affe
304、cts or may affect national security.However,there have been no clarificationsfrom the relevant authorities as of the date of this annual report as to the standards for determining whether an activity is one that“affectsor may affect national security.”In addition,the Draft Regulations requires that
305、data processors that process“important data”or are listedoverseas must conduct an annual data security assessment by itself or commission a data security service provider to do so,and submit theassessment report of the preceding year to the municipal cybersecurity department by the end of January ea
306、ch year.As of the date of thisannual report,the Draft Regulations was released for public comment only,and their respective provisions and anticipated adoption oreffective date may be subject to change with substantial uncertainty.In July 2022,the CAC promulgated the Measures for the Security Assess
307、ment of Cross-border Data Transfer,which became effective onSeptember 1,2022.In accordance with such measures,data processors will be subject to security assessment conducted by the CAC priorto any cross-border transfer of data if the transfer involves(i)important data;(ii)personal information trans
308、ferred overseas by operators ofcritical information infrastructure or a data processor that has processed personal data of more than one million persons;(iii)personalinformation transferred overseas by a data processor which has already provided personal data of 100,000 persons or sensitive personal
309、data of 10,000 persons overseas since January 1 of the preceding year;or(iv)other circumstances as required by the CAC.In addition,anycross-border data transfer activities conducted in violation of the Measures for the Security Assessment of Cross-border Data Transferbefore the effectiveness of such
310、 measures are required to be rectified within 6 months of the effectiveness date thereof.Since thesemeasures are relatively new,there are still substantial uncertainties with respect to the interpretation and implementation of these measuresin practice and how they will affect our business operation
311、.In December 2022,the MIIT promulgated the Administrative Measures for Data Security in the Field of Industry and InformationTechnology(Trial),which came into effect on January 1,2023.Pursuant to these measures,data in the field of industry and informationtechnology shall include industrial data,tel
312、ecoms data,etc.,and data processors in the field of industry and information technology shallfurther implement data classification and hierarchical management and take necessary measures to ensure that data remains effectivelyprotected and being lawfully applied,and conduct data security risk monito
313、ring.These measures also provide the definitions of“core data”and“important data”in the field of industry and information technology.Personal Information and Privacy The Anti-monopoly Guidelines for the Platform Economy Sector published by the Anti-monopoly Committee of the State Council,effective o
314、n February 7,2021,prohibits collection of user information through coercive means by online platforms operators.In August 2021,the Standing Committee of the NPC promulgated the Personal Information Protection Law,which integrates the scatteredrules with respect to personal information rights and pri
315、vacy protection and took effect on November 1,2021.We update our privacypolicies from time to time to meet the latest regulatory requirements of PRC government authorities and adopt technical measures toprotect data and ensure cybersecurity in a systematic way.Nonetheless,the Personal Information Pr
316、otection Law elevates the protectionrequirements for personal information processing,and many specific requirements of this law remain to be clarified by the CAC,otherregulatory authorities,and courts in practice.We may be required to make further adjustments to our business practices to comply with
317、 thepersonal information protection laws and regulations.23Table of Contents On June 24,2022,the CAC promulgated the Administrative Provisions on Mobile Internet Application Information Services,whichbecame effective on August 1,2022.Pursuant to these provisions,the mobile internet applications prov
318、iders shall acquire relevantqualifications required by laws and regulations and implement the information security management responsibilities strictly and fulfill theirobligations,including,among others,adopting a real-name system,protection of users information,examination and management ofinforma
319、tion content,and shall comply with relevant provisions on the scope of necessary personal information when engaging in personalinformation processing activities.In addition,such providers shall not compel the user to agree to the processing of personal informationfor any reason and refuse the user t
320、o use its basic functions and services as the user does not agree to provide non-essential personalinformation.Many of the data-related legislations are relatively new and certain concepts thereunder remain subject to interpretation by the regulators.If anydata that we possess belongs to data catego
321、ries that are subject to heightened scrutiny,we may be required to adopt stricter measures for protection andmanagement of such data.The Cybersecurity Review Measures and the Draft Regulations remain unclear on whether the relevant requirements will beapplicable to companies that are already listed
322、in the United States,such as us.We cannot predict the impact of the Cybersecurity Review Measures andthe Draft Regulations,if any,at this stage,and we will closely monitor and assess any development in the rule-making process.If the CybersecurityReview Measures and the enacted version of the Draft R
323、egulations mandate clearance of cybersecurity review and other specific actions to be taken byissuers like us,we face uncertainties as to whether these additional procedures can be completed by us timely,or at all,which may subject us togovernment enforcement actions and investigations,fines,penalti
324、es,suspension of our non-compliant operations,or removal of our app from therelevant application stores,and materially and adversely affect our business and results of operations.As of the date of this annual report,we have notbeen involved in any formal investigations on cybersecurity review made b
325、y the CAC on such basis.While we take all reasonable measures to comply with applicable data privacy and protection laws and regulations,we cannot guarantee theeffectiveness of the measures undertaken by us and business partners,and such measures may still be determined as insufficient,improper,or e
326、ven asuser-privacy invasive,by the relevant authorities,which may result in penalties against us.The activities of third parties such as our customers andbusiness partners are beyond our control.If our business partners violate the PRC Cyber Security Law and other laws and regulations relating to th
327、eprotection of personal information,or fail to fully comply with the service agreements with us,or if any of our employees fail to comply with ourinternal control measures and misuse the information,we may be subject to penalties and other legal liabilities.Any failure or perceived failure tocomply
328、with all applicable data privacy and protection laws and regulations or to take prompt rectification actions as required by the enforcementauthorities,or any failure or perceived failure of our business partners to do so,or any failure or perceived failure of our employees to comply with ourinternal
329、 control measures,may result in negative publicity and legal proceedings or regulatory actions against us,and could damage our reputation,discourage current and potential users and customers from using our products or services and subject us to fines,damages and rectification,which couldhave a mater
330、ial adverse effect on our business and results of operations.In general,compliance with the existing PRC laws and regulations,as well as additional laws and regulations that PRC regulatory bodies mayenact in the future,related to data security and personal information protection,may be costly and re
331、sult in additional expenses to us,and subject us tonegative publicity,which could harm our reputation and business operations.There are also uncertainties with respect to how such laws and regulationswill be implemented and interpreted in practice.In addition,regulatory authorities around the world
332、have adopted or are considering a number of legislative and regulatory proposals concerningdata protection.These legislative and regulatory proposals,if adopted,and the uncertain interpretations and application thereof could,in addition to thepossibility of fines,result in an order requiring that we
333、 change our data practices and policies,which could have an adverse effect on our business andresults of operations.The European Union General Data Protection Regulation(“GDPR”),which came into effect on May 25,2018,includesoperational requirements for companies that receive or process personal data of residents of the European Economic Area.The GDPR establishes newrequirements applicable to the p