FinVolution Group [FINV] Filings

20-F 1 d587370d20f.htm FORM 20-F Form 20-F

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 20-F

☐	REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

☒	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2023

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☐	SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report

For the transition period from

Commission file number:

001-38269

FinVolution Group

(Exact name of Registrant as specified in its charter)

N/A

(Translation of Registrant’s name into English)

Cayman Islands

(Jurisdiction of incorporation or organization)

Building G1, No. 999 Dangui Road

Pudong New District, Shanghai 201203

The People’s Republic of China

(Address of principal executive offices)

Jiayuan Xu, Chief Financial Officer

Phone: +

86 21 8030 3200

Email: xujiayuan@xinye.com

Building G1, No. 999 Dangui Road

Pudong New District, Shanghai 201203

The People’s Republic of China

(Name, Telephone,

E-mail

and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act.


Title of each class	Trading Symbol	Name of each exchange on which registered
American depositary shares (one American depositary share representing five Class A ordinary shares, par value US$0.00001 per share)	FINV	New York Stock Exchange
Class A ordinary shares, par value US$0.00001 per share*		New York Stock Exchange

*	Not for trading, but only in connection with the listing on the New York Stock Exchange of American depositary shares.

Securities registered or to be registered pursuant to Section 12(g) of the Act.

Not Applicable

(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

Not Applicable

(Title of Class)

As of December 31, 2023, there were 1,326,394,939 ordinary shares outstanding, consisting of 757,194,939

Class A ordinary shares and

569,200,000 Class B ordinary shares, both with a par value of US$0.00001 per share.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes ☐ No ☒

Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of

Regulation S-T

(§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a

non-accelerated

filer or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in

Rule 12b-2

of the Exchange Act. (Check one):


Large accelerated filer	☒	Accelerated 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 elected not to use the extended transition period for complying with any new or revised financial accounting standards † provided pursuant to Section 13(a) of the Exchange Act. ☐

†	The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s 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 filing:



U.S. GAAP ☒	International Financial Reporting Standards as issued		Other ☐
	by the International Accounting Standard Board	☐

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. Item 17 ☐ Item 18 ☐

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in

Rule 12b-2 of

the Exchange Act).

Yes ☐ No ☒

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☐ No ☐

TABLE OF CONTENTS


INTRODUCTION		1
FORWARD-LOOKING STATEMENTS		2
PART I		3
ITEM 1.	IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS	3
ITEM 2.	OFFER STATISTICS AND EXPECTED TIMETABLE	3
ITEM 3.	KEY INFORMATION	3
ITEM 4.	INFORMATION ON THE COMPANY	69
ITEM 4A.	UNRESOLVED STAFF COMMENTS	106
ITEM 5.	OPERATING AND FINANCIAL REVIEW AND PROSPECTS	106
ITEM 6.	DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES	124
ITEM 7.	MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS	134
ITEM 8.	FINANCIAL INFORMATION	134
ITEM 9.	THE OFFER AND LISTING	135
ITEM 10.	ADDITIONAL INFORMATION	136
ITEM 11.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	148
ITEM 12.	DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES	148
PART II		150
ITEM 13.	DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES	150
ITEM 14.	MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS	150
ITEM 15.	CONTROLS AND PROCEDURES	150
ITEM 16A.	AUDIT COMMITTEE FINANCIAL EXPERT	151
ITEM 16B.	CODE OF ETHICS	151
ITEM 16C.	PRINCIPAL ACCOUNTANT FEES AND SERVICES	151
ITEM 16D.	EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES	152
ITEM 16E.	PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS	152
ITEM 16F.	CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT	153
ITEM 16G.	CORPORATE GOVERNANCE	153
ITEM 16H.	MINE SAFETY DISCLOSURE	154
ITEM 16I.	DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS	154
ITEM 16J.	INSIDER TRADING POLICIES	154
ITEM 16K.	CYBERSECURITY	154
PART III		155
ITEM 17.	FINANCIAL STATEMENTS	155
ITEM 18.	FINANCIAL STATEMENTS	155
ITEM 19.	EXHIBITS	155
SIGNATURES		159

INTRODUCTION

Unless otherwise indicated or the context otherwise requires in this annual report on Form 20-F:

•

“ADSs” refer to our American depositary shares, each of which represents five Class A ordinary shares;

•

“China” or the “PRC” refers to the People’s Republic of China, excluding, for the purposes of this annual report only, Hong Kong, Macau and Taiwan;

•

“outstanding loan balance” as of a given date refers to, in the case of the China market, the balance of outstanding loans facilitated on our platform in China excluding loans delinquent for more than 180 days from such date, and in the case of the overseas markets, the balance of outstanding loans facilitated on our platforms in the overseas markets excluding loans delinquent for more than 30 days from such date;

•

“ordinary shares” refer to our Class A and Class B ordinary shares, par value US$0.00001 per share;

•

“overseas markets” refer to our markets outside China;

•

“RMB” and “Renminbi” refer to the legal currency of China;

•

“SEC” refers to the U.S. Securities and Exchange Commission;

•

“US$,” “U.S. dollars,” “$,” and “dollars” refer to the legal currency of the United States;

•

“we,” “us,” “our company,” “our” and “FinVolution” refer to FinVolution Group, our Cayman Islands holding company, its direct and indirect subsidiaries. Our operations in China are primarily through (i) our PRC subsidiaries, (ii) the consolidated variable interest entities with which we have maintained contractual arrangements, including Beijing Paipairongxin Investment Consulting Co., Ltd., Shanghai Zihe Information Technology Group Co., Ltd., and Shanghai Ledao Technology Co., Ltd., and (iii) the subsidiaries of the consolidated variable interest entities. The consolidated variable interest entities are PRC companies conducting operations in China, and their financial results have been consolidated into our consolidated financial statements in accordance with U.S. GAAP for accounting purposes. Investors are purchasing an interest in FinVolution Group, a Cayman Islands holding company with no operations of its own. FinVolution Group does not have any equity ownership in the consolidated variable interest entities; and

•

“WFOEs” refer to Shanghai Guangjian Information Technology Co., Ltd. and Shanghai Manyin Information Technology Co., Ltd., our wholly owned subsidiaries in China.

Our reporting currency is the Renminbi because the overwhelming majority 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. Unless otherwise noted, all translations from Renminbi to U.S. dollars and from U.S. dollars to Renminbi in this annual report were made at RMB7.0999 to US$1.00, the noon buying rate on December 29, 2023 set forth in the H.10 statistical release of the U.S. Federal Reserve Board. We make no representation that any Renminbi or U.S. dollar amounts could have been, or could be, converted into U.S. dollars or Renminbi, as the case may be, at any particular rate, the rates stated below, or at all. The PRC government imposes control over its foreign currency reserves in part through direct regulation of the conversion of Renminbi into foreign exchange and through restrictions on foreign trade. On April 19, 2024, the noon buying rate set forth in the H.10 statistical release of the Federal Reserve Board was RMB7.2403 to US$1.00.

FORWARD-LOOKING STATEMENTS

This annual report on Form 20-F contains forward-looking statements that reflect our current expectations and views of future events. Known and unknown risks, uncertainties and other factors, including those listed under “Item 3. Key Information—D. Risk Factors,” may cause our actual results, performance or achievements to be materially different from those expressed or implied by the forward-looking statements. These statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigations Reform Act of 1995.

You can identify some of these forward-looking statements by words or phrases such as “may,” “will,” “expect,” “anticipate,” “aim,” “estimate,” “intend,” “plan,” “believe,” “is/are likely to,” “potential,” “continue” or other similar expressions. We have based these forward-looking statements largely on our current expectations and projections about future events that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements include statements relating to:

•

our mission and strategies;

•

our future business development, financial condition and results of operations;

•

the expected growth of the online consumer finance platform market;

•

our expectations regarding demand for and market acceptance of our products and services;

•

our expectations regarding our relationships with institutional funding partners and borrowers;

•

competition in our industry;

•

general economic and business condition in the markets where we have operations; and

•

government policies and regulations relating to our industry.

You should read this annual report and the documents that we refer to in this annual report with the understanding that our actual future results may be materially different from and worse than what we expect. Other sections of this annual report include additional factors which could adversely impact our business and financial performance. Moreover, we operate in an evolving environment. New risk factors and uncertainties emerge from time to time and it is not possible for our management to predict all risk factors and uncertainties, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. We qualify all of our forward-looking statements by these cautionary statements.

PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not applicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3. KEY INFORMATION

Our Holding Company Structure and Contractual Arrangements with the Consolidated Variable Interest Entities

The following diagram illustrates our corporate structure as of the date of this annual report, including our principal subsidiaries and our principal consolidated variable interest entities and their principal subsidiaries.

LOGO

Notes:

(1)

Beijing Paipairongxin currently has four shareholders: Jun Zhang, our co-founder and director, Tiezheng Li, our co-founder, vice chairman and chief executive officer, Honghui Hu, our co-founder and director, and Shaofeng Gu, our co-founder, chairman and chief innovation officer, each holding 13.22%, 4.81%, 12.85%, and 69.12% of Beijing Paipairongxin’s equity interests, respectively.

(2)

Shanghai Zihe currently has four shareholders: Jun Zhang, our co-founder and director, Tiezheng Li, our co-founder, vice chairman and chief executive officer, Honghui Hu, our co-founder and director, Shaofeng Gu, our co-founder, chairman and chief innovation officer, each holding 25% of Shanghai Zihe’s equity interests, respectively.

(3)	Shanghai Ledao currently has two shareholders: Lizhong Chen, a family relative of Tiezheng Li, and Yejun Jiang, a family relative of Honghui Hu, each holding 50% of Shanghai Ledao’s equity interests, respectively.

(4)	The remaining 20% equity interest is held by an unrelated third party.

(5)	The remaining 51% equity interest is held by our company through different intermediate entities.

FinVolution Group is not an operating company in China but a Cayman Islands holding company with no equity ownership in the consolidated variable interest entities. Our operations in China are primarily through (i) our PRC subsidiaries, (ii) the consolidated variable interest entities with which we have maintained contractual arrangements, and (iii) the subsidiaries of the consolidated variable interest entities. PRC laws and regulations restrict and impose conditions on foreign investment in value-added telecommunications services business, such as the internet content provision services and online data processing and transaction processing services. Accordingly, we operate these businesses in China through the consolidated variable interest entities and their respective subsidiaries, and rely on contractual arrangements among our PRC subsidiaries, the consolidated variable interest entities and their respective shareholders to direct the activities of operation of the consolidated variable interest entities and their respective subsidiaries. This structure provides investors with exposure to foreign investment in China-based companies where PRC laws and regulations prohibit or restrict direct foreign investment in operating companies in certain sectors. Revenues contributed by the consolidated variable interest entities and their respective subsidiaries accounted for 88.0%, 83.9% and 78.6% of our total revenues for 2021, 2022 and 2023, respectively. As used in this annual report, “we,” “us,” “our company” and “our” refer to FinVolution Group, its subsidiaries, and, in the context of describing our operations in China and consolidated financial information, the consolidated variable interest entities and their respective subsidiaries in China, including but not limited to (i) Beijing Paipairongxin Investment Consulting Co., Ltd., or Beijing Paipairongxin, which was established in June 2012; (ii) Shanghai PPDai Financial Information Service Co., Ltd., or Shanghai PPDai, a subsidiary of Beijing Paipairongxin, which was established in January 2011 and operates our ppdai.com website and PPDai mobile application; (iii) Hefei PPDai Information Technology Co., Ltd., or Hefei PPDai, a subsidiary of Shanghai PPDai, which was established in December 2016 and holds the value-added telecommunication business operation license for operation of call center services; (iv) Shanghai Erxu Information Technology Co., Ltd., or Shanghai Erxu, a subsidiary of Shanghai Zihe, which was established in April 2018 and primarily engages in the business of introducing borrowers to institutional funding partners to match transactions; and (v) Shanghai Ledao Technology Co., Ltd., or Shanghai Ledao, which was established in January 2019 and currently does not engage in any business operations. The consolidated variable interest entities are PRC companies conducting operations in China, and their financial results have been consolidated into our consolidated financial statements under U.S. GAAP for accounting purposes. Holders of our ADSs hold equity interest in FinVolution Group, our Cayman Islands holding company, and do not and may never have direct or indirect equity interest in the consolidated variable interest entities and their subsidiaries.

A series of contractual agreements, including loan agreements, business operation agreement, power of attorney, equity pledge agreement, exclusive technology consulting and service agreement and call option agreement, have been entered into by and among our subsidiaries, the consolidated variable interest entities and their respective shareholders. Terms contained in each set of contractual arrangements with the consolidated variable interest entities and their respective shareholders are substantially similar. The contractual arrangements enable us to direct the activities of operation that most significantly impact the economic performance of the consolidated variable interest entities and provide us with economic benefits of the consolidated variable interest entities and as such we are the primary beneficiary of these companies, and we have consolidated the financial results of these companies in our consolidated financial statements. For more details of these contractual arrangements, see “Item 4. Information on the Company—C. Organizational Structure—Contractual Arrangements.”

However, the contractual arrangements may not be as effective as equity ownership in providing us with control over the consolidated variable interest entities and we may incur substantial costs to enforce the terms of the arrangements. In addition, these agreements have not been tested in China courts. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Corporate Structure—We rely on contractual arrangements with the consolidated variable interest entities for a significant portion of our business operations, and such contractual arrangements may not be as effective as equity ownership in providing operational control” and “—The shareholders of the consolidated variable interest entities may have potential conflicts of interest with us, which may materially and adversely affect our business and financial condition.”

There are also substantial uncertainties regarding the interpretation and application of current and future PRC laws, regulations and rules regarding the status of the rights of our Cayman Islands holding company with respect to its contractual arrangements with the consolidated variable interest entities and their shareholders. It is uncertain whether any new PRC laws or regulations relating to consolidated variable interest entity structures will be adopted or if adopted, what they would provide. If we or any of the consolidated variable interest entities is found to be in violation of any existing or future PRC laws or regulations, or fail to obtain or maintain any of the required permits or approvals, the PRC regulatory authorities would have broad discretion to take action in dealing with such violations or failures. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Corporate Structure—If the PRC government deems that the contractual arrangements regarding the consolidated variable interest entities do not comply with PRC regulatory restrictions on foreign investment in the relevant industries, or if these regulations or the interpretation of existing regulations change in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations.”

Our corporate structure is subject to risks associated with our contractual arrangements with the consolidated variable interest entities. If the PRC government deems that our contractual arrangements with the consolidated variable interest entities do not comply with PRC regulatory restrictions on foreign investment in the relevant industries, or if these regulations or the interpretation of existing regulations change or are interpreted differently in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations. Our holding company, our PRC subsidiaries, the consolidated variable interest entities and their respective subsidiaries, and investors of our company face uncertainty about potential future actions by the PRC government that could affect the enforceability of the contractual arrangements with the consolidated variable interest entities and, consequently, significantly affect the financial performance of the consolidated variable interest entities and our company as a whole. The PRC regulatory authorities could disallow the contractual arrangements structure, which would likely result in a material change in our operations and cause the value of our securities to significantly decline or become worthless. For a detailed description of the risks associated with our corporate structure, please refer to risks disclosed under “Item 3. Key Information—D. Risk Factors—Risks Related to Our Corporate Structure.”

We face various legal and operational risks and uncertainties related to doing business in China. The overwhelming majority of our business operations are in China, and we are subject to complex and evolving PRC laws and regulations. For example, we face risks associated with regulatory approvals on offshore offerings and oversight on cybersecurity and data privacy, which may impact our ability to conduct certain businesses, accept foreign investments, or list on a United States or other foreign exchange. These risks could result in a material adverse change in our operations and the value of our ADSs, significantly limit or completely hinder our ability to continue to offer securities to investors, or cause the value of such securities to significantly decline or become worthless. For a detailed description of risks related to doing business in China, please refer to risks disclosed under “Item 3.D. Key Information—Risk Factors—Risks Related to Doing Business in China.”

PRC government’s significant authority in regulating our operations and its oversight and control over offerings conducted overseas by, and foreign 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 security related regulations, in this nature may cause the value of such securities to significantly decline. For more details, see “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—The PRC government’s significant oversight and discretion over our business operation could result in a material adverse change in our operations and the value of our ADSs.”

Risks and uncertainties arising from the legal system in China, including risks and uncertainties regarding the enforcement of laws and quickly evolving rules and regulations in China, could result in a material adverse change in our operations and the value of our ADSs. For more details, see “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—Uncertainties in the interpretation and enforcement of PRC laws and regulations could limit the legal protections available to us” and “—We may be adversely affected by the complexity, uncertainties and changes in PRC regulation of internet-related businesses and companies, and any lack of requisite approvals, licenses or permits applicable to our business may have a material adverse effect on our business and results of operations.”

The Holding Foreign Companies Accountable Act

Pursuant to the Holding Foreign Companies Accountable Act, or the HFCA Act, if 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 Company Accounting Oversight Board, or the PCAOB, for two consecutive years, the SEC will prohibit our shares or the ADSs from being traded on a national securities exchange or in the over-the-counter trading market in the United States. On December 16, 2021, the PCAOB issued a report to notify the SEC of its determination that the PCAOB was unable to inspect or investigate completely registered public accounting firms headquartered in mainland China and Hong Kong, including our auditor.

In May 2022, the SEC conclusively listed us as a Commission-Identified Issuer under the HFCA Act following the filing of this annual report on Form 20-F for the fiscal year ended December 31, 2021. On December 15, 2022, the PCAOB issued a report that vacated its December 16, 2021 determination and removed mainland China and Hong Kong from the list of jurisdictions where it is unable to inspect or investigate completely registered public accounting firms. We were therefore not identified as a Commission-Identified Issuer under the HFCA Act after we filed our annual report on Form 20-F for the fiscal year ended December 31, 2022.

Each year, the PCAOB will determine whether it can inspect and investigate completely audit firms in mainland China and Hong Kong, among other jurisdictions. As of the date of this annual report, the PCAOB has not issued any new determination that it is unable to inspect or investigate completely registered public accounting firms headquartered in any jurisdiction. If PCAOB determines in the future that it no longer has full access to inspect and investigate completely accounting firms in mainland China and Hong Kong and we continue to use an accounting firm headquartered in one of these jurisdictions to issue an audit report on our financial statements filed with the SEC, we would be identified as a Commission-Identified Issuer following the filing of the annual report on Form 20-F for the relevant fiscal year. There can be no assurance that we would not be identified as a Commission-Identified Issuer for any future fiscal year, and if we were so identified for two consecutive years, we would become subject to the prohibition on trading under the HFCA Act. See “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—The PCAOB had historically been unable to inspect our auditor in relation to their audit work performed for our financial statements and the inability of the PCAOB to conduct inspections of our auditor in the past has deprived our investors with the benefits of such inspections” and “—Our ADSs may be prohibited from trading in the United States under the HFCA Act in the future if the PCAOB is unable to inspect or investigate completely auditors located in China. The delisting of the ADSs, or the threat of their being delisted, may materially and adversely affect the value of your investment.”

Permissions Required from the PRC Authorities for Our Operations

Our operations in China are governed by PRC laws and regulations. As of the date of this annual report, our PRC subsidiaries and the consolidated variable interest entities and their respective subsidiaries have obtained the requisite licenses and permits from the PRC government authorities that are material for the business operations of our holding company and the consolidated variable interest entities in China, except that Shanghai PPDai has not obtained any value-added telecommunication business operation license. Due to the lack of regulatory authorities’ final interpretation of the applicable laws, there still exists uncertainties on which category of value-added telecommunication business operation license that may be applicable to Shanghai PPDai as the operator of our ppdai.com website and PPDai mobile application, and therefore Shanghai PPDai has not obtained any value-added telecommunication business operation license. We cannot rule out the possibility that Shanghai PPDai may be deemed by certain regulatory authorities as operating our ppdai.com website and PPDai mobile application without an appropriate value-added telecommunication business operation license, and we may be subject to regulatory penalties, including, but not limited to, rectification orders and warnings, fines, confiscation of illegal gains, and suspension or termination of operating of our website and mobile application.

In addition, given the rapid evolving of the online consumer finance industry and the uncertainties of interpretation and implementation of applicable laws and regulations and the enforcement practice by government authorities, we may be required to obtain additional licenses, permits, filings or approvals for the functions and services of our platforms in the future. For example, when facilitating the connection of borrowers to our institutional funding partners to match transactions, Shanghai Erxu also provides preliminary credit assessment services to these institutional funding partners for the referred borrowers. If regulatory authorities categorize these services as credit reference business or information provision activities, Shanghai Erxu may be requested to obtain a license for individual credit reference business, or alternatively, engage in collaborations with licensed credit reference agencies and submit the related cooperation agreements with the People’s Bank of China or its provincial branches. If we cannot obtain the regulatory approval or complete the filing in a timely manner, we may be deemed as violating the laws and regulations relating to credit reference services and subject to regulatory penalties, including cessation of business operations, confiscation of illegal gains, fines from RMB50,000 to RMB500,000, and even criminal liability. If we, our subsidiaries, the consolidated variable interest entities or their subsidiaries do not receive or maintain any necessary permissions or approvals from PRC authorities to operate business or offer securities, or if we are required to obtain additional permissions or approvals in the future due to changes of laws, regulations or interpretations, we cannot assure you that we will be able to obtain the necessary permissions or approvals in a timely manner, or at all. Any such circumstance could subject us to penalties, including fines, suspension of business and revocation of required licenses, significantly limit or completely hinder our ability to continue to offer securities to investors, and cause the value of such securities to significantly decline or become worthless. For more detailed information, see “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business—The laws and regulations governing online consumer finance industry in China are developing and evolving and subject to changes. If our business practices are deemed to violate any existing and future applicable laws, regulations or requirements of local regulatory authorities, our business, financial condition and results of operations would be materially and adversely affected.”

Furthermore, as advised by Hui Ye Law Firm, our PRC counsel, in connection with our historical issuance of securities to foreign investors, under current PRC laws, regulations and regulatory rules, as of the date of this annual report, we, our PRC subsidiaries and the consolidated variable interest entities, (i) are not required to obtain permissions from the China Securities Regulatory Commission, or the CSRC, (ii) are not required to go through cybersecurity review by the Cyberspace Administration of China, and (iii) have not received or were denied such requisite permissions by any PRC authority. However, if the PRC governmental authorities determine that our business may affect national security, they may initiate cybersecurity review against us. For more detailed information, see “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business—Any failure to comply with existing or future laws and regulations related to data protection, data security, cybersecurity or personal information protection could lead to liabilities, administrative penalties or other regulatory actions, which could negatively affect our operating results and business.”

The PRC government has promulgated certain regulations and rules to exert more oversight and control over offerings that are conducted overseas or foreign investment in China-based issuers. On February 17, 2023, the CSRC published the Trial Administrative Measures on the Overseas Issuance and Listing of Securities by Domestic Companies and five supporting guidelines, which are collectively known as the CSRC Filing Measures, effective on March 31, 2023. Pursuant to the CSRC Filing Measures, domestic companies in the PRC that directly or indirectly offer or list their securities in an overseas market are required to file with the CSRC. In addition, an overseas listed company must also submit the filing with respect to its follow-on offerings, issuance of convertible corporate bonds and exchangeable bonds, and other equivalent offering activities, within a specific time frame requested under the CSRC Filing Measures. Therefore, we will be required to file with the CSRC for our overseas offering of equity and equity linked securities in the future within the applicable scope of the CSRC Filing Measures. For more detailed information, see “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—The approval of and filing with the CSRC or other PRC government authorities may be required in connection with our offshore offerings under PRC law, and, if required, we cannot predict whether or for how long we will be able to obtain such approval or complete such filing.”

Enforceability of Civil Liabilities

We are incorporated in the Cayman Islands to take advantage of certain benefits associated with being a Cayman Islands exempted company, such as:

•

political and economic stability;

•

an effective judicial system;

•

a favorable tax system;

•

the absence of exchange control or currency restrictions; and

•

the availability of professional and support services.

However, certain disadvantages accompany incorporation in the Cayman Islands. These disadvantages include, but are not limited to:

•

the Cayman Islands has a less developed body of securities laws as compared to the United States and these securities laws provide significantly less protection to investors as compared to the United States; and

•

with respect to Cayman Islands companies, plaintiffs may face special obstacles, including but not limited to those relating to jurisdiction and standing, in attempting to assert derivative claims in state or federal courts of the United States.

Our memorandum and articles of association does not contain provisions requiring that disputes, including those arising under the securities laws of the United States, between us, our officers, directors and shareholders, be arbitrated.

The overwhelming majority of our operations are conducted in China, and a significant portion of our assets are located in China. A majority of our directors and executive officers are nationals or residents of jurisdictions other than the United States and a significant portion of their assets are located outside the United States. As a result, it may be difficult for a shareholder to effect service of process within the United States upon these individuals, or to bring an action against us or against these individuals in the United States, in the event that you believe that your rights have been infringed under the securities laws of the United States or any state in the United States.

Maples and Calder (Hong Kong) LLP, our legal counsel as to Cayman Islands law, and Hui Ye Law Firm, our legal counsel as to PRC law, have advised us, respectively, that there is uncertainty as to whether the courts of the Cayman Islands and China, respectively, would:

•

recognize or enforce judgments of United States courts obtained against us or our directors or officers predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States; or

•

entertain original actions brought in each respective jurisdiction against us or our directors or officers predicated upon the securities laws of the United States or any state in the United States.

We have been advised by our Cayman Islands legal counsel, Maples and Calder (Hong Kong) LLP, that the courts of the Cayman Islands are unlikely (i) to recognize or enforce against us judgments of courts of the United States predicated upon the civil liability provisions of the securities laws of the United States or any State; and (ii) in original actions brought in the Cayman Islands, to impose liabilities against us predicated upon the civil liability provisions of the securities laws of the United States or any State, so far as the liabilities imposed by those provisions are penal in nature. In those circumstances, although there is no statutory enforcement in the Cayman Islands of judgments obtained in the United States, the courts of the Cayman Islands will recognize and enforce a foreign money judgment of a foreign court of competent jurisdiction without retrial on the merits based on the principle that a judgment of a competent foreign court imposes upon the judgment debtor an obligation to pay the sum for which judgment has been given provided certain conditions are met. For such a foreign judgment to be enforced in the Cayman Islands, such judgment must be final and conclusive and for a liquidated sum, and may not be in respect of taxes or a fine or penalty, inconsistent with a Cayman Islands judgment in respect of the same matter, impeachable on the grounds of fraud or obtained in a manner, and or be of a kind the enforcement of which is, contrary to natural justice or the public policy of the Cayman Islands (awards of punitive or multiple damages may well be held to be contrary to public policy). A Cayman Islands Court may stay enforcement proceedings if concurrent proceedings are being brought elsewhere.

Hui Ye Law Firm has further advised us that the recognition and enforcement of foreign judgments are provided for under the PRC Civil Procedures Law. PRC courts may recognize and enforce foreign judgments in accordance with the requirements of the PRC Civil Procedures Law based either on treaties between China and the country where the judgment is made or on principles of reciprocity between jurisdictions. China does not have any treaties or other form of reciprocity with the United States or the Cayman Islands that provide for the reciprocal recognition and enforcement of foreign judgments. In addition, according to the PRC Civil Procedures Law, courts in the PRC will not enforce a foreign judgment against us or our directors and officers if they decide that the judgment violates the basic principles of PRC law or national sovereignty, security or public interest. As a result, it is uncertain whether and on what basis a PRC court would enforce a judgment rendered by a court in the United States or the Cayman Islands. Under the PRC Civil Procedures Law, foreign shareholders may originate actions based on PRC law against us in the PRC, if they can establish sufficient nexus to the PRC for a PRC court to have jurisdiction, and meet other procedural requirements, including, among others, the plaintiff must have a direct interest in the case, and there must be a concrete claim, a factual basis and a cause for the suit. However, it would be difficult for foreign shareholders to establish sufficient nexus to the PRC by virtue only of holding our ADSs or ordinary shares.

Cash and Asset Flows Through Our Organization

FinVolution Group is a holding company with no operations of its own. Our operations in China are primarily through our subsidiaries and the consolidated variable interest entities and their respective subsidiaries in China. As a result, although other means are available for us to obtain financing at the holding company level, FinVolution Group’s ability to continue paying dividends to the shareholders and investors of the ADSs and to service any debt it may incur may depend upon dividends paid by our PRC subsidiaries and service fees paid by the consolidated variable interest entities in China. If any of our PRC subsidiaries or the consolidated variable interest entities incurs debt on its own behalf in the future, the instruments governing such debt may restrict our PRC subsidiaries’ ability to pay dividends to FinVolution Group or the consolidated variable interest entities’ ability to pay service fees. In addition, our PRC subsidiaries are permitted to pay dividends to FinVolution Group only out of their retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. Further, our PRC subsidiaries and the consolidated variable interest entities are required to make appropriations to certain statutory reserve funds or may make appropriations to certain discretionary funds, which are not distributable as cash dividends except in the event of a solvent liquidation of the companies. For more details, see “Item 5. Operating and Financial Review and Prospects—Liquidity and Capital Resources—Holding Company Structure.”

Under PRC laws and regulations, our PRC subsidiaries and the consolidated variable interest entities are subject to certain restrictions with respect to paying dividends or otherwise transferring any of their net assets to us. Remittance of dividends by a wholly foreign-owned enterprise out of China is also subject to examination by the banks designated by the State Administration of Foreign Exchange, or SAFE. The amounts restricted include the paid-up capital and the statutory reserve funds of our PRC subsidiaries and the net assets of the consolidated variable interest entities in which we have no legal ownership, totaling RMB7.8 billion, RMB8.0 billion and RMB7.9 billion (US$1.1 billion) as of December 31, 2021, 2022 and 2023, respectively. Furthermore, cash transfers from our PRC subsidiaries and the consolidated variable interest entities to entities outside of China are subject to PRC government controls on currency conversion. To the extent cash in our business is in the PRC or a PRC entity, such cash may not be available to fund operations or for other use outside of the PRC due to restrictions and limitations imposed by the governmental authorities on the ability of us, our subsidiaries, or the consolidated variable interest entities to transfer cash outside of the PRC. Shortages in the availability of foreign currency may temporarily delay the ability of our PRC subsidiaries and the consolidated variable interest entities to remit sufficient foreign currency to pay dividends or other payments to us, or otherwise satisfy their foreign currency denominated obligations. In view of the foregoing, to the extent cash in our business is held in China or by a PRC entity, such cash may not be available to fund operations or for other use outside of the PRC. For risks relating to the fund flows of our operations in China, see “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—We may rely on dividends and other distributions on equity paid by our PRC subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of our PRC subsidiaries to make payments to us could have a material and adverse effect on our ability to conduct our business” and “—Governmental control of currency conversion may limit our ability to utilize our net revenues effectively and affect the price of our ADSs.”

For the years ended December 31, 2021, 2022 and 2023, no dividends or distributions were made to FinVolution Group, the parent company, by our subsidiaries.

Under PRC law, FinVolution Group may provide funding to our PRC subsidiaries only through capital contributions or loans, and to our PRC consolidated variable interest entities only through loans, subject to satisfaction of applicable government registration and approval requirements.

As of December 31, 2023, FinVolution Group, the parent company, had made cumulative capital contribution of RMB1,291.4 million (US$181.9 million) to our PRC subsidiaries through intermediate holding companies.

The consolidated variable interest entities may transfer cash to the corresponding PRC subsidiaries by paying service fees according to the restated exclusive technology consulting and service agreement or the exclusive technology consulting and service framework agreements, as applicable. Pursuant to these agreements between each of the consolidated variable interest entities and its corresponding PRC subsidiary, each of the consolidated variable interest entities agrees to pay the corresponding PRC subsidiary for technology consulting and service at an amount as determined on a case-by-case basis based on the content of technology consulting and service, level of difficulty and complexity, time spend by the corresponding PRC subsidiary and its employees, the commercial value of the technology consulting and service to be provided by the corresponding PRC subsidiary, and the revenue the consolidated variable interest entity generates due to the technology consulting and service provided by the corresponding PRC subsidiary. For the years ended December 31, 2021, 2022 and 2023, the service fees paid by the consolidated variable interest entities to the PRC subsidiaries through technical development service arrangements and technical support service arrangements were RMB2,313.2 million, RMB3,598.8 million and RMB2,132.2 million (US$300.3 million), respectively. If there is any amount payable to corresponding PRC subsidiaries under the contractual arrangements, the consolidated variable interest entities will settle the amount accordingly.

The following is a summary of cash transfers that have occurred between our subsidiaries and the consolidated variable interest entities:


	For the Year Ended December 31,
	2021			2022			2023
	(RMB in thousands)
Cash paid by the consolidated variable interest entities to our subsidiaries under service agreements¹		(2,313,224	)		(3,598,761	)		(2,132,263	)
Cash received by the consolidated variable interest entities from our subsidiaries under service agreements²		534,988			650,751			555,623
Capital contribution by the consolidated variable interest entities to our subsidiaries for intra-group investing³		(22,432	)		(10,020	)		—
Collection of loans by the consolidated variable interest entities from our subsidiaries for intra-group investing⁴		389,043			72,373			122,365
Cash paid as loans by the consolidated variable interest entities to our subsidiaries for intra-group investing⁵		(2,328,235	)		(304,533	)		(408,030	)
Repayment of loans by the consolidated variable interest entities to our subsidiaries for intra-group financing⁶		(164,719	)		(134,307	)		(1,667,749	)
Cash received as loans by the consolidated variable interest entities from our subsidiaries for intra-group financing⁷		1,785,238			1,533,401			1,357,249

Notes:

(1)

Represents the “cash used in operating activities under service agreements for group companies” line item of the consolidated variable interest entities and their subsidiaries under the condensed consolidating schedule of cash flow data, which represents the cash paid by the consolidated variable interest entities for intercompany services, including technical development services and technical support services.

(2)

Represents the “cash provided by operating activities under service agreements for group companies” line item of the consolidated variable interest entities and their subsidiaries under the condensed consolidating schedule of cash flow data, which represents the cash received by the consolidated variable interest entities for intercompany services, including technical development services and technical support services.

(3)

Represents the “capital contribution to group companies” line item of the consolidated variable interest entities and their subsidiaries under the condensed consolidating schedule of cash flow data, which represents the capital contribution by the consolidated variable interest entities to group companies.

(4)

Represents the “collection of loans from group companies” line item of the consolidated variable interest entities and their subsidiaries under the condensed consolidating schedule of cash flow data, which represents the collection of loans by the consolidated variable interest entities from group companies.

(5)

Represents the “cash paid as loans extended to group companies” line item of the consolidated variable interest entities and their subsidiaries under the condensed consolidating schedule of cash flow data, which represents the cash paid as loans by the consolidated variable interest entities to group companies.

(6)

Represents the “repayment of loans to group companies” line item of the consolidated variable interest entities and their subsidiaries under the condensed consolidating schedule of cash flow data, which represents the repayment of loans by the consolidated variable interest entities to group companies.

(7)

Represents the “cash received as loans from group companies” line item of the consolidated variable interest entities and their subsidiaries under the condensed consolidating schedule of cash flow data, which represents the cash received as loans by the consolidated variable interest entities from group companies.

For the years ended December 31, 2021, 2022 and 2023, except as disclosed above, no transfers of other assets, dividends or distributions were made between the holding company, our subsidiaries, and consolidated variable interest entities.

Our board of directors declared dividends in every March from 2019 to 2024. In addition, in March 2022, our board of directors approved an annual cash dividend policy, pursuant to which we will declare and distribute a recurring cash dividend at an amount of no less than 10% of our net income after tax in the previous fiscal year in the future. See “Item 8. Financial Information—A. Consolidated Statements and Other Financial Information—Dividend Policy.” For PRC and United States federal income tax considerations of an investment in our ADSs, see “Item 10. Additional Information—E. Taxation.” For the years ended December 31, 2021, 2022 and 2023, dividends made to U.S. investors were RMB317.6 million, RMB372.5 million and RMB416.5 million (US$58.7 million).

For purposes of illustration, the following discussion reflects the hypothetical taxes that might be required to be paid within China, assuming that: (i) we have taxable earnings, and (ii) we determine to pay a dividend in the future according to our dividend policy:


	Taxation Scenario⁽ⁱ⁾
	Statutory Tax and Standard Rates
Hypothetical pre-tax earnings ⁽ⁱⁱ⁾		100	%
Tax on earnings at statutory rate of 25% ⁽ⁱⁱⁱ⁾		(25	)%
Net earnings available for distribution		75	%
Withholding tax at standard rate of 10% ^(iv)		(7.5	)%
Net distribution to parent/shareholders		67.5	%

Notes:

(i)	For purposes of this example, the tax calculation has been simplified. The hypothetical book pre-tax earnings amount, not considering timing differences, is assumed to equal taxable income in China.

(ii)

Under the terms of contractual arrangements, our PRC subsidiaries may charge the consolidated variable interest entities for services provided to the consolidated variable interest entities. These fees shall be recognized as expenses of the consolidated variable interest entities, with a corresponding amount as service income by our PRC subsidiaries and eliminate in consolidation. For income tax purposes, our PRC subsidiaries and the consolidated variable interest entities file income tax returns on a separate company basis. The fees paid are recognized as a tax deduction by the consolidated variable interest entities and as income by our PRC subsidiaries and are tax neutral.

(iii)

Certain of our PRC subsidiaries and the consolidated variable interest entities qualifies for a 15% preferential income tax rate in China. However, such rate is subject to qualification, is temporary in nature, and may not be available in a future period when distributions are paid. For purposes of this hypothetical example, the table above reflects a maximum tax scenario under which the full statutory rate would be effective.

(iv)

The Enterprise Income Tax Law of the PRC imposes a withholding income tax of 10% on dividends distributed by a foreign invested enterprise to its immediate holding company outside of China. A lower withholding income tax rate of 5% is applied if the foreign invested enterprise’s immediate holding company is registered in Hong Kong or other jurisdictions that have a tax treaty arrangement with China, subject to a qualification review at the time of the distribution. For purposes of this hypothetical example, the table above assumes a maximum tax scenario under which the full withholding tax would be applied.

The table above has been prepared under the assumption that all profits of the consolidated variable interest entities will be distributed as fees to our PRC subsidiaries under tax neutral contractual arrangements. If, in the future, the accumulated earnings of the consolidated variable interest entities exceed the fees paid to our PRC subsidiaries (or if the current and contemplated fee structure between the intercompany entities is determined to be non-substantive and disallowed by Chinese tax authorities), the consolidated variable interest entities could, as a matter of last resort, make a non-deductible transfer to our PRC subsidiaries for the amounts of the stranded cash in the consolidated variable interest entities. This would result in such transfer being non-deductible expenses for the consolidated variable interest entities but still taxable income for the PRC subsidiaries. Such a transfer and the related tax burdens would reduce our after-tax income to approximately 50.6% of the pre-tax income. Our management believes that there is only a remote possibility that this scenario would happen.

Financial Information Related to the Consolidated Variable Interest Entities

The following table presents the condensed consolidating schedule of financial position for the consolidated variable interest entities and other entities as of the dates presented.

Condensed Consolidating Statements of Income Information


	For the Year Ended December 31, 2023
	FinVolution Group			Company Subsidiaries			Primary Beneficiary of Consolidated Variable Interest Entities			Consolidated Variable Interest Entities and Their Subsidiaries			Eliminations			Consolidated Total
	(RMB in thousands)
Third-party revenues		—			2,685,155			2,751			9,859,539			—			12,547,445
Group company revenues⁽¹⁾		—			3,542,003			16,158			498,189			(4,056,350	)		—
Net revenues		—			6,227,158			18,909			10,357,728			(4,056,350	)		12,547,445
Third-party expenses		(19,446	)		(1,226,081	)		(21,154	)		(3,633,284	)		—			(4,899,965	)
Group company expenses⁽¹⁾		—			(516,395	)		(2,927	)		(3,542,004	)		4,061,326			—
Related party expenses		—			—			—			—			—			—
Provision for accounts receivable and contract assets		—			(175,800	)		—			(78,148	)		—			(253,948	)
Provision for loans receivable		—			(557,338	)		889			(30,394	)		—			(586,843	)
Credit losses for quality assurance commitment		—			(865,628	)		—			(3,557,174	)		—			(4,422,802	)
Total operating expenses		(19,446	)		(3,341,242	)		(23,192	)		(10,841,004	)		4,061,326			(10,163,558	)
Income (loss) from subsidiaries⁽²⁾		2,325,611			(286,503	)		2,858,976			3,719			(4,901,803	)		—
Loss of the consolidated variable interest entities		—			—			(282,595	)		—			282,595			—
Income from operations		2,306,165			2,599,413			2,572,098			(479,557	)		(4,614,232	)		2,383,887
Other income, net		34,670			125,117			375			232,074			2,462			394,698
Profit before income tax expenses		2,340,835			2,724,530			2,572,473			(247,483	)		(4,611,770	)		2,778,585
Income tax expenses		—			(359,988	)		—			(35,112	)		—			(395,100	)
Net profit		2,340,835			2,364,542			2,572,473			(282,595	)		(4,611,770	)		2,383,485
Net loss attributable to non-controlling interest shareholders		—			(38,931	)		—			—			(3,719	)		(42,650	)
Net profit attributable to FinVolution Group’s ordinary shareholders		2,340,835			2,325,611			2,572,473			(282,595	)		(4,615,489	)		2,340,835

Condensed Consolidating Statements of Income Information


	For the Year Ended December 31, 2022
	FinVolution Group			Company Subsidiaries			Primary Beneficiary of Consolidated Variable Interest Entities			Consolidated Variable Interest Entities and Their Subsidiaries			Eliminations			Consolidated Total
	(RMB in thousands)
Third-party revenues		—			1,790,631			3,141			9,340,431			—			11,134,203
Group company revenues⁽¹⁾		—			3,296,525			14,431			535,053			(3,846,009	)		—
Net revenues		—			5,087,156			17,572			9,875,484			(3,846,009	)		11,134,203
Third-party expenses		(20,027	)		(1,012,268	)		(17,525	)		(3,567,004	)		—			(4,616,824	)
Group company expenses⁽¹⁾		—			(501,323	)		(1,006	)		(3,343,680	)		3,846,009			—
Related party expenses		—			—			—			(37	)		—			(37	)
Provision for accounts receivable and contract assets		—			(106,498	)		—			(284,384	)		—			(390,882	)
Provision for loans receivable		—			(324,351	)		1,239			(92,790	)		—			(415,902	)
Credit losses for quality assurance commitment		—			(213,884	)		—			(2,981,336	)		—			(3,195,220	)
Total operating expenses		(20,027	)		(2,158,324	)		(17,292	)		(10,269,231	)		3,846,009			(8,618,865	)
Income (loss) from subsidiaries⁽²⁾		2,287,509			(254,159	)		2,479,647			2,379			(4,515,376	)		—
Loss of the consolidated variable interest entities		—			—			(255,886	)		—			255,886			—
Income from operations		2,267,482			2,674,673			2,224,041			(391,368	)		(4,259,490	)		2,515,338
Other income, net		(1,100	)		61,729			1,340			158,724			—			220,693
Profit before income tax expenses		2,266,382			2,736,402			2,225,381			(232,644	)		(4,259,490	)		2,736,031
Income tax expenses		—			(431,640	)		107			(23,242	)		—			(454,775	)
Net profit		2,266,382			2,304,762			2,225,488			(255,886	)		(4,259,490	)		2,281,256
Net loss attributable to non-controlling interest shareholders		—			(17,253	)		—			—			2,379			(14,874	)
Net profit attributable to FinVolution Group’s ordinary shareholders		2,266,382			2,287,509			2,225,488			(255,886	)		(4,257,111	)		2,266,382

Condensed Consolidating Statements of Income Information


	For the Year Ended December 31, 2021
	FinVolution Group			Company Subsidiaries			Primary Beneficiary of Consolidated Variable Interest Entities			Consolidated Variable Interest Entities and Their Subsidiaries			Eliminations			Consolidated Total
	(RMB in thousands)
Third-party revenues		—			1,132,093			4,057			8,333,978			—			9,470,128
Group company revenues⁽¹⁾		—			2,545,816			16,400			796,071			(3,358,287	)		—
Net revenues		—			3,677,909			20,457			9,130,049			(3,358,287	)		9,470,128
Third-party expenses		(18,617	)		(892,810	)		(18,850	)		(3,441,504	)		—			(4,371,781	)
Group company expenses⁽¹⁾		—			(812,471	)		—			(2,545,816	)		3,358,287			—
Related party expenses		—			—			—			(7,503	)		—			(7,503	)
Provision for accounts receivable and contract assets		—			(4,288	)		—			(134,938	)		—			(139,226	)
Provision for loans receivable		—			(406,560	)		—			32,317			—			(374,243	)
Credit losses for quality assurance commitment		—			—			—			(1,963,609	)		—			(1,963,609	)
Total operating expenses		(18,617	)		(2,116,129	)		(18,850	)		(8,061,053	)		3,358,287			(6,856,362	)
Income (loss) from subsidiaries⁽²⁾		2,526,062			1,015,784			1,351,628			(448	)		(4,893,026	)		—
Income of the consolidated variable interest entities		—			—			1,017,759			—			(1,017,759	)		—
Income from operations		2,507,445			2,577,564			2,370,994			1,068,548			(5,910,785	)		2,613,766
Other income, net		1,502			26,847			345			93,674			—			122,368
Profit before income tax expenses		2,508,947			2,604,411			2,371,339			1,162,222			(5,910,785	)		2,736,134
Income tax expenses		—			(92,428	)		(3,927	)		(144,463	)		—			(240,818	)
Net profit		2,508,947			2,511,983			2,367,412			1,017,759			(5,910,785	)		2,495,316
Net loss attributable to non-controlling interest shareholders		—			14,079			—			—			(448	)		13,631
Net profit attributable to FinVolution Group’s ordinary shareholders		2,508,947			2,526,062			2,367,412			1,017,759			(5,911,233	)		2,508,947

Condensed Consolidating Balance Sheets Information


	As of December 31, 2023
	FinVolution Group		Company Subsidiaries		Primary Beneficiary of Consolidated Variable Interest Entities		Consolidated Variable Interest Entities and Their Subsidiaries		Eliminations			Consolidated Total
	(RMB in thousands)
Cash and cash equivalents		67,403		2,792,169		3,594		2,106,153		—			4,969,319
Restricted cash		—		297,912		—		1,502,159		—			1,800,071
Short-term investments		—		1,321,059		—		1,639,762		—			2,960,821
Accounts receivable and contract assets		—		273,145		—		1,935,393		—			2,208,538
Quality assurance receivable		—		270,282		—		1,485,333		—			1,755,615
Property, equipment and software, net		—		125,216		—		15,717		—			140,933
Intangible assets		—		63,760		—		34,932		—			98,692
Loans and receivables, net of credit loss allowance for loans receivables		—		477,549		—		649,839		—			1,127,388
Investments		—		170,378		—		964,755		—			1,135,133
Investment in subsidiaries ⁽³⁾		15,373,634		5,497,244		10,094,905		108,800		(31,074,583	)		—
Net assets of the consolidated variable interest entities		—				4,844,756		—		(4,844,756	)		—
Deferred tax assets		—		545,018		—		1,079,307		—			1,624,325
Prepaid expenses and other assets		18,290		118,164		146,742		3,096,253		—			3,379,449
Amounts due from Group companies⁽⁴⁾		1,108,198		8,341,052		642,052		2,544,968		(12,636,270	)		—
Amounts due from related party		—		1		—		4,867		—			4,868
Right of use assets		—		6,897		—		31,213		—			38,110
Goodwill⁽⁹⁾		—		50,411		—		—		—			50,411
Total assets		16,567,525		20,350,257		15,732,049		17,199,451		(48,555,609	)		21,293,673
Deferred guarantee income		—		278,354		—		1,603,682		—			1,882,036
Liability from quality assurance commitment		—		321,119		—		2,985,013		—			3,306,132
Payroll and welfare payable		—		115,525		3,389		142,614		—			261,528
Taxes payable		—		74,004		—		133,473		—			207,477
Short-term borrowings		—		5,756		—		—		—			5,756
Funds payable to investors of consolidated trusts		—		30		—		436,322		—			436,352
Contract liability		—		—		—		5,109		—			5,109
Amounts due to Group companies⁽⁴⁾		2,817,322		3,434,173		136,469		6,248,306		(12,636,270	)		—
Amounts due to related party		—		—		—		134		—			134
Deferred tax liabilities		—		275,407		—		65,201		—			340,608
Accrued expenses and other liabilities		1,418		238,275		42		702,030		—			941,765
Leasing liabilities		—		3,067		—		32,811		—			35,878
Total liabilities		2,818,740		4,745,710		139,900		12,354,695		(12,636,270	)		7,422,775
Total FinVolution Group shareholders’ equity⁽³⁾		13,748,785		15,373,634		15,592,149		4,844,756		(35,810,539	)		13,748,785
Non-controlling interest		—		230,913		—		—		(108,800	)		122,113
Total shareholders’ equity		13,748,785		15,604,547		15,592,149		4,844,756		(35,919,339	)		13,870,898
Total liabilities and shareholders’ equity		16,567,525		20,350,257		15,732,049		17,199,451		(48,555,609	)		21,293,673

Condensed Consolidating Balance Sheets Information


	As of December 31, 2022
	FinVolution Group		Company Subsidiaries		Primary Beneficiary of Consolidated Variable Interest Entities		Consolidated Variable Interest Entities and Their Subsidiaries		Eliminations			Consolidated Total
	(RMB in thousands)
Cash and cash equivalents		21,990		1,757,304		7,070		1,850,016		—			3,636,380
Restricted cash		—		169,897		—		2,672,810		—			2,842,707
Short-term investments		48,752		680,948		—		2,697,320		—			3,427,020
Accounts receivable and contract assets		—		644,100		—		1,573,345		—			2,217,445
Quality assurance receivable		—		124,894		—		1,544,961		—			1,669,855
Property, equipment and software, net		—		114,431		—		26,914		—			141,345
Intangible assets		—		63,505		—		35,187		—			98,692
Loans and receivables, net of credit loss allowance for loans receivables		—		694,219		—		1,442,213		—			2,136,432
Investments		—		138,137		—		945,947		—			1,084,084
Investment in subsidiaries⁽³⁾		13,049,302		5,930,934		7,827,297		73,853		(26,881,386	)		—
Net assets of the consolidated variable interest entities		—		1,395,376		5,482,793		—		(5,482,793	)		—
Deferred tax assets		—		130,496		—		788,865		—			919,361
Prepaid expenses and other assets		13,582		102,632		147,859		2,702,678		—			2,966,751
Amounts due from Group companies⁽⁴⁾		641,549		6,932,627		600,313		2,316,737		(10,491,226	)		—
Right of use assets		—		3,212		—		189,216		—			192,428
Goodwill⁽⁹⁾		—		50,411		—		—		—			50,411
Total assets		13,775,175		17,537,747		14,065,332		18,860,062		(42,855,405	)		21,382,911
Deferred guarantee income		—		81,964		—		1,723,200		—			1,805,164
Liability from quality assurance commitment		—		315,783		—		3,239,835		—			3,555,618
Payroll and welfare payable		—		113,207		3,246		157,955		—			274,408
Taxes payable		—		82,453		—		51,574		—			134,027
Funds payable to investors of consolidated trusts		—		—		—		1,845,210		—			1,845,210
Contract liability		—		—		—		5,109		—			5,109
Amounts due to Group companies⁽⁴⁾		1,400,183		3,638,208		303,770		5,149,065		(10,491,226	)		—
Amounts due to related party		—		—		—		1,000		—			1,000
Deferred tax liabilities		—		91,976		—		140,212		—			232,188
Accrued expenses and other liabilities		3,291		15,285		85		890,047		—			908,708
Leasing liabilities		—		2,928		—		174,062		—			176,990
Total liabilities		1,403,474		4,341,804		307,101		13,377,269		(10,491,226	)		8,938,422
Total FinVolution Group shareholders’ equity⁽³⁾		12,371,701		13,049,302		13,758,231		5,482,793		(32,290,326	)		12,371,701
Non-controlling interest		—		146,641		—		—		(73,853	)		72,788
Total shareholders’ equity		12,371,701		13,195,943		13,758,231		5,482,793		(32,364,179	)		12,444,489
Total liabilities and shareholders’ equity		13,775,175		17,537,747		14,065,332		18,860,062		(42,855,405	)		21,382,911

Condensed Consolidating Cash Flows Information


	For the Year Ended December 31, 2023
	FinVolution Group			Company Subsidiaries			Primary Beneficiary of Consolidated Variable Interest Entities			Consolidated Variable Interest Entities and Their Subsidiaries			Eliminations			Consolidated Total
	(RMB in thousands)
Cash used in operating activities under service agreements for Group companies⁽⁵⁾		—			(1,987,993	)		(59,897	)		(2,132,263	)		4,180,153			—
Cash provided by operating activities under service agreements for Group companies⁽⁵⁾		—			4,111,165			(486,635	)		555,623			(4,180,153	)		—
Net cash provided by (used in) operating activities for Third-parties		9,545			876,843			(458,067	)		985,102			—			1,413,423
Net cash provided by (used in) operating activities		9,545			3,000,015			(1,004,599	)		(591,538	)		—			1,413,423
Collection of loans from Group companies⁽⁷⁾		32,913			1,719,057			463,310			122,365			(2,337,645	)		—
Cash paid as loans extended to Group companies⁽⁸⁾		(499,562	)		(3,712,008	)		(2,256	)		(408,030	)		4,621,856			—
Other investing activities		—			(165,548	)		—			1,579,038			—			1,413,490
Net cash provided by (used in) investing activities		(466,649	)		(2,158,499	)		461,054			1,293,373			2,284,211			1,413,490
Repayment of loans to Group companies⁽⁷⁾		(74,346	)		(473,185	)		(122,365	)		(1,667,749	)		2,337,645			—
Cash received as loans from Group companies⁽⁸⁾		1,491,485			1,761,088			12,034			1,357,249			(4,621,856	)		—
Other financing activities		(1,110,984	)		14,712			—			(1,462,779	)		—			(2,559,051	)
Net cash provided by (used in) financing activities		306,155			1,302,615			(110,331	)		(1,773,279	)		(2,284,211	)		(2,559,051	)

Condensed Consolidating Cash Flows Information


	For the Year Ended December 31, 2022
	FinVolution Group			Company Subsidiaries			Primary Beneficiary of Consolidated Variable Interest Entities			Consolidated Variable Interest Entities and Their Subsidiaries			Eliminations			Consolidated Total
	(RMB in thousands)
Cash used in operating activities under service agreements for Group companies⁽⁵⁾		—			(649,653	)		(1,098	)		(3,598,761	)		4,249,512			—
Cash provided by operating activities under service agreements for Group companies⁽⁵⁾		—			3,587,081			11,680			650,751			(4,249,512	)		—
Net cash provided by (used in) operating activities for Third-parties		(36,357	)		(834,710	)		(158,727	)		1,298,627			—			268,833
Net cash provided by (used in) operating activities		(36,357	)		2,102,718			(148,145	)		(1,649,383	)		—			268,833
Capital contribution to Group companies⁽⁶⁾		—			—			—			(10,020	)		10,020			—
Collection of loans from Group companies⁽⁷⁾		455,144			161,047			237,169			72,373			(925,733	)		—
Cash paid as loans extended to Group companies⁽⁸⁾		(402,570	)		(3,849,985	)		(90,031	)		(304,533	)		4,647,119			—
Other investing activities		(48,275	)		(748,571	)		—			(756,382	)		—			(1,553,228	)
Net cash provided by (used in) investing activities		4,299			(4,437,509	)		147,138			(998,562	)		3,731,406			(1,553,228	)
Capital contribution from Group companies⁽⁶⁾		—			10,020			—			—			(10,020	)		—
Repayment of loans to Group companies⁽⁷⁾		(487,333	)		(231,720	)		(72,373	)		(134,307	)		925,733			—
Cash received as loans from Group companies⁽⁸⁾		1,240,317			1,796,828			76,573			1,533,401			(4,647,119	)		—
Other financing activities		(702,674	)		3,554			—			(96,736	)		—			(795,856	)
Net cash (provided by) used in financing activities		50,310			1,578,682			4,200			1,302,358			(3,731,406	)		(795,856	)

Condensed Consolidating Cash Flows Information


	For the Year Ended December 31, 2021
	FinVolution Group			Company Subsidiaries			Primary Beneficiary of Consolidated Variable Interest Entities			Consolidated Variable Interest Entities and Their Subsidiaries			Eliminations			Consolidated Total
	(RMB in thousands)
Cash used in operating activities under service agreements for Group companies⁽⁵⁾		—			(534,943	)		(45	)		(2,313,224	)		2,848,212			—
Cash provided by operating activities under service agreements for Group companies⁽⁵⁾		—			2,290,805			22,419			534,988			(2,848,212	)		—
Net cash provided by (used in) operating activities for Third-parties		(45,587	)		(716,930	)		(19,691	)		1,412,435			—			630,227
Net cash provided by (used in) operating activities		(45,587	)		1,038,932			2,683			(365,801	)		—			630,227
Capital contribution to Group companies⁽⁶⁾		—			—			—			(22,432	)		22,432			—
Collection of loans from Group companies⁽⁷⁾		846,737			186,283			256,537			389,043			(1,678,600	)		—
Cash paid as loans extended to Group companies⁽⁸⁾		(238,254	)		(2,296,392	)		(92,801	)		(2,328,235	)		4,955,682			—
Other investing activities		—			326,328			—			1,668,517			—			1,994,845
Net cash provided by (used in) investing activities		608,483			(1,783,781	)		163,736			(293,107	)		3,299,514			1,994,845
Capital contribution from Group companies⁽⁶⁾		—			22,432			—			—			(22,432	)		—
Repayment of loans to Group companies⁽⁷⁾		(839,719	)		(285,119	)		(389,043	)		(164,719	)		1,678,600			—
Cash received as loans from Group companies⁽⁸⁾		603,955			2,341,182			(225,307	)		1,785,238			(4,955,682	)		—
Other financing activities		(310,221	)		967			—			69,454			—			(239,800	)
Net cash (provided by) used in financing activities		(545,985	)		2,079,462			(163,736	)		1,689,973			(3,299,514	)		(239,800	)

Notes:

(1)	Represents the intercompany services eliminated at the consolidation level, including technical development services and technical support services.

(2)	Represents the elimination of the income from investment among FinVolution Group, equity subsidiaries, and primary beneficiary of consolidated variable interest entities.

(3)	Represents the elimination of the investment among FinVolution Group, equity subsidiaries, and primary beneficiary of consolidated variable interest entities.

(4)	Represents the elimination of intercompany balances among FinVolution Group, equity subsidiaries, primary beneficiary of consolidated variable interest entities, consolidated variable interest entities and consolidated variable interest entities’ subsidiaries.

(5)	Represents the cash received and cash paid for intercompany services, including technical development services and technical support services.

(6)	Represents the capital contribution at intercompany level.

(7)	Represents the collection of loans from group companies, and repayment of loans to group companies.

(8)	Represents the cash paid as loans extended to group companies, and cash received as loans from group companies.

(9)

In October 2017, one equity subsidiary and one consolidated variable interest entity subsidiary of FinVolution Group entered into a series of share purchase agreements with shareholders of HB micro lending company. After the transactions, FinVolution Group gained control of HB micro lending company. Goodwill and non-controlling interest were recognized in accordance with Accounting Standards Codification 805, “Business Combinations.” In this consolidated variable interest entity’s consolidating schedule, HB micro lending company’s financial information was recorded under the equity subsidiaries. FinVolution Group applied the equity method to account for its investment in the subsidiary of the consolidated variable interest entity in HB micro lending company, as it can exercise significant influence but does not have control. Total assets for HB micro lending company were RMB300,193 and RMB337,110 as of December 31, 2022 and 2023, respectively. Total liabilities for HB micro lending company were RMB128,115 and RMB148,912 as of December 31, 2022 and 2023, respectively.

Summary of Risk Factors

Investing in our ADSs involves significant risks. You should carefully consider all of the information in this annual report before making an investment in our ADSs. Below please find a summary of the principal risks we face, organized under relevant headings. All the operational risks associated with being based in and having operations in China also apply to our operations in Hong Kong. With respect to the legal risks associated with being based in and having operations in China, we expect the laws, regulations and the discretion of the governmental authorities in China discussed in this annual report to apply to entities and businesses in China, rather than entities or businesses in Hong Kong, which operate under a different set of laws from China.

Risks Related to Our Business

•

We generate the overwhelming majority of our revenues from China’s online consumer finance platform market, an emerging and evolving industry, which makes it difficult to evaluate our future prospects.

•

The laws and regulations governing online consumer finance industry in China are developing and evolving and subject to changes. If our business practices are deemed to violate any existing and future applicable laws, regulations or requirements of local regulatory authorities, our business, financial condition and results of operations would be materially and adversely affected.

•

We have modified our business model and practices in the past as a result of changes in laws, regulations, policies, measures and guidance. We may further change our business model or practices in the future, which may not be successful ultimately.

•

Our global operations expose us to a number of risks.

•

If we are unable to retain existing borrowers or institutional funding partners or attract new borrowers or institutional funding partners, the volume of loans facilitated through our platforms may not be maintained or increased, which may adversely affect our business and results of operations.

•

If our existing and new products and services do not achieve sufficient market acceptance, our financial results and competitive position will be harmed.

•

As we continue to develop our business, we may offer new products or services. Development and innovation in our business may expose us to new challenges and risks.

•

Our cooperation with institutional funding partners exposes us to regulatory uncertainties and we may be required to obtain additional government approval or license due to our cooperation with institutional funding partners.

•

Regulatory restrictions on institutional funding partners’ acceptance of credit enhancement may adversely affect our business and access to funding.

•

We collaborate with third-party trust management companies to set up trusts. We may be deemed to be an illegal financial institution under such trust arrangement, which may materially and adversely affect our business and financial condition.

•

Interest rates of certain of our loan products may exceed the statutory interest rate limit and therefore part of the interests may not be enforceable through the PRC judicial system.

•

We operate in markets where the credit infrastructure may still be at an early stage of development.

•

We bear credit risks for a substantial majority of the loans funded by institutional funding partners to borrowers we introduced. If we fail to effectively manage credit risk of our loans and our overdue loans increase, our business, financial condition and results of operations may be materially adversely affected.

Risks Related to Our Corporate Structure

•

We are a Cayman Islands holding company with no equity ownership in the consolidated variable interest entities, and our operations in China are primarily through (i) our subsidiaries in China, (ii) the consolidated variable interest entities with which we have maintained contractual arrangements, and (iii) the subsidiaries of the consolidated variable interest entities. Holders of our ADSs hold equity interest in FinVolution Group, our Cayman Islands holding company, and do not have direct or indirect equity interest in the consolidated variable interest entities and their subsidiaries. If the PRC government finds that the agreements that establish the structure for operating our business do not comply with PRC laws and regulations, or if these regulations or their interpretations change in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations. Our holding company, our PRC subsidiaries, the consolidated variable interest entities and their respective subsidiaries, and investors of our company face uncertainty about potential future actions by the PRC government that could affect the enforceability of the contractual arrangements with the consolidated variable interest entities and, consequently, significantly affect the financial performance of the consolidated variable interest entities and our company as a whole.

•

If the PRC government deems that the contractual arrangements regarding the consolidated variable interest entities do not comply with PRC regulatory restrictions on foreign investment in the relevant industries, or if these regulations or the interpretation of existing regulations change in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations.

•

We rely on contractual arrangements with the consolidated variable interest entities for a significant portion of our business operations, and such contractual arrangements may not be as effective as equity ownership in providing operational control.

•

Any failure by the consolidated variable interest entities, shareholders of the consolidated variable interest entities or other parties to perform their obligations under our contractual arrangements with them would have a material adverse effect on our business.

•

The shareholders of the consolidated variable interest entities may have potential conflicts of interest with us, which may materially and adversely affect our business and financial condition.

Risks Related to Doing Business in China

•

Most of our operations are located in China. Accordingly, our business, prospects, financial conditions and results of operations may be affected to a significant degree by political, economic and social conditions in China generally. In addition, a severe or prolonged downturn in the Chinese or global economy could reduce the demand for consumer loans and investments, which could materially and adversely affect our business and financial condition. For more details, see “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—Changes in China’s economic, political or social conditions or government policies could have a material adverse effect on our business and results of operations” and “—A severe or prolonged downturn in the Chinese or global economy could reduce the demand for consumer loans and investments, which could materially and adversely affect our business and financial condition.”

•

We face risks arising from uncertainties with respect to the PRC legal system. Certain rules and regulations can change quickly and sometimes on short notice, and there may be risks and uncertainties regarding the interpretation and enforcement of PRC laws and regulations. These risks and uncertainties may make it difficult for us to meet or comply with requirements under the applicable laws and regulations. For more details, see “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—Uncertainties in the interpretation and enforcement of PRC laws and regulations could limit the legal protections available to us.”

•

The PRC government’s significant authority in regulating our operations and its oversight and control over offerings conducted overseas by, and foreign 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 in this nature may cause the value of such securities to significantly decline. For more details, see “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—The PRC government’s significant oversight and discretion over our business operation could result in a material adverse change in our operations and the value of our ADSs.”

•

Our ADSs may be prohibited from trading in the United States under the HFCA Act in the future if the PCAOB is unable to inspect or fully investigate auditors located in China. The PCAOB had historically been unable to inspect our auditor in relation to their audit work performed for our financial statements and the inability of the PCAOB to conduct inspections of our auditor in the past has deprived our investors with the benefits of such inspections. The delisting of our ADSs, or the threat of their being delisted, may materially and adversely affect the value of your investment. For more details, see “tem 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—The PCAOB had historically been unable to inspect our auditor in relation to their audit work performed for our financial statements and the inability of the PCAOB to conduct inspections of our auditor in the past has deprived our investors with the benefits of such inspections” and “—Our ADSs may be prohibited from trading in the United States under the HFCA Act in the future if the PCAOB is unable to inspect or investigate completely auditors located in China. The delisting of the ADSs, or the threat of their being delisted, may materially and adversely affect the value of your investment.”

Risks Related to Our American Depositary Shares

•

The market price for our ADSs may be volatile.

•

We are an exempted company limited by shares incorporated under the laws of the Cayman Islands. We conduct the overwhelming majority of our operations in China and a significant portion of our assets are located in China. In addition, a majority of our directors and executive officers reside within China, and a significant portion of the assets of these persons are located within China. As a result, it may be difficult or impossible for you to effect service of process within the United States upon these individuals, or to bring an action against us or against these individuals in the United States in the event that you believe your rights have been infringed under the U.S. federal securities laws or otherwise. Even if you are successful in bringing an action of this kind, the laws of the Cayman Islands and of the PRC may render you unable to enforce a judgment against our assets or the assets of our directors and officers. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our American Depositary Shares—You may face difficulties in protecting your interests, and your ability to protect your rights through U.S. courts may be limited, because we are incorporated under Cayman Islands law” and “—Certain judgments obtained against us by our shareholders may not be enforceable.”

A.	[Reserved]

B.	Capitalization and Indebtedness

Not applicable.

C.	Reasons for the Offer and Use of Proceeds

Not applicable.

D.	Risk Factors

Investing in our ADSs involves significant risks. You should carefully consider all of the information in this annual report before making an investment in our ADSs. Below please find the principal risks we face, organized under relevant headings. In the event that PRC regulations become applicable to companies in Hong Kong, the legal and operational risks associated with operating in China, as discussed in “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business and Industry,” may also apply to our operations in Hong Kong. These risks are discussed more fully in the section titled “Item 3. Key Information—D. Risk Factors.”

Risks Related to Our Business

China’s online consumer finance industry is relatively new and may not develop as expected. The regulatory framework for this industry is also evolving and may remain uncertain for the foreseeable future. China’s online consumer finance industry in general remains at a rather preliminary development stage and may not develop at the anticipated growth rate. It is possible that the PRC laws and regulations may change in ways that do not favor our development. If that happens, there may not be adequate loans facilitated on our platforms and our current business model may be negatively affected. As a new industry, there are very few established players whose business models we can follow or build upon. Potential borrowers and institutional funding partners may not be familiar with this new industry and may have difficulty distinguishing our services from those of our competitors. Attracting and retaining borrowers and institutional funding partners is critical to increasing the volume of loans facilitated through our platforms. The emerging and evolving online consumer finance market makes it difficult to effectively assess our future prospects. In addition, our business has grown substantially in recent years, but our past growth rates may not be indicative of our future growth.

You should consider our business and prospects in light of the risks and challenges we encounter or may encounter in this developing and rapidly evolving industry. These risks and challenges include our ability to, among other things:

•

navigate an evolving regulatory environment;

•

expand the base of borrowers and institutional funding partners served on our platforms;

•

maintain our credit standards;

•

enhance our risk management capabilities;

•

improve our operational efficiency;

•

continue to scale our technology infrastructure to support the growth of our platforms and higher transaction volume;

•

broaden our loan product offerings;

•

operate without being adversely affected by the negative publicity about the industry in general and our company in particular;

•

maintain the security of our platforms and the confidentiality of the information provided and utilized across our platforms;

•

cultivate a vibrant consumer finance ecosystem;

•

attract, retain and motivate talented employees; and

•

defend ourselves in litigation, and against regulatory, intellectual property, privacy or other claims.

If the market for our platforms does not develop as we expect, if we fail to educate potential borrowers and institutional funding partners about the value of our platforms and services, or if we fail to address the needs of our target customers, our reputation, business and results of operations will be materially and adversely affected.

We expect the laws, regulations, rules and governmental policies to continue to evolve in China’s online consumer finance industry. We are unable to predict with certainty the impact, if any, that future legislation, judicial interpretations or regulations relating to the online consumer finance industry will have on our business, financial condition and results of operations. To the extent that we are not able to fully comply with any new laws or regulations when they are promulgated, our business, financial condition and results of operations may be materially and adversely affected.

For instance, in July 2021, it was reported that the Credit Information System Bureau of the People’s Bank of China notified several internet platforms to complete the “disconnecting direct connection” process between personal information and financial institutions. This notification implies that as an online consumer finance platform, we may be prohibited from directly providing borrowers’ personal information to institutional funding partners. We provide borrower referral and preliminary credit assessment services to our institutional funding partners. The borrower information provided by us with such institutional funding partners, with due authorization, may be deemed as credit information. We proactively adjusted our practices for transmission of borrowers’ personal information following the promulgation of regulations related to “disconnecting direct connection.”

Furthermore, on September 27, 2021, the People’s Bank of China introduced the Measures for Regulating Credit Reference. These measures state that financial institutions are prohibited from collaborating with any commercial entity lacking a credit reference license for credit reference services. For further information, please refer to “Item 4. Information on the Company—B. Business Overview—Regulations in the PRC—Regulations Relating to Credit Reference Activities.” These measures do not provide clear guidance or rules regarding how and when market participants like us, if deemed to be conducting credit reference business, could apply for the required licenses or ensure compliance when necessary. If regulatory authorities interpret our preliminary credit assessment services to institutional funding partners as credit reference activities, we may need to adjust our business operations to comply with these regulations. This adjustment may involve obtaining a license for individual credit reference activities from competent regulatory bodies, altering our business model, seeking partnerships with licensed credit reference agencies, or filing cooperation agreements with the People’s Bank of China or its provincial branches. Failure to secure regulatory approval, establish partnerships with licensed credit reference agencies, or complete cooperation agreement filings promptly may result in violations of applicable credit reference service laws and regulations. Such violations could lead to penalties, including business cessation, confiscation of illicit gains, fines ranging from RMB50,000 to RMB500,000, and potential criminal liability. As of the date of this annual report, we have adopted rectification measures and completed our adjustment process to comply with regulatory requirements regarding “disconnecting direct connections.” We have established collaborations with a licensed credit reference agency and regional financial organizations to ensure our practices for transmitting personal information comply with laws and regulations. However, we cannot guarantee that this approach will be deemed fully compliant with applicable laws and regulations regarding the “disconnecting direct connection.” As of the date of this annual report, we have not been subject to any penalties from the People’s Bank of China or any of its branches related to our cooperation with institutional funding partners.

Failure to meet the requirements of regulatory authorities may necessitate modifications to our business model, termination of certain practices, or even cessation of our business operations. Such outcomes could significantly and adversely affect our business, financial condition, and results of operations. Additionally, our origination, servicing expenses, and other costs of revenue may increase, or we may need to adjust our current business model to maintain full compliance with laws and regulations applicable to us in the future. Any non-compliance or potential non-compliance may subject us to fines or criminal liability, which may potentially impact our financial performance and results of operations.

Moreover, we depend on certain data partners, who collaborate with a licensed credit reference agency, to collect borrower credit information for our credit scoring and fraud detection purposes. If this approach is deemed non-compliant by regulatory authorities, we cannot ensure that we will find a timely or cost-efficient alternative. This could lead to reputational damage, regulatory intervention, and a diminished ability to conduct our business, all of which could have adverse effects on our business, financial condition, and results of operations.

Given the complexities, uncertainties and frequent changes in the laws, rules, regulations, policies and measures within the markets where we operate, including alterations in their interpretation and implementation, we have a track record of modifying our business models and practices in response to shifts in regulatory requirements and our strategic plans. For example, we started our business as an online lending information intermediary, however, we ceased facilitating new loans with funding from individual investors on our platforms since October 2019 due to shifts in regulatory requirements. Instead, we enhanced our business model by acquiring higher-quality borrowers and transitioning our funding sources from individual investors to institutional funding partners. On January 14, 2022, Shanghai Financial Stability Coordinating Joint Conference Office, Shanghai Online Lending Risk Rectification Office and other regulatory authorities jointly announced that Shanghai PPDai, among others, had declared the termination of its business operation as an online lending information intermediary and fully settled all related legacy loan products funded by individual investors. In connection with this change in our business model and practices, we underwent considerable changes, such as offering new products and services, adjusting our business process and model, hiring new employees and building up new departments, and collaborating with new business partners.

We may further change our business model or practices in the future. If this happens, our business operations may have to go through considerable changes and we may experience a loss of continuity, loss of accumulated knowledge or loss of efficiency during the transitional period, which may cause our competitive position, business, financial condition and results of operations to be materially and adversely affected.

Our global operations expose us to a number of risks.

We began our business operations in multiple jurisdictions in December 2018. In December 2018 and June 2019, we established two subsidiaries in the Philippines, and one of them is authorized to operate as a lending company and the other is authorized to operate as a financing company. In December 2019, our subsidiary in Indonesia obtained the license for Technology and Information Based Financial Lending Institution from the Financial Services Authority of Indonesia. In February 2024, one of our Filippino subsidiaries was accredited by the Credit Information Corporation as a Special Accessing Entity to the Credit Information System.

Our outstanding loan balance in the overseas markets increased from RMB330.0 million as of December 31, 2021 to RMB800.4 million as of December 31, 2022 and further to RMB1,262.3 million (US$177.8 million) as of December 31, 2023. In 2021, 2022 and 2023, revenues generated from the overseas markets amounted to RMB826.4 million, RMB1,149.7 million and RMB2,136.9 million (US$301.0 million), accounting for 8.7%, 10.3% and 17.0% of the respective year’s total net revenues.

As we continue to expand our global operations, we will face risks associated with expanding into markets where we have limited or no experience and where we may be less well-known or have fewer local resources. We will also be subject to a variety of risks inherent in operating overseas businesses, including:

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business licensing or certification requirements of the local markets;

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compliance challenges due to different laws and regulatory environments, including but not limited to those related to online consumer finance, privacy and data protection, data localization, network security, payments, and tax regimes and policies;

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the need for increased resources to manage regulatory compliance across our overseas businesses;

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challenges of localizing our services and products to meet the local needs;

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failure to effectively or efficiently locate and cooperate with local business partners;

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failure to attract and retain capable talent with international perspectives who can effectively manage and operate local businesses;

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higher costs of doing business globally, including increased accounting, travel, infrastructure and legal compliance costs;

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exchange rate fluctuations;

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international geopolitical tensions and events; and

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political, social and economic instability of each jurisdiction where we operate.

In particular, our overseas business operations are subject to increasing regulatory scrutiny, such as the areas of data privacy protection, interest rate cap and collection practices, which might adversely affect our business operations. While we strive to comply with all applicable laws and regulations and work closely with the regulatory authorities in the regions that we operate, we have limited experience in these markets and differences in interpretation of applicable laws, regulations, and/or policies. As a result, we may incur substantial compliance costs to carry out our business operations in the overseas market and still be subject to potential litigations, regulatory proceedings, penalties or incur other costs.

Furthermore, the regulatory framework for the online consumer finance industry in the oversea markets where we operate is also evolving and may remain uncertain for the foreseeable future. For example, the new rules adopted by the Indonesian regulator, the Financial Services Authority of Indonesia, to progressively reduce the interest rate cap imposed on fintech lenders from the maximum of 0.4% per day in 2023 to 0.3% in 2024 and further to 0.1% by 2026 poses a potential risk to our business operations in Indonesia. If our business operations in the overseas markets cannot grow and develop as expected, our results of operations, financial performance and prospect may be adversely or materially affected.

As we may expand further into new and existing countries, regions and markets, these risks could intensify, and efforts we make to expand our business and operations globally may not be successful. Failure to successfully expand globally and manage the complexity of our global operations could materially and adversely affect our business, financial condition and results of operations.

The loan origination volume on our platforms was RMB137.4 billion in 2021, RMB175.4 billion in 2022, and RMB194.3 billion (US$27.4 billion) in 2023. To maintain the growth momentum of our platforms, we must increase the volume of loans by retaining current users and attracting more users whose needs can be met on our platforms. If there are insufficient qualified loan requests, institutional funding partners may not be able to deploy their capital or their investors’ capital in a timely or efficient manner and may seek other investment opportunities. If there are insufficient funding commitments, borrowers may not be able to obtain capital through our platforms and may turn to other sources for their borrowing needs. If we are unable to attract qualified borrowers and sufficient funding commitments or if borrowers and institutional funding partners do not continue to participate in our platforms at the current rates due to any change we may be required to make to the way we conduct our business to ensure compliance with existing or new laws and regulations or due to any other commercial or regulatory reasons, we may not be able to increase our loan transaction volume and revenues as we expect, and our business and results of operations may be adversely affected. Normally the borrowers find us by downloading our mobile applications from application stores or through our Weixin official account. In response to the general regulatory environment, the operators of application stores or mobile application distributing channels may adjust their application exhibition policies or even remove our mobile applications from their application stores or distribution channels, which may materially and adversely affect our ability to engage new borrowers.

Currently, our institutional funding partners primarily include commercial banks, internet banks, private banks, consumer finance companies, micro-loan companies and trust management companies. If we are unable to retain our existing institutional funding partners or attract new institutional funding partners, or if regulatory authorities promulgated new laws and regulations to regulate, limit, or even prohibit our collaboration with the institutional funding partners, our business, results of operations and financial condition will be adversely affected. As of December 31, 2023, we had cumulatively cooperated with 94 institutional funding partners in China and 7 institutional funding partners in the overseas markets. Our success is dependent upon our ability to maintain and expand our cooperation with institutional funding partners on reasonable commercial terms. If the governmental authorities further tighten the regulations on the online consumer finance industry, our institutional funding partners would become more selective in choosing partners for referring borrowers and facilitating loans for them. The competition we face would become even more intensely. Our cooperation with institutional funding partners is not on an exclusive basis. If we fail to meet their requirements or needs, our financial institution partners may stop cooperating with us and turn to our competitors, which may also materially and adversely affect our business, financial condition and results of operations.

If our existing and new products and services do not achieve sufficient market acceptance, our financial results and competitive position will be harmed.

We have devoted significant resources to, and will continue to emphasize on, upgrading and marketing our existing products and services and enhancing their market awareness. We also incur expenses and expend resources upfront to develop, acquire and market new products and services that incorporate additional features, improve functionality or otherwise make our platforms more desirable to borrowers and institutional funding partners. New products and services must achieve high levels of market acceptance in order for us to recoup our investment in developing, acquiring and bringing them to market.

Our existing and new products and services could fail to attain sufficient market acceptance for many reasons, including:

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borrowers may not find terms of our products, such as costs and credit limit, competitive or appealing;

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our failure to predict market demand accurately and provide products and services that meet this demand in a timely fashion;

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borrowers and institutional funding partners using our platforms may not like, find useful or agree with, any changes;

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defects, errors or failures on our platforms;

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negative publicity about our loan products or our platforms’ performance or effectiveness;

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views taken by regulatory authorities that the new products, services or platform changes do not comply with laws, regulations or rules applicable to us; and

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the introduction or anticipated introduction of competing products by our competitors.

If our existing and new products and services do not achieve adequate acceptance in the market, our competitive position, results of operations and financial condition could be harmed.

As we continue to develop our business, we may offer new products or services. Development and innovation in our business may expose us to new challenges and risks.

We have invested, and intend to continue to invest, significantly in product development. The introduction of new products and services may have inherent and unforeseeable risks and may bring the attention of regulatory authorities. Regulatory measures may impede the conduct of our new products and services and render future innovation unsuccessful. New products and services also require significant expense and resources to attract and acquire users, and they may fail to gain market acceptance for a variety of reasons. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business—If our existing and new products and services do not achieve sufficient market acceptance, our financial results and competitive position will be harmed.”

If our future products and services fail to meet the expectations of borrowers or institutional funding partners, become obsolete, or do not address their needs, we may struggle to remain competitive. This could result in a decline in market share, materially affecting our business, financial condition, and operating results.

Additionally, the development of new products or services may require collaboration with third-party business partners. While we mandate that our partners comply with all applicable laws and regulations, we have limited control over their operations. Consequently, if our third-party partners fail to adhere to legal and regulatory requirements, it could negatively impact our reputation and business.

In 2021, 2022 and 2023, our loan origination volume in China was RMB133.6 billion, RMB171.1 billion and RMB186.4 billion (US$26.3 billion), all of which was funded by institutional funding partners. We carry out our cooperation with institutional funding partners through Shanghai Erxu, a subsidiary of one of the consolidated variable interest entities. Shanghai Erxu focuses on providing services to our institutional funding partners, including borrower referral and preliminary credit assessment, to facilitate their involvement in our online lending operations.

The online consumer finance industry in China is relatively new and evolving. Regulatory authorities’ interpretations of the laws governing this industry are subject to uncertainty. As such, there are uncertainties regarding whether the business practices of Shanghai Erxu will be deemed fully compliant with all applicable laws and regulations. For example, if regulatory authorities interpret the preliminary credit assessment services offered by Shanghai Erxu to our institutional funding partners as credit reference activities, Shanghai Erxu may need to adjust its practices to ensure compliance with relevant regulations. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business—The laws and regulations governing online consumer finance industry in China are developing and evolving and subject to changes. If our business practices are deemed to violate any existing and future applicable laws, regulations or requirements of local regulatory authorities, our business, financial condition and results of operations would be materially and adversely affected.” With the regulatory environment of the consumer finance industry continually evolving, regulatory authorities may introduce new requirements, potentially including a new licensing regime to oversee the type of business activities conducted by Shanghai Erxu. If such new regulatory rules are enacted, we cannot guarantee our ability to obtain the necessary licenses or regulatory approvals in a timely manner, or at all. Failure to do so may materially and adversely affect our business and our ability to sustain operations.

As of the date of this annual report, we have not been subject to any material fines or other penalties under any PRC laws or regulations, including those governing the online consumer finance industry in China. However, if governmental authorities adopt a more stringent regulatory framework for the online consumer finance industry in the future, we may become subject to additional requirements. Compliance with applicable laws and regulations can be costly. Moreover, if our business practices are found to violate any existing or future laws and regulations, we may face injunctions, including orders to cease illegal activities, and other penalties determined by the government authorities.

In addition, institutional funding partners are also subject to evolving regulations concerning online consumer finance industry. For instance, on July 12, 2020, the China Banking and Insurance Regulatory Commission introduced the Interim Measures for Commercial Banks Engaging in Online Lending Business. These measures permit banks to collaborate with various entities in online lending processes, including financing guarantee companies, e-commerce businesses, third-party payment providers, and information technology firms, for activities such as client referral, joint loan origination, risk distribution, and loan collection. However, these measures prohibit banks from accepting credit enhancements from third-party partners without a financing guarantee license or a credit security insurance license. Subsequently, the China Banking and Insurance Regulatory Commission issued the Notice of Further Regulating Online Loan Business of Commercial Banks on February 19, 2021, and the Notice on Strengthening the Management of Commercial Banks’ Online Lending Business and Improving the Quality and Efficiency of Financial Services on July 15, 2022. These regulations generally apply to consumer finance companies and trust companies involved in online lending activities, with some exceptions. For detailed information, please refer to “Item 4. Information on the Company—B. Business Overview—Regulations in the PRC—Regulations Relating to Online Consumer Finance Services.” Given that our institutional funding partners include banks, consumer finance companies, and trust companies, they are obligated to assess and review their collaborations with us in accordance with these regulations. If any of our institutional funding partners impose additional requirements for our collaborations, we may be unable to meet them. Failure to satisfy such requirements could result in the termination of cooperation, thereby adversely impacting our business and operational results.

Regulatory restrictions on institutional funding partners’ acceptance of credit enhancement may adversely affect our business and access to funding.

In our collaboration with institutional funding partners, we engage licensed third-party financing guarantee companies to offer guarantees for the majority of loans funded by our institutional funding partners. In case of borrower default, these companies are obliged to repay the overdue amount to the corresponding institutional funding partner. Subsequently, we purchase creditor’s rights from these guarantee companies. Additionally, we offer security deposits through these companies for loans funded by certain institutional funding partners. Moreover, we also cooperate with third-party insurance companies to provide quality assurance commitments. If a borrower defaults, institutional funding partners can seek insurance compensations under the policies, with guarantee companies covering any remaining overdue amount.

Furthermore, we established three financing guarantee subsidiaries, namely Fujian Zhiyun Financing Guarantee Co., Ltd., Zhiyun (Tianjin) Financing Guarantee Co., Ltd., and Hainan Shenxin Financing Guarantee Co., Ltd., in 2019 and 2020. Under some circumstances, these subsidiaries provide financing guarantee services directly to our institutional funding partners for loans they fund. However, under the Regulations on the Administration of Financing Guarantee Companies, as promulgated by the State Council on June 21, 2017, a financing guarantee company’s outstanding guarantee liabilities may not exceed ten times its net assets. As of March 31, 2024, the net assets of Fujian Zhiyun Financing Guarantee Co., Ltd., Zhiyun (Tianjin) Financing Guarantee Co., Ltd., and Hainan Shenxin Financing Guarantee Co., Ltd. were RMB1,841.5 million (US$259.4 million), RMB1,028.1 million (US$144.8million), and RMB313.6 million (US$44.2 million), respectively. Therefore, the maximum outstanding guarantee liabilities our own guarantee companies can provide may not meet all the needs of our institutional funding partners. Consequently, we will need to continue engaging third-party guarantee companies to provide quality assurance commitments to our institutional funding partners.

The Notice on Regulating and Rectifying “Cash Loan” Business, issued in December 2017, prohibits banks, trust management companies, and consumer finance companies from accepting credit enhancement services or assuming default risks from unlicensed third parties involved in loan facilitation transactions. Additionally, the Regulations on the Supervision and Administration of Financing Guarantee Companies, issued in August 2017, mandate that entities engaging in financing guarantee business must obtain approval from local regulatory authorities. Failure to comply may result in penalties, including business termination, fines, and potential criminal liability. Moreover, the Supplemental Rules to the Administration of Financing Guarantee Companies, issued in October 2019, state that entities providing client referral or credit assessment services to lending institutions are prohibited from offering financing guarantee services without proper regulatory approval. Non-compliance may lead to business operation bans and the requirement to settle existing business. For more detailed information, please refer to “Item 4. Information on the Company—B. Business Overview—Regulations in the PRC—Regulations Relating to Online Consumer Finance Services.”

Despite our efforts to mitigate regulatory risks, we cannot guarantee that regulatory authorities will not interpret or perceive the quality assurance commitments we provide to our institutional funding partners as engaging in financing guarantee business without approval. If we are unable to provide these quality assurance commitments due to regulatory restrictions, we may struggle to maintain our institutional funding partner base, leading to adverse effects on our liquidity, business operations, financial condition, and results. As of the date of this annual report, we have not faced any administrative penalties related to the quality assurance commitments provided to our institutional funding partners. However, if government authorities deem these commitments as unauthorized provision of financing guarantee business, we may face fines and other administrative penalties, significantly impacting our liquidity, business operations, financial condition, and results.

Moreover, on December 31, 2021, the People’s Bank of China published the Regulations on Local Financial Supervision and Administration (Draft for Comments), outlining several key provisions. These include prioritizing local clients for local financial organizations, requiring guidance from the State Council or designated financial regulatory authorities for conducting business outside registered provinces, designating six types of financial organizations, including financing guarantee companies and micro-lending companies, as local financial organizations, providing a transition period for organizations operating outside provinces before the draft’s effectiveness, and imposing penalties, such as correction orders, confiscation of illegal gains or fines, cessation of business operations, and revocation of business licenses, on organizations conducting business outside provinces without approval from competent provincial regulatory authorities. Currently, both the third-party guarantee companies we engage and our own guarantee companies provide nationwide services. However, uncertainties persist regarding when the Regulations on Local Financial Supervision and Administration (Draft for Comments) will become effective and how they will be implemented. Therefore, we cannot guarantee full compliance with these regulations in a timely manner or at all, and we may be required to rectify or terminate any actions deemed illegal by regulatory authorities.

Our collaboration with third-party trust management companies involves setting up trusts, in some of which we invested to provide loans to borrowers we introduce. These trusts are managed by third-party trust management companies. Once we introduce suitable borrowers to these companies, they conduct their own credit assessments to determine whether to approve the loan applications. If a borrower’s application is approved, the trust management company directly disburses the funds from the trust to the borrower’s bank account.

Under the Measures for Banning of Illegal Financial Institutions and Illegal Financial Business Operations, issued by the State Council on July 13, 1998, any entity engaging in financial activities without approval from the People’s Bank of China may be classified as an illegal financial institution. This includes providing loans without the necessary approval from the People’s Bank of China, which is considered an illegal financial business operation. Given the rapid evolution of the online consumer finance industry and the changing regulatory landscape since the enactment of these measures, there is ambiguity surrounding their interpretation and applicability to our operations. While the trust management companies overseeing these trusts are licensed and approved by financial regulatory authorities, and we believe that these companies, rather than us, are the lenders of the loans, there is no guarantee that our interpretation aligns with that of the authorities. We cannot rule out the possibility that our investments in these trusts may be considered as providing loans to the borrowers. Consequently, we may be classified as an illegal financial institution or as engaging in illegal financial business, potentially subjecting us to penalties. These penalties could include the confiscation of illegal gains, along with fines ranging from one to five times the illegal gains, or a fine of RMB100,000 to RMB500,000 if there are no illegal gains, and criminal liability if the violation constitutes a criminal offense.

In addition, the Supreme People’s Court, the Supreme People’s Procuratorate, the Ministry of Public Security, and the Ministry of Justice jointly issued the Guidance on Several Issues for Illegal Lending Regarding Criminal Cases on July 23, 2019. This guidance provides, among others, that if any entity or individual is engaged in providing loans to unspecified individuals consistently for the purpose of profits and without the approval from the regulatory authorities or outside its business scope, which disturbs the stability of financial markets, such entity or individual may face a criminal charge of unfair competition and may be imposed criminal liability in accordance with the applicable laws and regulations. “Providing loans to unspecified individuals consistently” refers to providing loans to entities and individuals no less than ten times within two years. Furthermore, if the actual annual interest rate of the loans provided by such entity or individual exceeds 36%, it would be deemed as an aggravated circumstance when such entity or individual face the abovementioned criminal charge of unfair competition. There are uncertainties as to the interpretation of this guidance, and it is still unclear how the regulatory authorities will interpret and implement it in the future. We cannot rule out the possibility that regulatory authorities may deem our operation activities under the trust arrangements as unfair competition and impose criminal liability on us. If that happens, our business, results of operations and financial condition would be materially and adversely affected.

Interest rates of certain of our loan products may exceed the statutory interest rate limit and therefore part of the interests may not be enforceable through the PRC judicial system.

Our revenue, to the extent they are deemed to be or related to loan interest and expense incurred by the borrower for the loan, is subject to interest rate restrictions imposed by various regulatory authorities in China. According to the Notice on Regulating and Rectifying Cash Loan Business, promulgated by the Internet Finance Rectification Office and the Online Lending Rectification Office in December 2017, in the context of cash loans provided by various types of institutions, the total borrowing costs, including interest and various fees charged to borrowers, must adhere to the upper limit on interest rates for private lending as outlined in the judicial interpretations issued by the Supreme People’s Court. At the time of the promulgation of this notice, the then effective upper limit on interest rates for private lending was 24% per annum, as judicially protected by the PRC court, while interest rates ranging from 24% to 36% per annum were considered legally permissible but unenforceable, and any interest rate exceeding 36% per annum was deemed illegal. For more details, see “Item 4. Information on the Company—B. Business Overview—Regulations in the PRC—Regulations Relating to Online Consumer Finance Services—Regulations on lending activities.”

The Supreme People’s Court subsequently approved two amendments to the Provisions on Several Issues Concerning Laws Applicable to Trials of Private Lending Cases on August 19, 2020 and December 29, 2020, pursuant to which the PRC courts will support a non-financial institution’s claim for interest on loans if their annual interest rate does not exceed four times the one-year Loan Prime Rate at the time of the establishment of the loan agreements. The aforementioned one-year Loan Prime Rate refers to the one-year loan market quoted interest rate issued by the National Bank Interbank Funding Center. As of the date of this annual report, the most recent one-year loan market quoted interest rate issued by the National Bank Interbank Funding Center was 3.45%. The one-year loan market quoted interest rate may decrease in the future.

Also on December 29, 2020, the Supreme People’s Court further issued the Reply Regarding the Scope of Application of the New Private Lending Judicial Interpretation, which provides that the amended Provisions of the Supreme People’s Court on Several Issues Concerning the Application of Law in the Trial of Private Lending Cases are not applicable to disputes arising from the financial business of microloan companies, financing guarantee companies, and five other types of local financial organizations which are regulated by local financial authorities.

Currently, substantially all of our institutional funding partners, with whom we collaborate to fund new loan originations on our platform in China, are financial institutions licensed by regulatory authorities. We believe that the interest rate limit stipulated by the Supreme People’s Court and the subsequent amendments does not apply to loans funded by these financial institutions. However, regulatory authorities may have broad discretion in the administration, interpretation, and enforcement of laws and regulations. Therefore, it is possible that they may hold different opinions. If such an interest rate limit were to be applied to loans on our platform in China, any loans facilitated at or above the limit that become delinquent may result in the part of the interest exceeding the limit being uncollectible through PRC judicial enforcement. Consequently, our institutional funding partners may suffer losses, which could adversely affect our reputation, financial condition, and results of operations.

Furthermore, on March 31, 2021, the People’s Bank of China issued its No. 3 announcement of 2021, commonly referred to as the PBOC No. 3 Announcement. This announcement includes provisions specifying that the annual interest rate of a loan should be calculated as the annualized ratio of all expenses charged from the borrower for the borrowing to the principal actually borrowed. These expenses encompass both interest and various other fees directly related to the borrowing. Compound interest rates and simple interest rates are both permitted for calculating the annual interest rate, provided that if a simple interest rate is used, it must be explicitly disclosed to the borrower. The PBOC No. 3 Announcement applies to deposit-taking financial institutions, consumer finance companies, microloan companies, and internet platforms providing loan application services like ours. Before the promulgation of the PBOC No. 3 Announcement, no rules or regulations explicitly defined the calculation method for the maximum interest rates permitted by the laws. Following the issuance of the No. 3 Announcement, we adjusted our calculation method for loan interest rates on our platform in China accordingly and explicitly disclosed the adjusted calculation method to our borrowers. As of December 31, 2023, the substantial majority of the outstanding balance of loans facilitated on our platform in China had interest rates below 24%. If any of the loans with an interest rate over 24% become delinquent, we may be unable to collect the portion of interest exceeding 24% annually through PRC judicial enforcement. Moreover, regulatory authorities may deem the portion of the interest rate exceeding 24% annually to be invalid, which could adversely and materially affect our business, results of operations, and financial condition. Failure to comply with regulatory requirements, supervision, or guidance may result in orders of suspension, cessation, or rectification, cancelation of qualifications, or other penalties. If we fail to comply with any regulatory requirements, our business, financial condition, results of operations, and cooperation with business partners could be materially and adversely affected.

We operate in markets where the credit infrastructure may still be at an early stage of development.

Credit infrastructure in the markets where we operate may still be at an early stage of development. For example, the Credit Reference Center established by the People’s Bank of China in 2002 has been the only credit reporting system in China. This centrally managed nationwide credit database operated by the Credit Reference Center only records limited credit information, such as tax payments, civil lawsuits, foreclosure and bankruptcy. Currently, this credit database is accessible to banks and market players authorized by the Credit Reference Center. In 2015, the People’s Bank of China announced that it would open the credit reporting market to private sectors with a view to spurring competition and innovation, but it may be a long-term process to establish a widely-applicable, reliable and sophisticated credit infrastructure in the market we operate. Although some of our licensed subsidiaries, such as our micro-loan company and financial guarantee companies, have been approved by the Credit Reference Center to check or report the borrower’s credit status, the cooperation is still at an early stage. The volume of loans for which we check or report borrower financial status from or to the Credit Reference Center through our licensed subsidiaries is relatively small compared with the loan origination volume on our platform in China. In most cases, our institutional funding partners decide at their own discretion if to check any borrower’s credit status at the Credit Reference Center as they conduct credit assessment independently. In general, the borrowers on our platform in China give general authorization to the institutional funding partners to check the borrowers’ credit status from and report the borrowers’ defaults to the Credit Reference Center. We have started data sharing with a credit reference agency licensed by the People’s Bank of China to provide individual credit reference service. However, the licensed credit reference agencies in China are newly established companies. Whether it can efficiently aggregate data from all different types of online databases with accuracy remains to be proven.

For our institutional funding partners, we provide our institutional funding partners with quality assurance commitments for a substantial majority of the loans they have funded. See “Item 4. Information on the Company—B. Business Overview—Quality Assurance Commitments for Our Institutional Funding Partners.” As a result, we are subject to credit risk for such loans.

Any deterioration in our loan portfolio quality and increase in default risks could materially adversely affect our results of operations. We may not be able to effectively control the level of our overdue loans in the future. Our default risks may increase in the future due to a variety of factors, including factors beyond our control, such as a slowdown in economic growth, a deepening of a credit crisis or other adverse macroeconomic trends. Such factors may cause operational, financial and liquidity issues for our borrowers and affect their ability to make loan repayments in a timely manner. Also, our financing guarantee subsidiaries may face a potential reduction in its assets if our institutional funding partners claim substantial repayments due to defaults, and we may need to provide additional capital injections into our financing guarantee subsidiaries, which may adversely affect our financial condition. If we fail to effectively manage credit risk of our loans and our overdue loans increase, our business, financial condition and results of operations may be materially adversely affected.

We are subject to credit cycle and the risk of deterioration of credit profiles of borrowers.

Our business is subject to credit cycle associated with the volatility of general economy. If economic conditions deteriorate, we may face increased risk of default or delinquency of borrowers, which will result in lower returns or losses. In the event that the creditworthiness of our borrowers deteriorates or we cannot track the deterioration of their creditworthiness, the criteria we use for the analysis of borrower credit profiles may be rendered inaccurate, and our risk management system may be subsequently rendered ineffective. This in turn may lead to higher default rates and adverse impacts on our reputation, business, results of operations and financial positions.

If we are unable to accurately assess the creditworthiness of the borrowers on our platforms or if we fail to accurately anticipate and manage the delinquency rates of the loans funded by our institutional funding partners, we will not be able to maintain our credit risk exposure within acceptable parameters. If we are unable to effectively collect these delinquent loans, our liquidity, business operations, financial condition and results of operations would be materially and adversely affected.

We rely on our proprietary credit-scoring model in assessing the creditworthiness of our borrowers and the risks associated with loans. If our credit-scoring model is flawed or ineffective, or if we otherwise fail or are perceived to fail to manage the default risks of loans facilitated through our platforms, our reputation and market share would be materially and adversely affected, which would severely impact our business and results of operations.

Our ability to attract borrowers and institutional funding partners to, and build trust in, our platforms is significantly dependent on our ability to effectively evaluate borrowers’ credit profiles and likelihood of default. To conduct this evaluation, we utilize our proprietary credit assessment model, known as the Magic Mirror Model, which is built based on data from multiple sources, including credit reference agency, and strengthened by our sophisticated artificial intelligence and advanced machine learning techniques. The Magic Mirror Model categorizes borrowers into different credit ratings according to their risk profiles, based on which our risk pricing system assigns them appropriate interest rates, credit limits and loan durations. However, the Magic Mirror Model may not effectively predict future loan losses. Subject to credit assessment result for each loan application, a borrower is allowed to take out multiple loans at a time on our platforms if their existing loans are not in default and the total outstanding balance is within the approved credit limit for the type of loan the borrower applies for. Credit limits are set by loan products, and thus a borrower may have a credit limit for each type of loans on our platforms. A borrower’s credit limit for a particular type of loan is determined considering a range of factors, including (i) the borrower’s credit level based on their Magic Mirror score—borrowers with better Magic Mirror credit scores are generally given higher credit limits, (ii) the borrower’s credit needs, such as the type of loans being applied for, (iii) the borrower’s credit limits and credit performance for other types of loans on our platforms, and (iv) overall investment demand from investors. A new Magic Mirror credit score is generated each time a borrower applies for a loan, which may change the borrower’s credit limit for that type of loan. As such, it is possible that borrowers may take out new loans on our platforms to pay off their other existing loans we facilitated or for other purposes. Given the practical difficulty in tracking and controlling the usage of borrowed funds, we are not able to effectively prevent borrowers from “rolling over” their loans on our platforms. Although the Magic Mirror Model looks less favorably upon borrowers who have high credit line utilization ratios, it may not be able to timely and accurately adjust down the credit rating assigned to a borrower if such borrower masks their deteriorating creditworthiness by refinancing existing loans with new loans on our platforms. If we are unable to effectively classify borrowers into the relative risk categories, we may be unable to offer attractive interest rates for borrowers and returns for investors and effectively manage the default risks of loans facilitated through our platforms. We consistently refine the algorithms, data processing and machine learning used by the Magic Mirror Model, but if any of these decision-making and scoring systems contain programming or other errors, are ineffective or the data provided by borrowers or third parties are incorrect or stale, our loan pricing and approval process could be negatively affected, resulting in mispriced or misclassified loans or incorrect approvals or denials of loans.

For loans funded by our institutional funding partners, they will review borrowers’ applications and may rely on our preliminary credit assessment we provide to them and then decide if to provide loans to such borrower as well as the credit limit after their independent credit review. If any data provided by borrowers or third parties are incorrect or stale or our preliminary credit assessment service is not effective, our cooperation with institutional funding partners could be negatively affected. In addition, we bear credit risks for a substantial majority of the loans funded by institutional funding partners to borrowers we introduced. If our ability to provide preliminary credit assessment is not as effective or efficient as expected, our liquidity, financial conditions and results of operations may be materially and adversely affected.

In addition, if a borrower’s financial condition deteriorates after their loan application is approved, we may not be able to take measures to prevent such borrower’s default and thereby maintain a reasonably low default rate for loans facilitated through our platforms.

Credit and other information that we receive from prospective borrowers and third parties about a borrower may be inaccurate or may not accurately reflect the borrower’s creditworthiness, which may compromise the accuracy of our credit assessment.

We obtain certain information from prospective borrowers and third parties for the purpose of credit assessment, which may not be complete, accurate, or reliable. A credit score assigned to a borrower may not reflect that particular borrower’s actual creditworthiness because the credit score may be based on outdated, incomplete or inaccurate borrower information. Additionally, once we have obtained a borrower’s information, the borrower may subsequently (i) become delinquent in the payment of an outstanding obligation; (ii) default on a pre-existing debt obligation; (iii) take on additional debt; or (iv) sustain other adverse financial events, making the information we have previously obtained inaccurate.

To better assess borrowers’ creditworthiness, we joined the credit and information sharing system set up by the National Internet Finance Association of China. A participant of this sharing system can obtain a borrower’s credit information shared by other participants. However, this sharing system is still at the primary stage of development and there are a limited number of participants and limited amount information in this sharing system. In addition, we share data with a credit reference agency licensed by the People’s Bank of China to provide individual credit reference service. However, it remains unclear as to whether the credit reference agency we cooperate with can efficiently and accurately aggregate data from all different types of online databases. As a result, we cannot determine whether borrowers have outstanding loans through other consumer finance marketplaces not participating in this sharing system at the time they obtain a loan from us. This creates the risk that a borrower may borrow money through our platforms in order to pay off loans on other consumer finance marketplaces and vice versa. If a borrower incurs additional debt before fully repaying any loan such borrower takes out on our platforms, the additional debt may impair the ability of that borrower to make payments on their loan. In addition, the additional debt may adversely affect the borrower’s creditworthiness generally, and could result in the financial distress or insolvency of the borrower. To the extent that a borrower has or incurs other indebtedness and cannot repay all of their indebtedness, the obligations under the loans will rank pari passu to each other and the borrower may choose to make payments to other creditors rather than to institutional funding partners on our platforms.

Furthermore, the Notice on Regulating and Rectifying “Cash Loan” Business provided, among others, that funds from banks cannot be used for “campus loan” business. See “Item 4. Information on the Company—B. Business Overview—Regulations in the PRC—Regulations Relating to Online Consumer Finance Services—Regulations on lending activities.” We have adopted several measures to identify college students and try to prevent them borrowing money from our platforms. However, we cannot assure that those measures are able to identify all college students on our platforms.

Such inaccurate or incomplete borrower information could compromise the accuracy of our credit assessment and adversely affect the effectiveness of our risk management, which could in turn harm our reputation, and as a result our business and results of operations could be materially and adversely affected.

Loss of or failure to maintain relationship with our strategic partners may materially and adversely affect our business and results of operations.

We currently rely on a number of strategic partners in various aspects of our business. For example, in terms of user acquisition, we acquire a significant portion of our borrowers through a limited number of online channels from a limited number of our strategic partners. To ensure compliance with the regulatory requirements regarding “disconnecting direct connection,” we collaborate with a licensed credit reference agency to provide borrowers’ personal credit information to our institutional funding partners. We rely on certain data partners to collect credit information of borrowers for credit scoring and fraud detections. We anticipate that we will continue to leverage strategic relationships with existing strategic partners to grow our business while pursuing new relationships with additional strategic partners.

Pursuing, establishing and maintaining relationships with strategic partners require significant time and resources as does integrating third-party data and services with our system. Our current agreements with partners generally do not prohibit them from working with our competitors or from offering competing services. Our competitors may be more effective in providing incentives to our partners to favor their products or services, which may in turn reduce the volume of loans facilitated through our platforms. Certain types of partners may devote more resources to support their own competing businesses. In addition, these partners may not perform as expected under our agreements with them, and we may have disagreements or disputes with them, which could adversely affect our brand and reputation. If we cannot successfully enter into and maintain effective strategic relationships with strategic partners, our business will be harmed.

In addition, if any of our partners fails to perform properly, we cannot assure you that we will be able to find an alternative in a timely and cost-efficient manner or at all. Any of these occurrences could result in our diminished ability to operate our business, potential liability to borrowers and institutional funding partners, inability to attract borrowers and institutional funding partners, reputational damage, regulatory intervention and financial harm, which could negatively impact our business, financial condition and results of operations.

We have obligations to verify information relating to borrowers and detecting fraud. If we fail to perform such obligations to meet the requirements of laws and regulations, we may be subject to liabilities.

In China, our business involves connecting institutional funding partners and borrowers, which constitutes an intermediary service. Our contracts with institutional funding partners and borrowers are considered intermediation contracts under the Civil Code of the PRC. According to this code, an intermediary who intentionally conceals material information or provides false information in connection with the conclusion of an intermediation contract, resulting in harm to the client’s interests, may not claim any service fee for its intermediary services and is liable for any damage incurred by the client. Therefore, if we fail to provide any material information to institutional funding partners and are found to be at fault, for failure or deemed failure to exercise proper care, to conduct adequate information verification or supervision, we could be subject to liabilities as an intermediary under the Civil Code of the PRC.

We leverage a large database of past fraud accounts information and sophisticated rule-based detection technology in detecting fraudulent behaviors. Based on new data collected and fraudulent behaviors detected during our daily business operations, we update our database on an as-needed basis. However, as the laws, regulations, rules, and governmental policies governing the online consumer finance industry are relatively new, it remains unclear to what extent online consumer finance platforms should exercise care in detecting fraud. Although we believe that as an information intermediary, we should not bear the credit risk for institutional funding partners exceeding the portion that we agreed to bear, as long as we take reasonable measures to detect fraudulent behaviors, we cannot assure you that we would not be subject to any liabilities under the current laws, regulations, rules, and governmental policies governing the online consumer finance industry if we fail to detect any fraudulent behavior. If that were to occur, our results of operations and financial condition could be materially and adversely affected.

We may be deemed to use our own funds to finance certain loans and therefore be subject us to regulatory risks.

In connection with our quality assurance commitments provided through third-party financing guarantee companies, when a borrower defaults, the third-party financing guarantee companies will repay the full overdue amounts to our institutional funding partners. Subsequently, we will purchase the creditors’ rights from these third-party financing guarantee companies, and the borrowers are required to repay the remaining principal and interest to us. We cannot rule out the possibility that regulatory authorities may view this business practice as constituting the provision of loans without the permission of the People’s Bank of China, potentially leading to our classification as an illegal financial institution. If found in violation of these measures, we would be subject to fines, penalties, or other liabilities, which could materially and adversely affect our business, financial condition, and prospects.

Our failure to compete effectively could adversely affect our results of operations and market share.

The online consumer finance industry in the markets where we operate is competitive and evolving. We compete with financial products and companies that attract borrowers and institutional funding partners. Primarily, we compete with leading online consumer finance companies in the markets where we operate. Additionally, concerning borrowers, we also compete with traditional financial institutions, such as consumer finance business units in commercial banks, credit card issuers, and other consumer finance companies. With respect to institutional funding partners, our product offerings also compete with other products and asset classes, such as equities, bonds, investment trust products, bank savings accounts, real estate, and alternative asset classes.

Our competitors operate with different business models, have different cost structures, or participate selectively in different market segments. Ultimately, they may prove more successful or adaptable to new regulatory, technological, and other developments. Some of our current and potential competitors have significantly more financial, technical, marketing, and other resources than we do and may be able to devote greater resources to the development, promotion, sale, and support of their platforms. Moreover, our competitors may possess more extensive borrower or funding sources, greater brand recognition and loyalty, and broader partner relationships than us. Additionally, a current or potential competitor may acquire one or more of our existing competitors or form a strategic alliance with one or more of our competitors. Any of the foregoing could adversely affect our business, results of operations, financial condition, and future growth.

Furthermore, our competitors may excel at developing new products, responding faster to new technologies, and undertaking more extensive marketing campaigns. When new competitors seek to enter our target market or existing market participants seek to increase their market share, they sometimes undercut the pricing and/or terms prevalent in that market, which could adversely affect our market share or ability to exploit new market opportunities. Also, since the online consumer finance industry in the markets where we operate is relatively new and fast-evolving, potential institutional funding partners and borrowers may not fully understand how our platforms work and may not fully appreciate the additional customer protections and features that we have invested in and adopted on our platforms compared to others. Our pricing and terms could deteriorate if we fail to meet these competitive challenges. Furthermore, to the extent that our competitors can offer more attractive terms to our cooperation partners, such cooperation partners may choose to terminate their relationships with us. If we are unable to compete with such companies and meet the need for innovation in our industry, the demand for our platforms could stagnate or substantially decline, resulting in reduced revenues or our platforms failing to achieve or maintain more widespread market acceptance, any of which could harm our business and results of operations.

If we fail to promote and maintain our brand in a cost-efficient way, our business and results of operations may be harmed.

We believe that developing and maintaining awareness of our brand effectively is critical to attracting new and retaining existing borrowers and institutional funding partners to our platforms. This depends largely on the effectiveness of our marketing efforts and the success of the channels we use to promote our platforms. If any of our current marketing channels become less effective, if we are unable to continue to use any of these channels, if the cost of using these channels were to significantly increase or if we are not successful in generating new channels, we may not be able to attract new borrowers and institutional funding partners in a cost-effective manner or convert potential borrowers and institutional funding partners into active borrowers and institutional funding partners on our platforms.

Our efforts to build our brand have caused us to incur significant expenses, and it is likely that our future marketing efforts will require us to incur significant additional expenses. These efforts may not result in increased revenues in the immediate future or at all and, even if they do, any increases in revenues may not offset the expenses incurred. If we fail to successfully promote and maintain our brand while incurring substantial expenses, our results of operations and financial condition would be adversely affected, which may impair our ability to grow our business.

Any negative publicity with respect to us, the online consumer finance industry in general and our third-party partners may materially and adversely affect our business and results of operations.

Reputation of our brand is critical to our business and competitiveness. Factors that are vital to our reputation include but are not limited to our ability to:

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maintain the quality and reliability of our platforms;

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provide borrowers and institutional funding partners with a superior experience on our platforms;

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enhance and improve our credit assessment and risk-pricing models;

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effectively manage and resolve borrower and institutional funding partner complaints; and

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effectively protect personal information and privacy of borrowers and institutional funding partners.

Any malicious or negative allegation made by the media or other parties about the foregoing or other aspects of our company, including but not limited to our management, business, compliance with law, financial condition or prospects, whether with merit or not, could severely compromise our reputation and harm our business and operating results.

As the online consumer finance industry is relatively new in the markets where we operate, and the regulatory framework for this industry is also evolving, negative publicity about this industry may arise from time to time. Negative publicity about the online consumer finance industry in general may have a negative impact on our reputation, regardless of whether we have engaged in any inappropriate activities. Governmental authorities in the markets where we operate have also instituted specific rules to develop a more transparent regulatory environment for the online consumer finance industry. See “Item 4. Information on the Company—B. Business Overview—Regulations in the PRC—Regulations Relating to Online Consumer Finance Services” for details. Non-compliance with these regulations by any players in the online consumer finance industry within our market may adversely impact the reputation of the industry as a whole. Any negative development in, or negative perception of, the online consumer finance industry as a whole, even if factually incorrect or based on isolated incidents, could compromise our image, undermine the trust and credibility we have established, and impose a negative impact on our ability to attract new borrowers and institutional funding partners. Negative developments in the online consumer finance industry, such as widespread borrower defaults, aggressive practices, or misconduct in loan collection, fraudulent behavior, and/or the closure of other online consumer finance platforms, may also lead to tightened regulatory scrutiny of the sector and limit the scope of permissible business activities that may be conducted by online consumer finance platforms like us.

In addition, negative publicity about our partners, outsourced service providers, or other counterparties, such as negative publicity about their loan collection practices and any failure by them to adequately protect the information of our borrowers, comply with applicable laws and regulations, or otherwise meet required quality and service standards, could harm our reputation. If any of the foregoing takes place, our business and results of operations could be materially and adversely affected.

Fraudulent activity on our platforms could negatively impact our operating results, brand and reputation and cause the use of our loan products and services to decrease.

We are subject to the risk of fraudulent activity both on our platforms and associated with borrowers, institutional funding partners and other third parties handling borrower information. Our resources, technologies and fraud detection tools may be insufficient to accurately detect and prevent fraud. Significant increases in fraudulent activity could negatively impact our brand and reputation, result in losses suffered by the institutional funding partners, reduce the volume of loans facilitated through our platforms and lead us to take additional steps to reduce fraud risk, which could increase our costs and expenses. High profile fraudulent activity could even lead to regulatory intervention, and may divert our management’s attention and cause us to incur additional expenses and costs. If any of the foregoing were to occur, our results of operations and financial condition could be materially and adversely affected.

Our current level of fee rates may decline in the future. Any material reduction in our fee rates could reduce our profitability.

We earn a substantial majority of our revenues from the service fees that we collect from institutional funding partners or third-party guarantee companies on loans facilitated through our platforms, as well as the fees that we charge borrowers as guarantee fees. The fee rates may vary among different business models and third-party guarantee companies or institutional funding partners. Any material reduction in our fee rates could have a significant adverse effect on our business, results of operations and financial condition.

Fluctuations in interest rates could negatively affect transaction volume facilitated through our platforms.

All loans facilitated through our platforms are issued with fixed interest rates. We determine the interest rates of the loans on our platforms primarily based on market conditions and the general interest rate environment, rather than by referencing a specific benchmark rate. Fluctuations in interest rates may affect the demand for loan services on our platforms. For example, a decrease in interest rates may cause potential borrowers to seek lower-priced loans from other channels. A high-interest-rate environment will likely increase the funding costs for our institutional funding partners, which may lead to a higher rate of return required by such institutional funding partners and thereby dampen their desire to fund borrowers on our platforms. If we fail to respond to fluctuations in interest rates promptly and adjust our loan product offerings, potential and existing investors may lose potential interest returns on our platforms and products, delay or reduce future loan investments, and potential and existing borrowers may show less interest in our loan products and platforms. Consequently, fluctuations in the interest rate environment may discourage institutional funding partners and borrowers from participating in our platforms, adversely affecting our business.

We may not be able to obtain additional capital on favorable terms or at all.

We need to make continued investments in facilities, hardware, software, technology systems and to retain talents to remain competitive. Due to the unpredictable nature of the capital markets and our industry, we cannot assure you that we will be able to raise additional capital on terms favorable to us, or at all, if and when required, especially if we experience disappointing operating results. If adequate capital is not available to us as required, our ability to fund our operations, take advantage of unanticipated opportunities, develop or enhance our infrastructure or respond to competitive pressures could be significantly limited, which would adversely affect our business, financial condition and results of operations. If we do raise additional funds through the issuance of equity or convertible debt securities, the ownership interests of our shareholders could be significantly diluted. These newly issued securities may have rights, preferences or privileges senior to those of existing shareholders.

Misconduct, errors and failure to function by our employees and third-party service providers could harm our business and reputation.

We are exposed to many types of operational risks, including the risk of misconduct and errors by our employees and third-party service providers. Our business depends on our employees and third-party service providers to interact with potential borrowers and institutional funding partners, process large numbers of transactions and support the loan collection process, all of which involve the use and disclosure of personal information. We could be materially adversely affected if transactions were redirected, misappropriated or otherwise improperly executed, if personal information was disclosed to unintended recipients or if an operational breakdown or failure in the processing of transactions occurred, whether as a result of human error, purposeful sabotage or fraudulent manipulation of our operations or systems. In addition, the manner in which we store and use certain personal information and interact with borrowers and institutional funding partners through our platforms is governed by various laws. It is not always possible to identify and deter misconduct or errors by employees or third-party service providers, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses. If any of our employees or third-party service providers take, convert or misuse funds, documents or data or fail to follow protocol when interacting with borrowers and institutional funding partners, we could be liable for damages and subject to regulatory actions and penalties. We could also be perceived to have facilitated or participated in the illegal misappropriation of funds, documents or data, or the failure to follow protocol, and therefore be subject to civil or criminal liability. In addition to our own collecting team, we also use certain third-party service providers for loan collection services. Aggressive practices or misconduct by any of our third-party service providers in the course of collecting loans could damage our reputation.

Any failure to comply with existing or future laws and regulations related to data protection, data security, cybersecurity or personal information protection could lead to liabilities, administrative penalties or other regulatory actions, which could negatively affect our operating results and business.

The regulatory framework for the collection, use, safeguarding, sharing, transfer and other processing of data and personal information worldwide is rapidly evolving and is likely to remain uncertain for the foreseeable future. As the regulations regarding data protection, data security, cybersecurity and personal information protection are quickly evolving in China and globally, we may become subject to new laws and regulations applying to the solicitation, collection, processing or use of personal information that could affect how we store, process and share data of our borrowers.

In particular, the PRC government has tightened the regulation of the storage, sharing, use, disclosure and protection of personal data and user data in recent years. PRC laws and regulations require internet service providers and other network operators to clearly state the authorized purpose, methods and scope of the collection and usage of personal data and obtain the consent of users for the processing of this personal data, as well as to establish user information protection systems with remedial measures. For details of these regulations, please refer to “Item 4. Information on the Company—B. Business Overview—Regulations in the PRC—Regulations Relating to Internet Companies—Regulations on internet security.”

On May 1, 2021, the Regulations on the Scope of Necessary Personal Information Collected by the Frequently Used Mobile Applications came into effect. See “Item 4. Information on the Company—B. Business Overview—Regulations in the PRC—Regulations Relating to Internet Companies—Regulations on internet security.” In 2021, the Ministry of Industry and Information Technology and its local branch decided that our PPDai mobile application was collecting users’ personal information in a non-compliance way. We had taken remedial measures in a timely manner and reported our rectification measures to the governmental authorities. The authorities did not take any further follow-up inquiries or investigations into the identified issues after our adoption of remedial measures. However, if the authorities identify any new non-compliance issues related to data protection or cybersecurity in the future, they may order us to make additional rectifications. If our remedial measures at that time are not satisfactory to them, we may be subject to government fines, penalties, suspension of our non-compliant operations, or removal of our app from application stores, which could materially and adversely affect our business and operating results.

On August 20, 2021, the Standing Committee of the National People’s Congress of China promulgated the Personal Information Protection Law, effective on November 1, 2021, which further details the general rules and principles on personal information processing and further increases the potential liability of personal information processor. See “Item 4. Information on the Company—B. Business Overview—Regulations in the PRC—Regulations on internet security.” Our mobile apps and websites only collect user personal information that we believe is necessary to provide the corresponding services. We update our privacy policies from time to time to meet the latest regulatory requirements of the Cyberspace Administration of China and other authorities and adopt technical measures to protect data and ensure cybersecurity in a systematic way. Nonetheless, the Personal Information Protection Law raises the protection requirements for processing personal information, and many specific requirements of the Personal Information Protection Law remain to be clarified by the Cyberspace Administration of China, other regulatory authorities, and courts in practice. If the Cyberspace Administration of China or other governmental authorities deem us as collecting excessive personal information, including the sensitive personal information, that beyond the necessity to provide the corresponding services, we will have to make adjustments to our business practices to comply with the personal information protection laws and regulations.

On November 14, 2021, the Cyberspace Administration of China released the Regulations on the Network Data Security (Draft for Comments). See “Item 4. Information on the Company—B. Business Overview—Regulations in the PRC—Regulations Relating to Internet Companies—Regulations on internet security.” As of the date of this annual report, the draft regulations were released for public comment only, and their respective provisions and the anticipated adoption or effective date may be subject to change with substantial uncertainty. The Draft Data Security Regulations remain unclear on whether the requirements will be applicable to companies that have been listed in the United States, such as us. We cannot predict the impact of the Draft Data Security Regulations, if any, at this stage, and we will closely monitor and assess any development in the rule-making process. If the enacted versions of the Draft Data Security Regulations mandate clearance of cybersecurity review and other specific actions to be completed by China-based companies listed on a U.S. stock exchange, such as us, we face uncertainties as to whether such clearance can be timely obtained, or at all.

On January 4, 2022, the Cyberspace Administration of China, the National Development and Reform Commission, the Ministry of Industry and Information Technology, and several other administrations jointly published the amended Measures for Cybersecurity Review, which became effective on February 15, 2022. The amended Measures for Cybersecurity Review further restates and expands the applicable scope of the cybersecurity review. See “Item 4. Information on the Company—B. Business Overview—Regulations in the PRC—Regulations Relating to Internet Companies—Regulations on internet security.” As of the date of this annual report, we have not been involved in any formal investigations on cybersecurity review made by the Cyberspace Administration of China on such basis. In anticipation of the strengthened implementation of cybersecurity laws and regulations and the continued expansion of our business, we face potential risks if we are deemed as a critical information infrastructure operator, or if our data processing activities raise “national security” concern under the amended Measures for Cybersecurity Review. In such case, if we are not able to comply with the cybersecurity and network data security requirements in a timely manner, or at all, we may be subject to government enforcement actions and investigations, fines, penalties, suspension of our non-compliant operations, or removal of our app from the application stores, among other sanctions, which could materially and adversely affect our business and results of operations. In addition to the cybersecurity review, the Cyberspace Administration of China released the Regulations on the Network Data Security (Draft for Comments) requires that data processors processing “important data” or listed overseas shall conduct an annual data security assessment by itself or commission a data security service provider to do so and submit the assessment report of the preceding year to the municipal cybersecurity department by the end of January each year. If a final version of these draft regulations is adopted, we may be subject to review when conducting data processing activities and annual data security assessment and may face challenges in addressing its requirements and make necessary changes to our internal policies and practices in data processing.

The regulatory authorities in China continue to monitor websites and apps in relation to the protection of personal information and data, privacy and information security, and may impose additional requirements from time to time. There are uncertainties as to the interpretation and application of laws in one jurisdiction which may be interpreted and applied in a manner inconsistent to another jurisdiction and may conflict with our current policies and practices or require changes to the features of our system. As a result, we cannot assure that our existing user information protection system and technical measures will be considered sufficient under all applicable laws and regulations. If we are unable to address any information protection concerns, any compromise of security that results in unauthorized disclosure or transfer of personal data, or to comply with the then applicable laws and regulations, we may incur additional costs and liability and result in governmental enforcement actions, litigation, fines and penalties or adverse publicity and could cause our borrowers and institutional partners to lose trust in us, which could have a material adverse effect on our business, results of operations, financial condition and prospects.

We face indirect technology, cybersecurity and operational risks relating to third parties.

We also face indirect technology, cybersecurity and operational risks relating to the third parties upon whom we rely to facilitate or enable our business activities, such as third-party online payment service providers who manage accounts for certain borrower and institutional funding partner funds. As a result of increasing consolidation and interdependence of technology systems, a technology failure, cyber-attack or other information or security breach that significantly compromises the systems of one entity could have a material impact on its counterparties. Although our agreements with third-party payment service providers provide that each party is responsible for the cybersecurity of its own systems, any cyber-attack, computer viruses, physical or electronic break-ins or similar disruptions of such third-party payment service providers could, among other things, adversely affect our ability to serve our users, and could even result in misappropriation of funds of our borrowers and institutional funding partners. If that were to occur, both we and third-party payment service providers could be held liable to borrowers and institutional funding partners who suffer losses from the misappropriation.

Our business depends on third-party service providers to interact with potential borrowers and institutional funding partners, process large numbers of transactions and support the loan collection process, all of which involve the use and disclosure of personal information. Compliance with applicable data protection laws and regulations is a rigorous and time-intensive process. We have established a comprehensive administrative mechanism and standardized employee training system for stringent information security management, and we have received ISO 27001 Information Security Management System Certification, ISO 9001 Quality Management System Certification, and ISO 27701 Privacy Management System Certification. We have also been deploying innovative technologies to promote user data protection. For example, we are a member of the National Information Security Standardization Technical Committee, maintaining up to date knowledge and compliant regarding the latest cyber-security regulatory requirements.

For credit assessment purposes, we collaborate with third-party data providers to obtain borrowers’ credit and behavioral data, with their general consent. Although we require these providers to guarantee that data provided is lawfully collected and authorized, and that their collaboration with us complies with all applicable laws and regulations, we cannot assure you of strict compliance during the entire data collection, usage, storage, and processing process. To ensure compliance with regulatory requirements regarding “disconnecting direct connection,” most of our data partners collaborate with a licensed credit reference agency to provide borrowers’ personal credit information to us. The licensed credit reference agency undertakes that the products and service it provides to us is in compliance with applicable laws and regulations. If the licensed credit reference agency or any of our third-party data providers fails to comply with applicable data protection laws and regulations, our reputation could suffer and we could become subject to regulatory intervention. Furthermore, our collaboration with third-party data providers may subject us to significant civil or criminal penalties and negative publicity or result in the delayed or halted processing of personal data that we need to undertake to carry on our business, which could have a material adverse effect on our business, financial condition and results of operations. See “—Cyber-attacks, computer viruses, physical or electronic break-ins or similar disruptions of us or of a third party could result in disclosure or misuse of confidential information and misappropriation of funds of our borrowers and institutional funding partners, subject us to liabilities, cause reputational harm and adversely impact our results of operations and financial condition.”

If our ability to collect delinquent loans is impaired, our business and results of operations might be materially and adversely affected.

We primarily rely on our in-house collection team to handle the collection of delinquent loans. We also engage certain third-party collection service providers to assist us with loan collection. If our or third-party agencies’ primary collection methods, such as phone calls, text messages, legal letters and legal proceedings, are not as effective as they were and we fail to respond quickly and improve our collection methods, our delinquent loan collection rate may decrease, and our investors may suffer loss. In addition, we bear credit risks for a substantial majority of the loans funded by our institutional funding partners to borrowers we introduced. If our ability to collect delinquent loans is not as effective or efficient as expected, our liquidity, financial conditions and results of operations could be materially and adversely affected.

Moreover, according to the Notice on Regulating and Rectifying “Cash Loan” Business, promulgated by the Internet Finance Rectification Office and the Online Lending Rectification Office in December 2017, delinquent loans in China may not be collected by means of violence, intimidation, insult, defamation, or harassment. Any violation of this notice may result in penalties, including but not limited to suspension of operation, orders to make rectification, condemnation, revocation of license, orders to cease business operations, and even criminal liabilities. If the collection methods we use in collecting delinquent loans are viewed by the borrowers or regulatory authorities as harassments, threats or other illegal conducts, we may be subject to lawsuits initiated by the borrowers or prohibited by the regulatory authorities from using certain collection methods. If this were to happen and we fail to adopt alternative collection methods in a timely manner or the alternative collection methods are proven not effective, we might not be able to maintain our delinquent loan collection rate and the investors’ confidence in our platforms may be negatively affected.

Furthermore, the Ministry of Public Security promulgated the Guidance on Several Issues for Soft Violence Regarding Criminal Cases on April 9, 2019, which provides, among other things, that harassment by means of the internet or telecommunication to disturb people’s normal life, work, production, business, and social order may be deemed as soft violence, subjecting individuals to criminal liabilities. In 2019, several public security authorities in different provinces of China took actions against some loan collection outsourcing companies, and even criminal cases were reported to have been charged against some of them. We have established strict implementation policies to ensure that our collection personnel and third-party collection service providers do not engage in aggressive practices. However, our in-house collection team is large, and we cannot assure that each member will strictly comply with our policies. Furthermore, we have no direct control over the management of third-party collection service providers. If any practices by our in-house collection team members or our third-party collection service providers are deemed by governmental authorities as aggressive collection or soft violence, our reputation and business could be materially and adversely affected. If any of the foregoing takes place and impairs our ability to collect delinquent loans, the transaction volumes on our platforms will decrease, and our business and results of operations could be materially and adversely affected.

Cyber-attacks, computer viruses, physical or electronic break-ins or similar disruptions of us or of a third party could result in disclosure or misuse of confidential information and misappropriation of funds of our borrowers and institutional funding partners, subject us to liabilities, cause reputational harm and adversely impact our results of operations and financial condition.

Our computer system and data storage facilities, the networks we use, the networks of other third parties with whom we interact, are potentially vulnerable to physical or electronic computer break-ins, viruses and similar disruptive problems or security breaches. A party that is able to circumvent our security measures could misappropriate proprietary information or customer information, jeopardize the confidential nature of the information we transmit over the internet and mobile network or cause interruptions in our operations. We or our service providers may be required to invest significant resources to protect against the threat of security breaches or to alleviate problems caused by any breaches.

In addition, our platforms collect, store, and process certain personal and other sensitive data from our borrowers. The data that we have processed and stored makes us or third-party service providers who host our servers a target and potentially vulnerable to cyber-attacks, computer viruses, physical or electronic break-ins or similar disruptions. While we have taken steps to protect the confidential information that we have access to and put in place internal reporting procedures relating to cybersecurity incidents, our security measures could be breached. As of the date of this annual report, we have not experienced any material cyber security incidents. However, we cannot assure you that our security measures will not be breached in the future. Because techniques used to sabotage or obtain unauthorized access to systems change frequently and generally are not recognized until they are launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures. Any accidental or willful security breaches or other unauthorized access to our platforms could cause confidential borrower and institutional funding partner information to be stolen and used for criminal purposes.

We also face indirect technology, cybersecurity and operational risks relating to the third parties upon whom we rely to facilitate or enable our business activities, including, among others, third-party online payment service providers who manage accounts for certain borrower and institutional funding partner funds. As a result of increasing consolidation and interdependence of technology systems, a technology failure, cyber-attack or other information or security breach that significantly compromises the systems of one entity could have a material impact on its counterparties. Although our agreements with third-party payment service providers provide that each party is responsible for the cybersecurity of its own systems, any cyber-attack, computer viruses, physical or electronic break-ins or similar disruptions of such third-party payment service providers could, among other things, adversely affect our ability to serve our users, and could even result in misappropriation of funds of our borrowers and institutional funding partners. If that were to occur, both we and third-party payment service providers could be held liable to borrowers and institutional funding partners who suffer losses from the misappropriation.

Security breaches or unauthorized access to or sharing of confidential information could also expose us to liability related to the loss of the information, time-consuming and expensive litigation and negative publicity. In addition, leakages of confidential information may be caused by third-party service providers or business partners. If security measures are breached because of third-party action, employee misconduct or error, failure in information security management, malfeasance or otherwise, or if design flaws in our technology infrastructure are exposed and exploited, our relationships with borrowers, institutional funding partners and business partners could be severely damaged, we may become susceptible to future claims if our borrowers, institutional funding partners or business partners suffer damages, and could incur significant liability, and our business and operations could be adversely affected.

We are subject to governmental regulation and other legal obligations related to the protection of personal data, privacy and information security in the regions where we do business, and there has been and may continue to be a significant increase in such laws that restrict or control the use of personal data. See “—Any failure to comply with existing or future laws and regulations related to data protection, data security, cybersecurity or personal information protection could lead to liabilities, administrative penalties or other regulatory actions, which could negatively affect our operating results and business.”

Any failure by our institutional funding partners or third-party service providers to comply with applicable anti-money laundering and anti-terrorism financing laws and regulations could damage our reputation.

If any of our institutional funding partners fails to comply with applicable anti-money laundering laws and regulations, it could become subject to regulatory intervention or sanction and its business may be adversely affected, which could further have a material adverse effect on our reputation, business financial condition and results of operations.

In addition, we currently rely on the third-party service providers, in particular payment companies, that manage the transfer of funds between borrowers and institutional funding partners, to appropriately design and adopt their own appropriate anti-money laundering policies and procedures. The payment companies are subject to anti-money laundering obligations under applicable anti-money laundering laws and regulations and are regulated by competent regulatory authorities. If any of our third-party service providers fails to comply with applicable anti-money laundering laws and regulations, our reputation could suffer and we could become subject to regulatory intervention, which could have a material adverse effect on our business, financial condition and results of operations.

For example, in October 2018, the People’s Bank of China, the China Banking and Insurance Regulatory Commission, and the CSRC, jointly issued the Anti-money Laundering and Anti-terrorism Financing Administrative Measures for Internet Finance Institution, which states that internet finance institutions in China are obliged to accept the anti-money laundering and anti-terrorism financing inspection conducted by the People’s Bank of China and its branches. These measures also authorized the establishment of the internet finance anti-money laundering and anti-terrorism financing monitor platform, by the National Internet Finance Association under the instruction of the People’s Bank of China and other financial governmental authorities, to improve the online monitoring mechanism and information sharing between the institutions. To comply with these measures, we have formulated policies, including internal controls and “know-your-customer” procedures. However, we cannot assure you that we will be able to maintain effective anti-money laundering and anti-terrorism financing policies and procedures to protect our platforms from being exploited for money laundering or terrorism financing purposes, or that such policies and procedures will be deemed compliant with applicable anti-money laundering and anti-terrorism financing laws and regulations.

If we fail to maintain an effective system of internal controls over financial reporting, we may be unable to accurately report our results of operations, meet our reporting obligations or prevent fraud.

We are subject to reporting obligations under the U.S. securities laws. The SEC, as required by Section 404 of the Sarbanes-Oxley Act of 2002, adopted rules requiring every public company to include a management report on such company’s internal control over financial reporting in its annual report, which contains management’s assessment of the effectiveness of our internal control over financial reporting. As we are no longer an emerging growth company, we are subject to the requirement that an independent registered public accounting firm must attest to and report on the effectiveness of our internal control over financial reporting.

Our management, with the participation of our chief executive officer and chief financial officer, has performed an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15I under the Exchange Act) and internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) as of the end of the period covered by this annual report, as required by Rule 13a-15(b) through (c) under the Exchange Act. Based upon that evaluation, our management has concluded that our internal control over financial reporting was effective as of December 31, 2023. Our independent registered public accounting firm, PricewaterhouseCoopers Zhong Tian LLP, also attested and reported our internal control over financial reporting. See the attestation report on page F-2 issued by our independent registered public accounting firm for further details. However, if we fail to maintain effective internal control over financial reporting in the future, we could suffer material misstatements in our financial statements and fail to meet our reporting obligations, which would likely cause investors to lose confidence in our reported financial information. This could in turn limit our access to capital markets, harm our results of operations, and lead to a decline in the trading price of our ADSs. Additionally, ineffective internal control over financial reporting could expose us to increased risk of fraud or misuse of corporate assets and subject us to potential delisting from the stock exchange on which we list, regulatory investigations and civil or criminal sanctions. We may also be required to restate our financial statements from prior periods.

Our operations depend on the performance of the internet infrastructure and telecommunications networks in China.

Almost all access to the internet in China is maintained through state-owned telecommunication operators under the administrative control and regulatory supervision of the Ministry of Industry and Information Technology. We primarily rely on a limited number of telecommunication service providers to provide us with data communications capacity through local telecommunications lines and internet data centers to host our servers. We have limited access to alternative networks or services in the event of disruptions, failures or other problems with China’s internet infrastructure or the fixed telecommunications networks provided by telecommunication service providers. With the expansion of our business, we may be required to upgrade our technology and infrastructure to keep up with the increasing traffic on our platforms. We cannot assure you that the internet infrastructure and the fixed telecommunications networks in China will be able to support the demands associated with the continued growth in internet usage.

In addition, we have no control over the costs of the services provided by telecommunication service providers. If the prices we pay for telecommunications and internet services rise significantly, our results of operations may be adversely affected. Furthermore, if internet access fees or other charges to internet users increase, our user traffic may decline and our business may be harmed.

Any significant disruption in service on our platforms, in our computer systems or third-party service providers’ systems, including events beyond our control, could prevent us from processing or posting loans on our platforms, reduce the attractiveness of our platforms and result in a loss of borrowers or investors.

In the event of a platform outage and physical data loss, our ability to perform our servicing obligations, process loan applications or make funds available on our platforms would be materially and adversely affected. The satisfactory performance, reliability and availability of our platforms and our underlying network infrastructure are critical to our operations, customer service, reputation and our ability to retain existing and attract new borrowers and institutional funding partners. Much of our system hardware is hosted in a leased facility located in Shanghai that is operated by our IT staff. We also maintain a real-time backup system in the same facility and a remote backup system at a separate facility also located in Shanghai. Our operations depend on our ability to protect our systems against damage or interruption from natural disasters, power or telecommunications failures, air quality issues, environmental conditions, computer viruses or attempts to harm our systems, criminal acts and similar events. If there is a lapse in service or damage to our leased facilities in Shanghai, we could experience interruptions and delays in our service and may incur additional expense in arranging new facilities.

Any interruptions or delays in our service, whether as a result of third-party or our error, natural disasters or security breaches, whether accidental or willful, could harm our relationships with our borrowers and institutional funding partners and our reputation. Additionally, in the event of damage or interruption, our insurance policies may not adequately compensate us for any losses that we may incur. Our disaster recovery plan has not been tested under actual disaster conditions, and we may not have sufficient capacity to recover all data and services in the event of an outage. These factors could prevent us from processing or posting payments on loans, damage our brand and reputation, divert our employees’ attention, subject us to liability and cause borrowers and institutional funding partners to abandon our platforms, any of which could adversely affect our business, financial condition and results of operations.

Our platforms and internal systems rely on software that is highly technical, and if it contains undetected errors, our business could be adversely affected.

Our platforms and internal systems rely on software that is highly technical and complex. In addition, our platforms and internal systems depend on the ability of such software to store, retrieve, process and manage immense amounts of data. The software on which we rely has contained, and may now or in the future contain, undetected errors or bugs. Some errors may only be discovered after the code has been released for external or internal use. Errors or other design defects within the software on which we rely may result in a negative experience for borrowers and institutional funding partners using our platforms, delay introductions of new features or enhancements, result in errors or compromise our ability to protect borrower or investor data or our intellectual property. Any errors, bugs or defects discovered in the software on which we rely could result in harm to our reputation, loss of borrowers or investors or liability for damages, any of which could adversely affect our business, results of operations and financial condition.

We may not be able to prevent others from unauthorized use of our intellectual property, which could harm our business and competitive position.

We regard our trademarks, domain names, know-how, proprietary technologies and similar intellectual property as critical to our success, and we rely on a combination of intellectual property laws and contractual arrangements, including confidentiality, invention assignment and non-compete agreements with our employees and others to protect our proprietary rights. See also “Item 4. Information on the Company—B. Business Overview—Intellectual Property.” Despite these measures, any of our intellectual property rights could be challenged, invalidated, circumvented or misappropriated, or such intellectual property may not be sufficient to provide us with competitive advantages. In addition, because of the rapid pace of technological change in our industry, parts of our business rely on technologies developed or licensed by third parties, and we may not be able to obtain or continue to obtain licenses and technologies from these third parties on reasonable terms, or at all.

It may be difficult to maintain and enforce intellectual property rights in certain markets where we operate. Statutory laws and regulations may be subject to judicial interpretation and enforcement and may not be applied consistently due to the lack of clear guidance on statutory interpretation. Confidentiality, invention assignment and non-compete agreements may be breached by counterparties, and there may not be adequate remedies available to us for any such breach. Accordingly, we may not be able to effectively protect our intellectual property rights or to enforce our contractual rights in certain markets where we operate. Preventing any unauthorized use of our intellectual property is difficult and costly and the steps we take may be inadequate to prevent the misappropriation of our intellectual property. In the event that we resort to litigation to enforce our intellectual property rights, such litigation could result in substantial costs and a diversion of our managerial and financial resources. We can provide no assurance that we will prevail in such litigation. In addition, our trade secrets may be leaked or otherwise become available to, or be independently discovered by, our competitors. To the extent that our employees or consultants use intellectual property owned by others in their work for us, disputes may arise as to the rights in related know-how and inventions. Any failure in protecting or enforcing our intellectual property rights could have a material adverse effect on our business, financial condition and results of operations.

We may be subject to intellectual property infringement claims, which may be expensive to defend and may disrupt our business and operations.

We cannot be certain that our operations or any aspects of our business do not or will not infringe upon or otherwise violate trademarks, patents, copyrights, know-how or other intellectual property rights held by third parties. We may be from time to time in the future subject to legal proceedings and claims relating to the intellectual property rights of others. In addition, there may be third-party trademarks, patents, copyrights, know-how or other intellectual property rights that are infringed by our products, services or other aspects of our business without our awareness. Holders of such intellectual property rights may seek to enforce such intellectual property rights against us in the markets where we operate. If any third-party infringement claims are brought against us, we may be forced to divert management’s time and other resources from our business and operations to defend against these claims, regardless of their merits.

Additionally, the application and interpretation of intellectual property right laws and the procedures and standards for granting trademarks, patents, copyrights, know-how or other intellectual property rights in certain markets where we operate are still evolving and are uncertain, and we cannot assure you that the courts or regulatory authorities in certain markets where we operate would agree with our analysis. If we were found to have violated the intellectual property rights of others, we may be subject to liability for our infringement activities or may be prohibited from using such intellectual property, and we may incur licensing fees or be forced to develop alternatives of our own. As a result, our business and results of operations may be materially and adversely affected.

We may be held liable for information or content displayed on, retrieved from or linked to our mobile applications, which may materially and adversely affect our business and operating results.

We offer consumer finance products in China mainly through our mobile applications, which are regulated by the Administrative Provisions on Mobile Internet Applications Information Services. This regulation was promulgated by the Cyberspace Administration of China on June 28, 2016, and amended on June 14, 2022. It states that providers of mobile applications may not create, copy, publish, or distribute information and content prohibited by laws and regulations. We have implemented internal control procedures to screen the information and content on our mobile applications to ensure compliance with this regulation. However, we cannot assure that all information or content displayed on, retrieved from, or linked to our mobile applications complies with the requirements at all times. If our mobile applications were found to violate any requirement under this regulation, we may be subject to administrative penalties, including warnings, service suspension, or removal of our mobile applications from mobile application stores, which could materially and adversely affect our business and operating results.

We may from time to time be subject to claims, controversies, lawsuits and legal proceedings, which could have a material adverse effect on our financial condition, results of operations, cash flows and reputation.

We may from time to time become subject to or involved in various claims, controversies, lawsuits, and legal proceedings. See “Item 8. Financial Information—Legal Proceedings” for more details. Claims, lawsuits, and litigations are subject to inherent uncertainties, and we are uncertain whether the foregoing claim would develop into a lawsuit. Lawsuits and litigations may cause us to incur defense costs, utilize a significant portion of our resources and divert management’s attention from our day-to-day operations, any of which could harm our business. Any settlements or judgments against us could have a material adverse impact on our financial condition, results of operations and cash flows. In addition, negative publicity regarding claims or judgments made against us may damage our reputation and may result in material adverse impact on us.

From time to time we may evaluate and potentially consummate strategic investments or acquisitions, which could require significant management attention, disrupt our business and adversely affect our financial results.

We may evaluate and consider strategic investments, combinations, acquisitions or alliances to further increase the value of our platforms and better serve borrowers and institutional funding partners. These transactions could be material to our financial condition and results of operations if consummated. If we are able to identify an appropriate business opportunity, we may not be able to successfully consummate the transaction and, even if we do consummate such a transaction, we may be unable to obtain the benefits or avoid the difficulties and risks of such transaction.

Strategic investments or acquisitions will involve risks commonly encountered in business relationships, including:

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regulatory risks, including remaining in good standing with existing regulatory bodies or receiving any necessary pre-closing or post-closing approvals, as well as being subject to new regulators with oversight over an acquired business;

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difficulties in assimilating and integrating the operations, personnel, systems, data, technologies, rights, platforms, products and services of the acquired business;

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inability of the acquired technologies, products or businesses to achieve expected levels of revenue, profitability, productivity or other benefits;

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difficulties in retaining, training, motivating and integrating key personnel;

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diversion of management’s time and resources from our daily operations;

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difficulties in maintaining uniform standards, controls, procedures and policies within the combined organizations;

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difficulties in retaining relationships with customers, employees and business partners of the acquired business;

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risks of entering markets in which we have limited or no prior experience;

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assumption of contractual obligations that contain terms that are not beneficial to us, require us to license or waive intellectual property rights or increase our risk for liability;

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failure to successfully further develop the acquired technology;

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liability for activities of the acquired business before the acquisition, including intellectual property infringement claims, violations of laws, commercial disputes, tax liabilities and other known and unknown liabilities;

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potential disruptions to our ongoing businesses; and

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unexpected costs and unknown risks and liabilities associated with strategic investments or acquisitions.

We may not make any investments or acquisitions, or any future investments or acquisitions may not be successful, may not benefit our business strategy, may not generate sufficient revenues to offset the associated acquisition costs or may not otherwise result in the intended benefits. In addition, we cannot assure you that any future investment in or acquisition of new businesses or technology will lead to the successful development of new or enhanced loan products and services or that any new or enhanced loan products and services, if developed, will achieve market acceptance or prove to be profitable.

Our business depends on the continued efforts of our senior management. If one or more of our key executives were unable or unwilling to continue in their present positions, our business may be severely disrupted.

Our business operations depend on the continued services of our senior management, particularly the executive officers named in this annual report. While we have provided different incentives to our management, we cannot assure you that we can continue to retain their services. For example, our former chief executive officer, Mr. Feng Zhang, resigned in March 2023 due to personal reasons, and our board of directors appointed Mr. Tiezheng Li, the then vice chairman of our board and president, to assume the position of chief executive officer. If any additional key executives were unable or unwilling to continue in their present positions, we may not be able to replace them easily or at all, our future growth may be constrained, our business may be severely disrupted and our financial condition and results of operations may be materially and adversely affected, and we may incur additional expenses to recruit, train and retain qualified personnel. In addition, although we have entered into confidentiality and non-competition agreements with our management, there is no assurance that any member of our management team will not join our competitors or form a competing business. If any dispute arises between our current or former officers and us, we may have to incur substantial costs and expenses in order to enforce such agreements or we may be unable to enforce them at all.

Competition for employees is intense, and we may not be able to attract and retain the qualified and skilled employees needed to support our business.

We believe our success depends on the efforts and talent of our employees, including risk management, software engineering, financial and marketing personnel. Our future success depends on our continued ability to attract, develop, motivate and retain qualified and skilled employees. Competition for highly skilled technical, risk management and financial personnel is extremely intense. We may not be able to hire and retain these personnel at compensation levels consistent with our existing compensation and salary structure. Some of the companies with which we compete for experienced employees have greater resources than we have and may be able to offer more attractive terms of employment.

In addition, we invest significant time and expenses in training our employees, which increases their value to competitors who may seek to recruit them. If we fail to retain our employees, we could incur significant expenses in hiring and training new employees, and the quality of our services and our ability to serve borrowers and institutional funding partners could diminish, resulting in a material adverse effect to our business.

Increases in labor costs may adversely affect our business and results of operations.

As of December 31, 2023, we had 3,648 employees, and most of them were based in China. We may need to increase our employee compensation and benefits levels and offer more favorable working conditions to remain competitive in attracting and retaining talented employees. In addition, we are required to pay various statutory employee benefits, including pension, housing fund, medical insurance, work-related injury insurance, unemployment insurance and maternity insurance to designated government agencies for the benefit of our employees in China. We expect that our labor costs, including wages and employee benefits, may continue to increase. Unless we are able to control our labor costs or pass on these increased labor costs to our borrowers or institutional funding investors by increasing the fees of our services, our financial condition and results of operations may be adversely affected.

We are subject to changing law and regulations regarding regulatory matters, corporate governance and public disclosure that have increased both our costs and the risk of non-compliance.

We are subject to rules and regulations by various governing bodies, including, for example, the SEC, which is charged with the protection of investors and the oversight of companies whose securities are publicly traded, and the various regulatory authorities in China and the Cayman Islands, and to new and evolving regulatory measures under applicable law. Our efforts to comply with new and changing laws and regulations have resulted in and are likely to continue to result in, increased expenses and a diversion of management time and attention from revenue-generating activities to compliance activities.

Moreover, because these laws, regulations and standards are subject to varying interpretations, their application in practice may evolve over time as new guidance becomes available. This evolution may result in continuing uncertainty regarding compliance matters and additional costs necessitated by ongoing revisions to our disclosure and governance practices. If we fail to address and comply with these regulations and any subsequent changes, we may be subject to penalty and our business may be harmed.

If we cannot maintain our corporate culture as we grow, we could lose the innovation, collaboration and focus that contribute to our business.

We believe that a critical component of our success is our corporate culture, which we believe fosters innovation, encourages teamwork and cultivates creativity. As we continue to grow, we may find it difficult to maintain these valuable aspects of our corporate culture. Any failure to preserve our culture could negatively impact our future success, including our ability to attract and retain employees, encourage innovation and teamwork and effectively focus on and pursue our corporate objectives.

We do not have any business insurance coverage.

Insurance companies in China currently do not offer as extensive an array of insurance products as insurance companies in more developed economies. Currently, we do not have any business liability or disruption insurance to cover our operations. We have determined that the costs of insuring for these risks and the difficulties associated with acquiring such insurance on commercially reasonable terms make it impractical for us to have such insurance. Any uninsured business disruptions may result in our incurring substantial costs and the diversion of resources, which could have an adverse effect on our results of operations and financial condition.

We face risks related to widespread health epidemics or other outbreaks or natural disasters, which could significantly disrupt our operations.

Our business could be materially and adversely affected by the outbreak of a widespread health epidemic, such as COVID-19, swine flu, avian influenza, severe acute respiratory syndrome, Ebola and Zika, since it could require our employees to be quarantined or our offices to be disinfected or even temporarily closed. For example, from early 2020 to early 2023, the COVID-19 pandemic triggered a series of lockdowns, social distancing requirements, and travel restrictions that significantly and negatively affected our various businesses in China. Our operations in overseas markets also experienced adverse impacts. Furthermore, as COVID-19 has negatively affected the global economy, the countries where we operate may continue to experience lower domestic consumption, higher unemployment, severe disruptions to exporting goods to other countries, and greater economic uncertainty, which may materially impact our business. People, in general, may be less inclined to borrow, and borrowers may have reduced propensity or ability to repay their loans due to the economic problems caused by COVID-19, potentially affecting credit quality. The extent to which the pandemic will affect our results of operations going forward will depend on future developments, which remain uncertain and unpredictable.

We are also vulnerable to natural disasters and other calamities. Fire, floods, typhoons, earthquakes, power loss, telecommunications failures, break-ins, war, riots, terrorist attacks or similar events may give rise to server interruptions, breakdowns, system failures, technology platform failures or internet failures, which could cause the loss or corruption of data or malfunctions of software or hardware as well as adversely affect our ability to provide products and services on our platforms. In addition, our revenue and profitability could be materially reduced to the extent that a natural disaster, health epidemic or other outbreak or any change in policy in response to such event harms the global or local economy in general.

In addition, our headquarters are located in Shanghai, where most of our directors and management and a large majority of our employees currently reside. Most of our system hardware and back-up systems are hosted in leased facilities located in Shanghai. Consequently, we are highly susceptible to factors adversely affecting Shanghai. If any of the abovementioned natural disasters, health epidemics or other outbreaks were to occur in Shanghai, our operation may experience material disruptions, such as temporary closure of our offices and suspension of services, disruption of communications between our headquarters and overseas operations, which may materially and adversely affect our business, financial condition and results of operations.

Risks Related to Our Corporate Structure

Foreign ownership of internet-based businesses, such as distribution of online information, is subject to restrictions under current PRC laws and regulations. For example, except otherwise regulated, foreign investors are not allowed to own more than 50% of the equity interests in a value-added telecommunications service provider (except for e-commerce, domestic multi-party communications, storage and forwarding classes, and call centers).

We are a Cayman Islands company and our PRC subsidiaries are considered foreign invested enterprises. There has been no official guidance or interpretation from the PRC government clarifying which category of value-added telecommunication services our business falls into. However, we believe the online consumer finance services we provide in China may constitute a type of value-added telecommunication service that is subject to restrictions on foreign ownership and investment. Therefore, to comply with PRC laws, regulations and regulatory requirements, we set up a series of contractual arrangements entered into among some of our PRC subsidiaries, the consolidated variable interest entities, and their shareholders to conduct some of our operations in China. For more detailed about these contractual arrangements, see “Item 4. Information on the Company—C. Organizational Structure—Contractual Arrangements.” As a result of these contractual arrangements, we are able to direct the activities of the operation of the consolidated variable interest entities and their subsidiaries and consolidate their operating results in our financial statements under U.S. GAAP.

In the opinion of our PRC counsel, Hui Ye Law Firm, our current structures of the consolidated variable interest entities and our WFOEs are not in violation of existing PRC laws, regulations and rules, and these contractual arrangements are valid, binding and enforceable in accordance with their terms and applicable PRC laws and regulations currently in effect.

We are a Cayman Islands holding company with no equity ownership in the consolidated variable interest entities, and our operations in China are primarily through the consolidated variable interest entities with which we have maintained contractual arrangements. Holders of our ADSs hold equity interest in FinVolution Group, our Cayman Islands holding company, and do not have direct or indirect equity interest in the consolidated variable interest entities and their subsidiaries. If the PRC government deems that our contractual arrangements with the consolidated variable interest entities do not comply with PRC regulatory restrictions on foreign investment in the relevant industries, or if these regulations or the interpretation of existing regulations change or are interpreted differently in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations. We may not be able to repay the notes and other indebtedness, and our ADSs may decline in value or become worthless, if we are unable to assert our contractual control rights over the assets of the consolidated variable interest entities, which contribute to 78.6% of our revenues in 2023. Our holding company in the Cayman Islands, the consolidated variable interest entities, and investors of our company face uncertainty about potential future actions by the PRC government that could affect the enforceability of the contractual arrangements with the consolidated variable interest entities and, consequently, significantly affect the financial performance of the consolidated variable interest entities and our company as a group.

However, our PRC counsel, Hui Ye Law Firm, has also advised us that there are substantial uncertainties regarding the interpretation and application of current or future PRC laws and regulations and there can be no assurance that the PRC government will ultimately take a view that is consistent with the opinion of our PRC counsel.

Although we believe we, our PRC subsidiaries and the consolidated variable interest entities comply with current PRC laws and regulations, we cannot assure you that the PRC government would agree that our contractual arrangements comply with PRC licensing, registration or other regulatory requirements, with existing policies or with requirements or policies that may be adopted in the future. The PRC government may have broad discretion in determining rectifiable or punitive measures for non-compliance with or violations of PRC laws and regulations. If the PRC government determines that we or the consolidated variable interest entities do not comply with applicable law, it could revoke the consolidated variable interest entities’ business and operating licenses, require the consolidated variable interest entities to discontinue or restrict the consolidated variable interest entities’ operations, restrict the consolidated variable interest entities’ right to collect revenues, block the consolidated variable interest entities’ websites, require the consolidated variable interest entities to restructure our operations, impose additional conditions or requirements with which the consolidated variable interest entities may not be able to comply, impose restrictions on the consolidated variable interest entities’ business operations or on their customers, or take other regulatory or enforcement actions against the consolidated variable interest entities that could be harmful to their business. Any of these or similar occurrences could significantly disrupt our or the consolidated variable interest entities’ business operations or restrict the consolidated variable interest entities from conducting a substantial portion of their business operations, which could materially and adversely affect the consolidated variable interest entities’ business, financial condition and results of operations. If any of these occurrences results in our inability to direct the activities of operation of any of the consolidated variable interest entities that most significantly impact its economic performance, or our failure to receive the economic benefits from any of the consolidated variable interest entities, we may not be able to consolidate these entities in our consolidated financial statements in accordance with U.S. GAAP.

We face uncertainties with respect to the implementation of the Foreign Investment Law of the PRC and how it may impact the viability of our current corporate structure, corporate governance and business operations.

On March 15, 2019, the National People’s Congress enacted the Foreign Investment Law of the PRC, which replaced the previous laws regulating foreign investment in China. The Foreign Investment Law of the PRC embodies an expected trend in PRC regulatory policy to rationalize its foreign investment regulatory regime in line with prevailing international practices and legislative efforts to unify corporate legal requirements for both foreign and domestic investments. However, since it is relatively new, uncertainties still exist regarding its interpretation and implementation. In particular, under the Foreign Investment Law of the PRC, “foreign investment” refers to investment activities directly or indirectly conducted by foreign individuals, enterprises, or other entities in China. Though it does not explicitly classify contractual arrangements as a form of foreign investment, there is no assurance that foreign investment via contractual arrangement would not be interpreted as a type of indirect foreign investment activity under the definition in the future. Additionally, the definition contains a catch-all provision which includes investments made by foreign investors through means stipulated in laws or administrative regulations or other methods prescribed by the State Council. On December 26, 2019, the State Council promulgated the Implementation Regulations on the Foreign Investment Law of the PRC, but this regulation still does not explicitly define whether contractual arrangements would be deemed as a form of foreign investment. Therefore, it still leaves leeway for future laws, administrative regulations, or provisions promulgated by the State Council to provide for contractual arrangements as a form of foreign investment.

We cannot rule out the possibility that control through contractual arrangement may be regarded as a form of control made by foreign investors, and therefore require approval from the competent governmental authorities. In any of these cases, it will be uncertain whether our contractual arrangements will be deemed to be in violation of the market access requirements for foreign investment under the PRC laws and regulations. Furthermore, if future laws, administrative regulations or provisions promulgated by the State Council mandate further actions to be taken by companies with respect to existing contractual arrangements, we may face substantial uncertainties as to whether we can complete such actions in a timely manner, or at all. Failure to take timely and appropriate measures to cope with any of these or similar regulatory compliance challenges could materially and adversely affect our current corporate structure, corporate governance and business operations.

We have relied and expect to continue to rely on contractual arrangements with the consolidated variable interest entities to operate our online consumer finance platform business in China. For a description of these contractual arrangements, see “Item 4. Information on the Company—C. Organizational Structure.” Revenues contributed by the consolidated variable interest entities and their respective subsidiaries accounted for 88.0%, 83.9% and 78.6% of our total revenues for 2021, 2022 and 2023, respectively. These contractual arrangements may not be as effective as equity ownership in providing us with control over the consolidated variable interest entities. For example, the consolidated variable interest entities and its shareholders could breach their contractual arrangements with us by, among other things, failing to conduct their operations in an acceptable manner or taking other actions that are detrimental to our interests.

If we had direct ownership of the consolidated variable interest entities, we would be able to exercise our rights as a shareholder to effect changes in the board of directors of the consolidated variable interest entities, which in turn could implement changes, subject to any applicable fiduciary obligations, at the management and operational level. However, under the current contractual arrangements, we rely on the performance of obligations under the contractual arrangements by the consolidated variable interest entities, shareholders of the consolidated variable interest entities, and other parties to the contractual arrangements to direct the activities of operation of the consolidated variable interest entities. The shareholders of the consolidated variable interest entities may not act in the best interests of our company or may not perform their obligations under these contracts. Such risks exist throughout the period in which we intend to operate our business through the contractual arrangements with the consolidated variable interest entities. Although we have the right to replace any shareholder of the consolidated variable interest entities under the contractual arrangements, if any of these shareholders are uncooperative or any dispute relating to these contracts remains unresolved, we will have to enforce our rights under these contracts through the operations of PRC laws and arbitration, litigation and other legal proceedings, the outcome of which will be subject to uncertainties. See “—Any failure by the consolidated variable interest entities, shareholders of the consolidated variable interest entities or other parties to perform their obligations under our contractual arrangements with them would have a material adverse effect on our business.” Therefore, our contractual arrangements with the consolidated variable interest entities and shareholders of the consolidated variable interest entities may not be as effective in ensuring our control over our business operations as equity ownership would be.

If the consolidated variable interest entities or their shareholders fail to perform their respective obligations under the contractual arrangements, we may incur substantial costs and expend additional resources to enforce such arrangements. We may also have to rely on legal remedies under PRC laws, including seeking specific performance or injunctive relief, and claiming damages, which we cannot assure you will be effective under PRC laws. For example, if the shareholders of the consolidated variable interest entities were to refuse to transfer their equity interests in the consolidated variable interest entities to us or our designee when we exercise the purchase option pursuant to these contractual arrangements, or if they were otherwise to act in bad faith toward us, then we may have to take legal actions to compel them to perform their contractual obligations.

All the agreements under our contractual arrangements are governed by PRC laws and provide for the resolution of disputes through arbitration in China. Accordingly, these contracts would be interpreted in accordance with PRC laws and any disputes would be resolved in accordance with PRC legal procedures. The legal system in the PRC is evolving rapidly. The interpretations of many laws, regulations, and rules may exhibit inconsistencies, and the enforcement of these laws, regulations, and rules may also involve uncertainties. As a result, uncertainties in the PRC legal system could limit our ability to enforce these contractual arrangements. Meanwhile, there are very few precedents and little formal guidance as to how contractual arrangements in the context of a consolidated variable interest entity should be interpreted or enforced under PRC laws. There remain significant uncertainties regarding the ultimate outcome of such arbitration should legal action become necessary. In addition, under PRC laws, rulings by arbitrators are final and parties cannot appeal arbitration results in court unless such rulings are revoked or determined unenforceable by a competent court. If the losing parties fail to carry out the arbitration awards within a prescribed time limit, the prevailing parties may only enforce the arbitration awards in PRC courts through arbitration award recognition proceedings, which would require additional expenses and delay. In the event that we are unable to enforce these contractual arrangements, or if we suffer significant delay or other obstacles in the process of enforcing these contractual arrangements, we may not be able to direct the activities of operation of the consolidated variable interest entities and their respective subsidiaries, and our ability to conduct our business may be negatively affected. See “—Risks Related to Doing Business in China—Uncertainties in the interpretation and enforcement of PRC laws and regulations could limit the legal protections available to us.”

The shareholders of the consolidated variable interest entities may have potential conflicts of interest with us, which may materially and adversely affect our business and financial condition.

The equity interests of the consolidated variable interest entities are held by Mr. Jun Zhang, Mr. Tiezheng Li, Mr. Honghui Hu and Mr. Shaofeng Gu, our co-founders and shareholders, as well as a few of their family relatives. Their interests in the consolidated variable interest entities may differ from the interests of our company as a whole. These shareholders may breach, or cause the consolidated variable interest entities to breach, the existing contractual arrangements we have with them and the consolidated variable interest entities, which would have a material adverse effect on our ability to direct the activities of operation of the consolidated variable interest entities and their subsidiaries and receive economic benefits from them. For example, the shareholders of Beijing Paipairongxin, one of the consolidated variable interest entities, may be able to cause our agreements with Beijing Paipairongxin and Shanghai PPDai, a major subsidiary of Beijing Paipairongxin, to be performed in a manner adverse to us by, among other things, failing to remit payments due under the contractual arrangements to us on a timely basis. We cannot assure you that when conflicts of interest arise, any or all of these shareholders will act in the best interests of our company or such conflicts will be resolved in our favor.

Currently, we do not have any arrangements to address potential conflicts of interest between these shareholders and our company, except that we could exercise our purchase option under the call option agreement with these shareholders to request them to transfer all of their equity interests in the consolidated variable interest entities to a PRC entity or individual designated by us, to the extent permitted by PRC laws. If we cannot resolve any conflict of interest or dispute between us and the shareholders of the consolidated variable interest entities, we would have to rely on legal proceedings, which could result in the disruption of our business and subject us to substantial uncertainty as to the outcome of any such legal proceedings.

Contractual arrangements with the consolidated variable interest entities may be subject to scrutiny by the PRC tax authorities and they may determine that we or the consolidated variable interest entities owe additional taxes, which could negatively affect our financial condition and the price of our ADSs.

Under applicable PRC laws and regulations, arrangements and transactions among related parties may be subject to audit or challenge by the PRC tax authorities. We may face material and adverse tax consequences if the PRC tax authorities determine that the contractual arrangements among the consolidated variable interest entities, shareholders of the consolidated variable interest entities and us as well as other parties were not entered into on an arm’s length basis in such a way as to result in an impermissible reduction in taxes under applicable PRC laws, regulations and rules, and adjust the consolidated variable interest entities’ income in the form of a transfer pricing adjustment. A transfer pricing adjustment could, among other things, result in a reduction of expense deductions recorded by the consolidated variable interest entities for PRC tax purposes, which could in turn increase their tax liabilities without reducing our tax expenses. In addition, if we request the shareholders of the consolidated variable interest entities to transfer their equity interests in the consolidated variable interest entities at nominal or no value pursuant to these contractual arrangements, such transfer could be viewed as a gift and subject us to PRC income tax. Furthermore, the PRC tax authorities may impose late payment fees and other penalties on the consolidated variable interest entities for the adjusted but unpaid taxes according to the applicable regulations. Our financial position could be materially and adversely affected if the consolidated variable interest entities’ tax liabilities increase or if they are required to pay late payment fees and other penalties.

We may lose the ability to use and enjoy assets held by the consolidated variable interest entities that are material to the operation of our business if any consolidated variable interest entity goes bankrupt or becomes subject to a dissolution or liquidation proceeding.

The consolidated variable interest entities and their subsidiaries hold certain assets that are material to the operation of our business, including, among others, intellectual properties, hardware and software. Under the contractual arrangements, the consolidated variable interest entities may not, and the shareholders of the consolidated variable interest entities may not cause them to, in any manner, sell, transfer, mortgage or dispose of their assets or their legal or beneficial interests in the business without our prior consent. However, in the event that the shareholders of the consolidated variable interest entities breach the these contractual arrangements and voluntarily liquidate the consolidated variable interest entities, or the consolidated variable interest entities declare bankruptcy and all or part of their assets become subject to liens or rights of third-party creditors, or are otherwise disposed of without our consent, we may be unable to continue some or all of our business activities, which could materially and adversely affect our business, financial condition and results of operations. If the consolidated variable interest entities undergo a voluntary or involuntary liquidation proceeding, independent third-party creditors may claim rights to some or all of these assets, thereby hindering our ability to operate our business, which could materially and adversely affect our business, financial condition and results of operations.

Risks Related to Doing Business in China

Changes in China’s economic, political or social conditions or government policies could have a material adverse effect on our business and results of operations.

The overwhelming majority of our operations are located in China. Accordingly, our business, prospects, financial condition and results of operations may be influenced to a significant degree by political, economic and social conditions in China generally and by continued economic growth in China as a whole.

The Chinese economy differs from the economies of most developed countries in many respects, including the degree of government involvement, level of development, growth rate, control of foreign exchange and allocation of resources. Although the Chinese government has implemented measures emphasizing the utilization of market forces for economic reform, the reduction of state ownership of productive assets and the establishment of improved corporate governance in business enterprises, a substantial portion of productive assets in China are still owned or controlled by the government. In addition, the Chinese government continues to play a significant role in regulating industry development by imposing industrial policies. The Chinese government also exercises significant control over China’s economic growth through allocating resources, controlling payment of foreign currency-denominated obligations, setting monetary policy, and providing preferential treatment to particular industries or companies.

While the Chinese economy has experienced significant growth over the past decades, the growth rate has gradually slowed since 2010, and growth has been uneven, both geographically and among various sectors of the economy. The Chinese government has implemented various measures to encourage economic growth and guide the allocation of resources. Some of these measures may benefit the overall Chinese economy, but may have a negative effect on us. For example, our financial condition and results of operations may be adversely affected by government control over capital investments or changes in tax regulations. Any prolonged slowdown in the Chinese economy may reduce the demand for our products and services and materially and adversely affect our business and results of operations.

A severe or prolonged downturn in the Chinese or global economy could reduce the demand for consumer loans and investments, which could materially and adversely affect our business and financial condition.

COVID-19 had a severe and negative impact on the Chinese and the global economy from 2020 through 2022, and the global macroeconomic environment still faces numerous challenges. The growth rate of the Chinese economy has been slowing since 2010 and the Chinese population began to decline in 2022. The Federal Reserve and other central banks outside of China have raised interest rates. The Russia-Ukraine conflict, the Hamas-Israel conflict and the attacks on shipping in the Red Sea have heightened geopolitical tensions across the world. The impact of the Russia-Ukraine conflict on Ukraine food exports has contributed to increases in food prices and thus to inflation more generally. There have also been concerns about the relationship between China and other countries which may potentially have economic effects. In particular, there is significant uncertainty about the future relationship between the United States and China with respect to a wide range of issues including trade policies, treaties, government regulations and tariffs. Economic conditions in China are sensitive to global economic conditions, as well as changes in domestic economic and political policies and the expected or perceived overall economic growth rate in China. Any severe or prolonged slowdown in the global or Chinese economy may reduce the demand for consumer loans and investments, and materially and adversely affect our business, results of operations and financial condition.

Uncertainties in the interpretation and enforcement of PRC laws and regulations could limit the legal protections available to us.

The PRC legal system is based on written statutes and prior court decisions have limited value as precedents. Since the PRC legal system continues to rapidly evolve, the interpretations of many laws, regulations and rules are not always uniform and enforcement of these laws, regulations and rules involves uncertainties.

In particular, PRC laws and regulations concerning the online consumer finance industry are still developing and evolving. Although we have taken measures to comply with the laws and regulations that are applicable to our business operations, including the regulatory principles raised by the China Banking and Insurance Regulatory Commission, and avoid conducting any non-compliant activities under the applicable laws and regulations, such as providing guarantee to institutional funding partners or sharing borrowers’ personal information with institutional funding partners directly, the PRC government authority may promulgate new laws and regulations regulating the online consumer finance industry in the future. We cannot assure you that our business operations would not be deemed to violate any new PRC laws or regulations relating to online consumer finance. Moreover, developments in the online consumer finance industry may lead to changes in PRC laws, regulations and policies or in the interpretation and application of existing laws, regulations and policies, which in turn may limit or restrict online consumer finance platforms like us and could materially and adversely affect our business and operations.

From time to time, we may have to resort to administrative and court proceedings to enforce our legal rights. However, since PRC administrative and court authorities have significant discretion in interpreting and implementing statutory and contractual terms, it may be more difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection we enjoy than in more developed legal systems. Furthermore, the PRC legal system is based in part on government policies and internal rules (some of which are not published in a timely manner or at all) that may have retroactive effect. As a result, we may not be aware of our violation of these policies and rules until sometime after the violation. Such uncertainties, including uncertainty over the scope and effect of our contractual, property (including intellectual property) and procedural rights, could materially and adversely affect our business and impede our ability to continue our operations.

The PRC government has significant oversight over the conduct of our business and it has exerted more oversight over offerings that are conducted overseas and/or foreign investment in China-based issuers. Any such action could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or be worthless.

We may be adversely affected by the complexity, uncertainties and changes in PRC regulation of internet-related businesses and companies, and any lack of requisite approvals, licenses or permits applicable to our business may have a material adverse effect on our business and results of operations.

The PRC government extensively regulates the internet industry, including foreign ownership of, and the licensing and permit requirements pertaining to, companies in the internet industry. These internet-related laws and regulations are relatively new and evolving, and their interpretation and enforcement involve significant uncertainties. As a result, in certain circumstances it may be difficult to determine what actions or omissions may be deemed to be in violation of applicable laws and regulations.

We only have contractual control over the consolidated variable interest entities. Such corporate structure may subject us to sanctions, compromise the enforceability of related contractual arrangements, which may result in significant disruption to our business or have other harmful effects on us.

The evolving PRC regulatory system for the internet industry may lead to the establishment of new regulatory agencies. For example, in May 2011, the State Council announced the establishment of the Cyberspace Administration of China (with the involvement of the State Council Information Office, the Ministry of Industry and Information Technology, and the Ministry of Public Security). The primary role of this agency is to facilitate the policy-making and legislative development in this field, to direct and coordinate with different departments in connection with online content administration and to deal with cross-ministry regulatory matters for the internet industry.

Our ppdai.com website and PPDai mobile application, operated by Shanghai PPDai, a subsidiary of Beijing Paipairongxin, one of the consolidated variable interest entities, may be considered to provide internet content provision services, as well as online data processing or transaction processing services. As a result, Shanghai PPDai may need to obtain certain value-added telecommunications business licenses. For more detailed information, see “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business—Any failure to comply with existing or future laws and regulations related to data protection, data security, cybersecurity or personal information protection could lead to liabilities, administrative penalties or other regulatory actions, which could negatively affect our operating results and business.”

The interpretation and application of existing PRC laws, regulations and policies and possible new laws, regulations or policies relating to the internet industry have created substantial uncertainties regarding the legality of existing and future foreign investments in, and the businesses and activities of, internet businesses in China, including our business. We cannot assure you that we have obtained all the permits or licenses required for conducting our business in China or will be able to maintain our existing licenses or obtain new ones. If the PRC government considers that we were operating without the proper approvals, licenses or permits or promulgates new laws and regulations that require additional approvals or licenses or imposes additional restrictions on the operation of any part of our business, it has the power, among other things, to levy fines, confiscate our income, revoke our business licenses, and require us to discontinue the related business or impose restrictions on the affected portion of our business. Any of these actions by the PRC government may have a material adverse effect on our business and results of operations.

The PRC government’s significant oversight and discretion over our business operation could result in a material adverse change in our operations and the value of our ADSs.

The overwhelming majority of our operations are located in China, which are governed by PRC laws and regulations. The PRC government has significant oversight and discretion over the conduct of our business, and may influence our operations as the government deems appropriate to advance regulatory and societal goals and policy positions. Historically, the PRC government had published new regulations and policies that significantly affected our industry. For example, we modified our business model and practices in the past as a result of changes in laws, regulations. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business—We have modified our business model and practices in the past as a result of changes in laws, regulations, policies, measures and guidance. We may further change our business model or practices in the future, which may not be successful ultimately.” Additionally, we have adjusted our practices for transmission of borrowers’ personal information following the promulgation of regulations related to “disconnecting direct connection.” See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business—The laws and regulations governing online consumer finance industry in China are developing and evolving and subject to changes. If our business practices are deemed to violate any existing and future applicable laws, regulations or requirements of local regulatory authorities, our business, financial condition and results of operations would be materially and adversely affected.”

We cannot rule out the possibility that the PRC government will release additional regulations or policies in the future that directly or indirectly affect our industry or require us to seek additional permission to continue our operations, which could result in a material adverse change in our operation and/or the value of our ADSs. In addition, implementation of industry-wide regulations directly targeting our operations could cause the value of our securities to significantly decline. Therefore, investors of our company and our bus

FinVolution Group [FINV] Filings
20-F	[2024-04-25]
20-F	[2023-04-25]
20-F	[2022-04-29]
20-F	[2021-04-28]
20-F	[2020-04-30]
20-F	[2019-04-25]
20-F	[2018-04-27]
F-1	[2017-10-13]