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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 20-F

(Mark One)

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

OR

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2021.

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from         to

OR

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 . . . . . . . . . . . . . . . . . . .

Commission file number: 001-37657

Yiren Digital Ltd.

(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)

5/F, Hanwei Plaza, No. 7, Guanghua Road

Chaoyang District, Beijing 100022

The People’s Republic of China

(Address of principal executive offices)

Na Mei, Chief Financial Officer

Telephone: +86 10 5090-5315

Email: ir@yirendai.com

5/F, Hanwei Plaza, No. 7, Guanghua Road

Chaoyang District, Beijing 100022

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 two ordinary shares, par value US$0.0001 per share)

 

YRD

New York Stock Exchange

 

 

 

Ordinary shares, par value US$0.0001 per share*

 

New York Stock Exchange

(1)    * 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:

None

(Title of Class)

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

None

(Title of Class)

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

169,995,926 ordinary shares, par value US$0.0001 per share, as of December 31, 2021.

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 definition of “large accelerated filer,” “accelerated filer” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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.

 Yes   No 

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
by the International Accounting Standards Board 

Other 

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

 Item 17  Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b2 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

Page

INTRODUCTION

iii

FORWARD-LOOKING INFORMATION

iv

PART I

1

Item 1.

Identity of Directors, Senior Management and Advisers

1

Item 2.

Offer Statistics and Expected Timetable

1

Item 3.

Key Information

1

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

1

Permissions Required from the PRC Authorities for Our Operations

3

Cash and Asset Flows through Our Organization

6

Financial Information Related to the Consolidated Variable Interest Entities

9

Selected Financial Data

12

B.   Capitalization and Indebtedness

14

C.   Reasons for the Offer and Use of Proceeds

14

D.   Risk Factors

14

Item 4.

Information on the Company

69

A.   History and Development of the Company

69

B.   Business Overview

71

C.   Organizational Structure

106

D.   Property, Plant and Equipment

112

Item 4A.

Unresolved Staff Comments

112

Item 5.

Operating and Financial Review and Prospects

113

A.   Operating Results

113

Off-Balance Sheet Arrangements

132

B.   Liquidity and Capital Resources

132

Contractual Obligations

135

C.Product Development

136

D.   Trend Information

136

Item 6.

Directors, Senior Management and Employees

138

A.   Directors and Senior Management

138

B.   Compensation

140

C.   Board Practices

142

D.   Employees

144

E.   Share Ownership

145

Item 7.

Major Shareholders and Related Party Transactions

146

A.   Major Shareholders

146

B.   Related Party Transactions

146

C.   Interests of Experts and Counsel

151

Item 8.

Financial Information

151

A.   Consolidated Statements and Other Financial Information

151

B.   Significant Changes

152

Item 9.

The Offer and Listing

152

A.   Offering and Listing Details

152

B.   Plan of Distribution

152

C.   Markets

152

D.   Selling Shareholders

152

E.   Dilution

153

F.   Expenses of the Issue

153

Item 10.

Additional Information

153

A.   Share Capital

153

B.   Memorandum and Articles of Association

153

C.   Material Contracts

157

D.   Exchange Controls

157

E.   Taxation

157

i

F.   Dividends and Paying Agents

163

G.   Statement by Experts

163

H.   Documents on Display

163

I.   Subsidiary Information

163

Item 11.

Quantitative and Qualitative Disclosures about Market Risk

163

Item 12.

Description of Securities Other than Equity Securities

164

A.   Debt Securities

164

B.   Warrants and Rights

164

C.   Other Securities

164

D.   American Depositary Shares

164

PART II

166

Item 13.

Defaults, Dividend Arrearages and Delinquencies

166

Item 14.

Material Modifications to the Rights of Security Holders and Use of Proceeds

166

Item 15.

Controls and Procedures

166

Item 16A.

Audit Committee Financial Expert

167

Item 16B.

Code of Ethics

167

Item 16C.

Principal Accountant Fees and Services

167

Item 16D.

Exemptions from the Listing Standards for Audit Committees

168

Item 16E.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

168

Item 16F.

Change in Registrant’s Certifying Accountant

168

Item 16G.

Corporate Governance

170

Item 16H.

Mine Safety Disclosure

170

Item 16I.

Disclosure Regarding Foreign Jurisdictions That Prevent Inspections

170

PART III

171

Item 17.

Financial Statements

171

Item 18.

Financial Statements

171

Item 19.

Exhibits

171

SIGNATURES

175

ii

INTRODUCTION

Unless otherwise indicated or the context otherwise requires in this annual report:

“ADSs” refer to our American depositary shares, each of which represents two ordinary shares;
“CreditEase” refers to CreditEase Holdings (Cayman) Limited, our parent company and controlling shareholder;
“M3+ Net Charge-off Rate” with respect to loans facilitated during a specified time period, which we refer to as a vintage, is defined as the difference between (i) the total balance of outstanding principal of loans that become over three months delinquent during a specified period, and (ii) the total amount of recovered past due payments of principal and accrued interest in the same period with respect to all loans in the same vintage that have ever become over three months delinquent, divided by (iii) the total initial principal of the loans facilitated in such vintage;
“net payout” refers to the portion of an investor’s outstanding principal and accrued interest paid out to the investor from our quality assurance program in the event of a loan default. Prior to the discontinuation of our quality assurance program in May 2018, we implemented a 100% payout ratio policy allowing investors to fully recover their outstanding principal and accrued interest in the event of loan default;
“ordinary shares” refer to our ordinary shares, par value US$0.0001 per share;
“prime borrower” refers to credit card holders with stable credit performance and sufficient repayment capabilities. In determining whether a prospective borrower has stable credit performance and sufficient repayment capabilities, we review such borrower’s credit card statement for the last six months and/or credit report from the People’s Bank of China, or the PBOC, for the last five years and re-evaluate the secured asset’s valuation for secured loans, as applicable;
“client assets” refer to the balance of client assets generated through our platforms.
“RMB” and “Renminbi” refer to the legal currency of China;
“US$,” “U.S. dollars,” “$,” and “dollars” refer to the legal currency of the United States;
“Yiren Credit” refers to our credit-tech platform that has the capability to provide individual borrowers and small business owners with a full spectrum of online and offline, multi-channel loan products funded by financial institutions;
“Yiren Digital,” “we,” “us,” “our company” and “our” refer to Yiren Digital Ltd., its subsidiaries and in the context of describing our operations and consolidated financial information, the consolidated variable interest entities in China, including, but not limited to, CreditEase Puhui Information Consultant (Beijing) Co., Ltd., Hexiang Insurance Broker Co., Ltd., Haijin Yichuang Financial Leasing Co., Ltd., Yiren Financial Information Service (Beijing) Co., Ltd., Dekai Yichuang Asset Management (Shenzhen) Co., Ltd., Hainan Haijin Yichuang Data Information Service Co., Ltd.;
“Yiren Wealth” refers to our wealth management platform that specifically targets the mass affluent investors and provides them with one-stop asset allocation-based wealth management solutions; and
“Yiren Select” refers to the “Finance Plus Life” super App initiative launched by Yiren Wealth, which cater to the mass affluent group’s diversified and comprehensive needs in different life scenarios.

In March and July 2019, we entered into definitive agreements and certain amendment, respectively, with CreditEase, the controlling shareholder of our company, pursuant to which we assumed from CreditEase and its affiliates certain business operations, mainly including online wealth management targeting the mass affluent, unsecured and secured consumer lending, small-and-medium-enterprise (SME) lending and other related services or businesses (the “Acquired Businesses”). This transaction was consummated in July 2019. Unless otherwise indicated, the financial data and operating data of our company set forth in this annual report reflect the inclusion of the Acquired Businesses.

iii

On December 31, 2020, we consummated another business restructuring with CreditEase to streamline our service lines and reposition us as a comprehensive digital personal financial management platform in China. In connection with the business restructuring, we had disposed of the online consumer lending platform targeting individual investors as the funding source (the “Disposed Business”). The Disposed Business was operated by Hengcheng Technology Development (Beijing) Co., Ltd. (“Hengcheng”), and CreditEase had, through its subsidiaries and affiliates, paid the designated subsidiaries of our company an aggregate amount of RMB67.0 million in cash. After the restructuring, the funding source for Yiren Credit is investments from institutional funding partners only.

Our reporting currency is Renminbi, or RMB. Unless otherwise noted, all translations from RMB to U.S. dollars and from U.S. dollars to RMB in this annual report are made at a rate of RMB6.3726 to US$1.00, the exchange rate in effect as of December 31, 2021 as set forth in the H.10 statistical release of The Board of Governors of the Federal Reserve System. We make no representation that any RMB or U.S. dollar amounts could have been, or could be, converted into U.S. dollars or RMB, as the case may be, at any particular rate, or at all.

FORWARD-LOOKING INFORMATION

This annual report on Form 20-F contains forward-looking statements that reflect our current expectations and views of future events. These statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. You can identify these forward-looking statements by terminology 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 and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements include, but are not limited to:

our goals and strategies;
our future business development, financial condition and results of operations;
the expected growth of the online consumer finance marketplace market in China;
our expectations as to the charge-off rates of loans facilitated through our platform;
our expectations regarding demand for and market acceptance of our products and services;
our expectations regarding our relationships with investors and borrowers;
our plans to invest in our proprietary technologies in the areas of data collection and processing algorithms as well as new business initiatives;
competition in our industry;
potential impact of COVID-19 outbreak on our current and future business development, financial condition and results of operations; and
relevant government policies and regulations relating to our industry.

We would like to caution you not to place undue reliance on these forward-looking statements and you should read these statements in conjunction with the risk factors disclosed in “Item 3D. Key Information—Risk Factors.” Those risks are not exhaustive. We operate in an evolving environment. New risks emerge from time to time and it is impossible for our management to predict all risk factors, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ from those contained in any forward-looking statement. We do not undertake any obligation to update or revise the forward-looking statements except as required under applicable law. You should read this annual report and the documents that we reference in this annual report completely and with the understanding that our actual future results may be materially different from what we expect.

iv

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

Yiren Digital Ltd. is not a Chinese operating company but a Cayman Islands holding company with no equity ownership in the consolidated variable interest entities. We conduct our operations in China through (i) our PRC subsidiaries and (ii) the consolidated variable interest entities with which we have maintained contractual arrangements. PRC laws and regulations restrict and impose conditions on foreign investment in internet culture business and certain value-added telecommunication services such as internet content provision services. Accordingly, we operate these businesses in China through the consolidated variable interest entities, and rely on contractual arrangements among our PRC subsidiaries, the consolidated variable interest entities and their shareholders to conduct the business operations of the consolidated variable interest entities. Revenues contributed by the consolidated variable interest entities accounted for 96.4%, 64.4% and 71.3% of our total revenues for the years of 2019, 2020 and 2021, respectively. As used in this annual report, “we,” “us,” “our company” and “our” refers to Yiren Digital Ltd., its subsidiaries, and, in the context of describing our operations and consolidated financial information, the consolidated variable interest entities in China, including but not limited to CreditEase Puhui Information Consultant (Beijing) Co., Ltd. or CreditEase Puhui, which was established in March 2011 and holds our Domestic Call Center Service Permit, operates our website and primarily engages in the credit business; Hexiang Insurance Broker Co., Ltd. or Hexiang Insurance Brokers, which was established in September 2011 and holds our Business Licenses to Professional Insurance Intermediaries, operates our website and primarily engages in the insurance brokerage business; Dekai Yichuang Asset Management (Shenzhen) Co., Ltd. or Dekai Yichuang, which was established in March 2016 and primarily engages in the business of asset management; Hainan Haijin Yichuang Data Information Service Co., Ltd. or Yichuang Data, which was established in December 2016 and primarily engages in the business of data information; Haijin Yichuang Financial Leasing Co., Ltd. or Yichuang Financial Leasing, which was established in March 2017 and primarily engages in the business of financial leasing; Yichuang Micro-lending Co., Ltd. or Yichuang Micro-lending, which was established in May 2017 and primarily engages in the micro-lending business; Yiren Financial Information Service (Beijing) Co., Ltd. or Yiren Wealth, which was established in October 2016 and operates our website and mobile application and primarily engages in the wealth management business; Heilongjiang Changtuo Technology Development Co., Ltd. or Changtuo Technology, which was established in January 2014; Tianjin Linyang Information and Technology Co., Ltd. or Tianjin Linyang, which was established in July 2019 and primarily engages in the business of referral service; Beijing Yiding Technology Co., Ltd. or Yiding Technology, which was established in August 2019 and operates our website and primarily engages in the insurance referral business; Beijing Kechuang Xinlian Technology Co., Ltd. or Kechuang Xinlian, which was established in November 2019 and holds our Internet Culture Business Permit, Internet Content Provider License and Electronic Data Interchange License, operates our website and mobile application and primarily engages in the electronic commerce business. Investors in our ADSs are not purchasing equity interest in the consolidated variable interest entities in China but instead are purchasing equity interest in a holding company incorporated in the Cayman Islands.

A series of contractual agreements, including loan agreements, exclusive purchase option agreements, exclusive technology consulting and services agreements or exclusive business cooperation agreements, as applicable, intellectual property rights license agreement, equity pledge agreements, powers of attorney and business operation agreements, 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. As a result of the contractual agreements, we are considered the primary beneficiary of these companies and 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 with the Consolidated Variable Interest Entities.”

1

However, the contractual arrangements may not be as effective as direct ownership 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, and their respective shareholders for a portion of our business operations, which may not be as effective as direct ownership” and “Item 3. Key Information—D. Risk Factors—Risks Related to Our Corporate Structure— 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 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 relevant 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 in relation to 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 and 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 whole. 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 risks and uncertainties related to doing business in China. Our business operations are primarily conducted 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, anti-monopoly regulatory actions, 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. 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 has significant authority in regulating our operations and may influence our operations. It may exert more oversight and control over offerings conducted overseas by, and foreign investment in, China-based issuers, which 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 or anti-monopoly 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 with respect to the legal system in Chinese mainland could adversely affect us. Certain laws and regulations in Chinese mainland can evolve quickly, which bring risks and uncertainties to their interpretation and enforcement. Administrative and court proceedings in Chinese mainland may be protracted. Some government policies and internal rules may not be published on a timely manner. These risks and uncertainties may make it difficult for us to meet or comply with requirements under the applicable laws and regulations” 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.”

2

Permissions Required from the PRC Authorities for Our Operations

We conduct our business primarily through our subsidiaries and the consolidated variable interest entities in China. 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 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, including, among others, Internet Content Provider (“ICP”) License, Electronic Data Interchange (“EDI”) License, Internet Culture Business Permit, Food Business Permit, Internet Drug Information Service Certificate, Financing Guarantee Business License and Business Licenses to Professional Insurance Intermediaries. Given the uncertainties of interpretation and implementation of relevant laws and regulations and the enforcement practice by relevant government authorities, we may be required to obtain additional licenses, permits, filings or approvals for the functions and services of our platform in the future. For more detailed information, see “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business—If our practice is deemed to violate any PRC laws, rules or regulations, our business, financial condition and results of operations would be materially and adversely affected.”

Furthermore, in connection with our 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) have not received request to obtain permissions from the China Securities Regulatory Commission, or the CSRC, (ii) have not received request to go through cybersecurity review by the Cyberspace Administration of China, or the CAC, and (iii) have not received or were denied such requisite permissions by any PRC authority.

However, the PRC government has recently indicated an intent to exert more oversight and control over offerings that are conducted overseas and/or foreign investment in China-based issuers. If we fail to obtain the relevant approval or complete other filing procedures for any future offshore offering or listing, we may face sanctions by the CSRC or other PRC regulatory authorities, which may include fines and penalties on our operations in China, limitations on our operating privileges in China, restrictions on or prohibition of the payments or remittance of dividends by our subsidiaries in China, restrictions on or delays to our future financing transactions offshore, or other actions that could have a material and adverse effect on our business, financial condition, results of operations, reputation and prospects, as well as the trading price of our ADSs. For more detailed information, see “Item 3. Key Information—D. Risk Factors—Risks Relating 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” and “—Our business is subject to complex and evolving Chinese and international laws and regulations regarding data privacy and cybersecurity. Failure to protect confidential information of our customers and network against security breaches could damage our reputation and brand and substantially harm our business and results of operations.”

The Holding Foreign Companies Accountable Act

The Holding Foreign Companies Accountable Act, or the HFCA Act, was enacted on December 18, 2020. The HFCA Act states if the SEC determines that we have filed audit reports issued by a registered public accounting firm that has not been subject to inspection by the Public Company Accounting Oversight Board (United States), or the PCAOB, for three consecutive years beginning in 2021, the SEC shall prohibit our shares or ADSs from being traded on a national securities exchange. Our current independent registered public accounting firm, Wei, Wei & Co., LLP (“Wei Wei”), whose audit report is included in this annual report on Form 20-F, is headquartered in Flushing, New York, and has been inspected by the PCAOB on a regular basis. The PCAOB currently has access to inspect the working papers of our auditor. Our auditor is not headquartered in mainland China or Hong Kong and was not identified in the report as a firm subject to the PCAOB determinations announced on December 16, 2021 and as of the filing date of this annual report. Notwithstanding the foregoing, in the future, if either there is any regulatory change or steps taken by the PRC regulators that does not permit Wei Wei to provide audit documentation located in mainland China or Hong Kong to the PCAOB for inspection or investigation or if we change auditors and they are not able to provide audit documentation for the inspection or investigation of the PCAOB, they could become subject to the HFCA Act prohibitions. On August 26, 2022, the PCAOB signed a Statement of Protocol with the Chinese authorities governing inspections and investigations of audit firms based in China, which marks the first step toward opening access for the PCAOB to inspect and investigate registered public accounting firms in China. For more details, see “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—The PCAOB may be unable to inspect or fully investigate our auditor in relation to their audit work performed for our financial statements. If the PCAOB is unable to conduct such inspection, our investors would be deprived of the benefits of such inspection” and “—Our ADSs may be prohibited from trading in the United States under the HFCA Act in 2024 if the PCAOB is unable to inspect or fully investigate auditors located in China, or in 2023 if proposed changes to the law are enacted. The delisting of our ADSs, or the threat of their being delisted, may materially and adversely affect the value of your investment.”

3

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. These risks are discussed more fully in the section titled “Item 3. Key Information—D. Risk Factors.”

Risks Related to Our Delayed Filing of this Form 20-F

The filing of this Form 20-F may not make us “current” in our Exchange Act filing obligations, which means we retain certain potential liability and may not be eligible to use certain forms or rely on certain rules of the SEC.

Risks Related to Our Business

Risks and uncertainties related to our business include, but are not limited to, the following:

We operate in emerging and evolving industries, and our operations, services and products have been and may need to be modified in answering to the latest market trends, which makes it difficult to evaluate our future prospects.
If we are unable to obtain adequate funding from institutional funding partners to meet user demand for loans on our platform, our business and results of operations will be adversely affected.
If we are unable to maintain or increase the volume of loans facilitated through our marketplace or if we are unable to retain existing borrowers or investors or attract new borrowers or investors, our business and results of operations will be adversely affected.
If our practice is deemed to violate any PRC laws, rules or regulations, our business, financial condition and results of operations would be materially and adversely affected.
We may not be able to achieve profitability in the future.
If we fail to maintain an effective system of internal control over financial reporting, we may be unable to accurately report our financial results or prevent fraud.
Our business is subject to complex and evolving Chinese and international laws and regulations regarding data privacy and cybersecurity. Failure to protect confidential information of our customers and network against security breaches could damage our reputation and brand and substantially harm our business and results of operations.

Risks Related to Our Carve-out from CreditEase and Our Relationship with CreditEase

Risks and uncertainties related to our carve-out from CreditEase and our relationship with CreditEase include, but are not limited to, the following:

We rely on our parent company, CreditEase, for the successful operation of our business.
Our financial information included in this annual report may not be representative of our financial condition and results of operations if we had been operating as a stand-alone company.
We may have conflicts of interest with CreditEase and, because of CreditEase’s controlling ownership interest in our company, we may not be able to resolve such conflicts on favorable terms for us.

4

Risks Related to Our Corporate Structure

Risks and uncertainties related to our corporate structure include, but are not limited to, the following:

Yiren Digital Ltd. is a Cayman Islands holding company with no equity ownership in the consolidated variable interest entities and their subsidiaries. We conduct our operations in China primarily through (i) our subsidiaries in China, (ii) the variable interest entities with which we have maintained contractual arrangements, and (iii) the subsidiaries of the variable interest entities. Holders of our ADSs hold equity interest in Yiren Digital Ltd. and do not have direct or indirect equity interest in the consolidated variable interest entities and their subsidiaries. There are uncertainties under PRC laws and regulations regarding the enforceability of the whole or any part of these contractual arrangements. If the whole or any part of our contractual arrangements with the variable interest entities and their shareholders is found to be unenforceable, we may not be able to consolidate, or derive economic interests from the consolidated variable interest entities and their subsidiaries, which could result in a material adverse change in the financial performance of our company and the value of our ADSs.
Any failure by the consolidated variable interest entities or their respective shareholders 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

We are also subject to risks and uncertainties relating to doing business in China in general, including, but not limited to, the following:

PRC government has significant authority in regulating our operations and may influence our operations. It may exert more oversight and control over offerings conducted overseas by, and foreign investment in, China-based issuers, which 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 or anti-monopoly related regulations, in this nature may cause the value of such securities to significantly decline. 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.”
Changes in China’s or global economic, political or social conditions or government policies could have a material adverse effect on our business and results of operations.
Uncertainties with respect to the legal system in Chinese mainland could adversely affect us. Certain laws and regulations in Chinese mainland can evolve quickly, which bring risks and uncertainties to their interpretation and enforcement. Administrative and court proceedings in Chinese mainland may be protracted. Some government policies and internal rules may not be published on a timely manner. These risks and uncertainties may make it difficult for us to meet or comply with requirements under the applicable laws and regulations.
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 funds in our PRC subsidiaries or the consolidated variable interest entities in Chinese mainland may not be available to fund operations or for other use outside of Chinese mainland due to interventions in or the imposition of restrictions and limitations on the ability of our holding company, our subsidiaries, or the consolidated variable interest entities by the PRC government on currency conversion. See “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—Governmental control of currency conversion may limit our ability to utilize our net revenue effectively and affect the value of your investment.”

5

The PCAOB may be unable to inspect or fully investigate our auditor in relation to their audit work performed for our financial statements. If the PCAOB is unable to conduct such inspection, our investors would be deprived of the benefits of such inspection.
Our ADSs may be prohibited from trading in the United States under the HFCA Act in 2024 if the PCAOB is unable to inspect or fully investigate auditors located in China, or in 2023 if proposed changes to the law are enacted. The delisting of our 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

In addition to the risks described above, we are subject to general risks relating to our ADSs, including, but not limited to, the following:

The trading price of our ADSs may be volatile, which could result in substantial losses to investors.
The sale or availability for sale of substantial amounts of our ADSs could adversely affect their market price.

Cash and Asset Flows through Our Organization

We have established stringent controls and procedures for cash flows within our organization. Each transfer of cash between our Cayman Islands holding company and a subsidiary, the variable interest entities or their subsidiaries is subject to internal approval. The cash inflows of the Cayman Islands holding company were primarily generated from the proceeds we received from our public offerings of ordinary shares, other financing activities and cash generated from operating activities. In 2019, 2020 and 2021, our Cayman Islands holding company transferred cash in the total amount of RMB13.9 million, RMB9.6 million and RMB11.9 million (US$1.9 million) to our subsidiaries. In 2019, 2020 and 2021, no assets other than cash were transferred between our Cayman Islands holding company and a subsidiary, a variable interest entity or its subsidiary, no subsidiaries paid dividends or made other distributions to the holding company, and no dividends or distributions were paid or made to U.S. investors. Pursuant to the exclusive technical and consulting services agreements between our wholly-owned PRC subsidiaries and the consolidated variable interest entities, the amount of service fee shall be calculated in such manner as determined by both the consolidated variable interest entities and our wholly-owned PRC subsidiary from time to time based on the nature of service and paid. The consolidated variable interest entities have paid RMB1,205.7 million, RMB392.8 million and RMB66.0 million (US$10.4 million) of service fee to our wholly-owned PRC subsidiary under the variable interest entity arrangements for the years ended December 31, 2019, 2020 and 2021, respectively. The consolidated variable interest entities expect to continue to settle any service fees incurred under the exclusive technical and consulting services agreements. Furthermore, cash transfers from our PRC subsidiaries and the consolidated variable interest entities to entities outside of Chinese mainland are subject to PRC governmental control on currency conversion. As a result, the funds in our PRC subsidiaries or the consolidated variable interest entities in Chinese mainland may not be available to fund operations or for other use outside of Chinese mainland due to interventions in, or the imposition of restrictions and limitations on, the ability of our holding company, our subsidiaries, or the consolidated variable interest entities by the PRC government on such currency conversion. For risks relating to the fund flows of our operations in China, see “Item 3.D. Key Information—Risk Factors—Risks Related to Doing Business in China—We 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 adverse effect on our ability to conduct our business” and “Item 3.D. Key Information—Risk Factors—Risks Related to Doing Business in China—Governmental control of currency conversion may limit our ability to utilize our net revenue effectively and affect the value of your investment.”

6

As a Cayman Islands holding company, we may receive dividends from our PRC subsidiaries. Under the Enterprise Income Tax Law of the PRC, or the EIT Law, and related regulations, dividends, interests, rent or royalties payable by a foreign-invested enterprise, such as our PRC subsidiaries, to any of its foreign non-resident enterprise investors, and proceeds from any such foreign enterprise investor’s disposition of assets (after deducting the net value of such assets) are subject to a 10% withholding tax, unless the foreign enterprise investor’s jurisdiction of incorporation has a tax treaty with China that provides for a reduced rate of withholding tax. The Cayman Islands, where Yiren Digital Ltd., the direct parent company of our PRC subsidiaries, is incorporated, does not have such a tax treaty with China. Hong Kong has a tax arrangement with China that provides for a 5% withholding tax on dividends subject to certain conditions and requirements, such as the requirement that the Hong Kong resident enterprise own at least 25% of the PRC enterprise distributing the dividend at all times within the 12-month period immediately preceding the distribution of dividends and be a “beneficial owner” of the dividends. If our PRC subsidiaries declare and distribute profits to us, such payments will be subject to withholding tax, which will increase our tax liability and reduce the amount of cash available to our company. See “Item 3. Key Information—D. Risk Factors—Risks Relating to Our Corporate Structure—Contractual arrangements in relation to the consolidated variable interest entities may be subject to scrutiny by the PRC tax authorities and they may determine that we owe additional taxes, which could negatively affect our financial condition and the value of your investment.” If our holding company in the Cayman Islands or any of our subsidiaries outside of China were deemed to be a “resident enterprise” under the PRC Enterprise Income Tax Law, it would be subject to enterprise income tax on its worldwide income at a rate of 25%.

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 dividends in the future.

    

Tax calculation (1)

 

Hypothetical pre-tax earnings (2)

 

100

%

Tax on earnings at statutory rate of 25% (3)

 

(25)

%

Net earnings available for distribution

 

75

%

Withholding tax at standard rate of 10% (4)

 

(7.5)

%

Net distribution to Parent/Shareholders

 

67.5

%

Notes:

(1)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.
(2)Under the terms of variable interest entity agreements, our PRC subsidiaries may charge the consolidated variable interest entities for services provided to the consolidated variable interest entities. These service 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 service 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.
(3)Certain of our subsidiaries and the 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.
(4)The PRC Enterprise Income Tax Law imposes a withholding income tax of 10% on dividends distributed by a foreign invested enterprise, or FIE, to its immediate holding company outside of China. A lower withholding income tax rate of 5% is applied if the FIE’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 service 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 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.

7

Under PRC laws and regulations, we are subject to restrictions on foreign exchange and cross-border cash transfers, including to U.S. investors. Our ability to distribute earnings to the holding company and U.S. investors is also limited. We are a Cayman Islands holding company and we may rely on dividends and other distributions on equity paid by our PRC subsidiary, which in turn relies on consulting and other fees paid to us by the consolidated variable interest entities, for our cash and financing requirements, including the funds necessary to pay dividends and other cash distributions to our shareholders and service any debt we may incur. When any of our PRC subsidiaries incurs debt on its own behalf, the instruments governing the debt may restrict its ability to pay dividends or make other distributions to us.

Our subsidiaries’ ability to distribute dividends is based upon their distributable earnings. Current PRC regulations permit our PRC subsidiaries to pay dividends to their respective shareholders only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. In addition, each of our PRC subsidiaries and the consolidated variable interest entities are required to set aside at least 10% of its after-tax profits each year, if any, to fund a statutory reserve until such reserve reaches 50% of its registered capital. Each of such entities in China is also required to further set aside a portion of its after-tax profits to fund the employee welfare fund, although the amount to be set aside, if any, is determined at the discretion of its board of directors. These reserves are not distributable as cash dividends.

In addition, our PRC subsidiaries, the consolidated variable interest entities and their subsidiaries generate revenue primarily in Renminbi, which is not freely convertible into other currencies. As a result, any restriction on currency exchange may limit the ability of our PRC subsidiaries to pay dividends to us. For more details, see “Item 3. Key Information—D. Risk Factors—Risks Relating to Doing Business in China—We 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 adverse effect on our ability to conduct our business,” and “—PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion may delay or prevent us from using the proceeds of our initial public offering and the concurrent private placement to make loans to or make additional capital contributions to our PRC subsidiaries, which could materially and adversely affect our liquidity and our ability to fund and expand our business.”

8

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.

Selected Condensed Consolidated Statements of Income Information

    

For the Year Ended December 31, 2021

Consolidated

Consolidated

Assets Backed

Company

Variable Interest

Financing

Consolidated

    

Parent

    

Subsidiaries

    

Entities

    

Entities

    

Eliminations

    

 Total

RMB

(In millions)

Net revenue

 

 

1,773

 

3,282

 

 

(577)

 

4,478

Net income/(loss)

 

(37)

 

790

 

349

 

(75)

 

6

 

1,033

    

For the Year Ended December 31, 2020

Consolidated

Consolidated

Assets Backed 

Company

Variable Interest

Financing

Consolidated

    

Parent

    

Subsidiaries

    

Entities

    

Entities

    

Eliminations

    

Total

RMB

 

(In millions)

Net revenue

 

 

3,858

 

2,663

 

 

(2,559)

 

3,962

Net income/(loss)

 

(29)

 

1,592

 

(2,122)

 

(129)

 

(5)

 

(693)

    

For the Year Ended December 31, 2019

Consolidated

Consolidated

Assets Backed

Company

Variable Interest

Financing

Consolidated

    

Parent

    

Subsidiaries

    

Entities

    

Entities

    

Eliminations

    

Total

RMB

 

(In millions)

Net revenue

 

 

1,611

 

8,370

 

 

(1,364)

 

8,617

Net income/(loss)

 

(57)

 

903

 

522

 

(214)

 

2

 

1,156

9

Selected Condensed Consolidated Balance Sheets Information

    

As of December 31, 2021

Consolidated

Consolidated

Assets Backed

Company

Variable Interest

Financing

Consolidated

    

Parent

    

 Subsidiaries

    

Entities

    

Entities

    

Eliminations

    

Total

RMB

(In millions)

Cash and cash equivalents

 

6

 

1,465

 

1,393

 

 

 

2,864

Restricted cash

 

 

24

 

 

57

 

 

81

Accounts receivable

 

 

88

 

217

 

 

 

305

Contract assets, net

 

 

543

 

563

 

 

 

1,106

Contract cost

 

 

4

 

9

 

 

(3)

 

10

Prepaid expenses and other assets

 

 

206

 

145

 

1

 

 

352

Loans at fair value

 

 

 

 

74

 

 

74

Financing receivables

 

 

 

1,698

 

 

 

1,698

Amounts due from related parties

 

1,408

 

3,661

 

2,284

 

 

(6,474)

 

879

Held-to-maturity investments

 

 

 

 

2

 

 

2

Available-for-sale investments

 

89

 

155

 

5

 

 

(72)

 

177

Property, equipment and software, net

 

 

22

 

81

 

 

 

103

Deferred tax assets

 

 

 

7

 

 

 

7

Right-of-use assets

 

 

35

 

46

 

 

 

81

Investments in its subsidiaries and the consolidated VIEs

 

3,332

 

1,432

 

 

 

(4,764)

 

Total assets

 

4,835

 

7,635

 

6,448

 

134

 

(11,313)

 

7,739

Accounts payable

 

 

 

19

 

 

 

19

Amounts due to related parties

 

 

2,826

 

3,964

 

42

 

(6,399)

 

433

Deferred revenue

 

 

2

 

10

 

 

 

12

Payable to investors at fair value

 

 

 

 

203

 

(152)

 

51

Accrued expenses and other liabilities

 

14

 

214

 

954

 

1

 

 

1,183

Secured borrowings

 

 

 

1,029

 

 

 

1,029

Refund liabilities

 

 

6

 

 

 

 

6

Deferred tax liabilities

 

 

72

 

41

 

 

 

113

Lease liabilities

 

 

33

 

39

 

 

 

72

Total liabilities

14

3,153

6,056

246

(6,551)

2,918

10

    

As of December 31, 2020

Consolidated

Consolidated

Assets Backed

Company

Variable Interest

Financing

Consolidated

    

Parent

    

Subsidiaries

    

Entities

    

Entities

    

Eliminations

    

Total

RMB

(In millions)

Cash and cash equivalents

 

51

 

1,419

 

1,000

 

 

 

2,470

Restricted cash

 

 

24

 

 

213

 

 

237

Accounts receivable

 

 

23

 

100

 

 

 

123

Contract assets, net

 

 

208

 

542

 

 

 

750

Contract cost

 

 

10

 

64

 

 

(8)

 

66

Prepaid expenses and other assets

 

2

 

49

 

228

 

 

 

279

Loans at fair value

 

 

 

 

192

 

 

192

Financing receivables

 

 

 

1,253

 

 

 

1,253

Amounts due from related parties

 

1,396

 

1,775

 

773

 

 

(3,060)

 

884

Held-to-maturity investments

 

 

 

 

3

 

 

3

Available-for-sale investments

 

74

 

179

 

56

 

 

(133)

 

176

Property, equipment and software, net

 

 

38

 

109

 

 

 

147

Deferred tax assets

 

 

 

16

 

 

 

16

Right-of-use assets

 

 

9

 

97

 

 

 

106

Investments in its subsidiaries and the consolidated VIEs

 

2,263

 

1,432

 

 

 

(3,695)

 

Total assets

 

3,786

 

5,166

 

4,238

 

408

 

(6,896)

 

6,702

Accounts payable

 

 

 

9

 

 

 

9

Amounts due to related parties

 

 

1,341

 

2,494

 

119

 

(2,984)

 

970

Deferred revenue

 

 

7

 

44

 

 

 

51

Payable to investors at fair value

 

 

 

 

321

 

(268)

 

53

Accrued expenses and other liabilities

 

9

 

145

 

1,054

 

1

 

 

1,209

Secured borrowings

 

 

 

501

 

 

 

501

Refund liabilities

 

 

11

 

 

 

 

11

Deferred tax liabilities

 

 

25

 

14

 

 

 

39

Lease liabilities

 

 

8

 

74

 

 

 

82

Total liabilities

9

1,537

4,190

441

(3,252)

2,925

11

Selected Condensed Consolidated Cash Flows Information

    

For the Year Ended December 31, 2021

Consolidated  

Consolidated  

Assets Backed

    

    

Company 

    

Variable

    

Financing

    

    

Parent

Subsidiaries

Interest Entities

 Entities

Eliminations

Consolidated Total

RMB 

(In millions)

Net cash (used in)/provided by operating activities

(10)

(35)

250

(35)

(12)

158

Net cash (used in)/provided by investing activities

(31)

81

(359)

66

(104)

(347)

Net cash (used in)/provided by financing activities

 

(3)

 

 

501

 

(187)

 

116

 

427

Effect of foreign exchange rate changes

 

(1)

 

 

 

 

 

(1)

    

For the Year Ended December 31, 2020

Consolidated  

Consolidated  

Assets Backed

Company 

Variable

Financing

    

Parent

    

Subsidiaries

    

Interest Entities

    

 Entities

    

Eliminations

    

Consolidated Total

RMB 

(In millions)

Net cash (used in)/provided by operating activities

(13)

1,091

(828)

42

(10)

282

Net cash (used in)/provided by investing activities

(1,203)

(1,249)

33

622

(1,797)

Net cash (used in)/provided by financing activities

 

(3)

 

(66)

 

1,542

 

94

 

(612)

 

955

Effect of foreign exchange rate changes

 

(1)

 

(2)

 

 

 

 

(3)

    

For the Year Ended December 31, 2019

Consolidated  

Consolidated  

Assets Backed

Company 

Variable

Financing

    

Parent

    

Subsidiaries

    

Interest Entities

    

 Entities

    

Eliminations

    

Consolidated Total

RMB 

(In millions)

Net cash (used in)/provided by operating activities

(15)

1,366

(912)

(151)

(14)

274

Net cash (used in)/provided by investing activities

(12)

(645)

442

640

685

1,110

Net cash (used in)/provided by financing activities

 

(37)

 

(204)

 

600

 

(838)

 

(671)

 

(1,150)

Effect of foreign exchange rate changes

 

 

 

 

 

 

Selected Financial Data

In July 2019, we consummated a business realignment transaction with CreditEase, the controlling shareholder of our company, pursuant to which we have assumed from CreditEase and its affiliates the Acquired Businesses. As our company and the Acquired Businesses have been under the common control of CreditEase since the establishment of our company, ASC 805-50 requires that our financial statements be recast to retroactively reflect the acquisition of the Acquired Businesses for all the applicable prior periods presented. Item 3 of Form 20-F requires that selected financial information be presented for the registrant’s most recent five fiscal years. However, registrants are permitted to omit up to two of the earliest years in such five-year period in certain circumstances.

12

On December 31, 2020, we consummated another business restructuring with CreditEase to streamline our service lines and reposition us as a comprehensive digital personal financial management platform in China. In connection with the business restructuring, we had disposed of the Disposed Business. The Disposed Business was operated by Hengcheng, and CreditEase had, through its subsidiaries and affiliates, paid the designated subsidiaries of our company an aggregate amount of RMB67.0 million in cash. Please see “Item 4. Information on the Company—A. History and Development of the Company” for further information.

The following selected consolidated statements of operations data for the years ended December 31, 2019, 2020 and 2021 and selected consolidated balance sheet data as of December 31, 2020 and 2021 have been derived from our audited consolidated financial statements included in this annual report beginning on page F-1. The following selected consolidated balance sheets data as of December 31, 2019 has been derived from our audited consolidated financial statements not included in this annual report. The following selected recast consolidated statements of operations data for the year ended December 31, 2017 and 2018 and the selected recast consolidated balance sheet data as of December 31, 2018 have been derived from our audited recast consolidated financial statements not included in this annual report. The following selected recast consolidated balance sheet data as of December 31, 2017 are derived from our unaudited recast consolidated balance sheet as of December 31, 2017 not included in this annual report.

Our historical results do not necessarily indicate results expected for any future periods. The selected consolidated financial data should be read in conjunction with, and are qualified in their entirety by reference to, our audited consolidated financial statements and the related notes and “Item 5. Operating and Financial Review and Prospects” below. Our audited consolidated financial statements are prepared and presented in accordance with U.S. GAAP.

    

For the Year Ended December 31,

2017

2018

2019

2020

 

2021

RMB

    

RMB

    

RMB

    

RMB

     

RMB

    

US$

(in thousands, except for share, per share and per ADS data, and percentages)

Selected Consolidated Statements of Operations Data:

 

  

 

  

 

  

 

  

Net revenue (including revenue from related parties of RMB177,341, RMB142,477, RMB145,442, and RMB573,158 for the years ended December 31,2018, 2019, 2020 and 2021, respectively)

 

11,534,808

 

11,244,114

 

8,616,784

 

3,961,962

4,477,929

702,685

Operating costs and expenses:

 

  

 

  

 

  

 

  

Sales and marketing (including expenses from related parties of RMB997,203, RMB434,875, RMB111,550 and RMB1,548 for the years ended December 31, 2018, 2019, 2020 and 2021, respectively)

 

(9,004,959)

 

(6,658,270)

 

(4,457,353)

 

(1,905,095)

(1,553,344)

(243,754)

Origination, servicing and other operating costs (including costs from related parties of RMB559,724, RMB409,287, RMB718,734 and RMB354,985 for the years ended December 31, 2018, 2019, 2020 and 2021, respectively)

 

(1,242,928)

 

(1,061,289)

 

(665,083)

 

(1,104,682)

(760,858)

(119,395)

General and administrative (including expenses from related parties of RMB584,426, RMB122,338, RMB 192,934 and RMB135,118 for the years ended December 31, 2018, 2019, 2020 and 2021, respectively)

 

(1,323,608)

 

(1,336,247)

 

(731,806)

 

(627,368)

(508,869)

(79,853)

Provision for contingent liability

 

(43,049)

 

(419,581)

 

(9,462)

 

(3,187)

2,629

413

Allowance for contract assets, receivables and others

 

 

(992,581)

 

(1,625,051)

 

(371,629)

(370,154)

(58,085)

Loss of disposal

 

 

 

 

(655,839)

Total operating costs and expenses

 

(11,614,544)

 

(10,467,968)

 

(7,488,755)

 

(4,667,800)

(3,190,596)

(500,674)

Interest income, net

 

115,060

 

73,917

 

73,367

 

61,623

(73,383)

(11,515)

Fair value adjustments related to the consolidated asset backed financing entities

 

(86,372)

 

243,122

 

3,866

 

(143,988)

(37,442)

(5,875)

Gain on disposal of loan receivables and other beneficial rights

 

271,125

 

663,884

 

159,392

 

Other (expenses) / income, net

 

(32,001)

 

26,323

 

32,365

 

14,844

26,665

4,183

Total other income/(expenses), net

 

267,812

 

1,007,246

 

268,990

 

(67,521)

(84,160)

(13,207)

Income/(loss) before provision for income taxes

 

188,076

 

1,783,392

 

1,397,019

 

(773,359)

1,203,173

188,804

Income tax (expenses)/benefit

 

(381,210)

 

(194,287)

 

(239,228)

 

80,611

(170,189)

(26,706)

Share of results of equity investees

 

5,060

 

(9,295)

 

(2,180)

 

Net (loss)/income

 

(188,074)

 

1,579,810

 

1,155,611

 

(692,748)

1,032,984

162,098

Weighted average number of ordinary shares outstanding, basic

 

182,438,985

 

184,225,643

 

185,219,586

 

180,301,898

169,029,826

169,029,826

Basic net (loss)/income per share

 

(1.0309)

 

8.5754

 

6.2391

 

(3.8422)

6.1113

0.9590

Basic net (loss)/income per ADS (1) (2)

 

(2.0618)

 

17.1508

 

12.4782

 

(7.6844)

12.2226

1.9180

Weighted average number of ordinary shares outstanding, diluted

 

182,438,985

 

186,270,515

 

186,535,464

 

180,301,898

170,590,203

170,590,203

Diluted net (loss)/income per share

 

(1.0309)

 

8.4813

 

6.1951

 

(3.8422)

6.0554

0.9502

Diluted net (loss)/income per ADS (1) (2)

 

(2.0618)

 

16.9626

 

12.3902

 

(7.6844)

12.1108

1.9004

(1)Each ADS represents two ordinary shares.

13

(2)For purposes of calculating net loss/income per share, the weighted average number of ordinary shares for all the prior periods presented in the consolidated financial statements have been retroactively adjusted to reflect the issuance of our ordinary shares to CreditEase in consideration of our assumption of the Acquired Businesses.

As of December 31,

2017

2018

2019

2020

 

2021

    

RMB

    

RMB

    

RMB

    

RMB

     

RMB

    

US$

(in thousands)

Selected Consolidated Balance Sheet Data:

 

  

 

  

 

  

 

  

Cash and cash equivalents

 

2,222,785

 

2,606,939

 

3,198,086

 

2,469,909

2,864,543

449,511

Restricted cash

 

2,257,537

 

427,546

 

71,056

 

237,239

80,800

12,679

Contract assets, net (net of allowance of RMB992,049, RMB1,515,627, RMB467,306 and RMB350,686 as of December 31, 2018, 2019, 2020 and 2021, respectively)

 

 

3,909,263

 

2,398,685

 

750,174

1,105,905

173,541

Loans at fair value

 

1,450,707

 

1,375,221

 

418,492

 

192,156

73,734

11,571

Financing receivables (net of allowance of nil, nil, RMB32,975 and RMB65,489 as of December 31, 2018, 2019, 2020 and 2021, respectively)

 

 

 

29,612

 

1,253,494

1,697,962

266,449

Held-to-maturity investments

 

24,094

 

329,597

 

6,627

 

3,286

2,200

341

Available-for-sale investments

 

966,353

 

835,565

 

460,991

 

175,515

177,360

27,832

Total assets

 

16,124,352

 

14,251,815

 

9,644,420

 

6,702,253

7,739,440

1,214,487

Secured borrowings

 

50,000

 

222,419

 

18,590

 

500,500

1,028,600

161,410

Refund liabilities

 

 

2,145,748

 

1,801,535

 

10,845

5,732

899

Total liabilities

 

24,014,085

 

14,615,228

 

5,154,330

 

2,924,589

2,918,008

457,899

Total (deficit)/equity

 

(7,889,733)

 

(363,413)

 

4,490,090

 

3,777,664

4,821,432

756,588

B.Capitalization and Indebtedness

Not applicable.

C.Reasons for the Offer and Use of Proceeds

Not applicable.

D.Risk Factors

Risks Related to Our Delayed Filing of this Form 20-F

The filing of this Form 20-F may not make us “current” in our Exchange Act filing obligations, which means we retain certain potential liability and may not be eligible to use certain forms or rely on certain rules of the SEC.

We are filing a comprehensive annual report on Form 20-F since we have been delinquent in meeting our periodic reporting requirements with the SEC, following, by analogy, previously issued guidance from the staff of the SEC’s Division of Corporation Finance, or the Staff, with respect to U.S. domestic issuers. Our filing of this Form 20-F does not necessarily mean that the Staff will conclude that we have complied with all applicable financial statement requirements or complied with all reporting requirements of the Exchange Act, nor does it foreclose any enforcement action by the SEC with respect to our disclosure, filings or failures to file reports under the Exchange Act.

As a result of our failure to maintain current filings with the SEC in the past, our use of this format of the Form 20-F and any potential enforcement action from the SEC or other regulatory agencies, we may not be eligible to use certain short-form registration statements or rely on certain rules of the SEC. This could increase our transaction costs and adversely impact our ability to raise capital in a timely manner.

14

Risks Related to Our Business

We operate in emerging and evolving industries, and our operations, services and products have been and may need to be modified in answering to the latest market trends, which makes it difficult to evaluate our future prospects.

The market for China’s loan facilitation and wealth management solutions are emerging and in general remain at relatively preliminary stages of development and may not continue to develop as rapidly as expected. The regulatory framework for the industries we operate in is also evolving and may remain uncertain for the foreseeable future.

We launched our online marketplace in March 2012 and have a limited operating history. Starting in the fourth quarter of 2014, we began offering loan products with different pricing grades. In the second quarter of 2017, we further launched a new credit scoring system, the Yiren score, which can be used to more accurately characterize a borrower’s credit profile. As a result of our strategic business realignment with CreditEase in 2019, we have begun operating our business on a more diverse and scalable mix of service platforms——Yiren Credit and Yiren Wealth. Yiren Credit is our credit-tech platform that has the capability to provide individual borrowers and small business owners with a full spectrum of online and offline, multi-channel loan products funded by retail and institutional investors. Yiren Wealth is our wealth management platform that specifically targets the mass affluent investors and provides them with one-stop asset allocation-based wealth management solutions. On December 31, 2020, we consummated another business restructuring with CreditEase to streamline our service lines and reposition us as a comprehensive digital personal financial management platform in China. In connection with the business restructuring, we had disposed of the online consumer lending platform targeting individual investors as the funding source (the “Disposed Business”). The Disposed Business was operated by Hengcheng, and CreditEase had, through its subsidiaries and affiliates, paid the designated subsidiaries of our company an aggregate amount of RMB67.0 million in cash. After the restructuring, the funding source for Yiren Credit is investments from institutional funding partners only.

As our business develops or in response to competition, we may continue to introduce new products or make adjustments to our existing products, or make adjustments to our business model. In connection with the introduction of new products or in response to general economic conditions, we may impose more stringent borrower qualifications to ensure the quality of loans on our platform, which may negatively affect the growth of our business. Any significant change to our business model may not achieve expected results and may have a material and adverse impact on our financial condition and results of operations. For example, we cannot assure you that wealth management products and services available through our platform can be widely accepted in light of our limited experience and operating history in the wealth management sector. It is possible that we may not be able to provide access to attractive wealth management products and services to achieve our clients’ expectation of the investment returns. Any failure on our part to keep up with providing access to wealth management products and services or any failure to respond quickly to the market trend may materially and adversely affect the growth of our wealth management business. It is therefore difficult to effectively assess our future prospects. The risks and challenges we encounter or may encounter in this developing and rapidly evolving market may adversely impact our business and prospects. These risks and challenges include our ability to, among other things:

navigate an evolving regulatory environment;
expand the base of borrowers and investors served on our platforms;