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A. History and Development of the Company
The history of our retail credit and enablement business dates back to August 2005, when Ping An Group launched a consumer loan business in Shenzhen, China.
In 2014, we underwent a series of reorganizations to further the strategic development of our business and incorporated Lufax Holding Ltd as an exempted company under the laws of the Cayman Islands in December 2014 to act as the holding company for our corporate group. In May 2016, we acquired our retail credit and enablement business from Ping An Group.
Prior to our initial public offering, we carried out three rounds of equity financing, the first two in 2015 and 2016, and the third one with separate closings in 2018 and 2019. In addition, we issued automatically convertible promissory notes and optionally convertible promissory notes in 2020. On October 30, 2020, the ADSs representing our ordinary shares commenced trading on NYSE under the symbol “LU.”
On April 14, 2023, our ordinary shares commenced trading, by way of introduction, on the Main Board of the Hong Kong Stock Exchange under the stock code “6623.” The ordinary shares listed on the Main Board of the Hong Kong Stock Exchange are fully fungible with the ADSs listed on the NYSE.
On December 15, 2023, we effected an ADS ratio change to adjust our ordinary share to ADS ratio from two ADSs representing one ordinary share to one ADS representing two ordinary shares.
On March 21, 2024, our board of directors resolved to recommend a special dividend of US$1.21 per ordinary share or US$2.42 per ADS, with an option for holders to elect payment either wholly in cash or wholly in the form of new shares or ADSs. Shareholders approved this special dividend on May 30, 2024. Following shareholder elections, we paid approximately US$720 million in cash and issued 586,176,887 new ordinary shares, of which 67,027,960 were represented by ADSs. Two of our shareholders that are wholly owned subsidiaries of Ping An Insurance, namely An Ke Technology Company Limited and China Ping An Insurance Overseas (Holdings) Limited, received 305,989,352 and 203,890,905 new ordinary shares, respectively, in the dividend. As a result, Ping An Insurance’s total holdings increased from 41.4% to 56.8% of our enlarged issued share capital, triggering a mandatory general offer under Rule 26 of the Hong Kong Code on Takeovers and Mergers. On September 27, 2024, Ping An Insurance, through An Ke Technology Company Limited and China Ping An Insurance Overseas (Holdings) Limited, offered to acquire all remaining outstanding ordinary shares and ADSs owned by other shareholders of us at a price of US$1.127 per ordinary share and US$2.254 per ADS, net in cash, excluding interest and subject to tax withholding. The offer period started from September 27, 2024 and ended on October 28, 2024. By the offer’s close, valid acceptances were received for 57,828 ADSs, representing 115,656 ordinary shares (approximately 0.01% of the total issued ordinary shares as of October 28, 2024).
Following the allotment and issuance of new ordinary shares in the special dividend, we became a non-wholly-owned subsidiary of Ping An Insurance. Since July 2024, our financial results have been consolidated into the consolidated financial statements of Ping An Group.
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On April 2, 2024, we acquired a 100% equity interest in Ping An Digital Bank (International) Limited (formerly known as PAO Bank Limited) from OneConnect Financial Technology Co., Ltd. for HK$933 million (US$131 million) in cash. We refer to OneConnect Financial Technology Co., Ltd. as OneConnect and Ping An Digital Bank (International) Limited as Ping An Digital Bank in this annual report. Ping An Digital Bank operates a digital bank business in Hong Kong under a license granted by the Hong Kong Monetary Authority.
We conduct our retail credit and enablement business primarily through Ping An Puhui Enterprises Management Co., Ltd. and its subsidiaries, as well as Ping An Rongyi (Jiangsu) Financing Guarantee Co., Ltd. These entities are collectively known as Ping An Rongyi. Ping An Rongyi (Jiangsu) Financing Guarantee Co., Ltd. holds licenses for providing financing guarantee services. We conduct our consumer finance business through Ping An Consumer Finance Co., Ltd., which is licensed to provide consumer finance services. We do not conduct our retail credit and enablement business or our consumer finance business through the consolidated affiliated entities.
In order to comply with PRC laws and regulations, we historically carried out our online wealth management business primarily through the consolidated affiliated entities. We used two wholly foreign-owned entities in China, namely Weikun (Shanghai) Technology Service Co., Ltd, or Weikun (Shanghai) Technology, and Lufax Holding (Shenzhen) Technology Service Co., Ltd., or Lufax (Shenzhen) Technology, to direct the activities of the consolidated affiliated entities and their subsidiaries. Weikun (Shanghai) Technology has a series of contractual arrangements with Shanghai Xiongguo and its shareholders, and a series of contractual arrangements with Shanghai Lufax and its shareholders. Lufax (Shenzhen) Technology has a series of contractual arrangements with Shenzhen Lufax Enterprise Management and its shareholders. See “—Contractual Arrangements with the Principal Consolidated Affiliated Entities” below. Revenues contributed by the consolidated affiliated entities and their subsidiaries accounted for 0.8% , 1.8% and 1.0% of our total revenues for 2023, 2024 and 2025, respectively. As of the date of this annual report, we have begun the winding down of our online wealth management business.
Our principal executive offices are located at 18th Floor, No. 1333 Lujiazui Ring Road, Pudong New District, Shanghai, the People’s Republic of China. Our telephone number at this address is +86 21-3863-6278.
Our registered office in the Cayman Islands is located at PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands. Our agent for service of process in the United States is Cogency Global Inc., located at 122 East 42nd Street, 18th Floor, New York, NY 10168. Investors should contact us for any inquiries through the address and telephone number of our principal executive offices.
The SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC on www.sec.gov. You can also find information on our website ir.lufaxholding.com. The information contained on our website is not a part of this annual report.
Recent Developments
Change in Auditors
On June 25, 2025, our shareholders approved the removal of PricewaterhouseCoopers, or PwC, and PricewaterhouseCoopers Zhong Tian LLP, or PwC ZT, as our auditors, and the appointment of Ernst & Young and Ernst & Young Hua Ming LLP as our new auditors. The circumstances leading to the decision of our board of directors to propose the removal of PwC and PwC ZT as our auditors were previously publicly disclosed in a Form 6-K furnished to the SEC on January 27, 2025, which Form 6-K is incorporated herein by reference. For more information, please see Item 16F of our annual report on Form 20-F for the fiscal year ended December 31, 2024 filed with the SEC on February 17, 2026.
Independent Investigation
As disclosed in our Form 6-K dated January 27, 2025 and detailed in Item 16F of our annual report on Form 20-F for the fiscal year ended December 31, 2024 filed with the SEC on February 17, 2026, our audit committee received letters from PwC and PwC ZT on January 21, 2025 (collectively, the “PwC Letters”), which raised concerns, in the view of PwC and PwC ZT, about certain possible related party transactions (the “Subject Transactions”). PwC ZT further stated that its 2022 and 2023 audit opinions on our annual financial statements should no longer be relied upon.
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To address the above concerns, our audit committee engaged a leading international law firm and forensic accounting experts from an international consulting firm that is not our auditor (the “Investigation Team”) to conduct an independent investigation (the “Independent Investigation”) into the Subject Transactions, covering the period from January 1, 2022 to December 31, 2024.
On April 23, 2025, we disclosed the findings as of that date to the public in a Form 6-K furnished to the SEC, which Form 6-K is incorporated herein by reference. As of the date of this annual report, the Company’s response to certain inquiries and comments received from the Hong Kong Stock Exchange continues.
In summary, the findings of the Independent Investigation were as follows. From May 2023 to January 2024, we, through a subsidiary of ours, invested as the sole investor in certain trusts, or the Subject Trusts, established and maintained by an unrelated trust company. At our direction, these trusts purchased certain assets (the “Target Assets”) from certain entities affiliated with us (each an “Affiliated Entity”).
The Investigation Team found that, contrary to the allegations made in the PwC Letters, the aforementioned transactions were not used “to compensate the Company’s affiliated entities for losses incurred by those or other affiliated entities in prior transactions with the Company.” Instead, we entered into these transactions to buy back via these trusts the underlying assets of the Investment Products (the “Relevant Assets,” being part of the Target Assets) with the view to compensating certain retail investors for investment losses incurred in connection with certain private investment fund products (the “Investment Products”). We did so because one of our subsidiaries was involved in selling the Investment Products to retail investors and faced demands by these retail investors to mitigate their investment losses when the Investment Products resulted in monetary losses. In addition, we also used our investments in the Subject Trusts to purchase some other assets (being the remainder of the Target Assets) from another Affiliated Entity. In effectuating the foregoing, from July 2023 to September 2024, we sold and transferred certain high yield assets to a third-party bank, which, upon receipt of the transfer, immediately transferred back such assets to the Subject Trusts, to mitigate moral hazard risks and the potential impairment on the book value of the Target Assets.
Another Subject Transaction raised in the PwC Letters concerned our investments into another trust company since July 2020 that were unrelated and prior to any of the above transactions. The trusts into which we invested were discretionary trusts (the “Discretionary Trusts”) managed by an independent third party and, contrary to the allegations made in the PwC Letters, were not used “to compensate the Company’s affiliated entities for losses incurred by those or other affiliated entities in prior transactions with the Company.”
Pursuant to the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited, or the Hong Kong Listing Rules, the Affiliated Entities are connected persons of the Company, and the above transactions relating to the Subject Trusts (“Connected Transactions”), which involved purchasing of Target Assets from Affiliated Entities, constitute connected transactions of the Company subject to the announcement, reporting and approval of independent shareholders requirements under Chapter 14A of the Hong Kong Listing Rules. However, we recorded the Subject Trusts as discretionary trusts and did not follow the required procedures pursuant to the Hong Kong Listing Rules. In addition, the book value of the Subject Trusts did not reflect the fair value of the Target Assets in our accounts which would impact our profit and net equity.
The former co-chief executive officer who left office in November 2024 was in charge of the relevant department where the Connected Transactions occurred, and the former chief financial officer, who reported to the former co-chief executive officer, was then in charge of our financial department and left office in April 2024.
Supplemental Investigation
As disclosed in our Form 6-K dated January 27, 2026, which is incorporated herein by reference, the Company was responding to certain inquiries by the Hong Kong Stock Exchange into the Subject Transactions, with the view of assessing their impact on the Company’s business operations and financial position and satisfying the requirements set forth in the Hong Kong Stock Exchange’s resumption guidance.
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To ascertain whether there were additional transactions of a similar nature as the Subject Transactions, the Investigation Team, under the instruction of the Audit Committee, conducted a supplemental investigation (the “Supplemental Investigation”). The Supplemental Investigation found that, between June 2017 and January 2023, the Company extended various loans to a third party called Shenzhen DeCheng Investment and Development Co., Ltd. (“DeCheng Investment”), totaling RMB3.84 billion (the “Loan Transactions”). As of the end of 2025, the outstanding loan principal was approximately RMB1.46 billion, and the total outstanding principal plus interest was approximately RMB1.8 billion. From 2022 to January 2023, DeCheng Investment used a portion of the loan proceeds from the Company to acquire the underlying assets of certain risk assets or non-performing asset portfolios related to the investment products issued by the Company’s related parties (the “Compensatory Transactions”). These distressed underlying assets, after their acquisition by DeCheng Investment, came under the Company’s de facto control.
The Company entered into the above arrangement with DeCheng Investment because the risk assets and the non-performing asset portfolios were sold and promoted through the Company’s online platform. When these financial products suffered investment losses or faced risk of delinquency, to mitigate potential reputational risks and to manage the Company’s potential exposure, the Company entered into the above transactions with the view of compensating these retail investors, in whole or in part.
The Supplemental Investigation found that the accounting treatment of the aforementioned Loan Transactions that were used for Compensatory Transactions failed to reflect the economic substance of the above Loan Transactions, which is that DeCheng Investment, on behalf of the Company, assumed the underlying risk assets or non-performing asset portfolios and paid consideration to compensate retail investors.
The Supplemental Investigation also found that three entities, including two held by DeCheng Investment, were controlled by the Company, but whose financials were not consolidated by the Company in the Company’s financial statements.
The Supplemental Investigation found that the Company’s former co-chief executive officer and former chief financial officer, who left office in late- and early-2024, respectively, were primarily responsible for designing and implementing the Compensatory Transactions. With respect to the responsible personnel, including those who played supporting roles in the Subject Transactions and/or the Compensatory Transactions, and who knew or should have known of their improper accounting treatment and related compliance issues, the Company is considering appropriate personnel actions and, where appropriate, will make a further announcement about them in compliance with applicable law.
In addition, as disclosed in the Company’s prior announcements, the Company has engaged the Independent Internal Controls Consultant to review its internal controls policies and procedures. For more details about the Internal Controls Review, please refer to the next section.
Remedial Actions and Improvement of Internal Controls
We have taken remedial actions to address the findings of the Independent Investigation and the Supplemental Investigation. We paid a total of RMB1.37 billion (the “Paid Amount”) through Subject Trusts to buy back the Relevant Assets to mitigate retail investors’ investment losses from their purchase of the Investment Products. We engaged in discussions with relevant Affiliated Entity (the “Affiliate”) which was also involved in the selling of the Investment Products, to allocate their respective responsibility for the losses on a fair and reasonable basis. On April 23, 2025, with the approval of the board of directors, an agreement was entered into with the Affiliate, whereby the Affiliate agreed to bear 70% and us to bear the remaining 30% of the retail investors’ relevant investment losses (the “Agreed Percentage”), and the Affiliate further agreed to repay us the difference between the fair value of the Relevant Assets and the Paid Amount based on the Agreed Percentage.
In addition, our board of directors, upon recommendation of our audit committee, has also resolved to take the following initiatives to further optimize our corporate governance structure. On April 23, 2025, our board of directors acted on the recommendation of our audit committee to appoint Mr. Dicky Peter Yip as an independent non-executive director and as the chairman of the board of directors, with immediate effect. Mr. Yong Suk Cho ceased to serve as the chairman of the board of directors, but continues to serve as our chief executive officer and executive director. This change, which separated the role of the chief executive officer from that of the chairman of the board of directors, was made to meet the requirements of the Hong Kong Listing Rules and strengthen the independence of our board of directors. On the same day, Mr. Alston Peiqing Zhu tendered his resignation as our chief financial officer, executive director and authorized representative under Rule 3.05 of the Hong Kong Listing Rules, and Mr. Hui Liu tendered his resignation as our non-executive director, both effective April 23, 2025. Mr. Tongzhuan Xi was appointed as our chief financial officer, executive director and authorized representative under Rule 3.05 of the Hong Kong Listing Rules, effective on the same date. An extraordinary special committee under the board of directors was also formed to oversee the improvement of our internal control system, and an extraordinary executive committee at the management level was also set up to support the special committee under the board of directors.
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We appointed Deloitte Consulting (Shanghai) Co., Ltd. as our independent internal control consultant (the “Independent Internal Controls Consultant”) to conduct a review of our internal control policies and procedures and provide corresponding rectification recommendations to improve our internal control system of our company. The scope of the internal control review covers entity-level internal controls (control environment, risk assessment, control activities, information and communication, monitoring), business process-level internal controls (wealth management business processes), and management process-level internal controls (financial reporting and information disclosure, management processes for related parties and related party transactions, cash and treasury management processes, investment and valuation processes), involving relevant businesses occurring during the period from January 1, 2022 to December 31, 2025. Among these, business and management functions directly related to the transactions under independent investigation were designated as key areas for review, primarily including the corporate level, wealth management business, management of related parties and related party transactions, financial reporting and information disclosure, cash and treasury management, investment and valuation, and consolidation and subsidiary management. As of the date of this annual report, the Independent Internal Control Consultant has provided improvement recommendations regarding internal control deficiencies identified during the internal control review. The Company has been responding and implementing corresponding remedial measures based on the recommendations of the Independent Internal Control Consultant. The Independent Internal Control Consultant is concurrently conducting follow-up review to assess the implementation of the remedial measures.
Please refer to “Item 15. Controls and Procedures—Management’s Plan for Remediation of Material Weaknesses” for more details on the remedial actions taken by our company.
B. Business Overview
We are a leading financial services enabler for SBOs in China. We are committed to providing SBOs with comprehensive, convenient financial products and services as well as enabling financial institution partners to reach and serve SBOs efficiently. In addition, we provide consumer finance products and services for retail consumers. We enabled loans for 3.9 million active borrowers in 2023, 5.0 million active borrowers in 2024, and 4.0 million active borrowers in 2025. The total outstanding balance of loans we enabled was RMB315.4 billion, RMB216.9 billion and RMB183.8 billion (US$26.3 billion) as of December 31, 2023, 2024 and 2025, respectively.
We enable loans primarily under two distinct business models. Approximately 88.2%, 76.9% and 67.6% of the total outstanding balance of loans we had enabled as of December 31, 2023, 2024 and 2025, respectively, are loans we enabled under our core retail credit and enablement business model. These are large-ticket loans, having an average ticket size of RMB278,067, RMB219,291 and RMB198,485 for general unsecured loans enabled in 2023, 2024 and 2025, respectively, and RMB551,253, RMB586,807 and RMB445,242 for secured loans enabled in 2023, 2024 and 2025, respectively. The remaining 11.8%, 23.1% and 32.4%, respectively, consist of loans we had enabled through our licensed consumer finance subsidiary. These are small-ticket loans, having an average drawdown of RMB6,805, RMB6,728 and RMB8,888 in 2023, 2024 and 2025, respectively. The enablement of loans accounted for substantially all of our total income in 2023, 2024 and 2025.
Starting in 2024, we introduced a strategy to support the growth of our core retail credit and enablement business and consumer finance business that centers on our key licenses: our financing guarantee business license, consumer finance business license and microloan business license in the PRC, as well as the banking license for Ping An Digital Bank in Hong Kong. These licenses enable us to provide diverse financial services, ensuring regulatory compliance while driving business growth and expansion. In 2025, we embarked on a strategic transformation focused on (i) rebalancing our customer base by offering flexible and diversified products tailored to the differentiated needs of premium customers, (ii) servicing valued customers, optimizing our services and boosting repeat borrowing, (iii) innovating our direct sales model to acquire quality customers at scale and enhance productivity, while developing diversified new channels, including insurance and banking networks, to drive further expansion, (iv) upgrading our risk management infrastructure through AI-driven credit approval, micro-expression detection and granular customer tiering, (v) transitioning toward an asset-light, higher-leverage capital model, and (vi) improving profitability by reducing risks, operating costs and funding costs.
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Our Business Models
Core Retail Credit and Enablement Business Model
We enable both borrowers and institutional partners through our core retail credit and enablement business model.
Our core retail credit and enablement business model comprises both general unsecured loans and secured loans. This was previously enabled under the Puhui brand. It was rebranded as Ping An Danbao in 2024, and then further rebranded as Ping An Rongyi in April 2025. We rebranded this business to Ping An Rongyi, which embodies the core value proposition of “making financing easier through professionalism,” to better reflect the brand’s core values and highlight our commitment to providing convenient financing services to small and micro business owners, individual entrepreneurs, and individuals through financial technology and an offline service network.
Our borrowers include small business owners who need larger loans on short notice to address imminent operational needs. We leverage our large nationwide direct sales team to serve millions of otherwise hard to reach potential borrowers in this critical but undercapitalized sector of the Chinese economy. To a lesser extent we also serve salaried workers dealing with major life expenses under this business model. We apply advanced risk analytics leveraging our 20 years of proprietary data to assess the creditworthiness of potential borrowers and co-design loan product terms with our funding partners to serve their needs. We enable our institutional partners by referring borrowers who fit their target profiles and sharing our risk analytics so that each of our funding partners is taking on the degree of risk that is compatible with its own business model. We also provide post-loan and collection services to our institutional partners to further manage their credit risk.
We only enable loans to individuals and not to entities, but our risk analytics incorporate data on both personal and business assets of potential borrowers. For loans funded by third parties requiring credit enhancement, we used to guarantee a portion of the risk on each new loan transaction along with our credit enhancement providers. We have been gradually reducing our reliance on third-party credit enhancement providers over time. In the fourth quarter of 2023, we successfully completed the transformation of our core retail credit and enablement business such that our licensed financing guarantee subsidiary now provides a guarantee for nearly every new loan transaction (excluding certain consumer finance loan products and referral products) without the involvement of third-party credit enhancement. As a result, our risk bearing by new loan sales (excluding consumer finance loans) increased from 49.8% for the year ended December 31, 2023 to 99.7% for the year ended December 31, 2024, and remained almost flat at 99.1% for the year ended December 31, 2025. The percentage of outstanding loans with credit risk exposure for our company has increased from 39.8% as of December 31, 2023, to 74.5% as of December 31, 2024, and further to 91.4% in 2025.
For our core retail credit and enablement model, customers are charged an effective APR, from which we receive credit and enablement service fees, interest income and guarantee income, while our institutional partners such as funding partners receive funding fees and, where applicable, credit enhancement providers receive credit guarantee insurance premiums. We earn profit before income tax expenses after deducting operating expenses and impairment losses based on expected loan losses for the portion of loans that we bear credit risk.
The total outstanding balance of loans enabled under our core retail credit and enablement business model was RMB278.3 billion as of December 21, 2023, RMB166.8 billion as of December 31, 2024, and RMB124.3 billion (US$17.8 billion) as of December 31, 2025.
Consumer Finance Business Model
We also provide consumer finance loans through our licensed consumer finance subsidiary, Ping An Consumer Finance Co., Ltd. As a licensed entity in a highly regulated sector, it operates independently from Ping An Rongyi and follows its own distinct business model. Our consumer finance subsidiary is focused on regulatory compliance and consumer protection, including maintaining adequate capital reserves, managing risks, and maintain stable relationships with regulators.
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This subsidiary targets consumers in China who require small-ticket loans, typically for short-term cash flow needs or discretionary consumer goods purchases. The market for consumer finance loans is complementary to the market for the large-ticket, long-tenor loans facilitated by Ping An Rongyi, with minimal overlap between the borrower bases. We aim to attract consumer finance customers from both internal and external ecosystems. Internally, our consumer finance business taps into resources from Ping An Group and Lufax. Externally, it collaborates with major internet platforms, including Ant Group, Meituan, ByteDance and Duxiaoman. This approach is intended to support customer acquisition, risk control, and product development.
We deploy strategies focused on both re-engaging existing customers and expanding into new segments. Data-driven methods are used to increase customer lifetime value and conversion rates, particularly in the inclusive finance sector. Compliance and risk management are prioritized through the establishment of internal controls, legal compliance training, and a risk management matrix to ensure financial safety and regulatory compliance.
Our consumer finance subsidiary bears some of the credit risk on the loans it provides. We recognize the income from the consumer finance loans as net interest income. Borrower acquisition costs are deducted from net interest rather than being recognized separately. The total outstanding balance of loans enabled by our licensed consumer finance subsidiary was RMB37.1 billion as of December 31, 2023, RMB50.1 billion as of December 31, 2024, and RMB59.6 billion (US$8.5 billion) as of December 31, 2025.
How We Enable Small Business Owners and Retail Borrowers
We enable SBO and retail borrowers by connecting them with institutional partners and making the borrowing process faster, simpler and more intuitive to effectively address their financing needs.
Our Borrowers
Under our Ping An Rongyi brand, we target small business owners who have residential property, automobiles, financial assets and some access to commercial bank credit. Small business owners often need larger ticket size loans on short notice for imminent commercial operating needs of their business and yet are underserved by traditional financial institutions. We also enable loans to salaried workers who need large ticket size consumption loans for purposes such as education, home decoration, and purchase of consumer durables.
Many of our SBO borrowers have fewer than 50 employees and annual revenues of less than RMB30 million. Some of them do business through a corporation, others through a partnership, still others as a sole proprietor, but regardless of the legal form of the business, the owner of the business is always the borrower in his or her personal capacity, so that the owner cannot avoid repayment of the loan on the basis of having limited liability for the debts of the entity.
As of December 31, 2025, we had over 7.2 million cumulative SBO borrowers under our Ping An Rongyi brand. Small business owners accounted for approximately 90%, 84% and 87% of all new loans we enabled under our Ping An Rongyi brand in 2023, 2024 and 2025, respectively, and 86%, 85% and 84% of the balance of such loans as of December 31, 2023, 2024 and 2025, respectively.
For unsecured loans, we have been concentrating our efforts on borrowers at the higher end of our internal ranking of creditworthiness. In 2025, of the borrowers of loans under our Ping An Rongyi brand, 85.1% had credit cards, 28.8% owned residential property, 26.9% had life insurance policies, and 40.1% had no unsecured loans outstanding from banks.
We also make loans through our consumer finance subsidiary. Borrowers of consumer finance loans are typically looking to meet personal short-term cash flow needs of individual borrowers. Borrowers of consumer finance loans typically seek financial assistance to address immediate cash flow needs, such as managing unexpected personal expenses or making discretionary purchases of consumer goods, including electronics, home appliances or travel-related services.
Our consumer finance subsidiary focuses on addressing the small-scale, decentralized consumer credit needs of various segments of society. It primarily serves small business owners through inclusive financial services to meet their consumer financing needs, while also providing convenient consumer finance services to medium- and low-risk customer groups, including individuals with stable salaried income and those with a strong record of consumer activity. As such, our consumer finance subsidiary focuses on providing unsecured loans tailored to their specific financial needs, offering more accessible and inclusive credit options.
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As of December 31, 2025, nearly 70% of the borrowers for our consumer finance loans were individuals aged between 25 and 45. As of December 31, 2023, 2024 and 2025, our consumer finance subsidiary served approximately 1.8 million, 4.1 million and 3.2 million active borrowers, respectively.
Sourcing Borrowers
We had a cumulative total of 29.1 million borrowers as of December 31, 2025. The number of active borrowers for whom we enabled loans was 3.9 million in 2023, 5.0 million in 2024, and 4.0 million in 2025. We source borrowers through a variety of channels.
Retail Credit and Enablement
We source borrowers under our Ping An Rongyi brand primarily through offline channels, because we primarily focus on loans with larger ticket sizes that often require additional consultation services to be provided to the borrowers during the origination process. The origination of these loans incurs higher costs as compared to the origination of smaller ticket size consumer loans but it also generates more value under typical circumstances. However, in 2025, the direct sales channel’s profitability will likely remain under pressure.
The following table shows the volume of new general unsecured and secured loans we enabled under our Ping An Rongyi brand by origination channel for the years indicated.
For the Year Ended December 31,
2023 2024 2025
(RMB) (%) (RMB) (%) (RMB) (%)
(in billions, except percentages)
Volume of New Loans
Direct sales 85.6 62.6 86.7 73.7 73.7 78.2
Channel partners 31.8 23.2 19.7 16.8 12.1 12.8
Online and telemarketing 19.5 14.2 11.2 9.5 8.5 9.0
Total 136.8 100.0 117.6 100.0 94.3 100.0
Direct sales
We had a direct sales network of over 21,800 full-time employees as of December 31, 2025, of whom over 97% have a junior college education or above. Together they covered approximately 172 cities across China. Our direct sales force proactively seeks out potential borrowers using their own knowledge and contacts with the help of a specialized mobile app designed to optimize their time and efforts. This system tracks and shows location and travel data for all of our sales employees in real time. Our system can further overlay an AI heat map showing our borrowers and their borrowing characteristics, which allows us to identify regions with higher sales potential.
In supervising and evaluating the performance of our direct sales network, we give close attention to the creditworthiness of the borrowers they bring in. The volume of new loans sourced per employee per month by our direct sales team was RMB240 thousand in 2023, RMB341 thousand in 2024 and RMB280 thousand (US$40 thousand) in 2025.
Our direct sales channel was responsible for sourcing RMB85.6 billion, or 62.6%, of our total volume of new loans in 2023, RMB86.7 billion, or 73.7%, of our total volume of new loans in 2024, and RMB73.7 billion, or 78.2%, of our total volume of new loans in 2025. The increase of 4.5 percentage points in 2025 was primarily due to a strategic decision to source more loans through our direct sales channel.
Channel partners
We complement our direct sales force with a large and robust set of channel partners. Our channel partners introduce borrowers and are paid referral fees for each loan originated. The vast majority of our channel partners are individual partners associated with Ping An Insurance. Although substantially all of these individuals are associated with Ping An Group entities as referral representatives, the corresponding Ping An Group entities are not involved in the referrals. Individual referrals are rewarded on the basis of a referral program where individuals sign up with our group and receive fees on successfully referred borrowers. Historically, we also cooperated with corporate channel partners, though we have largely phased out our corporate referrals channels.
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Online and telemarketing
As of December 31, 2025, we employed almost 1,000 employees to engage in targeted online and telemarketing campaigns to reach customers based on their potential need for loans, which we have identified from online behavioral data and other big data techniques. Our online and telemarketing channel primarily enables general unsecured loans, and it focuses on helping high-quality borrowers borrow new loans.
We have leveraged the application of advanced AI technology to maintain the productivity of our online and telemarketing channel. The volume of new loans sourced per employee per month by our online and telemarketing channel was RMB782 thousand in 2023, RMB627 thousand in 2024, and RMB723 thousand (US$103 thousand) in 2025.
Our online and telemarketing channel was responsible for sourcing RMB19.5 billion, or 14.2%, of the new loans we enabled in 2023, RMB11.2 billion, or 9.5%, of the new loans we enabled in 2024, and RMB8.5 billion (US$1.2 billion), or 9.0%, of the new loans we enabled in 2025.
Consumer Finance
Our consumer finance subsidiary acquires borrowers through both online and offline channels. The number of borrowers with outstanding consumer finance loans has increased over time. The number grew from 1.8 million as of December 31, 2023 to 4.1 million as of December 31, 2024, and further to 3.2 million as of December 31, 2025.
Online channels
We utilize our consumer finance app and third-party traffic platforms to attract potential borrowers and provide them with a seamless digital experience for consumer finance loan applications. Our consumer finance app draws borrowers through its organic traffic bolstered by the reputation of Ping An Group. These third-party traffic platforms include Ant Group, Meituan, Bytedance, Du Xiaoman and others.
Offline channels
We also rely on a direct sales network, which allows us to engage borrowers directly and personally. This approach is particularly effective for reaching borrowers who prefer in-person interactions or may be less familiar with digital platforms. As of December 31, 2025, our direct sales network consisted of over 21 thousand full-time employees, covering approximately 172 cities across China.
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Loan Products
The typical borrower of a secured loan is a small business owner who uses the loan proceeds for business operations. Borrowers of general unsecured loans include both small business owners and salaried workers who use the loan proceeds for business operations or personal consumption. We base our credit assessment on individual data for salaried workers and a combination of individual and business data for small business owners, plus the characteristics of the collateral for borrowers of secured loans, who are almost all small business owners. We only accept residential property and automobiles as collateral. We also make consumer finance loans to retail borrowers through our licensed consumer finance subsidiary. It primarily serves emerging customer groups, such as younger consumers, individuals in third-tier and smaller cities, and people who have recently relocated to urban areas. The following chart summarizes some of the characteristics of these various borrowers and their loans in 2025:
Core Retail Credit and Enablement Consumer Finance Business
General Unsecured Loans Secured Loans Consumer Finance Loans
Credit Risk Assessment • Individual, business • Individual, business, collateral • Individual
Average Ticket Size • RMB198,485 (US$28,383) • RMB445,242 (US$63,669) • RMB8,888 (US$ 1,271)(1)
Average Contractual Tenor • 35.4 months • 35.8 months • N/A(2)
Average APR • 21.6% • 17.0% • 17.2%
Repayment Schedule • Fixed installments or balloon payments • Fixed installments or balloon payment • Fixed installments
Note:
(1) This represents the average single drawdown amount for consumer finance loans.
(2) Due to the wide variety of products offered by our consumer finance business, each with significant differences in tenor, this indicator lacks meaningfulness and thus is not applicable.
The following table shows the outstanding balance of loans under Ping An Rongyi and our consumer finance subsidiary by product as of the dates indicated.
As of December 31,
2023 2024 2025
(RMB) (%) (RMB) (%) (RMB) (%)
(in billions, except percentages)
Outstanding Balance
General unsecured loans 207.9 65.9 124.8 57.6 93.9 51.1
Secured loans 70.4 22.3 42.0 19.4 30.4 16.5
Consumer finance loans 37.1 11.8 50.1 23.1 59.6 32.4
Total 315.4 100.0 216.9 100.0 183.8 100.0
The following table shows the volume of new loans by product during the years indicated.
For the Year Ended December 31,
2023 2024 2025
(RMB) (%) (RMB) (%) (RMB) (%)
(in billions, except percentages)
Volume of New Loans
General unsecured loans 91.0 43.7 86.2 40.4 70.8 33.1
Secured loans 45.9 22.0 31.4 14.7 23.4 11.0
Consumer finance loans 71.2 34.2 95.5 44.8 119.7 55.9
Total 208.0 100.0 213.1 100.0 214.0 100.0
Loans are available on flexible terms. The loan products we enable under our Ping An Rongyi brand permit large ticket sizes, long tenors and early repayment options, which are important features for small business owners.
The maximum permitted ticket size in 2025 was RMB10 million for secured loans, RMB2 million for general unsecured loans, and RMB200,000 for consumer finance loans. The following table shows the average ticket size for loans we enabled in Renminbi for both general unsecured loans and secured loans and the average drawdown in RMB for consumer finance loans. The increase in the average drawdown for consumer finance loans is generally due to giving larger drawdowns to high-quality customers.
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For the Year Ended December 31,
2023 2024 2025
(RMB)
Average Ticket Size
General unsecured loans 278,067 219,291 198,485
Secured loans 551,253 586,807 445,242
Consumer finance loans 6,805 6,728 8,888
In general, the maximum contractual tenor offered on general unsecured loans and secured loans is 36 months, and most borrowers choose a tenor of 36 months. In 2021, we began to enable loans with contractual tenors of up to 60 months to selected borrowers, but we discontinued this practice in 2023. The following table shows the average contractual tenor for loans we enabled in months, for both general unsecured loans and secured loans.
For the Year Ended December 31,
2023 2024 2025
(months)
Average Contractual Tenor
General unsecured loans 35.7 35.4 35.4
Secured loans 36.5 35.8 35.8
Due to early repayment options, the effective tenor will be shorter than the average contractual tenor. The table below sets forth the estimated effective tenor of loans that we do not consolidate on our balance sheet, after considering assumptions of early repayment, as of December 31, 2023, 2024 and 2025.
As of December 31,
2023 2024 2025
(months)
Estimated Effective Tenor for Off-Balance Sheet Loans
General unsecured loans 20.46 21.70 21.61
Secured loans 15.50 15.41 17.01
Our consumer finance revolver loans typically have a contractual tenor of 12 months, while our consumer finance installment loans have a maximum contractual tenor of 36 months. The following table shows the average contractual tenor for consumer finance loans in months, for both consumer finance revolver loans and consumer finance installment loans. Due to early repayment options, the effective tenor will be shorter than the average contractual tenor.
For the Year Ended December 31,
2023 2024 2025
(months)
Average Contractual Tenor
Consumer finance revolver loans 13.12 15.89 16.34
Consumer finance installment loans 34.97 34.90 35.64
We enable loans with fixed installment and balloon payment repayment schedules. As of December 31, 2025, approximately 81.7% of the loans we enabled under our Ping An Rongyi brand had fixed installment repayment schedules and the other 18.3% had balloon payment schedules. Fixed installment loans include loans where the sum of the principal repayment and interest payment is fixed and service, insurance and guarantee fees gradually decrease as the outstanding balance decreases. We do not offer an interest-free period in any of the loans we enable under our Ping An Rongyi brand.
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In 2025, our average APR for new loans was 21.6% for general unsecured loans, 17.0% for secured loans and 17.2% for consumer finance loans. APR represents the monthly all-in borrowing cost as a percentage of the outstanding balance annualized by a factor of 12. The following table shows our average APR for new loans in 2023, 2024 and 2025 for general unsecured loans, secured loans and consumer finance loans. We have not enabled any loans with an APR higher than 24% for loan applications after September 2020.
As of December 31,
2023 2024 2025
(%)
Average APR for New Loans
General unsecured loans 20.9 21.3 21.6
Secured loans 16.0 16.2 17.0
Consumer finance loans 19.7 17.6 17.2
General Unsecured Loans
General unsecured loans target both small business owners and salaried workers. In 2025, approximately 82.7% of the general unsecured loans we enabled, by volume, were borrowed by small business owners, and 17.3% by salaried workers. The average contractual tenor of new general unsecured loans we enabled during this period was approximately 35.4 months and the average ticket size was RMB198,485 (US$28,383).
Our outstanding balance of general unsecured loans enabled was RMB207.9 billion, RMB124.8 billion and RMB93.9 billion (US$13.4 billion) as of December 31, 2023, 2024 and 2025, respectively. Our total volume of general unsecured loans enabled amounted to RMB91.0 billion, RMB86.2 billion and RMB70.8 billion (US$10.1 billion) in 2023, 2024 and 2025, respectively.
The following table presents the volume of general unsecured loans we enabled by ticket size for the years indicated:
For the Year Ended December 31,
2023 2024 2025
(RMB) (%) (RMB) (%) (RMB) (%)
(in billions, except percentages)
Ticket Size
Up to RMB50,000 0.6 0.6 0.4 0.5 0.7 1.0
RMB50,001 to RMB100,000 4.3 4.8 16.7 19.3 12.6 17.8
RMB100,001 to RMB200,000 12.6 13.9 10.3 12.0 17.4 24.6
RMB200,001 to RMB300,000 26.5 29.1 21.5 25.0 13.2 18.6
RMB300,001 or above 47.0 51.7 37.2 43.2 26.9 38.0
Total 91.0 100.0 86.2 100.0 70.8 100.0
We focus on enabling loans with higher ticket size, which is an important feature for satisfying the needs of small business owners.
Secured Loans
Secured loans target small business owners. Approximately 96.5% of the secured loans we enabled, by volume, were borrowed by small business owners. In 2025, the average contractual tenor of new secured loans we enabled was approximately 35.8 months and the average ticket size was RMB445,242 (US$63,669).
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Our outstanding balance of secured loans enabled was RMB70.4 billion, RMB42.0 billion, and RMB30.4 billion (US$4.3 billion) as of December 31, 2023, 2024 and 2025, respectively. Our total volume of secured loans enabled amounted to RMB45.9 billion, RMB31.4 billion and RMB23.4 billion (US$3.3 billion) in 2023, 2024 and 2025, respectively.
For our secured loans, we focus on SBOs who have residential property located in economically more developed cities which can be pledged as collateral, given such cities’ relatively stable economic growth and real estate prices. The majority of the outstanding balance of secured loans is secured by real estate and the remainder by automobiles. The real estate collateral is well diversified across China, with a large proportion located in more developed cities. As we continue to focus on serving more SBOs and higher quality borrowers, the average loan-to-value ratio at origination for the secured loans we enabled has grown from 75% in 2023 to 76% in 2024, and further to 78% in 2025.
Consumer Finance Loans
We began to make consumer finance loans in May 2020 through our licensed consumer finance subsidiary. Borrowers of consumer finance loans are typically looking to meet personal short-term cash flow needs or to make discretionary purchases of consumer goods.
Our consumer finance loans include both revolver loans and installment loans. Our consumer finance revolver loans have a typical contractual tenor of 12 months, and our consumer finance installment loans have a maximum contractual tenor of 36 months. Our consumer finance loans had average drawdowns of RMB6.8 thousand in 2023, RMB6.7 thousand in 2024 and RMB8.9 thousand (US$1.3 thousand) in 2025. Our outstanding balance of consumer finance loans was RMB37.1 billion, RMB50.1 billion and RMB59.6 billion (US$8.5 billion) as of December 31, 2023, 2024 and 2025, respectively. Our total volume of consumer finance loans amounted to RMB71.2 billion, RMB95.5 billion and RMB119.7 billion (US$17.1 billion) in 2023, 2024 and 2025, respectively.
Our Guarantees
We work closely with funding partners through our financing guarantee subsidiary and its network of licensed branches in 29 provinces. For loans funded by third parties where the lender requires credit enhancement, we used to guarantee a portion of the risk on each new loan transaction along with our credit enhancement providers. However, we have been gradually reducing our reliance on third-party credit enhancement providers over time. In the fourth quarter of 2023, we successfully completed the transformation of our core retail credit and enablement business such that our licensed financing guarantee subsidiary now provides a guarantee for nearly every new loan transaction (excluding certain consumer finance loan products and referral products) without the involvement of third-party credit enhancement. We had RMB54.9 billion, RMB68.0 billion and RMB67.5 billion (US$9.6 billion) in off-balance sheet financing guarantee contracts as of December 31, 2023, 2024 and 2025, respectively. As of December 31, 2025, 8.6% of the financing guarantees for the outstanding balance of loans enabled by us were provided by third-party credit enhancement providers.
Pursuant to the regulations and rules regarding financing guarantee companies, the minimum registered capital of a financing guarantee company is not less than RMB20 million and its net assets must be no less than one-fifteenth of the total outstanding guaranteed amount it has guaranteed. Our financing guarantee subsidiary had net assets of RMB29.5 billion in aggregate and a leverage ratio of 3.6X as of December 31, 2025.
How We Enable Our Institutional Partners
We enable our institutional partners by identifying potential borrowers who possess the characteristics that they wish to target, co-designing loan products that fit the needs of those potential borrowers, providing accurate credit assessment to make it possible for funding partners to correctly price the risk that they assume, and managing credit risk on outstanding loans through effective loan servicing and collection.
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Our Funding Partners
Our funding partners consist of the banks and trusts that fund the loans that we enable. We had relationships with 80 banks and 7 trust companies as of December 31, 2025.
The following table shows the volume of new loans enabled in each period by funding source, including loans that we enabled through our own licensed consumer finance subsidiary and microloan subsidiary:
As of December 31,
2023 2024 2025
(RMB) (%) (RMB) (%) (RMB) (%)
(in billions, except percentages)
Volume of New Loans Enabled by Funding Source
Banks 81.4 39.1 65.8 30.9 59.3 27.7
Trusts 55.4 26.6 47.9 22.5 24.4 11.4
Our licensed consumer finance subsidiary 71.2 34.2 95.5 44.8 119.7 55.9
Our microloan subsidiary / / 4.0 1.9 10.6 4.9
Total 208.0 100.0 213.1 100.0 214.0 100.0
We are continually refining our funding mix. Our ability to enable loans has not been constrained by our funding supply. We only utilized 45.6% of the credit facility provided by banks and 26.9% of the credit facility provided by trust companies in 2025. We believe our relationships with banks and trust companies are sustainable as our ability to help them generate interest income by enabling loans from our high quality borrowers makes us a valuable partner to them. In 2025, the only funding source that accounted for more than 10% of the funding for the loans we enabled was our consumer finance funding source.
For loan transactions with third-party credit enhancement, we entered into trilateral agreements with each funding partner and credit enhancement provider that contain the principal terms governing funding arrangements and credit enhancement for the loans that we enabled with them. These agreements generally include provisions specifying the proportion of loans to be insured or guaranteed by the credit enhancement provider and the geographical scope of the collaboration, and some of them set out the rate of interest to be charged by the funding partner for the loans. They also require each party to perform its own credit assessment of the borrowers, the funding partner to enter into the loan agreement with the borrower, and the credit enhancement provider to reimburse the lending partner for each loan that is 80 days past due.
Under our business model where our licensed financing guarantee subsidiary provides a guarantee for nearly every new loan transaction (excluding certain consumer finance loan products and referral products) without the use of third-party credit enhancement, we enter into agreements with each funding partner and our licensed financing guarantee subsidiary. These agreements encapsulate the principal terms governing funding arrangements and financial guarantee for the loans that we enable with them. Some of these agreements specify the total amount of loans to be guaranteed by our licensed financing guarantee subsidiary and the geographical scope of the collaboration. Some of these agreements set out the rate of interest to be charged by the funding partner for the loans. Additionally, they require the funding partner to perform its own credit assessment of the borrowers and to enter into the loan agreement with the borrower. Under these agreements, the funding partner delegates the right to perform post-loan services to us.
Banks
Under the bank funding model, a third-party bank lends directly to the borrower. We provide loan enablement services for borrowers and enable borrowers to obtain loans from third-party banks.
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We partnered with 79 banks in 2023, 79 banks in 2024, and 80 banks in 2025. These banks included national joint-stock banks, city commercial banks, rural commercial banks and others. The banks determine the creditworthiness of borrowers that we refer, though we help gather the information our bank partners need. Banks funded approximately 39.1% of the new loans we enabled in 2023, 30.9% of the new loans we enabled in 2024, and 27.7% of the new loans we enabled in 2025. Maintaining stable and long-term relationships with banks is an important factor in sustainable funding.
Trusts
Under the trust model, a third-party trust company sets up a trust plan to which investors contribute funds through three major funding sources. There are: (i) funding from open market issuance, (ii) institutional funding from banks, securities and insurance companies, and (iii) retail funding directed by private banks. We provide loan enablement services for borrowers and enable borrowers to obtain loans from trusts. We perform credit assessments and match borrowers to the trust plans.
We partnered with six, six and seven trust companies in each of 2023, 2024 and 2025. Trusts funded approximately 26.6% of the new loans we enabled in 2023, 22.5% of the new loans we enabled in 2024, and 11.4% of the new loans we enabled in 2025. The loans funded by consolidated trusts appear on our balance sheet, and those funded by unconsolidated trusts do not. See “Item 5. Operating and Financial Review and Prospects—A. Operating Results—On- and Off-Balance Sheet Treatment of Loans and Risk Exposure.”
Our Licensed Consumer Finance Subsidiary
Our licensed consumer finance subsidiary, Ping An Consumer Finance Co., Ltd., enabled 34.2%, 44.8% and 55.9% of the volume of new loans we enabled in 2023, 2024 and 2025, respectively.
Our Microloan Subsidiary
We acquired a nationwide microloan license—also commonly known as a small lending license—in July 2024 and began providing new loans under this license in August 2024. By the end of 2025, we had issued approximately RMB10.6 billion in loans under this new license, which accounted for 4.9% of the volume of new loans we enabled in 2025.
Credit Analytics
Our credit analytics include anti-fraud assessment and credit assessment. These are supported by both financial and behavioral data and managed by our risk management department. In addition to meeting the basic requirements on nationality, age, residency and the availability of credit and other history, a borrower must pass both our anti-fraud and credit assessments before we will refer them to funding partners for a potential loan.
Once a loan application passes our credit assessment process, then we will refer the loan to a funding partner for it to conduct an independent evaluation of the loan application. We only match borrowers who we believe meet our partners’ lending criteria, and our partners independently review all of the application information before making a lending decision. Loans are disbursed by the funding partner directly to the borrower.
Data
Our credit assessment is built upon a variety of our own and third-party data, under proper authorization and within lawful ranges, including the data of the Credit Reference Center of the People’s Bank of China, data publicly available from other governmental institutions, and a variety of consumption, social or other behavioral data. We have cumulatively analyzed over 20 years of through-cycle credit data from approximately 73.7 million unique individual applicants as of December 31, 2025. Our proprietary and third-party data includes both know-your-customer or KYC personal financial information and know-your-business or KYB business information for loans to small business owners. All data are accessed and used only with the customer’s consent.
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Out of over 9,400 predictive variables per borrower, we applied machine learning algorithms and regression analysis to select around 2,200 of the most relevant variables to build our anti-fraud models and around 1,700 of the most relevant variables to build our loan decision models as of December 31, 2025.
For loans with larger ticket sizes, our experience shows that both ability to repay and willingness to repay are important in the credit underwriting process. Behavioral data are nearly as useful as credit and financial data in anti-fraud assessment, as they can be helpful in evaluating a borrower’s willingness to repay. However, credit and financial data are substantially more predictive of creditworthiness as they can help evaluate a borrower’s ability to repay. As of December 31, 2025, credit and financial data comprise approximately 62% of the variables of our anti-fraud assessment and 63% of the variables of our credit assessment, while behavioral data make up the remaining 38% of the variables for our anti-fraud assessment and 37% of the variables of our credit assessment.
Anti-fraud Assessment
Our anti-fraud assessment checks for identity fraud, against negative records and for organized fraud. We verify the borrower’s identity by crosschecking against the National Citizen Identity Information Center’s ID database using facial recognition technology. We also verify the borrower’s identity using phone number and bank card verifications. By cross checking within and across data sources, we ensure that the borrower is who he or she claims to be and that the same borrower is completing the application from beginning to end.
Next we check each borrower against blacklists and negative records, including lists that we have built up through our own operations, from third-party sources and from publicized fraud attempts. We also further check if the borrower uses technology to provide falsified information, such as false location information using VPNs or IP address proxies.
Furthermore, we use our social network model built upon graphic computation and machine learning algorithms to identify and screen out organized fraud attempts. We have an extensive database of location and IP data to support our social network model. We check the borrower’s key information using our fraud detection mode.
Credit Assessment
Borrowers who pass our anti-fraud assessment process move onto our credit assessment process. Our credit assessment process has been made as convenient as possible for potential borrowers through the application of automatic speech recognition, optical character recognition and natural language processing.
We have three key models for credit assessment: an application score model, a risk-based pricing model and a loan sizing model.
The application score model generates a score for each borrower, based on which we determine the borrower’s eligibility for a given loan. Our acceptance criteria and assessment processes vary depending on the borrower risk rating, which may vary from R1 to R6 on our rating system. Since 2024, with the iterative advancement of AI technology, taken into account business risk performance as well as user experience, we upgraded the approval process for general unsecured loan borrowers to 100% AI-assisted online interviews or fully AI-driven interviews. As a result, interviews are no longer waived. Borrowers of secured loans, who have extensive personal interaction with our direct sales team or our channel partners, are all given live interviews.
When we give a live interview, our credit approval team interviews borrowers using web conferencing tools. During interviews, we use facial and voice recognition to identify borrowers and micro facial expression and speech emotion analytics to analyze borrowers’ emotional reactions to assist in assessing the trustworthiness of the borrowers. Other than live interviews, our credit assessment process is entirely automated, which helps us to achieve a unified and data-driven decision process with strong predictive power.
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After being screened by the application score model, the borrower will be further assessed by our risk-based pricing and loan sizing models. In our risk-based pricing model, we consider the borrower’s risk rating and debt to income ratio and the value of the borrower’s assets to determine the appropriate risk-based pricing. After taking into account the borrower’s risk rating and debt to income ratio and the value of the borrower’s assets, the borrower can only qualify for a loan if the assigned pricing does not exceed the maximum permitted APR. Our loan sizing model is primarily based on the borrower’s credit and financial information, which we access with due authorization, such as other loan or credit card repayment records, insurance repayment records, car value, social insurance records and indebtedness information. Every loan applicant must authorize us to check their data through the Credit Reference Center of the People’s Bank of China, and these checks form a routine part of our credit assessment process. The data includes information on outstanding loans funded by licensed financial institutions in China such as banks, trusts, consumer finance companies and financing leasing companies. Our sizing model for secured loans further takes into consideration the value of the pledged collateral, which we determine in an efficient and expeditious manner with help from online valuers. Since we specialize in large ticket size loans, a borrower only qualifies for a general unsecured or secured loan if they meet the minimum creditworthiness threshold of at least RMB20,000 and, for secured loans, are secured by at least RMB50,000 of assets.
For small business owners, know your business or KYB is an additional element of our credit assessment process. We analyze data relating to the borrower’s business including its corporate credit rating, if any, its VAT, point-of-sale and UnionPay records, its utility bills, and any insurance, memberships in industry organizations or other pertinent information. We believe that it is essential to combine both KYC and KYB data for small business owners to accurately assess their creditworthiness.
Loan Servicing and Collection Services
Our loan servicing and collection services enable our institutional partners to concentrate on their core businesses while we manage troubled assets for them. We have accumulated 20 years of through-cycle proprietary data based on our offline-to-online business model that informs our collection efforts.
We utilize an online system for efficient and effective post-loan management and loan collection. Powered by AI servicing, intelligent loan collection algorithm and App smart robots, we increase the stability, speed, and efficiency of our post-loan process. Data from post-loan monitoring and collection efforts is constantly fed back into customer selection and credit approval algorithms to make sure our models are continuously refined to further improve outcomes. Deployment of AI collectors and segmentation algorithms for collection has enhanced our ability to identify fraud and high-risk borrowers, while being able to enhance product pricing, improve underwriting results and lift loan collection efficiency.
Our post-loan servicing model is based on credit scores to triage delinquencies. We check the loan records of our existing borrowers through the Credit Reference Center of the People’s Bank of China with their authorization on a regular basis so as to monitor their liability status and we use customer segmentation modeling to divide borrowers into low, medium and high risk. We also provide a repayment reminder service to our borrowers, including text message reminders for low-risk borrowers and AI-enabled contact for medium- and high-risk borrowers. In 2025, we carried out our repayment reminders primarily through messages and AI-enabled phone calls, with a small remaining volume handled by human agents.
If borrowers fail to repay on time, our collection process will be initiated. Borrowers whose loans are overdue by one day are contacted by AI, and all other borrowers with overdue loans are contacted by a live collection agent. The relatively large average ticket size of the loans that we enable makes it more cost-efficient for us to escalate the collection process for delinquent loans, as compared to platforms that primarily enable small consumer loans.
Our collection professionals cannot access the mobile phone numbers of our borrowers and can only contact them through our systems. All contact with customers is recorded and retained for use in resolving disputes and ensuring that our collection team is fully in compliance with applicable laws and rules at all times. Data we accumulate in the collection process gets fed back into our credit assessment process in a closed loop. The average outstanding loan balance per post-loan servicing employee per year was RMB49.7 million, RMB41.6 million and RMB44.9 million (US$6.4 million) in 2023, 2024 and 2025, respectively.
In line with common industry practice, we also use third-party collection agencies, to a limited extent, to collect loans that are delinquent for more than 80 days. We regularly evaluate our agency partner companies based on their performance, service quality, experience in the industry and compliance with laws and regulations.
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In addition to the collection efforts described above, we have established additional debt assignment procedures for our secured loans. First, our local collection team conducts due diligence on the collateral, with support from local third-party collection agencies if necessary. Then, we value the collateral and settle the debt through debt assignment, helping to reduce or mitigate losses for the credit enhancement provider and our financing guarantee subsidiary.
Credit Risk Management
Credit risk is the risk that the borrowers of our loans default and do not repay, including due to a lack of intention to repay or a lack of ability to repay. Credit risk is borne by one or more of the funding partner, the credit enhancement provider and our own licensed financing guarantee subsidiary, in different combinations and different proportions depending on the loan. As of December 31, 2025, 8.6% of financing guarantees for the outstanding balance of loans enabled by us were provided by third-party credit enhancement providers. Under our 100% guarantee business model, our licensed financing guarantee subsidiary now provides a guarantee for nearly every new loan transaction (excluding certain consumer finance loan products and referral products) without the use of third-party credit enhancement. The ability to manage credit risk is thus of key importance in our business. We manage credit risk through anti-fraud assessment, credit assessment and loan servicing and collections.
For the general unsecured loans we enable, we rank qualified borrowers on a scale of one to six, where R1 is the highest quality (lowest risk) and R6 is the lowest quality (highest risk). The risk level is determined based on two primary considerations. The first is credit risk score, modeled using statistical techniques and based on the records of the Credit Reference Center of the People’s Bank of China and the borrower’s prior records such as repayment, delinquency and application histories. The other consideration takes into account the customer’s assets, such as residential property, vehicle and insurance policies. Borrowers with higher credit risk scores and better assets will be assigned a lower risk level.
As mentioned previously, we have been concentrating our efforts on borrowers at the higher end of our R1 to R6 ranking of creditworthiness. Risk rating is a dynamic process which reflects our risk appetite and acceptance from time to time, and we have been focusing our efforts on serving high quality customers.
The following table shows the DPD 30+ delinquency rates for general unsecured loans and secured loans as of December 31, 2023, 2024 and 2025.
As of December 31,
DPD 30+ Delinquency Rates by Type of Loan 2023 2024 2025
General unsecured loans 7.7 4.7 5.6
Secured loans 4.4 5.1 5.3
All loans 6.9 4.8 5.6
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The core indicator for credit quality monitored by our management is DPD 90+. The following table presents the DPD 90+ delinquency rates for general unsecured loans and secured loans as of December 31, 2023, 2024 and 2025. We define the DPD 90+ delinquency rate as the outstanding balance of loans for which any payment is 90 to 179 calendar days past due, divided by the outstanding balance of loans. This table reflects all the loans we enable on a whole portfolio basis, not just the loans that are consolidated on our balance sheet. In addition, when a loan becomes 80 days past due and the funding provider is reimbursed by a credit enhancement provider, we still treat the loan as overdue for purposes of the DPD 90+ calculation, since the loan has not been repaid by the borrower. The credit enhancement provider acquires the creditor rights after reimbursing the funding provider and we continue to provide post-loan services to the credit enhancement provider.
As of December 31,
DPD 90+ Delinquency Rates by Type of Loan 2023 2024 2025
General unsecured loans 4.6 2.9 3.4
Secured loans 2.6 2.9 3.3
All loans 4.1 2.9 3.4
The following chart shows the DPD 90+ delinquency rates by vintage as of December 31, 2025, on general unsecured loans that we have enabled. DPD 90+ delinquency rates by vintage is defined as the total balance of outstanding principal of a vintage for which any payment is over 90 calendar days past due as of a particular date (adjusted to reflect total amount of recovered past due payments for principal and without taking into account charge-offs), divided by the total initial principal in such vintage. Months on book, or MOB, is the number of complete calendar months that have elapsed since the calendar month in which the loan was originated, measured at the end of each calendar month.
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The following chart shows the DPD 90+ delinquency rates by vintage as of December 31, 2025 on secured loans that we have enabled.
Flow rate is a forward-looking indicator that estimates the percentage of current loans that will become non-performing at the end of three months, and is defined as the product of (i) the loan balance that is overdue from 1 to 29 days as a percentage of the total current loan balance of the previous month, (ii) the loan balance that is overdue from 30 to 59 days as a percentage of the loan balance that was overdue from 1 to 29 days in the previous month, and (iii) the loan balance that is overdue from 60 to 89 days as a percentage of the loan balance that was overdue from 30 days to 59 days in the previous month.
The following chart shows the flow rates in 2023, 2024 and 2025 for the general unsecured loans we have enabled.
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The following chart shows the flow rates in 2023, 2024 and 2025 for the secured loans we have enabled.
Our consumer finance subsidiary operates separately from our core retail credit and enablement business in many respects and has its own independent credit risk management personnel. As a licensed and regulated entity in the PRC, it must follow certain procedures and track certain metrics in order to ensure its compliance with regulatory requirements. As part of credit risk management for our consumer finance business, we conduct an online verification on customer identity and an anti-fraud assessment for each prospective borrower and determine the credit quota through our automated decisioning engine. Upon applying for drawdown, selected customers would enter into phone interviews with our credit assessment staff, and the drawdown would be disbursed after approval. We rely on a combination of text messages, AI and human agents in our collection process for consumer finance loans. We use texts and AI primarily for reminders and for payments that are not long overdue, and outsource collection efforts for longer overdue loans.
The non-performing loan ratio for consumer finance loans was 1.2% for the year ended December 31, 2025, as compared to 1.2% for the year ended December 31, 2024 and 1.5% for the year ended December 31, 2023. The non-performing loan ratio for consumer finance loans is calculated by the outstanding balance of consumer finance loans for which any payment is 91 or more calendar days past due and not written off, plus certain restructured loans, divided by the total outstanding balance of consumer finance loans.
Our Credit Enhancement Providers
As we completed the transformation of our business to a new business model in the fourth quarter of 2023, under which our licensed financing guarantee subsidiary provides a guarantee for nearly every new loan (excluding certain consumer finance loan products and referral products) without third-party credit enhancement, we provided the majority of the financing guarantees for the outstanding balance of loans we enabled as of December 31, 2025.
Our credit enhancement providers include credit insurance companies and guarantee companies. We worked with six credit insurance companies in 2025. We enabled them to extend credit enhancement for loans whose borrowers met their desired risk profile. Credit enhancement providers benefit from the same customer referral, risk analytics and loan servicing and collection services as our funding partners. The proportion of the outstanding balance of loans we enabled under the Ping An Rongyi brand that was insured or guaranteed by third parties was 64.2%, 28.6% and 8.2% of the outstanding balance as of December 31, 2023, 2024 and 2025, respectively.
Ping An P&C provided credit enhancement on standard commercial arm’s-length terms for loans we enabled. Ping An P&C had provided credit enhancement on 7.3% of the outstanding balance of loans we had enabled under our Ping An Rongyi brand as of December 31, 2025. For loans enabled by us and insured by Ping An P&C, we entered into agreements with terms of three years with Ping An P&C and each of the funding partners. These third-party credit enhancement providers provide credit guarantee insurance or guarantees on the loans we enabled and will repay the lenders if a loan becomes sufficiently delinquent. We are not aware of any instance where our credit enhancement providers have ever failed to fulfill their insurance or guarantee obligations. Our credit enhancement providers conducted their own evaluation of each borrower to determine whether they would provide insurance or guarantees while we helped our partners collect the necessary information.
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All of our credit enhancement providers are regulated and inspected by the Chinese authorities and subject to detailed statutory and regulatory requirements. Insurance companies are regulated and inspected by the China Banking and Insurance Regulatory Commission. Pursuant to the regulations and rules regarding insurance companies issued by the China Banking and Insurance Regulatory Commission, the minimum registered capital of an insurance company is no less than RMB200 million and must be fully paid up in cash. For insurance companies engaged in credit guarantee insurance, the core solvency adequacy ratio at the end of the last two quarters must be no less than 75%, and the comprehensive solvency adequacy ratio must be no less than 150%. We engaged in a strict assessment process in selecting our credit enhancement providers. We assessed whether an insurer had a license from the China Banking and Insurance Regulatory Commission to provide credit insurance on three-year retail credit, whether it was able to meet the China Banking and Insurance Regulatory Commission’s stringent requirements for solvency ratios, concentration risks, leverage ratios, and liquidity stress tests under the Measures for Regulating the Credit Insurance and Guaranty Insurance issued by the China Banking and Insurance Regulatory Commission in May 2020, and whether it had the relevant experience, track record, and reputation within the industry. Our insurers were required to publicly file their quarterly solvency reports with the China Banking and Insurance Regulatory Commission, and we reviewed their public filings to verify that they remained in compliance with the requirements. Financing guarantee companies are regulated and inspected by the financial authorities of the local provincial or municipal government. Pursuant to the regulations and rules regarding financing guarantee companies, the minimum registered capital of a financing guarantee company is not less than RMB20 million and must be fully paid up in currency, and net assets must be no less than one-fifteenth of their total outstanding guaranteed amount.
We have established a highly automated claims process with our funding partners and credit enhancement providers. Once a loan becomes delinquent for 80 days, a notice of claim will be automatically sent to the third-party credit enhancement provider, if the third-party credit enhancement is involved. Normally this payment occurs without our participation and the timing of it does not affect our cash flow or cash position.
The table below shows the amount of claims submitted to credit enhancement providers for the loans consolidated on our balance sheet and the amount of claims reimbursed during each period. The discrepancies in amounts submitted and amounts reimbursed are mainly due to timing differences. When we submit a claim, the credit enhancement provider will typically complete its review and make the payment to the funding partner within one business day.
For the Year Ended December 31,
2023 2024 2025
(RMB in millions)
Amount of claims submitted 13,786 6,935 3,308
Amount of claims reimbursed 13,788 6,935 3,308
Ping An Digital Bank
In April 2024, we acquired Ping An Digital Bank, which operates a digital banking business in Hong Kong. Ping An Digital Bank was granted a banking license by the Hong Kong Monetary Authority in May 2019 to offer banking services through digital channels. Having started with a focus on SMEs, Ping An Digital Bank has steadily expanded into the retail banking sector. With the recent acquisition of insurance agency license, dealing in securities license and advising on securities license, Ping An Digital Bank now offers comprehensive services—including investment, insurance, deposits, foreign exchange, and cross-border remittance—within a single mobile application. At the same time, Ping An Digital Bank remains dedicated to empower SMEs. Through the comprehensive and personalized financial solution, Ping An Digital Bank provides end-to-end services, including account management, deposit, cross-border remittance and loan offerings to SMEs via its Business Banking platform. Leveraging its leading fintech advantages, Ping An Digital Bank is striving to become one of Ping An Group’s integrated financial platforms in Hong Kong, delivering a more comprehensive and user-friendly wealth management experience, and aiming to be recognized as the preferred digital bank in the minds of customers.
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As of December 31, 2025, following our acquisition of Ping An Digital Bank in April 2024, we had completed multiple capital injections, with HK$500 million injected in 2024 and HK$700 million in 2025.
Other services
We used to enable a variety of financial institutions including banks, trust companies, mutual fund companies, private investment fund management companies, asset management companies, securities companies and insurance companies to access investors for wealth management products. The wealth management products we enabled included asset management plans, mutual fund products, private investment fund products and trust products, among others. Since 2023, we no longer enable new wealth management products, and we are currently maintaining the existing wealth management products until maturity. As of the date of this annual report, we have begun the winding down of our online wealth management business.
Our Technology
Our proprietary end-to-end system enables us to strengthen our product sourcing and enablement capabilities, streamline our loan enablement process, improve customer experience and achieve economies of scale and operational efficiency. Designed for scalability and flexibility, our end-to-end system handles massive volumes of data required to evaluate a large number of customers, product providers and products profiles, enable loan transactions, enable products that meet the needs of investors, and monitor fund transfers, and repayment activities. For example, we deploy biometric identification, natural language processing, and optical character recognition to eliminate some of the more onerous loan application procedures and simplify the process for borrowers to provide loan documentation.
Many of the advanced technologies that we use, such as facial and voice recognition technology for verifying customer identities, and AI and machine learning algorithms, have been licensed from Ping An Group, Ping An Technology and OneConnect. We train these technologies using our own data and business scenarios to create our own proprietary applied technologies unique to our own business.
Artificial Intelligence
Faster processor speeds, lower hardware costs, increasing sophisticated algorithms and the accumulation of high quality data have enabled us to adopt AI in more and more fields across our business. AI has helped us to reduce costs by increasing productivity and making decisions based on information that is too complex for a human to process. Our technology possesses leading artificial neural networks and by processing more examples from our over 20 years of through-cycle proprietary data, our neural network system evolves better and better over time. As a result we developed a deep learning model that could enable algorithms to powerfully analyze unstructured data for faster and cheaper credit scoring and quality loan assessments, precise marketing, custom-built intelligent customer service bots, pioneering regulatory compliance and various other business areas. Intelligent algorithms are able to spot anomalies and fraudulent information in a matter of seconds. We also integrated Deepseek into our business in 2025. The more we apply AI the more new use cases we find for it.
We currently use AI models to help boost efficiency across a range of areas, including sales, approvals, collections, customer service, and security. For example, AI assists with sales by facilitating the application process, during which AI models identify customer intent and guide them through each step. Any complex or problematic cases are handed off to human agents, which increases the productivity of service representatives. When customers submit documents, AI models detect potential risks. These risks are then verified through AI-driven conversations, creating a decision-making process that combines both AI and human judgment. Additionally, in calls to customers, AI models are able to gauge a customer’s willingness to repay, remind them of the consequences of overdue payments, and encourage timely repayment. This helps collection agents work more efficiently.
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Data Science
Data technology is extensively used in the entire aspects of our operations, including KYC, KYP, anti-fraud and credit assessment, targeted marketing, product design and customer experience. We have invested significant resources in building up a petabyte-scale data platform, which covers a wide range of information pertinent to a customer’s profile and creditworthiness from a holistic perspective, particularly financial data that are more indicative of our customer’s financial strength and creditworthiness. We have accumulated over 19 years of through-cycle credit data, supplemented by Ping An ecosystem analytics and insights and access to enterprise data through external data providers, and our data-mining capabilities enable us to convert the originally unstructured data into structured data using deep learning and artificial intelligence techniques.
Data technology is being utilized in several key areas to enhance financial services and risk management. One major application is in comprehensive customer profiling and risk assessment. By aggregating and analyzing a broad spectrum of data—including historical customer behavior, credit records, and social information—we are able to construct detailed customer profiles that support more accurate credit evaluations. The implementation of distributed big data computing frameworks has significantly enhanced our ability to process large volumes of risk model factors, reducing processing times from T+15 to T+1. This improvement enables us to accelerate model iteration and deployment cycles, thereby providing more timely and reliable support for credit approval, underwriting, and marketing decisions.
Another important use case is anti-fraud detection and overdue risk tracing. Real-time big data computing frameworks, combined with blacklist factors, allow for the assessment of customer application behaviors within milliseconds. This rapid evaluation makes it possible to quickly identify and intercept high-risk applications, effectively preventing fraudulent activities. Furthermore, by analyzing comprehensive data from historical overdue cases and examining customer behavior characteristics, institutions can pinpoint the root causes of overdue payments. This ongoing analysis helps to continuously improve the quality of risk control.
Furthermore, data technology enhances our post-loan collection strategies. By segmenting customers according to credit scores and behavioral characteristics, we can tailor collection approaches to different risk categories. Predictive analytics also enable us to anticipate changes in customer risk profiles, allowing for early intervention and timely adjustments to our operational and collection strategies. These capabilities contribute to more effective management of post-loan collections and overall portfolio performance.
Stable and Scalable Cloud-based Infrastructure
Our platform is built on cloud-native infrastructure supplied by Ping An Cloud. Ping An Cloud provides us with computing services, storage, server and bandwidth. We maintain redundancy through a real-time multi-layer data backup system to ensure the reliability of our network. Cloud-native flexibility enables us to deliver financial services with fast and seamless digital experience.
We have adopted modular architecture that consists of multiple connected components, each of which can be separately upgraded and replaced without compromising the functioning of other components. This advanced architecture gives us increased flexibility in adding or removing modules, and it speeds up the deployment of new capabilities, features and functionalities.
Our technology has built-in software and hardware redundancy. We make use of distributed computing architecture so that a single point of failure does not cause the entire system to fail. Combined with our modular architecture, this makes our platform both highly stable and easily scalable.
Research and Development
Since our inception, we have cultivated a culture of innovation and invested significantly in technology. As of December 31, 2025, we had a team of over 600 engineers and data analysts who have extensive working experience in China’s internet and financial institution industries. Benefiting from the diversified background and expertise of our technology team, we have built our system infrastructure, which is reputable in both the internet and financial institutions industries.
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Multilevel Security
We are committed to maintaining a secure online platform, as data protection and privacy are critical to our business. We have developed our proprietary security system, covering entire aspects of our operation and use a variety of techniques to protect our customer’s data. We rely on multiple layers of network segregation using firewalls to protect against attacks or unauthorized access. We also employ proprietary technologies to protect our users. For example, if we suspect that a user’s account or a transaction may have been compromised, we may use micro expression, facial recognition or voice recognition to validate that the person accessing the account or authorizing the transaction is the actual account holder. We also use automated data tiering technology to store our users’ data to ensure safety and for any transmission of sensitive user information, we use data encryption to ensure confidentiality. Our security system has been certified by ISO27001 standard and PRC national level III security protection standard.
Intellectual Property
We strongly emphasize the establishment, application, administration and protection of intellectual property rights. Through research, development and application in our ordinary course of business, we have obtained various intellectual property rights, including for our Ping An Rongyi mobile app and for our Lu.com domain name, which offer enormous value to our businesses.
We regard our patents, copyrights, trademarks, domain names, know-how, proprietary technologies and similar intellectual property as critical to our success, and we rely on patent, copyright, trademark, and trade secret law and confidentiality, invention assignment and non-compete agreements with our employees and others to protect our proprietary rights. As of December 31, 2025, we had registered 174 patents and 289 software copyrights and art work copyrights in the PRC and other jurisdictions. We had 156 registered domain names and 737 registered trademarks in the PRC and other jurisdictions as of the same date.
Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy or otherwise obtain and use our technology. Monitoring unauthorized use of our technology is difficult and costly, and we cannot be certain that the steps we have taken will prevent misappropriation of our technology. From time to time, we may have to resort to litigation to enforce our intellectual property rights, which could result in substantial costs and diversion of our resources.
In addition, third parties may initiate litigation against us alleging infringement of their proprietary rights or declaring their non-infringement of our intellectual property rights. In the event of a successful claim of infringement and our failure or inability to develop non-infringing technology or license the infringed or similar technology on a timely basis, our business could be harmed. Moreover, even if we are able to license the infringed or similar technology, license fees could be substantial and may adversely affect our results of operations.
We are not aware of any material intellectual property right infringement claims or litigation initiated by others against us, nor do we have any such claims or litigation outstanding against others. See “Item 3. Key Information—D. Risk Factors—Risks Relating to Our Business and Industry—We may not be able to prevent others from making unauthorized use of our intellectual property, which could harm our business and competitive position” and “—We may be subject to intellectual property infringement claims, which may be expensive to defend and may disrupt our business and operations.”
Seasonality
Our overall operating results fluctuate from quarter to quarter as a result of a variety of factors, including seasonal factors and economic cycles that influence our operations, such as seasonal marketing efforts. However, seasonality generally does not have a major effect on our financial results.
Competition
We compete primarily with non-traditional financial service providers such as MYbank, WeBank, Du Xiaoman Financial and JD Technology, and with traditional financial institutions, such as traditional banks, which are focused on retail and SMB lending. We also compete with providers of consumer finance services.
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Many non-traditional financial service providers trace their origins back to services offered by a technology company, so they tend to compete with us in segments of the market that are more amenable to purely technological solutions and do not necessarily require strong financial expertise. Banks may compete with us as lenders or cooperate with us as funding partners. The PRC government is encouraging banks to increase their lending to the small business sector, which may cause them to pay more attention to the kinds of borrowers that we target than they have in the past. In addition, decreases in the maximum APR that can be charged to borrowers and our own increasing focus on high-quality borrowers to maintain credit quality may also cause our target borrowers to overlap more with those that banks have targeted in the past.
Some of our larger competitors have significant financial resources to support heavy spending on sales and marketing and to provide more services to customers. We believe that our ability to compete effectively for borrowers and investors depends on many factors, including the variety of our products, quality of our user experience, effectiveness of our risk management, our partnership with third parties, our marketing and selling efforts and the strength and reputation of our brand.
Furthermore, as our business continues to grow rapidly, we face significant competition for highly skilled personnel. The success of our growth strategy depends in part on our ability to retain existing personnel and add additional highly skilled employees.
Insurance
We maintain major insurance coverage for areas such as office buildings and facilities, equipment and materials, and losses due to fire, flood and other natural disasters. We believe our insurance coverage is adequate and in line with the commercial practice of industries we operate.
While a portion of our loan products carry credit guarantee insurance provided by third parties, the insurance premiums are paid by the borrower as part of the cost of the loan, and we are not obligated to pay any of the premiums.
We consider our insurance coverage to be adequate as we have in place all the mandatory insurance policies required by the PRC laws and regulations and in accordance with the commercial practices in our industry. However, our insurance policies are subject to standard deductibles, exclusions and limitations. As a result, our insurance policies may not be able to cover all of our losses and we cannot provide any assurance that we will not incur losses or suffer claims beyond the limits of, or outside the coverage of, our insurance policies. For details of risks relating to our insurance coverage, see “Item 3. Key Information—D. Risk Factors—Risks Relating to Our Business and Industry—We have limited insurance coverage, which could expose us to significant costs and business disruption.”
Regulation
We operate in an increasingly complex legal and regulatory environment. We are subject to a variety of PRC and foreign laws, rules and regulations across numerous aspects of our business. This section sets forth a summary of the principal PRC laws, judicial interpretations, rules and regulations relevant to our business and operations in the PRC.
Regulations Relating to Foreign Investment
The establishment, operation and management of corporate entities in the PRC, including foreign-invested companies, are subject to the Company Law, which was issued by the Standing Committee of the National People’s Congress and was last amended on December 29, 2023. Unless otherwise provided in the PRC’s foreign investment laws, the provisions of the Company Law shall prevail.
Investments in the PRC by foreign investors and foreign-invested enterprises are regulated by the Catalog of Industries in which Foreign Investment is Encouraged (2025 edition) and the Special Administrative Measures for Foreign Investment Access (Negative List 2024), which we refer to as the 2024 Negative List. The establishment of wholly foreign-owned enterprises is generally allowed in industries not included in the 2024 Negative List. Industries not listed in the 2024 Negative List are generally open to foreign investments unless specifically restricted by other applicable Chinese regulations. Under the 2024 Negative List, foreign equity in companies providing value-added telecommunications services, excluding e-commerce, domestic multi-party communications, data collection and transmission services, and call centers, should not exceed 50%.
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The establishment procedures, filing and approval procedures, registered capital requirements, foreign exchange restrictions, accounting practices, taxation, and labor matters of a wholly foreign-owned enterprise are governed by the Foreign Investment Law, which took effect on January 1, 2020. It replaced most laws and regulations previously governing foreign investment in the PRC. The Company Law and the Partnership Enterprise Law of the PRC generally govern the organization of a foreign invested enterprise.
The Foreign Investment Law mainly stipulates four forms of foreign investments: (a) a foreign investor, individually or collectively with other investors, establishes a foreign-invested enterprise within the PRC; (b) a foreign investor acquires stock shares, equity shares, interests in assets, or other like rights and interests of an enterprise within the PRC; (c) a foreign investor, individually or collectively with other investors, invests in a new project within the PRC; and (d) foreign investors invest in the PRC through any other methods under laws, administrative regulations, or provisions prescribed by the State Council. It does not mention the concept and regulatory regime of consolidated affiliated entities structures and uncertainties still exist with regards to its interpretation and implementation.
Under the Foreign Investment Law, foreign investment is accorded pre-admission national treatment, which means that treatment given to foreign investors and their investments shall not be less favorable than those given to domestic investors and their investments, except where a foreign investment falls under the 2024 Negative List. It also provides several protective rules and principles for foreign investors and their investments in the PRC, including foreign investors’ funds being freely transferred out and into the territory of the PRC through the entire life cycle from the entry to the exit of foreign investment, a comprehensive system to guarantee fair competition among foreign-invested enterprises and domestic enterprises to be established, and prohibition of the state to expropriate any foreign investment except under special circumstances.
In addition, the Foreign Investment Law subjects foreign investors and foreign-invested enterprises to legal liabilities for failing to report their investment information in accordance with the requirements of an information reporting system to be established. It also provides that foreign invested enterprises established according to the previous laws regulating foreign investment before the Foreign Investment Law came into effect may maintain their structure and corporate governance within five years after the implementation of the Foreign Investment Law. This means that foreign invested enterprises may be required to adjust their structure and corporate governance in accordance with the PRC Company Law and other laws and regulations governing the corporate governance.
On December 26, 2019, the State Council promulgated the Implementation Regulations for the Foreign Investment Law, effective January 1, 2020. The Implementation Regulations for the Foreign Investment Law emphasizes the promotion of foreign investment, refined specific measures, and also replaced various previous laws and regulations. On December 26, 2019, the Supreme People’s Court issued an Interpretation on Several Issues Concerning the Application of the Foreign Investment law of the PRC, which also came into effect on January 1, 2020. The interpretation applies to any contractual dispute arising from the acquisition of rights and interests by a foreign investor through gift, division of property, merger of enterprises, division of enterprises, etc. On December 30, 2019, the Ministry of Commerce and the State Administration for Market Regulation jointly issued the Measures on Reporting of Foreign Investment Information, which replaced the existing filing and approval procedures regarding the establishment and change of foreign-invested companies. On December 31, 2019, the Ministry of Commerce issued the Announcement on Matters Relating to Foreign Investment Information Reporting which emphasized the information reporting requirements provided by the Measures on Reporting of Foreign Investment Information, and stipulated the forms for information reporting.
On December 19, 2020, the National Development and Reform Commission and the Ministry of Commerce jointly issued the Measures for the Security Review of Foreign Investment, effective January 18, 2021. The measures stipulate rules for foreign investment that is subject to security review. According to the measures, procedures will be established for organizing, coordinating, and guiding the security review of foreign investments, and the office in charge of the security review will be set up under the National Development and Reform Commission, and led by the National Development and Reform Commission and the Ministry of Commerce. Furthermore, the measures provide that if foreign investors or relevant parties in China intend to invest in crucial information technology and internet products and services, in crucial financial services or in other crucial fields which relate to national security, and to obtain the actual control over the enterprises they invested in, they shall apply to the office in advance for a security review.
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Regulations Relating to Value-Added Telecommunication Services
The Telecommunications Regulations of the PRC, which were issued by the State Council in 2000 and last amended on February 6, 2016, provide the general framework for the provision of telecommunication services by PRC companies. It requires a telecommunication service provider in China to obtain an operating license from the Ministry of Industry and Information Technology or its provincial branch prior to commencement of operations.
The Telecommunications Regulations of the PRC categorize telecommunication services in China as either basic telecommunications services or value-added telecommunications services. According to the Classification Catalog of Telecommunications Business, attached to the Telecommunications Regulations and issued by the Ministry of Industry and Information Technology in 2015 and last amended on June 6, 2019, online data processing, transaction processing and information services provided via fixed network, mobile network and internet are value-added telecommunication services.
On July 3, 2017, the Ministry of Industry and Information Technology issued the Administrative Measures for Telecommunications Business Operating Permit, which took effect on September 1, 2017. The measures set forth more specific provisions regarding the types of licenses required to operate value-added telecommunications services, the qualifications and procedures for obtaining the licenses and the administration and supervision of these licenses. Operators are required to submit an application within the prescribed period to the original permit-issuing authority with respect to changes in the business scope or the operating entity resulting from shareholder changes or the merger and division of the company as prescribed under regulations.
Regulations on Foreign Investment in Value-added Telecommunications
Foreign direct investment in telecommunications companies in China is governed by the Administrative Rules on Foreign-invested Telecommunications Enterprises, which were issued by the State Council in 2001. It provides that a foreign investor’s beneficial equity ownership in an entity providing value-added telecommunications services in China shall not exceed 50%. However, the 2024 Negative List provides that foreign investors may hold 100% equity interest in e-commerce, domestic multi-party communications, data collection and transmission services and call centers. On March 29, 2022, the State Council issued the Decision of the State Council to Amend and Repeal Certain Administrative Regulations, effective May 1, 2022, which amended the Administrative Rules on Foreign-invested Telecommunications Enterprises issued in 2001. According to the currently effective rules, foreign investors who are involved in a business providing value-added telecommunications will be no longer subject to the requirement to demonstrate a good track record and experience in providing the services. In addition, the amended rules simplify the application process for telecommunication business operation permits and shorten the review period.
The Ministry of Industry and Information Technology’s Circular on Strengthening the Administration of Foreign Investment in and Operation of Value-added Telecommunications Business, issued on July 13, 2006, requires foreign investors to set up foreign-invested enterprises and obtain a license for value-added telecommunications services. It prohibits domestic companies holding value-added telecommunications services licenses from leasing, transferring or selling their licenses in any form, or providing any resource, sites or facilities, to any foreign investors intending to conduct this type of business in China. In addition to restricting dealings with foreign investors, it contains a number of detailed requirements applicable to operators of value-added telecommunications services, including that operators or their shareholders must legally own the domain names and trademarks used in their daily operations and each operator must possess the necessary facilities for its approved business operations and maintain its facilities in the regions covered by its license. The Ministry of Industry and Information Technology or its provincial counterpart has the power to require corrective actions after discovering any non-compliance by operators, and where operators fail to take those steps, the Ministry of Industry and Information Technology or its provincial counterpart can revoke the value-added telecommunications services license.
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Regulations on Internet Information Services
The Administrative Measures on Internet Information Services, which were issued by the State Council in 2000 and amended on January 8, 2011 and December 6, 2024, set out guidelines on the provision of internet information services. Pursuant to these measures, “internet information services” are defined as services that provide information to online users through the internet. These measures require internet information services operators to obtain an ICP license from the government authorities before engaging in any commercial internet information services operations in China. Internet information services operators operating non-commercial internet information services are required to complete the filing procedures.
In addition, internet information service providers are required to monitor their websites to ensure that they do not contain content prohibited by law or regulation. The PRC government may require corrective actions to address non-compliance by ICP license holders or revoke their ICP license for serious violations. Furthermore, the Notice of the Ministry of Industry and Information Technology on Regulating the Use of Domain Names in Internet Information Services, effective January 1, 2018, requires internet information service providers to register and own the domain names they use in providing internet information services. Each of Shenzhen Lufax Internet Information Service Co., Ltd and Chongqing Financial Assets Exchange Limited, a subsidiary of the consolidated affiliated entities, currently holds an ICP license.
Regulations on Mobile Internet Application Information Services
On June 28, 2016, the Cyberspace Administration of China issued the Administrative Provisions on Mobile Internet Application Information Services, which was amended on June 14, 2022 and became effective on August 1, 2022. The amended provisions clarify the requirements regarding the provision of application information services and application distribution services in China. The amended provisions also outline the requirements for application providers, which include, among other things, (i) verifying user identity information; (ii) obtaining an internet news and information services license or other administrative licenses for information services; and (iii) establishing a mechanism for examining the content of the information. In particular, the amended provisions stipulate the obligations regarding cyber security, data security and personal information protection, emphasizing the necessity for personal information collection and the fact that users shall not be denied the use of the basic function services of certain applications merely on account of their refusal to provide unnecessary personal information. The amended provisions also set out the requirements for application distribution platforms, which include, among other things, (i) filing the required information with the local network information administration authority within 30 days from the time the platform has become operational; and (ii) establishing classification management systems. If the applications violate the amended provisions, laws and regulations, and service agreements, the application distribution platform shall take such measures as giving warnings, suspension of services, removal of the application from the platform, etc. It shall also keep records and report the breach to competent authorities.
Under the Interim Provisions on the Administration of Pre-Installation and Distribution of Applications for Mobile Smart Terminals, which took effect on July 1, 2017, the internet information service provider is also required to ensure that an app, as well as its ancillary resource files, configuration files and user data, can be conveniently uninstalled by its users, unless it is a basic function software (i.e., software that supports the normal functioning of hardware and operating system of a mobile smart device).
The Ministry of Industry and Information Technology issued the Notice on the Further Special Rectification of Apps Infringing upon Users’ Personal Rights and Interests on July 22, 2020. The notice requires that certain conducts of app service providers should be inspected, including, among other things (i) collecting personal information without the user’s consent, collecting or using personal information beyond the necessary scope of providing services, and forcing users to receive advertisements; (ii) requesting user’s permission in a compulsory and frequent manner, or frequently launching third-parties apps; and (iii) deceiving and misleading users into downloading apps or providing personal information. The notice also set forth that the period for the regulatory specific inspection on apps and that the Ministry of Industry and Information Technology will order the non-compliant entities to modify their business within five business days, or otherwise to make public announcement to remove the apps from the app stores and impose other administrative penalties.
On July 21, 2023, the Ministry of Industry and Information Technology issued the Notice on the Record-filing of Mobile Internet Applications. Pursuant to this notice, sponsors of mobile internet applications, or apps, who are engaged in internet information services within the PRC must perform record-filing procedures in accordance with the Administrative Measures on Internet Information Services and the Law of the People’s Republic of China Against Telecommunications and Internet Frauds. If app sponsors fail to complete the requisite record-filing procedures, they may not engage in the provision of app internet information services. An app sponsor must complete the record-filing procedures with the provincial communications administration at the place where it is domiciled through its network access service provider and the app distribution platform by making an online submission for application and inspection and review.
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Regulations Relating to Retail Credit Enablement
Regulations on Loans
The PRC Civil Code, which was adopted effective January 1, 2021, requires that the interest rates charged under a loan agreement must not violate applicable provisions of the PRC laws and regulations. The Civil Code also provides that the interest shall not be deducted from the principal of the loan in advance, and if the interest is deducted from the principal in advance, the loan shall be repaid and the interest shall be calculated based on the actual loan amount.
On January 30, 2024, the National Financial Regulatory Administration issued the Measures for the Administration of Private Lending effective on July 1, 2024, which replaced the Interim Measures for the Administration of Private Lending. The Measures for the Administration of Private Lending regulates the private lending businesses operated by banking financial institutions, which means financial institutions that accept deposits from the public such as commercial banks, rural cooperative banks or rural credit cooperatives established in the PRC.
The Provisions on Several Issues Concerning Laws Applicable to Trials of Private Lending Cases issued by the Supreme People’s Court in August 2015, provided that agreements between lenders and borrowers on loans with interest rates no higher than 24% per annum are valid and enforceable. As to the loans with interest rates per annum between 24% (exclusive) and 36% (inclusive), if the interest on the loans has already been paid to the lender, and so long as such payment has not damaged the interest of the state, the community and any third parties, the courts will turn down the borrower’s request to demand the return of the excess interest payment. If the annual interest rate of a private loan is higher than 36%, the agreement on the excess part of the interest is invalid, and if the borrower requests the lender to return the part of interest exceeding 36% of the annual interest that has been paid, the courts will support such requests. In addition, on August 4, 2017, the Supreme People’s Court issued the Several Opinions on Further Strengthening the Judicial Work in the Finance Sector, which provided that (i) if the total amount of interest, compounded interest, default interest and other fees charged by a lender under a loan contract substantially exceeds the actual loss of such lender, the request by the debtor under such loan contract to reduce or to adjust the part of the aforementioned fees exceeding the amount accrued at an annual rate of 24% will be upheld; and (ii) in the context of peer-to-peer lending disputes, if the online lending information intermediaries and lenders circumvent the statutory limit of the interest rate by charging intermediary fees, such fees shall be deemed invalid.
On July 20, 2020, the Supreme People’s Court and the National Development and Reform Commission jointly released the Opinions on Providing Judicial Services and Safeguards for Accelerating the Improvement of the Socialist Market Economic System for the New Era. The opinions set out that if the interest and fees, including compound interest, penalty interest and liquid damages, claimed by one party to the loan contract exceed the upper limit under judicial protection, the claim will not be supported by the court, and if the parties to the loan disguise the financing cost in an attempt to circumvent the upper limit, the rights and obligations of all parties to the loan will be determined by the actual loan relationship.
The Supreme People’s Court amended the Provisions of the Supreme People’s Court on Several Issues Concerning the Application of Law in the Trial of Private Lending Cases on August 20, 2020, and then again on January 1, 2021. Under these amendments, if the service fees or other fees that we charge are deemed to be loan interest or fees related to loans (inclusive of any default rate and default penalty and any other fee), then in the event that the sum of the annualized interest that lenders charge and fees we and our business partners charge exceed four times the one-year Loan Prime Rate at the time of the establishment of the agreement, the borrower may refuse to pay the portion that exceeds the limit. In that case, PRC courts will not uphold our request to demand the payment of fees that exceed the limit from the borrower. If the borrower has already paid the fees that exceed the limit, the borrower may request that we refund the portion exceeding the limit and the PRC courts may uphold such requests. 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. These new limits replace the upper limits on interest rates of 24% and 36% described above. Moreover, if the lender and the borrower agree on both the overdue interest rate and the liquidated damages or other fees, the lender may choose to claim any or all of them, but the portion of the total exceeding the limit shall not be supported by the people’s court. The new limits apply to new first-instance cases of private lending disputes accepted by the people’s court after August 20, 2020. As to the cases in which the loan contract was established before August 20, 2020, if the lender requests that the court apply the old limits of 24% and 36% for calculating the loan interest accrued from the establishment of the loan contracts up to August 19, 2020, such request will be supported by the court, but the loan interest accrued from August 20, 2020 to the date of the loan repayment shall be calculated by applying the new limit of four times the one-year Loan Prime Rate at the time of the filing of the lawsuit. On December 29, 2020, the Supreme People’s Court also issued the Reply Regarding the Scope of Application of the New Private Lending Judicial Interpretation, which provides that the two amendments 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.
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The Notice on Regulating and Cleaning up the Cash Loan Business, or Circular 141, introduces the regulation guidance on cash loan businesses, including online micro-lending companies, peer-to-peer lending platforms and banking financial institutions. According to Circular 141, activities relating to offerings of cash loans are subject to regulatory inspections and rectifications to prohibit excessive lending and repeated grant of credits to individual borrowers, collection of abnormally high interest rates, and violations against privacy protection. Circular 141 provides further requirements regarding banking financial institution’s participation in cash loan businesses, including the qualifications of the third party institutions cooperating with banking financial institutions, each party’s responsibilities in the cooperation and the fee charging arrangement. Circular 141 also provides that institutions or third-party agencies shall not conduct loan collection by means of violence, intimidation, insult, defamation, harassment or other illegal methods. In case of violation, the authorities, depending on the severity of the circumstances, may suspend such entity’s business, order rectification, reprimand such entity, reject its filing procedures, or terminate its business qualification. In addition, the authorities may order any website or platform operator to suspend its business, if such website or platform operator helped the entity to conduct business in violation of laws or regulations.
The Supreme People’s Court, the Supreme People’s Procuratorate, the Ministry of Public Security and the Ministry of Justice jointly issued the Notice on Promulgating the Opinions on Several Issues concerning the Handling of Criminal Cases of Illegal Lending on July 23, 2019, which came into effect on October 21, 2019. It clarifies the standards for the determination of whether the illegal lending activity constitutes the crime of illegal business operations. It provides that it will be convicted of the crime of illegal business operations and punished in accordance with Item 4 of Article 225 of the Criminal Law, if it meets all of the following criteria: (i) without the approval of the regulatory authorities or beyond the business scope, for the purpose of making profits, frequently granting loans to non-specific objects of the society which disturbs the order of the financial market, (ii) having been deemed as a “serious circumstance.” “Frequently granting loans to non-specific objects of the society” shall refer to lending to non-specific several persons (including entities and individuals) in the name of loans or in any other name for more than 10 times within two years. If the repayment period is extended after the maturity of the loan, the number of times the loan is granted shall be counted as once.
On July 12, 2020, the Interim Measures for the Administration of Online Loans by Commercial Banks came into effect. While they apply to commercial banks and by analogy to consumer finance companies and auto finance companies directly, they also require them to strengthen loan cooperation management, which would affect the institutions cooperating with them to develop internet loan businesses, and their existing business models. Pursuant to these interim measures, commercial banks shall evaluate their cooperation agencies and implement list management. Commercial banks shall not accept direct and disguised credit enhancement services from unqualified cooperation agencies. The interim measures also provide that, except for cooperating institutions that jointly provide loans, commercial banks shall not entrust the cooperating institutions to perform key operations, such as loan issuance, loan principal and interest recovery, and stopping of loan payment. Pursuant to the interim measures, commercial banks shall independently carry out risk assessment and credit approval for the loans they fund, and take primary responsibility for post-loan management. Commercial banks shall not entrust third-party institutions with records of violent collection or other illegal records to collect loans. The China Banking and Insurance Regulatory Commission and its local branches shall evaluate the reports and materials submitted by commercial banks, and key assessment factors include independent control of credit approval procedures, contract signing and other core risk management procedures of commercial banks.
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On February 19, 2021, the China Banking and Insurance Regulatory Commission further issued the Notice of Further Regulating Online Loan Business of Commercial Banks, also known as Circular 24, supplementary to the Interim Measures for the Administration of Online Loans by Commercial Banks. Circular 24 reiterates that commercial banks shall independently carry out the risk management of online loans and are forbidden from outsourcing the key procedures of loan management. In addition, Circular 24 provides that, when a commercial bank and its joint lending partner jointly contribute funds to issue online loans, the funding contribution percentage of its joint lending partner shall not be less than 30%, a bank’s proprietary loan balance under the joint lending partnership with a single partner should be no higher than 25% of its net tier-1 capital, and its proprietary loan balance under the joint lending partnership with all partners should not exceed 50% of its total outstanding loans. Moreover, regional commercial banks are prohibited from engaging in an online loan business outside the region of their registration, which are known as “cross-regional operations.” In addition, under Circular 24, the China Banking and Insurance Regulatory Commission and its local offices shall, under the principle of “one policy for one bank and smooth transition,” urge commercial banks to rectify their non-compliant online loan business. The China Banking and Insurance Regulatory Commission and its local offices may, at their discretion, impose more stringent regulatory requirements for the fund contribution percentage of joint lending partners, concentration level of joint-lending partners and total amount limit of online loans under the joint-lending model on the basis of the provisions captioned aforehand under Circular 24. Finally, it is also provided that Circular 24 will also apply by analogy to branches of foreign banks, trusts, consumer finance companies and auto finance companies. Circular 24 clarified that the requirements on the fund contribution percentage of a joint lending partner and the restraints for regional commercial banks from cross-regional operations to enact from January 1, 2022. Any legacy businesses shall be settled naturally.
On July 12, 2022, the China Banking and Insurance Regulatory Commission issued the Notice of Strengthening the Administration of the Internet Loan Business of Commercial Banks and Improving the Quality and Efficiency of Financial Services, which further requires commercial banks to strengthen their risk control and regulate the cooperation with third-party institutions in online loan business, including: (i) commercial banks shall enter into separate cooperation agreements in respect of joint capital contribution, information technology cooperation and other business cooperation, respectively, for clarifying rights and responsibilities of each party; (ii) commercial banks shall fulfill the primary responsibility in respect of loan administration. If internet loans involve cooperation with cooperative institutions in, for example, marketing, payment and settlement, and information technology, commercial banks shall strengthen the management of core risk control links, and shall not lower risk control standards due to business cooperation; (iii) commercial banks shall strengthen information and data management, and the written agreements signed by a commercial bank with a cooperative institution shall clearly specify the specific requirements for submission of relevant information. This notice provides a transitional period for the existing online loan business of commercial banks until June 30, 2023. These rules also apply to branches of foreign banks, trusts, consumer finance companies and auto finance companies.
On April 1, 2025, the NFRA issued the Notice on Strengthening the Management of Internet Lending Facilitation Business of Commercial Banks and Enhancing the Quality and Efficiency of Financial Services, effective on October 1, 2025. This notice refines and supplements the existing regulatory framework governing internet lending. It underscores that commercial banks engaged in internet-facilitated lending must follow the principles of centralized management at the head-office level, alignment of responsibilities and benefits, prudent risk-based pricing, and maintaining an appropriate business scale. The notice further requires commercial banks’ head offices to reinforce oversight of internet lending activities, establish clear eligibility standards for platform partners and credit enhancement service providers, and strengthen cost control and operational efficiency. In addition, it calls for standardized pricing mechanisms, enhanced autonomous risk management capabilities, prevention of excessive risk-taking by credit enhancement service providers, and the reinforcement of commercial banks’ primary responsibilities in safeguarding the rights and interests of financial consumers.
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Regulations on Financing Guarantee Companies
The Tentative Measures for the Administration of Financing Guarantee Companies were jointly promulgated by the China Banking Regulatory Commission, the National Development and Reform Commission, the Ministry of Industry and Information Technology, the Ministry of Finance, the Ministry of Commerce, the People’s Bank of China, and the State Administration for Market Regulation on March 8, 2010, which stipulates the registered capital, business scope, operating rules, risk control and supervision of financing guarantee companies, and also require that (i) the outstanding balance of financing guarantee liabilities of a financing guarantee company shall not exceed 10 times of that company’s net assets, though the upper limit can be raised to 15 times for a financing guarantee company that mainly provides services to small and micro enterprises, the agriculture sector, rural villages and farmers, (ii) the balance amount of outstanding guarantee liabilities of a financing guarantee company for a single guaranteed party shall not exceed 10% of that company’s net assets, and (iii) the balance amount of outstanding guarantee liabilities of a financing guarantee company for a single guaranteed party and its affiliated parties shall not exceed 15% of that company’s net assets. On November 25, 2010, the China Banking Regulatory Commission issued the Notice on Issuing the Guidelines for the Corporate Governance of Financing Guarantee Companies, which was the basis for the Supervision and evaluation of the corporate governance of financing guarantee companies. According to the Notice, the directors, supervisors and senior managers of financing guarantee companies shall have the risk awareness of prudent operation, corresponding business skills and practical experiences. The State Council released the Regulation on Financing Guarantee Companies, effective October 1, 2017, to further clarify various regulatory indicators. “Financing guarantee” shall refer to the activities where a guarantor provides a guarantee for debt financing such as borrowings or debentures of a debtor. The regulatory authorities determined by the provincial level of governments shall be responsible for the supervision and administration of financing guarantee companies of its region. The establishment of a financing guarantee company shall be subject to the approval of the regulatory department and certain conditions. According to such regulation, any entity without a qualified license to engage in the financing guarantee business will be ordered to suspend its operations and be subject to a fine between RMB0.5 million and RMB1.0 million, and its relevant illegal income will be confiscated accordingly. In addition, if the outstanding balance of financing guarantee liabilities of the financing guarantee company does not meet the requirements pursuant to the aforementioned rules, it will be ordered to make timely rectification. If the company fails to make rectification in a timely manner, a fine of between RMB100,000 and RMB500,000 will be imposed, and the illegal income will be confiscated. Such a company may be ordered to suspend its business for rectification, and, under serious circumstances, its license for financing guarantee business may be revoked.
The Notice on Issuing Four Supporting Systems for the Regulations on the Supervision and Administration of Financing Guarantee Companies was jointly promulgated by the China Banking and Insurance Regulatory Commission, the National Development and Reform Commission, the Ministry of Industry and Information Technology, the Ministry of Finance, the Ministry of Agriculture and Rural Affairs, the People’s Bank of China and the State Administration for Market Regulation on April 2, 2018 and amended on June 21, 2021, which includes the Administrative Measures on Financing Guarantee Business Permits, the Measures on the Measurement of the Balance of Financing Guarantee Liability, the Administrative Measures on the Asset Proportions of Financing Guarantee Companies and the Guidelines for Business Cooperation between Banking Financial Institutions and Financing Guarantee Companies. The Administrative Measures on Financing Guarantee Business Permits clarify the definition of the operating license of financing guarantee business, the conditions and procedures for the issuance, renewal, revocation or cancellation of the operating license of financing guarantee business, and the information to be specified and recorded on the license. The Measures on the Measurement of the Balance of Financing Guarantee Liability provide the definition of the balance of financing guarantee liability and certain upper limits for the scale of loan guarantee business or the balance of financing guarantee liabilities for a financing guarantee company. The Administration Measures on the Asset Proportions of Financing Guarantee Companies categorize the main assets of financing guarantee companies into three levels and set up specific requirements for each level. Among other things, the sum of the Level I and Level II financial assets of a financing guarantee company is required to be no less than 70% of such financing guarantee company’s total assets less qualified receivables. The ratio for Ping An Rongyi (Jiangsu) Financing Guarantee Co., Ltd was 72.5% as of December 31, 2025. The Guidelines for Business Cooperation between Banking Financial Institutions and Financing Guarantee Companies require that, neither the bank nor the guarantee company may collect any fees, other than the fees as stated in the cooperation agreement or the guarantee contract, for any reason or in any form during their cooperation. Furthermore, banks and guarantee companies may separately accept clients’ applications and recommend clients to each other.
On October 9, 2019, the Notice on the Promulgation of Supplementary Provisions on the Supervision and Administration of Financing Guarantee Companies was jointly promulgated by the China Banking and Insurance Regulatory Commission, the National Development and Reform Commission, the Ministry of Industry and Information Technology, the Ministry of Finance, the Ministry of Commerce, the People’s Bank of China, the Ministry of Housing and Urban-Rural Development, the Ministry of Agriculture and Rural Affairs, and the State Administration for Market Regulation, which was amended on June 21, 2021. This notice requires that all local regulatory authorities shall conduct a comprehensive investigation to supervise if the entities engaging in financing guarantee businesses have been licensed or not. For companies engaging in financing guarantee business without the financing guarantee business operation license, the authorities may order them to close down the financing guarantee business.
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On July 14, 2020, the Guidelines for Off-site Supervision of Financing Guarantee Companies was issued by the China Banking and Insurance Regulatory Commission, effective on September 1, 2020, which provide the guidelines for the competent regulatory authorities to continually analyze and evaluate the risk of financing guarantee companies and the financing guarantee industry, by way of collecting report data and other internal and external data of the financing guarantee companies and carrying out corresponding measures.
On December 31, 2021, the People’s Bank of China published the Regulations on the Local Financial Supervision and Administration (Draft for Comments), which requires that, among other things, (i) six types of financial organizations, including financing guarantee companies, are deemed as local financial organizations, and the incorporation of local financial organizations should be approved by the competent provincial regulatory authorities before they apply for the business licenses, (ii) local financial organizations are required to operate their business within the area approved by the competent provincial regulatory authorities and in principle are not allowed to conduct business across provinces, and (iii) the rules for cross-province business carried out by local financial organizations should be formulated by the State Council or by the financial regulatory department of the State Council as authorized by the State Council. The financial regulatory department of the State Council will specify a transition period for local financial organizations that have carried out businesses across provinces to maintain compliance. Notwithstanding the foregoing, pursuant to the currently effective regulations, a financing guarantee company may establish a branch to conduct financing guarantee business outside the province where it is domiciled with a prior approval from the regulatory department where the branch is located.
Ping An Rongyi (Jiangsu) Financing Guarantee Co., Ltd., one of our subsidiaries, holds a financing guarantee business permit issued by Jiangsu Provincial Bureau of Local Financial Supervision and Administration in March 2025.
Regulations on Credit Guarantee Insurance
The Interim Measures for Regulating the Credit Guarantee Insurance were issued by the China Insurance Regulatory Commission, one of the predecessors of the China Banking and Insurance Regulatory Commission, on July 11, 2017 to regulate the business operations of credit guarantee insurance. It was repealed by the Measures for Regulating the Credit Insurance and Guaranty Insurance issued by the China Banking and Insurance Regulatory Commission on May 8, 2020. Pursuant to these measures, “financial credit guarantee business” refers to the credit guarantee business in which insurance companies provide insurance protection for the performance of credit risks of financing contracts such as borrowing and financing leases. Insurance companies shall not outsource credit risk review and credit management businesses to third-party partners, and shall not underwrite financial credit guarantee business in which the interest rates of loans exceed the regulatory upper limit. Insurance companies shall strengthen the supervision and management of the operation activities of cooperative institutions, head offices shall formulate a unified template for cooperation agreements to clarify the rights and obligations of both parties, and insurance companies shall make clear requirements in terms of access, evaluation, withdrawal, and complaints according to the characteristics and risks of different cooperative institutions. The Notice of the General Office of China Banking and Insurance Regulatory Commission on Relevant Issues Concerning Further Strengthening and Improving the Product Supervision of Property Insurance Companies, effective from March 1, 2020, stipulates that the credit insurance and guarantee insurance products over one year are required to complete the record-filing instead of the approval procedure.
On September 14, 2020, the China Banking and Insurance Regulatory Commission issued the Notice of Guidelines for Pre-guarantee Management and Post-guarantee Management of Financing Credit Insurance Business, which provides that insurance companies shall conduct risk supervision on cooperative institutions when they engage in a credit insurance marketing business through such cooperative institutions. If cooperative institutions induce the borrowers to change the purpose of loans, conceal the use of capital, guide customers to make malicious complaints, or conduct false promotion for expanding insurance liability, the insurance companies shall promptly impose punishment measures on such cooperative institutions according to their cooperative agreements and the requirements under the cooperative management system.
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Regulations Relating to Consumer Finance Companies
The Administrative Measures for the Pilot Scheme of Consumer Finance Companies, issued by the China Banking Regulatory Commission in 2013 and effective on January 1, 2014, stipulates the conditions for the investor of the consumer finance company, its business scope, and operating rules. The Measures for the Implementation of Administrative Licensing Matters for Non-Banking Financial Institutions, issued in 2015 and most recently amended on October 9, 2023, further stipulates the establishment of shareholder qualifications and other matters.
On May 18, 2023, the National Administration of Financial Regulation was established, replacing the former China Banking and Insurance Regulatory Commission. On March 18, 2024, the National Financial Regulatory Administration issued the Administrative Measures for Consumer Finance Companies, replacing the previous Pilot Scheme. These measures took effect on April 18, 2024. The key revisions involve raising entry standards by increasing asset, operating income, and minimum shareholding requirements for major shareholders. Moreover, they enhance business supervision by categorizing basic and special business scopes, eliminating non-core businesses, and implementing stricter oversight. Additionally, corporate governance sees improvements with the full implementation of relevant regulatory requirements, and clarification of shareholder obligations, compensation management, and related-party transactions. Furthermore, the measures aim to reinforce risk management by specifying regulatory requirements for credit, liquidity, operational, and information technology risks.
With the approval of the National Financial Regulatory Administration, consumer finance companies may conduct some or all of the following Renminbi-denominated businesses: (i) disbursing consumer loans to individuals; (ii) accepting deposits from shareholders and their domestic subsidiaries, parent companies of shareholder groups, and their domestic subsidiaries; (iii) obtaining loans from financial institutions in China; (iv) obtaining loans from overseas financial institutions that are shareholders of the company; (v) issuing non-capital bonds; (vi) engaging in interbank borrowings; (vii) providing advisory and agency services related to consumer finance, and any other activities approved by the National Financial Regulatory Administration. The establishment, change, termination of a consumer finance company, and administrative licensing procedures for approval of appointment qualifications of directors and senior management personnel shall comply with the provisions of the National Financial Regulatory Administration.
On December 9, 2024, the National Financial Regulatory Administration promulgated the Measures for the Regulatory Rating of Consumer Finance Companies, which provides the overall arrangements for the regulatory rating of consumer finance companies. Specifically, the measures set forth seven rating elements for consumer finance companies, including corporate governance, capital management, risk management, cooperative organization management, professional service quality, consumer rights and interests protection and information technology management. The results of the regulatory rating will serve as an important basis for regulatory authorities in assessing the operation, risk profile and risk management capability of consumer finance companies as well as in formulating regulatory plans, allocating regulatory resources, and taking regulatory measures. The results will also be used as reference factors for market entry of consumer finance companies.
Regulations Relating to Microloan Companies
Pursuant to the Guiding Opinions on the Pilot Operation of Microloan Companies, which were jointly promulgated by the China Banking Regulatory Commission and the People’s Bank of China on May 4, 2008, if a provincial government determines a competent department to be responsible for the supervision and administration of microloan companies and the regulation of risks associated with microloan companies, such provincial government may carry out the pilot operation of microloan companies within such province. The Guiding Opinions on the Pilot Operation of Microloan Companies further provided that when granting loans, microloan companies are required to adhere to the principle of “small sum and decentralization.” The balance of loans granted by a microloan company to a same borrower cannot exceed 5% of the net capital of the company. Microloan companies are required to operate on the market-oriented principle. The loan interest ceiling is floating but cannot exceed the ceiling prescribed by the judicatory authority, and the loan interest floor is required to be 0.9 times the loan base interest rate published by the People’s Bank of China. The specific floating range is required to be determined independently according to the market principles.
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On November 21, 2017, the Office of the Leading Group of Special Rectification of Internet Financial Risks issued the Notice on the Immediate Suspension of Approvals for the Establishment of Online Microloan Companies, which provides that the regulatory authorities for microloan companies shall not grant any approval of establishment of online microloan companies, or grant any approval for existed microloan companies to conducting business across the provinces.
Circular 141 requires the regulatory authorities to suspend the approval of the establishment of online microloan companies and the approval of any microloan business across provinces. Circular 141 also specifies that online microloan companies shall not provide campus loans, shall suspend the funding of online microloans with no specific scenario or no designated purpose, and gradually reduce the outstanding amount of such loans and take rectification measures. Furthermore, according to Circular 141, microloan companies that have exceeded the required threshold of certain caps or ratios shall stipulate plans to reduce the business scale and comply with the threshold within a time limitation. In case of violation, the authorities, depending on the severity of the circumstances, may suspend such microloan company’s business, order rectification, reprimand such company, reject its filing procedures, or terminate its business qualification. In addition, the authorities may order any website or platform operator to suspend its business, if such website or platform operator helped the entity to conduct business in violation of laws or regulations.
The Notice on Specific Rectification Implementation Measures for Risk of Online Microloan Businesses of Microloan Companies, which was issued on December 8, 2017, defines “online microloans” as microloans provided through the internet by online microloan companies controlled by internet companies. The features of online microloans include borrower acquisition, credit assessment based on the online information collected from business operation and internet consumption, as well as loan application, approval and funding made through online procedures. It aims to investigate the legal compliance of microloan business carried out by microloan companies through the internet, and focus on remediation of microloan companies without the qualification of online lending operation or lending business. There are 11 key areas of investigation and renovation: (i) strict management of the authority of examination and approval; (ii) re-examination of the online microloan management qualifications; (iii) equity management; (iv) on-balance sheet financing; (v) asset securitization and other financing; (vi) integrated actual interest rate; (vii) the behavior of loan management and collection; (viii) the scope of the loan; (ix) business cooperation; (x) information security; and (xi) illegal operation.
In addition, consistent with the Guidance on the Guiding Opinions on the Pilot Operation of Microloan Companies and Circular 141, the above notice emphasize several aspects where inspection and rectification measures must be carried out for the online microloans industry, which include (i) the microloan companies shall be approved by the local authorities in accordance with the applicable regulations promulgated by the State Council, and the approved online microloan companies in violation of any regulatory requirements shall be re-examined; (ii) qualification requirements to conduct online microloan business (including the qualification of shareholders, sources of borrowers, internet scenario and the digital risk-management technology); (iii) whether the “integrated actual interest rate” (namely the ratio of the aggregated borrowing costs charged to borrowers in the form of interest and various fees to the principal of loans) are annualized and subject to the limit on interest rate of private lending set forth in the private lending judicial interpretations issued by the Supreme People’s Court and, whether any interest, handling fee, management fee or deposit are deducted from the principal of loans provided to the borrowers in advance; (iv) whether microloan companies cooperate with internet platforms without relevant website registration or telecommunication business licenses to offer microloans and whether microloan companies cooperate with institutions with no lending qualification to offer loans or provide funds to such institutions for them to offer loans, and with respect to the loan business conducted in cooperation with third-party institutions, whether the online microloan companies outsource their core business (including the credit assessment and risk control), or accept any credit enhancement services provided by any third-party institutions with no guarantee qualification; or whether any applicable third-party institution collects any interest or fees from the borrowers; and (v) whether entities that conduct online microloans business have obtained approvals or licenses for their lending business. It also sets forth that all related institutions shall be subject to inspection and investigation before the end of January 2018. Depending on the results, different measures will be taken on the institutions that need rectification before the end of March 2018, including: (i) for institutions that hold online microloan licenses but do not meet the qualification requirements to conduct online microloan business, their online microloan licenses shall be revoked and such institutions will be prohibited from conducting loan business outside the administrative jurisdiction of their respective approved authorities; and (ii) for institutions holding online microloan licenses that meet the qualification requirements to conduct online microloan business but were found not in compliance with other requirements, such as the requirements on the integrated actual interest rate, the scope of loans and cooperation with third-party institutions, such institutions shall take rectification measures within a certain period specified by the local authorities, and in the event that the rectification measures do not meet the local authorities’ requirements, such institutions shall be subject to several sanctions, including revocation of their online microloan licenses and to cease their business operations.
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On September 7, 2020, the China Banking and Insurance Regulatory Commission issued the Notice on Strengthening the Supervision and Management of Microloan Companies. This notice aims to regulate the operation of microloan companies, prevent and resolve risks, promote the healthy growth of the microloan industry, and stipulates multiple requirements with respect to microloan companies.
On November 2, 2020, the China Banking and Insurance Regulatory Commission, the People’s Bank of China and other regulatory authorities released a consultation draft of the Interim Measures for the Administration of Online Microloan Business, which states that a microloan company must obtain the official approval of the China Banking and Insurance Regulatory Commission to conduct online micro lending businesses outside the province where it is registered. In addition, the draft provides the statutory qualified requirements for an online microloan company, covering such things as registered capital, controlling shareholders, and use of the internet platform to engage in an online microloan business. We used to have three microloan subsidiaries in Shenzhen, Hunan and Chongqing to provide loans in a small number of cases from our own funds. In response to the above consultation draft, we have ceased to use these microloan subsidiaries to fund any new loans since December 2020. Subsequently, we canceled the microloan business licenses of our Shenzhen Hunan subsidiaries and completed their deregistration with the local Administration of Market Regulation in December 2022 and 2024, respectively. We also cancelled the microloan business license of our Chongqing subsidiary in October 2024.
On December 31, 2024, the State Financial Supervision and Administration issued the Interim Measures for the Supervision and Administration of Microloan Companies. Concurrently, the Notice on Strengthening the Supervision and Management of Microloan Companies was abolished. These interim measures stipulate, among other things, that (i) the establishment of a microloan company is subject to the approval of the provincial local financial regulatory authority; (ii) microloan companies must state the business in which they are engaged in in their business scope, which may include in the business of issuing microloans, accepting and discounting commercial bills, and other businesses stipulated by laws and administrative regulations and approved by the National Financial Regulatory Administration; (iii) the balance of loans offered to one borrower may not exceed 10% of the net assets of the microloan company as of the end of the previous year, and the balance of loans offered to one borrower and such borrower’s related parties may not exceed 15% of the net assets of the microloan company as of the end of the previous year; as for online microloan companies, the balance of loans for consumption to one borrower may not exceed RMB 200,000, and the total balance of loans for production and operation to one borrower may not exceed RMB 10 million; (iv) microloan companies shall calculate the annualized interest rate of the loan as the ratio of all interest and fees charged to the borrower to the principal amount of the loan, and must specify this in the loan contract, and must not violate relevant national regulations. If there are cooperating institutions that charge fees for loan assistance information services or guarantee enhancements, microloan companies must truthfully and fully inform the borrower in writing. Microloan companies must pay the full amount of the loan principal to the borrower in accordance with the amount agreed upon in the loan contract, and must not deduct interest, handling fees, management fees, deposits or other similar payments in advance; (v) the sources of lending funds for microloan companies are limited to their own capital and externally raised funds; the financing balance of the microloan company funding by bank loans, shareholder loans and other nonstandard financing instruments may not exceed such company’s net assets by the end of the previous year and the financing balance of the microloan company funding by issuance of bonds, asset securitization products and other instruments of standardized debt assets shall not exceed four times of its net assets by the end of the previous year; and (vi) when a microloan company conducts marketing to acquire customers, launch loan products, or issues loans through internet platforms such as websites, mobile applications, and mini-programs (including both its own and those of partner institutions, the same hereinafter), it shall report the information of these internet platforms and detailed product information to the local financial regulatory authority.
The Interim Measures for the Supervision and Administration of Microloan Companies further provide that microloan companies should be based locally and conduct business within the region approved by law. Microloan companies may not conduct business across provinces, autonomous regions, or municipalities directly under the central government. The conditions for microloan companies to operate across prefecture-level cities shall be prescribed by the provincial local financial regulatory authorities. The conditions for the operating areas of online microloan companies shall be stipulated separately.
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According to these interim measures, provincial local financial regulatory authorities may, in accordance with laws, regulations, and the interim measures, formulate or revise detailed implementation rules for the supervision and management of microloan companies within their jurisdiction, and submit them to the National Financial Regulatory Administration. Based on regulatory needs, provincial local financial regulatory authorities may stipulate stricter and more prudent provisions in the implementation rules regarding certain matters. Microloan companies shall gradually meet all the requirements stipulated in the interim measures within the transition period specified by the provincial local financial regulatory authorities. The transition period shall not exceed two years.
In July 2024, we acquired a nationwide microloan license—also commonly known as a small lending license—and began providing new loans under this license in August 2024.
Regulations Relating to Internet Finance
On July 18, 2015, ten PRC regulatory agencies, including the People’s Bank of China, the Ministry of Industry and Information Technology, the China Banking Regulatory Commission, and other government authorities, promulgated the Guidelines on Promoting the Sound Development of Internet Finance. These guidelines define the internet finance as a new financial business model whereby traditional financial institutions and internet enterprises use internet technology and information and communications technology to provide loans, payments, investments and information intermediary services.
On April 12, 2016, the General Office of the PRC State Council issued the Implementing Proposal for the Special Rectification of Internet Financial Risk, which emphasizes the goal to ensure legitimacy and compliance of the internet finance service industry and specifies the rectification measures for non-compliance regarding the operations of internet finance business and by institutions engaged in the internet finance business.
On April 14, 2016, the Promulgation of Implementation Plan for the Special Rectification regarding Risks of Online Asset Management and Cross-Boundary Financial Business was jointly issued by the People’s Bank of China, the China Insurance Regulatory Commission, the CSRC and other authorities. It provides that any internet company conducting asset management business shall be ordered by the competent authority to rectify, if any of the following issues occur: (i) the licensed financial institutions entrusting internet companies without the license for sale of financial products to sell them; (ii) the internet companies without any asset management business qualifications, conducting online asset management business; or (iii) the internet companies without any financial licenses, conducting cross-border online financial activities (except for the peer-to-peer, equity crowdfunding, internet insurance, third-party payment, asset management business).
On June 30, 2017, the Office of the Leading Group of Special Rectification of Internet Financial Risks issued the Notice on the Clean-up and Reorganization of Illegal Business in Cooperation with Internet Platforms and Various Trading Venues, which stipulates that the supervision of the internet platform and trading venues shall order internet platforms within the jurisdiction to stop illegal business before July 15, 2017 and properly resolve any illegal stock business.
The Office of the Leading Group of Special Rectification of Internet Financial Risks issued the Notice on Intensifying the Corrective Action on Asset Management Business through the Internet and Conducting Acceptance Work on March 28, 2018. Under this notice, non-financial institutions are not allowed to issue or sell asset management products, except as otherwise stipulated. An asset management business conducted through the internet is subject to the oversight of financial regulatory authorities and the relevant licensing requirements. Any public issuance or sale of asset management products through the internet would be deemed as a financing business and the relevant asset management approvals, licenses or permits are required to conduct such business. Any entities, including internet asset management platforms, are not allowed to publicly raise funds through “targeted commissioning plans,” “targeted-source financing plans,” “wealth management plans,” “asset management plans,” “transfers of right of earnings” or similar products, or to act as an agent for any type of trading exchanges to sell asset management products without permission.
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Regulations Relating to Internet Advertising
The main regulations governing internet advertising include the Advertising Law of the PRC, which was recently amended on April 29, 2021, and the Interim Measures for Administration of Internet Advertising, which were issued by the State Administration for Market Regulation in 2016. Pursuant to these regulations, internet advertisers are responsible for the authenticity of the content of advertisements. The identity, administrative license, cited information and other certificates that advertisers are required to obtain in publishing internet advertisements shall be true and valid. Internet advertisements shall be distinguishable and prominently marked as “advertisements” in order to enable consumers to identify them as advertisements. Publishing and circulating advertisements through the internet shall not affect the normal use of the internet by users. It is not allowed to induce users to click on the content of advertisements by any fraudulent means, or to attach advertisements or advertising links in the emails without permission. The Internet Advertising Measures also impose several restrictions on the forms of advertisements and activities used in advertising. “Internet advertising” refers to commercial advertisements that directly or indirectly promote goods or services through websites, web pages, internet applications or other internet media in various forms, including texts, pictures, audio clips and videos. Furthermore, on February 25, 2023, the State Administration for Market Regulation published the Measures for Administration of Internet Advertising, which became effective on May 1, 2023 and replaced the Interim Measures for Administration of Internet Advertising. The new measures generally retain the requirements of the interim measures, while incorporating the following major modifications: (i) clarifying the respective responsibilities of advertising publishers, internet information service providers and advertising operators; (ii) introducing rules targeting new types of advertisements including those published through smart home appliances and live webcast; and (iii) further prohibiting disguised publication of advertisements.
On December 31, 2021, the People’s Bank of China, the Ministry of Industry and Information Technology, the China Banking and Insurance Regulatory Commission, the CSRC, the Cyberspace Administration of China, SAFE and the State Intellectual Property Office jointly issued the Measures for Administration of Online Marketing of Financial Products (Draft for Comments), which regulate financial institutions and internet platform operators entrusted by such financial institutions to carry out internet marketing activities of financial products. Pursuant to these draft measures, financial institutions may not entrust any other entities or individuals to carry out internet marketing of financial products unless otherwise provided or authorized by laws and regulations. The draft measures also prohibit third-party online platform operators from participating in the sale of financial products in a disguised way without the approval of financial regulatory authorities, including but not limited to interactive consultation with consumers on financial products, suitability evaluation of consumers of financial products, signing of sale contracts, transfer of funds and participation in the income sharing of financial business by setting various charging mechanisms linked to the loan scale and interest scale. Private equity fund management institutions, credit rating agencies, and local financial organizations approved by local financial regulatory authorities, like our financing guarantee subsidiary shall, upon the formal release and effectiveness of the draft measures, upon the formal release and effectiveness of the draft measures, also be subject to these measures when conducting internet marketing activities of financial products as financial institutions.
On April 24, 2026, the People’s Bank of China, the Ministry of Industry and Information Technology, the State Administration for Market Regulation, the National Financial Regulatory Administration, the China Securities Regulatory Commission, the State Intellectual Property Office, the Cyberspace Administration of China, and the State Administration of Foreign Exchange jointly issued the Measures for Administration of Internet Marketing of Financial Products, which will take effect on September 30, 2026. These measures regulate financial institutions and internet platform operators entrusted by such financial institutions to carry out internet marketing activities of financial products. The measures explicitly prohibit third-party online platform operators from intervening or covertly intervening in financial product sales processes in violation of laws, regulations, and national financial management provisions, such as the execution of sale contracts, transfer of funds, suitability evaluation of financial consumers and investors, and evaluation of loan limits. Furthermore, such third-party online platform operators are not allowed to engage in interactive consultation with consumers and investors regarding financial products. In addition, when charging network marketing service fees, third-party internet platforms should price reasonably and ensure that the price matches the quality of the services. Local financial organizations conducting internet marketing of financial products independently or in cooperation with third-party internet platforms shall be managed by local financial regulatory agencies with reference to the relevant provisions of these Measures. Consequently, our retail credit and enablement business, along with other relevant operations, will be subject to additional regulatory requirements and restrictions.
Regulations Relating to the Protection of Consumers Rights and Interests
The Consumers Rights and Interests Protection Law of the PRC, which was released by the Standing Committee of the National People’s Congress and last amended on October 25, 2013, provides the general regulatory principles and rules regarding consumers rights and interests protection in the PRC. According to the Consumers Rights and Interests Protection Law of the PRC, business operators should guarantee that the products and services they provide satisfy the requirements for personal or property safety, and provide consumers with authentic information about the quality, function, usage and term of validity of the products or
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services. The Regulations on the Implementation of the Consumers Rights and Interests Protection Law of the PRC, which was issued on March 15, 2024 and came into effect on July 1, 2024, further specify the obligations of operators concerning consumer safety, product quality, and transparent pricing. These regulations particularly emphasize rules for online transactions and prepaid services. Pursuant to the Measures for Penalties for Infringement of Consumer Rights and Interests, which was issued by the State Administration for Market Regulation on March 15, 2015 and amended on October 23, 2020, where business operators use standard terms, notices, statements, shop bulletins, etc. in providing goods or services for consumers, business operators shall not coerce or coerce in disguised forms consumers to purchase and use goods or services provided by them or by their designated operators, and they shall not refuse to provide the corresponding goods or services to consumers who reject their unreasonable conditions, or raise fee rates for such consumers. On November 4, 2015, the General Office of the State Council issued the Guiding Opinions on Strengthening the Protection of Financial Consumers’ Rights and Interests, which stipulated that financial management departments shall, according to the requirements of the state on the development of inclusive finance, expand the coverage of inclusive finance and improve the permeability. Financial institutions shall attach importance to the diversity and difference of the needs of financial consumers, and actively support underdeveloped areas and low-income groups in having access to necessary and timely basic financial products and services.
On November 8, 2019, the Notice of the Supreme People’s Court on Issuing the Minutes of the National Court Work Conference for Civil and Commercial Trials was issued, which provides guidance for the people’s courts at all levels in civil and commercial trials. For the trial of cases involving disputes over protection of financial consumers’ rights and interests, the Minutes emphasize that issuers and sellers of financial products as well as suppliers of financial services shall assume appropriate obligation, which refers to the obligation to know customers and products and to sell or provide appropriate products or services to financial consumers in the process of promoting or selling bank wealth management products, insurance investment products, trust wealth management products, collective wealth management plans of securities companies, shares of leveraged funds, options and other off-exchange derivatives and other high-risk financial products to financial consumers, as well as the obligation to provide services to financial consumers during the process of their participation in high-risk investment activities such as securities margin trading, new third board, growth enterprise board and futures. The Minutes further stipulate the liability where the issuer or seller of a financial product fails to fulfill its suitability obligation, leading to any loss to the financial consumer in the process of purchasing the financial product. In case a financial service supplier fails to perform suitability obligations, causing losses to financial consumers after accepting financial services relating to high-risk level investments, the financial consumer may request the financial service provider to bear compensation liability.
On September 24, 2019, the China Banking and Insurance Regulatory Commission issued the Notice on Rectification of Banking Institutions and Insurance Institutions regarding the Infringement of the Rights and Interests of Consumers, which stipulated that banking institutions shall not infringe consumers’ freedom of choice by compulsory bundling, and shall not force consumers to buy products and services from their third-party partners, and if insurance institutions cooperate with third-party online lending platforms, they shall not force borrowers to buy accident insurance, guarantee insurance, or other insurance products. Such rules have been emphasized by the Notice on Further Regulating Credit Financing Charges to Reduce Comprehensive Financing Costs, which was jointly issued by the China Banking and Insurance Regulatory Commission, the People’s Bank of China and other regulatory authorities on May 18, 2020 and became effective from June 1, 2020. The notice also provides that banking institutions shall not force borrowers to purchase insurance, wealth management or other asset management products during the credit examination procedure.
Furthermore, the Implementation Measures for the Protection of the Rights and Interests of Financial Consumers, issued by the People’s Bank of China on September 15, 2020 and effective from November 1, 2020, provide that banking institutions and third-party payment institutions shall not take advantage of technical means or dominant positions to force financial consumers to purchase financial products or services, or restrict financial consumers from purchasing other financial products or services provided by peer institutions.
On December 26, 2022, the China Banking and Insurance Regulatory Commission issued the Administrative Measures for the Protection of Consumers’ Rights and Interests by Banking and Insurance Institutions, which came into effect on March 1, 2023. It requires banking and insurance institutions to establish and improve systems and mechanisms for the protection of consumer’s rights and interests, including mechanisms for review, disclosure, consumer appropriateness management, traceability of sales practices, protection of consumers’ information, list-based management of the partners, complaint handling, diversified resolution of conflicts and disputes, internal training, internal assessment and internal audit. It also lists the following consumers’ rights that the banking and insurance institutions shall protect: (i) right to know; (ii) right to choices on their own; (iii) right to a fair transaction; (iv) right to property safety; (v) right to lawful claim; (vi) right to education; (vii) right to respect; and (viii) right to information security. Further, the China Banking and Insurance Regulatory Commission and its local offices may take regulatory measures against the institutions if any problem regarding consumer protection was inspected, and may impose administrative punishment in case of violation of the administrative measures.
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Regulations Relating to Credit Investigation Business
The PRC government has adopted several regulations governing personal and enterprise credit investigation businesses. These regulations include the Regulation for the Administration of Credit Investigation Industry, enacted by the State Council and effective in March 2013, and the Management Rules on Credit Agencies, issued by the People’s Bank of China, in the same year.
On September 27, 2021, the People’s Bank of China issued the provisions of Administrative Measures on Credit Investigation, effective on January 1, 2022. These measures define “credit information” to include “basic information, borrowing and lending information and other information collected pursuant to the law to provide services for financial and other activities for identifying and judging the credit standing of businesses and individuals, as well as analysis and evaluation formed based on the aforesaid information.” They apply to entities that carry out credit investigation business and “activities relating to credit investigation business” in China. Separately, entities providing “services with credit investigation function” in the name of “credit information service, credit service, credit evaluation, credit rating, credit repair and other services” are also subject to these measures. These measures require that whoever engages in personal credit investigation business shall obtain permit from the People’s Bank of China’s personal credit investigation agency and whoever engages in enterprise credit investigation business shall complete filing formalities pursuant to the law; and whoever engages in credit rating business shall complete filings as a credit rating agency pursuant to the law.
Regulations Relating to Anti-Money Laundering
The Anti-money Laundering Law of the PRC was promulgated by the Standing Committee of the National People’s Congress in 2006, effective since January 1, 2007, and was subsequently amended on November 8, 2024. It sets forth the principal anti-money laundering requirements applicable to financial institutions as well as non-financial institutions with anti-money laundering obligations, including the adoption of precautionary and supervisory measures, establish sound internal controls for anti-money laundering and fulfill other obligations such as conducting customer due diligence, preserving the identity materials of customers and transaction records, reporting large-value transactions and suspicious transactions, and taking special preventive measures against money laundering, among others. Pursuant to the PRC Anti-money Laundering Law, financial institutions subject to the Anti-money Laundering Law include (i) financial institutions in the banking, securities, fund and futures, insurance and trust industries; (ii) non-banking payment institutions; and (iii) other institutions determined and announced by the anti-money laundering authority under the State Council and other institutions engaged in financial business as determined and announced by the anti-money laundering administrative authority of the State Council. Non-financial institutions with anti-money laundering obligations include (i) real estate development enterprises or real estate intermediaries providing housing sales, housing purchase and sale brokerage services; (ii) accounting firms, law firms and notary organs that are entrusted to deal with the purchase and sale of real estate for their customers, to manage funds, securities or other assets on a commission basis, to manage bank accounts and securities accounts on a commission basis, to raise funds for the establishment and operation of enterprises, or to act as an agent for the purchase and sale of business entities; (iii) dealers that engage in the spot trading of precious metals or precious stones whose value is above the prescribed amount; and (iv) other institutions that perform the anti-money laundering obligations determined by the anti-money laundering authority under the State Council in conjunction with the relevant departments of the State Council depending on money laundering risk profiles. The latest amendment also provides detailed requirements for different aspects of anti-money laundering obligations. The People’s Bank of China and other governmental authorities issued a series of administrative rules and regulations to specify the anti-money laundering obligations of financial institutions and designated non-financial institutions, such as insurance brokerage companies, insurance agencies and payment institutions.
Furthermore, the Guidelines on Promoting the Sound Development of Internet Finance require internet financial actors to comply with certain anti-money laundering requirements, including taking measures to recognize the identity of customers, monitoring and reporting of suspicious transactions, preservation of customer information and transaction records, and provision of assistance to the public security department and judicial authority in investigations and proceedings concerning anti-money laundering matters.
The Administrative Measures for Anti-Money Laundering and Counter-Terrorism Financing by Internet Financial Service Agencies (Trial) was jointly promulgated by the People’s Bank of China, the China Banking and Insurance Regulatory Commission and the CSRC and came into effect on January 1, 2019. It specifies the anti-money laundering obligations of internet finance service agencies and regulate that the internet finance service agencies shall (i) adopt continuous customer identification measures; (ii) implement the system for reporting large-value or suspicious transactions; (iii) conduct real-time monitoring of the lists of listed terrorist organizations and terrorists; and (iv) properly keep the information, data and materials such as customer identification and suspicious transaction reports.
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The Measures for the Supervision and Administration of Combating Money Laundering and Financing of Terrorism by Financial Institutions was promulgated by the Peoples Bank of China, last amended September 30, 2025 and came into effect on December 1, 2025. The measures stipulate a financial institution shall establish a self-assessment system for risks of money laundering and financing of terrorism at the headquarters level, and assess risks of money laundering and financing of terrorism on a regular and irregular basis, and submit the self-assessment situation to the People’s Bank of China or the branch office of the People’s Bank of China at the place where it is located within 10 working days from the date of review by the board of directors or senior executives.
On October 31, 2025, the NRFA promulgated the Measures for the Customer Due Diligence of Financial Institutions and the Preservation of Customer Identity Information and Transaction Records, effective January 1, 2026. The measures stipulate financial institutions shall be diligent and conscientious, adhere to the principle of “know your customer”, identify and take reasonable measures to verify the identities of customers and their beneficial owners, and adopt appropriate due diligence measures based on the characteristics of customers, the nature of transactional activities, and the risk profile.
The Measures for the Supervision and Administration of Combating Money Laundering and Financing of Terrorism by Financial Institutions was promulgated by the People’s Bank of China and last amended September 30, 2025. They came into effect on December 1, 2025. These measures stipulate that a financial institution shall establish a self-assessment system for risks of money laundering and financing of terrorism at the headquarters level, and assess risks of money laundering and financing of terrorism on a regular and irregular basis, and submit the self-assessment situation to the People’s Bank of China or the branch office of the People’s Bank of China at the place where it is located within 10 working days from the date of review by the board of directors or senior executives.
On October 31, 2025, the NRFA promulgated the Measures for the Customer Due Diligence of Financial Institutions and the Preservation of Customer Identity Information and Transaction Records, which became effective on January 1, 2026. These measures stipulate that financial institutions shall be diligent and conscientious, adhere to the principle of “know your customer”, identify and take reasonable measures to verify the identities of customers and their beneficial owners, and adopt appropriate due diligence measures based on the characteristics of customers, the nature of transactional activities, and the risk profile.
We have implemented various policies and procedures, including internal controls and “know-your-customer” procedures, aimed at preventing money laundering and terrorism financing. See “Item 3. Key Information—D. Risk Factors—Risks Relating to Our Business and Industry—We may be subject to domestic and overseas anti-money laundering and anti-terrorist financing laws and regulations and any failure by us, funding partners or payment agents to comply with such laws and regulations could damage our reputation, expose us to significant penalties and decrease our income and profitability.”
Regulations on Anti-Monopoly Matters Related to Internet Platform Companies
The PRC Anti-Monopoly Law, which took effect on August 1, 2008, prohibits monopolistic conduct such as entering into monopoly agreements, abusing market dominance and concentration of undertakings that has or may have the effect of eliminating or restricting competition. Moreover, the Standing Committee of the National People’s Congress revised the PRC Anti-Monopoly Law in June 2022, effective August 1, 2022, which requires that operators may not use data and algorithms, technology, capital advantages and platform rules to engage in monopolistic behaviors prohibited by this law. On February 7, 2021, the Anti-Monopoly Commission of the State Council officially promulgated the Anti-Monopoly Guidelines for the Internet Platform Economy Sector. The guidelines prohibit certain monopolistic acts of internet platforms so as to protect market competition and safeguard interests of users and undertakings participating in internet platform economy, including without limitation, prohibiting platforms with dominant position from abusing their market dominance (such as discriminating customers in terms of pricing and other transactional conditions using big data and analytics, coercing counterparties into exclusivity arrangements, using technology means to block competitors’ interface, favorable positioning in search results of goods displays, tying or attaching unreasonable trading conditions, compulsory collection of unnecessary user data). In addition, the guidelines also reinforce antitrust merger review for internet platform related transactions to safeguard market competition. The Provisions on the Prohibitions of Acts of Abuse of Dominant Market Positions, issued by the State Administration for Market Regulation on March 10, 2023, further prevent and prohibit the abuse of dominant market positions.
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Regulations Relating to Information Security and Privacy Protection
Regulations on Information Security
In recent years, PRC governmental authorities have enacted laws and regulations with respect to internet information security and protection of personal information from abuse or unauthorized disclosure. Pursuant to the Decision on the Maintenance of Internet Security issued by the Standing Committee of the National People’s Congress in 2000 and amended on August 27, 2009, persons may be subject to criminal liabilities in China for any attempt to: (i) gain improper entry to a computer or system of strategic importance; (ii) disseminate politically disruptive information; (iii) leak state secrets; (iv) spread false commercial information or (v) infringe upon intellectual property rights and other activities prohibited by laws and regulations.
The Administration Measures on the Security Protection of Computer Information Network with International Connections, issued by the Ministry of Public Security and last amended in 2011, prohibits using the internet in ways that result in a leak of state secrets or a spread of socially destabilizing content. The Ministry of Public Security has supervision and inspection powers and relevant local security bureaus may also have jurisdiction. If a value-added-telecommunications service license holder violates these measures, the government of the PRC may revoke its value-added-telecommunications service license and shut down its websites.
Pursuant to the Regulations of the People’s Republic of China for Safety Protection of Computer Information Systems, which was issued by the State Council and amended on August 1, 2011, the safety grading protection is provided for the computer information systems, and no organization or individual is allowed to take advantage of computer information systems to engage in activities harmful to the national interests and other people’s interests or legitimate rights, nor endanger the safety of computer information systems.
Pursuant to the Ninth Amendment to the Criminal Law issued by the Standing Committee of the National People’s Congress in 2015 and effective on November 1, 2015, any internet service provider that fails to fulfill the obligations related to internet information security administration as required by applicable laws and refuses rectification orders is subject to criminal penalty for (i) any dissemination of illegal information in large scale, (ii) any severe effect due to leakage of the client’s information, (iii) any serious loss of criminal evidence, or (iv) other severe situation. The amendment also states that any individual or entity that (i) sells or provides personal information to others that violates applicable law, or (ii) steals or illegally obtains any personal information, is subject to criminal penalty for severe violations.
On May 8, 2017, the Supreme People’s Court and the Supreme People’s Procuratorate issued the Interpretations on Several Issues Concerning the Application of Law in the Handling of Criminal Cases Involving Infringement of Citizens’ Personal Information, which became effective on June 1, 2017 and stipulates that the personal information of a natural person shall be protected by the law. It clarifies several concepts regarding the crime of “infringement of citizens’ personal information,” including “citizen’s personal information,” “provision,” and “unlawful acquisition.” Any organization or individual shall legally obtain such personal information of others when necessary and ensure the safety of such information, and shall not illegally collect, use, process or transmit personal information of others, or illegally purchase or sell, provide or make public personal information of others.
The Cybersecurity Law of the PRC was promulgated by the Standing Committee of the National People’s Congress and took effect on June 1, 2017. Pursuant to it, network operators must comply with laws and regulations and fulfill their obligations to safeguard security of the network when conducting business and providing services. Those who provide services through networks must take technical measures and other necessary measures pursuant to laws, regulations and compulsory national requirements to safeguard the safe and stable operation of the networks, respond to network security incidents effectively, prevent illegal and criminal activities, and maintain the integrity, confidentiality and usability of network data. Network operators shall not collect personal information that is irrelevant to the services it provides or collect or use the personal information in violation of the provisions of laws or agreements between both parties. The Regulations on Cybersecurity Supervision and Inspection of Public Security Organs, which were issued by the Ministry of Public Security and came into effect on November 1, 2018, is an important basis for the Public Security Bureau to strengthen the enforcement of the Cybersecurity Law.
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The PRC Civil Code provides that personal information of natural persons is protected by law. The Civil Code defines the processing of personal information as the collection, storage, use, processing, transmittal, provision and disclosure of personal information. Furthermore, according to the Civil Code, any entity that engages in the processing of personal information must follow the principles of lawfulness, fairness, and necessity and may not overuse personal information, and they must obtain the consent of the natural person or his or her guardian, except as otherwise provided by laws and regulations.
Pursuant to the Announcement of Conducting Special Supervision against the Illegal Collection and Use of Personal Information by Apps, which was issued on January 23, 2019, app operators should collect and use personal information in compliance with the Cybersecurity Law and should be responsible for the security of personal information obtained from users and take effective measures to strengthen the personal information protection. Furthermore, app operators should not force their users to make authorization by means of bundling, suspending installation or in other default forms and should not collect personal information in violation of laws, regulations or breach of user agreements. Such regulatory requirements were emphasized by the Notice on the Special Rectification of Apps Infringing upon Users’ Personal Rights and Interests, which was issued by the Ministry of Industry and Information Technology on July 22, 2020. The Interpretations on Certain Issues Regarding the Applicable of Law in the Handling of Criminal Case Involving Illegal Use of Information Networks and Assisting Committing Internet Crimes, which was jointly issued by the Supreme People’s Court and the Supreme People’s Procuratorate and came into effect on November 1, 2019, further clarifies the meaning of internet service provider and the severe situations of the relevant crimes.
The Guidelines for Internet Personal Information Security Protection, which was issued by the Ministry of Public Security and came into effect on April 10, 2019, provide guidelines by internet service providers to carry out measures for personal information protection. These are non-binding standards and guidelines applicable to personal information holders, including both the enterprises that provide services via the internet and organizations or individuals that control and process personal information by using private networks or offline environments. The Guidelines for Internet Personal Information Security Protection requires such personal information holders to establish a personal information administrative control system, implement technical safeguards and protect personal information during their business processes.
The Cybersecurity Review Measures were issued on April 13, 2020 and took effect on June 1, 2020. The measures provide detailed rules regarding cybersecurity review, and any operator in violation of the regulations shall be penalized in accordance with Article 65 of the Cybersecurity Law. On December 28, 2021, the Cyberspace Administration of China together with other twelve governmental authorities published a new version of the Cybersecurity Review Measures, which replaced the Cybersecurity Review Measures published in 2020 and became effective on February 15, 2022. Pursuant to the Cybersecurity Review Measures and other PRC cybersecurity laws and regulations, critical information infrastructure operators that purchase internet products and services or online platform operators that carry out data processing activities that affect or may affect national security shall be subject to the cybersecurity review. Moreover, where an online platform operator who possesses the personal information of over one million users intends to apply for foreign listing, it must undergo a cybersecurity review. Meanwhile, the Cybersecurity Review Measures grants the competent authorities the right to initiate a cybersecurity review without application, if any member organization of the cybersecurity review mechanism has reason to believe that any internet products, services or data processing activities affect or may affect national security.
On June 10, 2021, the Standing Committee of the National People’s Congress issued the Data Security Law of the PRC, effective September 1, 2021. The Data Security Law clarifies the scope of data to cover a wide range of information records generated from all aspects of production, operation and management of government affairs and enterprises in the process of the gradual transformation of digitalization, and requires that data collection shall be conducted in a legitimate and proper manner, and the theft or illegal collection of data is not permitted. Data processors shall establish and improve whole-process data security management rules, organize and implement data security training and take appropriate technical measures and other necessary measures to protect data security. In addition, data processing activities shall be conducted on the basis of the graded protection system for cybersecurity. Monitoring of data processing activities shall be strengthened, and remedial measures shall be taken immediately in case of discovery of risks regarding data security related defects or bugs. In case of data security incidents, responsive measures shall be taken immediately, and disclosure to users and report to the competent authorities shall be made in a timely manner.
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On July 30, 2021, the State Council issued the Regulations for the Security Protection of Critical Information Infrastructure, which came into effect on September 1, 2021. Pursuant to these regulations, “critical information infrastructures” refers to important network facilities and information systems of important industries and sectors such as public communications and information services, energy, transport, water conservation, finance, public services, e-government, and science and technology industry for national defense, as well as other important network facilities and information systems that may seriously endanger national security, national economy and citizen’s livelihood and public interests if they are damaged or suffer from malfunctions, or if any leakage of data in relation thereto occurs. Competent authorities as well as the supervision and administrative authorities of the above-mentioned important industries and sectors are responsible for the security protection of critical information infrastructures, or the Protection Authorities. The Protection Authorities will establish the rules for the identification of critical information infrastructures based on the particular situations of the industry and report such rules to the public security department of the State Council for record. The following factors must be considered when establishing identification rules: (i) the importance of network facilities and information systems to the core businesses of the industry and the sector; (ii) the harm that may be brought by the damage, malfunction or data leakage of, the network facilities and information systems; and (iii) the associated impact on other industries and sectors. The Protection Authorities are responsible for organizing the identification of critical information infrastructures in their own industries and sectors in accordance with the identification rules, promptly notifying the operators of the identification results and reporting to the public security department of the State Council.
The Administrative Provisions on Security Vulnerability of Network Products were jointly promulgated by the Ministry of Industry and Information Technology, the Cyberspace Administration of China and the Ministry of Public Security on July 12, 2021 and came into effect on September 1, 2021. Network product providers, network operators as well as organizations or individuals engaging in the discovery, collection, release and other activities of network product security vulnerability are subject to the provisions and shall establish channels to receive information of security vulnerability of their respective network products. In response to the Cybersecurity Law, network product providers shall be reported to the Cyber Security Threat and Vulnerability Information Sharing Platform of the Ministry of Industry and Information Technology within two days and provide technical support for network product users. Network operators shall take measures to examine and fix security vulnerability in a timely manner after discovering or acknowledging that their networks, information systems or equipment have such security vulnerability. According to the provisions, the breaching parties may be subject to punishments as regulated in accordance with the Cybersecurity Law.
On September 17, 2021, the Cyberspace Administration of China and eight other authorities jointly promulgated the Notice on Promulgation of the Guiding Opinions on Strengthening the Comprehensive Governance of Algorithm-Related Internet Information Services, which proposes a three-year plan to gradually establish a comprehensive governance pattern for algorithm security with sound governance mechanism, perfect regulatory system and standardized algorithm ecology. On December 31, 2021, the Cyberspace Administration of China, the Ministry of Industry and Information Technology, the Ministry of Public Security and the State Administration for Market Regulation jointly issued the Administration Provisions on Algorithmic Recommendation of Internet Information Services, which became effective on March 1, 2022. The provisions provide that algorithmic recommendation service providers shall (i) fulfill their responsibilities for algorithm security, (ii) establish and improve management systems for algorithm mechanism examination, ethical vetting in technology, user registration, information release vetting, protection of data security and personal information, anti- telecommunications and internet fraud, security assessment and monitoring, emergency response to security incidents, etc., and (iii) formulate and disclose rules for algorithm recommendation services, and be equipped with professional staff and technical support appropriate to the scale of the algorithm recommendation service.
On July 7, 2022, the Cyberspace Administration of China published the Measures for the Security Assessment of Outbound Data Transfer, effective September 1, 2022, pursuant to which a data processor shall apply to the national cyberspace administration for the security assessment of the outbound data transfer through the local provincial cyberspace administration, if it intends to provide data abroad under any of the following circumstances: (i) the data processor provides important data abroad; (ii) the critical information infrastructure operator or the data processor that has processed the personal information of over one million people provides personal information abroad; (iii) the data processor that has provided the personal information of over 100,000 people or the sensitive personal information of over 10,000 people cumulatively since January 1 of the previous year provides personal information abroad; (iv) any other circumstance where an application for the security assessment of outbound data transfer is required by the national cyberspace administration.
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On February 22, 2023, the Cyberspace Administration of China issued the Measures for Standard Contract for Outbound Data Transfer of Personal Information, effective June 1, 2023. The measures provide a transitional period of six months from the effective date for companies to take necessary measures to comply with the requirements. According to the measures, in the cases where the personal information processor provides personal information abroad by concluding a standard contract, the contract shall be concluded in strict compliance with the form Standard Contract, that is attached as an annex to the measures. The measures further provide that personal information processors may agree on other terms with overseas recipients, but they shall not conflict with the Standard Contract. According to the measures, the personal information processor shall, within ten working days from the effective date of the standard contract, file with the local provincial network information department and submit the standard contract and personal information protection impact assessment report for record.
On March 22, 2024, the Cybersecurity Administration of China promulgated the Provisions on Promoting and Regulating Cross-border Data Flows, effective immediately. These provisions delineate scenarios exempt from data cross-border compliance declarations, elevate the threshold for such declarations and reduce the instances requiring them. In case of any inconsistencies between these provisions and the Measures on Security Assessment of Outbound Data Transfer and the Measures for Standard Contract for Outbound Data Transfer of Personal Information, the provisions will prevail.
On September 24, 2024, the State Council promulgated the Regulation on Network Data Security Management, which became effective on January 1, 2025. The Regulation on Network Data Security Management consolidates and integrates various obligations of different types of cyber data processors, including general obligations of cyber data processors, obligations of personal information processors, obligations of key data processors, and obligations of network platform service providers. The Regulation on Network Data Security Management stipulates that cyber data processors should standardize data processing activities, implement cybersecurity level protection measures, establish network data security management systems, and develop network data security incident emergency plans. Furthermore, the Regulation on Network Data Security Management refines the provisions of the Personal Information Protection Law on notification, consent, and individual exercise of rights. Compared with the Draft for Comments version published on November 14, 2021, the official regulation removes the requirement that data processors seeking to list in Hong Kong whose activities affect or may affect national security should apply for cybersecurity review. Instead, the official regulation only stipulates that where network data handlers carry out network data processing activities that affect or may affect national security, they shall undergo a national security review in accordance with relevant national regulations.
On October 14, 2025, the Cyberspace Administration of China published the Measures for Personal Information Protection Certification for Outbound Data Transfer of Personal Information, effective January 1, which specify the key aspects of the personal information protection certification system, including its applicable scenarios and targets, certification evaluation content, implementation process, utilization of certification results, and post-certification supervision.
Regulations on Privacy Protection
The Regulations on Technological Measures for Internet Security Protection were issued by the Ministry of Public Security on December 13, 2005 and came into effect on March 1, 2006. It requires internet service providers to utilize standard technical measures for internet security protection.
Under the Several Provisions on Regulating the Market Order of Internet Information Services, which were issued by the Ministry of Industry and Information Technology on December 29, 2011 and came into effect on March 15, 2012, internet service providers are also prohibited from collecting any personal user information or providing any information to third parties without the consent of the user. The Cybersecurity Law provides an exception to the consent requirement where the information is anonymous, not personally identifiable and unrestorable. Internet service providers must expressly inform the users of the method, content and purpose of the collection and processing of user personal information and may only collect information necessary for its services. Internet service providers are also required to properly maintain user personal information, and in case of any leak or likely leak of user personal information, they must take remedial measures immediately and report any material leak to the telecommunications regulatory authority.
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In addition, the Decision on Strengthening Network Information Protection issued by the Standing Committee of the National People’s Congress on December 28, 2012 emphasizes the need to protect electronic information that contains individual identification information and other private information. The decision requires internet service providers to establish and publish policies regarding the collection and use of personal electronic information and to take necessary measures to ensure the security of the information and to prevent leakage, damage or loss. Furthermore, the Ministry of Industry and Information Technology’s Order on Protection of Personal Information of Telecommunications and Internet Users, which took effect on September 1, 2013, contains detailed requirements on the use and collection of personal information as well as the security measures to be taken by internet service providers.
The Standing Committee of the National People’s Congress promulgated the Personal Information Protection Law of the PRC on August 20, 2021, effective on November 1, 2021. According to the Personal Information Protection Law, personal information is all kinds of information, recorded by electronic or other means, related to identified or identifiable natural persons, not including information after anonymization handling. The principles of legality, propriety, necessity, and sincerity shall be observed for personal information handling. Moreover, the Personal Information Protection Law specified rules for handling sensitive personal information, which means personal information that, once leaked or illegally used, may easily cause infringement of the dignity of natural persons or harm to personal or property security, including information on biometric characteristics, financial accounts and individual location tracking, and the personal information of minors under the age of 14. Personal information handlers shall bear responsibility for their personal information handling activities, and adopt the necessary measures to safeguard the security of the personal information they handle. Otherwise, the personal information handlers will be ordered to correct or suspend or terminate the provision of services and be subject to confiscation of illegal income, fines or other penalties. Any personal information processor outside the territory of the PRC that processes the personal information of natural persons located within the PRC territory under any of the circumstances set forth in the Personal Information Protection Law shall establish a special agency or designate a representative within the territory of the PRC to be responsible for handling matters relating to personal information protection. Where a personal information processor needs to provide personal information outside the territory of the PRC due to business or other needs, it shall meet one of the conditions prescribed by the Personal Information Protection Law, such as passing a security evaluation organized by the Cyberspace Administration of China, or other conditions prescribed by laws, administrative regulations or the Cyberspace Administration of China. Where an overseas organization or individual engages in personal information processing activities infringing upon the personal information rights and interests of PRC citizens or endangering the national security and public interests of the PRC, the Cyberspace Administration of China may include such organization or individual in the list of subjects to whom provision of personal information is restricted or prohibited, announce the same, and take measures such as restricting or prohibiting provision of personal information to such organization or individual.
Regulations Relating to Taxation
Regulations on Enterprise Income Tax
The PRC Enterprise Income Tax Law was issued by the Standing Committee of the National People’s Congress in 2007 and most recently amended on December 29, 2018. The Implementation Rules for the PRC Enterprise Income Tax Law were issued by the State Council in 2007 and were amended on April 23, 2019. According to these regulations, taxpayers consist of resident enterprises and non-resident enterprises. Resident enterprises are defined as enterprises that are established in China in accordance with the PRC laws, or that are established in accordance with the laws of foreign countries but whose actual or de facto control entity is within the PRC. Non-resident enterprises are defined as enterprises that are set up in accordance with the laws of foreign countries and whose actual or de facto control entity is located outside the PRC, but (i) have entities or premises in the PRC, or (ii) have no entities or premises but have income generated from China. According to the PRC Enterprise Income Tax Law, foreign-invested enterprises in the PRC are generally subject to a uniform enterprise income tax rate of 25%. A non-resident enterprise that has an establishment or premises within the PRC must pay enterprise income tax at a rate of 25% on its income that is derived from such establishment or premises inside the PRC and that is sourced outside the PRC but is actually connected with the said establishment or premises. However, if non-resident enterprises have not formed permanent establishments or premises in the PRC, or if they have formed permanent establishment institutions or premises in the PRC but there is no actual relationship between the income derived in the PRC and the established institutions or premises set up by them, the enterprise income tax is, in that case, set at the rate of 10% for their income sourced from inside the PRC.
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Enterprises that are recognized as high and new technology enterprises in accordance with the Administrative Measures for the Determination of High and New Tech Enterprises, issued by the Ministry of Science, the Ministry of Finance and the State Administration of Taxation on April 14, 2008 and last amended on January 29, 2016, are entitled to enjoy a preferential enterprise income tax rate of 15%. The validity period of the high and new technology enterprise qualification shall be three years from the date of issuance of the certificate of high and new technology enterprise. An enterprise can re-apply for such recognition as a high and new technology enterprise before or after the previous certificate expires.
On February 3, 2015, the State Administration of Taxation issued the Announcement on Several Issues Concerning Enterprise Income Tax on Indirect Transfer of Assets by Non-Resident Enterprises, or SAT Circular 7. SAT Circular 7 provides comprehensive guidelines relating to, and heightening the Chinese tax authorities’ scrutiny of, indirect transfers by a non-resident enterprise of PRC taxable assets, which include assets of organizations and premises in the PRC, immovable property in the PRC and equity investments in PRC resident enterprises. For instance, if a non-resident enterprise transfers equity interest in an overseas holding company that directly or indirectly holds certain PRC taxable assets and if the transfer is believed by the Chinese tax authorities to have no reasonable commercial purpose other than to evade enterprise income tax, SAT Circular 7 allows the Chinese tax authorities to reclassify the indirect transfer of PRC taxable assets into a direct transfer and therefore impose PRC enterprise income tax at a rate of a 10% on the non-resident enterprise. On the other hand, indirect transfers falling into the scope of the safe harbors under SAT Circular 7 are not subject to PRC tax under SAT Circular 7. The safe harbors include qualified group restructurings, public market trades and exemptions under tax treaties or arrangements.
The State Administration of Taxation issued the Announcement on Issues Relating to Withholding at Source of Income Tax of Non-resident Enterprises, which took effect on December 1, 2017 and was amended on June 15, 2018. According to this announcement, the balance after deducting the equity net value from the equity transfer income shall be the taxable income amount of equity transfer income.
Under SAT Circular 7 and the Law on the Administration of Tax Collection issued by the Standing Committee of the National People’s Congress in 1992 and last amended on April 24, 2015, in the case of an indirect transfer, entities or individuals that are obligated to pay the transfer price to the transferor shall act as withholding agents. If they fail to make withholding or withhold the full amount of tax payable, the transferor of equity must declare and pay tax to the tax authorities in charge within seven days from the occurrence of the tax payment obligation. Where the withholding agent does not make withholding, and the transferor of equity does not pay the payable amount, the tax authority may impose late payment interest on the transferor. In addition, the tax authority may also hold the withholding agents liable and impose a penalty of ranging from 50% to 300% of the unpaid tax on them. The penalty imposed on the withholding agents may be reduced or waived if the withholding agents have submitted the relevant materials in connection with the indirect transfer to the PRC tax authorities in accordance with SAT Circular 7.
Regulations on Dividend Tax
Pursuant to the Circular of the State Administration of Taxation on Relevant Issues relating to the Implementation of Dividend Clauses in Tax Agreements, which took effect on February 20, 2009, all of the following requirements must be satisfied to enjoy the preferential tax rates provided under the tax agreements: (i) the tax resident that receives dividends should be a company as provided in the tax agreement; (ii) the equity interest and voting shares of the PRC resident company directly owned by the tax resident satisfy the percentages specified in the tax agreement; and (3) the equity interest of the PRC resident company directly owned by such tax resident at any time during the 12 months prior to receiving the dividends satisfy the percentage specified in the tax agreement.
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The PRC Enterprise Income Tax Law provides that an income tax rate of 10% will normally be applicable to dividends payable to investors that are “non-resident enterprises,” and gains derived by such investors, which (i) do not have an establishment or place of business in the PRC or (ii) have an establishment or place of business in the PRC, but the income is not effectively connected with the establishment or place of business to the extent such dividends and gains are derived from sources within the PRC. The income tax on the dividends may be reduced pursuant to a tax treaty between China and other applicable jurisdictions. Pursuant to the Arrangement Between the Mainland of China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income, issued by the State Administration of Taxation in 2006, and other applicable PRC laws, if a Hong Kong resident enterprise is determined by the competent PRC tax authority to have satisfied the conditions and requirements under such Double Tax Avoidance Arrangement and other applicable laws, the 10% withholding tax on the dividends the Hong Kong resident enterprise receives from a PRC resident enterprise may be reduced to 5% upon receiving approval from the in-charge tax authority. However, based on the Circular of the State Administration of Taxation on Relevant Issues relating to the Implementation of Dividend Clauses in Tax Agreements, if the PRC tax authorities determine, in their discretion, that a company benefits from such reduced income tax rate due to a structure or arrangement that is primarily tax-driven, such PRC tax authorities may adjust the preferential tax treatment. Based on the Announcement of Taxation on Issues Relating to “Beneficial Owner” in Tax Treaties by the State Administration of Taxation, effective from April 1, 2018, to determine the “beneficial owner” status of a resident of the treaty counterparty seeking to enjoy tax treaty benefits, a comprehensive analysis must be carried out in accordance with the factors set out in the announcement.
On August 27, 2015, the State Administration of Taxation issued the Administrative Measures for Tax Convention Treatment for Non-resident Taxpayers, which was amended on June 15, 2018. The announcement was repealed by the Administrative Measures on Non-resident Taxpayers Enjoying Treaty Benefits, which was propagated on October 14, 2019 and took effect on January 1, 2020. Under such announcement, non-resident taxpayers meeting conditions for enjoying the convention treatment may be entitled to the convention treatment themselves when filing a tax return or making a withholding declaration through a withholding agent, subject to the subsequent administration by the tax authorities. Such taxpayers who make their own declaration must assess whether they are entitled to tax treaty benefits, make truthful declarations and submit the reports, statements and materials required by the tax authorities.
Regulations on Value-added Tax
All entities and individuals engaged in the sale of goods, provision of processing, repairs and replacement services, and the importation of goods within the territory of the PRC must pay value-added tax in accordance with the Provisional Regulations on Value-added Tax of the PRC and its implementation rules. These regulations were issued by the State Council in 1993 and last amended on November 19, 2017. The regulations applicable to value-added tax were further amended by the Notice of Adjustment of VAT Rates, issued on April 4, 2018, and by the Notice of Strengthening Reform of Value-added Tax Policies, issued on March 20, 2019. Value-added tax payable is calculated as “output value-added tax” minus “input value-added tax.” The rate of value-added tax varies from 3% to 13% depending on the product type.
On December 25, 2024, the National People’s Congress passed the Value-added Tax Law of the PRC, which came into effect on January 1, 2026, replacing the Provisional Regulations on Value-added Tax, which was abolished accordingly. The Value-added Tax Law specifies that all entities and individuals engaged in the sale of goods, services, intangible assets, real estate and importation of goods within the territory of the PRC are value-added taxpayers. “A taxable transaction that occurs in China” refers to the following: (i) sales of goods where the place of departure or the location of the goods is in China; (ii) sales or leases of real estate or transfers of the right to use natural resources where the location of the real estate or natural resources is in China; (iii) sales of financial products where the financial products are issued in China or the seller is an entity or individual in China; and (iv) except where covered by items (i) and (iii) above, sales of services or intangible assets, services or intangible assets in China or which involve a seller that is an entity or individual in China. Any of the following circumstances is deemed as a taxable transaction and is subject to VAT: (i) the use of goods produced or goods processed on commission by an entity or individual business for collective welfare or personal consumption; (ii) the transfer of goods free of charge by an entity or individual business; or (iii) the transfer of intangible assets, real estate or financial products free of charge by an entity or individual.
Regulations Relating to Intellectual Property
Regulations on Trademark Law
Trademarks in the PRC are governed by the Trademark Law of the PRC, last amended on April 23, 2019 and effective on November 1, 2019, and the Regulations for the Implementation of Trademark Law of the PRC, last amended on April 29, 2014. The Trademark Office of the National Intellectual Property Administration is responsible for the registration and administration of trademarks throughout the PRC and the Trademark Review and Adjudication Board of the State Administration for Market Regulation under the State Council is responsible for handling trademark disputes.
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Registered trademarks in the PRC refer to trademarks that have been approved and registered by the Trademark Office, including commodity trademarks, service trademarks, collective marks and certification marks. A trademark registrant will enjoy an exclusive right to use the trademark, which will be protected by laws and regulations. Any visible mark in the form of word, graphic, alphabet, number, 3D (three-dimension) mark, color combination or the combination of these elements that can distinguish the commodities of the natural person, legal person or other organizations from those of others can be registered as a trademark. A trademark for which an application is filed for registration must be distinctive to be distinguishable, and may not go against the legitimate rights previously obtained by others. A trademark registrant is entitled to include the words “Registered Trademark” or a sign indicating that it is registered.
Any of the following acts will be an infringement upon the right to exclusive use of a registered trademark: (i) using a trademark that is identical to a registered trademark on the same kind of commodities without a license from the registrant of the registered trademark; (ii) using a trademark that is similar to a registered trademark on the same kind of commodities, or using a trademark that is identical or similar to the registered trademark on similar goods without a license from the registrant of the registered trademark, if the use is likely to cause confusion; (iii) selling commodities that infringe upon the right to exclusive use of a registered trademark; (iv) counterfeit or unauthorized production of the label of another’s registered trademark, or sale of any such label that is counterfeited or produced without authorization; (v) changing a registered trademark and putting the commodities with the changed trademark into the market without the consent of the registrant of the registered trademark; (vi) providing, intentionally, facilitation for activities infringing upon others’ exclusive right of trademark use, and facilitating others to commit infringement on the exclusive right of trademark use; or (vii) causing other damage to the right to exclusive use of a holder of a registered trademark. In the event of infringement of the registered trademark above that leads to disputes, the parties concerned may settle such disputes through negotiations; if no negotiation is prospective or fails, the trademark registrant or any interested party may file a lawsuit before the People’s Court or request the administrative department for market regulation for handling.
Regulations on Patent Law
Patents in the PRC are mainly protected under the Patent Law of the People’s Republic of China, which was issued by the Standing Committee of the National People’s Congress in 1984 and last amended on October 17, 2020, effective on June 1, 2021, and Implementation Rules of the Patent Law of the People’s Republic of China, which were promulgated by the State Council in 2001 and last amended on December 11, 2023. The Patent Law and its implementation rules provide for three types of patents: “invention,” “utility model” and “design.” “Invention” refers to any new technical solution relating to a product, a process or improvement thereof; “utility model” refers to any new technical solution relating to the shape, structure, or their combination, of a product, which is suitable for practical use; and “design” refers to any new design of the whole or partial shape, pattern, color or the combination of any two of them, of a product, that creates an aesthetical feeling and is suitable for industrial application. Invention patents are valid for 20 years, while design patents and utility model patents are valid for 15 years and 10 years, respectively, each calculated from the date of application. To be patentable, invention or utility models must meet three criteria: novelty, inventiveness and practicability. Except under certain specific circumstances provided by law, any third-party user must obtain consent or a proper license from the patent owner to use the patent. Otherwise, the use constitutes an infringement of the patent rights.
If a dispute arises due to patent infringement, the dispute must be settled through consultation involving both parties. If one or both parties are unwilling to submit to consultation, or if the consultation fails, then the patentee or any interested party may initiate legal proceedings in the People’s Court, or request the patent administrative department to handle the matter.
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Regulations on Domain Names
Domain names are protected under the Administrative Measures on Internet Domain Names, issued by the Ministry of Industry and Information Technology on August 24, 2017 and effective as of November 1, 2017. It regulates efforts to undertake internet domain name services as well as the operation, maintenance, supervision and administration thereof and other relevant activities within the territory of the PRC. A person that has domain name root servers, an institution for operating domain name root servers, a domain name registry and a domain name registrar operating within the territory of the PRC must obtain a permit for this purpose from the Ministry of Industry and Information Technology or the relevant communications administration of the local province, autonomous region or municipality. Domain name owners must register their domain names, and the Ministry of Industry and Information Technology is in charge of the administration of PRC internet domain names. In the case of infringement, the telecommunications authority will take measures to stop the infringer and give it a warning or impose a fine of more than RMB10,000 but less than RMB30,000 depending on the seriousness of the case.
Regulations on Copyright and Software Products
Copyright in the PRC, including copyrighted software, is principally protected under the Copyright Law of the PRC, which took effect in 1991 and was most recently amended on November 11, 2020, and the related Implementing Regulations of the Copyright Law of the PRC, which was issued by the State Council on August 2, 2002 and most recently amended on January 30, 2013. The next amendment to the Copyright Law took effect on June 1, 2021. Under the Copyright Law of the PRC and the related Implementing Regulations of the Copyright Law of the PRC, works of Chinese citizens, legal persons or other organizations, whether published or not, enjoy copyright in their works, which include works of literature, art, architectural works, natural science, social science, graphic works and model works such as engineering design plan, product design plan, map, schematic diagram and computer software. The term of protection for copyrighted software is 50 years.
Similarly, under the Computer Software Protection Regulations last amended on January 30, 2013 and became effective on March 1, 2013, Chinese citizens, legal persons and other organizations shall enjoy copyright on the software they develop, regardless of whether the software has been released publicly. Software copyright commences from the date on which the development of the software is completed. A software copyright owner may register with the software registration institution recognized by the copyright administration department of the State Council. A registration certificate issued by the software registration institution is a preliminary proof of the registered items. The protection period for software copyright of a legal person or other organizations shall be fifty years, concluding on December 31 of the fiftieth year after the software’s initial release.
Regulations Relating to Labor
Regulations on Labor Contract
The main PRC employment laws and regulations applicable to us include the Labor Law, the Labor Contract Law, the Implementing Regulations on the Labor Contract Law of the PRC and other laws and regulations.
The Labor Law was last amended on December 29, 2018. Under the Labor Law, employers shall enter into employment contracts with their employees based on the principles of equality, consent and agreement through consultation. Wages will be paid based on the policy of performance, equal pay for equal work, lowest wage protection and special labor protection for female workers and juvenile workers. The Labor Law also requires employers to establish and effectively implement a system of ensuring occupational safety and health, educate employees on occupational safety and health, preventing work-related accidents and reducing occupational hazards. Employers are also required to pay their employees’ social insurance premiums.
The Labor Contract Law was last amended on December 28, 2012 and took effect on July 1, 2013. Under the Labor Contract Law and its implementing regulations, enterprises established in the PRC shall enter into employment agreements with their employees to provide for the term of employment, job duties, work time, holidays and statutory payments, labor protection, working condition and occupational hazard prevention and protection and other essential contents. Both employers and employees will duly perform their duties. The Labor Contract Law also provides for the scenario of rescission and termination. Except for certain situations explicitly stipulated in the Labor Contract Law that are not subject to economic compensation, economic compensation shall be paid to the employee by the employer for the rescission or termination of the employment agreement.
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Regulations on Social Insurance and Housing Funds
Pursuant to the Social Insurance Law of the PRC, which was last amended on December 29, 2018, the PRC established social insurance systems such as basic pension insurance, basic medical insurance, work-related injury insurance, unemployment insurance and maternity insurance. Employers are required to contribute, on behalf of their employees, to a number of social security funds, including funds for basic pension insurance, unemployment insurance, basic medical insurance, work-related injury insurance and maternity insurance. Employers must apply for completion of social security registration with the local social security agency within 30 days from the date of incorporation with their business license, registration certificate or corporation seal. Employers that fail to complete social security registration will be ordered by the social security administrative authorities to make correction within a stipulated period; where correction is not made within the stipulated period, the employers will be subject to fines ranging from one to three times the amount of the payable social security premiums, and the person(s)-in-charge who is/are directly accountable and other directly accountable personnel will be subject to fines ranging from RMB500 to RMB3,000. If an employer does not pay the full amount of social insurance premiums as scheduled, the social insurance premium collection institution will order it to make the payment or make up the difference within the stipulated period and impose a daily surcharge equivalent to 0.05% of the overdue payment from the date on which the payment is overdue. If payment is not made within the stipulated period, the relevant administration department will impose a fine from one to three times the amount of overdue payment.
Pursuant to the Regulations on the Administration of Housing Funds last amended on March 24, 2019, employers must complete housing funds registration with local housing fund administration centers and open housing fund accounts for their employees in the bank. Employers must, within 30 days from their date of establishment, go through housing funds registration with local housing fund administration centers and complete housing fund account establishment procedures for employees with the examination and approval documents of the housing fund management center within 20 days from completion of registration. The contribution rate of housing funds of an employee and employer may not be less than 5% of the monthly average salary in the previous year, and cities with good conditions may properly raise the contribution rate. Employers are required to pay and deposit housing funds on behalf of their employees in full and in a timely manner, and any employer that fails to open such bank account or contribute housing funds may be fined and ordered to make payment within a prescribed time limit. If the employer still fails to do so, the housing fund administration center may apply to the court for enforcement of the unpaid amount.
Pursuant to the Opinions of the General Office of the State Council on Comprehensively Promoting the Implementation of the Combination of Maternity Insurance and Basic Medical Insurance for Employees issued on March 6, 2019, maternity insurance and basic medical insurance for employees will be consolidated. On July 20, 2018, the General Office of the Central Committee of the Communist Party of China and the General Office of the State Council issued the Reform Plan of the State Tax and Local Tax Collection Administration System. Under this plan, tax authorities are responsible for the collection of social insurance contributions in the PRC beginning from January 1, 2019.
Pursuant to the Interim Measures for Participation in Social Insurance by Hong Kong, Macao and Taiwan Residents in the Mainland, which was promulgated by the Ministry of Human Resources and Social Security on November 29, 2019, effective on January 1, 2020, employers registered in mainland China shall contribute basic pension insurance, basic medical insurance, work-related injury insurance, unemployment insurance and maternity insurance for Hong Kong, Macao and Taiwan residents who are employed or recruited by them.
Regulations Relating to Foreign Exchange
Regulation on Foreign Currency Exchange
The principal law governing foreign currency exchange in the PRC is the Foreign Exchange Administration Regulations of the PRC. The Foreign Exchange Administration Regulations, most recently amended on August 5, 2008, stipulates that Renminbi is freely convertible into other currencies for current account items, including the distribution of dividends, interest payments, trade and service-related foreign exchange transactions. However, it is not freely convertible for capital account items, such as direct investments, loans, repatriation of investments and investments in securities outside of China, unless prior approval is obtained from SAFE, or its local branch, and prior registration with SAFE is made.
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Pursuant to the Regulation of Settlement, Sale and Payment of Foreign Exchange, promulgated by the People’s Bank of China and effective on July 1, 1996, foreign-invested enterprises may only buy, sell or remit foreign currencies at those banks authorized to conduct foreign exchange business after providing valid commercial supporting documents and, in the case of capital account item transactions, obtaining approvals from SAFE or its local counterpart. Foreign-invested enterprises are permitted to convert their after-tax dividends into foreign exchange and to remit such foreign exchange out of their foreign exchange bank accounts in the PRC. However, foreign exchange transactions involving overseas direct investment or investment and exchange in securities and derivative products abroad are subject to registration with SAFE and approval from or filing with the PRC governmental authorities.
The Notice on Reforming the Administration of Foreign Exchange Settlement of Capital of Foreign Invested Enterprises, issued by SAFE and most recently amended on March 23, 2023, further expanding the extent of convertibility under direct investment. It stipulates that the use of capital funds and exchange settlement funds by foreign-invested enterprises will be subject to foreign exchange management regulations and the implementation of negative list management.
On December 4, 2023, SAFE amended the Circular on Reforming and Regulating Policies on the Management of the Settlement of Foreign Exchange of Capital Accounts. It unifies the discretional foreign exchange settlement for all the domestic institutions. The discretional foreign exchange settlement refers to foreign exchange capital in the capital account that has been confirmed by the relevant policies subject to the discretional foreign exchange settlement (including foreign exchange capital, foreign loans and funds remitted from the proceeds from the overseas listing) and which can be settled at the banks based on the actual operational needs of the domestic institutions. The proportion of discretional foreign exchange settlement of the foreign exchange capital is temporarily determined as 100%. Violations of the circulars of SAFE could result in administrative penalties under the Regulations of the PRC on Foreign Exchange Control and relevant provisions. Furthermore, it stipulates that the use of foreign exchange income of capital accounts of foreign-invested enterprises must follow the principles of authenticity and for the enterprises’ own use within the business scope of enterprises. Foreign exchange income of capital accounts and capital in Renminbi obtained by foreign-invested enterprises from foreign exchange settlement may not be directly or indirectly used for the following purposes: (i) payment outside of the business scope of the enterprises or the payment prohibited by laws and regulations; (ii) investment in securities or financial schemes other than bank-guaranteed products unless otherwise provided by laws and regulations; (iii) granting loans to non-connected enterprises, unless otherwise permitted by its business scope; and (iv) construction or purchase of real estate that is not for the enterprises’ own use (except for the real estate enterprises).
On January 26, 2017, SAFE promulgated the Notice on Improving the Check of Authenticity and Compliance to Further Promote Foreign Exchange Control, which stipulates several capital control measures with respect to the outbound remittance of profit from domestic entities to offshore entities, including (i) under the principle of genuine transaction, banks must check board resolutions regarding profit distribution, the original versions of tax filing records and audited financial statements; and (ii) domestic entities must hold income to account against previous years’ losses before remitting profits. Moreover, domestic entities must make detailed explanations of the sources of capital and utilization arrangements, and provide board resolutions, contracts and other proof when completing the registration procedures in connection with an outbound investment.
On October 23, 2019, SAFE issued the Notice of the State Administration of Foreign Exchange on Further Promoting the Convenience of Cross-border Trade and Investment, which cancels the restrictions on the domestic equity investment with capital of non-investment foreign-invested enterprises, including the capital obtained from foreign exchange settlement. Such investments should be real and should be in compliance with the laws, regulations and rules, including the provisions of the 2024 Negative List. In addition, it stipulates that qualified enterprises in certain pilot areas may use their capital income from capital, foreign debt and overseas listing, for the purpose of domestic payments without providing authenticity certifications to the banks in advance for those domestic payments. On December 4, 2023, SAFE amended the above notice, explicitly defining the negative list for the use of capital income and facilitating pilot policies for cross-border financing nationwide.
On April 10, 2020, SAFE issued the Notice on Optimizing Foreign Exchange Administration to Support the Development of Foreign-related Business. It stipulates that on the premise of ensuring the true and compliant use of funds and compliance with the existing regulations on use of income under the capital account, enterprises which satisfy the criteria are allowed to use income under the capital account, such as capital funds, foreign debt and overseas listing for domestic payment, without prior provision of proof materials for veracity to the bank for each transaction. The authority to process the deregistration of qualified overseas loans under domestic guarantee and overseas lending shall be delegated to banks.
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Regulations on Dividend Distribution
Pursuant to the laws and regulations on foreign investment, wholly foreign-owned enterprises in China may pay dividends only out of their accumulated after-tax profits, if any, determined in accordance with PRC accounting standards and regulations. In addition, wholly foreign-owned enterprises in China must allocate at least 10% of their respective accumulated after-tax profits each year, after making up previous years’ accumulated losses each year, if any, to fund certain statutory reserve funds until these reserves have reached 50% of the registered capital of the enterprises. A PRC company may not distribute any profits until any losses from prior fiscal years have been offset. Profits retained from prior fiscal years may be distributed together with distributable profits from the current fiscal year. These reserves are not distributable as cash dividends. According to the Rules on the Accounting of Financial Enterprises released by the Ministry of Finance, financial enterprises shall allocate general risk reserves prior to the distribution of dividends.
Regulations on Foreign Exchange Registration of Overseas Investment by PRC Residents
On July 4, 2014, SAFE promulgated the Notice on Relevant Issues Relating to Domestic Residents’ Investment and Financing and Round-Trip Investment through Special Purpose Vehicles, or SAFE Circular 37, for the purpose of simplifying the approval process and for the promotion of the cross-border investment. SAFE Circular 37 supersedes the Notice on Relevant Issues on the Foreign Exchange Administration of Raising Funds through Overseas Special Purpose Vehicle and Investing Back in China by Domestic Residents, and revises and regulates matters involving foreign exchange registration for round-trip investment. Under SAFE Circular 37, (i) PRC residents (including PRC entities and PRC individuals) must register with the local branch of SAFE before he or she contributes assets or equity interest in an overseas special purpose vehicle that is directly established or indirectly controlled by the PRC resident for the purpose of conducting investment or financing; and (ii) following the initial registration, PRC residents must update their SAFE registration when the offshore special purpose vehicle undergoes material events relating to any change of basic information, including change of such PRC citizens or residents’ name, operation term, increases or decreases in investment amount, transfers or exchanges of shares, or mergers or divisions.
Pursuant to the Circular of the State Administration of Foreign Exchange on Further Simplification and Improvement of Foreign Exchange Administration on Direct Investment, which was amended on December 30, 2019, the registrations described in the preceding paragraph must be directly reviewed and handled by qualified banks, and SAFE and its branches will perform indirect regulation over the foreign exchange registration through qualified banks.
Failure to comply with the registration procedures set forth in the State Administration of Foreign Exchange Circular 37 may result in restrictions being imposed on the foreign exchange activities of the onshore company, including the payment of dividends and other distributions to its offshore parent or affiliate, and may also subject PRC residents to penalties under PRC foreign exchange administration regulations. PRC residents who control the company from time to time are required to register with SAFE in connection with their investments in the company. Moreover, failure to comply with the various registration requirements described above could result in liability under PRC law for evasion of foreign exchange controls.
Regulations on Stock Incentive Plans
On February 15, 2012, SAFE promulgated the Notice on Foreign Exchange Administration of PRC Residents Participating in Share Incentive Plans of Offshore Listed Companies. Individuals participating in any stock incentive plan of any overseas publicly listed company who are Chinese citizens or foreign citizens who reside in mainland China for a continuous period of not less than one year, subject to a few exceptions, are required to register with SAFE or its local branches and complete certain other procedures. These plan participants must also retain an overseas entrusted institution to handle matters in connection with their exercise of stock options, the purchase and sale of corresponding stock or interests and fund transfers. In addition, the agent in China is required to further amend the registration as required by State Administration of Foreign Exchange with respect to the stock incentive plan if there is any material change to the stock incentive plan, the mainland Chinese agent or the overseas entrusted institution or other material changes. The Chinese agents must, on behalf of the PRC residents who have the right to exercise the employee share options, apply to SAFE or its local branches for an annual quota for the payment of foreign currencies in connection with the PRC residents’ exercise of the employee share options. The foreign exchange proceeds received by the PRC residents from the sale of shares under the stock incentive plans granted and dividends distributed by the overseas listed companies must be remitted into the bank accounts in China opened by the Chinese agents before distribution to such PRC residents. Under the Circular of the State Administration of Taxation on Issues Concerning Individual Income Tax in Relation to Equity Incentives promulgated by the State Administration of Taxation and effective from August 24, 2009, listed companies and their domestic organizations must, according to the individual income tax calculation methods for “wage and salary income” and stock option income, lawfully withhold and pay individual income tax on such income.
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Regulations on Loans Between a Foreign Company and its Chinese Subsidiaries
A loan made by foreign investors as shareholders in a foreign-invested enterprise is considered to be foreign debt in the PRC and is regulated by various laws and regulations, including the Regulation on Foreign Exchange Administration of the PRC, the Interim Provisions on the Management of Foreign Debts promulgated by SAFE, the National Development and Reform Commission and the Ministry of Finance and most recently amended on July 26, 2022, the Administrative Measures for Registration of Foreign Debts promulgated by SAFE and amended on May 4, 2015, and the Notice of the People’s Bank of China on Matters Concerning the Prudent Macro Management of All Cross-Border Financing promulgated on January 11, 2017. Under these rules, a shareholder loan in the form of foreign debt made to a Chinese entity does not require the prior approval of SAFE. However, such foreign debt must be registered with and recorded by SAFE or its local branches. The Notice of the State Administration of Foreign Exchange on Further Promoting the Convenience of Cross-border Trade and Investment, as most recently amended by SAFE on December 4, 2023, provides that a non-financial enterprise in the pilot areas may register the permitted amounts of foreign debts, which is as twice of the non-financial enterprise’s net assets, at the local foreign exchange bureau. Such non-financial enterprise may borrow foreign debts within the permitted amounts and directly handle the relevant procedures in banks without registration of each foreign debt. However, the non-financial enterprise should report its international income and expenditure regularly.
Regulations Relating to Outbound Direct Investment
The Administrative Measures on Overseas Investments was promulgated by the National Development and Reform Commission and took effect on March 1, 2018. Pursuant to it, non-sensitive overseas investment projects are required to make record filings with the local branch of the National Development and Reform Commission. On September 6, 2014, the Ministry of Commerce promulgated the Administrative Measures on Overseas Investments, which took effect on October 6, 2014. According to this regulation, overseas investments of PRC enterprises that involve non-sensitive countries and regions and non-sensitive industries must make record filings with a local branch of Ministry of Commerce. The Notice of State Administration of Foreign Exchange on Further Improving and Adjusting Foreign Exchange Administration Policies for Direct Investment was issued by SAFE in 2012 and last amended on December 30, 2019, under which PRC enterprises must register for overseas direct investment with local banks. The shareholders or beneficial owners who are PRC entities are required to be in compliance with the related overseas investment regulations. If they fail to complete the filings or registrations required by overseas direct investment regulations, the authorities may order them to suspend or cease the implementation of such investment and make corrections within a specified time.
Regulations Relating to M&A Rules and Overseas Listing
On August 8, 2006, six PRC regulatory agencies, including Ministry of Commerce, the State-owned Assets Supervision and Administration Commission of the State Council, the State Administration of Taxation, the State Administration for Market Regulation, the CSRC and SAFE, issued the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&A Rules, which was amended on June 22, 2009. Foreign investors are subject to the M&A Rules when they purchase equity interest of a domestic company or subscribe for the increased capital of a domestic company that changes a domestic company into a foreign-invested enterprise; or when the foreign investors establish a foreign-invested enterprise in the PRC, purchase the assets of a domestic company and operate the assets via such foreign-invested enterprise; or when the foreign investors purchase the assets of a domestic company, establish a foreign-invested enterprise by injecting such assets and operate the assets. The M&A Rules require offshore special purpose vehicles formed for overseas listing purposes through acquisitions of PRC domestic companies and controlled by PRC companies or individuals to obtain the approval of the CSRC prior to publicly listing their securities on an overseas stock exchange. The M&A Rules also provide that if a PRC entity or individual plans to merge or acquire its related PRC entity through an overseas company legitimately incorporated or controlled by such entity or individual, such a merger or acquisition shall be subject to examination and approval by the Ministry of Commerce.
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The M&A Rules and other recently adopted regulations and rules concerning mergers and acquisitions also establish additional procedures and requirements that could make merger and acquisition activities by foreign investors more time-consuming and complex. For example, the M&A Rules require that Ministry of Commerce be notified in advance of any change-of-control transaction in which a foreign investor takes control of a PRC domestic enterprise, if (i) any important industry is concerned, (ii) such transaction involves factors that impact or may impact national economic security or (iii) such transaction will lead to a change in control of a domestic enterprise which holds a famous trademark or PRC time-honored brand.
On July 6, 2021, the PRC governmental authorities issued the Opinions on Strictly Scrutinizing Illegal Securities Activities in Accordance with the Law. These opinions emphasized the need to strengthen the administration over illegal securities activities and the supervision on overseas listings by China-based companies and proposed to take effective measures, such as promoting the construction of relevant regulatory systems to deal with the risks and incidents faced by China-based overseas-listed companies.
On February 17, 2023, the CSRC released a set of regulations consisting of 6 documents, including the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies, or the Trial Measures, and 5 supporting guidelines, collectively, the Filing Measures, effective March 31, 2023. The Filing Measures establish a new filing-based regime to regulate overseas offerings and listings by domestic companies. According to the Filing Measures, the overseas offering and listing by a domestic company, whether directly or indirectly, shall be filed with the CSRC. The overseas offering or listing shall be considered as an indirect overseas offering and listing by a domestic enterprise, if the issuer meets both of the following conditions: (i) the operating revenue, gross profit, total assets, or net assets of the domestic operating entities in the most recent fiscal year accounts more than 50% of the relevant line item in the issuer’s audited consolidated financial statement for that year; and (ii) the business operation is mainly carried out in the PRC or the main places of business are located in the PRC, or senior management personnel responsible for business operations and management are mostly PRC citizens or are ordinarily resident in the PRC. The determination of an indirect offering and listing will be conducted on a “substance over form” basis.
On September 6, 2024, the National Development and Reform Commission and the Ministry of Commerce jointly issued the 2024 Negative List, which became effective on November 1, 2024. Pursuant to that, if a domestic company engaging in the prohibited business stipulated in the 2024 Negative List seeks an overseas offering and listing, it shall obtain the approval from the competent governmental authorities. Besides, the foreign investors of the company shall not be involved in the company’s operation and management, and their shareholding percentage shall be subject, mutatis mutandis, to the relevant regulations on the domestic securities investments by foreign investors.
According to the Trial Measures, an overseas offering and listing is prohibited under any of the following circumstances: (i) if the intended securities offering and listing is specifically prohibited by national laws and regulations and provisions; (ii) if the intended securities offering and listing constitutes endangers to national security as reviewed and determined by competent authorities under the State Council in accordance with law; (iii) if, in the past three years, the domestic enterprise or its controlling shareholders or actual controllers have committed corruption, bribery, embezzlement, misappropriation of property, or other criminal offenses disruptive to the order of the socialist market economy; (iv) if the domestic enterprise is under investigation according to law for suspected crimes or major violations of laws and regulations, but no clear conclusions have been reached; or (v) if there are material ownership disputes over the equity held by the controlling shareholder or by other shareholders that are controlled by the controlling shareholder and/or actual controller.
The Filing Measures require the issuer or its main operational entity in the PRC to: (i) file with the CSRC for its initial public offering or listing within three working days after the submission of listing application documents outside mainland China; (ii) file with the CSRC for its follow-on securities offerings in the same offshore market within three working days after the completion of such offerings; (iii) file with the CSRC for its offerings or listing in offshore stock market other than the stock market of its initial public offering or listing within three working days after the submission of offering application outside mainland China; (iv) report material events to the CSRC within three working days after the occurrence and announcement of such events, including, among other things, the change of control, investigation or penalties imposed by the authorities, the conversion of listing status or the transfer of listing board.
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On February 17, 2023, the CSRC also held a press conference for the release of the Trial Measures and issued the Notice on Administration for the Filing of Overseas Offering and Listing by Domestic Companies, which, among other things, clarifies that domestic companies already listed overseas before March 31, 2023, are not required to complete filing procedures immediately. However, they will be required to file with the CSRC when subsequent matters such as refinancing are involved. Furthermore, regarding the overseas listing of companies with contractual arrangements (also known as VIE structures), the CSRC will solicit opinions from relevant regulatory authorities. The CSRC will then complete the filing of the overseas listing for companies meeting compliance requirements, supporting their development and growth by enabling them to utilize both markets and their resources.
Furthermore, non-compliance with the Trial Measures or an overseas listing completed in breach of the Trial Measures may result in (i) domestic companies being required to correct the illegal behavior, and a warning and a fine of RMB1 million to RMB10 million imposed on the them; (ii) a warning and a fine of RMB500,000 to RMB5,000,000 imposed on the directly responsible supervisors and other directly responsible person; (iii) if the controlling shareholder or actual controller of the domestic enterprise organizes or incites the aforesaid illegal acts, a fine of RMB1 million to RMB10 million shall be imposed on them, and a fine of RMB500,000 to RMB5,000,000 shall be imposed on the directly responsible supervisors and other directly responsible person.
On February 24, 2023, the CSRC, jointly with other governmental authorities, promulgated the revised Provisions on Strengthening Confidentiality and Archives Management of Overseas Securities Issuance and Listing by Domestic Enterprises, effective on March 31, 2023. According to these provisions, domestic companies, whether offering and listing securities overseas directly or indirectly, must strictly abide by the applicable laws and regulations, enhance the sense of confidentiality, improve the archives management system, and take necessary measures to implement the confidentiality and archives management responsibilities when providing or publicly disclosing, either directly or through their overseas listed entities, documents and materials to securities services providers such as securities companies and accounting firms or overseas regulators in the process of their overseas offering and listing. In the event that such documents or materials contain any information related to state secrets or government authorities work secrets, domestic companies must obtain the approval from competent governmental authorities according to the applicable laws, and file with the secrecy administrative department at the same level with the approving governmental authority; and in the event that such documents or materials, if divulged, will jeopardize national security or public interest, domestic companies should strictly fulfill the procedures stipulated by the applicable laws and regulations. Furthermore, domestic companies should also provide a written statement about whether they have completed the approval or filing procedures as above when providing documents and materials to securities companies and securities service providers, and the securities companies and securities service providers should properly retain such written statements for inspection. Securities companies and securities service providers shall also fulfill the applicable legal procedures according to these provisions when providing overseas regulatory institutions and other institutions and individuals with documents or materials containing any state secrets or government authorities work secrets or other documents or materials that, if divulged, will jeopardize national security or public interest.
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C. Organizational Structure
The following diagram illustrates our corporate structure as of the date of this annual report, including our principal subsidiaries and the principal consolidated affiliated entities:
(1) Shenzhen Ping An Financial Technology Consulting Co., Ltd, Xinjiang Tongjun Equity Investment Limited Partnership, Shanghai Lanbang Investment Limited Liability Company and Linzhi Jinsheng Investment Management Limited Partnership hold 49.99%, 29.55%, 18.29% and 2.17%, respectively, of the equity interests in each of Shanghai Xiongguo and Shenzhen Lufax Enterprise Management.
Shenzhen Ping An Financial Technology Consulting Co., Ltd is wholly owned by Ping An Insurance. Xinjiang Tongjun Equity Investment Limited Partnership is a limited partnership incorporated under the laws of the PRC, and each of the two individuals, Mr. Wenwei Dou and Ms. Wenjun Wang, owns 50% of Xinjiang Tongjun Equity Investment Limited Partnership’s interests. Shanghai Lanbang Investment Limited Liability Company is a company incorporated under the laws of the PRC that is wholly owned by Ping An Insurance through Shenzhen Ping An Financial Technology Consulting Co., Ltd. Linzhi Jinsheng Investment Management Limited Partnership is a limited partnership incorporated under the laws of the PRC, and Mr. Xuelian Yang owns 60% and Mr. Jingkui Shi owns 40% of Linzhi Jinsheng Investment Management Limited Partnership’s interests.
(2) Shanghai Xiongguo and Shanghai Huikang Information Technology Co., Ltd. hold 99.995% and 0.005%, respectively, of the equity interests in Shanghai Lufax. Shanghai Xiongguo holds 100% of the equity interests in Shanghai Huikang Information Technology Co., Ltd., which in turn beneficially owns 100% of the equity interests in Shanghai Lufax.
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(3) Ping An Puhui Enterprises Management Co., Ltd. holds the remaining 9.375% of the equity interests in Chongqing Yuheao Commercial Information Consulting Co., Ltd.
(4) Ping An Insurance holds the remaining 30% of the equity interests in Ping An Consumer Finance Co., Ltd.
(5) Our principal subsidiaries also include Zhongshi Credit Management Co., Ltd. and Shenzhen Jiayun Hua’ao Information Service Co., Ltd., controlled by us through de facto control.
Our Relationship with Ping An Group
Ping An Group is a leading retail financial services group in the PRC, which principally engages in the following businesses:
• Insurance: the insurance business of Ping An Group consists of: (i) life and health insurance business; and (ii) property and casualty insurance business.
• Banking: the banking business of Ping An Group is conducted through Ping An Bank, a national joint-stock commercial bank headquartered in Shenzhen, the PRC, and listed on the Shenzhen Stock Exchange. It provides corporate, retail and government clients with multiple banking and financial services through outlets and branches across the PRC.
• Asset management: the asset management business of Ping An Group consists of trust business, securities business and other asset management business.
In addition, the technology business of the Ping An ecosystem provides various financial and daily life services through internet platforms, conducted through: (i) OneConnect, a technology-as-a-service provider; (ii) Ping An Healthcare and Technology Company Limited, a leading online healthcare services platform in the PRC and listed on the Hong Kong Stock Exchange; and (iii) our company, the principal business of which is set out in this annual report.
We enjoy significant benefits by having members of Ping An Group as our principal shareholders and strategic partners and by having extensive cooperation across the Ping An ecosystem. Our business operations and development strategies are supported by Ping An Group in a number of key areas including branding, customer acquisition, credit enhancement, analytics and insights, licenses, and technology. As part of the Ping An ecosystem, we enjoy access to the rest of the Ping An ecosystem and products capabilities spanning insurance, investment, and banking. Through the Ping An ecosystem, we also have access to valuable insights built on analytics. In addition, many of the technologies that we use, such as facial and voice recognition technology, and AI and machine learning algorithms, have been licensed from Ping An Group and OneConnect.
On March 21, 2024, our board of directors resolved to recommend a special dividend of US$1.21 per ordinary share or US$2.42 per ADS, with an option for holders to elect payment in cash or wholly in the form of new shares or ADSs. Shareholders approved this special dividend on May 30, 2024. Following shareholder elections, approximately US$720 million was paid in cash, while 519,148,927 new ordinary shares and 33,513,980 new ADSs were issued. An Ke Technology Company Limited and China Ping An Insurance Overseas (Holdings) Limited, both wholly owned subsidiaries of Ping An Insurance and our shareholders, received 305,989,352 and 203,890,905 new ordinary shares, respectively. As a result, Ping An Insurance’s total holdings increased from 41.4% to 56.8% of the enlarged issued share capital, triggering a mandatory general offer under Rule 26 of the Hong Kong Code on Takeovers and Mergers. On September 27, 2024, Ping An Insurance, through An Ke Technology Company Limited and China Ping An Insurance Overseas (Holdings) Limited, offered to acquire all remaining outstanding ordinary shares and ADSs owned by other shareholders of us at a price of US$1.127 per ordinary share and US$2.254 per ADS, net in cash, excluding interest and subject to tax withholding. The offer period started from September 27, 2024 and ended on October 28, 2024. By the offer’s close, valid acceptances were received for 57,828 ADSs under the US portion of the offer, representing 115,656 ordinary shares (approximately 0.01% of the total issued ordinary shares as of October 28, 2024), and for 44,842 ordinary shares under the Lufax non-US portion of the offer (approximately 0.00% of the total issued Lufax Shares as of October 28, 2024).
Following the allotment and issuance of new ordinary shares under the special dividend regime, we have become a non-wholly-owned subsidiary of Ping An Insurance. Since July 2024, our financial results have been consolidated into the consolidated financial statements of Ping An Group.
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Contractual Arrangements with the Principal Consolidated Affiliated Entities
PRC laws and regulations impose restrictions on foreign ownership and investment in certain internet-based businesses. We are a Cayman Islands exempted company and our PRC subsidiaries are considered foreign-invested enterprises. To comply with PRC laws, regulations and regulatory requirements, we have entered into a series of contractual arrangements, mainly (i) through Weikun (Shanghai) Technology, our wholly foreign owned entity, with Shanghai Xiongguo and Shanghai Lufax, the consolidated affiliated entities, and the shareholders of Shanghai Xiongguo and Shanghai Lufax to direct the activities of Shanghai Xiongguo and Shanghai Lufax and their subsidiaries, and (ii) through Lufax (Shenzhen) Technology, our wholly foreign owned entity, with Shenzhen Lufax Enterprise Management, the consolidated affiliated entity, and the shareholders of Shenzhen Lufax Enterprise Management to direct the activities of Shenzhen Lufax Enterprise Management and its subsidiaries.
We currently conduct some of our business through the principal consolidated affiliated entities, Shanghai Xiongguo, Shanghai Lufax and Shenzhen Lufax Enterprise Management, and their subsidiaries based on these contractual arrangements, which allow us to:
• direct the activities of the consolidated affiliated entities and their subsidiaries;
• receive substantially all of the economic benefits from the consolidated affiliated entities and their subsidiaries; and
• hold an exclusive option to purchase all or part of the equity interests and/or assets in the consolidated affiliated entities when and to the extent permitted by PRC law.
As a result of these contractual arrangements, we have become the primary beneficiary of the consolidated affiliated entities under IFRS.
We have consolidated the financial results of Shanghai Xiongguo, Shanghai Lufax and Shenzhen Lufax Enterprise Management and their subsidiaries in our consolidated financial statements in accordance with IFRS.
Contractual Arrangements With Shanghai Xiongguo, Shanghai Lufax and Their Respective Shareholders
Agreements That Allow Us to Receive Economic Benefits From Shanghai Xiongguo and Shanghai Lufax
Exclusive Business Cooperation Agreements. Weikun (Shanghai) Technology entered into exclusive business cooperation agreements with each of Shanghai Xiongguo and Shanghai Lufax. Pursuant to these agreements, Weikun (Shanghai) Technology has the exclusive right to provide Shanghai Xiongguo and Shanghai Lufax with comprehensive business support, technical support and consulting services. Without Weikun (Shanghai) Technology’s prior written consent, Shanghai Xiongguo and Shanghai Lufax shall not accept any consulting and/or services covered by these agreements from any third party. Shanghai Xiongguo and Shanghai Lufax agree to pay service fees based on services provided and market conditions on a quarterly basis. Weikun (Shanghai) Technology owns the intellectual property rights arising out of the services performed under these agreements. Unless Weikun (Shanghai) Technology terminates these agreements or pursuant to other provisions of these agreements, these agreements will remain effective for ten years and will be automatically renewed for another five years unless terminated by Weikun (Shanghai) Technology with 30 days’ advance written notice.
Agreements That Enable Us to Direct the Activities of Shanghai Xiongguo and Shanghai Lufax
Voting Proxy Agreements. Through a series of voting proxy agreements, each shareholder of Shanghai Xiongguo and Shanghai Lufax irrevocably authorizes Weikun (Shanghai) Technology or any person(s) designated by Weikun (Shanghai) Technology to act as its attorney-in-fact to exercise all of such shareholder’s voting and other rights associated with the shareholder’s equity interest in Shanghai Xiongguo and Shanghai Lufax, including but not limited to the right to attend shareholder meetings on behalf of such shareholder, the right to appoint legal representatives, directors, supervisors and chief executive officers and other senior management, and the right to sell, transfer, pledge and dispose of all or a portion of the shares held by such shareholder. The voting proxy agreement is irrevocable and remains in force continuously upon execution.
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Share Pledge Agreements. Weikun (Shanghai) Technology has entered into share pledge agreements with Shanghai Xiongguo and Shanghai Lufax and their respective shareholders. Pursuant to these share pledge agreements, the shareholders of Shanghai Xiongguo and Shanghai Lufax have pledged all of their equity interests in Shanghai Xiongguo and Shanghai Lufax to Weikun (Shanghai) Technology to guarantee the performance by such shareholders and Shanghai Xiongguo and Shanghai Lufax of their respective obligations under the exclusive business cooperation agreements, the voting proxy agreements, the exclusive option agreements, and any amendment, supplement or restatement to such agreements. If Shanghai Xiongguo and Shanghai Lufax or any of their shareholders breach any obligations under these agreements, Weikun (Shanghai) Technology, as pledgee, will be entitled to dispose of the pledged equity and have priority to be compensated by the proceeds from the disposal of the pledged equity. The shareholders of Shanghai Xiongguo and Shanghai Lufax agree that before their obligations under the contractual arrangements are discharged, they will not dispose of the pledged equity interests or create or allow any encumbrance on the pledged equity interests which may result in the change of the pledged equity that may have adverse effects on the pledgee’s rights under these agreements without the prior written consent of Weikun (Shanghai) Technology. These share pledge agreements will remain effective until Shanghai Xiongguo and Shanghai Lufax and their shareholders discharge all their obligations under the contractual arrangements. We completed the registration of the above share pledge with the relevant office of the Administration for Industry and Commerce of China in 2015. In light of the amendments to the contractual arrangements in February 2023, we completed the registration of each of the share pledge agreements relating to Shanghai Xiongguo and Shanghai Lufax by the end of January 2024.
Letters of Undertakings. Each of the four individual shareholders of the direct shareholders of Shanghai Xiongguo signed a letter of undertakings to our company. Under these letters, the signing indirect shareholder has separately irrevocably undertaken, in the event of his or her death or loss of capacity or any other events that could possibly affect his or her capacity to fulfill his or her obligations under the contractual arrangement, that he or she will unconditionally transfer his or her equity interest in Shanghai Xiongguo and Shanghai Lufax to any person designated by Weikun (Shanghai) Technology and the transferee will be deemed to be a party to the contractual arrangements and will assume all of his or her rights and obligations as such under the contractual arrangements. Each signing indirect shareholder represents that his or her spouse has no ownership interest in his or her equity interest in Shanghai Xiongguo and Shanghai Lufax. Each signing indirect shareholder further represents that, he or she will not, commit any conduct or omission that is contrary to the purpose and intention of the contractual arrangements, that leads or may lead to any conflict of interest between Shanghai Xiongguo and Shanghai Lufax and our company and our subsidiaries, and that if, during his or her performance of the contractual arrangements, there is a conflict of interest between the signing indirect shareholder and our company and our subsidiaries, the signing indirect shareholder will protect the legal interests of Weikun (Shanghai) Technology under the contractual arrangements and follow the instructions of our company.
Spousal Consent Letters. The spouses of the four individual shareholders of the direct shareholders of Shanghai Xiongguo each signed a spousal consent letter. Under these letters, each signing spouse respectively agreed that he or she was aware of the equity interest beneficially owned by his or her spouse in Shanghai Xiongguo and Shanghai Lufax and the relevant contractual arrangements in connection with such equity interest. The signing spouse unconditionally and irrevocably confirmed that he or she does not have any equity interest in Shanghai Xiongguo and Shanghai Lufax and committed not to impose any adverse assertions upon his or her spouse’s respective equity interest. Each signing spouse further confirmed that such equity interest may be disposed of pursuant to the contractual arrangements, and committed that he or she will take all necessary measures for the performance of those arrangements.
Agreements That Provide Us With Option to Purchase the Equity Interests and Assets in Shanghai Xiongguo and Shanghai Lufax
Exclusive Option Agreements. Weikun (Shanghai) Technology has entered into exclusive option agreements with Shanghai Xiongguo and Shanghai Lufax and their respective shareholders. Pursuant to these exclusive option agreements, the shareholders of Shanghai Xiongguo and Shanghai Lufax have irrevocably granted our Weikun (Shanghai) Technology or any third party designated by Weikun (Shanghai) Technology an exclusive option to purchase all or part of their respective equity interests in Shanghai Xiongguo and Shanghai Lufax. In addition, Shanghai Xiongguo and Shanghai Lufax have irrevocably granted Weikun (Shanghai) Technology or any third party designated by Weikun (Shanghai) Technology an exclusive option to purchase all or part of their respective assets in Shanghai Xiongguo and Shanghai Lufax. The purchase price of equity interests in Shanghai Xiongguo and Shanghai Lufax will be the lowest price permitted by law. The purchase price of assets in Shanghai Xiongguo and Shanghai Lufax will be the lowest price permitted by law. Without Weikun (Shanghai) Technology’s prior written consent, Shanghai Xiongguo and Shanghai Lufax shall not amend their articles of association, increase or decrease the registered capital, sell, dispose of or set any encumbrance on their assets, business or revenue, enter into any material contract outside the ordinary course of business, merge with any other persons, make any investments or distribute dividends. The shareholders of Shanghai Xiongguo and Shanghai Lufax also undertake that they will not transfer, gift or otherwise dispose of their respective equity interests in Shanghai Xiongguo and Shanghai Lufax to any third party or create or allow any encumbrance on their equity interests within the terms of these agreements. These agreements will remain effective for ten years and will be automatically renewed for another five years unless terminated by Weikun (Shanghai) Technology with 30 days’ advance written notice.
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Contractual Arrangements with Shenzhen Lufax Enterprise Management and Its Shareholders
Agreement That Allows Us to Receive Economic Benefits From Shenzhen Lufax Enterprise Management
Exclusive Business Cooperation Agreement. Lufax (Shenzhen) Technology entered into exclusive business cooperation agreement with Shenzhen Lufax Enterprise Management. Pursuant to the agreement, Lufax (Shenzhen) Technology has the exclusive right to provide Shenzhen Lufax Enterprise Management with comprehensive business support, technical support and consulting services. Without Lufax (Shenzhen) Technology’s prior written consent, Shenzhen Lufax Enterprise Management shall not accept any consulting and/or services covered by the agreement from any third party. Shenzhen Lufax Enterprise Management agrees to pay service fees on a quarterly basis. Lufax (Shenzhen) Technology owns the intellectual property rights arising out of the services performed under the agreement. Unless Lufax (Shenzhen) Technology terminates the agreement or pursuant to other provisions of the agreement, the agreement will remain effective for ten years and will be automatically renewed for another five years unless terminated by Lufax (Shenzhen) Technology with 30 days’ advance written notice.
Agreements That Enable Us to Direct the Activities of Shenzhen Lufax Enterprise Management
Voting Proxy Agreement. Through the voting proxy agreement, each shareholder of Shenzhen Lufax Enterprise Management irrevocably authorizes Lufax (Shenzhen) Technology or any person(s) designated by Lufax (Shenzhen) Technology to act as its attorney-in-fact to exercise all of such shareholder’s voting and other rights associated with the shareholder’s equity interest in Shenzhen Lufax Enterprise Management, including but not limited to the right to attend shareholder meetings on behalf of such shareholder, the right to appoint legal representatives, directors, supervisors and chief executive officers and other senior management, and the right to sell, transfer, pledge and dispose of all or a portion of the shares held by such shareholder. The voting proxy agreement is irrevocable and remains in force continuously upon execution.
Share Pledge Agreement. Lufax (Shenzhen) Technology has entered into a share pledge agreement with each shareholder of Shenzhen Lufax Enterprise Management. Pursuant to the share pledge agreement, each shareholder of Shenzhen Lufax Enterprise Management has pledged all its equity interest in Shenzhen Lufax Enterprise Management to Lufax (Shenzhen) Technology to guarantee the performance by such shareholder and Shenzhen Lufax Enterprise Management of their respective obligations under the exclusive business cooperation agreement, the voting proxy agreement, the exclusive option agreements, and any amendment, supplement or restatement to such agreements. If Shenzhen Lufax Enterprise Management or any of its shareholders breaches any obligations under these agreements, Lufax (Shenzhen) Technology, as pledgee, will be entitled to dispose of the pledged equity and have priority to be compensated by the proceeds from the disposal of the pledged equity. Each of the shareholders of Shenzhen Lufax Enterprise Management agrees that before its obligations under the contractual arrangements are discharged, it will not dispose of the pledged equity interests or create or allow any encumbrance on the pledged equity interests which may result in the change of the pledged equity that may have adverse effects on the pledgee’s rights under these agreements without the prior written consent of Lufax (Shenzhen) Technology. The share pledge agreement will remain effective until Shenzhen Lufax Enterprise Management and its shareholders discharge all their obligations under the contractual arrangements. We have completed the registration of the share pledge with the relevant office of the Administration for Market Regulation of China in April 2019.
Letters of Undertakings. Each of the four individual shareholders of the direct shareholders of Shenzhen Lufax Enterprise Management signed a letter of undertakings to our company. Under these letters, the signing indirect shareholder has separately irrevocably undertaken, in the event of his or her death or loss of capacity or any other events that could possibly affect his or her capacity to fulfill his or her obligations under the contractual arrangement, that he or she will unconditionally transfer his or her equity interest in Shenzhen Lufax Enterprise Management to any person designated by Shenzhen Lufax Enterprise Management and the transferee will be deemed to be a party to the contractual arrangements and will assume all of his or her rights and obligations as such under the contractual arrangements. Each signing indirect shareholder represents that his or her spouse has no ownership interest in his or her equity interest in Shenzhen Lufax Enterprise Management. Each signing indirect shareholder further represents that, he or she will not, commit any conduct or omission that is contrary to the purpose and intention of the contractual arrangements, that leads or may lead to any conflict of interest between Shenzhen Lufax Enterprise Management and our company and our subsidiaries, and that if, during his or her performance of the contractual arrangements, there is a conflict of interest between the signing indirect shareholder and our company and our subsidiaries, the signing indirect shareholder will protect the legal interests of Lufax (Shenzhen) Technology under the contractual arrangements and follow the instructions of our company.
Spousal Consent Letters. The spouses of the four individual shareholders of the direct shareholders of Shenzhen Lufax Enterprise Management each signed a spousal consent letter. Under these letters, each signing spouse respectively agreed that he or she was aware of the equity interest beneficially owned by his or her spouse in Shenzhen Lufax Enterprise Management and the relevant contractual arrangements in connection with such equity interest. The signing spouse unconditionally and irrevocably confirmed that he or she does not have any equity interest in Shenzhen Lufax Enterprise Management and committed not to impose any adverse assertions upon his or her spouse’s respective equity interest. Each signing spouse further confirmed that such equity interest may be disposed of pursuant to the contractual arrangements, and committed that he or she will take all necessary measures for the performance of those arrangements.
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Agreements That Provide Us With Option to Purchase the Equity Interests and Assets in Shenzhen Lufax Enterprise Management
Exclusive Option Agreements. Lufax (Shenzhen) Technology has entered into exclusive option agreements with Shenzhen Lufax Enterprise Management and its shareholders. Pursuant to these exclusive option agreements, the shareholders of Shenzhen Lufax Enterprise Management have irrevocably granted Lufax (Shenzhen) Technology or any third party designated by Lufax (Shenzhen) Technology an exclusive option to purchase all or part of their respective equity interests in Shenzhen Lufax Enterprise Management. In addition, Shenzhen Lufax Enterprise Management has irrevocably granted Lufax (Shenzhen) Technology or any third party designated by Lufax (Shenzhen) Technology an exclusive option to purchase all or part of their respective assets in Shenzhen Lufax Enterprise Management. The purchase price of equity interests in Shenzhen Lufax Enterprise Management will be the higher of (i) the total capital contribution to the registered capital of Shenzhen Lufax Enterprise Management multiplied by the percentage of equity interests purchased, (ii) the amount of loan provided by Lufax (Shenzhen) Technology multiplied by the percentage of equity interests purchased, if applicable, and (iii) the lowest price permitted by law. The purchase price of assets in Shenzhen Lufax Enterprise Management will be the higher of the net book value of the assets to be purchased and the lowest price permitted by law. Without Lufax (Shenzhen) Technology’s prior written consent, Shenzhen Lufax Enterprise Management shall not amend their articles of association, increase or decrease the registered capital, sell, dispose of or set any encumbrance on their assets, business or revenue, enter into any material contract outside the ordinary course of business, merge with any other persons, make any investments or distribute dividends. The shareholders of Shenzhen Lufax Enterprise Management also undertake that they will not transfer, gift or otherwise dispose of their respective equity interests in Shenzhen Lufax Enterprise Management to any third party or create or allow any encumbrance on their equity interests within the terms of these agreements. These agreements will remain effective for ten years and will be automatically renewed for another five years unless terminated by Lufax (Shenzhen) Technology with 30 days’ advance written notice.
In the opinion of Haiwen & Partners, our PRC counsel: (i) the structures of the consolidated affiliated entities and our WFOEs currently do not result in violation of PRC laws and regulations currently in effect; and (ii) except for certain clauses regarding the remedies or reliefs that may be awarded by an arbitration tribunal and the power of courts to grant interim remedies in support of the arbitration and the winding-up and liquidation arrangements, the agreements under the contractual arrangements between our WFOEs, the consolidated affiliated entities and their shareholders governed by PRC law are valid, binding and enforceable against each party thereto in accordance with their terms and applicable PRC laws and regulations currently in effect, and do not result in violation of PRC laws or regulations currently in effect. However, as of the date of this annual report, the legality and enforceability of our contractual arrangements, as a whole, have not been tested in any PRC court, and we cannot guarantee you that the contractual arrangements, as a whole, would ultimately be legal or enforceable if they were to be tested in a PRC court.
However, Haiwen & Partners, our PRC counsel, has also advised that there are substantial uncertainties regarding the interpretation and application of current and future PRC laws, regulations and rules. Accordingly, the PRC regulatory authorities may in the future take a view that is contrary to the above opinion of our PRC counsel. If the PRC government finds that the agreements that establish the structure for the operation of the consolidated affiliated entities do not comply with PRC government restrictions on foreign investment in our business, we could be subject to severe penalties, including being prohibited from continuing operations. See “Item 3. Key Information—D. Risk Factors—Risks Relating to Our Corporate Structure” and “Item 3. Key Information—D. Risk Factors—Risks Relating to Doing Business in China.”
D. Property, Plant and Equipment
We are headquartered in Shanghai. We had 402 offices in China and another 2 offices in Hong Kong as of December 31, 2025. The following table sets forth a summary of our facilities as of December 31, 2025:
Number of Facilities Aggregate Size (m2)
Shanghai 17 30,243
Jiangsu 52 29,510
Guangdong 36 25,039
Sichuan 17 19,502
Shandong 23 17,718
Hebei 19 17,271
Anhui 20 15,203
Hubei 18 14,101
Shanxi 15 12,396
Zhejiang 25 10,749
Others 162 86,479
Total 404 278,212
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As of December 31, 2025, we owned two properties with a total gross floor area of 4,783 square meters.
We lease our premises under lease agreements. The lease terms vary typically from three months to five years. As of December 31, 2025, our leased properties have a total gross floor area of over 273,429 square meters.
Much of our system hardware is hosted in leased facilities located in Shanghai and Shenzhen that are operated by our IT staff. We also maintain a real-time backup system and a remote backup system at separate facilities also located in Shanghai and Shenzhen.
We believe that our existing facilities are generally adequate to meet our current needs, but we expect to seek additional space as needed to accommodate future growth.