A. History and Development of the Company We commenced operations on January 2, 2018, when Shenzhen Wuxin Technology Co., Ltd., or Shenzhen Wuxin, was established. Relx Inc. was established in Cayman Islands in August 2018 as the offshore holding company for the business both inside and outside China. Relx Inc. established Relx HK Limited in Hong Kong in August 2018 as its intermediary holding company. Relx HK Limited subsequently established a wholly-owned principal subsidiary in China, Beijing Yueke Technology Co., Ltd., or Beijing Yueke, in October 2018. Relx Inc. obtained control and became the primary beneficiary of Beijing Wuxin Technology Co., Ltd., or Beijing Wuxin, which wholly owns Shenzhen Wuxin, in October 2018 by entering into a series of contractual arrangements with Beijing Wuxin and its shareholders through Beijing Yueke, in light of the PRC legal restrictions on foreign ownership of value-added telecommunication services and certain other businesses at the time. 76 Table of Contents We undertook a corporate restructuring. On September 24, 2020, Relx Inc. established a wholly-owned subsidiary, RLX Technology Inc., in the Cayman Islands. Subsequently in October 2020, Relx Inc. transferred 100% equity interests in Relx HK Limited to RLX Technology Inc., upon completion of which Relx HK Limited became a wholly owned subsidiary of RLX Technology Inc. Relx HK Limited continues to hold the same corporate structure in China. On November 25, 2020, RLX Technology Inc. entered into agreements with Relx Inc. and Relx HK Limited, pursuant to which RLX Technology Inc. assumed from Relx HK Limited a net amount due to Relx Inc. in the aggregate principal amount of RMB600.0 million, which was originally owed by Relx HK Limited to Relx Inc. Such amount due to Relx Inc. was deemed to be settled concurrently with a share issuance of 143,681,555 ordinary shares to Relx Inc, and each of those shares was subdivided into ten ordinary shares as a result of the 10-for-1 share subdivision effected by us on January 11, 2021. Historically, we entered into a non-competition agreement with Relx Inc. to set forth the business scope of us and Relx Inc. and the non-compete obligations between our two companies. The non-competition agreement with Relx Inc. was terminated upon negotiation between Relx Inc. and us in November 2023. In addition, all intellectual properties of Relx Inc., including trademarks and patents, were applied and registered by our subsidiaries or the consolidated VIE before the Restructuring. Therefore, we entered into an intellectual property license agreement with Relx Inc. to license these intellectual properties to Relx Inc. Such agreement became effective upon the completion of our initial public offering. For more detailed descriptions of the above-mentioned agreements with Relx Inc., see “Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions—Agreements with Relx Inc.” On January 11, 2021, we effected a 10-for-1 share subdivision, following which each of our issued and unissued ordinary shares was subdivided into ten ordinary shares. On January 22, 2021, our ADSs commenced trading on the NYSE under the symbol “RLX.” We raised from our initial public offering and from exercising the over-allotment option in full by the underwriters approximately US$1,553.0 million in net proceeds after deducting underwriting commissions and the offering expenses payable by us. On April 16, 2021, Relx Inc. completed a distribution of our ordinary shares held by it to the then existing shareholders of Relx Inc. in proportion to Relx Inc.’s then shareholding structure, or the Share Distribution. Prior to the Share Distribution, Relx Inc. beneficially owned all of our issued and outstanding Class B ordinary shares, which constituted approximately 91.5% of our total issued and outstanding ordinary shares and 99.1% of the aggregate voting power of total issued and outstanding ordinary shares, and was deemed as our parent company. Immediately after the completion of the Share Distribution, (i) Ms. Ying (Kate) Wang beneficially owned 224,935,770 Class A ordinary shares of our company through BJ BJ Limited and 618,171,790 Class B ordinary shares of our company through Relx Holdings Limited, representing 53.7% of the total issued and outstanding ordinary shares and 89.8% of the aggregate voting power of our company; and (ii) each existing shareholder of Relx Inc. other than Relx Holdings Limited beneficially owned only Class A ordinary shares. Simultaneously with the Share Distribution effected, our 2021 Plan assumed all outstanding share incentive awards issued under the 2018 Equity Incentive Plan and 2019 Equity Incentive Plan of Relx Inc., or the Relx Plans. As of March 31, 2026, 174,885,507 ordinary shares of our company were for the purpose of administering share incentive awards under the 2021 Plan. In 2022, there were further changes with respect to the shareholding structure of Relx Holdings Limited. Moreover, in the past, Ms. Ying (Kate) Wang entered into Acting-In-Concert Undertakings with certain shareholders of our company. Consequently, as of March 31, 2026, Ms. Ying (Kate) Wang beneficially owns 71,840,780 Class A ordinary shares of our company through BJ BJ Limited, 308,714,990 Class B ordinary shares of our company through Leo Valley Holding Limited, and is entitled to the voting rights of 412,501,527 Class A ordinary shares of our company pursuant to the Acting-In-Concert Undertakings, representing 51.2% of our company’s total issued and outstanding ordinary shares and 82.5% of the aggregate voting power of our company. We conducted business acquisitions to facilitate international expansion. In December 2023, we entered into two share purchase agreements with two target companies and their respective shareholders, with a total consideration of over US$24 million. Each of the two target companies is a market leader in the e-vapor industry in its home country, located in Southeast Asia and North Asia, respectively. These transactions facilitated our international expansion in these regions and strengthened our capabilities in local distribution, branding and operational execution. 77 Table of Contents In 2024, we successfully expanded into three new markets in the Asia Pacific region, marking a significant milestone in our international growth strategy and reinforcing our presence in key global markets. In 2025, we entered into an investment agreement involving a company based in Europe, further enhancing our footprint in the European market and supporting our long-term internationalization strategy. We consolidated the financial results of the target into the consolidated financial statements in June 2025. Corporate Information Our principal executive offices are located at 35/F, Pearl International Financial Center, No. 9 Jian’an First Road, Financial Street, Third District, Bao’an District, Shenzhen, Guangdong Province 518101, People’s Republic of China. Our telephone number at this address is +86 755 8696 7619. Our registered office in the Cayman Islands is located at the offices of Maples Corporate Services Limited at PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands. 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 https://ir.relxtech.com. The information contained on our website is not a part of this annual report. B. Business Overview We are a leading global branded e-vapor company. We deeply engage in the key activities in the e-vapor industry globally, from scientific research, technology and product development, supply chain management, to distribution of products. We leverage our strong in-house technology and product development capabilities and in-depth insights into adult smokers’ needs to develop superior e-vapor products. Since our inception, we have launched series of closed-system rechargeable e-vapor products, disposable e-vapor products and open system e-vapor products with various value-added features. To holistically improve adult smokers’ experience with our products, we have implemented a systematic five-tier development framework that encompasses molecular research, formulation and carriers, phase-transitions and delivery, hardware and interactions, and fundamental infrastructure and testing. Under this framework, we have developed many industry-leading technologies that strengthen various aspects of our products’ quality and performance. We have designed and implemented rigorous and standardized systems of quality assurance and control that cover the key steps of supply chain management to provide high-quality products to adult smokers in a consistent manner. We strictly uphold our extensive internal standards for various aspects of our products, and conduct thorough quality assurance and control practices throughout the entire production cycle. We have also adopted an integrated approach to managing our third-party manufacturers and suppliers and monitoring the quality of a variety of production resources. We had developed and adopted an integrated offline distribution model in China by distributing our e-vapor products to the qualified distributors with wholesale license (namely provincial Tobacco Commercial Enterprises in China) via the National Transaction Platform in compliance with the E-Cigarettes Administrative Measures, the Administrative Rules on Transaction of E-cigarettes, and other applicable laws. The qualified distributors would supply our products to the qualified retailers with retail license via the National Transaction Platform, who then sell our products to users across China. We also operate offline stores in China by ourselves, which source e-vapor products solely from the qualified distributors with wholesale license (namely provincial Tobacco Commercial Enterprises in China) and offer a variety of branded e-vapor products. We relentlessly pursue our strategy to expand international presence by collaborating with established international partners, acquiring well-known brands, or setting up joint ventures in international markets. For example, we began to conduct our North Asia Business through SS North Asia Holding Limited, a well-known e-vapor company in North Asia which offers e-vapor products. Building on our successful entry into three additional markets in the Asia-Pacific region in 2024, we further accelerated our global footprint in 2025 through our strategic investment in an European company. Our offshore entity also plays a critical role in supporting our international operations, serving as a hub for cross-border business development and regional market coordination. 78 Table of Contents We are committed to building and strengthening our trusted brand by consistently upholding and practicing our ethical principles. Through our Guardian Program, we promote the prevention of underage use of our products through a number of key initiatives, including the technology-driven Sunflower System, in concerted efforts with distributors and other partners. We also actively support a variety of other causes through our social responsibility initiatives relating to anti-counterfeiting, environmental protection and charity. Our brand’s association with responsibility is well-recognized among our users as well as the distributors and other stakeholders of the e-vapor industry. We are dedicated to scientific research and endeavor to utilize scientific advances to inform our technology and product development. We have established the RELX Physiochemistry Lab, which focuses on the assessment and research of e-liquid and aerosol, the RELX Sensory Analysis Lab, which focuses on the evaluation of sensory appeal of e-liquid, and the RELX Bioscience Lab to pursue valuable scientific advances in further understanding and minimizing the health risks associated with e-vapor products. Environmental, Social and Governance (ESG) has become an integral part of the daily operations of all our businesses. We have established an ESG Committee to develop sustainability strategies to improve our ESG performance and to ensure the implementation of relevant initiatives. Our ESG initiatives have been consistently recognized by prominent global rating agencies. Notably, our MSCI ESG rating has remained at ‘AA’ in 2025, maintaining the significant progress achieved through our upgrades from ‘A’ in 2022 and ‘CCC’ in 2021. This sustained high rating places us in the top tier of our global e-vapor peers. Our Product Portfolio In China market, we have launched series of rechargeable closed-system e-vapor products with various value-added features since our inception in 2018. Our rechargeable e-vapor products consist of a replaceable, snap-in cartridge containing the e-liquid and atomizer, and a device containing the battery and charging portal. We have developed a variety of cartridges, offering various alternatives for adult smokers. In 2024, we introduced the “Feiliu” series, our first compliant disposable product line since the implementation of national standards. As of the date of this annual report, our product portfolio offered in China primarily contains rechargeable e-vapor products (comprising six product lines: Qingyu, Phantom, Phantom Pro, Zeus, Leili, and Daqian) and disposable e-vapor products (Feiliu and Feiliu Mega). 79 Table of Contents In international markets, Our product portfolio management framework employs strategic market segmentation to align innovative solutions with evolving regulatory environments, cultivating sustainable growth through four core product categories: closed-system rechargeable products, open-system products, closed-system disposable products and modern oral products. This framework enables precision resource deployment against differentiated market needs. ​ 80 Table of Contents Closed-system rechargeable products are engineered for sustained user engagement. It prioritizes lifecycle value and convenience through standardized interfaces and replenishment economics, delivering consistent value retention. Open system products strategically calibrate modular innovation with compliance scalability, catering to market demands for customizable experiences. Disposable products enable rapid regional footprint expansion via regional consumption analytics, optimizing portfolio agility in dynamic regulatory landscapes. Our Technology and Product Development and Scientific Research Our advanced research and development capability is the bedrock of our continuous efforts to better serve adult smokers through our technological innovations and product development and our rigorous pursuit of scientific advances in the understanding of e-vapor products. Technology and product development Committed to providing scientific evidence-based product alternatives, we prioritize research and development by consistently expanding our technological integration and iterative development capabilities. We focus on scientific evidence-based product development, leveraging insights into novel nicotine products and quality control standards to provide global adult users with verified alternatives. To align our product roadmap with adult user requirements, we utilize a structured consumer insight framework: ● Data-Driven Tracking: Monitoring global user preference shifts via systematic surveys and multi-channel feedback loops. ● User Segmentation: Applying multivariate analysis to identify behavioral patterns and demographic-specific requirements. ● Iterative Development: Utilizing a “research-feedback-verification” cycle to facilitate rapid technical and product updates based on our user base. Our interdisciplinary technology and product development team comprises experts in industrial design, materials science, neuroscience, chemistry, physics, fluid mechanics, and electrical engineering. By employing standardized management tools and a multi-stage review system, we manage the transition of products from conceptualization to commercialization. 81 Table of Contents We have established a systematic framework to manage the full research and development lifecycle, organized into five functional layers: ● Molecular Research (Neuroscience): We analyze the underlying mechanisms of molecular activity and bioavailability from a neuroscience perspective. We are dedicated to developing innovative molecular synergy solutions that aim to manage nicotine intake while maintaining physiological satisfaction, offering adult users a more balanced and safer range of alternatives. ● Formulation and Carriers (Sensory): We focus on the diverse sensory requirements of global users by developing a systematic formulation library. This involves the application of new materials, refinement of manufacturing processes, and breakthroughs in carrier physical properties to achieve precise customization and optimization of the sensory experience. ● Phase-Transitions and Delivery (Physicochemical): The delivery and absorption of nicotine is a complex systemic engineering endeavor. We integrate thermodynamics, fluid mechanics, and biological sciences to develop solutions covering multiple product formats. Our proprietary technologies and modules are designed to optimize the physicochemical processes of phase transitions, ensuring consistent aerosol performance across various usage scenarios. ● Hardware and Interaction (Engineering): We seek to continually improve the reliability and functionality of our hardware through ergonomic design, customized microcircuits, and the application of advanced microchips. We also emphasize the smartness of our products, introducing interactive features that assist adult users in monitoring and managing their usage behavior more rationally. ● Fundamental Research and Testing (Infrastructure): To provide a solid foundation for continuous innovation, we maintain an extensive laboratory infrastructure focused on fundamental science and material safety. We utilize high-precision physicochemical measurements and standardized sensory characterization to ensure that every technological advancement undergoes rigorous scientific validation and meets our quality and compliance standards. Scientific research We are dedicated to the scientific research of e-vapor products and endeavor to utilize scientific advances to inform our technology and product development. We operate three laboratories located in Shenzhen, China to conduct our scientific research. The RELX Physiochemistry Lab was established in April 2019 to focus on the assessment and research of e-liquid and has been accredited by the China National Accreditation Service For Conformity Assessment. We launched the RELX Bioscience Lab in August 2020, to study and mitigate the health risks associated with e-vapor products. We launched the RELX Sensory Analysis Lab in June 2021, to evaluate the sensory appeal of e-liquid. Our Product Distribution We sell our products to the qualified distributors in China with wholesale license (namely provincial Tobacco Commercial Enterprises in China) via the National Transaction Platform in compliance with the E-Cigarettes Administrative Measures, the Administrative Rules on Transaction of E-cigarettes, and other applicable laws. The qualified distributors would supply our products to the qualified retailers with retail license via the National Transaction Platform, who then sell our products to users across China. As part of our international expansion strategy, we make efforts to develop distribution channels in markets outside China. In such international markets, we sell our products through our own local channels, third-party distribution channels and distribution channels co-managed with third parties. We also rely on our offshore entity to sell our products to overseas markets. We frequently refined our Route-to-Market strategy by optimizing our distribution channels based on the specific characteristics of each market. Customer Service We are committed to providing high-quality services to adult smokers. We have established a comprehensive service platform, operated by a dedicated team of service professionals and third - party partners, to address inquiries and needs from adult smokers in a timely manner. 82 Table of Contents Supply Chain Management We have adapted our supply chain management to the new and currently effective laws, regulations, and policies applicable to global e-vapor industry and us. Our suppliers and manufacturers in China had obtained the requisite licenses and authorization under the E-Cigarettes Administrative Measures. Raw Materials and Components Our key raw materials and components primarily include e-liquid solutions, packaging, batteries, integrated circuit components and metal cases. We apply stringent standards in selecting our suppliers, considering a variety of factors, including their service standards, quality, capacity, supply chain capabilities and price. We typically place purchase orders with our suppliers on an as-needed basis based on rolling forecasts and estimates of our management pursuant to our framework agreements with them. Such framework agreements typically have a one-year term, renewable automatically upon expiration, and may be terminated by either party with advance notice. Due to the requirements under the new regulatory regime since 2022, we scaled our production of e-liquid solutions at an e-liquid plant owned and operated by a subsidiary of the consolidated VIE, which obtained the Tobacco Monopoly License for Manufacturing Enterprise to manufacture e-liquid. The e-liquid plant is in Shenzhen, China, and have a gross area of 2,285 square meters. We have a dedicated team of production and quality assurance and control professionals in managerial and supervisory positions working on-site. Production A significant portion of our products is produced at an exclusive production plant in China that we operate in cooperation with a third-party partner. In addition, we outsource production of our products to a growing number of third-party manufacturers, particularly for our overseas business. We have adopted such a hybrid approach to achieve an optimal balance between production stability, flexibility in production planning, and efficiency in resource allocation across different markets. The exclusive production plant is in Shenzhen, China, and has a gross area of over 23,575 square meters. We have a dedicated team of supply chain management and quality assurance and control professionals in managerial and supervisory positions working on-site. We have engaged the third-party operational partner to execute the production and assembly processes according to our requirements and standards for the exclusive production of our products, and to help with the outsourcing of the workforce. The exclusive production plant has received major certifications from domestic and international organizations recognizing the quality of our production and supply chain management. We also outsource production of our products to a number of selected third-party manufacturers. We have entered into framework manufacturing and supply agreements with certain third-party manufacturers, while we collaborate with others only on a purchase order basis. We are highly selective in choosing third-party manufacturers, assessing many criteria including supply chain capabilities, pricing, quality and quantity. We require them to apply production and quality assurance and control standards that are consistent with those imposed for the exclusive production plant. Our dedicated personnel regularly inspect our third-party manufacturers’ quality assurance and control practices. To further ensure quality consistency, we procure certain key raw materials and components for third-party manufacturers to assemble. For other raw materials and components, we set forth relevant requirements and request third-party manufacturers to procure them accordingly. To protect our proprietary know-how and intellectual property rights, we only provide third-party manufacturers our products’ specifications and the corresponding standard operating procedures for production and quality assurance and control practices. Quality Assurance and Control To provide high-quality products to adult smokers in a consistent manner, we have designed and implemented rigorous and standardized systems of quality assurance and control that cover the key steps of supply chain management to provide high-quality products to adult smokers in a consistent manner. Comprehensive and Strict Standards. We hold ourselves to comprehensive and strict quality assurance and control standards. In particular, we have implemented an extensive set of strict internal standards that thoroughly encompass all key aspects of our products’ quality assurance and control, including battery safety, e-liquid composition and safety, and aerosol specifications, among others. In devising our internal standards, we referenced the stringent standards under the Tobacco Products Directive adopted by the European Union, as well as certain standards applied in the food industry. 83 Table of Contents Full-Cycle Assurance and Control. We conduct thorough quality assurance and control practices throughout the entire production cycle of our products. To ensure that raw materials and components meet our requirements before commencing assembly processes, we conduct regular inspections and examinations of them on-site at our suppliers’ production plants, as well as at the exclusive production plant upon their delivery. Furthermore, our dedicated in-house quality assurance and control professionals regularly monitor the assembly processes to make sure they are on par with our strict procedural requirements. Once the assembly processes are completed, we also carry out rigorous inspection and screening of the finished products both before and after packaging. In addition, we also conduct product inspections at various key logistics waypoints, including our warehouse and locations of the qualified distributors and retail outlets, to ensure the quality of our products remains consistent throughout the value chain. Integrated Third Party Management. We have adopted an integrated approach to managing our third-party operational partner, manufacturers and suppliers, rigorously monitoring the quality of a variety of production resources ranging from raw materials and components, production tooling to assembly lines in a holistic manner. We have accordingly adopted a multi-faceted framework for the qualification and evaluation of our third-party operational partner, manufacturers and suppliers. Our dedicated, cross-functional team continually audits their quality assurance and control practices and ranks them on a monthly basis, factoring the nature and importance of the different production resources and processes their performance involves. Corporate Social Responsibility We regularly engage in corporate social responsibility initiatives to support a range of causes, including prevention of underage use, anti-counterfeiting, environmental protection and charity, among others. Prevention of underage use Since inception, we have been steadfast in our opposition to the sale of e-vapor products to minors and their use in their presence. As part of our commitment to protecting minors, we have implemented the “Guardian Program” to establish a comprehensive protection mechanism for minors throughout the distribution chain. Adhering strictly to regulations set by authorities and laws aimed at preventing the sale of e-cigarettes to minors, we prioritize safeguarding minors through various measures, including displaying clear warning signs on our products and packaging and refraining from using any marketing materials that could attract minors. Guardian Program: This initiative ensures that there are protective measures in place along the distribution chain to prevent minors from accessing e-vapor products. We work closely with our partners to enforce these protection mechanisms. Sunflower System: Launched in 2019 and upgraded to version 3.0 in September 2021, this intelligent protection system incorporates user verification through advanced recognition function.” By utilizing advanced technology and big data, the system can efficiently detect and address any attempts by minors to purchase e-vapor products. Anti-counterfeiting We have zero tolerance for counterfeit products, which could jeopardize adult smokers’ health and interest. To that end, we have launched the Golden Shield Program to combat sales of counterfeit products in cooperation with the public, media and local authorities. Environmental protection As the popularity of vapers grows, the disposal of used cartridges has become a major concern for both e-vapor companies and users. To solve the problem and create additional economic value, we launched China’s first cartridge recycling program in September 2021. Users can pick up special recycling bags in certain retail outlets in China to collect used cartridges and return them to in-store recycling bins. Charity We are committed to giving back to and contributing to our society through various charitable initiatives. For example, we have cooperated with renowned non-governmental and community organizations to launch fundraising and charitable events to help address various social issues, including improving agricultural production infrastructure in impoverished regions and related efforts to help alleviate the negative impact the pandemic has brought to local communities in China. 84 Table of Contents Intellectual Property We highly value our intellectual property rights, which are fundamental to our success and competitiveness. We rely on a combination of copyright and trademark law, trade secret protection and confidentiality agreements with employees to protect our intellectual property rights. We have also adopted a comprehensive set of internal rules for intellectual property management. These guidelines set the obligations of our employees and create a reporting mechanism in connection with our intellectual property protection. As of December 31, 2025, we hold or otherwise have legal rights to use 463 patents, 1,008 trademarks, 37 software copyrights, 97 artwork copyrights and 112 domain names in China and overseas. Competition The e-vapor market is dynamic in China and globally. We anticipate that the market for our products will continue to evolve, with effective technological innovation strategies, improving industry standards, and further refined needs of adult smokers calling for increasingly advanced choices. We must continually design, develop and introduce new products with value-added features and value propositions to stay competitive. We believe the principal competitive factors in our market are: ● brand value and recognition; ● technologies and product innovation; ● quality assurance and control of products; and ● time to market and customer service. We believe that we are well-positioned to effectively compete on the factors listed above. However, some of our current or future competitors globally may have greater financial, technical or distribution resources than we do. See “Item 3. Key Information—D. Risk Factors—Risks Relating to Our Business and Industry—We face competition from players in e-vapor industry and may fail to compete effectively.” Insurance We maintain product liability insurance and cargo insurance to cover related product and logistics risks. Consistent with customary industry practice in China, we do not maintain business interruption insurance or key-man life insurance. Government Regulations This section sets forth a summary of the most significant rules and regulations that affect our business activities. Regulations Related to Foreign Investment in China The establishment, operation and management of companies in China are governed by the PRC Company Law, as amended in 2004, 2005, 2013, 2018 and 2023, respectively. The PRC Company Law applies to both PRC domestic companies and foreign-invested companies. The direct or indirect investment activities of a foreign investor are governed by the PRC Foreign Investment Law and its implementation rules. The PRC Foreign Investment Law was promulgated by the National People’s Congress on March 15, 2019 and took effect on January 1, 2020, replacing the PRC Equity Joint Venture Law, the PRC Cooperative Joint Venture Law and the PRC Wholly Foreign-owned Enterprise Law. The Foreign Investment Law adopts the administrative system of pre-entry national treatment along with a negative list for foreign investments, and establishes the basic framework for access to, and the promotion, protection and administration of, foreign investments in view of investment protection and fair competition. 85 Table of Contents Pursuant to the Foreign Investment Law, “foreign investments” refers to any direct or indirect investment activities conducted by any foreign individual, enterprise, or organization (collectively referred to as “foreign investors”) in the PRC, which includes any of the following circumstances: (i) foreign investors establishing foreign-invested enterprises, or FIEs, in the PRC solely or jointly with other investors; (ii) foreign investors acquiring shares, equity interests, property portions or other similar rights and interests thereof within the PRC; (iii) foreign investors investing in new projects in the PRC solely or jointly with other investors; and (iv) other forms of investments as defined by laws, regulations, or as otherwise stipulated by the State Council. According to the Foreign Investment Law, the State Council should promulgate or approve a list of special administrative measures for market access of foreign investments, or the Negative List. The Foreign Investment Law grants national treatment to foreign-invested entities, except for those foreign-invested entities that operate in industries deemed to be either “restricted” or “prohibited” in the Negative List. The Foreign Investment Law provides that foreign investors are not permitted to invest in the “prohibited” industries, and are required to meet certain requirements as stipulated under the Negative List for investing in “restricted” industries. In addition, the Foreign Investment Law also provides several protective rules and principles for foreign investors and their investments in the PRC, including, among others, that (i) local governments should abide by their commitments to the foreign investors; (ii) FIEs are allowed to issue stocks and corporate bonds; except for special circumstances, in which case statutory procedures should be followed and fair and reasonable compensation should be made in a timely manner; expropriation or requisition of the investment of foreign investors is prohibited; (iii) mandatory technology transfer is prohibited; and (iv) capital contributions, profits, capital gains, proceeds out of asset disposal, licensing fees of intellectual property rights, indemnity or compensation legally obtained, or proceeds received upon settlement by foreign investors within the PRC, may be freely remitted inward and outward in RMB or a foreign currency. Also, foreign investors or FIEs should assume legal liabilities for failing to report investment information in accordance with the requirements. Furthermore, the Foreign Investment Law provides that FIEs established prior to the effectiveness of the Foreign Investment Law may maintain their legal form and structure of corporate governance within five years after January 1, 2020. On December 26, 2019, the State Council further issued the Regulations on Implementing the PRC Foreign Investment Law, or the Implementation Regulations, which came into effect on January 1, 2020, and replaced the Regulations on Implementing the PRC Equity Joint Venture Law, Provisional Regulations on the Duration of PRC Equity Joint Venture Law, the Regulations on Implementing the PRC Cooperative Joint Venture Law, and the Regulations on Implementing the PRC Wholly Foreign-owned Enterprise Law. The Implementation Regulations restate certain principles of the Foreign Investment Law and further provide that, among others, (i) if an FIE established prior to the effective date of the Foreign Investment Law fails to adjust its legal form or governance structure to comply with the provisions of the Companies Law of the PRC or the Partnership Enterprises Law of the PRC, as applicable, and complete amendment registration before January 1, 2025, the enterprise registration authority will not process other registration matters of the FIE and may make public such non-compliance thereafter; and (ii) the provisions regarding equity interest transfer and distribution of profits and remaining assets as stipulated in the contracts among the joint venture parties of an FIE established before the effective date of the Foreign Investment Law may, after adjustment of the legal form and governing structure of such FIE, remain binding upon the parties during the joint venture term of the enterprise. On September 6, 2024, the NDRC and the MOFCOM promulgated the 2024 Negative List, which came into effect on November 1, 2024. In addition, the NDRC and the MOFCOM promulgated the Encouraged Industry Catalogue for Foreign Investment (2025 version), or the 2025 Encouraged Industry Catalogue, which came into effect on February 1, 2026. Industries not listed in the 2024 Negative List and 2025 Encouraged Industry Catalogue are generally open for foreign investments unless specifically restricted by other PRC laws. The establishment of wholly foreign-owned enterprises is generally allowed in encouraged and permitted industries. Some restricted industries are limited to equity or contractual joint ventures, while in some cases Chinese partners are required to hold the majority equity interests in such joint ventures. In addition, foreign investment in projects in a restricted category is subject to government approvals. Foreign investors are not allowed to invest in industries in the prohibited category. Pursuant to the Provisional Administrative Measures on Establishment and Modifications (Filing) for Foreign Invested Enterprises promulgated by the MOFCOM on October 8, 2016 and amended in 2017 and 2018, establishment of and changes to FIEs not subject to approvals under the special entry management measures should be filed with the relevant commerce authorities. However, as the PRC Foreign Investment Law has taken effect, the MOFCOM and the State Administration for Market Regulation, or the SAMR, jointly approved the Foreign Investment Information Report Measures on December 19, 2019, which went into effect on January 1, 2020. According to the Foreign Investment Information Report Measures, which repealed the Provisional Administrative Measures on Establishment and Modifications (Filing) for Foreign Invested Enterprises, foreign investors or FIEs should report their investment-related information to the competent local counterparts of the MOFCOM through the Enterprise Registration System and National Enterprise Credit Information Notification System. 86 Table of Contents On December 19, 2020, the NDRC and the MOFCOM promulgated the Foreign Investment Security Review Measures, which took effect on January 18, 2021. Under the Foreign Investment Security Review Measures, investments in military, national defense-related areas or in locations in proximity to military facilities, or investments that would result in acquiring the actual control of assets in certain key sectors are required to obtain approval from designated governmental authorities in advance. Although the term “actual control” and “investment through other means” are not clearly defined under the Foreign Investment Security Review Measures, it is possible that control through contractual arrangement may be regarded as a form of actual control and therefore requires approval from the competent governmental authority. As the interpretations and implementations of the Foreign Investment Security Review Measures are subject to further clarification and enforcement, there are substantial uncertainties as to whether our contractual arrangements may be deemed as a method of foreign investment in the future. Regulations Related to Our Products On March 11, 2022, the State Tobacco Monopoly Administration issued the Administrative Measures for E-Cigarettes, or the E-Cigarettes Administrative Measures, which came into effect on May 1, 2022. The E-Cigarettes Administrative Measures primarily aim at strengthening the management of e-cigarettes and regulating the e-cigarette market order, and stipulate, among others, the definition, licensing system, distribution management, technical review and quality control, transport, import and export, advertising and promotion of e-cigarettes. On April 8, 2022, the SAMR and the Standardization Administration of the PRC issued the National Standards for E-Cigarettes, or the National Standards, which came into effect on October 1, 2022. The National Standards stipulate the technical terminology in relation to e-cigarettes and definitions thereof, clarify the standards for product design and raw materials of e-cigarettes and technical requirements for e-cigarette devices, e-atomization materials and e-cigarette emissions, and prescribe rules for instructions and labels of e-cigarette products. From April, 2022 to the date of this annual report, the State Tobacco Monopoly Administration issued a set of implementing rules and guiding opinions regarding e-cigarette industrial policies, e-cigarette products technical review, e-cigarette product traceability system, approval and administration of licenses for e-cigarette manufacturing enterprises, e-cigarette wholesale enterprises and e-cigarette retail outlets, layout of e-cigarette wholesale enterprises and e-cigarette retail outlets, e-cigarette product quality supervision and random inspection, e-cigarette product identification and testing, e-cigarette product packaging, warning signs on e-cigarette product package, the logistics and transactions of e-cigarette products, the establishment, division, merger or dissolution of e-cigarette manufacturing enterprises, fixed asset investment of e-cigarettes, foreign investment in e-cigarettes, import and export trade, foreign economic and technical cooperation of e-cigarettes, cracking down on illegal e-cigarette activities, and dynamic supply-demand balancing management for e-cigarettes. In addition, effective laws and regulations which specifically govern the distribution of e-cigarettes in the PRC also include certain announcements prohibiting the sale of e-cigarettes, including e-vapor products, to juveniles and sale through the internet, as well as the smoking control rules of some cities regarding using e-cigarettes as a form of smoking. Furthermore, we are also subject to general PRC business licensing requirements and the business operations of us and the consolidated VIE are subject to laws and regulations that are generally applicable to electronic products, such as laws and regulations relating to product quality and consumer rights. E-Cigarettes Administrative Measures The E-Cigarettes Administrative Measures primarily aim at strengthening the management of e-cigarettes and regulating the e-cigarette market order, including: (i) Definition of E-cigarettes and Flavor Ban. E-cigarettes that are under regulation of E-Cigarettes Administrative Measures include cartridges containing e-atomization material, e-cigarette devices, and other products that are sold in combination with cartridge and e-cigarette device. In addition, E-Cigarettes Administrative Measures ban flavored e-cigarettes other than those with tobacco flavor. (ii) E-cigarette Licensing System. E-cigarette manufacturing enterprises, enterprises holding e-cigarette brands and e-cigarette OEM enterprises (collectively referred to as “e-cigarette manufacturing enterprises”) are required to apply with the department of tobacco monopoly administration under the State Council for a Tobacco Monopoly License for Manufacturing Enterprise. Any e-cigarette retailer, including any entity or individual who engages in the retail business of e-cigarettes, must apply with the competent department of tobacco monopoly administration for a Tobacco Monopoly License for Retail Business or approval of modification of its registered business scope. Any enterprise that has obtained the Tobacco Monopoly License for Wholesale Enterprises must apply with the department of tobacco monopoly administration under the State Council for approval of modification of its registered business scope prior to engagement in the wholesale business of e-cigarette products. 87 Table of Contents (iii) Distribution Management. E-cigarettes, e-atomization material, and e-cigarette nicotine, among others, can only be transacted via the national e-cigarette transaction and management platform, or the National Transaction Platform, which should be established by the department of tobacco monopoly administration under the State Council, and e-cigarette manufacturing enterprises should sell e-cigarettes to e-cigarette wholesale enterprises via the National Transaction Platform in China. As for e-cigarette retailers, they should purchase e-cigarette products from local e-cigarette wholesale enterprises and avoid conducting any exclusive operation regarding any marketed e-cigarette products. E-cigarette retailers are required to be located on a rational basis. Furthermore, E-Cigarettes Administrative Measures expressly prohibit sale of e-cigarette products to juveniles, sale of e-cigarette products through networks other than the National Transaction Platform, and sale of e-cigarette products by means of any self-service sales method, such as vending machines. (iv) Technical Review and Quality Control. Each e-cigarette product must pass the technical review, which should be conducted by professional institutions certified by the department of tobacco monopoly administration under the State Council or authorized otherwise by applicable laws and regulations, before being launched for sales. In addition, any marketed e-cigarette product will be further subject to regular and random inspection or examination by competent department of tobacco monopoly administration. E-cigarette products should comply with the mandatory national standard for e-cigarettes. It is the e-cigarette manufacturing enterprises’ responsibility to establish product quality assurance systems. (v) Transport, Import and Export. Transport of e-cigarette products, e-atomization material and e-cigarette nicotine should be subject to the administration of competent department of tobacco monopoly administration. The quantity of e-cigarette products, e-atomization material and e-cigarette nicotine transmitted or carried off-site should not exceed the limits prescribed by the relevant competent government authority under the State Council. E-cigarettes exclusively for export and not for domestic sale must comply with regulations and standards of the destination country or region. Import of e-cigarette products, e-atomization material and e-cigarette nicotine have to be approved by the department of tobacco monopoly administration under the State Council. (vi) Advertising and Promotion. The E-Cigarettes Administrative Measures stipulate that the relevant regulations on tobacco advertisements should apply to e-cigarettes, thus publishing e-cigarette advertisements via mass media, on public premises, public transportation vehicles or outdoor, or by means of the Internet are prohibited. Using advertisements for other products or services to publicize the names, trademarks, packages, decorations or other similar content of e-cigarette products are also prohibited. The E-Cigarettes Administrative Measures also prohibit exhibitions, expositions, or forums for the purpose of introducing or promoting e-cigarette products. (vii) Other Regulatory Requirements. Tobacco leaves, re-cured tobacco leaves, tobacco sheets and other tobacco monopoly products used for manufacturing e-cigarettes should be purchased from relevant enterprises that have been authorized by competent department of tobacco monopoly administration. The plan for the purchase and sale of tobacco leaves, re-cured tobacco leaves, tobacco sheets and other tobacco monopoly products should be issued by the department of tobacco monopoly administration under the State Council. If any individual, legal person or other organization fails to comply with the above-mentioned regulatory requirements and other stipulations in the E-Cigarettes Administrative Measures, competent department of tobacco monopoly administration may take actions accordingly, including conducting regulatory interviews, discontinuing or restricting its transaction qualifications on the National Transaction Platform, ordering it to suspend operation and make rectifications, and revoking its business and operating licenses. National Standards On April 8, 2022, the SAMR and the Standardization Administration of the PRC issued the National Standards for E-Cigarettes, or the National Standards, which came into effect on October 1, 2022. The National Standards stipulate the technical terminology in relation to e-cigarettes and definitions thereof, clarify the standards for product design and raw materials of e-cigarettes and technical requirements for e-cigarette devices, e-atomization materials and e-cigarette emissions, and prescribe rules for instructions and labels of e-cigarette products, among others. According to the National Standards, e-liquid must contain nicotine, the concentration of nicotine in the aerosol should not be higher than 20 mg/g, and the total amount of nicotine should not be higher than 200 mg. Certain components of e-cigarettes should comply with the relevant national standards. For example, the general safety design of the electronic cigarette device should comply with the requirements of certain national standard regarding the household and similar electronic appliances, and the heavy metals contained in the e-atomization material should comply with the requirements of certain national food safety standard regarding the limit test of heavy metals in food additives. 88 Table of Contents Implementing Rules and Guiding Opinions Regarding E-cigarettes From April, 2022 to the date of this annual report, the State Tobacco Monopoly Administration issued a set of implementing rules and guiding opinions regarding e-cigarette industrial policies, e-cigarette products technical review, e-cigarette product traceability system, approval and administration of licenses for e-cigarette manufacturing enterprises, e-cigarette wholesale enterprises and e-cigarette retail outlets, layout of e-cigarette wholesale enterprises and e-cigarette retail outlets, e-cigarette product quality supervision and random inspection, e-cigarette product identification and testing, e-cigarette product packaging, warning signs on e-cigarette product package, the logistics and transactions of e-cigarette products, the establishment, division, merger or dissolution of e-cigarette manufacturing enterprises, fixed asset investment of e-cigarettes, foreign investment in e-cigarettes, import and export trade, foreign economic and technical cooperation of e-cigarettes, cracking down on illegal e-cigarette activities, dynamic supply-demand balancing management for e-cigarettes and the credit information collection, evaluation, and graded management of e-cigarette manufacturing and wholesale enterprises as follows: (i) The Several Policies and Measures in Relation to Promoting the Legalization and Standardization of the E-cigarette Industry (for Trial Implementation), the Notice on Further Promoting Dynamic Supply-Demand Balance in the E-cigarette Industry and Implementing Rules on the Pre-examination for Domestic and Overseas Initial Public Offerings and Listing of E-cigarette Related Enterprises. The Several Policies and Measures in Relation to Promoting the Legalization and Standardization of the E-cigarette Industry (for Trial Implementation), or the E-cigarette Industrial Policies and Measures (for Trial Implementation), primarily aim at regulating the order of e-cigarette industry, protecting people’s health and safety, and strengthening smoking control. The E-cigarette Industrial Policies and Measures (for Trial Implementation) emphasize on optimizing the layout of the e-vapor industry, strengthening the supply and demand management of e-cigarettes, implementing management requirements regarding investment and financing of the e-cigarette industry, developing a fair competition market system, and enhancing the product quality and safety management. According to the E-cigarette Industrial Policies and Measures (for Trial Implementation), the overall amount of e-cigarette products for domestic sale should be subject to the administration of the competent department of tobacco monopoly administration. The department of tobacco monopoly administration under the State Council should determine the annual domestic sales target of e-cigarette product based on various factors, including among others, the smoking control, market demand, economic development, demographic change, and market status, while the department of tobacco monopoly administration on the municipal level should organize local e-cigarette wholesale enterprises to operate according to the applicable municipal annual domestic sales target of e-cigarette products. Investment in e-vapor industry should be in strict compliance with the relevant industrial policies. For example, foreign investors are prohibited from investing in the wholesale or retailing business of e-cigarette products, and foreign investment in the production of e-cigarette products is subject to regulatory approval. The application of a domestic or overseas offering and listing by an e-cigarette related enterprise should be examined and approved by the department of tobacco monopoly administration under the State Council. The E-cigarette Industrial Policies and Measures (for Trial Implementation) prohibit on price fraud and the price for the same specification of e-cigarette product should be unified on the national level. Moreover, the pricing of e-cigarette products should be market-based. On April 2, 2026, the State Tobacco Monopoly Administration further published the Notice on Modifying Certain E-cigarette Regulatory Policy Documents (Draft for Comments) (the “Draft Amending Notice”). Pursuant to the Draft Amending Notice, the State Tobacco Monopoly Administration proposes to amend the E-cigarette Industrial Policies and Measures (for Trial Implementation), including adjusting the scope of overall volume management for e-cigarette products from domestic sales to e-cigarette manufacturing enterprises, thereby reinforcing the regulation over production. The Notice on Further Promoting Dynamic Supply-Demand Balance in the E-cigarette Industry further emphasizes the need to promote a dynamic balance between supply and demand in the e-cigarette industry, regulate corporate investment activities, strengthen production capacity control over e-cigarettes, promote market supply and demand balance, mitigate and prevent the risk of overcapacity, and enhance the level of compliance operations. The Implementing Rules on the Pre-examination for Domestic and Overseas Initial Public Offerings and Listing of E-cigarette-related Enterprises, or the Pre-examination Rules, which, among others, stipulates the regulatory principles, application procedures and documents for the pre-examination for E-cigarette-related enterprises seeking domestic or overseas listings. According to the Pre-examination Rules, e-cigarette-related enterprises shall not proceed with the listing procedures unless they have completed the pre-examination and obtained approval from the tobacco monopoly administration under the State Council in advance. 89 Table of Contents (ii) Implementing Rules on E-cigarette Product Technical Review. The Implementing Rules on E-cigarette Products Technical Review, or the Technical Review Rules, clarify the legal force of the e-cigarette product technical review, the function of the relevant administration authority, and the requirements, main process and working methods for the technical review. According to the Technical Review Rules, the technical review of e-cigarette products should be conducted by professional institutions organized by the department of tobacco monopoly administration under the State Council from certain aspects, including, among others, the integrity and legitimacy of product descriptions, formulations and raw material reports, the validity and applicability of the relevant inspection and testing reports, the scientific objectivity, reliability and sufficiency of product safety assessment, the demonstration, legitimacy, feasibility and controllability of product quality and safety assurance, and the conformity of product flavor. Any applicant for e-cigarette product technical review shall submit its application to the department of tobacco monopoly administration under the State Council at the provincial level where such applicant is domiciled via the management system for technical review of e-cigarette products (or the “Technical Review Management System”). In addition, pursuant to the Draft Amending Notice, the State Tobacco Monopoly Administration proposes to amend the Technical Review Rules, primarily by revising the qualification requirements for applicants for e-cigarette product technical review, emphasizing that an applicant shall be a domestic brand-holding enterprise that has legally obtained the Tobacco Monopoly License for Manufacturing Enterprises and complies with the administrative regulations on e-cigarette production capacity and production scale. (iii) Administrative Rules on E-cigarette Product Traceability, and Notice on Matters relating to the Labeling of the Traceability QR Codes of E-cigarette Products. According to the Administrative Rules on E-cigarette Product Traceability, or the E-cigarette Product Traceability Rules, the e-cigarette manufacturing enterprises should apply for a QR code for each e-cigarette product that is launched for sales via the E-cigarette Product Traceability Platform, which should be established by the department of tobacco monopoly administration under the State Council. The e-cigarette manufacturing enterprises and the e-cigarette wholesale enterprises should also establish and improve their supporting system and necessary facilities for the implementation of e-cigarette product traceability, including, among others, marking a QR code on the package of each e-cigarette product, associating each e-cigarette with its QR code, and uploading the production, transaction and transmission information via the E-cigarette Product Traceability Platform. The Notice on Matters relating to the Labeling of the Traceability QR Codes of E-cigarette Products further specifies the technical standard, appearance design, label requirements of the QR code. In addition, pursuant to the Draft Amending Notice, the State Tobacco Monopoly Administration proposes to amend the E-cigarette Product Traceability Rules, including emphasizing that e-cigarette manufacturing enterprises and e-cigarette wholesale enterprises shall apply for and use the QR codes within the approved scope of authorization, approved production capacity, and approved production scale. (iv) Guiding Opinions on Approval of the Tobacco Monopoly License for Manufacturing Enterprises to E-cigarette Manufacturing Enterprises, and Administrative Rules on the Tobacco Monopoly License for E-cigarette Manufacturing Enterprises or E-cigarette Wholesale Enterprises. The Guiding Opinions on Approval of the Tobacco Monopoly License for Manufacturing Enterprises to E-cigarette Manufacturing Enterprises, or the Manufacturing Enterprises License Opinions and the Administrative Rules on the Tobacco Monopoly License for E-cigarette Manufacturing Enterprises or E-cigarette Wholesale Enterprises, stipulate the fundamental principle, main process and working methods and restricted circumstances for approval of the Tobacco Monopoly License for Manufacturing Enterprises, the requirements for e-cigarette manufacturing enterprises to apply for the Tobacco Monopoly License for Manufacturing Enterprises, the requirements for e-cigarette wholesale enterprises to apply for the Tobacco Monopoly License for Wholesale Enterprises, and certain categories of the Tobacco Monopoly License for Manufacturing Enterprises and Tobacco Monopoly License for Wholesale Enterprises. According to the above-mentioned regulations, the application for the Tobacco Monopoly License for Manufacturing Enterprises and Tobacco Monopoly License for Wholesale Enterprises should be accepted by the provincial tobacco monopoly administration at the place where the applicant is domiciled, and approved by the State Tobacco Monopoly Administration. (v) Guiding Opinions on E-cigarette Wholesale Enterprises Layout. According to the Guiding Opinions on E-cigarette Wholesale Enterprises Layout, or the Wholesale Enterprises Layout Opinions, the e-cigarette wholesale enterprises should operate locally and be strictly regulated. Besides, the layout of e-cigarette wholesale enterprises should be market-oriented and be subject to a holistic assessment on relevant consumers, local economic level, transportation, and other conditions. The Wholesale Enterprises Layout Opinions also stipulate the general requirements and the restricted circumstances for e-cigarette wholesale enterprises to apply for the Tobacco Monopoly License for Wholesale Enterprises. According to the Wholesale Enterprises Layout Opinions, the application for the Tobacco Monopoly License for Wholesale Enterprises should be accepted by the provincial tobacco monopoly administration at the place where the applicant is domiciled, and approved by the State Tobacco Monopoly Administration. 90 Table of Contents (vi) Guiding Opinions on E-cigarette Retail Outlets Layout and License Administration. The Guiding Opinions on E-cigarette Retail Outlets Layout and License Administration, or the Retail Outlets Layout and License Opinions, stipulate the fundamental principal, main process, working methods and restricted circumstances for the approval of the Tobacco Monopoly License for Retail Business and the requirements for e-cigarette retail outlets to apply for the Tobacco Monopoly License for Retail Business. According to the Retail Outlets Layout and License Opinion, every e-cigarette retail outlet should apply for a Tobacco Monopoly License for Retail Business. The total number of e-cigarette retail outlets should be determined and adjusted based on the market demand and capacity, and the economic and social development level. The layout of e-cigarette retail outlets should be determined and adjusted by the provincial tobacco monopoly administrative department and be independent from that of cigarette retail outlets. In response to the Retail Outlets Layout and License Opinions, all of the provincial tobacco monopoly administrative departments (1) have issued provincial rules regarding the layout of local e-cigarette retail outlets, and (2) except for the tobacco monopoly administrative department in Shandong Province, have set a cap for the total number of their local e-cigarette retail outlets. Specifically, some municipal tobacco monopoly administrative departments, such as Dalian and Shenzhen, have further separately issued their own municipal rules regarding the layout of local e-cigarette retail outlets. (vii) Implementation Rules on the E-cigarette Product Quality Supervision and Random Inspection, Implementation Rules on the E-cigarette Product Identification and Testing, Implementation Rules on the E-cigarette Product Packaging, and Regulations on the Warning Signs of E-cigarettes. Implementation Rules on the E-cigarette Product Quality Supervision and Random Inspection, clarify, among others, the application scope and working scheme of the quality supervision and random inspection, the requirements for the inspection agencies, the solutions to objections to the inspection results, and the processing of the supervision and inspection results. Implementation Rules on the E-cigarette Product Identification and Testing, clarify, among others, the application scope and principle of the e-cigarette product identification and test, the requirements for the identification and testing agencies, the solutions to objections to the identification and testing results, and determination of counterfeit and genuine electronic cigarettes. Implementation Rules on the E-cigarette Product Packaging, clarify the basic unit of measurement for e-cigarette products, the minimum packaging unit, the number of products contained in the packaging unit on multiple levels, and the information required to be labeled on the package of e-cigarette products. The regulations on the Warning Signs of E-cigarettes clarifies that, the required warning signs shall be labeled on the package of e-cigarette products in a specified way, and it is prohibited to use misleading and inductive language in the selling package, inner package, logo and product instructions of the e-cigarettes. (viii) Administrative Rules on Logistics of E-cigarettes, Announcement on the Limited Delivery of E-cigarette Products, E-cigarette Atomizer and E-cigarette Nicotine, and Announcement on the Off-site Limited Carrying of E-cigarette Products, E-cigarette Atomizer and E-cigarette Nicotine. The Administrative Rules on Logistics of E-cigarettes requires that all the e-cigarette manufacturing enterprises, e-atomization manufacturing enterprises, e-cigarette nicotine manufacturing enterprises, e-cigarette nicotine raw material sale enterprises, e-cigarette wholesale enterprises (including e-cigarette import enterprises) and relevant service providers shall establish relatively fixed logistics nodes, strictly regulate warehousing, sorting, transportation, distribution of e-cigarette products, and collect, maintain, upload the data regarding the transport of e-cigarette products via the relevant information platform. Furthermore, the Announcement on the Limited Delivery of E-cigarette Products, E-cigarette Atomizer and E-cigarette Nicotine, and the Announcement on the Off-site Limited Carrying of E-cigarette Products, E-cigarette Atomizer and E-cigarette Nicotine stipulate the specified amount limits of e-cigarette delivery and off-site carrying one day. (ix) Administrative Rules on Transaction of E-cigarettes. The Administrative Rules on Transaction of E-cigarettes, or the E-cigarettes Transaction Rules, stipulates, among others, the transaction types, commodity management, contract and order management, and member management of the National Transaction Platform. According to the E-cigarettes Transaction Rules, e-cigarette-related enterprises shall register with the National Transaction Platform, conduct the e-cigarettes transactions, file the e-cigarette product information, publicize the price adjustment information, sign contracts, settle the payment via the National Transaction Platform. In addition, the e-cigarette import enterprises and e-cigarette manufacturing enterprises should file with the National Transaction Platform before importing or within 30 days after the export declaration of any e-cigarette, e-atomization material, and e-cigarette nicotine. 91 Table of Contents (x) Administrative Rules on Establishment, Division, Merger or Dissolution of E-cigarette Manufacturing Enterprises. The Administrative Rules on Establishment, Division, Merger or Dissolution of E-cigarette Manufacturing Enterprises, stipulates the requirements, procedures, and regulatory authorities for the establishment, division, merger or dissolution of e-cigarette manufacturing enterprises. The application for the establishment of e-cigarette manufacturing enterprises should be accepted, examined, and pre-approved by the provincial tobacco monopoly administration at the place where the applicant is domiciled, and approved by the tobacco monopoly administration under the State Council. While the application for the division, merger or dissolution of e-cigarette manufacturing enterprises should be accepted and approved by the tobacco monopoly administration under the State Council. In addition, pursuant to the Draft Amending Notice, the State Tobacco Monopoly Administration intends to clarify that any division or merger of an e-cigarette manufacturing enterprise involving fixed asset investment, approved production capacity or verified production scale shall be handled in accordance with the relevant provisions. (xi) E-Cigarette Fixed Asset Investment Management Rule. The State Tobacco Monopoly Administration (STMA) issued the new E-Cigarette Fixed Asset Investment Management Rules on July 30, 2024, repealing the 2022 version, with stricter controls including mandatory pre-approval for e-cigarette-related fixed asset investments, minimum capital requirements for new manufacturing projects, and potential production caps to curb industry overcapacity. The rules reinforce China’s broader e-cigarette regulations, emphasizing compliance through inspections, with penalties ranging from fines to license revocation for violations, effectively raising barriers to entry and requiring existing firms to reassess investment plans. Businesses must review the full STMA guidelines to ensure adherence to these tightened restrictions. In addition, pursuant to the Draft Amending Notice, the State Tobacco Monopoly Administration proposes to amend certain provisions of the E-Cigarette Fixed Asset Investment Management Rules, including tightening the circumstances under which approval shall be denied. For example, if an e-cigarette enterprise’s actual production volume over the past 12 months fails to reach 85% of its equipment production capacity most recently reported to the tobacco monopoly administrative department, and its actual production volume over the past 36 months fails to reach 85% of the production capacity approved by the tobacco monopoly administrative department, the competent authority will reject the approval application. (xii) Administrative Rules on the Examination and Approval of the Establishment of Foreign-invested E-cigarette-related Manufacturing Enterprises. The Administrative Rules on the Examination and Approval of the Establishment of Foreign-invested E-cigarette-related Manufacturing Enterprises, or the Foreign-invested E-cigarette-related Manufacturing Enterprises Rules, stipulates the application conditions, required materials, application procedures for the establishment of foreign-invested e-cigarette manufacturing enterprises. According to the Foreign-invested E-cigarette-related Manufacturing Enterprises Rules, foreign investor who invests in the establishment of e-cigarette manufacturing enterprises should obtain the approval from the State Tobacco Monopoly Administration before its application for Tobacco Monopoly License for Manufacturing Enterprises. If the foreign investor invests in a non-foreign-funded enterprise who has obtained the Tobacco Monopoly License for Manufacturing Enterprises, the enterprise shall reapply a new Tobacco Monopoly License for Manufacturing Enterprises after the investment. 92 Table of Contents (xiii) Administrative Rules on the Import and Export Trade and Foreign Economic and Technical Cooperation of E-cigarettes, Guidelines on Promoting the Construction of Product Quality Assurance System for Export of E-cigarette. The Administrative Rules on the Import and Export Trade and Foreign Economic and Technical Cooperation of E-cigarettes, stipulates the import and export trade, foreign investment, technical cooperation and cross-border service trade of e-cigarettes, according to which, imported e-cigarette products should be traded through the National Transaction Platform and comply with the regulations related to technical review, commodity inspection, e-cigarette package, e-cigarette product traceability system. Furthermore, the imported e-cigarette products and raw materials should not exceed the imported demand set by the State Tobacco Monopoly Administration and e-cigarette manufacturing enterprises should produce e-cigarette products and raw materials for export within the approved license scope and export production scale. For overseas orders in excess of the approved export production scale, enterprises are entitled to organize the relevant production and sales after fulfilling the filing procedures on the National Transaction Platform in accordance with the relevant provisions of the State Tobacco Monopoly Administration. Exported e-cigarette products should comply with the laws, regulations and standards of the destination country or region, if the destination country or region does not have relevant laws, regulations and standards, then such exported e-cigarette products shall comply with relevant requirements of China. In addition, export of e-cigarette products should strictly follow the export package standard and logistics requirements, including that the packaging of the exported e-cigarette products should be labeled with the license number of the Tobacco Monopoly License for Manufacturing Enterprises (with commissioned products being labeled with the license number of the commissioned enterprise), and the exported e-cigarette products should be directly transported from the warehouses of the manufacturer to the place designated by the General Administration of Customs of the People’s Republic of China or its local branches, or if necessary to transfer such exported e-cigarette products to other warehouses within PRC, consignor should submit the relevant information to the local branch of the State Tobacco Monopoly Administration where the warehouse is located, and consignee is obligated to report the inventory quantity on a monthly basis. Export of e-cigarette products should also file with the Technical Review Management System before exporting, file with the National Transaction Platform within 30 days after the export declaration. Enterprises engaging in the import and export of e-cigarettes should submit the import and export data of previous year to the State Tobacco Monopoly Administration before the end of March each year. Furthermore, foreign investors are prohibited from e-cigarette wholesale and retail, and overseas service providers are prohibited from engaging in the wholesale, retail, import and export of e-cigarettes within China. In addition, pursuant to the Draft Amending Notice, the State Tobacco Monopoly Administration proposes to amend the Administrative Rules on the Import and Export Trade and Foreign Economic and Technical Cooperation of E-cigarette, requiring enterprises to operate strictly within their verified production scales. The Guidelines on Promoting the Construction of Product Quality Assurance System for Export of E-cigarette further specifies the requirements of the product quality standard, process flow, production resources, system construction, product packaging, logistics, transportation, export declaration and filing of the e-cigarette export. (xiv) The Opinions on Cracking Down on Tobacco-related Illegal Activities Across the Entire Chain, the Opinions on Cracking Down on Tobacco-related Illegal Activities Across the Entire Chain emphasizes stringent investigations into e-cigarette-related violations, strengthening all-around supervision, and strictly cracking down on illegal activities such as unauthorized production, wholesale, transportation, retail, and export reflux of e-cigarettes. (xv) The Rules for Credit Administration of E-cigarette Manufacturing and Wholesale Enterprises (Trial Version). The Rules for Credit Administration of E-cigarette Manufacturing and Wholesale Enterprises (Trial Version) establishes a credit information collection, evaluation, and graded management system to promote standardized governance within the e-cigarette industry. In accordance with enterprise credit information and records of dishonesty, enterprise credit ratings are classified into four levels in descending order: A, B, C, and D. Tobacco Monopoly Administrations at all levels shall, within the scope of their respective authorities, implement graded management of enterprises on the basis of such credit ratings. 93 Table of Contents Tobacco Monopoly Law and its Implementation Regulation The Tobacco Monopoly Law of the PRC, or the Tobacco Monopoly Law, adopted by the Standing Committee of the National People’s Congress on June 29, 1991 and last amended on April 24, 2015, and the Implementation Regulation of the Tobacco Monopoly Law issued by the State Council on July 3, 1997 and last amended on July 20, 2023, stipulated a tobacco monopoly license system for tobacco monopoly commodities. Pursuant to the Tobacco Monopoly Law and its Implementation Regulation, the state exercised monopoly administration in accordance with law over the production and sale of tobacco monopoly commodities; “tobacco monopoly commodities” refers to cigarettes, cigars, cut tobacco, redried leaf tobacco, leaf tobacco, cigarette paper, filter rods, cigarette tow and special tobacco machines. Cigarettes, cigars, cut tobacco and redried leaf tobacco are generally referred to as “tobacco products” under the Tobacco Monopoly Law. Further, the regulation for next-generation tobacco products including e-cigarettes should make reference to the relevant regulations for cigarettes under the Implementation Regulations. Restrictions on Tobacco Industries On December 27, 2023, the NDRC issued the Catalogue for Guiding Industry Restructuring (2024 Version) or the Industry Restructuring Catalogue, which became effective on February 1, 2024. According to the Industry Restructuring Catalogue, the industries in PRC are classified into three categories, that is, encouraged industries, restricted industries and eliminated industries. Tobacco product (including e-cigarettes) processing projects fall into restricted industries, meaning all tobacco manufacturing enterprises are subject to certain restrictions, including being prohibited from investing in new tobacco product (including e-cigarettes) processing projects, and being required to renovate and upgrade the existing production capacity within a certain period. Juveniles protection On August 28, 2018, the SAMR and the State Tobacco Monopoly Administration jointly issued the Announcement on Prohibition of Selling E-Cigarettes to Juveniles, or the August 2018 Announcement, which expressly prohibits the sale of e-cigarette products to juveniles for the protection of physical and mental health. It is suggested that e-cigarette products containing the words “students” and “juveniles” should be removed from the shelves of e-commerce platforms, and relevant stores (sellers) should be relegated or closed. The e-commerce platforms should also strengthen the examination and verification of the names of e-cigarette products on the shelves, take effective measures to block relevant keywords, and refrain from displaying e-cigarette products to juveniles. On October 30, 2019, the SAMR and the State Tobacco Monopoly Administration jointly issued the Announcement on Further Protecting Juveniles from E-Cigarettes, or the October 2019 Announcement, to further strengthen the protection of the physical and mental health of juveniles and prevent juveniles from buying e-cigarettes through the internet. The announcement urged (i) e-cigarette producers and sellers to shut down their online sales websites or online sales application programs in time and to withdraw the advertisements of e-cigarettes published on the internet, and (ii) e-commerce platform operators to close e-cigarettes online shops in time and take e-cigarette products off shelves. On March 11, 2022, the State Tobacco Monopoly Administration issued the Administrative Measures, which came into effect on May 1, 2022. The Administrative Measures expressly prohibit the sale of e-cigarette products to juveniles. According to the Administrative Measures, the location of e-cigarette retailers is subject to certain requirements of rational distribution while e-cigarette stores should not be set up around primary and secondary schools, special education schools, secondary vocational schools, specialized schools, and kindergartens. On September 28, 2022, the State Tobacco Monopoly Administration issued the Notice on Matters Related to Strengthen the Supervision of E-Cigarettes, to reaffirm the prohibition of selling or advertising e-cigarettes to the juveniles. 94 Table of Contents Smoking control On August 28, 2005, the Standing Committee of the National People’s Congress decided to ratify the Framework Convention on Tobacco Control, which was adopted at the 56th conference of WHO on May 21, 2003, and simultaneously declared that according to Article 16 of Paragraph 5 of the Framework Convention on Tobacco Control of WHO, any automatic cigarette vending machine is prohibited from being used within the territory of the PRC. Pursuant to the Framework Convention on Tobacco Control of WHO, each party should adopt and apply effective legislative, administrative and/or other measures within its national jurisdiction to prevent exposure to tobacco smoke in public places like indoor workplaces, public transportation and indoor public places, among others. In response to the Framework Convention on Tobacco Control of WHO, many cities have issued smoking control rules to prohibit smoking in public places, while the smoking control rules of some cities (such as Shenyang, Hainan, Shenzhen, Hangzhou, Nanning, Qinhuangdao, Wuhan, Zhangjiakou, Chongqing and Xi’an) have specified that using e-cigarettes is a form of smoking, and thus it is banned to use e-cigarettes in public places in such cities. Product quality Products made in the PRC are subject to the Product Quality Law of the PRC, or the Product Quality Law, which was adopted by the Standing Committee of the National People’s Congress on February 22, 1993 and amended in 2000, 2009 and 2018. Applicable to all production and marketing activities in the PRC, the Product Quality Law was formulated to strengthen the administration of rules pertaining to product quality, as well as to clarify the rules on product liability, protect consumers and maintain social and economic order. Products offered for sale must meet the relevant quality and safety standards. Manufacturers and sellers should establish a sound internal product quality control system and strictly adhere to a job responsibility system in relation to quality standards and quality liabilities, together with implementing corresponding examination and inspection measures. Enterprises must not produce or market counterfeit products in any fashion, including forging brand labels or giving false information about the manufacturer of a product. Violations of state or industrial standards for health, safety and any other related violations may result in civil liabilities and penalties, such as compensation for damages, fines, suspension or shutdown of business, as well as confiscation of products illegally produced for sale and the sales proceeds of such products. The responsible individual or enterprise will be subject to criminal liabilities for serious violations. Manufacturers whose products cause personal or property damages due to their latent defects are liable for such damages unless the manufacturer is able to prove that (i) the product has never been put into circulation; (ii) the defects causing the damage did not exist at the time when the product was circulated; or (iii) the state of scientific or technological knowledge at the time when the product was circulated was not such that it allowed the defect to be discovered. The seller will be liable to compensate for any personal or property damages (other than the defective product itself) caused by the defective products it sold if such defect is attributable to the seller. A person who is harmed or whose property is damaged by the defective product may claim such loss against the manufacturer or the seller. Under the Standardization Law of the PRC (2017 Amendment) and the Regulations for the Implementation of the Standardization Law of the PRC, products must conform to certain technical requirements set out by governments and certain institutions. Compulsory standards must be implemented. Products and services not meeting compulsory standards cannot be produced, sold, imported, or provided. Consumer rights The Law of the PRC on the Protection of Consumer Rights and Interests, or the Consumer Rights Protection Law, was promulgated on October 31, 1993, amended on August 27, 2009 and October 25, 2013 and became effective on March 15, 2014. According to the Consumer Rights Protection Law, unless otherwise provided by this law, a business that provides products or services is obligated to, in any of the following circumstances, bear civil liability in accordance with the Product Quality Law and other relevant laws and regulations: (i) where a defect exists in a product; (ii) where a commodity does not possess functions it is supposed to possess, and it is not declared when the product is sold; (iii) where the product standards indicated on a product or on the package of such product are not met; (iv) where the quality condition indicated by way of product description or physical sample, among others, is not met; (v) where products pronounced obsolete by formal State decrees are produced or have expired, or deteriorated commodities are sold; (vi) where a sold product is not adequate in quantity; (vii) where the service items and charges are in violation of an agreement; (viii) where demands by a consumer for repair, redoing, replacement, return, making up the quantity of a product, refund of a product purchase price or service fee or claims for compensation have been delayed deliberately or rejected without reason; or (ix) in other circumstances whereby the rights and interests of consumers, as provided by the PRC laws and regulations, are harmed. 95 Table of Contents The PRC Civil Code was promulgated on May 28, 2020 and came into force on January 1, 2021 to clarify tort liability, and to prevent and punish tortious conduct. Under this law, in the event of damage arising from a defective product, the victim may seek compensation from either the manufacturer or seller of such a product. If the defect is caused by the seller, the manufacturer is entitled to seek reimbursement from the seller upon compensation of the victim. Regulation Related to Commercial Franchising Pursuant to the Regulations on the Administration of Commercial Franchising, or the Franchising Regulations, which took effect on May 1, 2007, commercial franchising refers to the business activities where a franchisor, being an enterprise possessing registered trademarks, corporate logos, patents, proprietary technology, or other business resources, licenses through contracts its business resources to the franchisees, being other business operators, and the franchisees carry out business operation under a uniform business model and pay franchising fees to the franchisor pursuant to the contracts. The Franchising Regulations set forth a number of prerequisite requirements for the franchisors, including the possession of a mature business model, the capability to provide business guidance, technical support, and business training to the franchisees, and the ownership of at least two direct stores that have been in operation for at least one year in China. The Franchising Regulations also set forth a number of requirements governing the franchise agreements. For example, the franchisors and franchisees are required to enter into franchising agreements containing certain required terms, and the franchise term thereunder should be no less than three years unless otherwise agreed upon by the franchisee. Pursuant to the Administrative Measures on the Filing of the Commercial Franchise, which took effect on February 1, 2012 and last amended on December 29, 2023, and the Franchising Regulations, within 15 days after executing the first franchise agreement, the franchisor should file with the MOFCOM or its local counterparts for record, and if there occurs any change to the franchisor’s business registration, business resources, and the franchisee store network throughout China, the franchisor should apply to MOFCOM for alteration within 30 days after the occurrence of such change. Furthermore, within the first quarter of each year, the franchisor should report the execution, revocation, termination, and renewal of the franchise agreements occurring in the previous year to MOFCOM or its local counterparts. Furthermore, the franchisor is required to implement an information disclosure system. The Administrative Measures on the Information Disclosure of Commercial Franchising, which took effect on April 1, 2012, provides a list of information that the franchisor should disclose to franchisees in writing at least 30 days prior to the execution of the franchising agreements. Regulation Related to Value-Added Telecommunications Services Regulation related to value-added telecommunications services The PRC Telecommunications Regulations, promulgated on September 25, 2000 by the State Council of the PRC and most recently amended in February 2016, are the primary regulations governing telecommunications services. Under the PRC Telecommunications Regulations, a telecommunications service provider is required to procure operating licenses from the MIIT, or its provincial counterparts, prior to the commencement of its operations. Otherwise such operator might be subject to sanctions, including corrective orders and warnings from the competent administrative authority, fines and confiscation of illegal gains. In the case of serious violations, the operator’s websites may be ordered to be closed. The PRC Telecommunications Regulations categorize telecommunications services in China as either basic telecommunications services or value-added telecommunications services, and value-added telecommunications services are defined as telecommunications and information services provided through public network infrastructures. The Administrative Measures for Telecommunications Business Operating License promulgated by the MIIT in July 2017, or the Telecom License 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. Pursuant to the Telecom License Measures, a commercial operator of value-added telecommunications services must first obtain an operating license for value-added telecommunication business, or VATS License. The Telecom License Measures also provides that an operator providing value-added services in multiple provinces is required to obtain a cross-region VATS License, whereas an operator providing value-added services in one province is required to obtain an intra-provincial VATS License. Pursuant to the Telecom License Measures, any telecommunications services operator must conduct telecommunication business pursuant to the type and within the scope of business as specified in its VATS License. 96 Table of Contents Pursuant to the Catalog of Telecommunications Services promulgated by the Ministry of Information Industry of the PRC (the predecessor of the MIIT) on February 21, 2003 and last amended by the MIIT on June 6, 2019, internet information services fall within Class 2 value-added telecommunication services. “Information services” refer to the information services provided for users via the public communication network or the internet and by the information collection, development, processing and construction of information platforms. The Administrative Measures on Internet Information Services, which was promulgated by the State Council on September 25, 2000 and last amended on December 6, 2024, sets out guidelines on the provision of internet information services. The Administrative Measures on Internet Information Services classify internet information services into commercial internet information services and non-commercial internet information services. Pursuant to the Administrative Measures on Internet Information Services, commercial internet information services refer to the provision of paid information or website production or other service activities to online users via the internet; non-commercial internet information services refer to the provision with free information that is in the public domain and openly accessible to online users via the internet. The Administrative Measures on Internet Information Services requires that a provider of commercial internet information services should obtain a VATS License for internet information services. It further requires that a provider of non-commercial internet information services should carry out record-filing procedures with the provincial level counterparts of the MIIT. Regulation on foreign investment restrictions on value-added telecommunications services Pursuant to the 2024 Negative List, the equity ratio of foreign investment in the value-added telecommunications enterprises is subject to the cap of 50% except for investment in an e-commerce operation business, a domestic multi-party communication business, an information storage and re-transmission business and a call center business. Specifically, foreign direct investment in telecommunications companies in China is governed by the Administrative Regulations on Foreign-Invested Telecommunications Enterprises, which were promulgated by the State Council on December 11, 2001 and amended in 2008, 2016 and 2022. The regulations require that foreign-invested value-added telecommunications enterprises must be in the form of a Sino-foreign equity joint venture, and the ultimate capital contribution percentage by foreign investor(s) in a foreign-invested value-added telecommunications enterprise must not exceed 50%, other than certain exceptions. In 2006, the predecessor of the MIIT issued the Circular of the Ministry of Information Industry on Strengthening the Administration of Foreign Investment in Value-added Telecommunications Business, according to which a foreign investor in the telecommunications services industry of China must apply for a telecommunications business operation license. This circular further requires that: (i) PRC domestic telecommunications business enterprises must not lease, transfer or sell a telecommunications business operation license to a foreign investor through any form of transaction or provide resources, offices and working places, facilities or other assistance to support the illegal telecommunications services operations of a foreign investor; (ii) value-added telecommunications enterprises or their shareholders must directly own the domain names and trademarks used by such enterprises in their daily operations; (iii) each value-added telecommunications enterprise must have the necessary facilities for its approved business operations and maintain such facilities in the regions covered by its license; and (iv) all providers of value-added telecommunications services are required to maintain network and internet security in accordance with the standards set forth in the relevant PRC regulations. If a license holder fails to comply with the requirements in the circular and fails to cure such non-compliance, the MIIT or its local counterparts have the discretion to take measures against such license holder, including revoking its license for the value-added telecommunications business. Regulation Related to Internet Security and Privacy Protection Regulations related to internet security The Decision in Relation to Protection of Internet Security enacted by the Standing Committee of the National People’s Congress on December 28, 2000, as amended in 2009, provides that, among other things, the following activities conducted through the internet, if constituting a crime under PRC laws, are subject to criminal punishment: (i) hacking into a computer or system of strategic importance; (ii) intentionally inventing and spreading destructive programs such as computer viruses to attack the computer system and the communications network, thus damaging the computer system and the communications networks; (iii) in violation of national regulations, discontinuing the computer network or the communications service without authorization; (iv) leaking state secrets; (v) spreading false commercial information; or (vi) infringing intellectual property rights through internet. 97 Table of Contents The Provisions on Technological Measures for Internet Security Protection, or the Internet Security Protection Measures, promulgated on December 13, 2005 by the Ministry of Public Security, require internet service providers and organizations to use interconnection technical measures for internet security protection, such as technical measures for preventing any matter or act that may endanger network security, including but not limited to computer viruses, invasion or attacks to the network, or destruction of the network. All internet access service providers are required to take measures to keep records of and preserve user registration information. On November 7, 2016, the Standing Committee of the National People’s Congress promulgated the Cyber Security Law, which came into effect on June 1, 2017 and lastly amended on October 28, 2025, applies to the construction, operation, maintenance and use of networks as well as the supervision and administration of cybersecurity in China. The Cyber Security Law defines “networks” as systems that are composed of computers or other information terminals and relevant facilities used for the purpose of collecting, storing, transmitting, exchanging and processing information in accordance with certain rules and procedures. “Network operators,” who are broadly defined as owners and administrators of networks and network service providers, are subject to various security protection-related obligations, including: (i) complying with security protection obligations in accordance with tiered cybersecurity system’s protection requirements, which include formulating internal security management rules and manuals, appointing cybersecurity responsible personnel, adopting technical measures to prevent computer viruses and cybersecurity endangering activities, and adopting technical measures to monitor and record network operation status and cybersecurity events; (ii) formulating cybersecurity emergency response plans, timely handling security risks, initiating emergency response plans, taking appropriate remedial measures and reporting to regulatory authorities; and (iii) providing technical assistance and support for public security and national security authorities for the protection of national security and criminal investigations in accordance with the law. Network service providers who do not comply with the Cyber Security Law may be subject to fines, suspension of their businesses, shutdown of their websites, and revocation of their business licenses. On July 30, 2021, the State Council promulgated the Regulations on Protection of Critical Information Infrastructure, which came into effect on September 1, 2021. Pursuant to the Regulations on Protection of Critical Information Infrastructure, critical information infrastructure means any important network facilities or information systems of an important industry or field such as public communication and information service, energy, transportation, water conservation, finance, public services, e-government affairs and national defense science, which may endanger national security, people’s livelihood and public interest in case of damage, function loss or data leakage. In addition, relevant administration departments of each critical industry and sector, or Protection Departments, are responsible for formulating eligibility criteria, determining the critical information infrastructure operator in the respective industry or sector, and notifying the critical information infrastructure operators in time after such determination. On December 28, 2021, the CAC and other twelve PRC regulatory authorities jointly revised and promulgated the Measures for Cybersecurity Review, or the Cybersecurity Review Measures, which came into effect on February 15, 2022 and replaced the Measures for Cybersecurity Review promulgated on April 13, 2020. The Cybersecurity Review Measures provide that, among others, (i) the purchase of cyber products and services by critical information infrastructure operators and the network platform operators engaging in data processing activities that affects or may affect national security are subject to a cybersecurity review by the Cybersecurity Review Office, the department which is responsible for the implementation of cybersecurity review under the CAC; (ii) network platform operators with personal information data of more than one million users are obliged to apply for a cybersecurity review by the Cybersecurity Review Office before listing abroad; and (iii) relevant governmental authorities in the PRC may initiate cybersecurity review if they determine an internet platform operator’s network products or services or data processing activities affect or may affect national security. In addition, on September 24, 2024, the CAC released the Regulations on the Network Data Security, which became effective on January 1, 2025. The Regulations on the Network Data Security set out general guidelines, protection of personal information, security of important data, security management of cross-border data transfer, obligations of internet platform operators, supervision and management, and legal liabilities. In accordance with the Regulations on the Network Data Security, data processors shall apply for a cybersecurity review for conducting activities that affect or may affect national security. However, since the Regulations on the Network Data Security is relatively new, the interpretation and implementation of the Regulations on the Network Data Security and the enforcement practice by relevant government authorities regarding the Regulations on the Network Data Security remains to be seen. 98 Table of Contents Regulations related to privacy protection On December 29, 2011, the MIIT issued the Several Provisions on Regulating the Market Order of Internet Information Services, pursuant to which an internet information service provider may not collect any user personal information or provide any such information to third parties without the consent of a user. In addition, an internet information service provider must expressly inform the users of the method, content and purpose of the collection and processing of such user personal information, and may only collect such information necessary for the provision of its services. An internet information service provider is also required to properly maintain the user personal information, and in case of any leak or likely leak of the user personal information, the internet information service providers must take immediate remedial measures and, in severe circumstances, make an immediate report to the telecommunications regulatory authority. Pursuant to the Decision on Strengthening the Protection of Online Information, issued by the Standing Committee of the National People’s Congress in 2012, and the Order for the Protection of Telecommunication and Internet User Personal Information, issued by the MIIT in 2013, any collection and use of a user’s personal information must be subject to the consent of the user, be legal, reasonable and necessary and be limited to specified purposes, methods and scopes. An internet information service provider must also keep such information strictly confidential, and is further prohibited from divulging, tampering with or destroying any such information, or selling or providing such information to other parties. An internet information service provider is required to take technical and other measures to prevent the collected personal information from any unauthorized disclosure, damage or loss. Any violation of these laws and regulations may subject the internet information service provider to warnings, fines, confiscation of illegal gains, revocation of licenses, cancelation of filings, closedown of websites or even criminal liabilities. With respect to the security of information collected and used by mobile apps, 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 must 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 User’s Personal Rights and Interests, which was issued by MIIT on October 31, 2019. On November 28, 2019, the CAC, the MIIT, the Ministry of Public Security and the SAMR jointly issued the Methods of Identifying Illegal Acts of Apps to Collect and Use Personal Information. This regulation further illustrates certain commonly seen illegal practices of apps operators in terms of personal information protection, including “failure to publicize rules for collecting and using personal information,” “failure to expressly state the purpose, manner and scope of collecting and using personal information,” “collection and use of personal information without consent of users of such App,” “collecting personal information irrelevant to the services provided by such app in violation of the principle of necessity,” “provision of personal information to others without users’ consent,” “failure to provide the function of deleting or correcting personal information as required by laws” and “failure to publish information such as methods for complaints and reporting.” Among others, any of the following acts of an app operator will constitute “collection and use of personal information without consent of users”: (i) collecting an user’s personal information or activating the permission for collecting any user’s personal information without obtaining such user’s consent; (ii) collecting personal information or activating the permission for collecting the personal information of any user who explicitly refuses such collection, or repeatedly seeking for user’s consent such that the user’s normal use of such app is disturbed; (iii) any user’s personal information which has been actually collected by the app operator or the permission for collecting any user’s personal information activated by the app operator is beyond the scope of personal information which such user authorizes such app operator to collect; (iv) seeking for any user’s consent in a non-explicit manner; (v) modifying any user’s settings for activating the permission for collecting any personal information without such user’s consent; (vi) using users’ personal information and any algorithms to directionally push any information, without providing the option of non-directed pushing of such information; (vii) misleading users to permit collecting their personal information or activating the permission for collecting such users’ personal information by improper methods such as fraud and deception; (viii) failing to provide users with the means and methods to withdraw their permission of collecting personal information; and (ix) collecting and using personal information in violation of the rules for collecting and using personal information promulgated by such app operator. 99 Table of Contents Pursuant to the Notice of the Supreme People’s Court, the Supreme People’s Procuratorate and the Ministry of Public Security on Legally Punishing Criminal Activities Infringing upon the Personal Information of Citizens, issued in 2013, and the Interpretation of the Supreme People’s Court and the Supreme People’s Procuratorate on Several Issues regarding Legal Application in Criminal Cases Infringing upon the Personal Information of Citizens, which was issued on May 8, 2017 and took effect on June 1, 2017, the following activities may constitute the crime of infringing upon a citizen’s personal information: (i) providing a citizen’s personal information to specified persons or releasing a citizen’s personal information online or through other methods in violation of relevant national provisions; (ii) providing legitimately collected information relating to a citizen to others without such citizen’s consent (unless the information is processed, not traceable to a specific person and not recoverable); (iii) collecting a citizen’s personal information in violation of applicable rules and regulations when performing a duty or providing services; or (iv) collecting a citizen’s personal information by purchasing, accepting or exchanging such information in violation of applicable rules and regulations. In addition, on May 28, 2020, the National People’s Congress of the PRC approved the PRC Civil Code, which came into effect on January 1, 2021. Pursuant to the PRC Civil Code, the collection, storage, use, process, transmission, provision and disclosure of personal information should follow the principles of legitimacy, properness and necessity. On August 20, 2021, the Standing Committee of the National People’s Congress promulgated the Personal Information Protection Law, which took effect on November 1, 2021. Pursuant to the Personal Information Protection Law, the processing of personal data should have clear and reasonable purposes, be directly related to the purposes of processing, and be carried out in a way that has minimal impact on personal rights and interests; the collection of personal data should be limited to the smallest scope necessary for achieving the purpose of processing, and personal data should not be collected excessively; and the processing of personal data should follow the principles of openness and transparency, make public the rules on personal data processing and publicly disclose the purpose, methods and scope of processing. The Personal Information Protection Law further provides that personal data processors should be responsible for their personal data processing activities, and should take necessary measures to ensure the security of the personal data processed thereby. Anyone processing personal information in violation of or failing to perform any obligation of personal information protection specified in Personal Information Protection Law in the processing of personal information will be ordered to make a correction, given a warning, and confiscated of any illegal gain by the authorities performing personal information protection duties, and any application program that illegally processes personal information will be ordered to suspend or terminate its services; and if the required correction is not made, a fine of up to RMB1 million will be imposed on the violator; and any person in charge or any other individual directly liable for the violation will be fined between RMB10,000 and RMB100,000. On June 10, 2021, the Standing Committee of the National People’s Congress promulgated the Data Security Law, which took effect on September 1, 2021, to regulate data processing activities and ensure data security. The Data Security Law provides that the state should establish a data classified and categorized protection system to protect data in a classified and categorized manner, and a security review system to conduct national security review of data processing activities that affect or may affect national security. Pursuant to the Data Security Law, the data processors should comply with laws and regulations in data processing activities, establish and improve a whole-process data security management system, organize data security education and training, and take corresponding technical and other necessary measures to ensure data security. The Data Security Law also stipulates that the relevant authorities will formulate the catalogues for important data and strengthen the protection of important data, and state core data, i.e., data having a bearing on national security, the lifelines of national economy, people’s key livelihood and major public interests, should be subject to stricter management system. Regulations Related to Production Safety Pursuant to the Work Safety Law of the PRC, or the Work Safety Law, which was promulgated on June 29, 2002 and amended in 2009, 2014 and 2021, enterprises are obliged to implement measures to ensure safety at work, including strengthening work safety management, establishing and improving work safety responsibility systems and work safety policies and rules, enhancing work safety conditions, establishing work safety standardization, and improving work safety levels, among others. The work safety standards prescribed by the Work Safety Law and other relevant laws, administrative regulations and national or industry standards must be observed. Where such conditions are not complied with, no enterprise should commence or be engaged in production and other business activities. Additionally, enterprises must offer production safety courses and training programs to their employees. Entities engaging in mining, metal smelting, building construction, road transportation, manufacturing, marketing, or storing hazardous substances must have a work safety management body or full-time work safety management personnel. Violation of this law and failure to perform duties in work safety management may lead to administrative punishments, including correction orders, qualification revocation, fines, and criminal liability if the violation constitutes a crime. 100 Table of Contents According to the Special Equipment Safety Law of the PRC promulgated by the Standing Committee of the National People’s Congress on June 29, 2013 and implemented on January 1, 2014, enterprises manufacturing or using special equipment should establish and strive to improve the safety and energy-saving management system and safety and energy-saving responsibility system for special equipment. Special equipment refers to boilers, pressure vessels (including gas cylinders), pressure pipelines, elevators, lifting appliances, passenger ropeways, large amusement facilities, and special vehicles used in the factory, which involve a high degree of safety risks. An enterprise can only use special equipment if it has a production permit and has passed a quality examination; and is prohibited to use special equipment reported as useless or eliminated by the State. This law also provides that enterprises using special equipment should prepare and keep safety technology files for their special equipment. Regulations Related to Environmental Protection Environmental protection According to the Environmental Protection Law of the PRC, or the Environmental Protection Law, promulgated on December 26, 1989 and amended in 2014 (the revision was implemented on January 1, 2015), enterprises, public institutions, and other business operators should prevent and reduce environmental pollution and ecological disruption, and assume liabilities for damage caused by them. These entities are also required to comply with the national environmental quality standards set out by the environmental protection administrative department of the State Council, and local environmental quality standards established by people’s governments of provinces, autonomous regions, and municipalities. The State adopts certain policies and measures to encourage and support the development of environmental protection industries, and further reduction of pollutant discharge by enterprises, public institutions, and other business operators after meeting the statutory requirements for the discharge of pollutants. The Environmental Protection Law also stipulates the obligation of enterprises, public institutions, and other business operators to prevent and control pollution and damage to the environment caused by waste gas, water and residue, medical waste, dust, malodorous gasses, radioactive substances, noise, vibration, optical radiation, electromagnetic radiation, and other substances generated in their production, construction, and other activities. Any breach of the Environmental Protection Law may lead to fines, production restriction or business suspension, order of cessation or closedown, or detention by public security authority, among others. Prevention and control of water pollution The Water Pollution Prevention and Control Law of the PRC, promulgated on May 11, 1984 and amended in 1996, 2008 and 2017 (the latest revision was implemented on January 1, 2018), provides that each new construction, expansion, reconstruction or other related project, which directly or indirectly discharges pollutants into a water source, is subject to the state regulations on environmental protection of construction projects. Discharged water pollutants should not exceed the national or local standards for discharge of water pollutants and the indexes for control of the total discharge of major water pollutants. Each enterprise that discharges pollutants directly or indirectly into a water source must register its facility with, and submit relevant information to the local environmental protection authorities. Such information may include the categories, quantity and concentration of pollutants discharged during the ordinary course of the operations of the enterprise. Such an enterprise may also be required to submit information on its water pollution prevention and control measures to the local environmental protection authorities. In addition, the PRC government also requires that each enterprise obtain a permit for the direct or indirect discharge of pollutants into the water, and pay a pollutant discharge fee. Prevention and control of air pollution The Atmospheric Pollution Prevention and Control Law of the PRC, promulgated on September 5, 1987 and amended in 1995, 2000, 2015 and 2018 (the latest amendment was implemented on October 26, 2018), provides that each new construction, expansion, reconstruction or other related project that discharges atmospheric pollutants is subject to state regulations on environmental protection of construction projects. Each enterprise that discharges atmospheric pollutants must register its facilities with, and submit relevant information to the local environmental protection authorities. Such information may include the categories, quantity and concentration of pollutants during the ordinary course of the operations of the enterprise. Such an enterprise may also be required to provide certain technological information associated with atmospheric pollution to the local environmental protection authorities. In addition, the PRC government has implemented a system to collect fees from enterprises that discharge pollutants based on the categories and quantities of atmospheric pollutants discharged. The relevant environmental protection authorities have established standards for collecting fees that take into consideration the relevant atmospheric pollution regulations and the national economic and technological development level. 101 Table of Contents Prevention and control of environmental pollution by solid waste Enterprises’ production and construction are also regulated by the Law of the PRC on the Prevention and Control of Environmental Pollution Caused by Solid Wastes which was promulgated on October 30, 1995 and recently amended on April 29, 2020. Entities discharging industrial solid wastes are obliged to establish and perfect the responsibility system for the prevention and control of environmental pollution and to adopt treatment on industrial solid wastes to reduce or control environmental pollution. The PRC government has in place an industrial solid waste declaration and registration system. Enterprises and public institutions should make use of industrial solid wastes produced thereby pursuant to economic and technical conditions; for those industrial solid wastes that will not or cannot be utilized temporarily, enterprises and public institutions should, in accordance with the regulations of the environmental protection administrative department of the State Council, build facilities and sites for their safe and classified storage or carry out harmless treatment for them. It is prohibited to close down, leave idle or dismantle, without approval, facilities or places for the prevention and control of environmental pollution by industrial solid wastes. Prevention and control of environmental noise pollution According to the Law of the PRC on Prevention and Control of Pollution from Noise, promulgated on December 24, 2021 and became effective on June 5, 2022, enterprises producing noise should establish a responsibility system for the prevention and control of noise pollution, clarifying the responsibilities of the persons in charge and the relevant personnel. Enterprises, public institutions and other producers and business operators producing industrial noise should take effective measures to reduce vibration and noise and obtain a pollutant discharge permit or fill in a pollutant discharge registration. Entities subject to pollutant discharge licensing management should, according to the provisions, carry out self-monitoring of industrial noise, keep the original monitoring records, disclose the monitoring result to the public and be responsible for the authenticity and accuracy of the monitoring data. Regulation Related to Anti-Monopoly On August 30, 2007, the Standing Committee of the National People’s Congress adopted the PRC Anti-Monopoly Law, or the AML, which became effective on August 1, 2008 and was last amended on June 24, 2022, and provides the regulatory framework for the PRC anti-monopoly. Under the AML, the prohibited monopolistic acts include monopolistic agreements, abuse of a dominant market position and concentration of businesses that may have the effect of eliminating or restricting competition. Pursuant to the AML, a business operator that possesses a dominant market position is prohibited from abusing its dominant market position, including conducting the following acts: (i) selling commodities at unfairly high prices or buying commodities at unfairly low prices; (ii) without justifiable reasons, selling commodities at prices below cost; (iii) without justifiable reasons, refusing to enter into transactions with their trading counterparts; (iv) without justifiable reasons, allowing trading counterparts to make transactions exclusively with itself or with the business operators designated by it; (v) without justifiable reasons, tying commodities or imposing unreasonable trading conditions to transactions; (vi) without justifiable reasons, applying differential prices and other transaction terms among their trading counterparts who are on an equal footing; and (vii) other acts determined as abuse of dominant market position by the relevant governmental authorities. Pursuant to the AML and relevant regulations, when a concentration of undertakings occurs and reaches any of the following thresholds, the undertakings concerned should file a prior notification with the anti-monopoly agency (i.e., the State Administration for Market Regulation): (i) the total global turnover of all operators participating in the transaction exceeded RMB10 billion in the preceding fiscal year and at least two of these operators each had a turnover of more than RMB400 million within China in the preceding fiscal year, or (ii) the total turnover within China of all the operators participating in the concentration exceeded RMB2 billion in the preceding fiscal year, and at least two of these operators each had a turnover of more than RMB400 million within China in the preceding fiscal year are triggered, and no concentration should be implemented until the anti-monopoly agency clears the anti-monopoly filing. “Concentration of undertakings” means any of the following: (i) merger of undertakings; (ii) acquisition of control over another undertaking by acquiring equity or assets; or (iii) acquisition of control over, or exercising decisive influence on, another undertaking by contract or by any other means. In addition, pursuant to the AML and relevant regulations, entering into monopolistic agreements, which means agreements or concerted practices to eliminate or restrict competition, are prohibited, unless such agreements satisfy the specific exemptions prescribed therein, such as improving technologies or increasing the efficiency and competitiveness of small and medium-sized undertakings. 102 Table of Contents If business operators fail to comply with the AML or other relevant regulations, the anti-monopoly agency is empowered to cease the relevant activities, unwind the transactions, and confiscate illegal gains and fines. Regulations Related to Unfair Competition According to the Law of the People’s Republic of China against Unfair Competition, or the Anti-Unfair Competition Law, promulgated by the Standing Committee of the National People’s Congress on September 2, 1993, lastly amended on June 27, 2025 and effective from October 15, 2025, operators should not undermine their competitors by engaging in improper activities, including but not limited to, taking advantage of powers or influence to affect a transaction, market confusion, commercial bribery, misleading false publicity, infringement of trade secrets, price dumping, illegitimate premium sale, commercial libel, digital and cyber unfair competition, platform pricing coercion, and abusing market advantages. Any operators who violate the Anti-Unfair Competition Law by engaging in the foregoing unfair competitive activities should be ordered to cease such illegal activities, eliminate the influence of such activities or compensate for the damages caused to any party. The competent supervision and inspection authorities may also confiscate the illegal gains or impose fines on such operators. Regulations on Pricing In China, prices of most commodities and services are market-adjusted and a very small number of commodities and services are subject to government-guided prices or government-set prices. Pursuant to the PRC Pricing Law, which was published by the Standing Committee of the National People’s Congress on December 29, 1997, and took effect on May 1, 1998, business operators must display prices clearly and in accordance with the requirements set out by the relevant authority. Further, business operators must indicate the name, origin of production, specifications and other relevant information. Business operators should not charge any price different from the displayed price or fees that are not explicitly indicated. Business operators must not engage in any specified unlawful pricing activities, such as colluding with others to manipulate the market price, using false or misleading prices to lure consumers into concluding a transaction, or conducting price discrimination against other business operators. Failure to comply with the PRC Pricing Law may subject business operators to administrative sanctions, such as warnings or corrective orders from the competent administration authority, confiscation of illegal gains, imposition of fines, suspension of business operations or revocation of business licenses under severe circumstances, as well as potential civil and criminal liabilities. Regulations on Advertising The Advertising Law of the PRC, or the Advertising Law, promulgated by the Standing Committee of the National People’s Congress on October 27, 1994 and amended on April 24, 2015, October 26, 2018, and April 29, 2021, stipulates in detail the forms for distribution, production and content prohibited from advertising, as well as penalties and liabilities for violations. The Advertising Law sets forth certain content requirements for advertisements in China, which include prohibitions on, among other things, false or misleading content, superlative wording such as “the state-level,” “the highest grade,” “the best” or other similar words, socially destabilizing content or content involving obscenities, superstition, violence, discrimination or infringement of the public interest. The dissemination of tobacco advertisements via media is also prohibited as well as the display of tobacco advertisements in any waiting lounge, theater, cinema, conference hall, stadium or other public area. It is prohibited to use the advertisements or public service advertisements for other products or services to publicize the names, trademarks, packages, decorations or other similar content of tobacco products. No names, trademarks, packages, decorations or other similar content of tobacco products should be contained in the notices on relocation, change of the name or recruitment published by the producers or sellers of such tobacco products. On October 31, 2022, the SAMR and several other regulatory authorities, issued the Guiding Opinions on Further Regulating Celebrities’ Endorsement Activities in Advertising, which became effective on the same day. According to the Guiding Opinions on Further Regulating Celebrities’ Endorsement Activities in Advertising, celebrities are prohibited to endorse any tobacco and tobacco products (including e-cigarettes). On February 25, 2023, the SAMR issued the Administration Measures of Internet Advertising, or the Internet Advertising Measures, which became effective on May 1, 2023 and replace the Interim Measures for the Administration of Internet Advertising, issued by the SAMR on July 4, 2016. According to the Internet Advertising Measures, the commercial advertising activities for direct or indirect marketing goods or services in the form of text, image, audio, video, or other means through websites, web pages, internet applications, or other internet media, shall be carried out under the laws and regulations, the principle of good faith and fair competition. No entity and individual may publish any advertisement of tobacco (including e-cigarettes); by means of the internet. 103 Table of Contents Regulations on Intellectual Property Patent Patents in the PRC are principally protected under the Patent Law of the PRC. The Chinese patent system adopts a first-to-file principle. To be patentable, an invention or a utility model must meet three criteria: novelty, inventiveness and practicability. The duration of a patent right is either 10 years, 15 years or 20 years from the date of application, depending on the type of patent right. Copyright Copyright in the PRC, including copyrighted software, is principally protected under the Copyright Law of the PRC and related rules and regulations. Under the Copyright Law, the term of protection for copyrighted software is 50 years. The Regulation on the Protection of the Right to Communicate Works to the Public over Information Networks, as most recently amended on January 30, 2013, provides specific rules on fair use, statutory license, and a safe harbor for use of copyrights and copyright management technology and specifies the liabilities of various entities for violations, including copyright holders, libraries and internet service providers. The Computer Software Copyright Registration Measures, or the Software Copyright Measures, promulgated by the National Copyright Administration on April 6, 1992 and amended in 2002 and 2004, regulates registrations of software copyrights, exclusive licensing contracts for software copyrights and assignment agreements. The National Copyright Administration, or the NCA, administers software copyright registration and the Copyright Protection Center of China is designated as the software registration authority. The Copyright Protection Center of China will grant registration certificates to the Computer Software Copyright applicants that meet the requirements of both the Software Copyright Measures and the Computer Software Protection Regulations (Revised in 2013). Trademark Registered trademarks are protected under the Trademark Law of the PRC and related rules and regulations. Trademarks are registered with the State Intellectual Property Office, formerly the Trademark Office of the SAMR. Where registration is sought for a trademark that is identical or similar to another trademark which has already been registered or given preliminary examination and approval for use in the same or similar category of commodities or services, the application for registration of this trademark may be rejected. Trademark registrations are effective for a renewable ten-year period, unless otherwise revoked. Domain name Domain names are protected under the Administrative Measures on Internet Domain Names promulgated by the MIIT on August 24, 2017 and effective as of November 1, 2017. Domain name registrations are handled through domain name service agencies established under the relevant regulations, and applicants become domain name holders upon successful registration. Regulations on Employment and Social Welfare Labor contract law The PRC Labor Contract Law, which became effective on January 1, 2008 and was amended in 2012, primarily aims at regulating rights and obligations of employment relationships, including the establishment, performance, and termination of labor contracts. Pursuant to the Labor Contract Law, labor contracts must be executed in writing if labor relationships are to be or have been established between employers and employees. Employers are prohibited from forcing employees to work above certain time limits and employers must pay employees for overtime work in accordance with national regulations. In addition, employee wages must not be lower than local standards on minimum wages and must be paid to employees in a timely manner. 104 Table of Contents Social insurance As required under the Regulation of Insurance for Labor Injury implemented on January 1, 2004 and amended in 2010, the Provisional Measures for Maternity Insurance of Employees of Corporations implemented on January 1, 1995, the Decisions on the Establishment of a Unified Program for Old-Aged Pension Insurance of the State Council issued on July 16, 1997, the Decisions on the Establishment of the Medical Insurance Program for Urban Workers of the State Council promulgated on December 14, 1998, the Unemployment Insurance Measures promulgated on January 22, 1999, and the PRC Social Insurance Law implemented on July 1, 2011 and amended on December 29, 2018, employers are required to provide their employees in China with welfare benefits covering pension insurance, unemployment insurance, maternity insurance, work-related injury insurance, and medical insurance. These payments are made to local administrative authorities. Any employer that fails to make social insurance contributions may be ordered to rectify the non-compliance and pay the required contributions within a prescribed time limit and be subject to a late fee. If the employer still fails to rectify the failure to make the relevant contributions within the prescribed time, it may be subject to a fine ranging from one to three times the amount overdue. 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 Plan for Reforming the State and Local Tax Collection and Administration Systems, which stipulated that the State Administration of Taxation, or the SAT, will become solely responsible for collecting social insurance premiums. Housing funds In accordance with the Regulations on the Administration of Housing Funds, which was promulgated by the State Council in 1999 and amended in 2002 and 2019, employers must register at the designated administrative centers and open bank accounts for depositing employees’ housing funds. Employers and employees are also required to pay and deposit housing funds, with an amount no less than 5% of the monthly average salary of the employee in the preceding year in full and on time. Regulations on Foreign Exchange and Dividend Distribution Regulations on foreign currency exchange The principal regulations governing foreign currency exchange in China are the Foreign Exchange Administration Regulations. Under PRC foreign exchange regulations, payments of current account items, such as profit distributions, interest payments and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior approval from the State Administration of Foreign Exchange, or SAFE, by complying with certain procedural requirements. By contrast, approval from or registration with appropriate government authorities is required where RMB is to be converted into foreign currency and remitted out of China to pay capital account items, such as direct investments, repayment of foreign currency-denominated loans, repatriation of investments and investments in securities outside of China. In 2012, SAFE promulgated the Circular of Further Improving and Adjusting Foreign Exchange Administration Policies on Foreign Direct Investment, or Circular 59, as amended in May 2015, October 2018 and December 2019, which substantially amends and simplifies the foreign exchange procedure. Pursuant to Circular 59, the opening of various special purpose foreign exchange accounts, such as pre-establishment expenses accounts, foreign exchange capital accounts and guarantee accounts, the reinvestment of RMB proceeds derived by foreign investors in the PRC, and remittance of foreign exchange profits and dividends by an FIE to its foreign shareholders no longer require the approval or verification of SAFE, and multiple capital accounts for the same entity may be opened in different provinces, which was not possible previously. In February 2015, SAFE promulgated the Notice on Further Simplifying and Improving the Administration of the Foreign Exchange Concerning Direct Investment, or SAFE Notice 13. Instead of applying for approvals regarding foreign exchange registrations of foreign direct investment and overseas direct investment from SAFE, entities and individuals may apply for such foreign exchange registrations from qualified banks. The qualified banks, under the supervision of SAFE, may directly review the applications and conduct the registration. 105 Table of Contents In addition, the PRC governmental authorities have gradually relaxed restrictions on the settlement of the foreign exchange capitals of FIEs in recent years. In March 2015, SAFE promulgated the Circular of the SAFE on Reforming the Management Approach regarding the Settlement of Foreign Capital of Foreign-invested Enterprise, or Circular 19, which expands a pilot reform of the administration of the settlement of the foreign exchange capitals of FIEs nationwide. Circular 19 replaced both the Circular of the SAFE on Issues Relating to the Improvement of Business Operations with Respect to the Administration of Foreign Exchange Capital Payment and Settlement of Foreign-invested Enterprises, or Circular 142, and the Circular of the SAFE on Issues concerning the Pilot Reform of the Administrative Approach Regarding the Settlement of the Foreign Exchange Capitals of Foreign-invested Enterprises in Certain Areas, or Circular 36. Circular 19 allows all FIEs established in the PRC to settle their foreign exchange capital on a discretionary basis according to the actual needs of their business operation, provides the procedures for foreign invested companies to use Renminbi converted from foreign currency-denominated capital for equity investments and removes certain other restrictions that had been provided in Circular 142. However, Circular 19 continues to prohibit FIEs from, among other things, using RMB funds converted from their foreign exchange capital for expenditure beyond their business scope and providing entrusted loans or repaying loans between non-financial enterprises. SAFE promulgated the Notice of the State Administration of Foreign Exchange on Reforming and Standardizing the Foreign Exchange Settlement Management Policy of Capital Account, or Circular 16, effective June 2016, which reiterates some of the rules set forth in Circular 19. Circular 16 provides that discretionary foreign exchange settlement applies to foreign exchange capital, foreign debt offering proceeds and remitted foreign listing proceeds, and the corresponding RMB capital converted from foreign exchange may be used to extend loans to related parties or repay inter-company loans (including advances by third parties). On October 23, 2019, SAFE further issued Circular of the State Administration of Foreign Exchange on Further Promoting the Facilitation of Cross-border Trade and Investment, or Circular 28, which took effect on the same day. Circular 28 allows non-investment FIEs to use their capital funds to make equity investments in China as long as such investments do not violate the Negative List and the target investment projects are genuine and in compliance with laws. In addition, Circular 28 stipulates that qualified enterprises in certain pilot areas may use their capital income from registered capital, foreign debt and overseas listing for the purpose of domestic payments without providing authenticity certifications to the relevant banks in advance for those domestic payments. Pursuant to the Circular of the State Administration of Foreign Exchange on Matters Concerning Deepening the Reform of Foreign Exchange Administration for Cross-Border Investment and Financing, which was promulgated on September 12, 2025 by the SAFE and came into effect on September 12, 2025, foreign-invested enterprises (including non-investment foreign-invested enterprises) are explicitly permitted to use their foreign exchange registered capital and the RMB converted therefrom for domestic reinvestment, without the need to complete the registration of basic information on receiving domestic reinvestment by the invested enterprise or the equity transferor, on the premise that such reinvestment does not violate the special administrative measures for foreign investment access and the domestic invested projects are true and compliant. Regulations on dividend distribution The principal regulations governing distribution of dividends of FIEs is the PRC Company Law. Under these laws and regulations, FIEs in China may pay dividends only out of their accumulated after-tax profits, if any, determined in accordance with China accounting standards and regulations. In addition, a PRC company, including FIEs in China, is required to allocate at least 10% of their respective accumulated profits each year, if any, to fund certain reserve funds until these reserves have reached 50% of the registered capital of the enterprises. A PRC company may, at their discretion, allocate a portion of their after-tax profits based on China accounting standards to staff welfare and bonus funds. These reserves are not distributable as cash dividends. Regulations on foreign exchange registration of overseas investment by PRC residents In 2014, SAFE issued the SAFE Circular on Relevant Issues Relating to Domestic Resident’s Investment and Financing and Roundtrip Investment through Special Purpose Vehicles, or SAFE Circular 37, replacing the SAFE Circular on Issues Concerning the Regulation of Foreign Exchange in Equity Finance and Return Investments by Domestic Residents through Offshore Special Purpose Vehicles, or SAFE Circular 75. SAFE Circular 37 regulates foreign exchange matters in relation to the use of special purpose vehicles by PRC residents or entities to seek offshore investment and financing or conduct round trip investment in China. Under SAFE Circular 37, a “special purpose vehicle” refers to an offshore entity established or controlled, directly or indirectly, by PRC residents or entities for the purpose of seeking offshore financing or making offshore investment, using legitimate onshore or offshore assets or interests, while “round trip investment” refers to direct investment in China by PRC residents or entities through special purpose vehicles, namely, establishing FIEs to obtain ownership, control rights and management rights. SAFE Circular 37 provides that, before making a contribution into a special purpose vehicle, PRC residents or entities are required to complete foreign exchange registration with SAFE or its local branch. 106 Table of Contents In 2015, SAFE promulgated SAFE Notice 13, which amended SAFE Circular 37 by requiring PRC residents or entities to register with qualified banks rather than SAFE or its local branch in connection with their establishment or control of an offshore entity established for the purpose of overseas investment or financing. PRC residents or entities who had contributed legitimate onshore or offshore interests or assets to special purpose vehicles but had not registered as required before the implementation of SAFE Circular 37 must register their ownership interests or control in the special purpose vehicles with qualified banks. An amendment to the registration is required if there is a material change with respect to the special purpose vehicle registered, such as any change of basic information (including change of the PRC residents, name and operation term), increases or decreases in investment amount, transfers or exchanges of shares, and mergers or divisions. Failure to comply with the registration procedures set forth in SAFE Circular 37 and the subsequent notice, or making misrepresentations or failing to disclose the control of the FIE that is established through round-trip investment, may result in restrictions being imposed on the foreign exchange activities of the relevant FIEs, including payment of dividends and other distributions, such as proceeds from any reduction in capital, share transfer or liquidation, to its offshore parent or affiliate, and the capital inflow from the offshore parent, and may also subject relevant PRC residents or entities to penalties under PRC foreign exchange administration regulations. Regulation related to stock incentive plans In February 2012, SAFE promulgated the Notice on Foreign Exchange Administration of Domestic Individuals Participating in Share Incentive Plans of Offshore Listed Companies, or the Stock Option Rules, replacing the previous rules issued by SAFE in March 2007 and January 2008. Under the Stock Option Rules and other relevant rules and regulations, domestic individuals, which means PRC residents and non-PRC citizens residing in China for a continuous period of not less than one year, subject to a few exceptions, who participate in a stock incentive plan in an overseas publicly listed company are required to register with SAFE or its local branches and complete certain other procedures. Participants of a stock incentive plan who are PRC residents must retain a qualified PRC agent, which could be a PRC subsidiary of the overseas publicly listed company or another qualified institution selected by the PRC subsidiary, to conduct the SAFE registration and other procedures with respect to the stock incentive plan on behalf of its participants. The 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 stocks or interests and fund transfers. In addition, the PRC agent is required to amend the SAFE registration with respect to the stock incentive plan if there is any material change to the stock incentive plan, the PRC agent or the overseas entrusted institution or other material changes. The PRC 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 the PRC opened by the PRC agents before distribution to such PRC residents. In addition, SAFE Circular 37 provides that PRC residents who participate in a share incentive plan of an overseas unlisted special purpose company may register with SAFE or its local branches before exercising rights. Regulations on Tax Enterprise income tax Under the Enterprise Income Tax Law of the PRC, or the EIT Law, which became effective on January 1, 2008 and was subsequently amended on February 24, 2017 and December 29, 2018, and its implementing rules, enterprises are classified as resident enterprises and non-resident enterprises. 107 Table of Contents Resident enterprises typically pay an enterprise income tax at the rate of 25% while non-resident enterprises without any branches in the PRC should pay an enterprise income tax in connection with their income from the PRC at the tax rate of 10%. An enterprise established outside of the PRC with its “de facto management bodies” located within the PRC is considered a “resident enterprise,” meaning that it can be treated in a manner similar to a PRC domestic enterprise for enterprise income tax purposes. The implementing rules of the EIT Law define a de facto management body as a managing body that in practice exercises “substantial and overall management and control over the production and operations, personnel, accounting, and properties” of the enterprise. Enterprises that are recognized as “High and New Technology Enterprises” in accordance with the Notice of the Ministry of Science and Technology, the Ministry of Finance and the State Administration of Taxation on Amending and Issuing the Administrative Measures for the Determination of High and New Tech Enterprises, or the Administrative Measures for the Determination of High and New Tech Enterprises, are entitled to enjoy a preferential enterprise income tax rate of 15% rather than the 25% uniform statutory tax rate. The preferential tax treatment continues as long as an enterprise can retain its “High and New Technology Enterprise” status. According to the Administrative Measures for the Determination of High and New Tech Enterprises, to be recognized as a “High and New Technology Enterprise,” an enterprise should ensure that the technologies that play a core supportive role for its main products (services) are included in the scope as provided in the High-Tech Areas with Key Support of the State. Under the High-Tech Areas with Key Support of the State, which was promulgated by the Ministry of Science and Technology and became effective on February 5, 2016, the high-tech areas with key support of the state include electronic information, biological and new medicine, aerospace, new material, high-tech services, new energy and energy conservation, resources and environment, and application of high-tech to transform traditional industries. According to the Circular on Improving the Policy on the Pre-tax Additional Deduction for Research and Development Expenses promulgated by the Ministry of Finance, the SAT and the Ministry of Science and Technology on November 2, 2015, which became effective on January 1, 2016, except for certain industries, such as tobacco manufacturing industry, the enterprises engaged in research and development activities are entitled to claim a tax deduction amounting to 50% of certain qualified research and development expenses when determining the taxable income for that year. This tax deduction was increased from 50% to 75%, effective from 2018 according to the Notice on Raising the Proportion of Weighted Pre-tax Deduction of Research and Development Expenses promulgated by the Ministry of Finance, the SAT and the Ministry of Science and Technology in September 2018, which was further extended to December 31, 2023 according to the Announcement on Extending the Implementation Period of Certain Preferential Tax Policies promulgated by the Ministry of Finance and the SAT and effective from March 15, 2021. This tax deduction was increased from 75% to 100% in certain qualified manufacture industry according to the Circular on Improving the Pre-tax Deduction of Enterprise Research and Development Expenses Policies, or the Circular 13, promulgated by the Ministry of Finance and the SAT on March 31, 2021, which became effective from January 1, 2021. This tax deduction was further increased to 100% from January 1, 2023 for all enterprises that can enjoy the pre-tax deduction policy according to the Circular on Improving the Pre-tax Deduction of Enterprise Research and Development Expenses Policies (2023 Version) promulgated by the Ministry of Finance and the SAT on March 26, 2023, which became effective from January 1, 2023 and replacing the Circular 13. On December 22, 2025, the Ministry of Finance and the SAT promulgated the Circular on Matters Relating to the Pre-tax Deduction of Advertising Expenses and Business Promotion Expenses, which became effective on January 1, 2026. According to such circular, the advertising expenses and business promotion expenses incurred by tobacco enterprises are not allowed to be deducted for calculation of taxable income. The EIT Law and the implementation rules provide that an income tax rate of 10% should normally be applicable to dividends payable to investors that are “non-resident enterprises,” and gains derived by such investors, which (a) do not have an establishment or place of business in the PRC or (b) have an establishment or place of business in the PRC, but the relevant 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. Such income tax on the dividends may be reduced pursuant to a tax treaty between China and other 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, or the Double Tax Avoidance Arrangement, and other applicable PRC laws, if a Hong Kong resident enterprise is determined by the competent PRC tax authority to have satisfied the relevant 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 competent tax authority. However, based on the Notice on Certain Issues with Respect to the Enforcement of Dividend Provisions in Tax Treaties issued on February 20, 2009 by the SAT, if the relevant 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; and based on the Announcement on Relevant Issues Concerning the “Beneficial Owners” in Tax Treaties issued on February 3, 2018 by the SAT and effective from April 1, 2018, which replaces the Notice on the Interpretation and Recognition of Beneficial Owners in Tax Treaties and the Announcement on the Recognition of Beneficial Owners in Tax Treaties by the SAT, comprehensive analysis based on the stipulated factor therein and actual circumstances should be adopted when recognizing the “beneficial owner” and agents and designated wire beneficiaries are specifically excluded from being recognized as “beneficial owners”. 108 Table of Contents Value-added tax and business tax Whereas, pursuant to the Value-Added Tax Law of the PRC, adopted by the Standing Committee of the National People’s Congress on December 25, 2024 and effective on January 1, 2026 and its implementation regulations, unless otherwise specified by relevant laws and regulations, any entity or individual engaged in the sales of goods, services and importation of goods into China is generally required to pay a value-added tax, or VAT, for revenues generated from sales of products, while qualified input VAT paid on taxable purchase can be offset against such output VAT. In November 2011, the Ministry of Finance and the SAT promulgated the Pilot Plan for Imposition of Value-Added Tax to Replace Business Tax. In March 2016, the Ministry of Finance and the SAT further promulgated the Notice on Fully Promoting the Pilot Plan for Replacing Business Tax by Value-Added Tax, which became effective on May 1, 2016. Pursuant to the pilot plan and relevant notices, VAT is generally imposed in lieu of business tax in the modern service industries, including the value-added telecommunication services, on a nationwide basis. VAT of a rate of 6% applies to revenue derived from the provision of some modern services. Certain small taxpayers under PRC law are subject to reduced value-added tax at a rate of 3%. Unlike business tax, a taxpayer is allowed to offset the qualified input VAT paid on taxable purchases against the output VAT chargeable on the modern services provided. On April 4, 2018, the Ministry of Finance and the SAT issued the Notice on Adjustment of VAT Rates, which came into effect on May 1, 2018. According to such notice, the taxable goods previously subject to VAT rates of 17% and 11% respectively become subject to lower VAT rates of 16% and 10% respectively starting from May 1, 2018. Furthermore, according to the Announcement on Relevant Policies for Deepening Value-added Tax Reform jointly promulgated by the Ministry of Finance, the SAT and the General Administration of Customs, which became effective on April 1, 2019, the taxable goods previously subject to VAT rates of 16% and 10% respectively become subject to lower VAT rates of 13% and 9% respectively starting from April 1, 2019. Excise Tax According to the Interim Regulations on Excise Tax of the PRC promulgated by the State Council on November 10, 2008, or the Excise Tax Interim Regulations, which came into effect on January 1, 2009, institutions and individuals that manufacture, subcontract the manufacture of or import the consumer goods as specified in the Excise Tax Interim Regulations, and other institutions or individuals determined by the State Council that sell the consumer goods as specified in the Excise Tax Interim Regulations, should pay excise tax in accordance with the Excise Tax Interim Regulations. On October 2, 2022, the Ministry of Finance of the People’s Republic of China, General Administration of Customs of the People’s Republic of China, and State Taxation Administration of the People’s Republic of China jointly issued the Announcement on Imposing Excise Tax on E-cigarettes (the “E-cigarette Tax Announcement”), which came effective on November 1, 2022. The E-cigarette Tax Announcement imposes excise tax on manufacturers, importers and/or distributors of e-cigarettes in China. E-cigarette manufacturers and importers are subject to excise tax at the rate of 36% on the production or import of e-cigarettes, and E-cigarette distributors are subject to excise tax at the rate of 11% on the wholesale distribution of e-cigarettes. Municipal maintenance tax According to the Law of the PRC on Urban Maintenance and Construction Tax promulgated by the Standing Committee of the National People’s Congress on August 11, 2020 and came into effect on September 1, 2021, a taxpayer of excise tax or value-added tax is required to pay a municipal maintenance tax calculated on the basis of the excise tax and value-added tax. The tax rate is 7% for a taxpayer in an urban area, 5% for a taxpayer in a county or a town, and 1% for a taxpayer not in any urban area or county or town. The Interim Provisions on the Collection of Educational Surcharges issued on April 28, 1986 and amended in 1990, 2005 and 2011, provides that taxpayers of excise tax, value-added tax and business tax should pay educational surcharges. Educational surcharges are evaluated on the amount of value-added tax, business tax or excise tax actually paid by entities and individuals, collected at the rate of 3%, and paid simultaneously with value-added tax, business tax and excise tax. It is also stipulated that enterprises’ educational surcharges are to be paid with sales income (or business income). 109 Table of Contents Stamp tax According to the PRC Stamp Tax Law promulgated by the Standing Committee of the National People’s Congress on June 10, 2021 and became effective on July 1, 2022, all units and individuals which execute taxable documents or conduct security transactions should be regarded as obligatory payers of stamp duty. The taxable documents include the contracts, property transfer documents and business account books listed in the Schedule of Stamp Duty Items and Tax Rates attached hereto. The securities transactions refer to the transfer of the stocks and depository receipts based on stocks, which are traded on the stock exchanges established according to laws or other national stock exchanges approved by the State Council. Dividend withholding tax The EIT Law and its implementing rules provide that since January 1, 2008, an income tax rate of 10% will normally be applicable to dividends declared to non-resident investors that do not have an establishment or place of business in China, or that have such establishment or place of business but the relevant income is not effectively connected with the establishment or place of business, to the extent such dividends are derived from sources within China. Pursuant to the Double Tax Avoidance Arrangement and other applicable PRC laws, if a Hong Kong resident enterprise is determined by the competent PRC tax authority to have met the relevant conditions and requirements under this 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%. However, based on the Notice on Certain Issues with Respect to the Enforcement of Dividend Provisions in Tax Treaties issued on February 20, 2009, if the relevant 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. Pursuant to the Announcement on Relevant Issues Concerning the “Beneficial Owners” in Tax Treaties, which was issued on February 3, 2018 by the SAT and became effective on April 1, 2018, when determining the applicant’s status as the “beneficial owner” regarding tax treatments in connection with dividends, interests, or royalties in the tax treaties, several factors, including, without limitation, whether the applicant is obligated to pay more than 50% of her or his income in twelve months to residents in a third country or region, whether the business operated by the applicant constitutes the actual business activities, and whether the counterparty country or region to the tax treaties does not levy any tax or grant any tax exemption on relevant incomes or levy tax at an extremely low rate, will be taken into account, and such factors will be analyzed according to the actual circumstances of the specific cases. This announcement further provides that an applicant who intends to prove her or his status as the “beneficial owner” must submit the relevant documents to the relevant tax bureau pursuant to the Announcement on Issuing the Measures for the Administration of Non-Resident Taxpayers’ Enjoyment of the Treatment under Tax Agreements. Tax on indirect transfer On February 3, 2015, the SAT issued the Circular on Issues of Enterprise Income Tax on Indirect Transfers of Assets by Non-PRC Resident Enterprises, or SAT Circular 7. Pursuant to SAT Circular 7, an “indirect transfer” of assets, including equity interests in a PRC resident enterprise, by non-PRC resident enterprises, may be recharacterized and treated as a direct transfer of PRC taxable assets, if such arrangement does not have a reasonable commercial purpose and was established for the purpose of avoiding payment of PRC enterprise income tax. As a result, gains derived from such indirect transfer may be subject to PRC enterprise income tax. When determining whether there is a “reasonable commercial purpose” in the transaction arrangement, features to be taken into consideration include, inter alia, whether the main value of the equity interest of the relevant offshore enterprise derives directly or indirectly from PRC taxable assets; whether the assets of the relevant offshore enterprise mainly consists of direct or indirect investment in China or if its income is mainly derived from China; and whether the offshore enterprise and its subsidiaries directly or indirectly holding PRC taxable assets have a real commercial nature which is evidenced by their actual function and risk exposure. Pursuant to SAT Circular 7, where the payer fails to withhold any or sufficient tax, the transferor should declare and pay such tax to the tax authority by itself within the statutory time limit. Late payment of applicable tax will subject the transferor to default interest. SAT Circular 7 does not apply to sale of shares transactions by investors through a public stock exchange where such shares were acquired on a public stock exchange. On October 17, 2017, the SAT issued the Circular on Issues of Tax Withholding Regarding Non-PRC Resident Enterprise Income Tax, or SAT Circular 37, which was amended by the Announcement of the State Administration of Taxation on Revising Certain Taxation Normative Documents issued on June 15, 2018 by the SAT. SAT Circular 37 further elaborates the relevant implement rules regarding the calculation, reporting, and payment obligations of the withholding tax by the non-resident enterprises. Nonetheless, there remain uncertainties as to the interpretation and application of SAT Circular 7. SAT Circular 7 may be determined by the tax authorities to be applicable to our offshore transactions or sale of our shares or those of our offshore subsidiaries where non-resident enterprises, being the transferors, were involved. 110 Table of Contents Regulations Relating to Overseas Listing and M&A On August 8, 2006, six PRC governmental and regulatory agencies, including the MOFCOM and the CSRC, jointly promulgated the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors (the “M&A Rules”), a regulation with respect to the mergers and acquisitions of domestic enterprises by foreign investors that became effective on September 8, 2006 and revised on June 22, 2009. Foreign investors should comply with the M&A rules when they purchase equity interests of a domestic company or subscribe for the increased capital of a domestic company, and thus changing the nature of the domestic company into a foreign- invested enterprise; or when the foreign investors establish a foreign-invested enterprise in the PRC for the purpose of purchasing the assets of a domestic company and operating the asset; or when the foreign investors purchase the asset of a domestic company, establish a foreign-invested enterprise by injecting such assets, and operate the assets. The M&A rules, among other things, purports to require that an offshore special vehicle, or a special purpose vehicle, formed for listing purposes and controlled directly or indirectly by PRC companies or individuals, should obtain the approval of the CSRC prior to the listing and trading of such special purpose vehicle’s securities on an overseas stock exchange. On July 6, 2021, the General Office of the Central Committee of the Communist Party of China and the General Office of the State Council issued Opinions on Strictly Cracking Down 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. According to the Trial Measures released on February 17, 2023, which came into effect on March 31, 2023, (1) domestic companies that seek to offer or list securities in overseas markets, either in direct or indirect means, should fulfill the filing procedure with and report relevant information to the CSRC; if a domestic company fails to complete the filing procedure or conceals any material fact or falsifies any major content in its filing documents, such domestic company may be subject to administrative penalties, such as order to rectify, warnings, fines, and its controlling shareholders, actual controllers, the person directly in charge and other directly liable persons may also be subject to administrative penalties, such as warnings and fines; (2) if the issuer meets both of the following criteria, the overseas offering and listing shall be determined as an indirect overseas offering and listing by a domestic company: (i) 50% or more of any of the issuer’s operating revenue, total profit, total assets or net assets as documented in its audited consolidated financial statements for the most recent fiscal year is accounted for by domestic companies; (ii) the main parts of the issuer’s operation activities are conducted in mainland China, or the principal operation premises are located in mainland China, or the majority of senior management staff in charge of its business operations and management are PRC citizens or have habitual residences located in mainland China; and (3) an overseas offering and listing of securities of a domestic company is prohibited under any of the following circumstances: (i) such securities offering and listing is explicitly prohibited by provisions in laws, administrative regulations and relevant state rules; (ii) the intended securities offering and listing may endanger national security as reviewed and determined by competent authorities under the State Council in accordance with law; (iii) the domestic company(ies) intending to make the securities offering and listing, or its controlling shareholder(s) and the actual controller, have committed relevant crimes such as corruption, bribery, embezzlement, misappropriation of property or undermining the order of the socialist market economy during the latest three years; (iv) the domestic company(ies) intending to make the securities offering and listing is currently under investigations for suspicion of criminal offenses or major violations of laws and regulations, and no conclusion has yet been made thereof; or (v) there are material ownership disputes over equity held by the PRC domestic company’s controlling shareholder(s) or by other shareholder(s) that are controlled by the controlling shareholder(s) and/or actual controller. Furthermore, the Trial Measures also provide that (1) where a domestic company seeks to indirectly offer and list securities in overseas markets, the issuer shall designate a major domestic operating entity, which shall, as the domestic responsible entity, fulfill the filing procedures with the CSRC; (2) an initial public offering and listing shall be filed with the CSRC within three business days after the relevant application is submitted overseas; (3) subsequent securities offerings of an issuer in the same overseas market where it has previously offered and listed securities shall be filed with the CSRC within three business days after the offering is completed; (4) subsequent securities offerings and listings of an issuer in overseas markets other than where it has offered and listed shall be filed pursuant to provisions as stipulated for initial public offerings and listings. 111 Table of Contents On February 17, 2023, the CSRC 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 others, clarifies that (1) domestic companies that have already been listed overseas on or prior to the effective date of the Trial Measures (i.e. March 31, 2023) shall be deemed as existing issuers, or the Existing Issuers, Existing Issuers are not required to complete the filling procedures immediately, and they are required to file with the CSRC when subsequent matters such as refinancing are involved; (2) on or prior to the effective date of the Trial Measures, domestic companies that have already submitted valid applications for overseas offering and listing but have not obtained approval from overseas regulatory authorities or stock exchanges may reasonably arrange the timing for submitting their filing applications with the CSRC, and shall complete the filing before the completion of their overseas offering and listing; (3) a six-month transition period will be granted to domestic companies which, prior to the effective date of the Trial Measures, have already obtained the approval from overseas regulatory authorities or stock exchanges (such as the completion of registration in the market of the United States or the completion of hearing in the market of Hong Kong), but have not completed the indirect overseas listing; if domestic companies fail to complete the overseas listing within such six-month transition period, they shall file with the CSRC according to the requirements; and (4) the CSRC will solicit opinions from relevant regulatory authorities and complete the filing of the overseas listing of companies with contractual arrangements which duly meet the compliance requirements, and support the development and growth of these companies by enabling them to utilize two markets and two kinds of resources. On February 24, 2023, the CSRC released the Confidentiality and Archives Management Provisions, which came into effect on March 31, 2023. The Confidentiality and Archives Management Provisions require, among others, that PRC domestic enterprises seeking to offer and list securities in overseas markets, either directly or indirectly, shall establish and improve the system of confidentiality and archives work, and shall complete approval and filing procedures with competent authorities, if such PRC domestic enterprises or their overseas listing entities provide or publicly disclose documents or materials involving state secrets and work secrets of state organs to relevant securities companies, securities service institutions, overseas regulatory agencies and other entities and individuals. It further stipulates that (1) providing or publicly disclosing documents and materials which may adversely affect national security or public interests, and accounting records or photocopies thereof to relevant securities companies, securities service institutions, overseas regulatory agencies and other entities and individuals shall be subject to corresponding procedures in accordance with relevant laws and regulations; and (2) any working papers formed in the territory of the PRC by securities companies and securities service agencies that provide domestic enterprises with securities services relating to overseas securities issuance and listing shall be stored in the territory of the PRC, the outbound transfer of which shall be subject to corresponding procedures in accordance with relevant laws and regulations. Regulations in Other Jurisdictions In jurisdictions other than China, regulations in relation to vaping products are subject to a complex and dynamic regulatory environment influenced by public health priorities, technology innovation and evolving regulatory responses. For instance, in the United States, the Food and Drug Administration (FDA) assumed regulatory authority over e-cigarettes and related products under the 2016 Deeming Rule, applying many of the same standards used for traditional tobacco products. Since then, the implementation of the Pre-Market Tobacco Product Application (PMTA) process has created a significant compliance burden, and the slow pace of approvals has left many products on the market without final authorization. This has resulted in legal uncertainty and varying enforcement practices across the country. Meanwhile, in Canada, the Tobacco and Vaping Products Act governs the marketing and sale of vaping products, with strict restrictions aimed at protecting youth. Recent policy developments have focused on limiting the appeal of flavored disposable vapes and enhancing product standards, signaling increased regulatory scrutiny. 112 Table of Contents The European Union maintains a relatively structured approach through the Tobacco Products Directive (TPD), which sets out uniform rules on product composition, packaging, labeling, and marketing. However, enforcement and additional restrictions vary significantly across member states, leading to a fragmented regulatory landscape. However, there is a patchwork of different rules throughout the EU as specific implementation varies across the EU member states. The United Kingdom, having transposed the TPD into domestic law prior to Brexit, takes a more pragmatic stance by integrating vaping into its national smoking cessation strategy. Public health authorities in the UK support the use of regulated vaping products as a potentially less harmful alternative for adult smokers, while still imposing restrictions on advertising and youth access. A nationwide ban on the sale and supply of single-use (disposable) e-vapor products came into effect on June 1, 2025, requiring a transition toward rechargeable and refillable product formats and potentially affecting user demand and product mix. Furthermore, the government in the United Kingdom has confirmed the introduction of a new "Vaping Products Duty" to be implemented on October 1, 2026. To facilitate this transition, a mandatory licensing and approval regime administered by HM Revenue & Customs (HMRC) will open on April 1, 2026, requiring all manufacturers and importers to secure formal authorization to legally produce or import vaping products. While a transitional window for full implementation runs to March 31, 2027, this excise tax will apply a flat rate of £2.20 per 10ml of vaping liquid, regardless of nicotine content, and will require the use of fiscal marks (stamps) on packaging. This new tax and the associated administrative requirements will have an impact on the retail prices and supply chain operations, which may impact user demand. In addition to these fiscal measures, the UK Parliament passed the Tobacco and Vapes Bill in April 2026, which introduces a “generational tobacco ban” prohibiting the sale of traditional tobacco to anyone born on or after January 1, 2009. While this generational ban does not currently apply to e-vapor products, the legislation grants the government broad powers to implement secondary regulations that may restrict vaping flavors, packaging designs, and retail display requirements. These evolving regulatory constraints, alongside the excise duties and licensing mandates, create ongoing uncertainty regarding product compliance and market dynamics in the United Kingdom. Germany has introduced and progressively increased excise taxes on e-liquids, including both nicotine-containing and non-nicotine products, which may affect user demand. In South Korea, the regulatory landscape is governed by the National Health Promotion Act and the Tobacco Business Act. While these statutes have long classified tobacco-derived nicotine products as tobacco, amendments effective April 2026 have expanded this classification to include synthetic nicotine. This reclassification subjects all nicotine-containing products to a comprehensive excise tax regime comprising various distinct levies and funds. However, a two-year transitional tax relief has been introduced for synthetic nicotine products, offering a 50% reduction in applicable rates compared to tobacco-derived products through early 2028. Despite this temporary relief, the absolute prohibition on e-commerce sales and the mandatory disclosure of liquid formulations under the Tobacco Harmfulness Management Act by Q4 2026 remain in effect. These measures, alongside mandatory graphic health warnings, create a uniform but complex regulatory environment that may increase compliance costs and affect pricing strategies, which in turn could impact user demand. Indonesia offers a relatively stable and predictable regulatory environment for vape products. The industry is governed by a well-established legal framework, including clear excise laws, health regulations, and trade controls, which are consistently implemented across the country. Excise duties on e-cigarettes have been in place since 2018, and the Ministry of Finance, along with the Food and Drug Authority (BPOM) and Ministry of Health, continue to provide structured guidance on product standards, labeling, and packaging. While new regulations, such as those introduced under Government Regulation No. 28/2024, tighten controls on packaging and promotion, they reflect a methodical approach to public health policy rather than sudden or disruptive shifts. The varying approaches in these jurisdictions demonstrate the diverse regulatory landscape for vaping products, each reflecting distinct perspectives on public health, consumer protection and harm reduction. As ongoing research and changing public opinions continue to develop, it is expected that these regulatory frameworks may experience further modifications in the future. 113 Table of Contents C.Organizational Structure The following diagram illustrates our corporate structure as of the date of this annual report, including our principal subsidiaries, the variable interest entity and its principal subsidiaries: ​ Note: (1) Beijing Wuxin Technology Center (Limited Partnership) and Tianjin Wuxin Technology Partnership (Limited Partnership) each holds 86.77% and 13.23% of the equity interests in Beijing Wuxin, respectively. Ms. Ying (Kate) Wang and Mr. Bing Du each holds 93.635% and 6.365% of the partnership interests in Beijing Wuxin Technology Center (Limited Partnership), respectively. Ms. Ying (Kate) Wang and Mr. Bing Du each holds 1.00% and 99.00% of the partnership interests in Tianjin Wuxin Technology Partnership (Limited Partnership), respectively. Ms. Wang is a beneficial owner and co-founder of our company and serves as the chairperson of our board of directors and the chief executive officer of our company. Mr. Du is a beneficial owner of our company. For details of the contractual arrangements between Beijing Wuxin and Beijing Yueke, see “—Contractual Arrangements with the Consolidated Variable Interest Entity and its Shareholders.” Contractual Arrangements with the Consolidated Variable Interest Entity and its Shareholders We conduct part of our business in China through Beijing Wuxin, the consolidated variable interest entity in the PRC, and its subsidiaries, based on a series of contractual arrangements by and among Beijing Yueke, Beijing Wuxin and its shareholders. We refer to Beijing Yueke as our WFOE, and Beijing Wuxin as the consolidated VIE in this annual report. Our contractual arrangements with the consolidated VIE and its shareholders allow us to (i) exercise effective control over the consolidated VIE, (ii) receive substantially all of the economic benefits of the consolidated VIE, and (iii) have an exclusive option to purchase all or part of the equity interests in the consolidated VIE when and to the extent permitted by PRC law. 114 Table of Contents As a result of our direct ownership in our WFOE and the contractual arrangements with the consolidated VIE, we are regarded as the primary beneficiary of the consolidated VIE, and we treat it and its subsidiaries as the consolidated variable interest entities under U.S. GAAP. We have consolidated the financial results of the consolidated VIE and its subsidiaries in our consolidated financial statements in accordance with U.S. GAAP. Agreements that provide us with effective control over the consolidated VIE Powers of Attorney. Pursuant to the powers of attorney, between our WFOE and the shareholders of the consolidated VIE, each of the shareholders of the consolidated VIE has executed a power of attorney to irrevocably authorize our WFOE, or any person designated by our WFOE, to act as its attorney-in-fact to exercise all of its rights as a shareholder of the consolidated VIE, including but not limited to, the right to (i) attend shareholders’ meetings, (ii) exercise all shareholder rights and vote on any resolution on behalf of the shareholders that require the shareholders to vote under PRC law and the consolidated VIE’s articles of association, such as the sale, transfer, pledge and disposal of all or part of a shareholder’s equity interest in the consolidated VIE, and (iii) designate and appoint the consolidated VIE’s legal representative, director, supervisor, chief executive officer and other senior management members on behalf of the shareholders. The powers of attorney will remain effective until such shareholder ceases to be a shareholder of the consolidated VIE. Equity Interest Pledge Agreement. Pursuant to the share pledge agreement, among our WFOE, the consolidated VIE and the shareholders of the consolidated VIE, the shareholders of the consolidated VIE have pledged all of their respective equity interests in the consolidated VIE to our WFOE to guarantee performance of the obligations of the consolidated VIE and its shareholders under the exclusive business cooperation agreement. In the event of a breach by the consolidated VIE or any of its shareholders of contractual obligations under the exclusive business cooperation agreement, our WFOE, as pledgee, will have the right to request for enforcement of the pledge and dispose of the pledged equity interests in the consolidated VIE and will have priority in receiving the proceeds from such disposal. The shareholders of the consolidated VIE also covenant that, without the prior written consent of our WFOE, they will not transfer the pledged equity interests, create or allow any new pledge or any other encumbrance on the pledged equity interests. The equity interest pledge agreement has an initial term of 10 years, which can be extended for a further term same as the extended term of the exclusive business cooperation agreement, if applicable. We have completed the registration of the equity interest pledge under the equity interest pledge agreement in relation to the consolidated VIE with the relevant office of the State Administration of Market Regulation in accordance with the PRC Civil Code. Agreement that allows us to receive economic benefits from the consolidated VIE Exclusive Business Cooperation Agreement. Pursuant to the exclusive business cooperation agreement, between our WFOE and the consolidated VIE, our WFOE has the exclusive right to provide the consolidated VIE with complete business support and technical and consulting services, including but not limited to technical services, staff training, network support, business consultations, intellectual property licenses, equipment or leasing, marketing consultancy, system integration, product research and development, and system maintenance. Without our WFOE’s prior written consent, the consolidated VIE may not accept any consultations and/or services regarding the matters contemplated by this agreement provided by any third party during the term of the agreement. The consolidated VIE agrees to pay our WFOE service fees based on the workload and business value of services provided by our WFOE on a quarterly basis. Our WFOE has the exclusive ownership of all the intellectual property rights created as a result of the performance of the exclusive business cooperation agreement. To guarantee the consolidated VIE’s performance of its obligations thereunder, the shareholders of the consolidated VIE have pledged all of their equity interests in the consolidated VIE to our WFOE pursuant to the equity interest pledge agreement. The exclusive business cooperation agreement has an initial term of 10 years and can be extended if confirmed in writing by our WFOE prior to the expiration. The extended term will be determined by our WFOE, and the consolidated VIE should accept such extended term unconditionally. 115 Table of Contents Agreements that provide us with the option to purchase the equity interests in the consolidated VIE Exclusive Option Agreement. Pursuant to the exclusive option agreement, among our WFOE, the consolidated VIE and the shareholders of the consolidated VIE, each of the shareholders of the consolidated VIE has irrevocably granted our WFOE, or any person or persons designated by our WFOE, an exclusive option to purchase all or part of its equity interests in the consolidated VIE, and the consolidated VIE has agreed to such grant of options. Our WFOE may exercise such options at a price equal to the lowest price as permitted by applicable PRC laws, except that a valuation is mandatory under applicable PRC laws and regulations at the time of such option exercise. The consolidated VIE and the shareholders of the consolidated VIE covenant that, without Our WFOE’s prior written consent, they will not, among other things, (i) supplement, change or amend the consolidated VIE’s articles of association and bylaws, (ii) increase or decrease the consolidated VIE’s registered capital or change its structure of registered capital, (iii) create any pledge or encumbrance on their equity interests in the consolidated VIE, other than those created under the equity interest pledge agreement, (iv) sell, transfer, mortgage, or dispose of their equity interests in and any assets of the consolidated VIE and any legal or beneficial interests in the business or revenue of the consolidated VIE, (v) enter into any material contracts by the consolidated VIE, except in the ordinary course of business, or (vi) merge or consolidate the consolidated VIE with any other entity. The exclusive option agreement has an initial term of 10 years, which could be extended at our WFOE’s election. Exclusive Assets Option Agreement. Pursuant to the exclusive assets option agreement, between our WFOE and the consolidated VIE, the consolidated VIE has irrevocably granted our WFOE, or any person or persons designated by our WFOE, an exclusive option to purchase all or part of the current and future intellectual properties and other assets owned by the consolidated VIE and its subsidiaries. Our WFOE may exercise such options at a price equal to the lowest price as permitted by applicable PRC laws at the time of transfer of assets. The consolidated VIE covenants that, without our WFOE’s prior written consent, it will not, among other things, sell, transfer, mortgage, authorize others to use, or dispose of any assets owned by it and its subsidiaries. The exclusive assets option agreement has an initial term of 10 years, which could be extended at our WFOE’s election. In the opinion of Han Kun Law Offices, our PRC legal counsel, subject to the disclosure in this annual report: · the ownership structures of the consolidated VIE in China and our WFOE do not and will not result in violation of applicable PRC laws and regulations currently in effect; and · the contractual arrangements between our WFOE, the consolidated VIE and its shareholders governed by PRC law are valid and binding, and will not result in any violation of applicable PRC laws and regulations currently in effect. However, our PRC legal counsel has also advised us 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 take a view that is contrary to the opinion of our PRC legal counsel. It is uncertain whether any new PRC laws or regulations relating to variable interest entity structures will be adopted or if adopted, what they would provide. If we or the consolidated VIE are found to be in violation of any existing or future PRC laws or regulations, or fail to obtain or maintain any of the required permits or approvals, the relevant PRC regulatory authorities would have broad discretion to take action in dealing with such violations or failures. See “Item 3. Key Information—D. Risk Factors—Risks Relating to Our Corporate Structure—If the PRC government deems that our contractual arrangements with the consolidated variable interest entity do not comply with PRC regulatory restrictions on foreign investment in the relevant industries, or if these regulations or the interpretation of existing regulations change in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations” and “Item 3. Key Information—D. Risk Factors—Risks Relating to Doing Business in China—Failure to respond to changes in the regulatory environment in China could materially and adversely affect us.” D. Property, Plants and Equipment Our principal executive offices are located in Shenzhen, China. Our offices are mainly located in China, as well as other countries. As of December 31, 2025, we leased and occupied our office space with an aggregate floor area of approximately 12,256 square meters. Our factories and warehouses in China and other countries have an aggregate leased floor area of approximately 61,757 square meters as of December 31, 2025. We operate stores by ourselves globally, with an aggregate leased floor area of approximately 6,065 square meters as of December 31, 2025. The lease terms for all of our leased properties as of December 31, 2025 range from one year to five years. 116 Table of Contents We lease our premises under lease agreements from independent third parties. 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. We owned one land parcel in North Asia with a site area of approximately 324 square meters as of December 31, 2025 which is primarily used as our office space. ​ Item 4.A. Unresolved Staff Comments Not Applicable. ​