A. Our Selected Consolidated Financial Data The following summary consolidated statements of comprehensive income data for the years ended December 31, 2023, 2024 and 2025, summary consolidated balance sheet data as of December 31, 2024 and 2025 and summary consolidated cash flow data for the years ended December 31, 2023, 2024 and 2025 have been derived from our audited consolidated financial statements included elsewhere in this annual report. The summary consolidated statements of comprehensive income data for the years ended December 31, 2021 and 2022, the summary consolidated balance sheet data as of December 31, 2021, 2022 and 2023 and the summary consolidated cash flow data for the years ended December 31, 2021 and 2022 have been derived from our audited consolidated financial statements that are not included in this annual report. Our consolidated financial statements are prepared and presented in accordance with accounting principles generally accepted in the United States of America, or U.S. GAAP. ​ You should read the summary consolidated financial information in conjunction with our consolidated financial statements and related notes and “Item 5. Operating and Financial Review and Prospects” included elsewhere in this annual report. Our historical results are not necessarily indicative of our results expected for future periods. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ ​ 2021 ​ 2022 ​ 2023 ​ 2024 ​ 2025 ​ ​ ​ ​ RMB ​ ​ ​ RMB ​ ​ ​ RMB ​ ​ ​ RMB ​ ​ ​ RMB ​ ​ ​ US$ ​ ​ (in thousands, except for share and per share data) Selected Consolidated Comprehensive Income Data: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Revenues ​ 30,405,839 ​ 35,376,996 ​ 38,418,915 ​ 44,280,720 ​ 49,098,667 ​ 7,021,016 Cost of revenues ​ (23,816,462) ​ (26,337,721) ​ (26,756,389) ​ (30,563,628) ​ (36,827,226) ​ (5,266,223) Gross profit ​ 6,589,377 ​ 9,039,275 ​ 11,662,526 ​ 13,717,092 ​ 12,271,441 ​ 1,754,793 Operating income (expenses): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Selling, general and Administrative ​ (1,875,869) ​ (2,077,372) ​ (2,425,253) ​ (2,690,017) ​ (2,637,560) ​ (377,166) Other operating income, net ​ 789,503 ​ 774,578 ​ 770,651 ​ 749,784 ​ 840,980 ​ 120,259 Total operating expenses ​ (1,086,366) ​ (1,302,794) ​ (1,654,602) ​ (1,940,233) ​ (1,796,580) ​ (256,907) Income from operations ​ 5,503,011 ​ 7,736,481 ​ 10,007,924 ​ 11,776,859 ​ 10,474,861 ​ 1,497,886 Other income (expenses): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest income ​ 363,890 ​ 503,722 ​ 706,765 ​ 993,535 ​ 747,072 ​ 106,830 Interest expense ​ (126,503) ​ (190,521) ​ (289,533) ​ (337,919) ​ (248,612) ​ (35,551) Gain from fair value changes of financial instruments ​ 52,909 ​ 46,246 ​ 164,517 ​ 202,886 ​ 126,038 ​ 18,023 Gain/(loss) on disposal of equity investees, subsidiaries and others ​ 2,357 69,598 5,485 (10,518) 37,034 5,296 Impairment of investment in equity investees ​ — (26,328) — (931,367) — — Impairment on Goodwill ​ — ​ — ​ — ​ — ​ (84,431) ​ (12,073) Foreign currency exchange gain/(loss) ​ (56,467) 147,254 93,543 (17,930) 1,542 221 Income before income tax and share of loss in equity method investments ​ 5,739,197 8,286,452 10,688,701 11,675,546 11,053,504 1,580,632 Income tax expense ​ (1,005,451) (1,633,330) (1,938,600) (2,845,361) (1,905,236) (272,445) Share of (loss)/income in equity method investments ​ (32,419) 5,844 4,356 57,410 87,393 12,497 Net Income ​ 4,701,327 6,658,966 8,754,457 8,887,595 9,235,661 1,320,684 Net loss/(income) attributable to noncontrolling interests ​ 53,500 150,090 (5,453) (70,760) (155,010) (22,166) Net income attributable to ZTO Express (Cayman) Inc. ​ 4,754,827 6,809,056 8,749,004 8,816,835 9,080,651 1,298,518 Net income attributable to ordinary shareholders 4,754,827 6,809,056 8,749,004 8,816,835 9,080,651 1,298,518 Net earnings per share/ADS attributable to ordinary shareholders ​ ​ ​ ​ ​ ​ Basic 5.80 8.41 10.83 10.95 11.38 1.63 Diluted 5.80 8.36 10.60 10.70 11.19 1.60 Weighted average shares used in calculating net earnings per ordinary share/ADS ​ ​ ​ ​ ​ ​ Basic 819,961,265 809,442,862 807,739,616 804,875,816 797,634,860 797,634,860 Diluted 819,961,265 820,273,531 838,948,683 838,441,916 820,802,763 820,802,763 Other comprehensive income (loss), net of tax of nil: ​ ​ ​ ​ ​ ​ Foreign currency translation adjustment (146,533) 155,432 (104,052) (103,970) 13,428 1,920 Comprehensive income attributable to ZTO Express (Cayman) Inc. 4,608,294 6,964,488 8,644,952 8,712,865 9,094,079 ​ 1,300,438 ​ 10 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, ​ ​ 2021 ​ 2022 ​ 2023 ​ 2024 ​ 2025 ​ ​ ​ ​ RMB ​ ​ ​ RMB ​ ​ ​ RMB ​ ​ ​ RMB ​ ​ ​ RMB ​ ​ ​ US$ ​ ​ (in thousands) Selected Consolidated Balance Sheet Data: ​ ​ ​ ​ ​ ​ ​ Current assets: ​ ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ 9,721,225 11,692,773 12,333,884 13,465,442 10,011,533 1,431,630 Short-term investment ​ 2,845,319 5,753,483 7,454,633 8,848,447 15,620,892 2,233,758 Advances to suppliers ​ 667,855 861,573 821,942 783,599 719,277 102,855 Prepayments and other current assets ​ 3,142,368 3,146,378 3,772,377 4,329,664 5,102,997 729,719 Non-current assets: ​ ​ ​ ​ ​ ​ ​ Property and equipment, net ​ 24,929,897 28,813,204 32,181,025 33,915,366 35,433,509 5,066,924 Goodwill ​ 4,241,541 4,241,541 4,241,541 4,241,541 4,157,111 594,459 Total assets ​ 62,772,343 78,523,586 88,465,221 92,340,330 91,023,997 13,016,257 Liabilities and equity ​ ​ ​ ​ ​ ​ ​ ​ Current liabilities: ​ ​ ​ ​ ​ ​ ​ ​ Short-term bank borrowings ​ 3,458,717 5,394,423 7,765,990 9,513,958 10,934,419 1,563,601 Other current liabilities ​ 5,794,380 6,724,743 7,236,716 6,571,492 6,288,714 899,273 Total liabilities ​ 13,844,762 24,051,116 28,184,813 29,665,497 23,887,584 3,415,877 Total liabilities and equity ​ 62,772,343 78,523,586 88,465,221 92,340,330 91,023,997 13,016,257 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ ​ 2021 ​ 2022 ​ 2023 ​ 2024 ​ 2025 ​ ​ ​ ​ RMB ​ ​ ​ RMB ​ ​ ​ RMB ​ ​ ​ RMB ​ ​ ​ RMB ​ ​ ​ US$ ​ ​ (in thousands) Selected Consolidated Cash Flow Data: ​ ​ ​ ​ ​ ​ ​ Net cash provided by operating activities ​ 7,220,217 11,479,308 13,360,967 11,429,436 11,968,419 1,711,461 Net cash used in investing activities ​ (8,756,533) (16,041,890) (12,252,751) (5,980,724) (4,827,106) (690,267) Net cash (used in) /provided by financing activities ​ (2,903,985) 7,058,202 (769,836) (4,995,180) (10,567,203) (1,511,090) Effect of exchange rate changes on cash, cash equivalents and restricted cash ​ (150,430) 338,106 109,843 26,105 (58,340) (8,343) Net increase/(decrease) in cash, cash equivalents and restricted cash ​ (4,590,731) 2,833,726 448,223 479,637 (3,484,230) (498,239) Cash, cash equivalents and restricted cash at beginning of year ​ 14,360,092 9,769,361 12,603,087 13,051,310 13,530,947 1,934,900 Cash, cash equivalents and restricted cash at end of year ​ 9,769,361 12,603,087 13,051,310 13,530,947 10,046,717 1,436,661 ​ ​ 11 Table of Contents Condensed Consolidating Financial Information of ZTO Express (Cayman) Inc. The following table presents the condensed consolidating balance sheet data for ZTO Express (Cayman) Inc., the VIE and VIE’s subsidiaries, and other entities as of the dates presented. For the purpose of this presentation, (i) the intercompany transactions among entities within our subsidiaries or among entities within the VIE and VIE’s subsidiaries were eliminated; and (ii) the equity method is used to account for ZTO Express (Cayman) Inc.’s investments in our subsidiaries and our subsidiary’s investment in the VIE, as presented below under “Investments in consolidated subsidiaries, VIE and other equity investees.” ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, 2025 ​ ​ ZTO Express ​ ​ ​ VIE and VIE’s ​ ​ ​ Consolidated ​ ​ ​ ​ (Cayman) Inc. ​ ​ ​ Subsidiaries ​ ​ ​ subsidiaries ​ ​ ​ Elimination ​ ​ ​ Total ​ ​ RMB ​ ​ (in thousands) Assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Current assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ 553,021 ​ 7,079,848 ​ 2,378,664 ​ — ​ 10,011,533 Restricted cash ​ — ​ 22,186 ​ 6,943 ​ — ​ 29,129 Accounts receivable, net ​ — ​ 178,280 ​ 1,109,195 ​ — ​ 1,287,475 Financing receivables, net — ​ 179,283 ​ 495,597 ​ — ​ 674,880 Short-term investment ​ 1,916,241 ​ 12,484,583 ​ 1,220,068 ​ — ​ 15,620,892 Inventories ​ — ​ 32,725 ​ 7,923 ​ — ​ 40,648 Advances to suppliers ​ — ​ 632,263 ​ 87,014 ​ — ​ 719,277 Prepayments and other current assets ​ 16,806 ​ 2,522,260 ​ 2,563,931 ​ — ​ 5,102,997 Amounts due from related parties outside the consolidated group ​ — ​ 452,499 ​ 25,366 ​ — ​ 477,865 Investments in equity investees including subsidiaries and VIE, and amounts due from subsidiaries and VIE ​ 64,716,810 ​ 36,553,887 ​ 14,416,724 ​ (115,687,421) ​ — Investment in equity investees ​ — ​ 1,885,124 ​ 66,786 ​ — ​ 1,951,910 Property and equipment, net ​ — ​ 28,870,545 ​ 6,562,964 ​ — ​ 35,433,509 Land use rights, net ​ — ​ 4,900,496 ​ 1,861,744 ​ — ​ 6,762,240 Intangible assets, net ​ — ​ 13,117 ​ 39,641 ​ — ​ 52,758 Operating lease right-of-use assets ​ — ​ 41,631 ​ 356,451 ​ — ​ 398,082 Goodwill ​ — ​ — ​ 4,157,111 ​ — ​ 4,157,111 Deferred tax assets ​ — ​ 638,512 ​ 465,143 ​ — ​ 1,103,655 Long-term investment ​ — ​ 4,161,110 ​ 1,060,000 ​ — ​ 5,221,110 Long-term financing receivables, net ​ — ​ 148,481 ​ 891,465 ​ — ​ 1,039,946 Other non-current assets ​ — ​ 479,577 ​ 459,403 ​ — ​ 938,980 Amounts due from related parties outside the consolidated groups-non-current ​ — ​ — ​ — ​ — ​ — TOTAL ASSETS ​ 67,202,878 ​ 101,276,407 ​ 38,232,133 ​ (115,687,421) ​ 91,023,997 Liabilities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Current liabilities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Short-term bank borrowings ​ 559,448 ​ 377,000 ​ 9,997,971 ​ — ​ 10,934,419 Accounts payable ​ — ​ 704,539 ​ 1,872,690 ​ — ​ 2,577,229 Advances from customers ​ — ​ 48,405 ​ 1,784,726 ​ — ​ 1,833,131 Income tax payable ​ — ​ 58,130 ​ 221,411 ​ — ​ 279,541 Amounts due to related parties outside the consolidated group ​ — ​ 702,587 ​ 94,073 ​ — ​ 796,660 Amounts due to related parties within the consolidated group ​ — ​ 14,416,724 ​ — ​ (14,416,724) ​ — Operating lease liabilities, current ​ — ​ 11,824 ​ 127,963 ​ — ​ 139,787 Dividends payable ​ 19,659 ​ — ​ — ​ — ​ 19,659 Other current liabilities ​ 115,328 ​ 3,071,923 ​ 3,101,463 ​ — ​ 6,288,714 Long-term bank borrowings ​ — ​ 18,000 ​ — ​ — ​ 18,000 Non-current operating lease liabilities ​ — ​ 30,149 ​ 231,108 ​ — ​ 261,257 Deferred tax liabilities ​ — ​ 518,302 ​ 96,771 ​ — ​ 615,073 Convertible senior bond ​ 124,114 ​ — ​ — ​ — ​ 124,114 TOTAL LIABILITIES ​ 818,549 ​ 19,957,583 ​ 17,528,176 ​ (14,416,724) ​ 23,887,584 Equity ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Ordinary shares ​ 513 ​ 17,452,435 ​ 600,000 ​ (18,052,435) ​ 513 Additional paid-in capital ​ 24,000,698 ​ 600,000 ​ 3,918,356 ​ (4,518,356) ​ 24,000,698 Treasury shares, at cost ​ (254,480) ​ — ​ — ​ — ​ (254,480) Retained earnings ​ 42,918,864 ​ 63,280,738 ​ 16,125,690 ​ (79,406,428) ​ 42,918,864 Accumulated other comprehensive loss ​ (281,266) ​ (706,522) ​ — ​ 706,522 ​ (281,266) Non-controlling interests ​ — ​ 692,173 ​ 59,911 ​ — ​ 752,084 Total Equity ​ 66,384,329 ​ 81,318,824 ​ 20,703,957 ​ (101,270,697) ​ 67,136,413 TOTAL LIABILITIES AND EQUITY ​ 67,202,878 ​ 101,276,407 ​ 38,232,133 ​ (115,687,421) ​ 91,023,997 ​ 12 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, 2024 ​ ​ ZTO Express ​ ​ ​ VIE and VIE’s ​ ​ ​ Consolidated ​ ​ ​ ​ (Cayman) Inc. ​ ​ ​ Subsidiaries ​ ​ ​ subsidiaries ​ ​ ​ Elimination ​ ​ ​ Total ​ ​ RMB ​ ​ (in thousands) Assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Current assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ 1,082,454 ​ 10,107,137 ​ 2,275,851 ​ — ​ 13,465,442 Restricted cash ​ — ​ 22,180 ​ 15,337 ​ — ​ 37,517 Accounts receivable, net ​ — ​ 193,150 ​ 1,310,556 ​ — ​ 1,503,706 Financing receivables, net ​ — ​ 161,573 ​ 1,017,044 ​ — ​ 1,178,617 Short-term investment ​ 222,293 ​ 7,327,159 ​ 1,298,995 ​ — ​ 8,848,447 Inventories ​ — ​ 15,970 ​ 22,599 ​ — ​ 38,569 Advances to suppliers ​ — ​ 610,740 ​ 172,859 ​ — ​ 783,599 Prepayments and other current assets ​ 8,693 ​ 2,104,574 ​ 2,216,397 ​ — ​ 4,329,664 Amounts due from related parties outside the consolidated group ​ — ​ 141,780 ​ 26,380 ​ — ​ 168,160 Investments in equity investees including subsidiaries and VIE, and amounts due from subsidiaries and VIE ​ 68,088,895 ​ 21,597,177 ​ 13,183,246 ​ (102,869,318) ​ — Investment in equity investees ​ — ​ 1,808,121 ​ 63,216 ​ — ​ 1,871,337 Property and equipment, net ​ — ​ 28,716,214 ​ 5,199,152 ​ — ​ 33,915,366 Land use rights, net ​ — ​ 4,908,573 ​ 1,261,660 ​ — ​ 6,170,233 Intangible assets, net ​ — ​ 17,043 ​ — ​ — ​ 17,043 Operating lease right-of-use assets ​ — ​ 67,855 ​ 498,461 ​ — ​ 566,316 Goodwill ​ — ​ 84,430 ​ 4,157,111 ​ — ​ 4,241,541 Deferred tax assets ​ — ​ 569,565 ​ 415,002 ​ — ​ 984,567 Long-term investment ​ — ​ 11,004,755 ​ 1,013,000 ​ — ​ 12,017,755 Long-term financing receivables, net ​ — ​ 148,261 ​ 713,192 ​ — ​ 861,453 Other non-current assets ​ — ​ 766,318 ​ 153,013 ​ — ​ 919,331 Amounts due from related parties outside the consolidated groups-non-current ​ — ​ 421,667 ​ — ​ — ​ 421,667 TOTAL ASSETS ​ 69,402,335 ​ 90,794,242 ​ 35,013,071 ​ (102,869,318) ​ 92,340,330 Liabilities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Current liabilities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Short-term bank borrowings ​ — ​ 20,000 ​ 9,493,958 ​ — ​ 9,513,958 Accounts payable ​ — ​ 655,719 ​ 1,807,676 ​ — ​ 2,463,395 Advances from customers ​ — ​ 46,222 ​ 1,518,925 ​ — ​ 1,565,147 Income tax payable ​ — ​ 70,531 ​ 418,358 ​ — ​ 488,889 Amounts due to related parties outside the consolidated group ​ — ​ 35,098 ​ 167,668 ​ — ​ 202,766 Amounts due to related parties within the consolidated group ​ — ​ 13,183,246 ​ — ​ (13,183,246) ​ — Operating lease liabilities, current ​ — ​ 29,896 ​ 153,477 ​ — ​ 183,373 Dividends payable ​ 14,134 ​ — ​ — ​ — ​ 14,134 Other current liabilities ​ 55,728 ​ 3,835,835 ​ 2,679,929 ​ — ​ 6,571,492 Non-current operating lease liabilities ​ — ​ 39,218 ​ 338,499 ​ — ​ 377,717 Deferred tax liabilities ​ — ​ 931,927 ​ 82,618 ​ — ​ 1,014,545 Convertible senior bond ​ 7,270,081 ​ — ​ — ​ — ​ 7,270,081 TOTAL LIABILITIES ​ 7,339,943 ​ 18,847,692 ​ 16,661,108 ​ (13,183,246) ​ 29,665,497 Equity ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Ordinary shares ​ 523 ​ 17,865,373 ​ 600,000 ​ (18,465,373) ​ 523 Additional paid-in capital ​ 24,389,905 ​ 600,000 ​ 3,918,356 ​ (4,518,356) ​ 24,389,905 Treasury shares, at cost ​ (1,131,895) ​ — ​ — ​ — ​ (1,131,895) Retained earnings ​ 39,098,553 ​ 54,002,954 ​ 13,818,318 ​ (67,821,272) ​ 39,098,553 Accumulated other comprehensive loss ​ (294,694) ​ (1,118,929) ​ — ​ 1,118,929 ​ (294,694) Non-controlling interests ​ — ​ 597,152 ​ 15,289 ​ — ​ 612,441 Total Equity ​ 62,062,392 ​ 71,946,550 ​ 18,351,963 ​ (89,686,072) ​ 62,674,833 TOTAL LIABILITIES AND EQUITY ​ 69,402,335 ​ 90,794,242 ​ 35,013,071 ​ (102,869,318) ​ 92,340,330 ​ 13 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, 2023 ​ ​ ​ ​ ZTO Express ​ ​ ​ ​ ​ ​ ​ VIE and VIE’s ​ ​ ​ ​ ​ ​ ​ Consolidated ​ ​ (Cayman) Inc. ​ Subsidiaries ​ subsidiaries ​ Elimination ​ Total ​ ​ RMB ​ ​ (in thousands) Assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Current assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ 8,881 ​ 9,516,208 ​ 2,808,795 ​ — ​ 12,333,884 Restricted cash ​ — ​ 569,244 ​ 117,324 ​ — ​ 686,568 Accounts receivable, net ​ — ​ 213,351 ​ 359,207 ​ — ​ 572,558 Financing receivables, net ​ — ​ 180,021 ​ 955,424 ​ — ​ 1,135,445 Short-term investment ​ 1,020,094 ​ 5,886,266 ​ 548,273 ​ — ​ 7,454,633 Inventories ​ — ​ 7,669 ​ 20,405 ​ — ​ 28,074 Advances to suppliers ​ — ​ 739,690 ​ 82,252 ​ — ​ 821,942 Prepayments and other current assets ​ — ​ 1,662,952 ​ 2,109,425 ​ — ​ 3,772,377 Amounts due from related parties outside the consolidated group ​ — ​ 124,640 ​ 23,427 ​ — ​ 148,067 Investments in equity investees including subsidiaries and VIE, and amounts due from subsidiaries and VIE ​ 64,660,093 ​ 15,134,775 ​ 10,556,052 ​ (90,350,920) ​ — Investment in equity investees ​ 1,144,479 ​ 2,058,375 ​ 252,265 ​ — ​ 3,455,119 Property and equipment, net ​ — ​ 26,252,559 ​ 5,928,466 ​ — ​ 32,181,025 Land use rights, net ​ — ​ 4,402,516 ​ 1,234,585 ​ — ​ 5,637,101 Intangible assets, net ​ — ​ 23,240 ​ — ​ — ​ 23,240 Operating lease right-of-use assets ​ — ​ 36,546 ​ 635,647 ​ — ​ 672,193 Goodwill ​ — ​ 84,430 ​ 4,157,111 ​ — ​ 4,241,541 Deferred tax assets ​ — ​ 579,011 ​ 300,761 ​ — ​ 879,772 Long-term investment ​ 69,629 ​ 11,601,252 ​ 500,000 ​ — ​ 12,170,881 Long-term financing receivables, net ​ — ​ 73,589 ​ 891,191 ​ — ​ 964,780 Other non-current assets ​ — ​ 567,080 ​ 134,678 ​ — ​ 701,758 Amounts due from related parties outside the consolidated groups-non-current ​ — ​ 584,263 ​ — ​ — ​ 584,263 TOTAL ASSETS ​ 66,903,176 ​ 80,297,677 ​ 31,615,288 ​ (90,350,920) ​ 88,465,221 Liabilities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Current liabilities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Short-term bank borrowings ​ — ​ 400,000 ​ 7,365,990 ​ — ​ 7,765,990 Accounts payable ​ — ​ 664,358 ​ 1,892,652 ​ — ​ 2,557,010 Advances from customers ​ — ​ 36,626 ​ 1,709,101 ​ — ​ 1,745,727 Income tax payable ​ — ​ 134,963 ​ 198,294 ​ — ​ 333,257 Amounts due to related parties outside the consolidated group ​ — ​ 37,662 ​ 197,021 ​ — ​ 234,683 Amounts due to related parties within the consolidated group ​ — ​ 13,302,933 ​ — ​ (13,302,933) ​ — Operating lease liabilities, current ​ — ​ 4,978 ​ 181,275 ​ — ​ 186,253 Dividends payable ​ 1,548 ​ — ​ — ​ — ​ 1,548 Other current liabilities ​ 70,333 ​ 2,735,803 ​ 4,430,580 ​ — ​ 7,236,716 Non-current operating lease liabilities ​ — ​ 31,568 ​ 424,311 ​ — ​ 455,879 Deferred tax liabilities ​ — ​ 556,229 ​ 81,971 ​ — ​ 638,200 Convertible senior bond ​ 7,029,550 ​ — ​ — ​ — ​ 7,029,550 TOTAL LIABILITIES ​ 7,101,431 ​ 17,905,120 ​ 16,481,195 ​ (13,302,933) ​ 28,184,813 Equity ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Ordinary shares ​ 525 ​ 17,845,730 ​ 600,000 ​ (18,445,730) ​ 525 Additional paid-in capital ​ 24,201,745 ​ 600,000 ​ 3,918,356 ​ (4,518,356) ​ 24,201,745 Treasury shares, at cost ​ (510,986) ​ — ​ — ​ — ​ (510,986) Retained earnings ​ 36,301,185 ​ 44,419,495 ​ 10,620,516 ​ (55,040,011) ​ 36,301,185 Accumulated other comprehensive loss ​ (190,724) ​ (956,110) ​ — ​ 956,110 ​ (190,724) Non-controlling interests ​ — ​ 483,442 ​ (4,779) ​ — ​ 478,663 Total Equity ​ 59,801,745 ​ 62,392,557 ​ 15,134,093 ​ (77,047,987) ​ 60,280,408 TOTAL LIABILITIES AND EQUITY ​ 66,903,176 ​ 80,297,677 ​ 31,615,288 ​ (90,350,920) ​ 88,465,221 ​ ​ 14 Table of Contents The following table presents the condensed consolidating operations data for ZTO Express (Cayman) Inc., the VIE and VIE’s subsidiaries, and other entities for the periods presented. For the purpose of this presentation, (i) the intercompany transactions among entities within our subsidiaries or among entities within the VIE and VIE’s subsidiaries were eliminated; and (ii) the equity method is used to account for the interests of ZTO Express (Cayman) Inc. in earnings of our subsidiaries, and the interests of our subsidiary in earnings of the VIE, as presented below under “Share of profit/(loss) in subsidiaries, consolidated VIE, and equity method investments.” ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, 2025 ​ ​ ZTO Express ​ ​ ​ VIE and VIE’s ​ ​ ​ Consolidated ​ ​ ​ ​ (Cayman) Inc. ​ ​ ​ Subsidiaries ​ ​ ​ subsidiaries ​ ​ ​ Elimination ​ ​ ​ Total ​ ​ RMB ​ ​ (in thousands) Revenue ​ — 20,324,921 42,757,837 (13,984,091) 49,098,667 Cost of revenues ​ — (14,546,826) (37,741,328) 15,460,928 (36,827,226) Gross profit ​ — ​ 5,778,095 ​ 5,016,509 ​ 1,476,837 ​ 12,271,441 Operating (expenses)/income ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Selling, general and administrative ​ (249,902) ​ (1,181,455) ​ (1,301,787) ​ 95,584 ​ (2,637,560) Other operating income, net ​ 24,079 ​ 3,212,612 ​ (823,290) ​ (1,572,421) ​ 840,980 Other income/(expenses) ​ 30,655 ​ 483,212 ​ 64,776 ​ — ​ 578,643 Income before income tax and share of profit/(loss) in subsidiaries, consolidated VIE, and equity method investments ​ (195,168) ​ 8,292,464 ​ 2,956,208 ​ — ​ 11,053,504 Income tax expense ​ (7,231) ​ (1,308,222) ​ (589,783) ​ — ​ (1,905,236) Share of profit/(loss) in subsidiaries, consolidated VIE, and equity method investments ​ 9,283,050 ​ 2,403,930 ​ (14,431) ​ (11,585,156) ​ 87,393 Net income ​ 9,080,651 ​ 9,388,172 ​ 2,351,994 ​ (11,585,156) ​ 9,235,661 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, 2024 ​ ​ ZTO Express ​ ​ ​ VIE and VIE’s ​ ​ ​ Consolidated ​ ​ ​ ​ (Cayman) Inc. ​ ​ ​ Subsidiaries ​ ​ ​ subsidiaries ​ ​ ​ Elimination ​ ​ ​ Total ​ ​ RMB ​ ​ (in thousands) Revenue ​ — 21,602,652 37,386,476 (14,708,408) 44,280,720 Cost of revenues ​ — (15,212,087) (31,413,847) 16,062,306 (30,563,628) Gross profit ​ — ​ 6,390,565 ​ 5,972,629 ​ 1,353,898 ​ 13,717,092 Operating (expenses)/income ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Selling, general and administrative ​ (337,258) ​ (1,392,543) ​ (1,048,134) ​ 87,918 ​ (2,690,017) Other operating income, net ​ 111,545 ​ 2,790,086 ​ (710,031) ​ (1,441,816) ​ 749,784 Other income/(expenses) ​ (509,456) ​ 331,314 ​ 76,829 ​ — ​ (101,313) Income before income tax and share of profit/(loss) in subsidiaries, consolidated VIE, and equity method investments ​ (735,169) ​ 8,119,422 ​ 4,291,293 ​ — ​ 11,675,546 Income tax expense ​ (31,510) ​ (1,740,643) ​ (1,073,208) ​ — ​ (2,845,361) Share of profit/(loss) in subsidiaries, consolidated VIE, and equity method investments ​ 9,583,514 ​ 3,255,373 ​ (40,352) ​ (12,741,125) ​ 57,410 Net income ​ 8,816,835 ​ 9,634,152 ​ 3,177,733 ​ (12,741,125) ​ 8,887,595 ​ 15 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, 2023 ​ ​ ZTO Express ​ ​ ​ VIE and VIE’s ​ ​ ​ Consolidated ​ ​ ​ ​ (Cayman) Inc. ​ ​ ​ Subsidiaries ​ ​ ​ subsidiaries ​ ​ ​ Elimination ​ ​ ​ Total ​ ​ RMB ​ ​ (in thousands) Revenue ​ — 19,966,654 31,276,014 (12,823,753) 38,418,915 Cost of revenues ​ — (12,858,581) (27,791,654) 13,893,846 (26,756,389) Gross profit ​ — ​ 7,108,073 ​ 3,484,360 ​ 1,070,093 ​ 11,662,526 Operating (expenses)/income ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Selling, general and administrative ​ (260,613) ​ (1,292,702) ​ (962,378) ​ 90,440 ​ (2,425,253) Other operating income, net ​ 52,968 ​ 1,857,145 ​ 21,071 ​ (1,160,533) ​ 770,651 Other income/(expenses) ​ (23,907) ​ 605,560 ​ 99,124 ​ — ​ 680,777 Income before income tax and share of profit/(loss) in subsidiaries, consolidated VIE, and equity method investments ​ (231,552) ​ 8,278,076 ​ 2,642,177 ​ — ​ 10,688,701 Income tax expense ​ (26,270) ​ (1,318,961) ​ (593,369) ​ — ​ (1,938,600) Share of profit/(loss) in subsidiaries, consolidated VIE, and equity method investments ​ 9,006,826 ​ 2,054,159 ​ (44,856) ​ (11,011,773) ​ 4,356 Net income ​ 8,749,004 ​ 9,013,274 ​ 2,003,952 ​ (11,011,773) ​ 8,754,457 ​ The following table presents condensed consolidating cash flow data for ZTO Express (Cayman) Inc., the VIE and VIE’s subsidiaries, and other entities for the years ended presented. For the purpose of this presentation, the intercompany transactions among entities within our subsidiaries or among entities within the VIE and VIE’s subsidiaries were eliminated. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, 2025 ​ ​ ZTO Express ​ ​ ​ VIE and VIE’s ​ ​ ​ Consolidated ​ ​ ​ ​ (Cayman) Inc. ​ ​ ​ Subsidiaries ​ ​ ​ subsidiaries ​ ​ ​ Elimination ​ ​ ​ Total ​ ​ RMB ​ ​ (in thousands) Net cash provided by/(used in) operating activities ​ (26,453) ​ 10,420,449 ​ 1,574,423 ​ — ​ 11,968,419 Net cash (used in)/provided by investing activities ​ 10,864,563 (811,742) (2,296,716) (12,583,211) (4,827,106) Net cash(used in)/provided by financing activities ​ (11,430,347) (12,536,779) 816,712 12,583,211 (10,567,203) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, 2024 ​ ​ ZTO Express ​ ​ ​ VIE and VIE’s ​ ​ ​ Consolidated ​ ​ ​ ​ (Cayman) Inc. ​ ​ ​ Subsidiaries ​ ​ ​ subsidiaries ​ ​ ​ Elimination ​ ​ ​ Total ​ ​ RMB ​ ​ (in thousands) Net cash provided by/(used in) operating activities ​ 59,881 ​ 12,452,817 ​ (1,083,262) ​ — ​ 11,429,436 Net cash (used in)/provided by investing activities ​ 7,759,397 (6,163,131) (1,279,070) (6,297,920) (5,980,724) Net cash(used in)/provided by financing activities ​ (6,763,490) (6,257,011) 1,727,401 6,297,920 (4,995,180) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, 2023 ​ ​ ZTO Express ​ ​ ​ VIE and VIE’s ​ ​ ​ Consolidated ​ ​ ​ ​ (Cayman) Inc. ​ ​ ​ Subsidiaries ​ ​ ​ subsidiaries ​ ​ ​ Elimination ​ ​ ​ Total ​ ​ RMB ​ ​ (in thousands) Net cash provided by/(used in) operating activities ​ 26,445 14,596,176 (1,261,654) — 13,360,967 Net cash (used in)/provided by investing activities ​ 3,027,005 (13,182,500) (536,180) (1,561,076) (12,252,751) Net cash(used in)/provided by financing activities ​ (3,096,040) (1,206,350) 1,971,478 1,561,076 (769,836) ​ B. Capitalization and Indebtedness Not applicable. C. Reasons for the Offer and Use of Proceeds Not applicable. 16 Table of Contents D. Risk Factors Summary of Risk Factors Investing in our Class A ordinary shares and/or ADSs involves significant risks. You should carefully consider all of the information in this annual report before making an investment in our Class A ordinary shares and/or ADSs. The following list summarizes some, but not all, of these risks. Risks Related to Our Business and Industry ● Our business and growth are highly dependent on the development of the e-commerce industry and the emergence of New Retail in China. ● Our business operations have relied on, and are likely to continue to be significantly influenced by, certain third-party e-commerce platforms. ● We face risks associated with our network partners and their employees and personnel. ● We face intense competition, which could adversely affect our results of operations and market share. ● Any service disruptions experienced by our sorting hubs or the outlets operated by our network partners may adversely affect our business operations. ● Our technology systems are critical to our business operations and growth prospects, and failure to continue to improve, and effectively utilize, our technology systems or develop new technologies could harm our business operations, reputation and growth prospects. ● We operate in a labor-intensive industry and an overall contraction in the availability of workers in the labor market or any labor unrest may negatively affect our business. ● We engage outsourcing firms to provide personnel for our operations. We have limited control over these personnel and may be liable for violations of applicable PRC labor laws and regulations accordingly. ● We face risks associated with parcels handled and transported through our network and risks associated with transportation. ● Our past growth rates may not be indicative of our future growth, and if we are unable to manage our growth or execute our strategies effectively, our business and prospects may be materially and adversely affected. Risks Related to Our Corporate Structure ZTO is a Cayman Islands holding company with no equity ownership in the VIE and we conduct our operations in China primarily through (i) our PRC subsidiaries and (ii) the VIE, with which we have maintained contractual arrangements. Investors in our ADSs and/or Class A ordinary shares thus are not purchasing equity interest in our operating entities in China but instead are purchasing equity interest in a Cayman Islands holding company. If the PRC government finds that the agreements that establish the structure for operating our business do not comply with the PRC laws and regulations, or if these regulations or their interpretations change in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations. Our holding company, our PRC subsidiaries, the VIE, and investors of ZTO face uncertainty about potential future actions by the PRC government that could affect the enforceability of the contractual arrangements with the VIE and, consequently, significantly affect the financial performance of the VIE and our company as a whole. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Corporate Structure—If the PRC government finds that the agreements that establish the structure for operating certain of our operations in China do not comply with PRC regulations relating to 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” on pages 40-41 of this annual report. 17 Table of Contents Risks Related to Doing Business in China ● Changes in China’s economic, political or social conditions or government policies could have a material adverse effect on our business and operations. See “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—Changes in China’s economic, political or social conditions or government policies could have a material adverse effect on our business and operations” on page 43 of this annual report. ● PRC government’s significant authority in regulating our operations and its oversight and control over securities offerings conducted overseas by, and foreign investment in, China-based issuers could significantly limit or completely hinder our ability to offer or continue to offer securities to investors. Implementation of industry-wide regulations in this nature may cause the value of such securities to significantly decline. See “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—The PRC government’s significant oversight and discretion over our business operation could result in a material adverse change in our operations and the value of our ADSs and ordinary shares” on page 44 of this annual report. ● Risks and uncertainties arising from the legal system in the jurisdiction where we operate, including risks and uncertainties regarding the enforcement of laws and quickly evolving rules and regulations in the jurisdiction where we operate, could result in a material adverse change in our operations and the value of our ADSs. See “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—Uncertainties with respect to the legal system in the jurisdiction where we operate could adversely affect us” on page 44 of this annual report. ● We may rely on dividends and other distributions on equity paid by our PRC subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of our PRC subsidiaries to make payments to us could have a material and adverse effect on our ability to conduct our business. See “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—We may rely on dividends and other distributions on equity paid by our PRC subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of our PRC subsidiaries to make payments to us could have a material and adverse effect on our ability to conduct our business” on page 46 of this annual report. ● The PCAOB had historically been unable to inspect our auditor in relation to their audit work performed for our financial statements and the inability of the PCAOB to conduct inspections of our auditor in the past has deprived our investors with the benefits of such inspections. See “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—The PCAOB had historically been unable to inspect our auditor in relation to their audit work performed for our financial statements and the inability of the PCAOB to conduct inspections of our auditor in the past has deprived our investors with the benefits of such inspections” on pages 53-54 of this annual report. ● Our ADSs may be prohibited from trading in the United States under the HFCAA in the future if the PCAOB is unable to inspect or investigate completely auditors located in China. The delisting of the ADSs, or the threat of their being delisted, may materially and adversely affect the value of your investment. See “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—Our ADSs may be prohibited from trading in the United States under the HFCAA in the future if the PCAOB is unable to inspect or investigate completely auditors located in China. The delisting of the ADSs, or the threat of their being delisted, may materially and adversely affect the value of your investment” on page 54 of this annual report. Risks Related to Our Shares and ADSs ● The trading prices of our ADSs and Class A ordinary shares have been and are likely to continue to be volatile, which could result in substantial losses to holders of our Class A ordinary shares and/or ADSs. ● Our dual-class share structure with different voting rights will limit your ability to influence corporate matters and could discourage others from pursuing any change of control transactions that holders of our Class A ordinary shares and ADSs may view as beneficial. ● We are a “controlled company” within the meaning of the NYSE Listed Company Manual and, as a result, may rely on exemptions from certain corporate governance requirements that provide protection to shareholders of other companies. 18 Table of Contents Risks Related to Our Business and Industry Our business and growth are highly dependent on the development of the e-commerce industry and the emergence of New Retail in China. We generate a significant portion of our parcel volume by serving end customers that conduct business on various e-commerce platforms in China, and our end customers rely on our services to fulfill orders placed by consumers on such platforms. In December 2025, more than 90% of our total parcel volume was attributable to e-commerce platforms. Our business and growth are therefore highly dependent on the current state and future prospects of the e-commerce industry in China. Any uncertainties relating to the growth, profitability and regulatory regime of the e-commerce industry in China could have a significant impact on us. The development of the e-commerce industry in China is affected by a number of factors, most of which are beyond our control. These factors include: ● the growth of broadband and mobile internet penetration and usage in China; ● the consumption power and disposable income of e-commerce consumers in China, as well as changes in demographics and consumer tastes and preferences; ● the availability, reliability and security of e-commerce platforms; ● the selection, price, quality and popularity of products offered on e-commerce platforms; ● the potential impact of health epidemics on our business operations and the economy in China and elsewhere generally; ● the emergence of alternative channels or business models that better suit the needs of consumers in China; ● the development of fulfillment, payment and other ancillary services associated with e-commerce; ● the continued integration of online and offline retail channels by large e-commerce platforms and various retail merchants to reduce customer acquisition costs and enhance customers’ shopping experience, a phenomenon knows as “New Retail”; and ● changes in laws and regulations, as well as government policies, that govern the e-commerce industry in China. The e-commerce industry is highly sensitive to changes in macroeconomic conditions, and e-commerce spending tends to decline during recessionary periods. Many factors beyond our control, including inflation and deflation, fluctuations in currency exchange rates, volatility of stock and real property markets, interest rates, tax rates and other government policies and changes in unemployment rates can adversely affect consumer confidence and spending behavior on e-commerce platforms, which could in turn materially and adversely affect our growth and profitability. In addition, unfavorable changes in domestic and international politics, including military conflicts, political turmoil and social instability, may also adversely affect consumer confidence and spending, which could in turn negatively impact our growth and profitability. Our business operations have relied on, and are likely to continue to be significantly influenced by, certain third-party e-commerce platforms. Our end customers include many e-commerce merchants who sell products on third-party e-commerce platforms, such as the Alibaba ecosystem. Although such third-party e-commerce platforms are not our direct customers or end customers, they have significant influence over how transactions take place on their e-commerce platforms, including how purchase orders are fulfilled by indicating to consumers the preferred express delivery companies for orders placed. As a result, our business operations have been and for the foreseeable future will continue to be significantly influenced by decisions made by such third-party e-commerce platforms. For example, in order to maintain and foster our cooperation with Alibaba, we may have to accommodate the demands and requirements from various players in the Alibaba ecosystem, such as the adoption of digital waybills initiated by Cainiao Network, a central logistics information system and solutions provider affiliated with Alibaba. Such demands and requirements may increase the cost of our business or weaken our connection with our end customers. 19 Table of Contents In May 2018, Alibaba and Cainiao Network entered into a strategic transaction with us. Pursuant to the transaction terms, certain investors led by Alibaba and Cainiao Network invested US$1.38 billion in our company in exchange for approximately 10% of our equity interest at that time and obtained certain shareholder rights in our company. The transaction was completed in June 2018. However, Alibaba has also invested, and may invest in the future, in our competitors. Alibaba may encourage merchants on its platforms to choose other investees’ services over ours for its own business reasons. Alibaba has also built an in-house delivery network to serve its e-commerce platforms and may devote more resources to developing its in-house delivery network. If Alibaba encourages the use of other delivery networks or its own delivery network over ours, our business may be negatively impacted, and our results of operations may be materially and adversely affected. We face risks associated with our network partners and their employees and personnel. As of December 31, 2025, we had over 31,000 pickup/delivery outlets and over 6,000 direct network partners under our ZTO brand. We rely on these network partners to directly interact with and serve end customers. However, the interests of a network partner may not be entirely aligned with ours or with those of our other network partners at all times. We manage our business relationships with direct network partners through contractual agreements, which provide for performance incentives along with periodic evaluations. Our direct network partners may sub-contract part of their business to their cooperation partners, which we refer to as our indirect network partners. The sub-contracting to indirect network partners is subject to our consent. However, we may not be able to manage the network partners as effectively as if we had full ownership of them or operated their business directly. In particular, we do not enter into agreements with our indirect network partners and are therefore unable to exert a significant degree of influence over them. Our network partners and their employees have a significant number of direct interactions with our end customers, and their performance is directly associated with our brand. We do not directly supervise the employees of our network partners in providing services to end customers. Our existing network-wide service standards and periodic training to the personnel of our network partners may not be sufficient for us to effectively monitor, maintain and improve their service quality or their general conduct towards end customers. In the event of any unsatisfactory performance or unlawful behavior by our network partners and/or their employees towards end customers, we may experience service disruptions and our reputation may be materially and adversely affected. We may voluntarily, or upon the request of applicable authorities, conduct investigations on such event and adopt remediation/preventive measures. Such efforts may not be limited to the relevant parties, but applicable throughout our network, which could cause temporary diversion from the ordinary course of our and our network partners’ business. Furthermore, our network partners may fail to implement sufficient control over the pickup and delivery personnel who work at the outlets in connection with their conduct, such as proper collection and handling of parcels and delivery service fees, adherence to customer privacy standards and timely delivery of parcels. As a result, we or our network partners may suffer financial losses, incur liabilities and suffer reputational damage in the event of theft or late delivery of parcels, embezzlement of delivery service fees, mishandling of customer privacy, misconduct or unlawful behavior towards end customers, or any other behavior that reflects adversely on our business and reputation. Suspension or termination of a network partner’s services in a particular geographic area may result in a significant interruption or failure to provide services in the corresponding geographic area. A network partner may suspend or terminate its services voluntarily or involuntarily due to various reasons, including a disagreement or dispute with us, failure to make a profit, failure to obtain requisite approvals, failure to maintain licenses or permits or to comply with other governmental regulations, and events beyond our or its control, such as inclement weather, natural disasters, transportation interruptions or labor unrest or shortage. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business and Industry—Any service disruptions experienced by our sorting hubs or the outlets operated by our network partners may adversely affect our business operations.” Due to the intense competition in China’s express delivery industry, our existing network partners may also choose to discontinue their cooperation with us and work with our competitors instead. We may not be able to promptly replace these network partners or find alternative ways to provide services in a timely, reliable and cost-effective manner, or at all. As a result of any service disruptions associated with our network partners, our customer satisfaction, reputation, operations and financial performance may be materially and adversely affected. 20 Table of Contents We face intense competition, which could adversely affect our results of operations and market share. We operate in a highly competitive and consolidating industry. We compete primarily with leading domestic express delivery companies, including YTO Express, STO Express, Yunda Express, J&T Express, SF Express, JD Logistics, and the express delivery services provided by China Post, such as EMS. We compete with them based on a number of factors, including network stability, business model, operational capabilities, infrastructure capacity, cost control and service quality. We have historically experienced a decline in the delivery service market prices and we may continue to face downward pricing pressure. If we and our network partners cannot effectively control our costs to remain competitive, our market share and revenue may decline. Additionally, if we have to subsidize our network partners to increase our network partners’ competitiveness, our gross margin may decline. Our competitors may attempt to gain market share by lowering their rates, especially during economic slowdowns or in key regional markets. Such rate reductions may limit our ability to maintain or increase our rates and operating margins and inhibit our ability to grow our business. In addition, major e-commerce platforms, such as Alibaba, Pinduoduo and JD.com, may choose to build or further develop their respective in-house delivery capabilities to serve their logistics needs and compete with us, which may significantly affect our market share and total parcel volume. Furthermore, as we diversify our service offering and further expand our customer base, we may face competition from existing or new players in new sectors we choose to enter. In particular, we or our network partners may face competition from existing or new last-mile delivery service providers which may expand their service offerings to include express delivery or adopt a business model disruptive to our business and compete with our network partners for delivery personnel. Similarly, existing players in an adjacent or sub-market may choose to leverage their existing infrastructure and expand their services to serve our customers. If these players succeed in doing so, our market share may suffer and our business and financial performance may be significantly and adversely affected. Certain of our current and potential competitors, as well as international logistics operators with a presence in China, may have significantly greater resources, longer operating histories, larger customer bases and greater brand recognition than us. Other current and potential competitors may be acquired by, receive investment from, or enter into strategic relationships with, established and well-financed companies or investors which would help enhance their competitiveness. Moreover, competitors may adopt more aggressive pricing policies or devote greater resources to marketing and promotional campaigns than us. We may not be able to compete successfully against current or future competitors, and competitive pressures may have a material and adverse effect on our business, financial condition and results of operations. Any service disruptions experienced by our sorting hubs or the outlets operated by our network partners may adversely affect our business operations. Our daily operations rely heavily on the orderly performance of our sorting hubs and the pickup and delivery outlets operated by our network partners. Any service disruption at our sorting hubs or the pickup and delivery outlets as a result of a failure or disruption of the automated facilities, under-capacity during peak parcel volume periods, force majeure, third-party sabotage, disputes, employee delinquency or strike, government inspections or regulatory orders mandating service halt or temporary or permanent shutdown would adversely impact our business operations. For example, any ad hoc regulatory inspection by local authorities, such as environmental safety, work safety, equipment safety, fire safety and security checks, on any of our facilities or our network partners’ service outlets may cause business disruptions and suspensions, delay the processing and delivery of parcels and penalties. The outbreak of an epidemic, such as the heavy rainfalls and floods in Hebei province in July and August 2023 caused temporary closure of our facilities, sorting hubs and service outlets in Hebei province. If we are required by governmental authorities to implement changes to our facilities or relocate any of our facilities or our network partners’ service outlets, the operating costs of us and our network partners may increase as a result. In the event of service disruptions at our sorting hubs or outlets, parcel sorting or parcel pickup and delivery may be delayed, suspended or stopped. Such parcels would need to be redirected to other nearby sorting hubs or outlets, and such rerouting of parcels will likely increase risks of delay and delivery errors. At the same time, increased parcel sorting or pickup and delivery pressure on nearby sorting hubs or outlets may negatively impact their performance and result in adverse effects to our entire network. Any of the foregoing events may result in significant operational interruptions and slowdowns, customer complaints and reputational damage. 21 Table of Contents Our technology systems are critical to our business operations and growth prospects, and failure to continue to improve, and effectively utilize, our technology systems or develop new technologies could harm our business operations, reputation and growth prospects. The satisfactory performance, reliability and availability of our technology systems is critical to our ability to deliver high-quality customer services. We rely on the Zhongtian system, a set of centralized technology systems that we developed, which comprises our operational management system, our network management system, our settlement system, our finance system and other systems and mobile apps connecting our network partners to efficiently operate our network. These integrated systems support the smooth performance of certain key functions of our business, such as order tracking, fleet dispatch and management, route planning, and fee settlement. In addition, the maintenance and processing of various operating and financial data is essential to the day-to-day operation of our business and formulation of our strategies. Therefore, our business operations and growth prospects depend, in part, on our ability to maintain and make timely and cost-effective enhancements and upgrade to our technology systems and to introduce innovative additions to meet changing operational needs. Continued investment in information technology and equipment to enhance operational efficiency and reliability is part of our growth strategy. While we have significantly increased our spending on technology, such investment may not be sufficient to fully support our expanding business needs. Failure to maintain sufficient spending on technology systems could cause economic losses and put us at a disadvantage to our competitors. We can provide no assurance that we will be able to keep up with technological improvements or that technologies developed by others (including our competitors) will not render our services less competitive or attractive. Any issues impairing the functionality and effectiveness of our systems could result in unanticipated system disruptions, slower response time and impaired user experiences, as well as delays or inaccuracies in reporting operating and financial information. Any interruptions caused by telecommunications failures, computer viruses, hacking, or other attempts to harm our technology infrastructure could result in the unavailability or slowdown of our centralized system and significantly impact workflows throughout our entire network. We can provide no assurance that our current security mechanisms will be sufficient to protect our technology systems from any third-party intrusions, viruses or hacker attacks, information or data theft or other similar activities. Any such occurrences could disrupt our services, damage our reputation and harm our results of operations. We operate in a labor-intensive industry and an overall contraction in the availability of workers in the labor market or any labor unrest may negatively affect our business. Our business is labor-intensive. As of December 31, 2025, we had a total of 23,399 employees. We also engage outsourcing firms to provide certain services at our network facilities. A failure by us or our network partners to maintain a stable and dedicated workforce may result in disruption or delays in the services provided to end customers. We and our network partners often need to hire additional or temporary workers to handle the significant increase in parcel volume following special promotional events such as promotional campaigns on June 18, November 11 and December 12 of each year or during other peak seasons throughout the year. During these periods we have observed an increasingly competitive and tight labor market. In general, this has resulted in, and we expect will continue to result in, increased labor costs driven by higher salaries, social benefits and employee headcounts. Further, we and our network partners compete with other companies in our industry as well as other labor-intensive industries for labor, and such competition may affect the overall stability of our workforce and the performance of our network. For example, emerging disruptive business models like intra-city delivery, which enables senders and recipients within the same city to achieve rapid point-to-point delivery; or omni-channel delivery, which fulfills the logistics demands for omni-channel retailers and consumers, are likely to compete for pickup and delivery personnel with our network partners and service outlets. Some of our network partners or outlets may be pressured to increase compensation and social welfare benefits for their employees, which may result in lower profitability and insufficient cashflow for our network partners or service outlets. If our network partners or service outlets are unable to offer competitive salaries and benefits, or pay their employees on time or in full, they may lose their personnel, resulting in insufficient delivery resources, disgruntled employees, and lower delivery service quality in certain parts of our network. 22 Table of Contents We and our network partners have been involved in labor disputes and penalties in the past, though none of these, whether individually or in the aggregate, has had a material adverse impact on us. We and our network partners expect to continue to be involved in labor disputes from time to time, including involvement in various legal or administrative proceedings related to such disputes. Any labor unrest directed against us or our network partners could directly or indirectly prevent or hinder our normal business operations, and, if not resolved in a timely manner, lead to delays in fulfilling our customer orders and decreases in our revenue. Historically, we have experienced an incident where an employee strike of one of our network partners caused a prolonged service suspension in a southern city of China, and we cannot assure you that similar incidents would not happen in the future. We and our network partners cannot always predict or control labor unrest, especially those involving labor not directly employed by us. Further, labor unrest may have a negative effect on general labor market conditions or result in changes to labor laws, which in turn could materially and adversely affect our business, financial condition and results of operations. We engage outsourcing firms to provide personnel for our operations. We have limited control over these personnel and may be liable for violations of applicable PRC labor laws and regulations accordingly. In fulfilling our services, we engage outsourcing firms to provide certain services at our network facilities. We enter into agreements only with outsourcing firms and do not have any direct contractual relationship with their personnel, resulting in limited control over them. If any such personnel fail to operate in accordance with instructions, policies and business guidelines set forth by outsourcing firms based on our requirements, our market reputation, brand image and results of operations could be materially and adversely affected. Our agreements with the outsourcing firms may provide that we are not liable to their personnel. However, if the outsourcing firms violate any PRC labor laws or regulations or their employment agreements with the personnel, such personnel may file a claim against us as they provide their services at our network facilities. As a result, we may incur legal liability, and our market reputation and brand image as well as our business, financial condition and results of operations could be materially and adversely affected. We face risks associated with parcels handled and transported through our network and risks associated with transportation. We handle a large volume of parcels across our network, and face challenges with respect to the protection and inspection of these parcels. Parcels in our network may be stolen, damaged or lost for various reasons, and we and/or our network partners may face actual or alleged liability for such incidents. In addition, we may fail to detect unsafe or prohibited/restricted items. There have been incidents in the past where our network partners failed to strictly implement parcel screening procedures and allowed controlled items to be mailed through our network. Further, unsafe items processed and transported through our network, such as flammables and explosives, toxic or corrosive items and radioactive materials, may damage other parcels in our network, injure their recipients, harm our personnel and result in property damage. Failure to prevent prohibited or restricted items from entering our network may result in administrative or criminal penalties as well as civil liability for personal injury and property damage. The transportation of parcels involves inherent risks. We have a large number of vehicles and personnel involved in our transportation operations at all times, who are subject to risks associated with transportation safety, including transportation related injuries and losses. For example, our vehicles and personnel may be involved in traffic accidents from time to time, resulting in personal injury and loss or damage to parcels carried by them. In addition, frictions or disputes may occasionally arise from the direct interaction of our personnel with parcel senders and recipients, which may result in personal injury or property damage if such incidents escalate. The insurance policies we carry may not fully cover the damages caused by transportation related injuries or losses. Any of the foregoing could disrupt our services, cause us to incur substantial expenses and divert the time and attention of our management. We and our network partners may face claims and incur significant liabilities if found liable or partially liable for any injuries, damages or losses. Claims against us may exceed the amount of our insurance coverage or may not be covered by insurance at all. Government authorities may also impose significant fines on us or require us to adopt costly preventive measures. Furthermore, if our services are perceived to be unsafe by our end customers, e-commerce platforms and consumers, our business volume may be significantly reduced, and our business, financial condition and results of operations may be materially and adversely affected. 23 Table of Contents Our past growth rates may not be indicative of our future growth, and if we are unable to manage our growth or execute our strategies effectively, our business and prospects may be materially and adversely affected. Our past growth rates may not be indicative of our future growth. We plan to further expand our network in response to increasing customer and consumer needs, but we may not succeed in doing so. Even if we are able to expand our network as planned, we may not be able to continue to integrate and optimize a larger network. In addition, as customer and consumer needs at both the national and regional levels are continuously changing, we may not be able to successfully anticipate or respond to such changes. For example, we may experience shortages in our delivery capacity if our expansion fails to accurately and timely match increased customer and consumer demand. Furthermore, our anticipated future growth will likely place significant demands on our management and operations. Our success in managing our growth will depend, to a significant degree, on the ability of our executive officers and other members of our senior management to carry out our strategies effectively, our ability to balance the interests between us and our network partners as well as among our network partners, and our ability to adapt, improve and develop our financial and management information systems, controls and procedures. In addition, we will likely have to successfully recruit, train and manage more employees and improve and expand our sales and marketing capabilities. If we are not able to manage our growth or execute our strategies effectively due to any of the foregoing reasons, our expansion may not be successful, and our business and prospects may be materially and adversely affected. Our long-term growth and competitiveness are highly dependent on our ability to control costs and maintain or raise prices. To maintain competitive pricing and enhance our profit margins, we must continually control our costs. Effective cost-control measures have a direct impact on our financial condition and results of operations. We have adopted various cost control measures and will continue to add new ones as necessary and appropriate. For example, transportation costs can be reduced through the choice of appropriate vehicles and optimization of transportation routes, and labor costs can be reduced through automation. However, the measures we have adopted or will adopt in the future may not be as effective as expected in improving our financial condition and results of operations. We do not intend to compete with our competitors by introducing aggressive pricing policies, which we consider detrimental to our long-term growth. Delivery services fees charged by our network partners to parcel senders have declined over time, partially as a result of market competition. Our gross profit per parcel is also affected by a variety of other factors, such as an increase or decline in the average weight of parcels handled by us, an increase in the adoption of digital waybills, which have a lower charge rate than traditional paper waybills, an increase or a decrease in delivery services directly provided to certain enterprise customers, and changes in our operating model. For example, the direct shipping model, whereby some parcels are directly shipped by certain volume-qualified network partners to our destination sorting hubs without going through our origination sorting hubs, reduces overall delivery time and operating costs and also lowers our revenues. If we are not able to effectively control our cost and adjust the level of network transit fees based on operating costs and market conditions, our profitability and cash flow may be adversely affected. We face challenges in diversifying our service offerings and expanding our customer base. We intend to further diversify our service offerings and expand our customer base to increase the number of revenue sources in the future. New services or new types of customers may involve risks and challenges that we do not currently face. Such new initiatives may require us to devote significant financial and managerial resources and may not perform as well as expected. We may not be able to successfully address customer demand and preferences and our existing network and facilities may not be adaptable enough to accommodate new services or customers. For example, different service offerings will likely require different equipment specifications and service standards, which may require significant time and costs to implement. We may also be inexperienced with operating models and cost structures associated with new types of customers we may choose to pursue. In addition, we may not be able to provide services of sufficient quality, which may result in complaints or liability claims against us, all of which would harm our overall reputation and financial performance. We may also selectively invest in emerging business opportunities in adjacent logistics markets, such as less-than-truckload shipping, leverage our existing network and infrastructure to directly engage in related businesses, or explore new business initiatives which may create synergies with our existing businesses. We cannot assure you that such endeavors will be profitable or that we will be able to recoup our investments with respect to any new services or new types of customers in time or at all. 24 Table of Contents Damage to our brand image and corporate reputation could materially and adversely impact our business. We believe our brand image and corporate reputation will play an increasingly important role in enhancing our competitiveness and maintaining our growth. Many factors, some of which are beyond our control, may negatively impact our brand image and corporate reputation if not properly managed. These factors include our ability to provide superior services to our end customers, successfully conduct marketing and promotional activities, manage relationships with and among network partners, manage complaints and negative publicity, and maintain a positive perception of our company, our peers and the express delivery industry in general. Any actual or perceived deterioration of our service quality, which is based on an array of factors including customer satisfaction, number of complaints and number of accidents, may subject us to damages, including the loss of important customers. Any negative publicity against us or our peers may harm our corporate reputation and may result in changes to government policies and the regulatory environment. If we are unable to promote our brand image and protect our corporate reputation, we may not be able to maintain and grow our customer base and our business and our growth prospects may be adversely affected. Our business and the business of our network partners are subject to a broad range of PRC laws and regulations. If we or our network partners are deemed to be not in compliance with any of these laws and regulations, our business, reputation, financial condition and results of operations may be materially and adversely impacted. Our business is subject to governmental supervision and regulation by the PRC governmental authorities, including but not limited to, the State Post Bureau and the Ministry of Transportation. Together, these governmental authorities promulgate and enforce regulations that cover many aspects of our day-to-day operations. See “Item 4. Information on the Company—B. Business Overview—Regulation.” For example, the PRC Postal Law indicates that express delivery companies cannot engage in “posting and mail delivery business exclusively operated by postal enterprises.” However, PRC law does not provide a specific definition for “posting and mail delivery business exclusively operated by postal enterprises.” If such term is specifically defined in the future and if the parcels that we deliver fall into the defined category, we may be considered in violation of such regulation. Further, certain of our network partners may commence express delivery services while still in the process of obtaining Courier Service Operation Permits, and since they use our brand in their businesses, we may be subject to fines or receive order of rectification as a result. Incidents like the foregoing ones may materially and adversely impact our business, reputation, financial condition and results of operations. The Interim Regulations on Express Delivery, which were promulgated by the State Council on March 2, 2018, took effect on May 1, 2018, recently amended on April 13, 2025 and took effect on June 1, 2025, imposed or revised a number of requirements on us in operating our express delivery business, including the following: (i) we are required to timely file records with the local postal administrations for opening express delivery terminal outlets; (ii) in case we intend to suspend operating express delivery services, we shall make public announcement in advance, submit a written notice to the postal administrative departments, return the Courier Service Operation Permit and make proper arrangements for undelivered express parcels; (iii) we shall not sell, reveal or illegally provide any client information and we shall take remedial measures and report to the local postal administrations in case any client information is revealed or may be revealed; (iv) we shall verify the identity of senders and register their identity information when receiving express parcels and shall not receive their express parcels where senders refuse to furnish identity information or furnish false identity information; (v) we shall refuse to accept prohibited parcels, shall cease sorting, transporting and delivering any parcels which are suspected of containing prohibited items and shall promptly submit a report to governmental authorities and assist in investigations; (vi) we shall formulate our emergency plans, carry out emergency drills and exercises regularly and report emergencies to the local postal administrations; (vii) clients may claim compensation from us for any delay, missing, damage or shortage of express parcels handled by our network partners, since they use our trademark, corporate name and express waybill; and (viii) we are required to use packaging materials in compliance with mandatory national standards, and encouraged to use such materials in an optimized and economical manner as well as to adopt those with Green Product Certification. See “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations Relating to Express Delivery Services.” The operation of our express delivery service is subject to this regulation. Failure to comply with these regulations or any regulatory requirements may result in regulatory interviews by the competent authorities, requirement to rectify, fines, suspension of business for remediation or revocation of Courier Service Operation Permits. Pursuant to the Administrative Provisions concerning the Running of Cargo Vehicles with Out-of-Gauge Goods, which were promulgated by the PRC Ministry of Transport on August 19, 2016, took effect on September 21, 2016 and were amended on August 11, 2021, cargo vehicles running on public roads shall not carry cargo weighing more than the limits prescribed by this regulation and their dimensions shall not exceed those as set forth by the same regulation. The operation of our truck fleet is subject to this regulation. We expect to gradually reduce the number of non-compliant trucks, the non-compliant trucks may be banned and we may be required to modify non-compliant trucks or purchase new ones to replace them. Otherwise, we may be subject to additional penalties under this regulation if we continue to operate trucks that exceed the limits set forth in the regulation. 25 Table of Contents Pursuant to the PRC E-commerce Law which was promulgated by the Standing Committee of the National People’s Congress on August 31, 2018, and took effect on January 1, 2019, we are subject to certain requirements in e-commerce business, including the following: (i) in providing express logistics services for e-commerce activities, the providers thereof shall abide by laws and administrative regulations, and comply with the service standards and time limits they have promised; (ii) while handing over commodities to consignees, express logistics service providers shall remind consignees to examine the commodities immediately on the spot; in the event that the commodities are received by others for consignees, such express logistics service providers shall obtain the consent of consignees; and while senders handing over commodities to express logistics service providers, such express logistics service provider shall, in accordance with the laws and regulations, examine whether the postal articles are prohibited or restricted from express delivery in the presence of senders; and (iii) express logistics service providers are required to use environmental-friendly packaging materials in accordance with the provisions in an effort to reduce the consumption of packaging materials and implement the recycling measures. While offering express logistics services, the providers thereof may agree to be entrusted by e-commerce operators to collect payments for goods on a commission basis. See “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations Relating to Express Delivery Services.” The operation of our express delivery service is subject to this law. If we are found to be not compliant with the requirements, and we may be required to rectify. In order to adapt to the evolving e-commerce industry, which could have a significant impact on us, we may need to develop or upgrade existing business model. If our efforts to comply with laws and regulations concerning e-commerce business are unsuccessful, our business, financial condition and results of operation may be materially and adversely affected. In addition, our network partners have full discretion over their daily operations and make localized decisions with respect to their facilities, vehicles and hiring and pricing decisions. Their operations are regulated by various PRC laws and regulations, including local administrative rulings, orders and policies that are pertinent to their localized express delivery business. For example, local regulations may specify the models or types of vehicles to be used in parcel pickup and delivery services or require the network partners to implement heightened parcel safety screening procedures, which could materially drive up the operating costs and delivery efficiency of the pickup and delivery outlets. Existing and new laws and regulations may be enforced from time to time and uncertainties exist regarding the interpretation and implementation of current and any future PRC laws and regulations applicable to us and/or our network partners. If the PRC government requires additional approvals or licenses, imposes additional restrictions on our or our network partners’ operations, or tightens enforcements of existing or new laws or regulations, it has the authority, among other things, to levy fines, confiscate income, revoke business licenses, and require us or our network partners to discontinue the relevant business operations. Any of these actions by the PRC authorities may have a material and adverse effect on our business reputation, financial condition and results of operations. Since our network partners use our brand in their businesses, if they are found to be noncompliant with PRC laws and regulations, our business, reputation, financial condition and results of operations may be materially and adversely impacted. Any lack of requisite approvals, licenses or permits applicable to our business operations or those of our network partners may have a material and adverse impact on our business, financial condition and results of operations. We and our network partners are required to hold a number of licenses and permits in connection with our business operation, including, but not limited to, Courier Service Operation Permits and Road Transportation Operation Permits. Under PRC laws, an enterprise that operates and provides express delivery services must obtain a Courier Service Operation Permit listing out all the regions it and its branches are allowed to operate in. Such enterprise needs to make a filing with the postal authority to update or renew its Courier Service Operation Permit to include any additional regions it plans to expand into. The consolidated affiliated entities engaging in the express delivery services need to obtain the Courier Service Operation Permits, which based on our geographical coverage would cover the majority part of China. The consolidated affiliated entities are required to timely make all required filings with the postal authorities including to update or renew their Courier Service Operation Permits with respect to the regions they operate in. Failure to make such filings may result in a correction order or fines. In addition, an enterprise engaging in road freight transportation is required to obtain a Road Transportation Operation Permit from the relevant county-level road transportation administrative bureau unless the vehicles used are ordinary freight vehicles with a total mass of 4.5 tons or less. Similarly, our network partners also need to obtain necessary licenses and permits to operate express delivery and transportation business. Failure to obtain such licenses and permits may result in suspension of operation, fines or other penalties by government authorities. In addition, companies that apply for the Courier Service Operation Permit are subject to certain service capability requirements. If any of the consolidated affiliated entities are found to obtain the Courier Service Operation Permits by improper means such as fraud or bribery, such entities may be subject to a fine ranging from RMB10,000 to RMB30,000, their Courier Service Operation Permits may be revoked by the postal administration department and they cannot re-apply to obtain the permit for a period of three years. 26 Table of Contents After obtaining the Courier Service Operation Permit, an enterprise is further required to maintain its express delivery service operations during the validity of such permit. As of the date of this report, we are in the process of applying to renew several Courier Service Operation Permits. Where the permit-holder does not operate any express delivery services for a period of time over six months without due grounds after obtaining the Courier Service Operation Permit, or suspends its business for more than six months without authorization, the postal administrative departments may cancel the Courier Service Operation Permit of such holder. We are currently not aware of any such cancellation or notice of cancellation. If we become subject to such cancellation, our business, results of operations, financial condition and prospects could be adversely affected. New laws and regulations may be enforced from time to time to require additional licenses and permits other than those we currently have. For instance, the PRC E-commerce Law establishes additional standards in the express delivery industry. The PRC Foreign Investment Law, promulgated on March 15, 2019 and effective on January 1, 2020, replaced the trio of existing laws regulating foreign investment in China, together with their implementation rules and ancillary regulations. Further, the State Council also promulgated the Interim Regulations on Express Delivery on March 2, 2018. The Interim Regulations on Express Delivery, which took effect on May 1, 2018, recently amended on April 13, 2025 and took effect on June 1, 2025, stipulate additional requirements and filing procedures for courier service operators in operating new express delivery terminal outlets. See “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations Relating to Express Delivery Services.” As a result, substantial uncertainties exist regarding the interpretation and implementation of current and any future PRC laws and regulations applicable to our businesses. If the PRC government considers that we or our network partners were operating without the proper approvals, licenses or permits or promulgates new laws and regulations that require additional approvals or licenses or imposes additional restrictions on the operation of any part of our business, it has the authority, among other things, to levy fines, confiscate our income, revoke our business licenses, and require us to discontinue our that business or impose restrictions on the affected portion of our business. Any of these actions by the PRC government may have a material and adverse effect on our results of operations. Any deficiencies in China’s telecommunication and internet infrastructure could impair the functioning of our technology system and the operation of our business. Our business depends on the performance and reliability of the telecommunication and internet infrastructure in China. The availability and reliability of our website, mobile applications, customer service hotline and technology systems depend on telecommunication carriers and other third-party providers for digital data transmission and storage capacity, including bandwidth and server storage, among other things. If we are unable to enter into and renew agreements with these providers on acceptable terms, or if any of our existing agreements with such providers are terminated as a result of our breach or otherwise, our ability to provide our services to our customers could be adversely affected. We have experienced service interruptions in the past due to service interruptions at the underlying external telecommunications service providers, such as internet data centers and broadband carriers. Frequent service interruptions could frustrate customers and discourage them from using our services, which could cause us to lose customers and harm our operating results. We may not be able to maintain our corporate culture, which has been a key to our success. Since our inception, our corporate culture has been defined by our mission, vision and values, and we believe that our culture has been critical to our success. In particular, our corporate culture has helped us serve our customers, attract, retain and motivate employees and network partners, and create value for our shareholders. We face a number of challenges that may affect our ability to maintain our corporate culture, including: ● failure to identify and promote people to leadership positions in our organization who share our culture, values and mission; ● the increasing number and geographic diversity of our network partners; ● competitive pressure to move in directions that may divert us from our mission and values; ● the continued challenges resulting from a constantly evolving business environment; ● potential pressure from public markets to focus on short-term results instead of long-term value creation; and ● the increasing need to develop expertise in new areas of business that affect us. 27 Table of Contents If we are not able to maintain our corporate culture or if our culture fails to deliver the long-term results we expect to achieve, our business, financial condition, results of operations and prospects may be materially and adversely affected. Our business and results of operations may be materially and adversely affected if we are unable to provide high quality services to network partners and our end customers. The success of our business largely depends on our ability to maintain and further enhance our service quality. We provide our network partners, who are our direct customers, with access to our line-haul transportation and sorting network. Together with our network partners, we provide complete door-to-door express delivery services to our end customers, which consist mainly of e-commerce merchants and other express delivery service users. If we or our network partners are unable to provide express delivery services in a timely, reliable, safe and secure manner, our reputation and customer loyalty could be negatively affected. If our customer service personnel fail to satisfy individual customer needs and respond effectively to customer complaints, we may lose potential or existing end customers and experience a decrease in customer orders, which could have a material adverse effect on our business, financial condition and results of operations. We face risks associated with the financial services we provide to network partners. We provide financial services to qualified network partners. A qualified network partner must meet certain criteria set by us, such as having a legal and stable income or source of income and engaging in operation activities that are legal and meet the national industrial policies and requirements. Under PRC laws, an enterprise must obtain business licenses with corresponding business scope and/or approvals or filings from the governmental authorities related to operating and providing financial services, and our company is compliant with the laws and regulations in the PRC in all material aspects during the 2023, 2024 and 2025 with regard to the provision of such financial services. In connection with the financial services we provide to qualified network partners, we have obtained the requisite business licenses and/or approvals under PRC laws and regulations through various PRC subsidiaries. We have entered into agreements with qualified network partners and have committed and will continue to commit our own capital, which has had, and may continue to have, a negative impact on our cash flow. However, we cannot assure you that the consolidated affiliated entities have timely made all required filings with the governmental authorities including to update or renew their business licenses, approvals or filings, and the failure may subject us to a correction order or fines. The risk of payment defaults and other credit risks are inherent to our financial services business. We cannot assure you that our monitoring of credit risk issues is or will be sufficient to result in lower delinquencies. Furthermore, our ability to manage the quality of these loans and the associated credit risks will also impact the results of operations of our financial services business. A deterioration in the overall quality of our loan portfolio and the increasing exposure to credit risks may occur due to a variety of reasons, including factors beyond our control, such as a slowdown in the growth of the global or Chinese economy or a liquidity or credit crisis in the global or Chinese finance sector, which may materially and adversely affect our businesses, operations or liquidity of our network partners, or their ability to repay or roll over their debt. Any significant deterioration in the asset quality of our financial services business and significant increase in associated credit risks may materially and adversely affect our business, financial condition and results of operations. Customer demand is difficult to forecast accurately, and we may fail to make accurate planning and spending decisions to match actual customer demand. We make planning and spending decisions, including capacity expansion, procurement commitments, personnel hiring and other resource requirements based on our estimates of customer demand. The parcel volume we generate from end customers can vary significantly and unexpectedly, reducing our ability to accurately estimate future customer demand. In particular, we may potentially experience capacity and resource shortages in fulfilling customer orders following special promotional events such as promotional campaigns on June 18, November 11 and December 12 of each year or during other peak seasons throughout the year. Failure to meet customer demand in a timely fashion or at all may adversely affect our financial condition and results of operations. 28 Table of Contents Our business depends on the continuing efforts of our management. If we lose their services, our business may be severely disrupted. Our business operations depend on the continuing efforts of our management team, particularly members of our senior management named in this annual report. If one or several members of our management team were unable or unwilling to continue their employment with us, we may not be able to replace them in a timely manner, or at all. We may incur additional expenses to recruit and retain qualified replacements. In addition, our management may join a competitor or form a competing company. We can provide no assurance that we will be able to successfully enforce our contractual rights included in employment agreements with our management team, in particular in China, where almost all of these individuals reside. As a result, our business may be negatively affected due to the loss of one or more members of our management, and our financial condition and results of operations may be materially and adversely affected. If we are unable to attract, train and retain qualified personnel, our business may be materially and adversely affected. We intend to hire and retain additional qualified employees to support our business operations and planned expansion. Our future success depends to a significant extent on our ability to attract, train and retain qualified personnel, particularly management and operational personnel with expertise in the express delivery industry, the e-commerce industry or other areas we may choose to expand into. Our experienced mid-level managers are instrumental in executing our business plans, implementing our business strategies and supporting our business operations and growth, and we cannot assure you that we will be able to attract or retain these qualified personnel. We have made, and may need to continue to make, substantial capital expenditures, and we will face risks that are inherent to such investments. In order to implement our strategies and expansion plan, we made significant capital expenditures on the acquisition of land use rights, construction of facilities and upgrading of delivery infrastructure in connection with the growth of our business. We paid an aggregate of approximately RMB6.7 billion, RMB5.9 billion and RMB6.1 billion (US$0.9 billion) in 2023, 2024 and 2025, respectively, for purchases of property and equipment and purchases of land use rights. To facilitate our future expansion, including the entry into new sectors, we may need to continue to make substantial capital expenditures. Significant capital expenditures are associated with certain inherent risks. We may not have the resources to fund investments that we have committed to making. Even if we have sufficient funding, the assets that best suit our needs may not be available at reasonable prices or at all. For example, land resources may be scarce in an area that best fits our network expansion plan due to local zoning plans or other regulatory controls. In addition, we are likely to incur capital expenditures earlier than all of the anticipated benefits, and the return on these investments may be lower, or may be realized more slowly, than we expected. In addition, the carrying value of the related assets may be subject to impairment, which may adversely affect our financial condition and operating results. Our results of operations are subject to seasonal fluctuations. We experience seasonality in our business, mainly correlating to the seasonality patterns associated with e-commerce in China. For example, our customers generally record fewer purchase orders during national holidays in China, particularly during the Chinese New Year holiday season in the first quarter of each year. Furthermore, when e-commerce platforms hold special promotional campaigns, which they do for example on June 18, November 11 and December 12 of each year, we typically observe peaks of parcel volume immediately following these campaigns. Our financial condition and results of operations for future periods may continue to fluctuate. As a result, our results of operations and the trading price of our Class A ordinary shares and/or ADSs may fluctuate from time to time due to seasonality. Fluctuations in the price or availability of fuel and uncertainty in third-party transportation capacity may adversely affect our line-haul transportation costs and operational results. Fuel costs and transportation expenses incurred in connection with the use of third-party transportation services represent 19%, 21% and 21% of our line-haul transportation costs in 2023, 2024 and 2025, respectively. The availability and price of fuel and third-party transportation capacity are subject to political, economic, and market factors that are outside of our control. In the event of a significant increase in fuel prices and third-party transportation service charges, our transportation expenses may rise, and our gross profit may decrease if we are unable to adopt effective cost control-measures or pass on incremental costs to our customers. For example, fuel price increases due to international factors, such as the Ukraine-Russia conflict and the Israeli-Palestinian conflict, may adversely impact our gross profit margin. As a result, our operating margin and the market price of our Class A ordinary shares and/or ADSs may be adversely affected. 29 Table of Contents We may not be able to obtain additional capital when desired, on favorable terms or at all. We need to make continued investments in equipment, land, facilities and technological systems to remain competitive. Due to the unpredictable nature of the capital markets and our industry, we cannot assure you that we will be able to raise additional capital on terms favorable to us, or at all, if and when required, especially if we experience disappointing operating results. If adequate capital is not available to us as required, our ability to fund our operations, take advantage of unanticipated opportunities, develop or enhance our infrastructure or respond to competitive pressures could be significantly limited. If we cannot raise required capital when needed, we may be unable to meet the demands of existing and prospective customers, which would adversely affect our business, financial condition and results of operations. If we do raise additional funds through the issuance of equity or convertible debt securities, the ownership interests of our shareholders could be significantly diluted. These newly issued securities may have rights, preferences or privileges senior to those of existing shareholders. A severe or prolonged downturn in the Chinese or global economy could materially and adversely affect our business and our financial condition. COVID-19 had a severe and negative impact on the Chinese and the global economy from 2020 through 2022, and the global macroeconomic environment still faces numerous challenges. The growth rate of the Chinese economy has been slowing since 2010 and the Chinese population began to decline in 2022. The Russia-Ukraine conflict, the Hamas-Israel conflict and the attacks on shipping in the Red Sea have heightened geopolitical tensions across the world. The impact of the Russia-Ukraine conflict on Ukraine food exports has contributed to increases in food prices and thus to inflation more generally. There have also been concerns about the relationship between China and other countries which may potentially have economic effects. In particular, there is significant uncertainty about the future relationship between the United States and China with respect to a wide range of issues including trade policies, treaties, government regulations and tariffs. Economic conditions in China are sensitive to global economic conditions, as well as changes in domestic economic and political policies and the expected or perceived overall economic growth rate in China. Any severe or prolonged slowdown in the global or Chinese economy may materially and adversely affect our business, results of operations and financial condition. Rising international political tensions, including changes in the U.S. and international trade policies, particularly with regard to China, may adversely impact our business, financial condition, and results of operations. Although our current operations are almost exclusively in China, we also offer express delivery services in certain key overseas markets. If we further expand our business internationally in the future, any unfavorable government policies on international trade, such as capital controls or tariffs, may affect the demand for our services, impact our competitive position, or prevent us from being able to conduct business in certain countries. If any new tariffs, legislation, or regulations are implemented, or if existing trade agreements are renegotiated, such changes could adversely affect our business, financial condition, and results of operations. There have been heightened tensions in international economic relations, such as the one between the United States and China. Tensions between the United States and China have led to additional or higher tariffs imposed by the United States on products imported from China and restrictions on the sale of certain products into the United States. China has responded by imposing, and proposing to impose, additional or higher tariffs on products imported from the United States, among other measures. These actions may materially and adversely affect international trade, global financial markets, and the stability of the global economic condition. As of the date of this annual report, there is still a high degree of uncertainty surrounding U.S. tariff policy, how it will be implemented, and how other countries will react to it. It also remains uncertain whether increased tariffs and trade tensions will create further disruptions and uncertainties to the international trade and lead to a downturn to the global economy. 30 Table of Contents In addition, political tensions between the United States and China have escalated due to various factors. On August 9, 2023, the Biden administration of the United States released an executive order directing the Department of Treasury to create an outbound foreign direct investment review program that would require reporting on or prohibit investments by U.S. persons involving “covered national security technologies and products.” On October 28, 2024, the Department of Treasury issued a final rule to implement the executive order, providing details on technical specifications and other aspects of the operative regulations, which came into effect on January 2, 2025. This is referred to as the Outbound Investment Rule. The Outbound Investment Rule imposes investment prohibitions and notification requirements on U.S. persons for a wide range of investments in entities associated with “countries of concern,” currently only China, that are engaged in activities relating to (i) semiconductors and microelectronics, (ii) quantum information technologies, and (iii) artificial intelligence systems. These entities are collectively defined as “Covered Foreign Persons.” U.S. persons subject to the Outbound Investment Rule are prohibited from making, or required to report, transactions involving Covered Foreign Persons that are defined as “covered transactions,” although the Outbound Investment Rule excludes some investments from the scope of covered transactions, including those in publicly traded securities. We do not believe that ZTO Express (Cayman) Inc. would be defined as a Covered Foreign Person under the Outbound Investment Rule. However, there is no assurance that the U.S. Department of Treasury will take the same view as ours. If we were to be deemed a “Covered Foreign Person,” and if U.S. persons were to engage in a “covered transaction” (as defined under the Outbound Investment Rule) that involves the acquisition of our equity interests, such U.S. persons may need to make a notification pursuant to the Outbound Investment Rule. In addition, even though U.S. persons’ acquisitions of publicly traded securities (such as our ADSs) will be exempted from the scope of covered transactions under the Outbound Investment Rule, the rule could still limit our ability to raise capital or contingent equity capital from U.S. investors given that the relevant laws, regulations, and policies continue to evolve and we cannot rule out the possibility of being deemed a Covered Foreign Person in the future due to different views taken by the U.S. Department of Treasury, potential amendments to the Outbound Investment Rule or the introduction of additional regulations. For example, on February 21, 2025, the White House released President Trump’s “America First Investment Policy” memorandum, outlining several initiatives to incentivize investment from U.S. allies and partners while restricting investments involving “foreign adversaries,” including China. On December 18, 2025, the Comprehensive Outbound Investment National Security Act of 2025, or the COINS Act, was signed into law. The COINS Act will keep the core of the Outbound Investment Rules unchanged while expanding its scope and coverage in certain respects. The COINS Act will not take effect until the Treasury issues new regulations (subject to notice and comment), which it must do by March 13, 2027. As such, the Treasury may further amend or expand existing prohibitions and restrictions in accordance with the COINS Act. Any such expansion may further deepen the uncertainties for cross-border collaborations, investments, and funding opportunities for China-based issuers including us. If our ability to raise such capital is significantly and negatively affected, it could be detrimental to our business, financial condition and prospects, and our ADSs may significantly decline in value. Rising political tensions could reduce levels of trades, investments, technological exchanges, and other economic activities between the two major economies. Besides, China is also facing the challenges of technological blockade and the economic decoupling between the U.S. and China. Any of these factors could have a material adverse effect on our business, prospects, financial condition and results of operations. Such tensions between the United States and China, and any escalation thereof, may have a negative impact on the general, economic, political, and social conditions in China. Although the direct impact of the current international trade tensions and political tensions between the United States and China, and any escalation of such tensions, on the housing transaction and services industry in China is uncertain, the negative impact on general, economic, political and social conditions may adversely impact our business, financial condition and results of operations. We have limited insurance coverage which could expose us to significant costs and business disruption. We have limited insurance coverage. For example, we are not legally required to maintain insurance for parcel shipments. We do not maintain business interruption insurance or general third-party liability insurance, nor do we maintain key-man life insurance. We cannot assure you that our insurance coverage is sufficient to prevent us from any loss or that we will be able to successfully claim our losses under our current insurance policies on a timely basis, or at all. If we incur any loss that is not covered by our insurance policies, or the compensated amount is significantly less than our actual loss, our business, financial condition and results of operations could be materially and adversely affected. 31 Table of Contents We rely on certain key operating metrics to evaluate the performance of our business, and real or perceived inaccuracies in such metrics may harm our reputation and negatively affect our business. We rely on certain key operating metrics, such as parcel volume and unit cost per parcel, to evaluate the performance of our business. Our operating metrics may differ from estimates published by third parties or from similarly titled metrics used by our competitors due to differences in methodology and assumptions. We calculate these operating metrics using internal company data that has not been independently verified. For example, our parcel volume data is derived based on the number of parcels collected by our network partners using our waybills. If we discover material inaccuracies in the operating metrics we use, or if they are perceived to be inaccurate, our reputation may be harmed, and our evaluation methods and results may be impaired, which could negatively affect our business. If investors make investment decisions based on operating metrics we disclose that are inaccurate, we may also face potential lawsuits or disputes. Our business is subject to complex and evolving laws and regulations regarding cybersecurity, privacy, data protection and information security in China. Failure to protect confidential information of our end customers or consumers could damage our reputation and substantially harm our business and results of operations. We have access to a large amount of confidential information in our day-to-day operations. Although we have managed to redact or hide the confidential information in a substantial majority of our waybills, the remaining ones may contain the names, addresses, phone numbers and other contact information of the sender and recipient of a parcel. The content of the parcel may also constitute or reveal confidential information. The proper use and protection of confidential information is essential to maintaining customer trust in us and our services. Our technology systems also process and store a significant amount of confidential information and data for the proper functioning of our network. Security breaches and hacker attacks on our system might result in a compromise to the technology that we use to protect confidential information. We may not be able to prevent third parties, especially hackers or other individuals or entities engaging in similar activities, from illegally obtaining confidential information in our possession. Such individuals or entities may engage in various other illegal activities using such information. Further, as parcels move through our network from pickup to delivery, certain personnel handling the flow of parcels may have access to certain confidential information despite that we have redacted or hidden most of the confidential information on the waybills. Some of these personnel may misappropriate the confidential information despite the security policies and measures we have implemented. In addition, most of the delivery and pickup personnel are not our employees, which makes it more difficult for us to implement sufficient and effective control over them. 32 Table of Contents Practices regarding the collection, use, storage, transmission and security of personal information have recently come under increased public scrutiny. On June 10, 2021, the Standing Committee of the National People’s Congress promulgated the PRC Data Security Law, which took effect on September 1, 2021. The PRC Data Security Law, among other things, provides for a security review procedure for the data activities that may affect national security. On December 28, 2021, the Cyberspace Administration of China and twelve other government authorities promulgated the new Measures for Cybersecurity Review, or Cybersecurity Review Measures, which took effect on February 15, 2022, to replace the original measures promulgated in 2020. Pursuant to the Cybersecurity Review Measures, critical information infrastructure operators that procure internet products and services, and network platform operators engaging in data processing activities, must be subject to the cybersecurity review if their activities affect or may affect national security. The Cybersecurity Review Measures further stipulate that the network platform operators holding over one million users’ personal information shall declare to the Cybersecurity Review Office for a cybersecurity review before any public offering at a foreign stock exchange. On August 17, 2021, the State Council promulgated the Regulations on the Security Protection of Critical Information Infrastructure, which became effective on September 1, 2021. Pursuant to the Regulations on the Security Protection of Critical Information Infrastructure, critical information infrastructure shall mean any important network facilities or information systems of the important industry or field such as public communication and information service, energy, transportation, water conservancy, finance, public services, e-government affairs and national defense science, technology and industry, as well as other important network facilities and information systems which, in case of destruction, loss of function or leak of data, may result in serious damage to national security, the national economy and the people’s livelihood and public interests. In addition, the administration departments of each critical industry and sector shall be responsible to formulate eligibility criteria and determine the critical information infrastructure operator in the respective industry or sector. The operators shall be informed about the final determination as to whether they are categorized as critical information infrastructure operators. As of the date of this annual report, no detailed rules or implementation has been issued by any administration department of any such critical industry and sector relevant to us. Furthermore, the exact scope of “critical information infrastructure operators” under the current regulatory regime remains unclear, and the PRC governmental authorities may have certain discretion in the interpretation and enforcement of these laws. Therefore, it is uncertain whether we would ultimately be deemed as a critical information infrastructure operator under PRC law. It also remains uncertain whether the future regulatory changes would impose additional restrictions on companies like us. As of the date of this annual report, we have not received any official letter or document issued by the competent governmental authorities identifying us as a critical information infrastructure operator under the Regulations on the Security Protection of Critical Information Infrastructure, we have not been involved in any investigations on cybersecurity review made by the Cyberspace Administration of China on such basis and we have not received any inquiry, notice, warning, or sanctions in such respect. We may need to declare to the Cybersecurity Review Office for a cybersecurity review and we may not be able to ascertain the results of such a declaration. If we are unable to comply with the cybersecurity, data privacy and critical information infrastructure requirements in a timely manner, or at all, we may be subject to government enforcement actions and investigations, fines, penalties, suspension of our non-compliant operations, or removal of our app from the application stores, among other sanctions, which could materially and adversely affect our business and results of operations. On July 7, 2022, the Cyberspace Administration of China promulgated the Measures on Security Assessment of Cross-border Data Transfer which became effective on September 1, 2022. The Measures on Security Assessment of Cross-border Data Transfer shall apply to the security assessment of the provision of important data and personal information collected and generated by data processors in the course of their operations within the territory of the PRC by such data processors to overseas recipients. Pursuant to such measures, a data processor shall apply to the national cyberspace administration for the security assessment of the outbound data transfer through the local provincial cyberspace administration, if it intends to provide data abroad under any of the following circumstances: (i) the data processor provides important data abroad; (ii) the critical information infrastructure operator or the data processor that has processed the personal information of over one million people provides personal information abroad; (iii) the data processor that has provided the personal information of over 100,000 people or the sensitive personal information of over 10,000 people cumulatively since January 1 of the previous year provides personal information abroad; (iv) any other circumstance where an application for the security assessment of outbound data transfer is required by the national cyberspace administration. Although certain of our data related to export cross-border parcel delivery has been approved for outbound transfers following the completion of the required outbound security assessments by the Cyberspace Administration of China as of the date of this annual report, we may be required to undergo security assessments for outbound data transfers from time to time, and we face uncertainties regarding whether such assessments or any other specific related actions can be completed in a timely manner or at all. If we fail to comply with such requirements may subject us to suspension of services, fines, and revoking business permits or business licenses, among other things. Apps are specially regulated by the Administrative Provisions on Mobile Internet Applications Information Services (Revised in 2022), promulgated by the Cyberspace Administration of China, last amended on June 14, 2022 and became effective on August 1, 2022. These provisions set forth the requirements on the app information service and the app distribution service. The Cyberspace Administration of China and its local branches shall be responsible for the supervision and administration of nationwide and local app information content respectively. We are currently in compliance with these provisions in all material aspects and we may still have to invest certain cost to ensure our app operation continuous compliance with the regulatory requirements. 33 Table of Contents In August 2021, the Standing Committee of the NPC promulgated the PRC Personal Information Protection Law, which integrates the scattered rules with respect to personal information rights and privacy protection and took effect on November 1, 2021. We update our privacy policies from time to time to meet the latest regulatory requirements of PRC government authorities and adopt technical measures to protect data and ensure cybersecurity in a systematic way. Nonetheless, the PRC Personal Information Protection Law elevates the protection requirements for personal information processing, and many specific requirements of this law remain to be clarified by the Cyberspace Administration of China, other regulatory authorities, and courts in practice. We may be required to make further adjustments to our business practices to comply with the personal information protection laws and regulations. On February 17, 2023, the CSRC promulgated the Overseas Listing Trial Measures, which became effective on March 31, 2023. Pursuant to the Overseas Listing Trial Measures, overseas offering and listing by domestic companies shall strictly abide by the laws, administrative regulations and state rules concerning national security in the areas of foreign investment, cybersecurity, data security and etc., and duly fulfill their obligations to protect national security. If the intended overseas offering and listing necessitates a national security review (for example, a cybersecurity review), the national security review procedures must be completed before the application for such offering and listing is submitted to overseas regulators and foreign stock exchanges. If we are not able to comply with the requirements under the laws, administrative regulations and rules concerning national security in spheres of foreign investment, cybersecurity, data security and other aspects in a timely manner, or at all, our future capital raising activities may be materially and adversely affected. In general, compliance with the existing PRC laws and regulations, as well as additional laws and regulations that PRC regulatory bodies may enact in the future, related to data security and personal information protection, may be costly and result in additional expenses to us, and subject us to negative publicity, which could harm our reputation and business operations. There are also uncertainties with respect to how such laws and regulations will be implemented and interpreted in practice. Any failure or perceived failure by us to prevent information security breaches or to comply with privacy policies or privacy-related legal obligations could cause our customers to lose trust in us and our services. Any perception that the privacy of information is unsafe or vulnerable when using our services, could damage our reputation and substantially harm our business. We may fail to successfully enter necessary or desirable strategic alliances or make acquisitions or investments, and we may not be able to achieve the anticipated benefits from these alliances, acquisitions or investments we make. We may selectively pursue strategic alliances and potential strategic acquisitions that are complementary to our business and operations, including opportunities that can help us further expand our service offering and improve our technology systems. Strategic alliances with third parties could subject us to a number of risks, including risks associated with sharing proprietary information, non-performance or default by counterparties, and increased expenses in establishing these new alliances, any of which may materially and adversely affect our business. We may have limited ability to control or monitor the actions of our strategic partners. To the extent a strategic partner suffers any negative publicity as a result of its business operations, our reputation may be negatively affected by virtue of our association with such party. To consolidate and optimize our delivery capacity in key geographic areas in China, we conducted certain asset and equity acquisitions from 2014 to 2016. In 2017, we acquired the core business of China Oriental Express Co., Ltd. and its subsidiaries. In June 2018, we made a strategic investment of approximately US$168 million to acquire an approximately 15% equity stake in Cainiao Post, Cainiao Network’s network of last-mile delivery stations. We have recorded goodwill as a result of certain acquisitions. If these companies do not subsequently generate the anticipated financial performance or if any goodwill impairment test triggering event occurs, we may need to revalue or write down the value of goodwill and other intangible assets in connection with such acquisitions, which would harm our results of operations. The impairment charge for the goodwill was nil, nil and RMB84.4 million (US$12.1 million) in 2023, 2024 and 2025, respectively. Furthermore, we continually review our equity method investments in equity investees to determine whether a decline in fair value below the carrying value is “other-than-temporary” and impairment loss needs to be recognized. The primary factors that we consider include the duration and severity of the decline in fair value, the financial condition, operating performance and the prospects of the equity investee and other company specific information such as recent rounds of financing. If the condition or performance of the equity investees has changed in the future, we may have to record additional impairment charges in future accounting periods. If we need to recognize significant impairment losses on equity investments, our results of operations will be materially and adversely affected. 34 Table of Contents In addition, we may consider strategically acquiring other companies, businesses, assets or technologies that are complementary to our business and operations as part of our growth strategy. The strategic acquisition and subsequent integration of new businesses is likely to require significant managerial and financial resources and could result in a diversion of resources from our existing business, which in turn could have an adverse effect on our growth and business operations. Acquired businesses or assets may not generate the financial results we expect and may be loss making over time. The cost and duration of integrating newly acquired businesses could also materially exceed our expectations. We may not be able to successfully integrate the businesses and assets we have acquired or to timely and effectively train and integrate the employees into our operations. Any such negative developments could have a material adverse effect on our business, financial condition and results of operations. If we cannot obtain sufficient cash when we need it, we may not be able to meet our payment obligations under our notes. In August 2022, we issued US$1 billion in aggregate principal amount of convertible senior notes due 2027, or the 2027 Notes. The 2027 Notes bear interest at a rate of 1.50% per year, payable semiannually in arrears on March 1 and September 1 of each year, beginning on March 1, 2023. The 2027 Notes will mature on September 1, 2027, unless earlier redeemed, repurchased or converted in accordance with their terms prior to such date. The holders may require us to repurchase for cash all or part of 2027 Notes on September 2, 2025, or upon a fundamental change, at a repurchase price equal to 100% of the principal amount of the notes to be repurchased, plus accrued and unpaid interest. In connection with the offering of the 2027 Notes, we have entered into capped call transactions with certain counterparties. The cap price of the capped call transactions is initially US$36.48 per ADS and is subject to adjustment under the terms of the capped call transactions. In February 2026, we issued US$1.5 billion in aggregate principal amount of convertible senior notes due 2031, or the 2031 Notes. The 2031 Notes will bear interest at a rate of 0.925% per year, payable semiannually in arrears on March 1 and September 1 of each year, beginning on September 1, 2026. The 2031 Notes will mature on March 1, 2031, unless earlier redeemed, repurchased or converted in accordance with their terms prior to such date. The holders may requires us to repurchase for cash all or part of 2031 Notes on March 1, 2029, or upon a fundamental change, at a repurchase price equal to 100% of the principal amount of the 2031 Notes to be repurchased, plus accrued and unpaid interest. In connection with the offering of the 2031 Notes, we have entered into capped call transactions with certain counterparties. The cap price of the capped call transactions is initially US$35.9906 per ADS and is subject to adjustment under the terms of the capped call transactions. We may not have sufficient funds to pay the interest or fulfill other obligations under these notes. We derive most of our revenues from, and hold most of our assets through, our subsidiaries. As a result, we may rely in part upon distributions and advances from our subsidiaries in order to help us meet our payment obligations under the notes and our other obligations. Our subsidiaries are distinct legal entities and do not have any obligation, legal or otherwise, to provide us with distributions or advances. We may face tax or other adverse consequences, or legal limitations, on our ability to obtain funds from these entities. In addition, our ability to obtain external financing in the future is subject to a variety of uncertainties, including: ●our financial condition, results of operations and cash flows; ●general market conditions for financing activities by internet companies; and ●economic, political and other conditions in the PRC and elsewhere. If we are unable to obtain funding in a timely manner or on commercially acceptable terms, we may not be able to meet our payment obligations under our notes. If we fail to pay interest on the notes, we will be in default under the indenture governing the notes, which in turn may constitute a default under existing and future agreements governing our indebtedness. Our business is subject to the risks associated with international expansion initiatives. Our current operations are almost exclusively in China, but we also offer express delivery services in certain key overseas markets. We intend to continue to explore and enter into other international expansion initiatives in the future. These initiatives are likely to involve countries where we have limited operational experience and subject us to various risks, including changes in local economic and political conditions, changes in international laws and regulations, changes in tariffs, trade restrictions, trade agreements and taxation, and difficulties in managing or overseeing operations outside China. The occurrence or consequences of any of these risks may restrict our ability to operate in the affected country and/or decrease our profitability of our operations in that country. We will also be exposed to increased risk of loss from foreign currency fluctuations and exchange controls, as well as longer accounts receivable payment cycles. We may also fail to alter or adjust our business practices in time to avoid or reduce adverse effects from any of the foregoing risks. 35 Table of Contents We may not be able to prevent others from unauthorized use of our intellectual property, which could harm our business and competitive position. We regard our trademarks, domain names, trade secrets, proprietary technologies and other intellectual property as critical to our business. We rely on a combination of intellectual property laws and contractual arrangements to protect our proprietary rights. We may fail to register, maintain and enforce intellectual property rights in the market where we operate if we do not provide sufficient evidence required by governmental authorities. The interpretation and enforcement of the laws and regulations and the enforcement practices by the governmental authorities may be changed if the laws and regulations change. Confidentiality agreements and license agreements may be breached by counterparties, and there may not be adequate remedies available to us for any such breach. Accordingly, we may not be able to effectively protect our intellectual property rights or to enforce our contractual rights in the market where we operate. Policing any unauthorized use of our intellectual property is difficult and costly and the steps we have taken may be inadequate to prevent the misappropriation of our intellectual property. In the event that we resort to litigation to enforce our intellectual property rights, such litigation could result in substantial costs and a diversion of our managerial and financial resources. We cannot provide any assurance that we will prevail in such litigation. In addition, our trade secrets may be leaked or otherwise become available to, or be independently discovered by, our competitors. Any failure in protecting or enforcing our intellectual property rights could have a material adverse effect on our business, financial condition and results of operations. Our business and reputation may be harmed by unethical or anticompetitive business conduct within or in connection with our network. There has been and may continue to be unethical or anticompetitive conduct, misconduct or unlawful behavior by our employees within, or in connection with, our network, such as with respect to the procurement of resources and the pricing of delivery service charges. The existing protocols and disciplinary measures governing the business conduct of our employees and our customers may not be sufficient to prevent them or their personnel from acting unethically or anticompetitively. Such conduct may include the mishandling of funds or accepting unlawful kick-backs during our raw material or equipment procurement. We are also aware of certain e-commerce merchants placing fabricated orders, such as parcels with valueless content, to themselves or to their designated parties with the intent to generate inflated sales records and consumer reviews and create perceived popularity among online consumers. These fabricated orders do not directly impact our revenues as our network partners are generally able to collect service charges from these merchants. It is extremely difficult for us and our network partners to distinguish these orders from genuine orders through the ordinary parcel screening procedures. We may be subject to heightened compliance costs or loss of business due to reduced e-commerce business volume if the PRC government cracks down on these unethical practices. We also have little control over third parties involved in unethical or anticompetitive business conduct targeted at or in connection with our network, such as non-compliance with laws, third-party sabotage or allegations intended to harm us or our network partners. We may incur substantial monetary losses and our reputation may suffer as a result to such conduct. We may also incur significant liabilities and penalties arising from such unethical conduct and may be required to allocate significant resources and incur material expenses to prevent such unethical or anticompetitive conduct in the future. We are regularly subject to claims, lawsuits and other proceedings that may adversely affect our reputation, business and results of operations. We are regularly subject to claims, lawsuits, arbitration proceedings, government investigations and other legal and regulatory proceedings in the ordinary course of business, including those involving personal injury, property damage, labor and employment, commercial disputes, user complaints, intellectual property disputes, compliance with regulatory requirements and other matters. We may become subject to additional types of claims, lawsuits, government investigations and legal or regulatory proceedings as our business grows and as we deploy new business offerings. We are also regularly subject to claims, lawsuits, arbitration proceedings, government investigations and other legal and regulatory proceedings seeking to hold us liable for the actions of retailers, merchants and riders on our platforms. The results of any such claims, lawsuits, arbitration proceedings, government investigations or other legal or regulatory proceedings cannot be predicted with certainty. Any claims against us, whether meritorious or not, could be time-consuming, result in costly litigation, be harmful to our reputation, require significant management attention and divert significant resources. It is possible that the resolution of one or more such proceedings could result in substantial damages, settlement costs, fines and penalties that could adversely affect our reputation and brand, business, financial condition and results of operations. In addition, the resolution or settlement of any legal proceeding that involve our industry, whether we are a party to such legal proceeding or not, could also harm our business, financial condition and results of operations. 36 Table of Contents In addition, we were named as a defendant in certain putative shareholder class action lawsuits in the United States. See “Item 8. Financial Information—A. Consolidated Statements and Other Financial Information—Legal Proceedings.” All of these cases were voluntarily dismissed without prejudice in 2021 other than one case in which the court rendered a judgment in 2021 in favor of us and the other defendants. We may be involved in more class action lawsuits in the future. Such lawsuits could divert a significant amount of our management’s attention and other resources from our business and operations, which could harm our results of operations and require us to incur significant expenses to defend the lawsuits. Any such class action suit, whether or not successful, could harm our reputation and restrict our ability to raise capital in the future. In addition, if a claim is successfully made against us, we may be required to pay significant damages, which could have a material adverse effect on our financial condition and results of operations. Claims, lawsuits and other regulatory actions under competition laws may subject us to penalties, constraints on our business and damage to our reputation. The PRC government strengthened enforcement against monopoly agreements, concentration of undertakings, abuse of dominant market position and other anti-unfair competitive activities or anti-monopoly activities in recent years. We may incur significant expenses and devote significant resources and efforts toward ensuring compliance with the existing and new laws, regulations, rules and other regulatory requirements that may be enforced from time to time. If we fail to comply with the competition laws, regulations, rules and other regulatory requirements, we may also be subject to investigations, penalties, sanctions, claims, lawsuits and other legal and regulatory proceedings, which could materially and adversely affect our business, operations, reputation, brand, the trading prices of our ADSs, Shares and/or other securities. The title defects with respect to or encumbrances on certain land and buildings or failure to obtain requisite approvals, licenses or permits in carrying out our property construction may cause interruptions to our business operations. As of March 31, 2026, we have not obtained land use rights certificates with respect to an aggregate gross land area of approximately 112,000 square meters of sorting hubs and property ownership certificates with respect to an aggregate gross floor area of approximately 608,000 square meters of buildings. We are in the process of applying for the registration of the land use right and property ownership certificates pursuant to the applicable contracts for assignment of state-owned construction land use right, but we are unable to estimate the time required to complete such registration and obtain such certificates. We have also used some new buildings before we finish filing of as-built inspection on such buildings. Furthermore, although it is customary for express delivery services providers to construct buildings on industrial land as their offices, delivery and sorting hubs or outlets, depending on the attitude and supervision of the government authority, we could be asked to use the building in line with the approved usage specified on certain licenses of such buildings. In connection with the construction of structures on our property, we are required to obtain requisite licenses, permits, certificates and approvals, including but not limited to, land use rights certificates/real estate certificates, construction land planning permits, construction works planning permits, construction work commencement permits and completion certificates from the government authorities in China. If we fail to obtain or renew such certificates, permits, registrations, filings, approvals and licenses in a timely manner, we may be subject to penalties and sanctions, including fines, rectification orders, construction suspension orders and demolition orders, all of which may adversely affect our construction efforts. We have not been in full compliance with certain construction and land use requirements under PRC laws and regulations. For example, we have commenced certain construction projects prior to obtaining requisite permits and put completed buildings into use before passing the requisite inspection and acceptance tests. Our non-compliance with these requirements has resulted in penalties imposed by the government authorities. Any of the foregoing risks could result in significant disruption to our operations and result in additional costs, which could adversely affect our business, financial condition and results of operations. 37 Table of Contents Our use of certain leased properties could be challenged by third parties or governmental authorities, which may cause interruptions to our business operations. As of March 31, 2026, for a small portion of our leased sorting hubs and offices, we have not been provided by the lessors with the applicable certificates, approvals or any other documentation proving their right to lease those properties to us. If our lessors are not the owners of the properties and they have not obtained consents from the owners or their lessors or permits from the governmental authorities, our leases could be invalidated. If this occurs, we may have to renegotiate the leases with the owners or other parties who have the right to lease the properties, and the terms of the new leases may be less favorable to us. To our knowledge, some of the lessors of the leased delivery and pickup outlets have not provided our network partners with their property title certificates, approvals or other documentation proving their right to lease those properties. If our network partners were to find replacement premises for their outlets due to any lease deficiencies, the daily operations of such outlets may be negatively affected. In addition, a substantial portion of our leasehold interests in leased properties have not been registered with the PRC governmental authorities as required by PRC laws. The failure to register leasehold interests may expose us to potential fines. Furthermore, some of our leased properties do not have title certificates or approvals and, the owner or lessor of such property may not have the right to lease such property to us. For example, certain properties we lease in Beijing for our sorting hub and office do not have a title certificate due to lack of appropriate approval during its construction, and the owner of such property had received notice from government authorities indicating that the construction was illegal. Although the authorities have not mandated the owner to dismantle the property, our use of the leased property may be affected in the future. In the event that our use of properties is successfully challenged, we may be subject to fines and forced to relocate. In addition, we may become involved in disputes with the property owners or third parties who otherwise have rights to or interests in our leased properties. We are currently using our best efforts to find an alternative location in Beijing, including purchasing a new piece of land, to mitigate the risk arising from such title deficiency. However, we can provide no assurance that we will be able to find suitable replacement sites on terms acceptable to us on a timely basis, or at all, or that we will not be subject to material liability resulting from third parties’ challenges on our use of such properties. As a result, our business, financial condition and results of operations may be materially and adversely affected. Failure to renew our current leases or locate desirable alternatives for our facilities could materially and adversely affect our business. We lease properties to operate some of our offices and sorting hubs and some of our network partners lease properties to operate their pickup and delivery outlets. We and our network partners may not be able to successfully extend or renew such leases upon expiration, on commercially reasonable terms or at all, and may be forced to relocate the affected operations. Such relocation may disrupt our operations and result in significant relocation expenses, which could adversely affect our business, financial condition and results of operations. We may not be able to locate desirable alternative sites for our facilities as our business continues to grow and failure in relocating our operations when required could adversely affect our business and operations. In addition, we compete with other businesses for premises at certain locations or of desirable sizes. Even if we or our network partners are able to extend or renew the respective leases, rental payments may significantly increase as a result of the high demand for the leased properties. We may be penalized if we fail to comply with regulations on commercial franchising. We are engaged in commercial franchising, which refers to the business activities where an enterprise that possesses the registered trademarks, enterprise logos, patents, proprietary technology or any other business resources allows such business resources to be used by another business operator through contract and the franchisee follows the uniform business model to conduct business operation and pay franchising fees according to the contract. We and our network partners are therefore subject to regulations on commercial franchising. See “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations Relating to Commercial Franchising.” Under the relevant regulations, we are required to file our cooperation arrangements with network partners with the PRC Ministry of Commerce or its local counterparts. We have completed the commercial franchising filing as of the date of this annual report and are subject to regular post-filing report. Failure to comply with these regulations result in orders to rectify, fines, or revocation of the filing. 38 Table of Contents We are uncertain about the recoverability of our input value-added tax, which may affect our financial positions in the future. As of December 31, 2023, 2024 and 2025, our input value-added tax, or VAT, amounted to RMB2,704.2 million, RMB3,012.3 million and RMB3,359.7 million (US$480.4 million), respectively. Input VAT can be deducted from output VAT payable. The VAT recoverable is mainly the net difference between output and input VAT. We did not encounter any disputes with the relevant taxation authorities on the amounts of VAT recoverable during 2023, 2024 and 2025. However, we cannot guarantee the recoverability of input VAT in the future because the rules, regulations and policies governing VAT may change in the future, which may have an impact on VAT recoverable. If we fail to recover our input VAT, our financial positions would be adversely affected. According to PRC laws and regulations, the tax authorities shall order to rectify loss of invoices or unauthorized destruction of invoices and may impose a fine of no more than RMB10,000; if the circumstances are serious, a fine ranging from RMB10,000 to RMB30,000 shall be imposed; any illegal income shall be confiscated. We may be required to rectify and pay fines if the aforementioned circumstances occur. Economic sanctions and anti-corruption laws imposed by the United States and other jurisdictions may expose us to potential compliance risks and any actual or alleged illegal or corrupt activities could damage our reputation, and materially and adversely affect our business, financial condition, and results of operations. Sanctions laws prohibit us from doing business in or with certain countries or governments, and with certain persons or entities that have been sanctioned by the United States or other governments and international or regional organizations, such as the United Nations Security Council. Although our primary market is China, we intend to expand our international business in the future, which may increase our exposure to international sanctions. For example, we have limited control over the activities of our international business partners and investees, which may provide delivery services into jurisdictions that are subject to sanctions. Any U.S. affiliate and any U.S. person employees will be subject to compliance with all U.S. economic sanctions requirements. We have implemented internal controls to monitor our compliance with applicable economic sanctions, but there can be no assurance that we are able to prevent or detect inadvertent business dealings with sanctioned parties or the delivery of parcels to higher-risk or prohibited end-uses. We also cannot predict with certainty the interpretation or implementation of any sanction laws or policies. While we do not believe that we are in violation of any applicable sanctions or that any of our activities are currently sanctionable under applicable laws, some of our activities or the activities of our affiliates could be exposed to penalties under these laws. Any alleged sanctions violations may adversely affect our reputation, business, results of operations and financial condition. In addition, we and our employees are subject to anti-corruption laws in China and globally, including the Foreign Corrupt Practices Act. Our operations in China subject us to risks of unauthorized payments or offers of payments by our directors, officers, employees, consultants, agents or other business partners of our company and its affiliates. While we have designed and adopted policies and procedures to ensure compliance by us and our directors, officers, employees, consultants, agents and business partners with applicable anti-corruption laws and regulations, there can be no assurance that these policies will be followed at all times, and they may not effectively detect and prevent all illegal, fraudulent, corrupt or collusive activity or misconduct by our directors, officers, employees, consultants, agents or business partners. Any actual or alleged illegal, fraudulent, corrupt or collusive activity or misconduct by us or our directors, officers, employees consultants, agents or business partners, whether related to our business activities or not, could subject us to adverse media coverage, regulatory inquiries, investigations and potential administrative, civil and criminal sanctions and other negative collateral consequences, all of which may adversely affect our reputation and materially and adversely affect our business, financial condition and results of operations. We may also be held liable under successor liability for violations committed by companies in which we invest or that we acquire. We face risks related to severe weather conditions and other natural disasters, health epidemics and other outbreaks, such as the outbreak of COVID-19, which could significantly disrupt our operations and adversely affect our business, financial condition or results of operations. Our business could be adversely affected by severe weather conditions and natural disasters, such as snowstorms, earthquakes, fire, typhoons or floods, or an outbreak of COVID-19, avian influenza, severe acute respiratory syndrome, influenza A (H1N1), H7N9 or another epidemic. Any of these occurrences could cause severe disruptions to our daily operations and may warrant a temporary closure of our facilities. Such closures may disrupt our business operations and adversely affect our results of operations. Our operation could also be disrupted if our suppliers, customers or business partners were affected by such natural disasters or health epidemics. For example, outbreaks of COVID-19 beginning in 2020 resulted in the temporary closure of many corporate offices, retail stores and manufacturing facilities across China, and our headquarters, dozens of our sorting hubs and thousands of service outlets across the country also suspended operations from time to time in 2022 due to COVID-19 resurgences caused by the Omicron variants. 39 Table of Contents Risk Related to Our Corporate Structure If the PRC government finds that the agreements that establish the structure for operating certain of our operations in China do not comply with PRC regulations relating to 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. Under current PRC laws and regulations, foreign enterprises or individuals may not invest in or operate domestic mail delivery services. According to the Negative List for Foreign Investment Access, foreign investment is prohibited in the establishment of any postal enterprise and in the establishment of any domestic mail delivery services. Postal enterprises refer to the China Post Group and its wholly owned enterprises or controlled enterprises providing postal services, as well as other services including but not limited to mail delivery, postal remittances, savings and issuance of stamps and production and sale of philatelic products. We are a Cayman Islands company and our PRC subsidiaries are considered foreign-invested enterprises. Accordingly, none of our PRC subsidiaries is eligible to operate domestic mail delivery services in China. It is also practically and economically not possible to separate the delivery of mail from the delivery of non-mail items in our day-to-day services. To ensure strict compliance with the PRC laws and regulations, we conduct such business activities through ZTO Express, the consolidated affiliated entity, and its subsidiaries. Shanghai Zhongtongji Network, our wholly owned subsidiary in China, has entered into a series of contractual arrangements with ZTO Express and its 43 shareholders, which allows us to (i) direct the activities of ZTO Express, (ii) receive substantially all of the economic benefits of ZTO Express, and (iii) have an exclusive option to purchase all or part of the equity interests and assets in ZTO Express when and to the extent permitted by PRC law. Because of these contractual arrangements, we have the ability to direct the activities of and are the primary beneficiary of ZTO Express and hence consolidate its financial results as the VIE under U.S. GAAP. ZTO is a Cayman Islands holding company with no equity ownership in ZTO Express. We conduct our operations in China primarily through our PRC subsidiaries and ZTO Express with which we have maintained contractual arrangements. Investors in our Class A ordinary shares or the ADSs thus are not purchasing equity interest in ZTO Express in China but instead are purchasing equity interest in a Cayman Islands holding company. If the PRC government deems that our contractual arrangements with ZTO Express do not comply with PRC regulatory restrictions on foreign investment in the relevant industries, or if these regulations or the interpretation of existing regulations change or are interpreted differently in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations. We may not be able to repay our indebtedness, and our shares may decline in value or become worthless, if we are unable to assert our contractual control rights over the assets of ZTO Express which contribute to 87.1% of our revenues in 2025. Our holding company in the Cayman Islands, ZTO Express and investors of ZTO face uncertainty about potential future actions by the PRC government that could affect the enforceability of the contractual arrangements with ZTO Express and, consequently, significantly affect the financial performance of ZTO Express and our company as a group. If the PRC government finds that our contractual arrangements do not comply with its restrictions on foreign investment in domestic express delivery services of mail, or if the PRC government otherwise finds that we, ZTO Express, or any of its subsidiaries are in violation of PRC laws or regulations or lack the necessary permits or licenses to operate our business, the PRC regulatory authorities would have broad discretion in dealing with such violations or failures, including, without limitation: ● revoking the business licenses and/or operating licenses of such entities; ● discontinuing or placing restrictions or onerous conditions on our operation through any transactions between our PRC subsidiaries and the consolidated affiliated entities; ● imposing fines, confiscating the income from our PRC subsidiaries or the consolidated affiliated entities, or imposing other requirements with which such entities may not be able to comply; ● requiring us to restructure our ownership structure or operations, including terminating the contractual arrangements with the VIE and deregistering the equity pledges of the VIE, which in turn would affect our ability to consolidate, derive economic interests from, or direct the activities of the VIE; ● restricting or prohibiting our use of the proceeds of any of our financing outside China to fund our business and operations in China; or ● restricting or prohibiting our future capital raising activities by the CSRC. 40 Table of Contents Any of these actions could cause significant disruption to our business operations and severely damage our reputation, which in turn could materially and adversely affect our business, financial condition and results of operations. If any of these occurrences results in our inability to direct the activities of the VIE that most significantly impact its economic performance, and/or our failure to receive the economic benefits from the VIE, we may not be able to consolidate the entity in our consolidated financial statements in accordance with U.S. GAAP. We rely on contractual arrangements with the VIE and its shareholders for a substantial portion of our business operations, which may not be as effective as direct ownership in providing us with the ability to direct the operational activities. We have relied and expect to continue to rely on contractual arrangements with ZTO Express and its shareholders to operate domestic express delivery services, including delivery of mail. For a description of these contractual arrangements, see “Item 4. Information on the Company—C. Organizational Structure.” These contractual arrangements may not be as effective as direct ownership in providing us with the ability to direct the activities of the VIE. For example, the VIE and its shareholders could breach their contractual arrangements with us by, among other things, failing to conduct its operations in an acceptable manner or taking other actions that are detrimental to our interests. If we had direct ownership of ZTO Express, we would be able to exercise our rights as a shareholder to effect changes in the board of directors of ZTO Express, which in turn could implement changes, subject to any applicable fiduciary obligations, at the management and operational level. However, under the current contractual arrangements, we rely on the VIE and its shareholders to perform of their obligations under the contracts to exercise our ability to direct the activities of the VIE. The shareholders of the VIE may not act in the best interests of our company or may not perform their obligations under these contracts. Such risks exist throughout the period in which we intend to operate certain portion of our business through the contractual arrangements with the VIE. If any dispute relating to these contracts remains unresolved, we will have to enforce our rights under these contracts through the operations of PRC law and arbitration, litigation and other legal proceedings and therefore may be subject to the uncertainties with respect to the legal system in the jurisdiction where we operate. Therefore, our contractual arrangements with the VIE may not be as effective in ensuring our ability to direct the activities of the relevant portion of our business operations as compared to if we had direct ownership over the VIE. Any failure by the VIE or its shareholders to perform their obligations under our contractual arrangements with them would have a material and adverse effect on our business. If the VIE or its shareholders fail to perform their respective obligations under the contractual arrangements, we may incur substantial costs and expend additional resources to enforce such arrangements. We may also have to rely on legal remedies under PRC law, including seeking specific performance or injunctive relief, and claiming damages, which we cannot assure you will be effective under PRC law. For example, if the shareholders of ZTO Express refuse to transfer their equity interest in ZTO Express to us or our designee if we exercise the purchase option pursuant to these contractual arrangements, or if they otherwise act in bad faith toward us, then we may have to take legal actions to compel them to perform their contractual obligations. Due to the significant number of shareholders in ZTO Express, we may not be able to obtain consent and cooperation from all the shareholders in further actions with respect to ZTO Express, such as the transferring the shareholders’ respective equity interests in ZTO Express to our designee. In addition, if any third parties claim any interest in such shareholders’ equity interests in ZTO Express, our ability to exercise shareholders’ rights or foreclose the share pledge according to the contractual arrangements may be impaired. For example, even though we have obtained spousal consents from spouses of our six key shareholders of ZTO Express, who collectively hold 73.8% of the equity interests in ZTO Express, we have not required spousal consents to be entered into by the rest of the shareholders of the VIE. With respect to those shareholders, we cannot assure you that our WFOE will be able to exercise or enforce its rights in full under our contractual arrangements in the event of a dispute between the shareholder and his or her spouse. If these or other disputes between the shareholders of the VIE and third parties were to impair our ability to direct the activities of ZTO Express, our ability to consolidate the financial results of the VIE would be affected, which would in turn result in a material adverse effect on our business, operations and financial condition. All the agreements under our contractual arrangements are governed by PRC law and provide for the resolution of disputes through arbitration in China. Accordingly, these contracts would be interpreted in accordance with PRC law and any disputes would be resolved in accordance with PRC legal procedures. Changes in the PRC laws and regulations could limit our ability to enforce these contractual arrangements. There remain significant uncertainties regarding the ultimate outcome of such arbitration should legal action become necessary. In addition, under PRC law, rulings by arbitrators are final, parties cannot appeal the arbitration results in courts, and if the losing parties fail to carry out the arbitration awards within a prescribed time limit, the prevailing parties may only enforce the arbitration awards in PRC courts through arbitration award recognition proceedings, which would require additional expenses and delay. In the event we are unable to enforce these contractual arrangements, or if we suffer significant delay or other obstacles in the process of enforcing these contractual arrangements, we may not be able to direct the activities of the VIE, and our ability to conduct our business may be negatively affected. 41 Table of Contents The shareholders of the VIE may have potential conflicts of interest with us, which may materially and adversely affect our business and financial condition. The shareholders of ZTO Express may have potential conflicts of interest with us. These shareholders may breach, or cause the VIE to breach, or refuse to renew, the existing contractual arrangements we have with them and the VIE, which would have a material and adverse effect on our ability to effectively control the VIE and receive economic benefits from it. For example, the shareholders may be able to cause our agreements with ZTO Express to be performed in a manner adverse to us by, among other things, failing to remit payments due under the contractual arrangements to us on a timely basis. We cannot assure you that when conflicts of interest arise, any or all of these shareholders will act in the best interests of our company or such conflicts will be resolved in our favor. If we cannot resolve any conflict of interest or dispute between us and these shareholders, we would have to rely on legal proceedings, which could result in disruption of our business and subject us to substantial uncertainty as to the outcome of any such legal proceedings. Our current corporate structure, business operations and future capital raising activities may be affected by the PRC Foreign Investment Law, the Overseas Listing Trial Measures and the most recently amended PRC Company Law. The PRC Foreign Investment Law replaced the existing laws regulating foreign investment in China, namely, the PRC Equity Joint Venture Law, the PRC Cooperative Joint Venture Law and the PRC Wholly Foreign-owned Enterprise Law, together with their implementation rules and ancillary regulations. The PRC Foreign Investment Law stipulates four forms of foreign investment, including (i) a foreign investor, individually or collectively with other investors, establishes a foreign-invested enterprise within China; (ii) a foreign investor acquires stock shares, equity, property shares, or other like rights and interests of an enterprise within China; (iii) a foreign investor, individually or collectively with other investors, invests in a new project within China; and (iv) a foreign investor invests through means stipulated in laws or administrative regulations or other methods prescribed by the State Council. Though it does not explicitly classify contractual arrangements as a form of foreign investment, there is no assurance that foreign investment via contractual arrangement would not be interpreted as a type of indirect foreign investment activities under the definition in the future. In addition, the definition contains a catch-all provision that includes investments made by foreign investors through means stipulated in laws or administrative regulations or other methods prescribed by the State Council. Therefore, it still leaves leeway for future laws, administrative regulations or provisions promulgated by the State Council to provide for contractual arrangements as a form of foreign investment. In any of these cases, it will be uncertain whether our contractual arrangements will be deemed to be in violation of the market access requirements for foreign investment under the PRC laws and regulations. Furthermore, if future laws, administrative regulations or provisions prescribed by the State Council mandate further actions to be taken by companies with respect to existing contractual arrangements, we may face substantial uncertainties as to whether we can complete such actions in a timely manner, or at all. Failure to take timely and appropriate measures to cope with any of these or similar regulatory compliance challenges could materially and adversely affect our current corporate structure, corporate governance and business operations. The Overseas Listing Trial Measures was promulgated and became effective on March 31, 2023, under which PRC domestic companies that seek to offer and list securities in overseas markets, either in direct or indirect means, are required to fulfill the filing procedure with the CSRC and report the required information. According to the Circular of Overseas Listing and Offering, issuers that have already been listed in an overseas market by March 31, 2023, such as our company, are not required to make any immediate filing. However, under the Overseas Listing Trial Measures, such issuers will be required to complete certain filing procedures with the CSRC in connection with future securities offerings and listings outside of mainland China, including follow-on offerings, issuance of convertible bonds, offshore relisting after going-private transactions, and other equivalent offering activities. In addition, such issuers are required to file a report to the CSRC after the occurrence and public disclosure of certain material corporate events, including but not limited to conversion of listing status in overseas markets (such as switching from secondary listing to dual primary listing). There may be updates and changes in the interpretation, application and implementation of the Overseas Listing Trial Measures. In addition, the CSRC requires the issuer to explain its contractual arrangements and requires the PRC legal counsel of the issuer to verify and explain the issues regarding the contractual arrangements pursuant to the Overseas Listing Trial Measures. Pursuant to the “Reply to the Reporter’s Question by the CSRC Responsible Officers” which was published on February 17, 2023, for the overseas listing of VIE-structured enterprises, the filing management will adhere to the principles of marketization and legalization, and strengthen regulatory coordination, and the CSRC will seek the opinions of the competent authorities, put the overseas listing of VIE-structured enterprises which meet the compliance requirements on file, and support the development and growth of enterprises using two markets and two resources. Though it does not prohibit the overseas listing of VIE-structured enterprises, the compliance requirements of VIE-structured enterprises were not explicitly listed or defined. Therefore, it still leaves leeway for future laws, administrative regulations or provisions promulgated by the CSRC regarding to the overseas listing of VIE-structured enterprises. If the CSRC deems that we have failed to meet the filing or reporting requirements or our contractual arrangements do not comply with current compliance requirements or future laws, administrative regulations or provisions, our corporate structure, business operations and future capital raising activities will be materially and adversely affected. 42 Table of Contents The PRC Company Law, promulgated by the Standing Committee of the National People’s Congress on December 29, 1993, was most recently amended on December 29, 2023 and became effective on July 1, 2024. The most recently amended PRC Company Law provides certain requirements for companies established within the territory of the PRC, such as the time limit for contribution of capital, changes to corporate governance matters, among others, which also applies to foreign investment enterprises in the PRC. If we fail to meet the requirements under the amended PRC Company Law, our corporate structure and business operations will be materially and adversely affected. Contractual arrangements in relation to the VIE may be subject to scrutiny by the PRC tax authorities and they may determine that we or our PRC variable interest entity owe additional taxes, which could negatively affect our financial condition and the value of your investment. Under applicable PRC laws and regulations, arrangements and transactions among related parties may be subject to audit or challenge by the PRC tax authorities within ten years after the taxable year when the transactions are conducted. We could face material and adverse tax consequences if the PRC tax authorities determine that the VIE contractual arrangements were not entered into on an arm’s length basis in such a way as to result in an impermissible reduction in taxes under applicable PRC laws, rules and regulations, and adjust income of ZTO Express in the form of a transfer pricing adjustment. A transfer pricing adjustment could, among other things, result in a reduction of expense deductions recorded by ZTO Express for PRC tax purposes, which could in turn increase its tax liabilities without reducing our PRC subsidiaries’ tax expenses. In addition, the PRC tax authorities may impose late payment fees and other penalties on ZTO Express for the adjusted but unpaid taxes according to the applicable regulations. Our financial position could be materially and adversely affected if the VIE’s tax liabilities increase or if it is required to pay late payment fees and other penalties. We may lose the ability to use and benefit from assets held by the consolidated affiliated entities that are material to the operation of a certain portion of our business if the entity goes bankrupt or becomes subject to a dissolution or liquidation proceeding. As part of our contractual arrangements with ZTO Express, the consolidated affiliated entities hold certain assets that are material to the operation of a certain portion of our business, including sorting hub premises and sorting equipment. If ZTO Express goes bankrupt and all or part of their assets become subject to liens or the rights of third-party creditors, we may be unable to continue some or all of our business activities, which could materially and adversely affect our business, financial condition and results of operations. Under the contractual arrangements, ZTO Express may not, in any manner, sell, transfer, mortgage or dispose of their assets or legal or beneficial interests in the business without our prior consent. If ZTO Express undergoes a voluntary or involuntary liquidation proceeding, the independent third-party creditors may claim rights to some or all of these assets, thereby hindering our ability to operate our business, which could materially and adversely affect our business, financial condition and results of operations. Risks Related to Doing Business in China Changes in China’s economic, political or social conditions or government policies could have a material adverse effect on our business and operations. Substantially all of our assets and operations are located in China. Accordingly, our business, financial condition, results of operations and prospects may be influenced to a significant degree by political, economic and social conditions in China generally. The Chinese economy differs from the economies of most developed countries in many respects, including the level of government involvement, level of development, growth rate, control of foreign exchange and allocation of resources. Although the Chinese government has implemented measures emphasizing the utilization of market forces for economic reform, the reduction of state ownership of productive assets, and the establishment of improved corporate governance in business enterprises, a substantial portion of productive assets in China is still owned by the government. In addition, the Chinese government continues to play a significant role in regulating industry development by imposing industrial policies. The Chinese government also exercises significant control over China’s economic growth through allocating resources, controlling payment of foreign currency-denominated obligations, setting monetary policy, and providing preferential treatment to particular industries or companies. 43 Table of Contents While the Chinese economy has experienced significant growth over the past decades, growth has been uneven, both geographically and among various sectors of the economy, and the rate of growth has been slowing since 2012. Any adverse changes in economic conditions in China, in the policies of the Chinese government or in the laws and regulations in China could have a material adverse effect on the overall economic growth of China. Such developments could adversely affect our business and operating results, lead to a reduction in demand for our services and adversely affect our competitive position. The Chinese government has implemented various measures to encourage economic growth and guide the allocation of resources. Some of these measures may benefit the overall Chinese economy but may have a negative effect on us. For example, our financial condition and results of operations may be adversely affected by government control over capital investments or changes in tax regulations. In addition, in the past the Chinese government has implemented certain measures, including interest rate adjustment, to control the pace of economic growth. These measures may cause decreased economic activity in China, which may adversely affect our business and operating results. The PRC government’s significant oversight and discretion over our business operation could result in a material adverse change in our operations and the value of our ADSs and ordinary shares. We conduct our business primarily in China. Our operations in China are governed by PRC laws and regulations. The PRC government has significant oversight and discretion over the conduct of our business, and may intervene or influence our operations as the government deems appropriate to advance regulatory and societal goals and policy positions. The PRC government has recently published new policies that significantly affected certain industries and we cannot rule out the possibility that it will in the future release regulations or policies that directly or indirectly affect our industry or require us to seek additional permission to continue our operations, which could result in a material adverse change in our operation and/or the value of our ADSs and ordinary shares. Therefore, investors of ZTO and our business face potential uncertainty from actions taken by the PRC government affecting our business. Uncertainties with respect to the legal system in the jurisdiction where we operate could adversely affect us. We conduct our business primarily through our subsidiaries and the consolidated affiliated entities in China. Our operations in China are governed by the laws and regulations of China. Our subsidiaries are generally subject to laws and regulations applicable to foreign investments in China. As a civil law jurisdiction, the legal system of China is based on written statutes. Prior court decisions may be cited for reference but have limited precedential value. The laws and regulations of China have significantly enhanced the protections afforded to various forms of foreign investments in mainland China for the past decades. However, because certain laws and regulations are relatively new, and because of the limited volume of published decisions, the interpretation and enforcement of these laws and regulations may evolve. Furthermore, the legal system of China is based in part on government policies and China is geographically large and divided into various provinces and municipalities. As such, different regulations and policies may have different and varying applications and interpretations in different parts of China, and it is possible that we may not be aware in a timely manner that we have been identified to be in violation of these policies and rules until sometime after the occurrence of the violation. In addition, certain administrative and court proceedings in China may result in substantial costs and diversion of resources and management attention. PRC government has complex regulatory requirements on the conduct of our business and it has recently promulgated certain regulations and rules to exert more oversight over offerings that are conducted overseas and/ or foreign investment in China-based issuers. Such action could significantly limit or hinder our ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline. 44 Table of Contents The approval of or filing to the CSRC or other PRC government authorities may be required in connection with our offshore offerings and future capital raising activities under PRC law, and, if required, we cannot predict whether or for how long we will be able to obtain such approval. The Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, adopted by six PRC regulatory agencies in 2006 and amended in 2009, requires an overseas special purpose vehicle formed for listing purposes through acquisitions of PRC domestic companies and controlled by PRC persons or entities to obtain the approval of the CSRC prior to the listing and trading of such special purpose vehicle’s securities on an overseas stock exchange. The interpretation and application of the regulations may be promulgated in the future, and our offshore offerings may ultimately require approval of the CSRC. If the CSRC approval is required, it is uncertain whether we can or how long it will take us to obtain the approval and, even if we obtain such CSRC approval, the approval could be rescinded. Any failure to obtain or delay in obtaining the CSRC approval for any of our offshore offerings, or a rescission of such approval if obtained by us, would subject us to sanctions imposed by the CSRC or other PRC regulatory authorities, which could include fines and penalties on our operations in China, restrictions or limitations on our ability to pay dividends outside of China, and other forms of sanctions that may materially and adversely affect our business, financial condition, and results of operations. On July 6, 2021, the PRC government authorities 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 regulatory systems to deal with the risks and incidents faced by China-based overseas-listed companies. Official guidance and related implementation rules of these opinions have not been issued yet. We cannot assure you that any new rules or regulations promulgated in the future will not impose additional requirements on us. On February 17, 2023, the CSRC issued the Overseas Listing Trial Measures, which became effective on March 31, 2023, under which PRC domestic companies that seek to offer and list securities in overseas markets, either in direct or indirect means, are required to fulfill the filing procedure with the CSRC and report the required information. According to the Circular of Overseas Listing and Offering, issuers that have already been listed in an overseas market by March 31, 2023, such as our company, are not required to make any immediate filing. However, under the Overseas Listing Trial Measures, such issuers will be required to complete certain filing procedures with the CSRC in connection with future securities offerings and listings outside of mainland China, including follow-on offerings, issuance of convertible bonds, offshore relisting after going-private transactions, and other equivalent offering activities. In addition, such issuers are required to file a report to the CSRC after the occurrence and public disclosure of certain material corporate events, including but not limited to conversion of listing status in overseas markets (such as switching from secondary listing to dual primary listing). The interpretation, application and implementation of the Overseas Listing Trial Measures may be enacted in the future. The Overseas Listing Trial Measures also stipulates that overseas offering and listing by domestic companies shall strictly abide by the laws, administrative regulations and state rules concerning national security in the areas of foreign investment, cybersecurity, data security and etc., and duly fulfill their obligations to protect national security. If the intended overseas offering and listing necessitates a national security review (for example, a cybersecurity review), the national security review procedures shall be completed before the application for such offering and listing is submitted to overseas regulators and foreign stock exchanges. Therefore, we may incur significant time, costs and resources to comply with these newly implemented regulatory requirements under the Overseas Listing Trial Measures and face uncertainties as to such approvals, filings and reporting obligations. 45 Table of Contents We may be required to go through these approval, filing and reporting procedures with the CSRC and other regulatory authorities for our offshore offerings and future capital raising activities, including the cybersecurity review under the Cybersecurity Review Measures and declaration of security assessment on data cross-border transfer under the Measures on Security Assessment of Cross-Border Data Transfer, it is uncertain whether we can or how long it will take us to obtain such approval or complete such procedures and any such approval could be rescinded. Any failure to obtain or delay in obtaining such approval or completing such procedures for our offshore offerings and future capital raising activities, or a rescission of any such approval if obtained by us, would subject us to sanctions by the CSRC or other PRC regulatory authorities. These regulatory authorities may impose fines and penalties on our operations in China, limit our ability to pay dividends outside of China, limit our operating privileges in China, delay, restrict or prohibit our future capital raising activities, delay or restrict the repatriation of the proceeds from our offshore offerings into China or take other actions that could materially and adversely affect our business, financial condition, results of operations, and prospects, as well as the trading price of our shares. The CSRC or other PRC regulatory authorities may also take actions requiring us, or making it advisable for us, to halt our offshore offerings before settlement and delivery of the shares offered. Consequently, if investors engage in market trading or other activities in anticipation of and prior to settlement and delivery, they do so at the risk that settlement and delivery may not occur. In addition, if the CSRC or other regulatory authorities later promulgate new rules or explanations requiring that we obtain their approvals or accomplish the required filing or other regulatory procedures for our prior offshore offerings, we may be unable to obtain a waiver of such approval requirements, if and when procedures are established to obtain such a waiver. Any uncertainties or negative publicity regarding such approval requirement could materially and adversely affect our business, prospects, financial condition, reputation, and the trading price of the shares. We may rely on dividends and other distributions on equity paid by our PRC subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of our PRC subsidiaries to make payments to us could have a material and adverse effect on our ability to conduct our business. ZTO is a Cayman Islands holding company and may rely principally on dividends and other distributions on equity from its PRC subsidiaries for cash requirements, including for services of any debt it may incur. Our subsidiaries’ ability to distribute dividends is based upon their distributable earnings. Current PRC regulations permit our PRC subsidiaries to pay dividends to their respective shareholders only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. In addition, each of the VIE is required to set aside at least 10% of its after-tax profits each year, if any, to fund a statutory reserve until such reserve reaches 50% of its registered capital. These reserves are not distributable as cash dividends. If our PRC subsidiaries incur debt on their own behalf in the future, the instruments governing the debt may restrict their ability to pay dividends or make other payments to us. Any limitation on the ability of our PRC subsidiaries to distribute dividends or other payments to their respective shareholders could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our businesses, pay dividends or otherwise fund and conduct our business. PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion may delay or prevent us from loaning to or making additional capital contributions to our PRC subsidiaries and the consolidated affiliated entities in China, which could materially and adversely affect our liquidity and our ability to fund and expand our business. We are an offshore holding company conducting our operations in China through our PRC subsidiaries and the consolidated affiliated entities. We may make loans to our PRC subsidiaries and the consolidated affiliated entities, or we may make additional capital contributions to our PRC subsidiaries, or we may establish new PRC subsidiaries and make capital contributions to these new PRC subsidiaries, or we may acquire offshore entities with business operations in China in an offshore transaction. Most of these ways are subject to PRC regulations and approvals or registration. For example, loans by us to our wholly owned PRC subsidiaries to finance their activities cannot exceed statutory limits and must be registered with the local counterpart of the State Administration of Foreign Exchange. If we decide to finance our wholly owned PRC subsidiaries by means of capital contributions, these capital contributions are subject to registration with the State Administration for Market Regulation of the PRC or its local branch, reporting of foreign investment information with the Ministry of Commerce, or registration with other governmental authorities in China. Due to the restrictions imposed on loans in foreign currencies extended to PRC domestic companies, we are not likely to make such loans to the consolidated affiliated entities, which are PRC domestic companies. Further, we are not likely to finance the activities of the consolidated affiliated entities by means of capital contributions due to regulatory restrictions relating to foreign investment in PRC domestic enterprises engaged in certain businesses. 46 Table of Contents The State Administration of Foreign Exchange promulgated the Circular on Reforming the Management Approach Regarding the Foreign Exchange Capital Settlement of Foreign-Invested Enterprises, or SAFE Circular 19, effective on June 1, 2015, in replacement of the Supplementary Circular of the Comprehensive Department of the State Administration of Foreign Exchange on the Relevant Operating Issues Concerning the Improvement of the Administration of the Payment and Settlement of Foreign Currency Capital of Foreign-Invested Enterprises, the Circular from the State Administration of Foreign Exchange 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, and the Circular from the State Administration of Foreign Exchange 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. According to SAFE Circular 19, the flow and use of the RMB capital converted from foreign currency-denominated registered capital of a foreign-invested company is regulated such that RMB capital may not be used for the issuance of RMB entrusted loans, the repayment of inter-enterprise loans or the repayment of banks loans that have been transferred to a third party. Although SAFE Circular 19 allows RMB capital converted from foreign currency-denominated registered capital of a foreign-invested enterprise to be used for equity investments within China, it also reiterates the principle that RMB converted from the foreign currency-denominated capital of a foreign-invested company may not be directly or indirectly used for purposes beyond its business scope. Thus, it is unclear whether the State Administration of Foreign Exchange will permit such capital to be used for equity investments in China in actual practice. The State Administration of Foreign Exchange promulgated the Notice of the State Administration of Foreign Exchange on Reforming and Standardizing the Foreign Exchange Settlement Management Policy of Capital Account, or SAFE Circular 16, effective on June 9, 2016, which reiterates some of the rules set forth in SAFE Circular 19, but changes the prohibition against using RMB capital converted from foreign currency-denominated registered capital of a foreign-invested company to issue RMB entrusted loans to a prohibition against using such capital to issue loans to non-associated enterprises. Violations of SAFE Circular 19 and SAFE Circular 16 could result in administrative penalties. SAFE Circular 19 and SAFE Circular 16 may significantly limit our ability to transfer any foreign currency we hold to our PRC subsidiaries, which may adversely affect our liquidity and our ability to fund and expand our business in China. On October 23, 2019, the State Administration of Foreign Exchange promulgated the Notice for Further Advancing the Facilitation of Cross-border Trade and Investment, which allows all foreign-invested companies to use Renminbi converted from foreign currency-denominated capital for equity investments in China, as long as the equity investment is genuine, does not violate applicable laws, and complies with the negative list on foreign investment. On December 4, 2023, the State Administration of Foreign Exchange promulgated the Notice on Further Deepening Reforms to Facilitate Cross-Border Trade and Investment, which further facilitated the foreign exchange receipts and payment, expanded capital account-related facilitation policies, and optimized the foreign exchange administration for the capital account. However, since the relevant government authorities have certain discretion in interpreting the regulation, it is unclear how the State Administration of Foreign Exchange and competent banks will carry this out in practice. In light of the various requirements imposed by PRC regulations on loans to and direct investment in PRC entities by offshore holding companies, we cannot assure you that we will be able to complete the necessary government registrations or obtain the necessary government approvals on a timely basis, or at all, with respect to future loans to our PRC subsidiaries or consolidated affiliated entities or future capital contributions by us to our PRC subsidiaries. As a result, uncertainties exist as to our ability to provide prompt financial support to our PRC subsidiaries or consolidated affiliated entities when needed. If we fail to complete such registrations or obtain such approvals, our ability to use the proceeds we received from our initial public offering and to capitalize or otherwise fund our PRC operations may be negatively affected, which could materially and adversely affect our liquidity and our ability to fund and expand our business. Fluctuations in exchange rates could have a material and adverse effect on our results of operations and the value of your investment. The conversion of Renminbi into foreign currencies, including U.S. dollars, is based on rates set by the People’s Bank of China. The Renminbi has fluctuated against the U.S. dollar, at times significantly and unpredictably. The value of the Renminbi against the U.S. dollar and other currencies is affected by changes in China’s political and economic conditions and by China’s foreign exchange policies, among other things. We cannot assure you that the Renminbi will not appreciate or depreciate significantly in value against the U.S. dollar in the future. It is difficult to predict how market forces or PRC or U.S. government policy will impact the exchange rate between the Renminbi and the U.S. dollar in the future. Any significant appreciation or depreciation of the Renminbi may materially and adversely affect our revenues, earnings and financial position, and the value of, and any dividends payable on, our Class A ordinary shares and/or ADSs. For example, to the extent that we need to convert U.S. dollars we receive into Renminbi to fund our operations, appreciation of the Renminbi against the U.S. dollar would have an adverse effect on the Renminbi amount we would receive from the conversion. Conversely, a significant depreciation of the Renminbi against the U.S. dollar may significantly reduce the U.S. dollar equivalent of our earnings, which in turn could adversely affect the valuation of our Class A ordinary shares and/or ADSs. 47 Table of Contents Very limited hedging options are available in China to reduce our exposure to exchange rate fluctuations. To date, we have entered into some hedging transactions, such as foreign currency deposits, foreign currency forward contract and options, in an effort to reduce our exposure to foreign currency exchange risk. While we may decide to enter into more hedging transactions in the future, the availability and effectiveness of these hedges may be limited, and we may not be able to adequately hedge our exposure or at all. In addition, our currency exchange losses may be magnified by PRC exchange control regulations that restrict our ability to convert Renminbi into foreign currency. As a result, fluctuations in exchange rates may have a material adverse effect on your investment. Governmental control of currency conversion may limit our ability to utilize our revenues effectively and affect the value of your investment. The PRC government imposes controls on the convertibility of the Renminbi into foreign currencies and, in certain cases, the remittance of currency out of China. We receive substantially all of our revenues in Renminbi. Under our current corporate structure, our Cayman Islands holding company primarily relies on dividend payments from our PRC subsidiaries to fund any cash and financing requirements we may have. Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior approval of the State Administration of Foreign Exchange by complying with certain procedural requirements. Specifically, under the existing exchange restrictions, without prior approval of the State Administration of Foreign Exchange, cash generated from the operations of our PRC subsidiaries in China may be used to pay dividends to our company. However, approval from or registration with appropriate governmental authorities is required where Renminbi is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of loans denominated in foreign currencies. As a result, we need to obtain the approval of the State Administration of Foreign Exchange to use cash generated from the operations of our PRC subsidiaries and variable interest entity to pay off their respective debt in a currency other than Renminbi owed to entities outside China, or to make other capital expenditure payments outside China in a currency other than Renminbi. For example, People’s Bank of China announced that from November 28, 2016, buying, paying or making capital expenditure of more than US$5 million or its equivalent must be reported as large-amount transaction to the State Administration of Foreign Exchange. Once reported to the State Administration of Foreign Exchange, such large-amount transactions are subject to examination of authenticity and compliance by the PRC Ministry of Commerce, the National Development and Reform Commission, the State Administration of Foreign Exchange, People’s Bank of China or other competent authorities. Although the State Administration of Foreign Exchange issued a statement stating that amounts from legitimate business transactions and capital reduction would not be affected, the PRC government may at its discretion restrict access to foreign currencies for current account transactions in the future. If the foreign exchange control system prevents us from obtaining sufficient foreign currencies to satisfy our foreign currency demands, we may not be able to pay dividends in foreign currencies to our shareholders, including holders of our ADSs. 48 Table of Contents Certain PRC regulations may make it more difficult for us to pursue growth through acquisitions. Among other things, on August 8, 2006, the PRC Ministry of Commerce issued the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investor, which took effect on September 8, 2006 and were amended on June 22, 2009, established additional procedures and requirements that could make merger and acquisition activities by foreign investors more time-consuming and complex. Such regulation requires, among other things, that the PRC Ministry of Commerce be notified in advance of any change-of-control transaction in which a foreign investor acquires control of a PRC domestic enterprise or a foreign company with substantial PRC operations, if (i) any important industry is concerned, (ii) such transaction involves factors that have or may have impact on the national economic security; (iii) such transaction will lead to a change in control of a domestic enterprise which holds famous trademarks or PRC time-honored brands; or (iv) certain thresholds under the Provisions on Thresholds for the Declaration of Concentrations of Undertakings, issued by the State Council on August 3, 2008 with latest amendment released on January 22, 2024, were triggered. In addition, the Provisions on the Review of Concentrations of Undertakings promulgated by the State Administration for Market Regulation, which became effective on April 15, 2023, further stipulates the detailed rules of declaration and examination of concentration of business operators. Moreover, the Anti-Monopoly Law promulgated by the Standing Committee of the National People’s Congress, which became effective on August 1, 2008, and amended on June 24, 2022, requires that transactions which are deemed concentrations and involve parties with specified turnover thresholds must be declared to the PRC Ministry of Commerce before they can be completed. In addition, the Notice of the General Office of the State Council on the Establishment of the Security Review System for Mergers and Acquisitions of Domestic Enterprises by Foreign Investors promulgated on February 3, 2011 and became effective after 30 days of promulgation, require acquisitions by foreign investors of PRC companies engaged in military related or certain other industries that are crucial to national security be subject to security review before consummation of any such acquisition. We may pursue potential strategic acquisitions that are complementary to our business and operations. Complying with the requirements of these regulations to complete such transactions could be time-consuming, and any required approval processes, including obtaining approval or clearance from the PRC Ministry of Commerce, may delay or inhibit our ability to complete such transactions, which could affect our ability to expand our business or maintain our market share. If we fail to comply with the Anti-Monopoly Law and other rules and provisions related to mergers and acquisitions in PRC, we may be subject to investigations, penalties and sanctions, including fines and termination of the mergers and acquisitions. Historically, certain subsidiaries commenced merger and acquisition transactions prior to filing a declaration. It remains uncertain whether such other subsidiaries or us will be subject to investigations, penalties and sanctions by the government authorities. PRC regulations relating to the establishment of offshore special purpose companies by PRC residents may subject our PRC resident beneficial owners or our PRC subsidiaries to liability or penalties, limit our ability to inject capital into our PRC subsidiaries, limit our PRC subsidiaries’ ability to increase their registered capital or distribute profits to us, or may otherwise adversely affect us. On July 4, 2014, the State Administration of Foreign Exchange has promulgated the Circular on Relevant Issues Concerning Foreign Exchange Control on Domestic Residents’ Offshore Investment and Financing and Roundtrip Investment Through Special Purpose Vehicles, or SAFE Circular 37, to replace the Notice on Relevant Issues Concerning Foreign Exchange Administration for Domestic Residents’ Financing and Roundtrip Investment Through Offshore Special Purpose Vehicles, or SAFE Circular 75, which ceased to be effective upon the promulgation of SAFE Circular 37. SAFE Circular 37 requires PRC residents (including PRC individuals and PRC corporate entities) to register with local branches of the State Administration of Foreign Exchange in connection with their direct or indirect offshore investment activities. SAFE Circular 37 is applicable to our shareholders who are PRC residents and may be applicable to any offshore acquisitions that we make in the future. Under SAFE Circular 37, PRC residents who make, or have prior to the implementation of SAFE Circular 37 made, direct or indirect investments in offshore special purpose vehicles, or SPVs, will be required to register such investments with local branches of the State Administration of Foreign Exchange. In addition, any PRC resident who is a direct or indirect shareholder of an SPV, is required to update its filed registration with the local branch of the State Administration of Foreign Exchange with respect to that SPV, to reflect any material change. Moreover, any subsidiary of such SPV in China is required to urge the PRC resident shareholders to update their registration with the local branch of the State Administration of Foreign Exchange. If any PRC shareholder of such SPV fails to make the required registration or to update the previously filed registration, the subsidiary of such SPV in China may be prohibited from distributing its profits or the proceeds from any capital reduction, share transfer or liquidation to the SPV, and the SPV may also be prohibited from making additional capital contribution into its subsidiary in China. The Notice on Further Simplifying and Improving Foreign Exchange Administration Policy on Direct Investment, or SAFE Notice 13, became effective on June 1, 2015. Under SAFE Notice 13, applications for foreign exchange registration of inbound foreign direct investment and outbound overseas direct investment, including those required under SAFE Circular 37, will be filed with qualified banks instead of the State Administration of Foreign Exchange. The qualified banks will directly examine the applications and accept registrations under the supervision of the State Administration of Foreign Exchange. 49 Table of Contents All of our shareholders that we are aware of being subject to the regulations promulgated by the State Administration of Foreign Exchange have completed all necessary initial registrations with the local branch of the State Administration of Foreign Exchange or qualified banks as required by SAFE Circular 37. We cannot assure you, however, that all of these individuals may thereafter continue to make required filings or updates on a timely manner, or at all. We can provide no assurance that we are or will in the future continue to be informed of the identities of PRC residents holding a direct or indirect interest in our company. Any failure or inability by such individuals to comply with the regulations promulgated by the State Administration of Foreign Exchange may subject us to fines or legal sanctions, such as restrictions on our cross-border investment activities or our PRC subsidiaries’ ability to distribute dividends to, or obtain foreign exchange-denominated loans from, our company or prevent us from making distributions or paying dividends. As a result, our business operations and our ability to make distributions to you could be materially and adversely affected. Furthermore, the interpretation and implementation of the foreign exchange regulations has been constantly evolving, these regulations, and any future regulation concerning offshore or cross-border transactions, may be interpreted, amended and implemented by the governmental authorities in the future. For example, we may be subject to a more stringent review and approval process with respect to our foreign exchange activities, such as remittance of dividends and foreign-currency-denominated borrowings, which may adversely affect our financial condition and results of operations. In addition, if we decide to acquire a PRC domestic company, we cannot assure you that we or the owners of such company, as the case may be, will be able to obtain the necessary approvals or complete the necessary filings and registrations required by the foreign exchange regulations. This may restrict our ability to implement our acquisition strategy and could adversely affect our business and prospects. Any failure to comply with PRC regulations regarding the registration requirements for employee stock incentive plans of overseas publicly listed companies may subject the PRC plan participants or us to fines and other legal or administrative sanctions. Pursuant to SAFE Circular 37, PRC residents who participate in share incentive plans in overseas non-publicly listed companies may submit applications to local branches of the State Administration of Foreign Exchange for the foreign exchange registration with respect to offshore special purpose companies. In the meantime, our directors, executive officers and other employees who are PRC citizens or who are non-PRC residents residing in the PRC for a continuous period of not less than one year, subject to limited exceptions, and who have been granted incentive share awards by us, may follow the Notices on Issues Concerning the Foreign Exchange Administration for Domestic Individuals Participating in Stock Incentive Plan of Overseas Publicly-Listed Company, promulgated by the State Administration of Foreign Exchange on February 15, 2012, or the 2012 SAFE Notices. Pursuant to the 2012 SAFE Notices, PRC citizens and applicable non-PRC citizens who reside in China for a continuous period of not less than one year who participate in any stock incentive plan of an overseas publicly listed company, subject to a few exceptions, are required to register with the State Administration of Foreign Exchange through a domestic qualified agent, which could be the PRC subsidiaries of such overseas listed company, and complete certain other procedures. In addition, an overseas entrusted institution must be retained to handle matters in connection with the exercise or sale of stock options and the purchase or sale of shares and interests. We and our executive officers and other employees who are PRC citizens or who reside in the PRC for a continuous period of not less than one year and who have been granted options are subject to these regulations as our company became an overseas listed company upon the completion of our initial public offering. Failure to complete registrations of the State Administration of Foreign Exchange may subject them to orders to rectify, warnings, fines of up to RMB300,000 for entities and up to RMB50,000 for individuals, and legal sanctions and may also limit our ability to contribute additional capital into our PRC subsidiaries and limit our PRC subsidiaries’ ability to distribute dividends to us. We also face regulatory uncertainties that could restrict our ability to adopt additional incentive plans for our directors, executive officers and employees under PRC law. See “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations Relating to Employee Stock Incentive Plan of Overseas Publicly-Listed Company.” The State Taxation Administration has issued certain circulars concerning employee share options and restricted shares. Under these circulars, our employees working in China who exercise share options or are granted restricted shares will be subject to PRC individual income tax. Our PRC subsidiaries have obligations to file documents related to employee share options or restricted shares with the tax authorities and to withhold individual income taxes of those employees who exercise their share options. If our employees fail to pay or we fail to withhold their income taxes according to the laws and regulations, we may face sanctions imposed by the tax authorities or other PRC governmental authorities. See “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations Relating to Employee Stock Incentive Plan of Overseas Publicly-Listed Company.” 50 Table of Contents It may be difficult for overseas securities regulators to conduct investigations or collect evidence within China. Shareholder claims or regulatory investigations that are common in the United States (including securities law class actions and fraud claims) may be difficult to pursue as a matter of law or practicality in China. For example, in China, there are significant legal and other obstacles to providing information needed for regulatory investigations or litigation initiated outside China and vice versa. Although the authorities in China may establish a regulatory cooperation mechanism with the securities regulatory authorities of another country or region to implement cross-border supervision and administration, such cooperation with the securities regulatory authorities in the Unities States may not be efficient in the absence of a mutual and practical cooperation mechanism. Furthermore, according to Article 177 of the PRC Securities Law, which became effective on March 1, 2020, no overseas securities regulator may directly conduct investigations or collect evidence and no entities or individuals may provide documents or materials in connection with securities activities without proper authorization as stipulated under Article 177. While detailed interpretation of or implementation rules under Article 177 have yet to be promulgated, the inability of an overseas securities regulator to directly conduct investigations or collect evidence within China may further increase difficulties faced by you in protecting your interests. If we are classified as a PRC resident enterprise for PRC income tax purposes, such classification could result in unfavorable tax consequences to us and our non-PRC shareholders or ADS holders. Under the PRC Enterprise Income Tax Law and its implementation rules, an enterprise established outside of the PRC with its “de facto management body” within the PRC is considered a “resident enterprise” and will be subject to the enterprise income tax on its global income at the rate of 25%. The implementation rules define the term “de facto management body” as the body that exercises full and substantial control and overall management over the business, productions, personnel, accounts and properties of an enterprise. On April 22, 2009, the State Taxation Administration of the PRC issued the Circular of the State Taxation Administration on Issues Concerning the Identification of Chinese-Controlled Overseas Registered Enterprises as Resident Enterprises in Accordance with the Actual Standards of Organizational Management, as amended on November 8, 2013 and December 29, 2017 and partially invalid, known as STA Circular 82, which provides certain specific criteria for determining whether the “de facto management body” of a PRC-controlled enterprise that is incorporated offshore is located in China. Although this circular only applies to offshore enterprises controlled by PRC enterprises or PRC enterprise groups, not those controlled by PRC individuals or foreigners, the criteria set forth in the circular may reflect the general position of the State Taxation Administration on how the “de facto management body” text should be applied in determining the tax resident status of all offshore enterprises. According to STA Circular 82, an offshore incorporated enterprise controlled by a PRC enterprise or a PRC enterprise group will be regarded as a PRC tax resident by virtue of having its “de facto management body” in China and will be subject to PRC enterprise income tax on its global income only if all of the following conditions are met: (i) the primary location of the day-to-day operational senior management and senior management department’s performance of their duties is in the PRC; (ii) decisions relating to the enterprise’s financial and human resource matters are made or are subject to approval by organizations or personnel in the PRC; (iii) the enterprise’s primary assets, accounting books and records, company seals, and board and shareholder resolutions, are located or maintained in the PRC; and (iv) at least 50% of voting board members or senior executives habitually reside in the PRC. We believe that ZTO is not a PRC resident enterprise for PRC tax purposes. See “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations Relating to Tax—Enterprise Income Tax.” However, the tax resident status of an enterprise is subject to determination by the PRC tax authorities and further interpretation of the term “de facto management body.” If the PRC tax authorities determine that ZTO is a PRC resident enterprise for enterprise income tax purposes, we may be required to withhold a 10% withholding tax from dividends we pay to our shareholders that are non-resident enterprises, including the holders of our ADSs. In addition, nonresident enterprise shareholders (including our ADS holders) may be subject to PRC tax on gains realized on the sale or other disposition of ADSs or ordinary shares, if such income is treated as sourced from within the PRC. Furthermore, if we are deemed a PRC resident enterprise, dividends payable to our non-PRC individual shareholders (including our ADS holders) and any gain realized on the transfer of ADSs or ordinary shares by such shareholders may be subject to PRC tax at a rate of 20% unless a reduced rate is available under an applicable tax treaty. Further interpretations may make it clear on whether non-PRC shareholders of ZTO would be able to claim the benefits of any tax treaties between their country of tax residence and the PRC in the event that ZTO is treated as a PRC resident enterprise. ​ 51 Table of Contents We face uncertainty with respect to indirect transfers of equity interests in PRC resident enterprises by their non-PRC holding companies. On February 3, 2015, the State Taxation Administration of the PRC issued a Public Notice Regarding Certain Corporate Income Tax Matters on Indirect Transfer of Properties by Non-Tax Resident Enterprises, or STA Public Notice 7, which was most recently amended on December 29, 2017. According to STA Public Notice 7, where a non-resident enterprise indirectly transfers equities and other properties of a PRC resident enterprise to evade its obligation of paying enterprise income tax by implementing arrangements that are not for bona fide commercial purpose, such indirect transfer shall be re-identified and recognized as a direct transfer of equities and other properties of the PRC resident enterprise. STA Public Notice 7 provides clearer criteria than STA Circular 698 for assessment of reasonable commercial purposes and has introduced safe harbors for internal group restructurings and the purchase and sale of equity through a public securities market. STA Public Notice 7 also brings challenges to both foreign transferor and transferee (or other person who is obligated to pay for the transfer) of taxable assets. PRC taxable assets include assets attributed to an establishment or place of business in China, real properties located in China, and equity investments in PRC resident enterprises, with respect of which gains from their transfer by a direct holder, being a non-PRC resident enterprise, would be subject to PRC enterprise income taxes. Where a non-resident enterprise transfers taxable assets indirectly by disposing of the equity interests of an overseas holding company, which is an indirect transfer, the non-resident enterprise as either the transferor or the transferee, or the PRC entity that directly owns the taxable assets, may report such indirect transfer to the tax authority. Using a “substance over form” principle, the PRC tax authority may disregard the existence of the overseas holding company if it lacks a reasonable commercial purpose and was clearly established for the purpose of reducing, avoiding or deferring PRC tax. As a result, gains derived from such indirect transfer may be subject to PRC enterprise income tax, and the transferee or other person who is obligated to pay for the transfer is obligated to withhold the applicable taxes, currently at a rate of 10% for the transfer of equity interests in a PRC resident enterprise. Both the transferor and the transferee may be subject to penalties under PRC tax laws if the transferee fails to withhold the taxes and the transferor fails to pay the taxes. According to the Announcement of the State Taxation Administration on Matters Concerning Withholding of Income Tax of Non-resident Enterprises at Source, or STA Announcement 37, which became effective on December 1, 2017 and amended on June 15, 2018, the withholding party shall, within seven days of the day on which the withholding obligation occurs, declare and remit the withholding tax to the competent tax authority at its locality. Where the withholding party fails to withhold and remit the income tax payable or is unable to perform its obligation in this regard, the non-resident enterprise that earns the income shall, declare and pay the tax that has not been withheld to the competent tax authority at the place where the income occurs, and complete the Withholding Statement of the People’s Republic of China for Enterprise Income Tax. We face uncertainties as to the reporting and other implications of certain past and future transactions where PRC taxable assets are involved, such as offshore restructuring, sale of the shares in our offshore subsidiaries or investments. Our company may be subject to filing obligations or taxed if our company is the transferor in such transactions and may be subject to withholding obligations if our company is the transferee in such transactions, under STA Public Notice 7 and STA Announcement 37. For transfer of shares in our company by investors that are non-PRC resident enterprises, our PRC subsidiaries may be requested to assist in the filing under STA Public Notice 7. As a result, we may be required to expend valuable resources to comply with STA Public Notice 7 and STA Announcement 37 or to request the transferors from whom we purchase taxable assets to comply with these circulars, or to establish that our company should not be taxed under these circulars, which may have a material adverse effect on our financial condition and results of operations. 52 Table of Contents Discontinuation of any of the preferential tax treatments or imposition of any additional taxes could adversely affect our financial condition and results of operations. Some of our subsidiaries and consolidated affiliated entities are entitled to a favorable statutory enterprise income tax rate of 15% or 10% because of their qualifications as a high and new technology enterprise, or as a key software enterprise, or as enterprises within the Catalogue of Encouraged Industries in Western Regions or because of favorable local tax treatment for various terms. The PRC Enterprise Income Tax Law and its implementation rules permit certain “high and new technology enterprises strongly supported by the state,” which hold independent ownership of core intellectual property to enjoy a preferential enterprise income tax rate of 15% subject to certain qualification criteria. Shanghai Zhongtongji Network, our wholly owned subsidiary, has enjoyed a preferential enterprise income tax rate of 15% as a high and new technology enterprise since 2017. It renewed this status for another three-year period in November 2023. We cannot assure you that Shanghai Zhongtongji Network will continue to qualify as a high and new technology enterprise when it is subject to review in the future. Should Shanghai Zhongtongji Network lose this qualification for any reason, it will no longer enjoy the 15% preferential tax rate, and its applicable enterprise income tax rate may increase to 25%. If Shanghai Zhongtongji Network does not maintain its status as a high and new technology enterprise, our financial condition and results of operation could be materially and adversely affected. In addition, in 2025, 19 of the consolidated affiliated entities located in the municipalities or provinces in western China benefitted from a 15% preferential income tax rate as qualified enterprises within the Catalogue of Encouraged Industries in Western Regions. The preferential income tax rate will expire as of December 31, 2030. Furthermore, Shanghai Zhongtongji Network was recognized as a key software enterprise status in 2025 and thus was entitled to a preferential tax rate of 10% retroactively for the fiscal year of 2024. ​ We may be required to register our operating offices outside of our residence addresses as branch offices under PRC law. Under PRC law, a company setting up premises for business operations outside its residence address shall register and obtain business licenses for branch offices at the competent local administration for market regulation. We may expand our delivery network in the future to additional locations in China, and we may not be able to register branch offices which operate outside our company’s residence address in a timely manner due to a multiple procedural requirements and relocation of branch offices from time to time. If the PRC regulatory authorities determine that we are in violation of the laws and regulations, we may be subject to penalties, including fines, confiscation of income and suspension of operation. If we become subject to these penalties, our business, results of operations, financial condition and prospects could be adversely affected. Our failure to fully comply with PRC labor-related laws may expose us to potential penalties. Companies operating in China are required to participate in various government sponsored employee benefit plans, including certain social insurance, housing funds and other welfare-oriented payment obligations, and contribute to the plans in amounts equal to certain percentages of salaries, including bonuses and allowances, of our employees up to a maximum amount specified by the local government from time to time at locations where we operate our businesses. The requirement of employee benefit plans has not been implemented consistently by the local governments in China given the different levels of economic development in different locations. We did not pay, or were not able to pay, certain past social security and housing fund contributions in strict compliance with the PRC regulations for and on behalf of our employees due to differences in local regulations and different implementation or interpretation by local authorities in the PRC and varying levels of acceptance of the housing fund system by our employees. Although we have recorded accruals for estimated underpaid amounts in our financial statements, we may be subject to fines and penalties for our failure to make payments in accordance with the applicable PRC laws and regulations. We may be required to make up the contributions for these plans as well as to pay late fees and fines. We have not made any accruals for the interest on underpayments and penalties that may be imposed by the PRC government authorities in the financial statements. If we are subject to late fees or fines in relation to the underpaid employee benefits, our financial condition and results of operations may be adversely affected. The PCAOB had historically been unable to inspect our auditor in relation to their audit work performed for our financial statements and the inability of the PCAOB to conduct inspections of our auditor in the past has deprived our investors with the benefits of such inspections. Our auditor, the independent registered public accounting firm that issues the audit report included elsewhere in this annual report, as an auditor of companies that are traded publicly in the United States and a firm registered with the PCAOB, is subject to laws in the United States pursuant to which the PCAOB conducts regular inspections to assess its compliance with the applicable professional standards. The auditor is located in mainland China, a jurisdiction where the PCAOB was historically unable to conduct inspections and investigations completely before 2022. 53 Table of Contents As a result, we and investors in the ADSs were deprived of the benefits of such PCAOB inspections. The inability of the PCAOB to conduct inspections of auditors in China in the past has made it more difficult to evaluate the effectiveness of our independent registered public accounting firm’s audit procedures or quality control procedures as compared to auditors outside of China that are subject to the PCAOB inspections. On December 15, 2022, the PCAOB issued a report that vacated its December 16, 2021 determination and removed mainland China and Hong Kong from the list of jurisdictions where it is unable to inspect or investigate completely registered public accounting firms. However, if the PCAOB determines in the future that it no longer has full access to inspect and investigate completely accounting firms in mainland China and Hong Kong, and we use an accounting firm headquartered in one of these jurisdictions to issue an audit report on our financial statements filed with the Securities and Exchange Commission, we and investors in our ADSs would be deprived of the benefits of such PCAOB inspections again, which could cause investors and potential investors in the ADSs to lose confidence in our audit procedures and reported financial information and the quality of our financial statements. Our ADSs may be prohibited from trading in the United States under the HFCAA in the future if the PCAOB is unable to inspect or investigate completely auditors located in China. The delisting of the ADSs, or the threat of their being delisted, may materially and adversely affect the value of your investment. Pursuant to the HFCAA, if the SEC determines that we have filed audit reports issued by a registered public accounting firm that has not been subject to inspections by the PCAOB for two consecutive years, the SEC will prohibit our shares or ADSs from being traded on a national securities exchange or in the over-the-counter trading market in the United States. On December 16, 2021, the PCAOB issued a report to notify the SEC of its determination that the PCAOB was unable to inspect or investigate completely registered public accounting firms headquartered in mainland China and Hong Kong and our auditor was subject to that determination. In May 2022, the SEC conclusively listed us as a Commission-Identified Issuer under the HFCAA following the filing of our annual report on Form 20-F for the fiscal year ended December 31, 2021. On December 15, 2022, the PCAOB removed mainland China and Hong Kong from the list of jurisdictions where it is unable to inspect or investigate completely registered public accounting firms. As of the date of this annual report, the PCAOB has not issued any new determination that it is unable to inspect or investigate completely registered public accounting firms headquartered in any jurisdiction. For this reason, we do not expect to be identified as a Commission-Identified Issuer under the HFCAA after we file this annual report on Form 20-F. Each year, the PCAOB will determine whether it can inspect and investigate completely audit firms in mainland China and Hong Kong, among other jurisdictions. If the PCAOB determines in the future that it no longer has full access to inspect and investigate completely accounting firms in mainland China and Hong Kong and we use an accounting firm headquartered in one of these jurisdictions to issue an audit report on our financial statements filed with the Securities and Exchange Commission, we would be identified as a Commission-Identified Issuer following the filing of the annual report on Form 20-F for the relevant fiscal year. In accordance with the HFCAA, our securities would be prohibited from being traded on a national securities exchange or in the over-the-counter trading market in the United States if we are identified as a Commission-Identified Issuer for two consecutive years in the future. Although our Class A ordinary shares have been listed on the Hong Kong Stock Exchange and the ADSs and Class A ordinary shares are fully fungible, we cannot assure your that an active trading market for our Class A ordinary shares on the Hong Kong Stock Exchange will be sustained or that the ADSs can be converted and traded with sufficient market recognition and liquidity, if our shares and ADSs are prohibited from trading in the United States. A prohibition of being able to trade in the United States would substantially impair your ability to sell or purchase our ADSs when you wish to do so, and the risk and uncertainty associated with delisting would have a negative impact on the price of our ADSs. Also, such a prohibition would significantly affect our ability to raise capital on terms acceptable to us, or at all, which would have a material adverse impact on our business, financial condition, and prospects. 54 Table of Contents RISKS RELATED TO OUR SHARES AND ADSS The trading prices of our ADSs and Class A ordinary shares have been and are likely to continue to be volatile, which could result in substantial losses to holders of our Class A ordinary shares and/or ADSs. The trading prices of our ADSs and Class A ordinary shares have been and are likely to continue to be volatile and could fluctuate widely in response to a variety of factors, many of which are beyond our control. Fluctuation in the trading prices of our listed securities may occur due to broad market and industry factors, including the performance and fluctuation of the market prices of other companies with business operations located mainly in China that have listed their securities in Hong Kong and/or the United States. Furthermore, stock markets in general have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of companies like us. Volatility or a lack of positive performance in the trading price of our listed securities may also adversely affect our ability to retain key employees, most of whom have been granted options or other equity incentives. In addition to market and industry factors, the price and trading volume for our listed securities may be highly volatile for factors specific to our own operations, including the following: ● variations in our revenues, earnings and cash flow; ● announcements of new investments, acquisitions, strategic partnerships or joint ventures by us or our competitors; ● announcements of new offerings, solutions and expansions by us or our competitors; ● changes in financial estimates by securities analysts; ● detrimental adverse publicity about us, our services or our industry; ● additions or departures of key personnel; ● release of lock-up or other transfer restrictions on our outstanding equity securities or sales of additional equity securities; and ● potential litigation or regulatory investigations. Any of these factors may result in large and sudden changes in the volume and price at which our ADSs or Class A ordinary shares will trade. Our dual-class share structure with different voting rights will limit your ability to influence corporate matters and could discourage others from pursuing any change of control transactions that holders of our Class A ordinary shares and ADSs may view as beneficial. We have a dual-class share structure such that our ordinary shares consist of Class A ordinary shares and Class B ordinary shares. In respect of matters requiring the votes of shareholders, on a poll holders of Class A ordinary shares are entitled to one vote per share, while holders of Class B ordinary shares are entitled to ten votes per share based on our dual-class share structure. Our ADSs represent underlying Class A ordinary shares. Each Class B ordinary share is convertible into one Class A ordinary share at any time by the holder thereof, while Class A ordinary shares are not convertible into Class B ordinary shares under any circumstances. Upon any sale, transfer, assignment or disposition of any Class B ordinary shares by a holder thereof to any person or entity which is not an affiliate of such holder or upon a change of ultimate beneficial ownership of any Class B ordinary shares to any person who is not an affiliate of the holder of such Class B ordinary shares, such Class B ordinary shares shall be automatically and immediately converted into the equal number of Class A ordinary shares. ​ 55 Table of Contents As of the date of this annual report, Zto Lms Holding Limited, a British Virgin Islands company wholly beneficially owned by The LMS Family Trust, with Mr. Meisong Lai as the settlor and Mr. Meisong Lai and his family members as beneficiaries, holds 206,100,000 Class B ordinary shares. Mr. Meisong Lai exercises the power to vote these shares which, due to the disparate voting powers associated with our dual-class share structure, constitutes 78.5% of the aggregate voting power of our company as of March 31, 2026. Consequently, Mr. Meisong Lai has decisive influence over matters such as decisions regarding mergers, consolidations and the sale of all or substantially all of our assets, election of directors and other significant corporate actions. He may take actions that are not in the best interest of us or our other shareholders. This concentration of ownership may discourage, delay or prevent a change in control of our company, which could have the effect of depriving our other shareholders of the opportunity to receive a premium for their shares as part of a sale of our company and may reduce the price of our listed securities. This concentrated control will limit your ability to influence corporate matters and could discourage others from pursuing any potential merger, takeover or other change of control transactions that holders of Class A ordinary shares and/or ADSs may view as beneficial. We are a “controlled company” within the meaning of the NYSE Listed Company Manual and, as a result, may rely on exemptions from certain corporate governance requirements that provide protection to shareholders of other companies. We are a “controlled company” as defined under the NYSE Listed Company Manual because Mr. Meisong Lai, our chairman of the board of directors and chief executive officer, beneficially owns more than 50% of our total voting power. For so long as we remain a “controlled company” under that definition, we are permitted to elect to rely, and may rely, on exemptions from certain corporate governance rules, including an exemption from the rule that a majority of our board of directors must be independent directors or that we have to establish a nominating committee and a compensation committee composed entirely of independent directors. In the event that we elect to rely on one or more of these exemptions, you will not have the same protection afforded to shareholders of companies that are subject to these corporate governance requirements. Techniques employed by short sellers may drive down the market price of our listed securities. Short selling is the practice of selling securities that a seller does not own but rather has borrowed from a third party with the intention of buying identical securities back at a later date to return to the lender. Short sellers hope to profit from a decline in the value of the securities between the sale of the borrowed securities and the purchase of the replacement shares, as short sellers expect to pay less in that purchase than they received in the sale. As it is in short sellers’ interest for the price of the security to decline, many short sellers publish, or arrange for the publication of, negative opinions and allegations regarding the issuer and its business prospects in order to create negative market momentum and generate profits for themselves after selling a security short. These short attacks have, in the past, led to selling of shares in the market. Public companies listed in the United States that have substantially all of their operations in China have been the subject of short selling. Such short selling was often driven by short seller reports, which often were based on allegations including inadequacies in internal control and/or corporate governance or a lack of adherence thereto and accounting irregularities and mistakes. Any such allegations may be followed by periods of instability in the market price of our ADSs and negative publicity. As a result, many of these companies are now conducting internal and external investigations into the allegations and, in the interim, are subject to shareholder lawsuits and/or SEC enforcement actions. We have granted, and may continue to grant, share incentives, which may result in increased share-based compensation expenses. We adopted share incentive plans for the purpose of granting share-based compensation awards to employees, directors and consultants to incentivize their performance and align their interests with ours. We account for compensation costs for all share options using a fair value-based method and recognize expenses in our consolidated statements of comprehensive income in accordance with U.S. GAAP. In June 2016, we also established an employee shareholding platform to allow our employees in the PRC to receive share incentives. We account for shared-based compensation for these share incentive awards using a fair value-based method and recognize expenses in our consolidated statements of comprehensive income in accordance with U.S. GAAP. We will incur additional share-based compensation expenses in the future as we continue to grant share incentives using the ordinary shares reserved for this platform. See “Item 6. Directors, Senior Management and Employees—B. Compensation of Directors and Executive Officers.” We believe the granting of share-based compensation is of significant importance to our ability to attract and retain key personnel and employees, and we will continue to grant share-based compensation to employees in the future. As a result, our expenses associated with share-based compensation may increase, which may have an adverse effect on our results of operations. 56 Table of Contents If securities or industry analysts do not publish research or reports about our business, or if they adversely change their recommendations regarding our Class A ordinary shares and/or ADSs, the market price for our Class A ordinary shares and/or ADSs and trading volume could decline. The trading market for our Class A ordinary shares and/or ADSs will be influenced by research or reports that industry or securities analysts publish about our business. If one or more analysts who cover us downgrade our Class A ordinary shares and/or ADSs, the market price for our Class A ordinary shares and/or ADSs would likely decline. If one or more of these analysts cease to cover us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause the market price of or trading volume for our Class A ordinary shares and/or ADSs to decline. The sale or availability for sale of substantial amounts of our listed securities could adversely affect their respective market price. Sales of substantial amounts of our Class A ordinary shares and/or ADSs in the public market, or the perception that these sales could occur, could adversely affect the market price of such securities and could materially impair our ability to raise capital through equity offerings in the future. We cannot predict what effect, if any, market sales of securities held by our significant shareholders or any other shareholder or the availability of these securities for future sale will have on the market price of our Class A ordinary shares and/or ADSs. Conversion of our convertible senior notes may dilute the ownership interest of the existing shareholders. The conversion of some or all of 2027 Notes and 2031 Notes will dilute the ownership interests of existing shareholders and existing ADS holders. Any sales in the public market of the ADSs and/or Class A ordinary shares issuable upon such conversion may increase the opportunities to create short positions with respect to the ADSs, which could adversely affect prevailing trading prices of our Class A ordinary shares and/or the ADSs. In addition, the existence of the 2027 Notes and the 2031 Notes may encourage short selling by market participants because the conversion of the 2027 Notes and the 2031 Notes could depress the price of our Class A ordinary shares and/or the ADSs. The prices of our Class A ordinary shares and/or the ADSs could be affected by possible sales of our Class A ordinary shares and/or the ADSs by investors who view the convertible senior notes as a more attractive means of equity participation in us and by hedging or arbitrage trading activity, which we expect to occur involving our Class A ordinary shares and/or the ADSs. In connection with the offering of the 2027 Notes and the 2031 Notes, we have entered into capped call transactions with certain counterparties in order to reduce the potential dilution with respect to our ADSs upon such conversion and/or offset any cash payments that we will be then required to make in excess of the principal amount of the converted notes. Such strategy with respect to the capped call transactions is subject to the risks described under “If we cannot obtain sufficient cash when we need it, we may not be able to meet our payment obligations under our notes.” Furthermore, if the market price per ADS, as measured under the terms of the capped call transactions, exceeds the cap price of the capped call transactions, there would nevertheless be dilution upon conversion of the notes to the extent that such market price exceeds the cap price of the capped call transactions (subject to our ability to elect, subject to certain conditions, to settle the capped call transactions in cash, in which case we would not receive any ADSs from the option counterparties upon settlement of the capped call transactions). Provisions of our convertible senior notes could discourage an acquisition of us by a third-party. Certain provisions of the 2027 Notes and the 2031 Notes could make it more difficult or more expensive for a third-party to acquire us, or may even prevent a third-party from acquiring us. For example, upon the occurrence of certain transactions constituting a fundamental change, holders of the 2027 Notes and the 2031 Notes will have the right, at their option, to require us to repurchase all of their notes or any portion of the principal amount of such notes. For instance, if our ADSs cease to be listed on the New York Stock Exchange, such potential delisting from the United States exchange would constitute a fundamental change, triggering the holders’ rights to require us to repurchase their notes. In the event of a potential delisting, if our Class A ordinary shares remain listed on the Hong Kong Stock Exchange, Singapore Exchange or London Stock Exchange, the 2027 Notes and the 2031 Notes may become converible into our Class A ordinary shares, but the content and impact of any supplemental indenture we need to execute in connection with the delisting are uncertain. In the event of a fundamental change, we may also be required to increase the conversion rate for conversions in connection with such fundamental changes. By discouraging an acquisition of us by a third-party, these provisions could have the effect of depriving our shareholders of an opportunity to sell their securities at a premium over prevailing market prices. 57 Table of Contents Negative publicity may harm our brand and reputation and have a material adverse effect on our business. Negative publicity about us, including our services, management, business model and practices, compliance with applicable rules, regulations and policies, or our network partners may materially and adversely harm our brand and reputation and have a material adverse effect on our business. We cannot assure you that we will be able to defuse any such negative publicity within a reasonable period of time, or at all. Additionally, allegations, directly or indirectly against us, may be posted on the internet by anyone on a named or anonymous basis, and can be quickly and widely disseminated. Information posted may be inaccurate, misleading and adverse to us, and it may harm our reputation, business or prospects. The harm may be immediate without affording us an opportunity for redress or correction. Our reputation may be negatively affected as a result of the public dissemination of negative and potentially inaccurate or misleading information about our business and operations, which in turn may materially adversely affect our relationships with our customers, employees or business partners, and adversely affect the price of our Class A ordinary shares and/or ADSs. Because the amount, timing, and whether or not we distribute dividends at all is entirely at the discretion of our board of directors, investors may need to mainly rely on price appreciation of our Class A ordinary shares and/or ADSs for return on their investments. On March 19, 2024, our board of directors approved a cash dividend of US$0.62 per ADS and ordinary share for the fiscal year 2023 to holders of ADSs and ordinary shares of record as of the close of business on April 10, 2024. On March 19, 2024, our board of directors approved a semi-annual cash dividend policy, under which, starting from 2024, we will declare and distribute a recurring cash dividend semi-annually, in which the aggregate amount of the semi-annual dividend distributions for each year is equivalent to no less than 40% of our distributable profit in such fiscal year, or as otherwise authorized by our board of directors. Based on our current policy, the amounts of dividends will vary based on the existence and amount of net profits that we can generate. In addition, the amount, timing, and whether or not we actually distribute dividends at all remains entirely at the discretion of our board of directors. Pursuant to this policy, on August 20, 2024, our board of directors approved an interim cash dividend of US$0.35 per ADS and ordinary share for the six months ended June 30, 2024 to holders of ADSs and ordinary shares of record as of the close of business on September 10, 2024. On March 18, 2025, our board of directors approved a cash dividend of US$0.35 per ADS and ordinary share for the six months ended December 31, 2024 to holders of ADSs and ordinary shares of record as of the close of business on April 10, 2025. On August 19, 2025, our board of directors approved an interim cash dividend of US$0.30 per ADS and ordinary share for the six months ended June 30, 2025 to holders of ADSs and ordinary shares of record as of the close of business on September 30, 2025. On March 17, 2026, our board of directors approved a cash dividend of US$0.39 per ADS and ordinary share for the six months ended December 31, 2025, to holders of its ordinary shares and ADSs as of the close of business on April 8, 2026. Since March 2024, we have maintained a semi-annual dividend policy with a payout ratio of no less than 40% of our prior year’s adjusted net income, or as otherwise authorized by our board. To optimize capital allocation and further align the interests of our shareholders, the board has approved an enhanced return mechanism. Starting from 2026, we target an aggregate annual shareholder return ratio of no less than 50% of our adjusted net income for the prior fiscal year, comprising both cash dividends and share repurchases. The specific mix, timing, and execution of such returns will be determined under the board’s direction and authorization, taking into account our share price, operating results, and cash reserves, among other factors, to ensure a balanced and sustainable return. 58 Table of Contents Our board of directors has discretion as to whether to distribute dividends, subject to certain requirements of Cayman Islands law. Our board of directors may revise our dividend policy or it may choose to cancel our dividend policy entirely. In addition, our shareholders may by ordinary resolution declare a dividend, but no dividend may exceed the amount recommended by our directors. Under Cayman Islands law, a Cayman Islands company may pay a dividend out of either profit or share premium account provided that in no circumstances may a dividend be paid if this would result in the company being unable to pay its debts as they fall due in the ordinary course of business. Even if our board of directors decides to declare and pay dividends, the timing, amount and form of future dividends, if any, will depend on our future results of operations and cash flow, our capital requirements and surplus, the amount of distributions, if any, received by us from our subsidiaries, our financial condition, contractual restrictions and other factors deemed relevant by our board of directors. Accordingly, the return on your investment in our Class A ordinary shares or ADSs will likely depend entirely upon any future price appreciation of our Class A ordinary shares or ADSs. There is no guarantee that our ADSs will appreciate in value or even maintain the price at which you purchased our Class A ordinary shares or ADSs. You may not realize a return on your investment in our Class A ordinary shares or ADSs, and you may even lose your entire investment in our Class A ordinary shares or ADSs. Our memorandum and articles of association contain anti-takeover provisions that could have a material adverse effect on the rights of holders of our Class A ordinary shares and ADSs. Our memorandum and articles of association contain provisions that have the potential to limit the ability of others to acquire control of our company or cause us to engage in change-of-control transactions. For example, such provisions include a dual-class share structure that gives greater voting power to the Class B ordinary shares beneficially owned by our founder. These provisions could have the effect of depriving our shareholders of an opportunity to sell their shares at a premium over prevailing market prices by discouraging third parties from seeking to obtain control of our company in a tender offer or similar transaction. Subject to our memorandum and articles of association and in compliance with the Hong Kong Listing Rules and the Codes on Takeovers and Mergers and Share Buy-backs, our board of directors has the authority, without further action by our shareholders, to issue preferred shares in one or more series and to fix their designations, powers, preferences, privileges, and relative participating, optional or special rights and the qualifications, limitations or restrictions, including dividend rights, conversion rights, voting rights, terms of redemption and liquidation preferences, any or all of which may be greater than the rights associated with our ordinary shares, in the form of ADS or otherwise. Preferred shares could be issued quickly with terms calculated to delay or prevent a change in control of our company or make removal of management more difficult. If our board of directors decides to issue preferred shares, the price of our Class A ordinary shares and/or ADSs may fall and the voting and other rights of the holders of our ordinary shares and/or ADSs may be materially and adversely affected. You may face difficulties in protecting your interests, and your ability to protect your rights through Hong Kong or U.S. courts may be limited, because we are incorporated under Cayman Islands law. We are an exempted company incorporated under the laws of the Cayman Islands. Our corporate affairs are governed by our memorandum and articles of association, the Companies Act (As Revised) of the Cayman Islands and the common law of the Cayman Islands. The rights of shareholders to take actions against the directors, actions by minority shareholders and the fiduciary duties of our directors to us under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands as well as from the common law of England, the decisions of whose courts are of persuasive authority, but are not binding, on a court in the Cayman Islands. The rights of our shareholders and the fiduciary duties of our directors under Cayman Islands law are not as clearly established as they would be under statutes or judicial precedent in some jurisdictions in the United States or in Hong Kong. In particular, the Cayman Islands has a less developed body of securities laws than the United States or Hong Kong. For example, some U.S. states, such as Delaware, have more fully developed and judicially interpreted bodies of corporate law than the Cayman Islands. In addition, with respect to Cayman Islands companies, plaintiffs may face special obstacles, including but not limited to those relating to jurisdiction and standing, in attempting to assert derivative claims in state or federal courts of the United States. Shareholders of Cayman Islands exempted companies like us have no general rights under Cayman Islands law to inspect corporate records (other than copies of our memorandum and articles of association, our register of mortgages and charges and any special resolution passed by our shareholders) or to obtain copies of lists of shareholders of these companies. Our directors have discretion under our memorandum and articles of association to determine whether or not, and under what conditions, our corporate records may be inspected by our shareholders, but are not obliged to make them available to our shareholders. This may make it more difficult for you to obtain the information needed to establish any facts necessary for a shareholder motion or to solicit proxies from other shareholders in connection with a proxy contest. 59 Table of Contents Certain corporate governance practices in the Cayman Islands, which is our home country, differ significantly from requirements for companies incorporated in other jurisdictions such as the United States and Hong Kong. We have elected to follow home country practice in lieu of the corporate governance requirements of the New York Stock Exchange with respect to the adoption of our 2024 Share Incentive Plan without the approval of our shareholders. In this respect, and in other respects if we choose to follow home country practice with respect to corporate governance matters, our shareholders may be afforded less protection than they otherwise would under rules and regulations applicable to U.S. domestic issuers. As a result of all of the above, our public shareholders may have more difficulty in protecting their interests in the face of actions taken by our management, members of the board of directors or controlling shareholders than they would as public shareholders of a company incorporated in the United States or Hong Kong. Certain judgments obtained against us by our shareholders may not be enforceable. We are a Cayman Islands exempted company. We conduct our operations in China and substantially all of our assets are located in China. In addition, many of our directors and senior management named in this annual report reside outside the United States or Hong Kong, and most of the assets of these persons are located outside the United States or Hong Kong. As a result, it may be difficult or impossible for shareholders to bring an action against us or against these individuals in the United States or Hong Kong in the event that shareholders believe that their rights have been infringed under the U.S. federal securities laws, Hong Kong securities laws or otherwise. Even if shareholders are successful in bringing an action of this kind, the laws of the Cayman Islands and of China may render them unable to enforce a judgment against our assets or the assets of our directors and officers. Holders of our ADSs may have fewer rights than holders of our ordinary shares and must act through the depositary to exercise those rights. Holders of ADSs do not have the same rights as our shareholders and may only exercise the voting rights with respect to the underlying Class A ordinary shares represented by the ADSs in accordance with the provisions of the deposit agreement. Holders of ADSs may not call a shareholders’ meeting, and do not have any direct right to attend general meetings of our shareholders or to cast any votes at such meetings. Under our memorandum and articles of association, an annual general meeting shall be called by not less than 21 days’ notice in writing and any other general meeting (including an extraordinary general meeting) shall be called by not less than 14 days’ notice in writing. Under the deposit agreement, ADS holders must vote by giving voting instructions to the depositary. If we ask for ADS holders’ instructions, then upon receipt of such voting instructions, the depositary will try to vote the underlying Class A ordinary shares in accordance with these instructions. If we do not instruct the depositary to ask for ADS holders’ instructions, the depositary may still vote in accordance with instructions given by ADS holders, but it is not required to do so. ADS holders will not be able to directly exercise their rights to vote with respect to the underlying Class A ordinary shares represented by the ADSs unless they withdraw the Class A ordinary shares and become the registered holders of such Class A ordinary shares prior to the record date for the general meeting. When a shareholders’ meeting is convened, holders of ADSs may not receive sufficient notice of a shareholders’ meeting to permit withdrawal of the underlying Class A ordinary shares represented by their ADSs to allow them to cast their votes with respect to any specific matter. If we ask for ADS holders’ instructions, the depositary will notify ADS holders of the upcoming vote and will arrange to deliver our voting materials to the ADS holders. We have agreed to give the depositary at least 30 days’ prior notice of our shareholder meetings. Nevertheless, the depositary and its agents may not be able to send voting instructions to holders of ADSs or carry out their voting instructions in a timely manner. We will make all reasonable efforts to cause the depositary to extend voting rights to holders of ADSs in a timely manner, but we cannot assure that holders of ADSs will receive the voting materials in time to ensure that they can instruct the depositary to vote their ADSs. Furthermore, the depositary and its agents will not be responsible for any failure to carry out any instructions to vote, for the manner in which any vote is cast or for the effect of any such vote. As a result, holders of ADSs may not be able to exercise their rights to vote and may have no legal remedy if the underlying Class A ordinary shares represented by their ADSs are not voted as they requested. 60 Table of Contents Holders of our ADSs may be subject to limitations on transfer of their ADSs. Our ADSs are transferable on the books of the depositary. However, the depositary may close its books at any time or from time to time when it deems expedient in connection with the performance of its duties. The depositary may close its books from time to time for a number of reasons, including in connection with corporate events such as an offering of rights, during which time the depositary needs to maintain an exact number of ADS holders on its books for a specified period. The depositary may also close its books in emergencies, and on weekends and public holidays. The depositary may refuse to deliver, transfer or register transfers of our ADSs generally when our share register or the books of the depositary are closed, or at any time if we or the depositary thinks it is advisable to do so because of any requirement of law or of any government or governmental body, or under any provision of the deposit agreement, or for any other reason. We are a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt from certain provisions applicable to United States domestic public companies. Because we are a foreign private issuer under the Exchange Act, we are exempt from certain provisions of the securities rules and regulations in the United States that are applicable to U.S. domestic issuers, including: (i) the rules under the Exchange Act requiring the filing of quarterly reports on Form 10-Q or current reports on Form 8-K with the SEC; (ii) the sections of the Exchange Act regulating the solicitation of proxies, consents, or authorizations in respect of a security registered under the Exchange Act; (iii) the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades made in a short period of time; and (iv) the selective disclosure rules by issuers of material nonpublic information under Regulation FD. We are required to file with the SEC an annual report on Form 20-F within four months of the end of each fiscal year. In addition, we intend to publish our results on a quarterly basis through press releases, distributed pursuant to the rules and regulations of the New York Stock Exchange. Press releases relating to financial results and material events will also be furnished to the SEC on Form 6-K. However, the information that we are required to file with or furnish to the SEC will be less extensive and less timely compared to that required to be filed with the SEC by U.S. domestic issuers. As a result, investors may not be afforded the same protections or information, which would be made available to investors, were they investing in a U.S. domestic issuer. As a Cayman Islands company listed on the NYSE, we are subject to the NYSE corporate governance listing standards. However, NYSE rules permit a foreign private issuer like us to follow the corporate governance practices of its home country. Certain corporate governance practices in the Cayman Islands, which is our home country, may differ significantly from the NYSE corporate governance listing standards. We have elected to follow home country practice in lieu of the corporate governance requirements of the New York Stock Exchange with respect to the adoption of our 2024 Share Incentive Plan without the approval of our shareholders. In this respect, and in other respects if we choose to follow home country practice in the future, our shareholders may be afforded less protection than they otherwise would under the NYSE corporate governance listing standards applicable to U.S. domestic issuers. We incur increased costs as a result of our listing on the Hong Kong Stock Exchange. As a public company listed on the Hong Kong Stock Exchange, we are subject to laws, rules and regulations in Hong Kong that are applicable to us. As a dual-listed company in Hong Kong and the United States, we have to comply with laws and regulations on both markets. However, Hong Kong and the United States have different regulatory regime governing matters related to listed companies and in certain cases have fairly different requirements on certain matters. We have been and will continue to incur additional costs and expenses in complying with the complex regulatory systems on both markets, in particular, after the conversion to dual-primary listing on the Hong Kong Stock Exchange effective as of May 1, 2023. Failure to comply with any regulatory requirements could result in material adverse impact on the trading of our Class A ordinary shares or the ADSs and reputation and subject us to administrative penalties. There can be no assurance that we will not be a passive foreign investment company, or PFIC, for U.S. federal income tax purposes for any taxable year, which could result in adverse U.S. federal income tax consequences to U.S. Holders of our ADSs or Class A ordinary shares. We will be considered a passive foreign investment company, or PFIC, for any taxable year if either (i) 75% or more of our gross income for such year consists of certain types of “passive” income (the “income test”); or (ii) 50% or more of the value of our assets (generally determined on the basis of a quarterly average) during such year is attributable to assets that produce or are held for the production of passive income (the “asset test”). 61 Table of Contents Although the law in this regard is unclear, we treat our consolidated VIE and its subsidiaries as being owned by us for United States federal income tax purposes because we control their management decisions and we are entitled to substantially all of the economic benefits, and, as a result, we consolidate their results of operations in our U.S. GAAP financial statements and treat them as being owned by us for United States federal income tax purposes. If it were determined, however, that we are not the owner of our consolidated VIE and its subsidiaries for U.S. federal income tax purposes, we may be treated as a PFIC for the current taxable year and in future taxable years. Assuming that we are the owner of the VIE for U.S. federal income tax purposes, and based upon our income and assets, and the market price of our ADSs, we do not believe we were a PFIC for the taxable year ended December 31, 2024 and we do not anticipate being or becoming a PFIC in the current taxable year or in the foreseeable future. While we do not anticipate being or becoming a PFIC in the current or foreseeable taxable years, no assurance can be given in this regard because the determination of whether we will be or become a PFIC is a factual determination made annually that will depend, in part, upon the composition of our income and assets. Fluctuations in the market price of our Class A ordinary shares and/or ADSs may cause us to be or become a PFIC for the current or future taxable years because the value of our assets for purposes of the asset test, including the value of our goodwill and other unbooked intangibles, may be determined by reference to the market price of our Class A ordinary shares and/or ADSs from time to time (which may be volatile). If our market capitalization subsequently declines, we may be or become classified as a PFIC for the current taxable year or future taxable years. If we are a PFIC in any taxable year, a U.S. Holder (as defined in “Item 10. Additional Information—E. Taxation—United States Federal Income Tax Considerations”) may incur significantly increased United States federal income tax on gain recognized on the sale or other disposition of the ADSs or Class A ordinary shares and on the receipt of distributions on the ADSs or Class A ordinary shares to the extent such distribution is treated as an “excess distribution” under the United States federal income tax rules, and such U.S. Holder may be subject to burdensome reporting requirements. Further, if we are a PFIC for any year during which a U.S. Holder holds our ADSs or Class A ordinary shares, we will generally continue to be treated as a PFIC for all succeeding years during which such U.S. Holder holds our ADSs or Class A ordinary shares. For more information, see “Item 10. Additional Information—E. Taxation—United States Federal Income Tax Considerations”. The different characteristics of the capital markets in Hong Kong and the U.S. may negatively affect the trading prices of our Class A ordinary shares and/or ADSs. As dual-listed company, we are subject to Hong Kong and NYSE listing and regulatory requirements concurrently. The Hong Kong Stock Exchange and NYSE have different trading hours, trading characteristics (including trading volume and liquidity), trading and listing rules, and investor bases (including different levels of retail and institutional participation). As a result of these differences, the trading prices of our Class A ordinary shares and our ADSs may not be the same, even allowing for currency differences. Fluctuations in the price of our ADSs due to circumstances peculiar to the U.S. capital markets could materially and adversely affect the price of our Class A ordinary shares, or vice versa. Certain events having significant negative impact specifically on the U.S. capital markets may result in a decline in the trading price of our Class A ordinary shares notwithstanding that such event may not impact the trading prices of securities listed in Hong Kong generally or to the same extent, or vice versa. Exchange between our Class A ordinary shares and our ADSs may adversely affect the liquidity and/or trading price of each other. Our ADSs are currently traded on the NYSE. Subject to compliance with U.S. securities law and the terms of the deposit agreement, holders of our Class A ordinary shares may deposit Class A ordinary shares with the depositary in exchange for the issuance of our ADSs. Any holder of ADSs may also withdraw the underlying Class A ordinary shares represented by the ADSs pursuant to the terms of the deposit agreement for trading on the Hong Kong Stock Exchange. In the event that a substantial number of Class A ordinary shares are deposited with the depositary in exchange for ADSs or vice versa, the liquidity and trading price of our Class A ordinary shares on the Hong Kong Stock Exchange and our ADSs on the NYSE may be adversely affected. The time required for the exchange between Class A ordinary shares and ADSs might be longer than expected and investors might not be able to settle or effect any sale of their securities during this period, and the exchange of Class A ordinary shares into ADSs involves costs. There is no direct trading or settlement between the NYSE and the Hong Kong Stock Exchange on which our ADSs and our Class A ordinary shares are respectively traded. In addition, the time differences between Hong Kong and New York, unforeseen market circumstances or other factors may delay the deposit of Class A ordinary shares in exchange of ADSs or the withdrawal of Class A ordinary shares underlying the ADSs. Investors will be prevented from settling or effecting the sale of their securities during such periods of delay. In addition, there is no assurance that any exchange of Class A ordinary shares into ADSs (and vice versa) will be completed in accordance with the timelines that investors may anticipate. 62 Table of Contents Furthermore, the depositary for the ADSs is entitled to charge holders fees for various services including for the issuance of ADSs upon deposit of Class A ordinary shares, cancelation of ADSs, distributions of cash dividends or other cash distributions, distributions of ADSs pursuant to share dividends or other free share distributions, distributions of securities other than ADSs and annual service fees. As a result, shareholders who exchange Class A ordinary shares into ADSs, and vice versa, may not achieve the level of economic return the shareholders may anticipate. An active trading market for our Class A ordinary shares on the Hong Kong Stock Exchange might not be sustained and trading prices of our Class A ordinary shares might fluctuate significantly. We cannot assure you that an active trading market for our ordinary shares on the Hong Kong Stock Exchange will be sustained. The trading price or liquidity for our ADSs on the NYSE might not be indicative of those of our Class A ordinary shares on the Hong Kong Stock Exchange. In 2014 and 2016, the Hong Kong Stock Exchange collaborated with Shanghai Stock Exchange and Shenzhen Stock Exchange separately to create an inter-exchange trading mechanism called Stock Connect that allows international and mainland Chinese investors to trade eligible equity securities listed in each other’s markets through the trading and clearing facilities of their home exchange. Stock Connect allows mainland Chinese investors to trade directly in eligible equity securities listed on the Hong Kong Stock Exchange, known as Southbound Trading; without Stock Connect, mainland Chinese investors would not otherwise have a direct and established means of engaging in Southbound Trading. We have been included in the Stock Connect since March 4, 2024, which allows eligible mainland Chinese investors to trade directly our Class A ordinary shares listed on the Hong Kong Stock Exchange and increases the liquidity of our Class A ordinary shares on the Hong Kong Stock Exchange. If an active trading market of our Class A ordinary shares on the Hong Kong Stock Exchange is not sustained, the market price and liquidity of our Class A ordinary shares could be materially and adversely affected. There is uncertainty as to whether Hong Kong stamp duty will apply to the trading or conversion of our ADSs. In connection with our initial public offering of Class A ordinary shares in Hong Kong, we have established a branch register of members in Hong Kong, which we refer to as the Hong Kong share register. Our Class A ordinary shares that are traded on the Hong Kong Stock Exchange, including those issued in our initial public offering of Class A ordinary shares in Hong Kong and those that may be converted from ADSs, are registered on the Hong Kong share register, and the trading of these Class A ordinary shares on the Hong Kong Stock Exchange will be subject to the Hong Kong stamp duty. To facilitate ADS-ordinary share conversion and trading between NYSE and the Hong Kong Stock Exchange, we also moved a portion of our issued Class A ordinary shares from our register of members maintained in the Cayman Islands to our Hong Kong share register. Under the Hong Kong Stamp Duty Ordinance, any person who effects any sale or purchase of Hong Kong stock, defined as stock the transfer of which is required to be registered in Hong Kong, is required to pay Hong Kong stamp duty. The ad valorem stamp duty is currently set at a total rate of 0.2% of the greater of the consideration for, or the value of, shares transferred, with 0.1% payable by each of the buyer and the seller. To the best of our knowledge, Hong Kong stamp duty has not been levied in practice on the trading or conversion of ADSs of companies that are listed in both the United States and Hong Kong and that have maintained all or a portion of their ordinary shares, including ordinary shares underlying ADSs, in their Hong Kong share registers. However, it is unclear whether, as a matter of Hong Kong law, the trading or conversion of ADSs of these dual-listed companies constitutes a sale or purchase of the underlying Hong Kong-registered ordinary shares that is subject to Hong Kong stamp duty. We advise investors to consult their own tax advisors on this matter. If Hong Kong stamp duty is determined by the competent authority to apply to the trading or conversion of our ADSs, the trading price and the value of your investment in our Class A ordinary shares and/or ADSs may be affected. ​ 63 Table of Contents