Cheche (CCG) 20-F2023 FY Annual report (foreign)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 20-F

(Mark One)

OR

For the fiscal year ended 

OR

OR

Date of event requiring this shell company report: September 14, 2023

Commission File Number: 001-41801

Cheche Group Inc.

(Exact name of Registrant as specified in its charter)

Lei Zhang

8/F, Desheng Hopson Fortune Plaza

13-1 Deshengmenwai Avenue

Xicheng District, Beijing 100088, China

(86) 10 5083-0911

(Name, Telephone, Email and/or Facsimile number and Address of Company Contact Person)

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

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

None

(Title of Class)

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

None

(Title of Class)

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the shell company report: 76,148,641 ordinary shares (consisting of 57,552,137 Class A ordinary shares and 18,596,504 Class B ordinary shares) and 13,726,877 warrants outstanding as of September 26, 2023.

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

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

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☐

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

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

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

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

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

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

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☐

TABLE OF CONTENTS

EXPLANATORY NOTE

On September 14, 2023, Cheche Group Inc. (the “Company” or “We”) consummated the previously announced business combination with Prime Impact Acquisition I (“Prime Impact”), pursuant to the business combination agreement, dated as of January 29, 2023 (the “Business Combination Agreement”), by and among Prime Impact, the Company, Cheche Merger Sub Inc. (“Merger Sub”), and Cheche Technology Inc. (“CCT”).

Pursuant to the Business Combination Agreement, the business combination (the “Business Combination”) were effected in two steps. On September 14, 2023 (the “Closing Date”), (1) Prime Impact merged with and into the Company (the “Initial Merger”), with the Company surviving the Initial Merger as a publicly traded entity (the time at which the Initial Merger became effective is referred to herein as the “Initial Merger Effective Time”); and (2) immediately following the Initial Merger, Merger Sub merged with and into CCT (the “Acquisition Merger” and, together with the Initial Merger, the “Mergers,” and together with all other transactions contemplated by the Business Combination Agreement, the “Business Combination”), with CCT surviving the Acquisition Merger as a wholly owned subsidiary of the Company.

At the Initial Merger Effective Time, pursuant to the Initial Merger: (1) each ordinary share of the Company, par value $0.00001 per share, issued and outstanding immediately prior to the Initial Merger Effective Time were redeemed for par value; (2) each then issued and outstanding Class A ordinary share of Prime Impact, par value $0.0001 per share and Class B ordinary share of Prime Impact, par value $0.0001 per share, were canceled and convert automatically, on a one-for-one basis, into one Class A ordinary share of the Company, par value $0.00001 per share (the “Class A Ordinary Shares”); and (3) each then issued, outstanding and unexercised whole warrant exercisable for one Class A ordinary share of Prime Impact (including public warrants sold as part of the units in Prime Impact’s initial public offering, and warrants sold to the Prime Impact Cayman LLC (the “Sponsor”), collectively, the “Prime Impact Warrants”) were assumed and converted automatically into one whole warrant exercisable for one Class A Ordinary Share (each resulting warrant, an “Assumed Public Warrant”).

On the Closing Date and immediately prior to the effective time of the Acquisition Merger (the “Acquisition Merger Effective Time”), each CCT Preferred Share then issued and outstanding immediately prior to the Acquisition Merger Effective Time were convert automatically into a number of ordinary shares, par value $0.00001 per share, of CCT at the then-effective conversion rate in accordance with CCT’s sixth amended and restated articles of association (the “Conversion”).

At the Acquisition Merger Effective Time, pursuant to the Acquisition Merger: (1) each ordinary share of CCT, par value $0.00001 per share (the “CCT Ordinary Shares”), including CCT Ordinary Shares resulting from the Conversion, that were (i) then issued and outstanding and (ii) held in CCT’s treasury, were canceled and converted into the right to receive a number of Class A Ordinary Shares based on the Per Share Merger Consideration (as defined herein); (2) each then issued and outstanding CCT Ordinary Share held by Mr. Lei Zhang and Mutong Holding Limited (“CCT Founder Shares”) were canceled and converted into the right to receive a number of Class B ordinary shares of the Company, par value $0.00001 per share (the “Class B Ordinary Shares”), based on the Per Share Merger Consideration; (3) each outstanding and unexercised warrant of CCT (the “CCT Warrant”) were assumed by the Company and converted into a warrant to acquire Class A Ordinary Shares (each resulting warrant, an “Assumed CCT Warrant”); (4) each CCT Option (as defined herein) to purchase a CCT Ordinary Share that was outstanding and unexercised were assumed and converted into an option to purchase such number of Class A Ordinary Shares based on the Per Share Merger Consideration; and (5) each CCT Restricted Share (as defined herein) that was issued and outstanding were converted into such number of Class A Ordinary Shares based on the Per Share Merger Consideration, subject to the terms and conditions that applied to the corresponding CCT Restricted Share Awards (as defined herein).

On September 11, 2023, the Company entered into a certain Subscription Agreement (the “Subscription Agreement”) with Prime Impact and certain leading global investor (the “PIPE Investor”), pursuant to which, among other things, the PIPE Investor agreed to subscribe for and purchase, and the Company agreed to issue and sell to the PIPE Investor, an aggregate of 1,300,000 Class A Ordinary Shares, at a purchase price equal to $10.00 per share (the “Private Placement”) in connection with a financing effort related to the transactions contemplated by the Business Combination Agreement. The Private Placement was closed concurrently with the closing of the Business Combination.

In addition to the Private Placement, on September 11, 2023, the Company entered into a certain Backstop Agreement (the “Backstop Agreement”) with Prime Impact and a certain investor (the “Backstop Investor”), pursuant to which, among other things, the Backstop Investor agreed (1) to purchase Class A ordinary shares of Prime Impact with an aggregate market value of no less than US$5.0 million (“SPAC Shares”) in open market or private transactions, (2) not to redeem or transfer any SPAC Shares purchased pursuant to the Backstop Agreement until and after the consummation of the Business Combination, and (3) to subscribe for and purchase an aggregate of 500,000 Class A Ordinary Shares, at a purchase price equal to $10.00 per share (the “Backstop Private Placement”) in connection with a financing effort related to the transactions contemplated by the Business Combination Agreement.

On September 14, 2023, the Company entered into a certain Sponsor Subscription Agreement (the “Sponsor Subscription Agreement”) with Prime Impact and the Sponsor, pursuant to which, among other things, the Sponsor agreed to subscribe for and purchase, and the Company agreed to issue and sell to the Sponsor, an aggregate of 634,228 Class A Ordinary Shares, at a purchase price equal to $10.00 per share (the “Sponsor Private Placement”) in connection with the settlement of the SPAC transaction expenses as contemplated under the Business Combination Agreement and a letter agreement by and among, Company, Prime impact and other relevant parties. The Sponsor Private Placement was closed concurrently with the closing of the Business Combination.

As a result of the foregoing transactions, there were 76,148,641 Ordinary Shares (consisting of 57,552,137 Class A Ordinary Shares and 18,596,504 Class B Ordinary Shares) and 13,726,877 Warrants (consisting of 10,802,764 Assumed Public Warrants, 2,860,561 Assume Private Warrants and 63,552 Innoven Warrant) outstanding as of September 26, 2023.

On September 18, 2023, the Class A Ordinary Shares and the warrants of the Company commenced trading on The Nasdaq Stock Market LLC (“Nasdaq”) under the symbols “CCG” and “CCGWW,” respectively.

Conventions that Apply to this Shell Report on Form 20-F

Except as otherwise indicated or required by context, references in this shell company report on Form 20-F (the “Report”) to “we,” “us,” “our,” “our company,” “the Company” refer to Cheche Group Inc., means its subsidiaries and, in the context of describing the operations and consolidated financial statements, the Affiliated Entities (as defined herein).

“Acquisition Closing” means the closing of the Acquisition Merger.

“Acquisition Closing Date” means the date of closing of the Acquisition Merger.

“Acquisition Merger” means the merger on the Closing Date of Merger Sub with and into CCT, with CCT surviving the merger as a wholly owned subsidiary of the Company.

“Acquisition Merger Effective Time” means the date and time at which the Acquisition Merger becomes effective.

“Affiliated Entities” means the VIE, Beijing Cheche Technology Co., Ltd., and its subsidiaries, Cheche Insurance Sales & Services Co., Ltd., Huicai Insurance Brokerage Co., Ltd. and Cheche Zhixing (Ningbo) Car Service Co., Ltd.

“Amended and Restated Memorandum and Articles of Association” means our currently effective memorandum and articles of association, which was adopted by the shareholders of Prime Impact and CCT on September 12, 2023 and became effective on September 14, 2023.

“Assumed CCT Warrant” means the warrants to purchase Class A Ordinary Shares into which the CCT Warrants will convert at the Acquisition Merger Effective Time.

“Assumed Private Warrant” means the warrants to purchase Class A Ordinary Shares into which the Private Warrants converted at the Initial Merger Effective Time.

“Assumed Public Warrant” means the warrants to purchase Class A Ordinary Shares into which the Prime Impact Warrants converted at the Initial Merger Effective Time.

“Backstop Private Placement” means the offer and sale to the Backstop Investor, an aggregate of 500,000 Class A Ordinary Shares at a purchase price equal to $10.00 per share, pursuant to the Backstop Agreement dated September 11, 2023, by and among Prime Impact, the Company and the Backstop Investor.

“Business Combination” means the Initial Merger, the Acquisition Merger, and all other transactions contemplated by the Business Combination Agreement.

“Business Combination Agreement” means that certain Business Combination Agreement, dated as of January 29, 2023, by and among Prime Impact, Merger Sub, the Company and CCT.

“CAC” means the Cyberspace Administration of the PRC.

“Cayman Companies Act” means the Companies Act (As Revised) of the Cayman Islands.

“CBIRC” means the China Banking and Insurance Regulatory Commission.

“CCT” means Cheche Technology Inc., its subsidiaries and, in the context of describing the operations and consolidated financial statements, the Affiliated Entities.

“CCT Options” means all outstanding options to purchase CCT Ordinary Shares, whether or not exercisable and whether or not vested, granted under the 2019 Equity Incentive Plan of CCT.

“CCT Preferred Shares” means (1) Series Seed Preferred Shares of CCT, par value $0.00001 per share, (2) Series Pre-A Preferred Shares of CCT, par value $0.00001 per share, (3) Series A Preferred Shares of CCT, par value $0.00001 per share, (4) Series B Preferred Shares of CCT, par value $0.00001 per share, (5) Series C Preferred Shares of CCT, par value $0.00001 per share, (6) Series D1 Preferred Shares of CCT, par value $0.00001 per share, (7) Series D2 Preferred Shares of CCT, par value $0.00001 per share, and (8) Series D3 Preferred Shares of CCT, par value $0.00001 per share, in each case issued and outstanding immediately prior to the Acquisition Merger Effective Time.

“CCT Restricted Share Awards” means all outstanding restricted share awards of CCT Ordinary Shares, whether or not vested, granted under the 2019 Equity Incentive Plan of CCT.

“CCT Warrant” or “Innoven Warrant” means a warrant to purchase an aggregate of 865,228 ordinary shares issued to Innoven Capital China Pte. Ltd., which were assumed by the Company at the Acquisition Merger Effective Time and converted into a warrant to purchase 63,552 Class A Ordinary Shares.

“Class A Ordinary Shares” means Class A Ordinary Shares, par value $0.00001 per share, of the Company, each of which will be entitled to one vote.

“Class B Ordinary Shares” means Class B Ordinary Shares, par value $0.00001 per share, of the Company, each of which will be entitled to three votes.

“Closing Date” means September 14, 2023, the date on which the Initial Closing and the Acquisition Closing occurred.

“Code” means the U.S. Internal Revenue Code of 1986, as amended.

“Conversion” means the conversion of each share of preferred shares of CCT into a number of CCT Ordinary Shares immediately prior to the Acquisition Merger Effective Time at the then-effective conversion rate as calculated pursuant to the constitutional documents of CCT.

“CSRC” means the China Securities Regulatory Commission.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Exchanged Restricted Shares” means the restricted Class A Ordinary Shares into which each CCT Restricted Share shall be converted, subject to the terms and conditions that applied to the corresponding CCT Restricted Share Awards, at the Acquisition Merger Effective Time.

“Founder” means Mr. Lei Zhang.

“HFCAA” means the Holding Foreign Companies Accountable Act.

“Hong Kong Subsidiaries” means Cheche Technology (HK) Limited and any other Hong Kong-incorporated subsidiary that CCT may have in the future.

“Initial Merger” means the merger of Prime Impact with and into the Company, with the Company surviving the merger as a publicly traded entity.

“Initial Merger Effective Time” means the date and time at which the Initial Merger becomes effective.

“insurance carriers” means companies that offer one or more types of insurance policies to individual consumers or corporate customers, either directly or through insurance agencies or brokers. Many insurance carriers in China maintain provincial and municipal branches, as under PRC Law, an insurance carrier can only issue auto insurance policies in the provinces, autonomous regions and municipalities where it is incorporated or has established branches.

“insurance carrier customers” means provincial or municipal branches, as the case maybe, of insurance carriers that have entered into contracts with us.

“iResearch” means iResearch Inc., a third-party research firm, which has prepared an industry report regarding our industry and market position in China.

“Merger Sub” means Cheche Merger Sub Inc.

“Ordinary Shares” means the Class A Ordinary Shares and Class B Ordinary Shares of the Company.

“PCAOB” means the Public Company Accounting Oversight Board.

“Plans of Merger” means the plans of merger pursuant to the Business Combination Agreement.

“PRC” or “China” means the People’s Republic of China (including, for the avoidance of doubt, the Hong Kong Special Administrative Region and the Macau Special Administrative Region), and only in the context of describing the industry matters, including those derived from the report of iResearch, and the PRC laws, rules, regulations, regulatory authorities, and any PRC entities or citizens under such rules, laws and regulations and other legal or tax matters in this Report, excludes Taiwan, the Hong Kong Special Administrative Region and the Macau Special Administrative Region.

“PRC Subsidiaries” means Baodafang Technology Co., Ltd., Cheche Technology (Ningbo) Co., Ltd. and any other PRC-incorporated subsidiary that CCT may have in the future.

“Prime Impact” means Prime Impact Acquisition I.

“Prime Impact Class A Ordinary Shares” means a Class A ordinary share of Prime Impact Acquisition I, par value $0.0001 per share.

“Prime Impact Class B Ordinary Shares” means a Class B ordinary share of Prime Impact Acquisition I, par value $0.0001 per share.

“Prime Impact Ordinary Shares” means Prime Impact Class A Ordinary Shares and Prime Impact Class B Ordinary Shares.

“Per Share Merger Consideration” means a number of Ordinary Shares equal to (1) $760,000,000 divided by $10.00, and divided by (2) the aggregate fully diluted share capital of CCT, being, without duplication, the aggregate number of CCT ordinary shares that are (i) (x) issued and outstanding and (y) held in the CCT’s treasury immediately prior to the Acquisition Merger Effective Time, (ii) issuable directly or indirectly upon, or subject to, the conversion, exercise or settlement of any equity interest in CCT issued and outstanding immediately prior to the Acquisition Merger Effective Time, including CCT Preferred Shares, CCT Options, CCT Restricted Shares Awards and CCT Warrant, in each case, that are issued and outstanding immediately prior to the Acquisition Merger Effective Time, or (iii) issuable pursuant to any permitted equity financing of CCT.

“Private Placement” means the offer and sale to the PIPE Investor, an aggregate of 1,300,000 Class A Ordinary Shares at a purchase price equal to $10.00 per share, pursuant to the Subscription Agreement dated September 11, 2023, by and among the Company, Prime Impact and the PIPE Investor.

“Private Warrants” means the warrants sold to Sponsor in the private placement consummated concurrently with the initial public offering of Prime Impact, each entitling its holder to purchase one Class A ordinary share of Prime Impact at an exercise price of $11.50 per share, subject to adjustment.

“Public Warrants” means the redeemable warrants issued in the initial public offering of Prime Impact, each entitling its holder to purchase one Class A ordinary share of Prime Impact at an exercise price of $11.50 per share, subject to adjustment.

“RMB” means Renminbi, the lawful currency of the PRC.

“SaaS” means software as a service, a software licensing and delivery model in which software is licensed on a subscription basis and is centrally hosted.

“SEC” means the Securities and Exchange Commission.

“Securities Act” means the Securities Act of 1933, as amended.

“Sponsor” means Prime Impact Cayman, LLC.

“Trust Account” means the U.S.-based trust account at J.P. Morgan Chase Bank, N.A., maintained by Continental Stock Transfer and Trust Company, acting as trustee, pursuant to an Investment Management Trust Agreement by and between Prime Impact and Continental Stock Transfer & Trust Company dated September 9, 2020.

“U.S. GAAP” means accounting principles generally accepted in the United States of America.

“VATS” means the value-added telecommunication services.

“VIE” means Beijing Cheche Technology Co., Ltd., the variable interest entity that CCT consolidates through contractual arrangements.

“Warrants” means the Assumed Public Warrants and the Assumed CCT Warrants.

“WFOE” means Cheche Technology (Ningbo) Co., Ltd., a wholly foreign owned subsidiary of CCT domiciled in China.  

“$” means United States dollars, the lawful currency of the United States of America.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Report contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (or the “Exchange Act”) that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this Report, including statements regarding our future financial position, business strategy and plans and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential” or “continue” or the negative of these terms or other similar expressions. Forward-looking statements include, without limitation, our expectations concerning the outlook for our business, productivity, plans and goals for future operational improvements and capital investments, operational performance, future market conditions or economic performance and developments in the capital and credit markets and expected future financial performance, as well as any information concerning our possible or assumed future results of operations as set forth in this Report. Forward-looking statements also include statements regarding the expected benefits of the Business Combination.

Forward-looking statements involve a number of risks, uncertainties and assumptions, and actual results or events may differ materially from those projected or implied in those statements. Important factors that could cause such differences include, but are not limited to:

We caution you against placing undue reliance on forward-looking statements, which reflect current beliefs and are based on information currently available to us as of the date a forward-looking statement is made. Forward-looking statements set forth herein speak only as of the date of this Report. We do not undertake any obligation to revise forward-looking statements to reflect future events, changes in circumstances, or changes in beliefs. In the event that any forward-looking statement is updated, no inference should be made that we will make additional updates with respect to that statement, related matters, or any other forward-looking statements. Any corrections or revisions and other important assumptions and factors that could cause actual results to differ materially from forward-looking statements, including discussions of significant risk factors, may appear, in our public filings with the SEC, which are accessible at www.sec.gov, and which you are advised to consult.

Market, ranking and industry data used throughout this Report, including statements regarding market size, is based on independent industry surveys and publications, including reports by iResearch Inc. These data involve a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates. While we are not aware of any misstatements regarding the industry data presented herein, such estimates involve risks and uncertainties and are subject to change based on various factors, including those discussed under the headings “Item 3. Key Information — D. Risk Factors” and “Item 5. Operating and Financial Review and Prospects” in this Report.

PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Information regarding the directors and executive officers of Cheche Group Inc. after the completion of the Business Combination is included under the section “Item 6. Directors, Senior Management and Employees.”

The business address for each of our directors and executive officers is 8/F, Desheng Hopson Fortune Plaza 13-1 Deshengmenwai Avenue, Xicheng District, Beijing 100088, China.

Wilson Sonsini Goodrich & Rosati, P.C. acted as counsel for the Company and CCT, and will act as counsel to the Company upon and following the consummation of the Business Combination. The address of Wilson Sonsini Goodrich & Rosati, P.C. is Unit 2901, 29F, Tower C, Beijing Yintai Centre, No. 2 Jianguomenwai Avenue, Chaoyang District, Beijing 100022, China.

Han Kun Law Offices acted as the PRC counsel for the Company and CCT, and will act as the PRC counsel to the Company upon and following the consummation of the Business Combination. The address of Han Kun Law Offices is 9/F, Office Tower C1, Oriental Plaza, 1 East Chang An Ave., Beijing, China.

Harney Westwood & Riegels acted as the Cayman counsel for the Company and CCT, and will act as the Cayman counsel to the Company upon and following the consummation of the Business Combination. The address of Harney Westwood & Riegels is 3501 The Center, 99 Queen’s Road Central, Hong Kong.

PricewaterhouseCoopers Zhong Tian LLP acted as the independent registered public accounting firm of Cheche Technology Inc., for its financial statements as of December 31, 2021 and 2022 and for the years then ended, and will be the Company’s independent registered public accounting firm after the consummation of the Business Combination. The address of PricewaterhouseCoopers Zhong Tian LLP is 26 /F Office Tower A, Beijing Fortune Plaza, 7 Dongsanhuan Zhong Road, Chaoyang District Beijing, China.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3. KEY INFORMATION

The following table sets forth the capitalization of the Company on an unaudited pro forma condensed combined basis as of December 31, 2022, after giving effect to the Business Combination, the Private Placement, the Backstop Private Placement and the Sponsor Private Placement.

Not applicable.

Our business and our industry are subject to significant risks. You should carefully consider all of the information set forth in this Report and in our other filings with the SEC, including the following risk factors, in evaluating our business. If any of the following risks actually occur, our business, financial condition, results of operations, and growth prospects would likely be materially and adversely affected. This Report also contains forward-looking statements that involve risks and uncertainties. See the section entitled “Cautionary Note Regarding Forward-Looking Statements.”

Summary of Risk Factors

Risks Related to Our Business and Industry

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

Risks Related to Our Corporate Structure

We carry out our business in China primarily through WFOE and our contractual arrangements with the Affiliated Entities. We are therefore subject to various legal and operational risks and uncertainties related to our corporate structure, which could materially and adversely affect our operations, cause the value of our securities to significantly decline or become worthless. Such risks and uncertainties include, but are not limited to, the following:

Risks Related to Doing Business in China

We face various legal and operational risks and uncertainties related to being based in and having significant operations in China, and therefore are subject to risks associated with doing business in China generally. Risks and uncertainties related to doing business in China could result in a material adverse change in our operations, significantly limit or completely hinder our ability to offer our securities to investors, and cause the value of our securities to significantly decline or become worthless. Such risks and uncertainties include, but not limited to, the following:

Risks Related to Our Securities

Risks Related to Our Business and Industry

We operate in a highly competitive and rapidly evolving market, which makes it difficult to evaluate our prospects.

We, through the VIE, commenced operations in September 2014. We operate in China’s insurance industry, which is highly competitive and rapidly evolving. Other participants in the industry, including insurance carriers, insurance intermediaries, third-party platforms, referral partners and insurance consumers, may have difficulty distinguishing our platform from those of our competitors. As the industry and our business develop, we may modify our business model or change our platform, services or products. These changes may not achieve expected results and may materially adversely affect our financial condition and results of operations.

CCT’s net revenue was RMB1,735.4 million and RMB2,679.1 million in 2021 and 2022, respectively. CCT’s gross profit was RMB80.8 million and RMB142.3 million in 2021 and 2022, respectively. We may not achieve similar growth rates in future periods as we expand our operations. You should evaluate our business and prospects in light of the risks and challenges that we are likely to face as a company seeking to develop in a rapidly evolving market.

Our business is subject to risks related to China’s digital insurance and the automotive industries.

Our business depends on the growth of China’s digital insurance industry and in particular, China’s digital auto insurance transaction industry, which is relatively new and may not develop as expected. The digital auto insurance transaction industry in China grew from RMB85.2 billion in 2018 to RMB270.9 billion in 2021, representing a CAGR of 47.1%, according to iResearch. However, China’s digital auto insurance transaction industry may not increase at the same rate in future periods.

The regulatory framework governing China’s digital insurance industry is evolving and is expected to remain uncertain for the foreseeable future. A reversal of, or a slowdown in, China’s digital insurance industry could reduce demand for our services and products for digital insurance transactions and insurance SaaS solutions and adversely affect our growth prospects and profitability.

We derive most of our revenues from providing auto insurance transaction services. As a result, our success depends on China’s automobile market. Automobile sales in China declined by 9.9% from 2.8 million vehicles 2018 to 2.6 million vehicles in 2021. Decreased demand for automobiles could adversely affect the demand for auto insurance and, in turn, the number of insurance carrier customers, third-party platforms, referral partners, insurance intermediaries and consumers using our platform. Accordingly, if the automobile industry declines or fails to grow, our business, results of operations and financial condition could suffer.

A downturn in general economic conditions in China could reduce consumer spending, negatively impacting the growth rates of China’s automotive industry and the demand for auto insurance in China. Automobile purchasers are also sensitive to trends in the broader economy, including the cost of energy and gasoline, the availability and cost of credit, business and consumer confidence, stock market volatility and unemployment. In addition, the growing popularity of ride-hailing applications in China, could adversely affect automobile purchases and decrease the demand for auto insurance in China.

Our business is subject to complex and evolving laws and regulations, many of which are subject to change and uncertain interpretation, which could result in changes to our business practices, reduced revenue and increased compliance costs or otherwise harm our business. Any failure to comply with laws or regulations may subject us to fines, injunctions and other penalties that could harm our business.

The insurance industry in China is subject to comprehensive government regulation and supervision. In recent years, the regulatory framework governing China’s insurance industry has changed significantly and may continue to change significantly in the future. See “Item 4. Information on the Company— B. Business Overview—Government Regulations—Regulations of the Insurance Industry” for a discussion of the laws and regulations applicable to our operations. Some laws were recently amended, and their interpretation following such amendments remains unclear. Compliance with these laws and regulations can be difficult and costly. New laws or regulations or changes to laws and regulations can impose additional compliance costs, reduce our revenues, require us to change our operations to ensure compliance or otherwise harm our business.

In September 2020, the China Banking and Insurance Regulatory Commission (the “CBIRC”) issued the Guiding Opinions on Implementing Comprehensive Reform of Auto Insurance. These opinions provided guidance for insurance carriers to (1) optimize actuarial and pricing practices, (2) expand protection coverages, and (3) enhance customer service quality for auto insurance. For commercial auto insurance products, insurance carriers must lower the cap on expense ratios from 35% to 25% of insurance premiums. Insurance carriers are also encouraged to optimize their cost structures to maintain higher loss ratios, from 65% to 75% of commercial auto insurance premiums. As a result, insurance carriers received lower premiums from selling commercial auto insurance, which adversely affected the service fees that we received from facilitating the sale of commercial auto insurance through our Easy-Insur and Insurance Marketplace since October 2020.

PRC regulatory authorities have published regulations requiring insurance carriers and insurance intermediaries to register salespersons of insurance products with the CBIRC before such salespersons begin practicing. Insurance intermediaries that engage in sales activities of insurance products with unregistered salespersons may be subject to warnings, fines and other penalties by regulatory authorities. However, due to the lack of detailed interpretation, the exact definition and scope of “sales activities” is unclear. Considerable uncertainties exist with respect to the interpretation of existing laws and regulations and new laws and regulations governing sales activities of insurance products. We may need to adjust our business model in response to evolving regulatory requirements.

PRC government authorities have also become increasingly vigilant in enforcing laws and regulations governing the digital auto insurance transaction industry. For example, pursuant to the Regulatory Measures for Risks in the Outsourcing of Information Technology by Banking and Insurance Institutions (the “Outsourcing Measures”) issued by the CBIRC on December 30, 2021, adoption of our SaaS solution services and products by insurance carriers and insurance intermediaries may be deemed as their outsourcing of information services, and as a result, we must meet the outsourcing requirements of the Outsourcing Measures. We may from time to time be required to conduct self-inspections and rectify any non-compliance with regulatory requirements. As of the date of this Report, we have conducted self-inspections in accordance with regulatory requirements and believes that we have rectified all material non-compliance identified in these inspections.

We may not have always been in full compliance with all applicable laws and regulations. For example, we used to offer insurance consumers small rewards to incentivize them to purchase insurance products through our platform. PRC regulators may deem these rewards to have violated PRC laws and regulations, which prohibit insurance intermediaries from offering insurance consumers benefits not stipulated in the relevant insurance contracts. We ceased offering these rewards to insurance consumers in late 2019. However, PRC regulators may impose retroactive administrative penalties on us for past rewards. As of the date of this Report, we are not aware of any active inquires or investigation by relevant regulators with respect to the imposition of retroactive administrative penalties on us for such historical practices.

We invest significant time and resources to comply with regulatory requirements, which could divert the attention of our management team and key employees and adversely affect our business. Non-compliance with applicable regulations or requirements could subject us to, among others: (1) investigations, enforcement actions and sanctions; (2) mandatory changes to our business model or services; (3) mandatory disgorgement of profits, fines and damages; (4) civil, administrative and criminal penalties or injunctions; (4) claims for damages by ecosystem participants and other third parties; (5) damage to our public image and market reputation; (6) invalidation or termination of contracts; and (7) loss of intellectual property rights.

Any of the foregoing could materially adversely affect our business, financial condition and results of operations.

Failure to obtain or maintain permits necessary for our operations may subject us to regulatory penalties or require us to adjust our business model.

Many aspects of our business depend on obtaining and maintaining licenses, approvals, permits or qualifications from PRC regulators. Obtaining such approvals, licenses, permits or qualifications depends on our compliance with regulatory requirements. PRC regulatory authorities also have relatively broad discretion to grant, renew and revoke licenses and approvals and to implement laws and regulations.

Based on PRC laws and regulations currently in effect and the legal advice of our PRC legal counsel, Han Kun Law Offices, and subject to different interpretations of these laws and regulations that may be adopted by PRC authorities, the PRC Subsidiaries and the Affiliated Entities have obtained the following licenses and approvals necessary to operate in China as of the date of this Report: (1) each of the PRC Subsidiaries and the Affiliated Entities has obtained a business license; (2) the VIE, through which the PRC Subsidiaries conduct their VATS business, has obtained a value-added telecommunications license for internet information services; and (3) Cheche Insurance Sales & Service Co., Ltd. has obtained the insurance intermediary license and the insurance agency business permit.

The PRC Subsidiaries and the Affiliated Entities may not be able to maintain existing licenses, permits and approvals and government authorities may subsequently require the PRC Subsidiaries and the Affiliated Entities to obtain additional licenses, permits and approvals. If the PRC Subsidiaries and the Affiliated Entities fail to obtain the necessary licenses, permits and approvals or inadvertently conclude that any permissions or approvals are not required, or if applicable laws, regulations, or interpretations change and the PRC Subsidiaries or the Affiliated Entities are required to obtain such permissions or approvals in the future, the PRC Subsidiaries and the Affiliated Entities may be subject to fines, confiscation of revenues generated from incompliant operations or the suspension of relevant operations. The PRC Subsidiaries and the Affiliated Entities may also experience adverse publicity arising from such non-compliance with government regulations that negatively impact our brand.

We have historically incurred net losses and negative operating cash flows, and may not achieve or maintain profitability in the future.

We have incurred net losses since our inception. CCT incurred net losses of RMB146.5 million and RMB91.0 million in 2021 and 2022, respectively. CCT had operating cash outflow of RMB187.6 million and RMB158.9 million in 2021 and 2022, respectively. We must grow our revenues to become profitable, and, even if we do, we may not maintain or increase our profitability. We expect to incur losses for the foreseeable future as we invest substantial financial and other resources in, among other things:

These expenditures may not result in additional revenue or the growth of our business. Accordingly, we may not generate sufficient revenue to offset our expected cost increases and achieve and sustain profitability. If we fail to achieve and sustain profitability, the market price of our Class A Ordinary Shares could decline.

Our effort to expand into the non-auto insurance market and diversify our revenues may not be successful.

While we historically focused on the auto insurance market, we have expanded into the non-auto insurance market in recent years to diversify our revenues. Our management believes that as non-auto insurance market develops, insurance carriers offering auto-insurance products are expected to have more opportunities to sell across different types of insurance products by utilizing their mature marketing channels, and non-auto insurance products tend to have more favorable margins. However, we may incur significant costs in research and development, recruiting additional personnel and engaging more third-party service providers to develop our non-auto insurance business, and such investment may not generate expected returns. Moreover, the non-auto insurance market may not develop as we expect. If we fail to diversify our revenues, our revenues may grow at a slower rate than it anticipates, and our business, financial condition and results of operations may be adversely affected.

We face intense competition and we may not be able to compete effectively.

We face significant competition from companies that provide services and products for digital insurance transactions or insurance SaaS solutions to insurance carriers and insurance intermediaries. In addition, insurance carriers can attract consumers directly through their own sales and marketing teams, other traditional methods of distribution or digital distribution channels. Insurance carriers and insurance intermediaries may also develop their own systems, instead of purchasing SaaS solution products from us or other vendors. We also expect that new competitors will enter China’s digital insurance industry in China with competing platforms, services and products, and we may face new competitors as we expand into new insurance markets. We must develop new services and products to respond to our ecosystem participants’ evolving needs. Our investments in new services and products may not be successful. See “—If we fail to enhance and expand our services and products in a manner that responds to our ecosystem participants’ evolving needs, our business may be adversely affected.”

Our competitors may have significantly more financial, technical, marketing and other resources than we have, and may devote greater resources to develop, promote and support their platforms and services. In addition, they may have more extensive insurance industry relationships than we have, longer operating histories and greater brand recognition. As a result, these competitors may be able to respond more quickly to new technologies, regulatory requirements and consumer demand.

If insurance carriers, third-party platforms or insurance intermediaries compete directly with us or partner with our competitors, it may be difficult for us to attract and retain referral partners, consumers and other ecosystem participants. This could reduce our revenues and market share and materially adversely affect our business, financial condition and results of operations.

Our success also depends on our ability to keep pace with advances in technologies and improve our platform to address the increasingly sophisticated and varied needs of our ecosystem participants; adapt our services and products to emerging industry standards and practices; and comply with evolving regulatory requirements. Our efforts to adapt to changes in technology could require substantial investments. Our ability to sustain and grow our business will suffer if we fail to respond to advances in technology in a timely and cost-effective manner.

Our competitors also may develop and market new technologies that render our platform less competitive, unmarketable or obsolete. For example, if our competitors develop platforms with similar or superior functionality to us, and the volume of transactions facilitated through our platform declines, we may need to decrease our transaction service fees. If we cannot maintain our pricing structure due to competitive pressures, our revenues could decline or fail to grow as we expect.

Competition may intensify as our competitors enter into business combinations or alliances or raise additional capital, or as established companies in other market segments or geographic markets expand into our market segments or geographic markets. Furthermore, current and future competitors could offer a different pricing model or undercut prices to increase market share. If we cannot compete successfully against current and future competitors, our business, results of operations and financial condition could deteriorate.

If we fail to enhance and expand our services and products in a manner that responds to our ecosystem participants’ evolving needs, our business may be adversely affected.

Our success depends on our ability to provide innovative services that make our platform useful for insurance carriers, third-party platforms, referral partners, insurance intermediaries and consumers. Accordingly, we must invest resources in technology and developments of new services and products to improve our platform. This may require significant investments in acquiring additional personnel, engaging third-party service providers and conducting research and development activities. We may not have the resources to make such investments.

While we historically focused on the auto insurance market, we have expanded into the non-auto insurance market. We also began to provide SaaS solution products to insurance intermediaries in December 2020 and to insurance carriers in March 2021, and we plan to further expand our service and product offerings. See “Item 4. Information on the Company—B. Business Overview —Services and Products.” We have limited experience in these new market segments, services and products, and our ecosystem participants may not respond favorably to new services and products. If the services or products that we introduce fail to engage ecosystem participants, we may fail to generate sufficient revenue or other value to justify our investments.

If we fail to penetrate new insurance markets or introduce new services and products successfully, our revenues may grow at a slower rate than we anticipate. Any of the foregoing could damage our reputation and materially adversely affect our business, financial condition and results of operations.

If we are unable to maintain and expand our local network, we may not be able to grow our business.

We had a nationwide network of over 400 service personnel in 24 provinces, autonomous regions and municipalities in China as of December 31, 2022. Our service personnel negotiate service fees and other contract terms with insurance carrier customers and facilitate the settlement and issuance of auto insurance policies to end consumers. We face significant challenges and risks in managing our geographically dispersed network. If one or more of our service personnel were to depart and join a competitor, they may divert business from us to our competitor, which could materially adversely affect our business.

As we grow our business, we need to expand the geographic reach of our network. This depends largely on our ability to meet local regulatory requirements and hire and retain service personnel with long-lasting relationships with insurance carriers and insurance intermediaries. Failure to do so would prevent us from expanding our business and maintaining our market share.

We may also need to seek additional business partners to assist in our expansion efforts. If we cannot successfully expand our nationwide network, our growth may be adversely impacted. In addition, the expansion of our nationwide network may not produce the expected financial or results of operations. Any of the foregoing could materially adversely affect our business, financial condition and results of operations.

If we cannot maintain and enhance our relationships with insurance carriers, our business, results of operations and financial condition could be materially adversely affected.

We generate most of our revenues from services and products provided to insurance carriers and insurance intermediaries. Our contracts with insurance carrier customers for digital insurance transaction services and with insurance carrier customers and insurance intermediaries for SaaS solution services typically have a one-year term. Insurance carrier customers and insurance intermediaries may terminate some of these contracts with relatively short notice periods under certain circumstances. We may not be able to renew any of these contracts upon their expiration on terms comparable to or better than existing contracts, if at all.

Our relationships with insurance carriers depend on our ability to deliver an attractive volume of consumers that match their desired consumer profiles. At the same time, our ability to attract consumers to our platform depends on the quantity and quality of insurance products insurance carriers offer through our platform.

If we cannot maintain our relationships with insurance carriers and add new insurance carriers to our ecosystem, we may be unable to offer our consumers the insurance buying experience they expect. The foregoing risks could reduce referral partners’ and consumers’ confidence in our products and services. As a result, referral partners and consumers could cease to use us, or use us at a decreasing rate, which would reduce our attractiveness to insurance carriers and materially adversely affect our business, results of operations and financial condition.

The fees that we charge for selling insurance products through our platform may fluctuate or decline significantly due to factors beyond our control, which could significantly harm our business, financial condition and results of operations.

We derive substantially all of our revenues from transaction service fees that we charge insurance carrier customers and other intermediaries for selling policies through our platform. We negotiate the transaction service fees with insurance carrier customers and other intermediaries based on prevailing economic and regulatory conditions, market demand and related factors. Many of these factors are beyond our control.

In particular, the transaction service fees that we charge depend on:

Because we do not control the decisions of insurance carrier customers, the transaction services fees that we receive from insurance carrier customers and other intermediaries vary significantly from period to period and among different insurance carrier customers, auto insurance products, transactions and geographic markets. We cannot determine or predict the timing or extent of any changes in our transaction service fees.

For example, insurance industry associations across China voluntarily agreed to limit the fee rates that insurance carriers pay insurance intermediaries, which resulted in industry-wide fee decreases for insurance intermediaries in accordance with the Circular of the General Office of the China Banking and Insurance Regulatory Commission on Matters relating to Further Tightened Regulation of Vehicle Insurance, which was promulgated and implemented by the CBIRC on January 14, 2019. Government regulations also prohibit insurance carriers in China from paying insurance intermediaries more than what they report to the CBIRC and require insurance intermediaries to keep a true and complete record of the amount and collection of commission. In practice, some insurance carriers pay insurance intermediaries additional fees in the form of fees for consulting, technical support or marketing services or through other means. The CBIRC punished some insurance carriers and insurance intermediaries for this practice. Historically, we charged third-party automobile service companies referral fees, as we referred insurance carrier customers and each unique insurance policy underwritten by them to third-party car services companies in 2020, which may be recognized by the CBIRC as commission received from insurance carrier customers. We terminated such referral services in 2021. Although we have ceased these payment practices, the CBIRC may still penalize us for having received such referral revenue. As of the date of this Report, we are not aware of any announcement by the CBIRC to impose penalties for such historical payment practices.

As a result, it is difficult for us to assess the effect of changes in transaction services fees on our operations. Any decrease in transaction service fees could adversely affect our revenues, cash flow and results of operations.

We may fail to maintain and grow our relationships with third-party platforms and referral partners and to effectively manage such relationships.

We collaborate with third-party platforms and insurance referral partners to direct consumers interested in insurance products to our platform and maintain and grow our consumer base. Our third-party platform partners and referral partners may enter into business collaborations with our competitors, or offer insurance products directly and compete with our business.

If our third-party platform partners or referral partners do not effectively market our platform, or if they choose to use greater efforts to market their own digital insurance transaction services and/or products of our competitors, the value of our platform to insurance carriers and the number of transactions on our platform may decline or fail to grow as we expect.

We pay fees to third-party platforms and referral partners for referring consumers to us and facilitating the purchase of insurance products through our platform. We may need to increase our fees for third-party platform partners and referral partners to incentivize them to promote our platform, which would reduce our profit margins. If we cannot source and engage insurance consumers through third-party platforms and referral partners at reasonable costs, our business, results of operations and prospects may be materially adversely affected.

We may not successfully attract prospective consumers.

The growth of our business depends on our ability to attract prospective consumers at reasonable costs. To expand the base of our consumers, we must invest significant resources to develop new services and build our relationships with insurance carriers, third-party platforms, referral partners and other ecosystem participants.

Our ability to successfully launch, operate and expand our services to attract prospective consumers depends on many factors, including our ability to anticipate and effectively respond to changing interests and preferences of consumers, anticipate and respond to changes in the competitive landscape, and develop and offer services that address the needs of consumers. Our ability to attract prospective consumers also depends on our referral partners’ ability to effectively market our platform. See “—We may fail to maintain and grow our relationships with third-party platforms and referral partners and to effectively manage such relationships.”

To attract prospective consumers, we must devote significant resources to enhancing the functionality and reliability of our platform and the speed with which it processes insurance purchase applications. If our efforts are unsuccessful, our base of consumers and the insurance transactions we facilitate may not increase at the rate we anticipate or may even decrease.

Our ability to attract prospective consumers also depends on consumers receiving competitive prices, convenience, customer service and responsiveness from insurance carriers on our platform. If these insurance carriers do not meet consumer expectations, our brand value and ability to attract consumers to our platform may decline, which could materially adversely affect our business, financial condition and results of operations.

Our business may be adversely affected if it is unable to maintain relationship with our insurance carriers, in particular certain group-wide insurance carrier conglomerates in China, as well as our referral partners and third-party platforms.

We have established relationships with a broad and diversified network of 100 insurance carriers of all sizes, including group-wide insurance conglomerates and other medium and small insurance carriers. Through our nationwide network, our local branches have entered into contracts with insurance carrier customers that are affiliated with such insurance carrier conglomerates for the sale of our insurance products. We also cooperate with other intermediaries to settle, issue and deliver auto insurance policies in regions where consumers register their vehicles and other insurance policies in their local regions. We have not entered into long-term contracts with other intermediaries. The loss or reduction of business from any major insurance carrier customers or insurance carrier conglomerates or services from any major intermediary partners could materially adversely affect our revenues, financial condition and results of operations. If one or more of our major insurance carrier customers or intermediary partners were to experience financial difficulties, reduce our sales of insurance products or limit or cease operations, our business and results of operations would suffer. In addition, fluctuations in the sales patterns of insurance carrier customers could adversely affect our revenues, financial condition or results of operations.

We utilize referral partners and third-party platforms to direct consumers interested in insurance products to our platform. Although we currently do not rely on any particular referral partners or third-party platforms to attract consumers, we may do so in the future, and the loss of any such referral partner or third-party platform would adversely impact our business. We have not entered into long-term contracts with our referral partners. To the extent that we will rely on one or few referral partners or third-party platforms to attract consumers to our platform in the future, if one or several such referral partners or third-party platforms were to discontinue promoting our platform, or promote our competitors over us, the volume of transactions on our platform may decrease. In addition, the loss of such referral partner or third-party platform would require us to identify and collaborate with alternative referral partners or third-party platform, or to rely more heavily on direct-to-consumer sales, which we may be unable to do successfully, or which could prove time-consuming and expensive.

The lag time between the payment of our referral service fees to referral partners and the receipt of our transaction service fees from insurance carrier customers and other intermediaries may adversely affect our liquidity and cash flows.

As is typical for a digital insurance service provider in China, we usually pay referral service fees to referral partners within a few days after referred consumers buy insurance policies from our platform. However, we generally receive payments of transaction service fees from insurance carrier customers and other intermediaries on a monthly basis. This time lag requires us to maintain significant working capital to fund our operations.

We expect that as our business grows, we will need additional working capital. We have entered into financing arrangements to manage our working capital needs. For example, CCT was granted a credit facility of RMB10.0 million in 2022 to support its operations, and drew down RMB10.0 million on June 30, 2022. These financing arrangements may not continue to be available on acceptable terms, or at all. If we do not have sufficient working capital, we may not be able to pursue our growth strategy, respond to competitive pressures or fund key strategic initiatives, which may harm our business, financial condition and results of operations.

Our SaaS solution services and products may not gain market acceptance, which could materially adversely affect our results of operations.

We began to provide SaaS solution services and products to insurance intermediaries in December 2020 and to insurance carrier customers in March 2021. The success of our SaaS solutions business depends on the adoption of SaaS solutions in China’s insurance industry, which may be affected by, among other things, regulatory requirements and widespread acceptance of SaaS solutions in general.

Market acceptance of SaaS solutions depends on a variety of factors, including but not limited to price, security, reliability, performance, customer preferences, public concerns regarding privacy and the enactment of restrictive laws or regulations. It is difficult to predict the demand for insurance SaaS solutions and the future growth rate and size of the insurance SaaS solutions market.

If we or other providers of SaaS solution services or products in the insurance industry or other industries experience security breaches, loss of customer data, disruptions in delivery or other problems, the market for SaaS solution services and products may suffer. If SaaS solutions do not achieve widespread adoption or the demand for SaaS solutions fails to grow due to a lack of customer acceptance, technological challenges, weakening economic conditions, security or privacy concerns, competing technologies and solutions, reductions in corporate spending or otherwise, our business, financial condition and results of operations could be materially adversely affected.

If we do not effectively manage our growth, control our expenses or implement our business strategies, we may be unable to maintain high-quality services or compete effectively.

We have experienced rapid growth in recent years, which has strained our management and resources. We believe that our growth will depend on our ability to:

Our expansion may require us to penetrate new cities in China, where we may have difficulty in satisfying local market demands and regulatory requirements. The foregoing risks will require substantial management skills and efforts and significant expenditures. We may not achieve any of the foregoing.

The expansion by we may divert our management, operational or technological resources from our existing operations. We may not successfully maintain our growth rate or implement our future business strategies effectively. Failure to do so may materially adversely affect our business, financial condition, results of operations and prospects.

If we fail to build and maintain our brand, we may not be able to attract enough ecosystem participants to grow our business.

Maintaining and enhancing our brand is critical to expanding our business. Maintaining and enhancing our brand largely depend on providing useful, reliable and innovative services, which we may not do successfully. We may introduce new services or terms of service that our ecosystem participants do not like, which may negatively affect our brand. We may also fail to provide adequate customer service, which could erode confidence in our brand.

Maintaining and enhancing our brand may require us to make substantial investments, which may not be successful. If we fail to successfully promote and maintain our brand, or if we incur excessive expenses in this effort, our business, financial condition and results of operations may be adversely affected.

Any negative publicity about our industry, our ecosystem participants or our other business partners may materially adversely affect our business and results of operations.

Our ability to attract and retain ecosystem participants depends in part upon public perception of our products, services, management and financial performance. Customer complaints, governmental investigations or service failures of our platform could cause substantial adverse publicity.

China’s insurance industry is highly regulated. China’s digital insurance industry is relatively new and the regulatory framework for this industry is evolving. Press coverage, social media messaging or other public statements that insinuate improper conduct by us or other participants in China’s insurance industry, and the digital insurance industry in particular, even if inaccurate, may result in negative publicity, litigation, governmental investigations or additional regulations.

Negative publicity about our ecosystem participants, including insurance carriers, third-party platforms, referral partners, insurance intermediaries and our other business partners could also adversely affect us. Addressing negative publicity and any resulting litigation or investigations may distract management, increase costs and divert resources. Negative publicity may also harm our reputation and the morale of our employees. Any of these developments could adversely affect our business, financial condition and results of operations and the price of our Class A Ordinary Shares.

We may acquire other companies or technologies that are complementary to our business, which could divert our management’s attention, dilute our shareholders, disrupt our operations and harm our results of operations.

On October 26, 2017, the VIE acquired 100% of the equity interests in Fanhua Times, which primarily engaged in the auto insurance agency business, for total consideration of approximately RMB225.4 million. If appropriate opportunities arise, we may acquire additional assets, products, technologies or businesses complementary to our business. In addition to obtaining shareholder approval, we may have to obtain approvals and licenses from government authorities for the acquisitions. These approvals and licenses could result in delays and increased costs, and may derail our business strategy if we fail to obtain them.

Acquisitions involve a number of risks and present financial, managerial and operational challenges, including potential disruption of our ongoing business and distraction of management, difficulty with integrating personnel and financial systems, hiring additional management and other critical personnel and increasing the scope, geographic diversity and complexity of our operations. We may not realize any anticipated benefits or achieve the synergies that we expect from acquired businesses or assets. Our ecosystem participants may react unfavorably to our acquisitions. We may be exposed to additional liabilities of any acquired business.

In addition, future acquisitions may involve the issuance of additional securities, which may dilute your equity interest in us. Any of the foregoing risks could materially adversely affect our revenues and results of operations.

Improper access to, use or disclosure of data could harm our reputation and adversely affect our business.

Our platform generates, stores and processes a large quantity of data. As a result, we are exposed to risks inherent in accessing and handling large volumes of data, including those associated with:

Cybersecurity and data privacy issues have become subject to increasing legislative and regulatory focus in China. See “Item 4. Information on the Company—B. Business Overview— Government Regulations—Regulation of Internet Content Providers” and “—Regulation of Privacy Protection.” Many of these laws and regulations are subject to frequent modification and differing interpretations.

Complying with these evolving regulatory requirements could require significant expense and effort and require us to change our business practices and privacy policies in a manner adverse to our ecosystem participants and our business. Failure to comply with existing or future cybersecurity and data privacy laws and regulations could result in litigation, fines and penalties, regulatory enforcement actions and reputational harm. In addition, changes in our ecosystem participants’ expectations and requirements regarding privacy and data protection could restrict our ability to collect and use information collected on our platform, which in turn could harm our ability to serve our ecosystem participants. Any of the foregoing risks could materially adversely affect our business, reputation, or financial results.

A severe or prolonged downturn in the Chinese or global economy may harm our business and results of operations.

A prolonged slowdown in the Chinese or global economy may harm our business, results of operations and financial condition. In particular, general economic factors and conditions in China or worldwide, including interest rates and unemployment rates, may affect consumers’ willingness to purchase insurance and automobiles and insurance carriers’ and intermediaries’ willingness to purchase SaaS solutions, which could in turn adversely affect the demand for auto and other insurance products and our SaaS solution services and products.

COVID-19 has had a severe and negative impact on the global and Chinese economy, and its long-term impact on the global and Chinese economy is still uncertain. Even before the outbreak of COVID-19, the global macroeconomic environment was facing challenges, including the end of quantitative easing by the U.S. Federal Reserve, the economic slowdown in the Eurozone since 2014, uncertainties over the impact of Brexit and the ongoing trade and tariffs disputes between China and the United States. The growth of the Chinese economy has slowed down since 2012 and such trend may continue. There is considerable uncertainty over the long-term effects of the monetary and fiscal policies adopted by the central banks and financial authorities of some of the world’s leading economies, including the United States and China. In addition, the trade tension between the United States and China, the drastic drop in oil prices and the U.S. Federal Reserve’s fiscal policies to strengthen the market in early 2020 also created uncertainty and challenges to the development of global economic conditions. 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 prolonged slowdown in the global or Chinese economy may have a negative impact on individual disposable income and in turn our business, results of operations and financial condition, and continued turbulence in the international capital markets may adversely affect our access to capital markets to meet liquidity needs.

We have limited ability to protect and defend our intellectual property rights, and unauthorized parties may infringe upon or misappropriate our intellectual property, which could harm our business and competitive position.

Our success depends on our ability to protect the know-how and technologies that we have developed. We cannot protect our intellectual property if we cannot enforce our rights or does not detect unauthorized use of our intellectual property. If we fail to protect our intellectual property rights adequately, our competitors may gain access to our technology and our business could be adversely affected.

We rely on a combination of patents, trademarks, trade secrets, copyrights, contractual restrictions and other intellectual property laws and confidentiality procedures to establish and protect our proprietary rights. However, the steps we take to protect our intellectual property may be inadequate.

Any patents, trademarks or other intellectual property rights that we obtain may be challenged by others or invalidated through administrative processes or litigation. We enter into confidentiality agreements with key employees and include confidentiality provisions in agreements with our business partners. These agreements may not be effective in controlling access to and distribution of our proprietary information.

Legal standards relating to the validity, enforceability and scope of protection of intellectual property rights are uncertain. The laws of the PRC with respect to protecting intellectual property rights are still evolving, and legal procedures for enforcing intellectual property rights may be inadequate in China. Accordingly, despite our efforts, we may not prevent third parties from infringing upon or misappropriating our intellectual property.

We may expend significant resources to monitor and protect our intellectual property rights. We may also pursue litigation to protect our intellectual property rights and protect our trade secrets. Litigation to protect and enforce our intellectual property rights could be costly, time-consuming and distracting to management. Litigation could also result in the impairment or loss of portions of our intellectual property.

Our efforts to enforce our intellectual property rights may face defenses, counterclaims and countersuits attacking the validity and enforceability of our intellectual property rights. Our failure to protect our proprietary technology against unauthorized copying or use, as well as any costly litigation or diversion of our management’s attention and resources, could delay introductions of new services, result in substituting less effective or more costly technologies into our platform, or injure our reputation.

Infringement or misappropriation claims by third parties could subject us to significant liabilities and other costs.

Our success depends largely on our ability to use and develop our technology and know-how without infringing the intellectual property rights of third parties. Our competitors or other third parties may claim that we are infringing upon their intellectual property rights, and we may be found to be infringing upon such rights.

Any claims or litigation, regardless of merit, could cause us to incur significant expenses. If successfully asserted against it, these claims could require that we pay substantial damages or ongoing royalty payments, prevent us from offering our services or require that we comply with other unfavorable terms.

Even if the claims do not result in litigation or resolve in our favor, these claims, and the time and resources spent in resolving them, could divert management resources and adversely affect our business and results of operations. We expect that the occurrence of infringement claims is likely to grow as the industry and our business grows. Accordingly, our exposure to damages resulting from infringement claims could increase and divert our financial and management resources.

Any significant disruption in our technology systems, including events beyond our control, could prevent us from offering our services and products or reduce our attractiveness and result in a loss of our ecosystem participants.

The performance, reliability and availability of our platform and the underlying technology infrastructure are critical to our operations, reputation and ability to attract and retain ecosystem participants. A system outage, malfunction or data loss could harm our ability to provide services.

Third-party cloud providers host our applications, APIs, website, SaaS solutions and supporting services. Our operations depend on service providers’ ability to protect our systems and their own systems against damage or interruption from natural disasters, power or telecommunications failures, environmental conditions, computer viruses or attempts to harm our systems, criminal acts and similar events, many of which are beyond our control. We offer our digital insurance transaction service products through application stores and third-party applications such as WeChat. Disruptions to the services of these stores and applications may negatively affect the delivery of our services to our ecosystem participants.

If our arrangements with these service providers terminate or if the services are no longer cost-effective to us, we could experience interruptions in our services and products as well as delays and additional expenses to serve our ecosystem participants. Our ability to exchange information with insurance carriers and other ecosystem participants could also experience interruptions.

Our applications, APIs, website and SaaS solutions may malfunction from time to time. In addition, we need to update our applications, APIs, website and SaaS solutions to improve functions, incorporate new functions or adapt major updates for operating systems of different users. If our applications, APIs, website and SaaS solutions fail to perform, user experience and our reputation may deteriorate, which could materially adversely affect our business.

We had connected our platform with the core technology systems of approximately 60 insurance carriers as of December 31, 2022. As a result, the safety and stability of system connections are critical to the user experience on our platform and insurance carriers’ confidence in our technology, as well as our operating efficiency. If our system connections with insurance carriers experience disruptions or suspensions, or attacks by external sources, our operations could be materially adversely affected.

Any interruptions or delays in our technology systems, products or services, whether as a result of third-party errors, natural disasters or security breaches, whether accidental or willful, could harm our relationships with consumers and insurance carriers and other ecosystem participants and our reputation. We may not have sufficient capacity to recover all data and services lost in the event of an outage.

These factors could prevent us from facilitating insurance transactions or providing SaaS solutions, damage our brands and reputation, divert the attention of our employees, reduce our revenue, subject us to liability; and cause referral partners, consumers, insurance carriers, insurance intermediaries, third-party platforms and other ecosystem participants to abandon our services and products.

As of the date of this Report, we had not experienced severe interruptions or delays in our technology systems, services or products. However, it could be subject to such interruptions and delays in the future. Any of the foregoing could materially adversely affect our business, financial condition and results of operations.

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

Substantially all access to the internet in China is maintained through state-owned telecommunication operators under the administrative control and regulatory supervision of the Ministry of Industry and Information Technology (the “MIIT”). Third-party cloud providers host our applications, APIs, website, SaaS solutions and supporting services. These service providers may have limited access to alternative networks or services in the event of disruptions, failures or other problems with China’s internet infrastructure or fixed telecommunications networks.

As our business expands, we may need to upgrade our technology and infrastructure to keep up with the increasing number and variety of transactions on our platform. Our technology systems and the underlying internet infrastructure and fixed telecommunications networks in China may not support the demands of continued growth in internet usage.

In addition, we do not control the costs of services provided by telecommunication service providers which may affect the cost of data center services. If the prices that we pay for data center services rise significantly, our results of operations may be adversely affected.

Misconduct or other improper activities by our employees, ecosystem participants and other third parties could harm our business and reputation.

Our employees, ecosystem participants and other third parties may engage in misconduct or other improper activities, which could subject us to financial losses or regulatory sanctions and seriously harm our reputation. This misconduct could include unauthorized activities resulting in unknown risks or losses, improper use of confidential or privacy information or fraudulent and other illegal or improper activities. It is not always possible to deter misconduct that occurs on our platform, and the precautions that we take to prevent and detect this activity may not be effective in all cases.

We cooperate with referral partners to attract potential insurance purchasers to our platform. These referral partners help consumers purchase insurance policies through our platform. As a result, consumers may associate these referral partners with us and hold us accountable for their misconduct.

We are also subject to the risk of fraudulent activities by consumers, who may provide us with inaccurate or misleading information or engage in other improper activities through our platform. Misconduct or other improper activities by our employees, ecosystem participants and other third parties could damage our brand and reputation, discourage ecosystem participants from using our services and require us to take additional steps to reduce improper and illegal activities on our platform, which could significantly increase our costs.

Our SaaS solution products offered to insurance carriers and insurance intermediaries are complex and are used in a wide variety of network environments. Such SaaS solution products may be intentionally misused or abused by customers, their employees or third parties who access or use our solution products. Because our customers rely on our SaaS solution products, services and maintenance support to manage a wide range of operations, the incorrect or improper use of our SaaS solution products, our failure to properly train customers on how to efficiently and effectively use our solution products, or our failure to properly provide maintenance services to our customers may result in negative publicity or legal claims against us.

As we expand our SaaS customer base, any failure by our employees to properly provide these services will likely result in lost opportunities for future sales of our SaaS solution products. Any of the foregoing could materially adversely affect our business, financial condition and results of operations.

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

Our operations depend on the continued services of our senior management, particularly the executive officers named in this Report. In particular, Mr. Lei Zhang, our founder and chief executive officer, is critical to the management of our business and the development of our strategic direction. While we have provided various incentives to our management, we may be unable to retain their services.

As the number of service and product providers for digital insurance transactions and insurance SaaS solutions in China increases, competitors may attempt to hire our senior management members. If we lose the services of any member of our senior management team, we may not be able to effectively manage our business or implement our growth strategies. If any of our senior management members joins a competitor or forms a competing company, we may lose trade secrets and relationships with our ecosystem participants, and our business may suffer.

Intense competition for employees and increases in labor costs in the PRC may adversely affect our business and results of operations.

We believe that our success depends on our ability to attract, develop, motivate and retain highly qualified and skilled employees. Qualified individuals are in high demand, and we may incur significant costs to attract and retain them. Experienced information technology personnel, who are critical to the success of our business, are in particularly high demand in China.

Competition for talent is intense, and retaining such individuals can be difficult. The loss of any of our key employees could materially adversely affect our ability to execute our business plan and strategy, and we may not find adequate replacements on a timely basis, or at all. We may not retain the services of any key employees. If we do not attract well-qualified employees, or retain and motivate existing employees, our business could be materially adversely affected.

We invest significant time and expenses to train our employees, which increases their value to competitors who may seek to recruit them. If we fail to retain our employees, we could incur significant expenses in hiring and training their replacements. As a result, the quality of our services and our ability to serve consumers, insurance carriers and other industry participants could diminish, materially adversely affecting our business.

The Chinese economy has experienced increases in inflation and labor costs in recent years. As a result, average wages in the PRC are expected to increase. In addition, PRC laws and regulations require us to pay various statutory employee benefits, including pension insurance, housing funds, medical insurance, work-related injury insurance, unemployment insurance and maternity insurance to designated government agencies for the benefit of employees. We expect that our labor costs, including wages and employee benefits, will increase. Unless we can control our labor costs or pass on these increased labor costs, our financial condition and results of operations may be adversely affected.

Our business fluctuates seasonally.

Our revenues and results of operations could vary significantly from period to period and fail to match expectations as a result of a variety of factors, some of which are outside of our control. Our results may vary as a result of fluctuations in the number of consumers and insurance carrier customers using our platform and seasonal promotions offered by insurance carrier customers and purchase patterns of insurance consumers. In addition, the digital insurance industry is subject to cyclical trends and uncertainties. Traditionally, higher levels of vehicle sales in China occur in September and October, which results in increased sales of auto insurance policies. As a result, we typically record higher transaction volumes and revenue for our digital insurance transaction service business during the second half of each year. These fluctuations are likely to continue and results of operations for any period may not be indicative of our performance in any future period. In addition, our liquidity may suffer during periods in which we receive lower cash flows.

Our leased property interests may be defective and our rights to the leased properties affected by such defects may be challenged, which could significantly disrupt our operations.

We lease a significant number of properties from third parties for our business. As of December 31, 2022, we leased a total gross floor area of approximately 9,400 square meters, which we primarily used for office space. We may need to relocate for a number of reasons. For example, we may not be able to renew our leases, and may move to more premium locations or relocate our operations. In those cases, we may not be able to locate desirable alternative sites for our offices under favorable terms.

We have not received from lessors of certain of our leased properties copies of title certificates or proof of authorization to lease the 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 relevant government authorities, our leases could be invalidated. If this occurs, we may have to renegotiate the leases with the owners or the parties who have the right to lease the properties, and the terms of the new leases may be less favorable to us.

We have not entered into written contracts with our lessors for some of our leased properties and the lessors of such properties may terminate our leases. Some of our leased properties were subject to mortgage at the time the leases were entered into. If no consent had been obtained from the mortgage holder under such circumstances, the lease may not be binding on the transferee of the property in the event that the mortgage holder forecloses on the mortgage and transfers the property to another party.

In addition, we have not registered most of our lease agreements with relevant government authorities as required by PRC law. Although failure to complete lease registrations would not affect the legal effectiveness of the leases under PRC law, real estate administrative authorities may require the parties to the lease agreements to register the leases within a prescribed period. Failure to do so may subject the parties to fines from RMB1,000 to RMB10,000 for each such lease. If any competent authority requires that we complete such lease registrations within a prescribed period of time, we would use our best efforts to comply with such requirements. While we have not been subject to any material penalties or disciplinary actions due to the failure to register our leases, we could face penalties or other disciplinary actions for past and future non-compliance.

As of the date of this Report, we are not aware of any material actions, claims or investigations threatened against us or our lessors with respect to the defects in our leasehold interests. However, if any of our leases terminate as a result of challenges by third parties or governmental authorities due to a lack of title certificates or proof of authorization to lease, we may relocate the affected offices or warehouses and incur additional expenses.

Our risk management systems may not assess or mitigate all risks to which it is exposed.

We have established risk management systems, consisting of policies and procedures that we believe are appropriate for our business. However, we may fail to successfully implement these policies and procedures.

We may also be exposed to fraud or other misconduct committed by our employees or third parties and other events that are out of our control. These events could adversely affect the quality of our services and reputation and subject us to financial losses or sanctions from government authorities. As a result, we cannot assure you that our risk management systems will be effective.

We may be subject to legal proceedings in the ordinary course of our business. Litigation could distract management, increase our expenses or subject us to material money damages and other remedies.

From time to time, we may be a party to litigation and other legal proceedings commenced by or against us, including but not limited to disputes with employees and ecosystem participants. The outcome of any legal proceeding is uncertain. If any legal proceedings were to result in an unfavorable outcome, it could materially adversely affect our business, financial position and results of operations.

Even if we successfully defend ourselves, we may incur substantial costs, time and efforts to defend against any legal action. In addition, any adverse publicity resulting from actual or potential litigation may also adversely affect our reputation, which in turn could harm our business.

We may not have sufficient insurance coverage.

Insurance carriers in China currently do not offer as extensive a range of insurance products as insurance carriers in more developed economies. We do not maintain property insurance or business interruption insurance, nor do we maintain product liability insurance or key-man life insurance. Any business disruption or litigation, or any liability or damage to, or caused by, our facilities or our personnel beyond our insurance coverage may result in substantial costs and may divert our resources.

We face risks related to natural disasters, health epidemics, including the ongoing COVID-19 outbreak, natural disasters and other events that could significantly disrupt our operations.

We are vulnerable to natural disasters and other calamities. Fire, floods, typhoons, earthquakes, power loss, telecommunications failures, break-ins, war, riots, terrorist attacks or similar events may cause server interruptions, breakdowns, system failures or internet failures. These incidents could cause the loss or corruption of data or malfunctions of software or hardware and adversely affect our ability to provide our services.

The effects of COVID-19, monkey pox, Ebola, H1N1 flu, H7N9 flu, avian flu, Severe Acute Respiratory Syndrome (“SARS”), or other epidemics could also affect our business. If any of our employees has a contagious disease or condition, we may need to quarantine our employees and/or disinfect our offices, which would negatively impact our business. In addition, our results of operations could be adversely affected to the extent that any of these epidemics harms the Chinese economy in general.

The COVID-19 pandemic could adversely affect our business, operating results and financial condition.

Our business could be harmed by the outbreak of COVID-19. The outbreak and protective public health measures undertaken by governments, businesses and individuals to contain the spread of COVID-19 adversely affected workforces, businesses and other organizations, economies and financial markets globally, leading to an economic downturn and increased market volatility.

Our business, operating results and financial condition could suffer if, as a result of the COVID-19 pandemic, demand for automobiles or our services and products for digital insurance transactions and insurance SaaS solutions declines, our insurance carrier customers seek to renegotiate their commission and fee arrangements with it, the policyholders to whom we have sold policies stop making their premium payments, or we fail to maintain and grow our relationships with referral partners.

The outbreak has disrupted the normal operations of many businesses, including our insurance carrier customers, third-party platforms, referral partners and other business partners. If our business partners experience shutdowns or continued business disruptions, our ability to conduct our business as planned could be materially and negatively affected.

While our business has not, to date, experienced material disruptions in transaction volumes or SaaS product subscriptions from the COVID-19 pandemic, a continued or intensifying outbreak over the short- or medium-term could result in delays in our services delivery, introduction of new products and services and implementations of expansion plans or interruptions in our sales and marketing activities, among others. The extent to which the COVID-19 outbreak affects our business will depend on future developments in China and around the world, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the coronavirus and the actions required to contain and treat it.

If the COVID-19 pandemic, the slowdown in economic growth and the resulting disruption to our business were to extend over a prolonged period, it could materially and adversely affect our business, financial condition and results of operations. To the extent the COVID-19 pandemic adversely affects our business and financial results, it may also have the effect of heightening many of the other risks described in this “Risk Factors” section.

Any failure by us or third parties with which we collaborate to comply with anti-money laundering and anti-terrorist financing laws and regulations could damage our reputation, expose us to significant penalties, and decrease our revenues and profitability.

We have implemented policies and procedures to comply with applicable anti-money laundering and anti-terrorist financing laws and regulations. These include internal controls and “know-your-customer” procedures, for preventing money laundering and terrorist financing. In addition, we rely on insurance carriers to have their own appropriate anti-money laundering policies and procedures.

Insurance carriers with which we collaborate are subject to anti-money laundering obligations under applicable anti-money laundering laws and regulations and are regulated by the People’s Bank of China (the “PBOC”). We have adopted commercially reasonable procedures for monitoring insurance carriers with which we collaborate.

We have not been subject to fines or other penalties, or suffered material business or other reputational harm, as a result of actual or alleged money laundering or terrorist financing activities in the past. However, our policies and procedures may not prevent other parties from using us or any insurance carriers with which we collaborate as a conduit for money laundering (including illegal cash operations) or terrorist financing without our knowledge.

If we were associated with money laundering (including illegal cash operations) or terrorist financing, our reputation could suffer. We could also become subject to regulatory fines, sanctions, or legal enforcement, including being added to any “blacklists” that would prohibit certain parties from engaging in transactions with us, all of which could materially adversely affect our financial condition and results of operations.

Even if we and insurance carriers with which we collaborate comply with applicable anti-money laundering laws and regulations, we and these insurance carriers may not be able to eliminate money laundering and other illegal or improper activities in light of their complexity and the secrecy of these activities. Any negative perception of the industry, including that which may arise from any failure of other insurance transaction service providers to detect or prevent money laundering activities, even if factually incorrect or based on isolated incidents, could compromise our image, undermine the trust and credibility that we have established, and negatively impact our financial condition and results of operation.

We have granted, and will grant, options and other types of awards under our share incentive plan, which may result in increased share-based compensation expenses.

CCT adopted the 2019 Equity Incentive Plan in January 2020 to grant share-based compensation awards to employees and directors to incentivize their performance and align their interests with CCT. CCT recognized expenses in its consolidated financial statements in accordance with U.S. GAAP. Under the 2019 Equity Incentive Plan, CCT is authorized to grant options, restricted shares, restricted share units and other types of awards. The shareholders of Prime Impact approved the 2023 Equity Incentive Plan on September 12, 2023, which provides equity awards as part of our compensation program.

As of December 31, 2022, options to purchase a total of 108,196,300 CCT Ordinary Shares and restricted share awards covering 23,171,350 CCT Ordinary Shares were granted and outstanding under the 2019 Equity Incentive Plan. To the extent that such CCT Options and CCT Restricted Shares were still issued and outstanding immediately prior to the Acquisition Merger Effective Time, they were assumed by us for the corresponding number of Class A Ordinary Shares. In 2021 and 2022, CCT recorded share-based compensation expenses of RMB18.5 million and RMB16.2 million, respectively. We may continue to record share-based compensation expenses in relation to such share option grants, and we plan to grant options and other types of awards under the 2023 Equity Incentive Plan, as we believe the granting of share-based compensation helps us attract and retain key personnel and employees. As a result, our expenses associated with share-based compensation may increase, which may adversely affect our results of operations.

Risks Related to Our Corporate Structure

If the PRC government determines that the contractual arrangements in relation to the VIE structure do not comply with PRC regulatory restrictions on foreign investment in certain industries, or if these regulations or the way they are interpreted change, we, the PRC Subsidiaries and the Affiliated Entities could be subject to severe penalties or be forced to relinquish their interests in those operations, and the Class A Ordinary Shares may decline in value or become worthless.

We, the PRC Subsidiaries and the VIE face material risks relating to our corporate structure. Investors in the Class A Ordinary Shares are not purchasing equity interests in the VIE domiciled in China but instead are purchasing equity interests in us, the ultimate Cayman Islands holding company. We are not a Chinese operating company but a Cayman Islands holding company with operations conducted by their subsidiaries and through contractual arrangements with VIE based in China, and this structure involves unique risks to investors. The VIE structure provides investors with exposure to foreign investment in China- based companies where Chinese law prohibits or restricts direct foreign investment in the operating companies, and investors may never hold equity interests in the Chinese operating companies. The PRC government regulates telecommunications-related businesses through strict business licensing requirements and other government regulations. These laws and regulations include limitations on foreign ownership of PRC companies that engage in telecommunications-related businesses. Foreign investors are generally not allowed to own more than a 50% equity interest in any PRC companies engaging in value-added telecommunications businesses (excluding e-commerce services, domestic multi-party communications, store-and-forward and call centers).

Because we are an exempted company incorporated in the Cayman Islands, we are classified as a foreign enterprise under PRC laws and regulations, and each of the PRC Subsidiaries is a foreign-invested enterprise (“FIE”). To comply with PRC laws and regulations, we conduct our business in China through the VIE and the Affiliated Entities pursuant to a series of contractual arrangements among WFOE, the VIE and its shareholders. See “Item 4. Information on the Company— C. Organizational Structure—Contractual Arrangements with the VIE and its Shareholders.” We, our subsidiaries and the investors do not have an equity ownership in, direct foreign investment in, or control through such ownership or investment of the VIE. The contractual arrangements with respect to the VIE are not equivalent to an equity ownership in the business of the VIE. Any references in this Report to control or benefits that accrue to us and our subsidiaries because of the VIE are limited to, and subject to conditions for consolidation of, the VIE under U.S. GAAP. Consolidation of VIE under U.S. GAAP generally occurs if we or our subsidiaries (1) have an economic interest in the VIE that provides significant exposure to potential losses or benefits from the VIE and (2) have power over the most significant economic activities of the VIE. For accounting purposes, we are the primary beneficiary of the VIE. In addition, the contractual agreements governing the VIE have not been tested in a court of law.

We believe that our corporate structure and contractual arrangements comply with PRC laws and regulations. Based on our understanding of the relevant laws and regulations, our PRC counsel, Han Kun Law Offices, is of the opinion that each of the contracts among WFOE, the VIE and its shareholders is valid, binding and enforceable in accordance with its terms.

However, substantial uncertainties remain regarding the interpretation and application of PRC laws and regulations. PRC government authorities may not agree that we and our subsidiaries’ corporate structure or any of the foregoing contractual arrangements comply with PRC licensing, registration or other regulatory requirements or policies.

If regulators deem we, our subsidiaries and the VIE’s corporate structure and contractual arrangements to be illegal, either in whole or in part, we may lose our ability to consolidate the financial results of the Affiliated Entities, and may have to modify our corporate structure to comply with regulatory requirements. We and our subsidiaries may not be able to achieve this without materially disrupting their business.

If we, our subsidiaries and the VIE’s corporate structure and contractual arrangements violate existing or future PRC laws or regulations, the relevant regulatory authorities would have broad discretion in dealing with such violations, including:

New PRC laws, rules and regulations may impose additional requirements on us, our subsidiaries and the VIE’s corporate structure and contractual arrangements, which could materially adversely affect our business, financial condition and results of operations. If any of these penalties or requirements causes us and our subsidiaries to lose the rights to direct the activities of the VIE or their right to receive economic benefits, we will no longer be able to consolidate the VIE’s financial results in our consolidated financial statements, which could cause the value of the Class A Ordinary Shares to decline significantly or become worthless.

On February 17, 2023, the CSRC released the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies (the “Overseas Listing Trial Measures”) and five supporting guidelines, which became effective on March 31, 2023. At the press conference held for the Overseas Listing Trial Measures on the same day, officials from the CSRC clarified that, as for companies seeking overseas listing with contractual arrangements, the CSRC will solicit opinions from relevant regulatory authorities and complete the filing of the overseas listing of such companies if they duly meet the compliance requirements, and support the development and growth of these companies by enabling them to utilize two markets and two kinds of resources. We completed the CSRC filing procedures under the Overseas Listing Trial Measures for the Business Combination on September 14, 2023. If we, the PRC Subsidiaries or the Affiliated Entities fail to complete the filing with the CSRC in a timely manner or at all, for any future offering, or any other capital raising activities which are subject to the filings under the Overseas Listing Trial Measures, due to our contractual arrangements, our ability to raise or utilize funds from such overseas fund-raising activities could be materially and adversely affected, and we may even need to unwind the contractual arrangements or restructure the business operations to rectify the failure to complete the filings. However, given that the Overseas Listing Trial Measures were recently promulgated, there remains substantial uncertainties as to their interpretation, application, and enforcement and how they will affect our operations and our future financing.

Contractual arrangements with the VIE may result in adverse tax consequences to us, the PRC Subsidiaries or the Affiliated Entities.

We, the PRC Subsidiaries and/or the Affiliated Entities could face material and adverse tax consequences if PRC tax authorities determine that WFOE’s contractual arrangements with the VIE were not made on an arm’s length basis and adjust the VIE’s income and expenses for PRC tax purposes by requiring a transfer pricing adjustment.

A transfer pricing adjustment could adversely affect us, the PRC Subsidiaries and the Affiliated Entities by (1) increasing the tax liabilities of the Affiliated Entities without reducing the tax liability of the PRC Subsidiaries, which could result in late payment fees and other penalties to the Affiliated Entities for underpaid taxes; or (2) limiting the Affiliated Entities’ ability to obtain or maintain preferential tax treatments and other financial incentives.

We and the PRC Subsidiaries rely on contractual arrangements with the VIE and the VIE’s shareholders to operate their business, which may not be as effective as direct ownership in providing operational control.

We and the PRC Subsidiaries rely on contractual arrangements with the VIE and its shareholders to operate their business. These contractual arrangements may not be as effective as direct ownership in providing us and the PRC Subsidiaries with control over the VIE.

Because we and the PRC Subsidiaries do not have a direct ownership interest in the VIE, we consolidate our financial results by relying on the performance by the VIE and its shareholders of their respective obligations under the contractual arrangements with them. The shareholders of the VIE may not act in the best interests of us and the PRC Subsidiaries, or otherwise fail to perform their contractual obligations.

We and the PRC Subsidiaries may replace the shareholders of the VIE pursuant to the contracts with the VIE and its shareholders. However, if any dispute relating to these contracts or the replacement of the VIE’s shareholders remains unresolved, we and the PRC Subsidiaries must enforce their rights under these contracts under PRC law and be subject to uncertainties in the PRC legal system.

Any failure by the VIE or its shareholders to perform their obligations under their contractual arrangements with WFOE would materially adversely affect the business, financial condition and results of operations of us and the PRC Subsidiaries.

If the VIE or its shareholders fail to perform their respective obligations under their contractual arrangements with WFOE, we and the PRC Subsidiaries may incur substantial costs and expend additional resources to enforce such arrangements. We and the PRC Subsidiaries may also have to rely on legal remedies under PRC law, including seeking specific performance or injunctive relief, and claiming damages. Such remedies may not be effective.

WFOE’s contractual arrangements with the VIE and its shareholders are governed by PRC laws and provide for the resolution of disputes through arbitrations in the PRC. Accordingly, these contractual arrangements would be interpreted in accordance with PRC laws, and any disputes arising from these contractual arrangements would be resolved in accordance with PRC legal procedures.

Uncertainties in the PRC legal system could limit the abilities of us and the PRC Subsidiaries to enforce these contractual arrangements. For example, there have been very few precedents and little formal guidance as to how contractual arrangements in the context of a variable interest entity should be interpreted or enforced under PRC laws. In addition, in the PRC, rulings by arbitrators are final, and parties cannot appeal the arbitration results in courts. If the losing parties fail to carry out the arbitration awards within a prescribed time limit, the prevailing parties may only enforce arbitration awards in PRC courts through arbitration award recognition proceedings, which would require additional expenses and delays. In the event that we and the PRC Subsidiaries cannot enforce the contractual arrangements with respect to the VIE, or suffer significant delays or other obstacles in enforcing these contractual arrangements, we and the PRC Subsidiaries may not be able to consolidate the financial results of the Affiliated Entities. As a result, the ability of us and PRC Subsidiaries to conduct our business, and our financial condition and results of operations may be materially adversely affected. See “—Risks Related to Doing Business in China—Uncertainties in the interpretation and enforcement of PRC laws, rules and regulations could materially adversely affect our business.” In addition, as of the date of this Report, 14.24% of the equity interests in the VIE held by Beijing Zhongjin Huicai Investment Management Co., Ltd. were frozen by the People’s Court of Futian District, Shenzhen City, Guangdong Province for a civil dispute between Beijing Zhongjin Huicai Investment Management Co., Ltd. and certain other party, which may affect the enforcement of the option of the WFOE under the contractual arrangements. See “—Risks Related to Our Corporate Structure—The VIE’s shareholders may have potential conflicts of interest with us, the PRC Subsidiaries and the Affiliated Entities, which may materially adversely affect our business and financial condition.”

The VIE’s shareholders may have potential conflicts of interest with us, the PRC Subsidiaries and the Affiliated Entities, which may materially adversely affect our business and financial condition.

The interests of the VIE’s shareholders may differ from the interests of us, the PRC Subsidiaries and the VIE. When conflicts of interest arise, any or all of these individuals may not act in the best interests of us, the PRC Subsidiaries and/or the Affiliated Entities, and any conflicts of interest may not resolve in the favor of us, the PRC Subsidiaries and/or the Affiliated Entities. In addition, these individuals may breach or cause the VIE and the PRC Subsidiaries to breach or refuse to renew existing contractual arrangements with WFOE.

None of us, the PRC Subsidiaries or the Affiliated Entities has arrangements to address potential conflicts of interest between these shareholders and any of themselves. We, the PRC Subsidiaries and the Affiliated Entities rely on these shareholders to abide by the laws of the Cayman Islands and China. These laws provide that directors owe a fiduciary duty to the us to act in good faith and in our best interests and not to use their respective positions for personal gain.

However, the legal frameworks of China and the Cayman Islands do not provide guidance on resolving conflicts in the event of a conflict with another corporate governance regime. If we, the PRC Subsidiaries and/or the Affiliated Entities cannot resolve any conflict of interest or dispute between any of themselves and the shareholders of the VIE, we, the PRC Subsidiaries and the Affiliated Entities will likely rely on legal proceedings, which could disrupt their business and subject them to substantial uncertainty as to the outcome of such proceedings.

As of the date of this Report, 14.24% of the equity interests in the VIE held by Beijing Zhongjin Huicai Investment Management Co., Ltd. were frozen by the People’s Court of Futian District, Shenzhen City, Guangdong Province for a civil dispute between Beijing Zhongjin Huicai Investment Management Co., Ltd. and certain other party. Under applicable PRC laws, (1) the frozen equity interests in the VIE cannot be sold, transferred, or disposed of in any manner from July 28, 2022 to July 27, 2025, unless such freezing was released by a competent court; and (2) if a competent court rules to auction off the frozen equity interests, the proceeds from the auctioning and sale of the frozen equity interests by competent court shall be firstly distributed to pledgee, i.e. the WFOE, thereafter the remaining proceeds (if any), shall be used to settle the claims of the creditor applying with court for enforcement. Therefore, uncertainties remain with respect to the enforcement of the option of the WFOE to purchase such frozen equity interests under the exclusive option agreement among us, WFOE, the VIE and shareholders of the VIE, dated June 18, 2021, which may be subject to the auction process by the competent court. However, as that such equity interests had been pledged to WFOE prior to the freezing, we do not believe the freezing of the above-mentioned equity interests in the VIE will cause any material impact to our operations.

We may rely principally on dividends and other distributions on equity paid by the PRC Subsidiaries to fund our cash and financing requirements, and any limitation on the ability of the PRC Subsidiaries to pay dividends to us could adversely affect our ability to conduct our business.

We rely principally on dividends and other distributions on equity paid by the PRC Subsidiaries, in particular, WFOE, Cheche Ningbo, which in turn relies on consulting and other fees paid to it by the VIE, for our cash and financing requirements, including the funds necessary to pay dividends and other cash distributions to our shareholders and service any debt that we may incur. Relevant PRC laws and regulations permit PRC companies to pay dividends only out of their retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. Additionally, the PRC Subsidiaries and the Affiliated Entities can only distribute dividends upon approval of the shareholders after they have met the PRC requirements for appropriation to the statutory reserve fund. The statutory reserve fund requires that annual appropriations of 10% of net after-tax income should be set aside prior to payment of any dividends, until the aggregate amount of such fund reaches 50% of their registered capital. As a result of these and other restrictions under PRC laws and regulations, the PRC Subsidiaries and the Affiliated Entities are restricted in their ability to transfer a portion of their net assets to us either in the form of dividends, loans or advances, which restricted portion amounted to RMB307.5 million and RMB448.0 million as of December 31, 2021 and 2022, respectively. If the PRC Subsidiaries incur debt on their own behalf, the instruments governing the debt may restrict their ability to pay dividends or make other distributions to us. In addition, PRC tax authorities may require one of the PRC Subsidiaries, Cheche Ningbo to adjust our taxable income under the contractual arrangements that we currently have in place with the VIE in a manner that would materially adversely affect our ability to pay dividends and other distributions to us.

Under PRC laws and regulations, the PRC Subsidiaries, as wholly foreign-owned enterprises in the PRC, may pay dividends only out of their accumulated profits as determined in accordance with PRC accounting standards and regulations. In addition, wholly foreign-owned enterprises, such as the PRC subsidiaries, must set aside at least 10% of their accumulated after-tax profits after making up the previous year’s accumulated losses each year, if any, to fund statutory reserve funds, until the aggregate amount of such fund reaches 50% of their registered capital.

We may allocate a portion of our after-tax profits based on PRC accounting standards to discretionary reserve funds according to our shareholder’s decision. These statutory reserve funds and discretionary reserve funds are not distributable as cash dividends. In addition, the EIT Law and its implementation rules provide that a withholding tax rate of 10% will be applicable to dividends payable by PRC companies to non-PRC-resident enterprises unless otherwise exempted or reduced according to treaties or arrangements between the PRC central government and governments of other countries or regions where the non-PRC-resident enterprises are incorporated.

For example, pursuant to the Arrangement between Mainland China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and Tax Evasion on Income (the “Arrangements”), Hong Kong resident enterprises that own no less than 25% equity interest in a PRC enterprise may qualify for a 5% withholding tax rate on dividends received from the PRC enterprise. Under the Administrative Measures for Non-Resident Enterprises to Enjoy Treatments under Tax Treaties, non-resident enterprises must determine whether they qualify for reduced withholding tax rates under the relevant tax treaties and file the relevant materials with the tax authorities. A non-resident enterprise must also meet other conditions to enjoy the reduced withholding tax rate based on other tax rules and regulations.

As of December 31, 2022, CCT reported accumulated loss and had no retained earnings for offshore dividend distributions. We intend to re-invest all the future earnings of the PRC Subsidiaries in our operations in China. We could be subject to significant withholding taxes if the PRC Subsidiaries decide to pay dividends to offshore entities. The tax authorities may also challenge our determination that we qualify for the reduced withholding tax of 5% under the Arrangements for dividends paid from the PRC Subsidiaries to the Hong Kong Subsidiaries, and the Hong Kong Subsidiaries may not be able to complete the tax filings to enjoy the reduced withholding tax rate.

Substantial uncertainties with respect to the implementation of the Foreign Investment Law may significantly impact the corporate structure and operations of us, the PRC Subsidiaries and the Affiliated Entities.

On March 15, 2019, the National People’s Congress published the Foreign Investment Law of the People’s Republic of China (the “Foreign Investment Law”), which became effective on January 1, 2020 and replaced the Sino-Foreign Equity Joint Venture Enterprise Law, the Sino-Foreign Cooperative Joint Venture Enterprise Law and the Foreign Owned Enterprise Law to become the legal foundation for foreign investment in the PRC. Although the Foreign Investment Law stipulates three forms of foreign investment, it does not explicitly stipulate the contractual arrangements as a form of foreign investment.

The Foreign Investment Law stipulates that the concept of a foreign investment includes foreign investors investing in China through “any other methods” under laws, administrative regulations, or provisions prescribed by the State Council. Future laws, administrative regulations or provisions prescribed by the State Council may regard contractual arrangements as a form of foreign investment. As a result, the contractual arrangements may be deemed to violate foreign investment access requirements and the interpretation of the above-mentioned contractual arrangements.

Changes in PRC laws and regulations could materially adversely affect the contractual arrangements and the business of us, the PRC Subsidiaries and the Affiliated Entities. If future laws, administrative regulations or provisions prescribed by the State Council mandate further actions by companies with existing contractual arrangements, we, the PRC Subsidiaries and the Affiliated Entities may face substantial uncertainties as to the timely completion of such actions. We, the PRC Subsidiaries and the Affiliated Entities could potentially be required to unwind the contractual arrangements and/or dispose the VIE, which could materially adversely affect our business, financial condition and results of operations.

The bankruptcy or liquidation of the VIE could materially adversely affect our business, our ability to generate revenue and the market price of the Class A Ordinary Shares.

If the VIE or any of the Affiliated Entities becomes the subject of a bankruptcy or liquidation proceeding, we and the PRC Subsidiaries may lose the ability to use and enjoy assets held by the VIE or any such Affiliated Entity. We and the PRC Subsidiaries conduct operations in China through contractual arrangements with the VIE and its shareholders and subsidiaries. As part of these arrangements, the VIE and its subsidiaries hold substantially all of the assets that are important to the operation of our business.

If any of these entities goes bankrupt and all or part of their assets become subject to liens or rights of third-party creditors, they may be unable to continue some or all of their business activities, which could in turn materially adversely affect our business, financial condition and results of operations. If the VIE or any of the Affiliated Entities undergoes a voluntary or involuntary liquidation proceeding, their shareholders or unrelated third-party creditors may claim rights to some or all of these assets, which would hinder their ability to operate their business, and could in turn materially adversely affect our business, our ability to generate revenue, and the market price of the Class A Ordinary Shares.

If the custodians or authorized users of our controlling non-tangible assets, including chops and seals, fail to fulfill their responsibilities, or misappropriate or misuse these assets, our business may be materially adversely affected.

Under PRC law, legal documents for corporate transactions, including agreements and contracts such as the leases and sales contracts, are executed using the chop or seal of the signing entity or with the signature of a legal representative whose designation is registered and filed with the relevant local branch of the State Administration for Market Regulation (the “SAMR”) (formerly known as State Administration for Industry and Commerce (the “SAIC”)). We generally execute legal documents by affixing chops or seals, rather than having the designated legal representatives sign the documents.

The relevant entities typically hold the chops of the Affiliated Entities and the PRC Subsidiaries, allowing them to execute documents locally. To maintain the physical security of these chops, we typically store them in secure locations accessible only to custodians and designated key employees of our legal, administrative or finance departments.

Although we have implemented approval procedures and monitored our chop custodians and key employees, including the designated legal representatives of the Affiliated Entities and the PRC Subsidiaries, the procedures may not prevent all instances of abuse or negligence. Our chop custodians, key employees or designated legal representatives may abuse their authority, for example, by binding the Affiliated Entities and the PRC Subsidiaries with contracts against these entities’ interests.

We may be required to honor these contracts if the other contracting party acts in good faith in reliance on the authority of our chops or signatures of our legal representatives. If any designated legal representative obtains control of the chop in an effort to obtain control over the relevant entity, we need to pass a shareholder or board resolution to designate a new legal representative and to take legal actions to seek the return of the chop, apply for a new chop, or otherwise seek legal remedies for the legal representative’s misconduct.

If any of the designated legal representatives obtains, misuses or misappropriates these chops and seals or other controlling intangible assets for whatever reason, we could experience disruptions in our operations. We may also have to take corporate or legal action, which could involve significant time and resources to resolve while distracting management from our operations, materially adversely affecting our business and results of operations.

PRC regulations of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion may delay or prevent us from using proceeds from offshore fund-raising activities, to make loans or additional capital contributions to the PRC Subsidiaries, which could materially adversely affect our liquidity and our ability to fund and expand our business.

Any funds we transfer to the PRC Subsidiaries, either as shareholder loans or as an increase in registered capital, are subject to approval by or registration with relevant governmental authorities in China. According to the relevant PRC regulations on FIEs in China, capital contributions to the PRC Subsidiaries are subject to the information report requirement with MOFCOM or their respective local branches and registration with a local bank authorized by State Administration of Foreign Exchange (“SAFE”). In addition, any foreign loan procured by the PRC Subsidiaries cannot exceed statutory limits and is required to be registered with SAFE or its respective local branches.

We may use the proceeds of our offshore fund-raising activities to provide loans or make capital contributions to the PRC Subsidiaries or provide loans to the VIE, in each case subject to the satisfaction of applicable regulatory requirements. Any medium or long-term loan to be provided by us or our offshore subsidiaries to the PRC Subsidiaries and the Affiliated Entities must be registered with NDRC and SAFE or its local branches. Before we or our offshore entities provide loans to the onshore entities (i.e., the PRC Subsidiaries and the Affiliated Entities), the borrower must make filings with the SAFE or its local counterparts in accordance with relevant PRC laws and regulations. In addition, in accordance with Administrative Measures for Review and Registration of Medium- and Long-term Foreign Debts of Enterprises issued by the NDRC on January 5, 2023, which took effect on February 10, 2023, for loans provided by us or our offshore entities to the PRC Subsidiaries or the Affiliated Entities with a term of more than one year, the borrower must also obtain a certificate of review and registration from the NDRC before obtaining such loan, and report relevant information to the NDRC afterward. We or our offshore subsidiaries may not complete such registrations on a timely basis, with respect to future capital contributions or foreign loans by us or our offshore subsidiaries to our onshore entities (i.e. the PRC Subsidiaries and the Affiliated Entities entities). If we or our offshore subsidiaries fail to complete such registrations, our ability to use the proceeds of securities offering, and to capitalize our PRC operations may be negatively affected, which could adversely affect our liquidity and our ability to fund and expand our business.

On March 30, 2015, SAFE promulgated the Circular on Reforming the Management Approach Regarding the Foreign Exchange Capital Settlement of Foreign-Invested Enterprises (“SAFE Circular 19”), which took effect on June 1, 2015. SAFE Circular 19 launched a nationwide reform of the administration of the settlement of the foreign exchange capital of FIEs and allows FIEs to settle their foreign exchange capital at their discretion. However, SAFE Circular 19 prohibits FIEs from using the Renminbi funds converted from their foreign exchange capital for expenditures beyond their business scopes, providing entrusted loans or repaying loans between nonfinancial enterprises.

SAFE issued the Circular on Reforming and Regulating Policies on the Control over Foreign Exchange Settlement of Capital Accounts (“SAFE Circular 16”), effective in June 2016. Pursuant to SAFE Circular 16, enterprises registered in China may convert their foreign debts from foreign currency to Renminbi on a discretionary basis. SAFE Circular 16 provides an integrated standard for conversion of foreign exchange under capital account items (including but not limited to foreign currency capital and foreign debts) on a discretionary basis which applies to all enterprises registered in China.

In addition, a foreign invested enterprise shall use its capital pursuant to the principle of authenticity and self-use within its business scope. The capital of a foreign invested enterprise shall not be used for the following purposes:

In light of the requirements imposed by PRC regulations on loans to and direct investment in PRC entities by offshore holding companies, we cannot assure you that we can complete the necessary government registrations or obtain the necessary government approvals or filings on a timely basis, if at all, with respect to future loans or with capital contributions by us to the PRC Subsidiaries and/or the Affiliated Entities in the PRC. If we fail to complete such registrations or obtain such approvals, our ability to capitalize or otherwise fund our PRC operations may be negatively affected, which could adversely affect our ability to fund and expand the business.

Risks Related to Doing Business in China

The PRC government has significant authority to exert influence on the China operations of an offshore holding company, and offerings conducted overseas and foreign investment in China-based issuers, such as us. Changes in China’s economic, political or social conditions or government policies could have a material adverse effect on our business, results of operations, financial condition, and the value of our securities.

We conduct our business in China and substantially all of our assets are located in China. Accordingly, our business, results of operations and financial condition may be influenced to a significant degree by the PRC political, economic and social conditions. The PRC government may intervene or influence our operations at any time, which could result in a material change in our operations and/or the value of our securities following the Business Combination.

The economic, political and social conditions in China differ from those of the countries in other jurisdictions in many respects, including with respect to the amount of government involvement, level of development, growth rate, control of foreign exchange and allocation of resources. The PRC 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. These reforms have resulted in significant economic growth and social prospects. However, a substantial portion of productive assets in China is still owned by the government. The PRC government exercises significant control over China’s economic growth by allocating resources, controlling payment of foreign currency-denominated obligations, setting monetary policy, regulating financial services and institutions, providing preferential treatment to particular industries or companies, or imposing industry-wide policies on certain industries. Economic reform measures may also be adjusted, modified or applied inconsistently from industry to industry or across different regions of the country, and there can be no assurance that the Chinese government will continue to pursue a policy of economic reform or that the direction of reform will continue to be market friendly.

While the Chinese economy has experienced significant growth in the past four decades, growth has been uneven, both geographically and among various sectors of the economy. Various measures implemented by the PRC government to encourage economic growth and guide the allocation of resources may benefit the overall Chinese economy, but may also have a negative effect on us. Our results of operations and financial condition could be materially and adversely affected by government control over capital investments, foreign investment or changes in applicable tax regulations. The PRC government has also implemented certain measures in the past, including interest rate adjustment, to control the pace of economic growth. These measures may cause decreased economic activity, which in turn could lead to a reduction in demand for our products and consequently have a material adverse effect on our business, results of operations and financial condition. In addition, the COVID-19 pandemic may also have a severe and negative impact on the Chinese economy. Any severe or prolonged slowdown in the rate of growth of the Chinese economy may adversely affect our business and results of operations, leading to reduction in demand for our products and adversely affect our competitive position.

Additionally, the PRC government may promulgate laws, regulations or policies that seek to impose stricter scrutiny over, or completely revise, the current regulatory regime in certain industries or in certain activities. For instance, the PRC government has significant discretion over the business operations in China and may intervene with or influence specific industries or companies as it deems appropriate to further regulatory, political and societal goals, which could have a material and adverse effect on the future growth of the affected industries and the companies operating in such industries. Furthermore, the PRC government has also recently indicated an intent to exert more oversight and control over overseas securities offerings and foreign investments in China-based companies. Any such actions may adversely affect our operations, and significantly limit or completely hinder our ability to offer or continue to offer securities to you and cause the value of our securities to significantly decline or be worthless.

Our ability to successfully maintain or grow business operations in China depends on various factors, which are beyond our control. These factors include, among others, macro-economic and other market conditions, political stability, social conditions, measures to control inflation or deflation, changes in the rate or method of taxation, changes in laws, regulations and administrative directives or their interpretation, and changes in industry policies. If we fail to take timely and appropriate measures to adapt to any of the changes or challenges, our business, results of operations and financial condition could be materially and adversely affected.

Recent greater oversight by the CAC over data security, particularly for companies seeking to list on a foreign exchange, could significantly limit or completely hinder our ability in capital raising activities and materially and adversely affect our business and the value of your investment.

On December 28, 2021, the CAC, jointly with 12 other governmental authorities, promulgated the revised Cybersecurity Review Measures (2021), which became effective on February 15, 2022. According to the Cybersecurity Review Measures (2021), critical information infrastructure operators that intend to purchase internet products and services which have or may have an adverse effect on national security must apply for cybersecurity review. Meanwhile, online platform operators holding personal information of over one million users that intend to list their securities on a foreign stock exchange must apply for cybersecurity review. In the meantime, the governmental authorities have the discretion to initiate a cybersecurity review on any data processing activity if they deem such a data processing activity affects or may affect national security.

On July 7, 2022, the CAC promulgated the Measures for the Security Assessment of Cross-Border Transfer of Data, which took effect on September 1, 2022. These measures aim to regulate cross-border transfers of data, requiring among other things, that data processors that provide data overseas apply to CAC for security assessments if: (1) data processors provide important data overseas; (2) critical information infrastructure operators or data processors process personal information of more than one million individuals provide personal information to overseas parties; (3) data processors that have cumulatively provided personal information of 100,000 people or sensitive personal information of 10,000 people to overseas since January 1 of the previous year, provide personal information to overseas parties; or (4) other scenarios required by the CAC to apply for security assessments occur. In addition, these measures require data processors to carry out self-assessments of risks of providing data overseas before applying to the CAC for security assessments. As of the date of this Report, the Measures for the Security Assessment of Cross-Border Transfer of Data has not materially affected our business or results of operations. Since the Measures for the Security Assessment of Cross-Border Transfer of Data was newly enacted, there remain substantial uncertainties about its interpretation and implementation, and it is unclear whether the relevant PRC regulatory authority would reach the same conclusion as us.

On February 24, 2023, the CSRC, the Ministry of Finance, the National Administration of State Secrets Protection and the National Archives Administration released the revised Provisions on Strengthening Confidentiality and Archives Administration of Overseas Securities Offering and Listing by Domestic Companies (the “Archives Rules”), which became effective on March 31, 2023. The Archives Rules regulate both overseas direct offerings and overseas indirect offerings, providing that, among other things:

Given that the above-mentioned newly promulgated laws, regulations and policies were recently promulgated or issued, and some of them have not yet taken effect, their interpretation, application and enforcement are subject to substantial uncertainties. Complying with new laws and regulations could cause us to incur substantial costs or require us to change our business practices in a manner materially adverse to our business.

As a network platform operator who possesses personal information of more than one million users for purposes of the Cybersecurity Review Measures (2021), we applied for and completed a cybersecurity review with respect to the proposed overseas listing pursuant to the Cybersecurity Review Measures (2021). We have not received any material adverse findings in such cybersecurity review and we are in compliance with the existing regulations and policies by the CAC regarding the Cybersecurity Review Measures (2021) as of the date of this Report. However, it remains uncertain as to how the existing regulatory measures will be interpreted or implemented in the future, and whether the PRC regulatory agencies, including the CAC, may adopt new laws, regulations, rules, or detailed implementation and interpretation related to the measures, which may have a material adverse impact on our future capital raising activities, or even retrospectively, on the Business Combination and the listing of our securities on Nasdaq. If any such new laws, regulations, rules, or implementation and interpretation come into effect, we face uncertainty as to whether any review or other required actions can be timely completed, or at all. Given such uncertainty, we may be further required to suspend our business or to face other penalties, which could materially and adversely affect our business, results of operations and financial condition, and/or the value of our securities, or could significantly limit or completely hinder our ability to offer securities to investors. In addition, if any of these events causes us unable to direct the VIE’s activities or lose the right to receive the economic benefits of the Affiliated Entities, we may not be able to consolidate the Affiliated Entities into our consolidated financial statements in accordance with U.S. GAAP, which could cause the value of our securities to significantly decline or become worthless.

Adverse changes in economic and political policies of the PRC government could negatively impact China’s overall economic growth, which could materially adversely affect our business.

We conduct substantially all of operations through the PRC Subsidiaries, the VIE and the Affiliated Entities in China. Accordingly, our business, financial condition, results of operations and prospects depend significantly on economic developments in China. China’s economy differs from the economies of most other countries in many respects, including the amount of government involvement in the economy, the general level of economic development, growth rates and government control of foreign exchange and the allocation of resources.

While the PRC economy has grown significantly over the past few decades, this growth has remained uneven across different periods, regions and economic sectors. The PRC government also exercises significant control over China’s economic growth by allocating resources, controlling the payment of foreign currency denominated obligations, setting monetary policy and providing preferential treatment to particular industries or companies. Any actions and policies adopted by the PRC government could negatively impact the Chinese economy, which could materially adversely affect our business.

Uncertainties in the interpretation and enforcement of PRC laws, rules and regulations could materially adversely affect our business.

We, the PRC Subsidiaries and the Affiliated Entities face risks arising from the legal system in China, including risks and uncertainties regarding the interpretation and enforcement of laws and that rules and regulations in China can change quickly with very short notice.

The PRC legal system is based on written statutes. Unlike under common law systems, decided legal cases have limited value as precedents in subsequent legal proceedings. In 1979, the PRC government began to publish a comprehensive system of laws and regulations governing economic matters in general, and forms of foreign investment (including wholly foreign-owned enterprises and joint ventures) in particular. These laws, regulations and legal requirements are relatively new and often change, and their interpretation and enforcement may raise uncertainties that could limit the reliability of the legal protections available to us, the PRC Subsidiaries and the Affiliated Entities. In addition, the PRC legal system is based in part on government policies and internal rules, some of which are not published on a timely basis, and which may have retroactive effect. As a result, we may not be aware of violation of these policies and rules until after the violation occurs.

We cannot predict future developments in the PRC legal system. We may need to procure additional permits, authorizations and approvals for our operations, which we may not be able to obtain. Our inability to obtain such permits or authorizations may materially adversely affect our business, financial condition and results of operations.

Administrative and court proceedings in China may be protracted, resulting in substantial costs and diversion of resources and management attention. Since PRC administrative and court authorities retain significant discretion in interpreting and implementing statutory and contractual terms, it may be difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection that we may enjoy. These uncertainties may impede our ability to enforce contracts and could materially adversely affect our business, financial condition and results of operations.

The filing with the CSRC may be required in connection with future overseas fund-raising activities, and we cannot predict whether we will be able to obtain such approval or complete such filing.

On August 8, 2006, six PRC regulatory agencies jointly adopted M&A Rules, which came into effect on September 8, 2006 and were amended on June 22, 2009. The M&A Rules include, among other things, provisions that require that an offshore special purpose vehicle formed for the purpose of an overseas listing of equity interests in a PRC company obtain the approval of the CSRC prior to the listing and trading of such special purpose vehicle’s equity securities on an overseas stock exchange. However, substantial uncertainty remains regarding the scope and applicability of the M&A Rules to offshore special purpose vehicles and to the Business Combination.

The regulations also established additional procedures and requirements that are expected to make merger and acquisition activities in China by foreign investors more time-consuming and complex, including requirements in some instances that MOFCOM be notified in advance of any change-of-control transaction in which a foreign investor takes control of a PRC domestic enterprise, or that the approval from MOFCOM be obtained in circumstances where overseas companies established or controlled by PRC enterprises or residents acquire affiliated domestic companies.

While the application of the M&A Rules remains unclear, we believe that the CSRC approval under the M&A Rules is not required in the context of the Business Combination, because (1) the PRC Subsidiaries are incorporated as a wholly foreign-owned enterprise by means of foreign direct investments rather than by merger with or acquisition of any PRC domestic companies owned by PRC companies or individuals as defined under the M&A Rules and (2) no explicit provision in the M&A Rules clearly classifies the contractual arrangements among WFOE, the VIE and the VIE’s shareholders as an acquisition falling under the M&A Rules. However, there can be no assurance that the relevant PRC government agencies, including the CSRC, would reach the same conclusion.

On July 6, 2021, the General Office of the Central Committee of the Communist Party of China and the General Office of the State Council jointly issued the Opinions on Severely Cracking Down on Illegal Securities Activities. According to Law, which emphasized the need to strengthen administration over illegal securities activities and supervision of overseas listings by China-based companies. The Opinions proposed promoting regulatory systems to deal with risks facing China-based overseas-listed companies, and provided that the State Council will revise provisions regarding the overseas issuance and listing of shares by companies limited by shares and will clarify the duties of domestic regulatory authorities.

On December 27, 2021, NDRC and MOFCOM jointly issued the Special Administrative Measures for Entry of Foreign Investment (Negative List) (2021 Version) (the “Negative List”), which became effective and replaced the previous version on January 1, 2022. According to the Negative List, domestic enterprises engaging in businesses in which foreign investment is prohibited shall obtain approval from the relevant authorities before offering and listing their shares on an overseas stock exchange. In addition, certain foreign investors shall not be involved in the operation or management of the relevant enterprise, and shareholding percentage restrictions under relevant domestic securities investment management regulations shall apply to such foreign investors.

Since none of the PRC Subsidiaries or the Affiliated Entities engages in businesses in which foreign investment is prohibited, we believe that the PRC Subsidiaries and the Affiliated Entities are not required to obtain such approval under the Negative List. However, the abovementioned newly promulgated laws, regulations and policies were recently promulgated or issued, and have not yet taken effect (as applicable), their interpretation, application and enforcement are subject to substantial uncertainties, and uncertainties remain regarding the interpretation and implementation of the new rules and regulations.

On February 17, 2023, the CSRC promulgated Trial Administrative Measures of the Overseas Securities Offering and Listing by Domestic Companies (the “Overseas Listing Trial Measures”) and circulated five supporting guidelines, which became effective on March 31, 2023.

According to the Overseas Listing Trial Measures, 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 relevant information. The Overseas Listing Trial Measures provides that an overseas listing or offering is explicitly prohibited, if any of the following: (1) such securities offering and listing is explicitly prohibited by provisions in laws, administrative regulations and relevant state rules; (2) the intended securities offering and listing may endanger national security as reviewed and determined by competent authorities under the State Council in accordance with law; (3) the domestic company intending to make the securities offering and listing, or its controlling shareholder(s) and the actual controller, have committed relevant crimes such as corruption, bribery, embezzlement, misappropriation of property or undermining the order of the socialist market economy during the latest three years; (4) the domestic company intending to make the securities offering and listing is currently under investigations for suspicion of criminal offenses or major violations of laws and regulations, and no conclusion has yet been made thereof; or (5) there are material ownership disputes over equity held by the domestic company’s controlling shareholder(s) or by other shareholder(s) that are controlled by the controlling shareholder(s) and/or actual controller.

The Overseas Listing Trial Measures also provides that if the issuer meets both the following criteria, the overseas securities offering and listing conducted by such issuer will be deemed as indirect overseas offering by PRC domestic companies: (1) 50% or more of any of the issuer’s operating revenue, total profit, total assets or net assets as documented in its audited consolidated financial statements for the most recent fiscal year is accounted for by domestic companies; and (2) the main parts of the issuer’s business activities are conducted in mainland China, or its main place(s) of business are located in mainland China, or the majority of senior management staff in charge of its business operations and management are PRC citizens or have their usual place(s) of residence located in mainland China. Where an issuer submits an application for initial public offering to competent overseas regulators, such issuer must file with the CSRC within three business days after such application is submitted. In addition, the Overseas Listing Trial Measures provide that the direct or indirect  overseas listings of the assets of domestic companies through one or more acquisitions, share swaps, transfers or other transaction arrangements shall be subject to filing procedures in accordance with the Overseas Listing Trial Measures, which filing shall be submitted within three business days after the issuer submits its application documents relating to the initial public offering and/or listing or after the first public announcement of the relevant transaction (if the submission of relevant application documents is not required). The Overseas Listing Trial Measures also requires subsequent reports to be filed with the CSRC on material events, such as change of control or voluntary or forced delisting of the issuer(s) who have completed overseas offerings and listings.

Guidance for Application of Regulatory Rules – Overseas Offering and Listing No.1, promulgated by CSRC together with the Overseas Listing Trial Measures, provides that if a domestic enterprise completes an overseas offering through an overseas special purposes acquisition company, it shall submit the filing materials within three business days after such overseas special purposes acquisition company publicly announces such acquisition transaction. In addition, according to the Notice on Administration for the Filing of Overseas Offering and Listing by Domestic Enterprises promulgated by CSRC on its official website on February 17, 2023, the companies that have already been listed on overseas stock exchanges prior to March 31, 2023 or the companies that have obtained the approval from overseas supervision administrations or stock exchanges for its offering and listing prior to March 31, 2023 and will complete their overseas offering and listing prior to September 30, 2023 are not required to make immediate filings for its listing, but are required to make filings for subsequent offerings in accordance with the Overseas Listing Trial Measures. Companies that have already submitted an application for an initial public offering to overseas supervision administrations but have not yet obtained the approval from overseas supervision administrations or stock exchanges for the offering and listing prior to March 31, 2023 may arrange for the filing within a reasonable time period and should complete the required CSRC filing procedure, the completion of which will be published on the CSRC website, before such companies’ overseas issuance and listing. We completed the filing procedures in connection with the Business Combination under the Overseas Listing Trial Measures on September 14, 2023, and the result of such CSRC approval was posted on the official website of the CSRC on the same date.

Pursuant to the Overseas Listing Trial Measures, we may need to complete filing procedures for future offshore fund-raising activities, including conducting follow-on offering in the United States. We may not be able to complete the filing procedures, obtain the approvals or authorizations, or complete required procedures or other requirements in a timely manner, or at all, and may face adverse actions or sanctions by the CSRC or other PRC regulatory agencies as a result. These regulatory agencies may impose penalties on us, including forced rectification, warning and fines from RMB1,000,000 to RMB10,000,000 against us, and could materially hinder our ability to raise fund overseas.

In addition, we cannot guarantee that new rules or regulations promulgated in the future will not impose any additional requirement on us, the PRC Subsidiaries or the Affiliated Entities or otherwise tighten the regulations on overseas listing of PRC domestic companies. If it is determined that our future offshore fund-raising activities is subject to any CSRC approval, filing, other governmental authorization or requirements, we cannot assure you that we, the PRC Subsidiaries or the Affiliated Entities could obtain such approval or meet such requirements in a timely manner or at all. Such failure may subject us, the PRC Subsidiaries or the Affiliated Entities to fines, penalties or other sanctions which may have a material adverse effect on our business and financial condition.

We may be liable for improper use or appropriation of personal information provided by our customers.

Our business involves collecting and retaining certain internal and customer data. We also maintain information about various aspects of our operations as well as regarding our employees. The integrity and protection of customer, employee and company data are critical to our business. Our customers and employees expect that we will adequately protect their personal information. We are required by applicable laws to keep strictly confidential the personal information that we collect, and to take adequate security measures to safeguard such information.

The PRC regulatory requirements regarding cybersecurity are evolving. For instance, various regulatory bodies in China, including the CAC, the Ministry of Public Security and the State Administration for Market Regulation (the “SAMR”) have enforced data privacy and protection laws and regulations with varying and evolving standards and interpretations. In April 2020, the Chinese government promulgated the Cybersecurity Review Measures, which came into effect on June 1, 2020. According to the Cybersecurity Review Measures, operators of critical information infrastructure must pass a cybersecurity review when purchasing network products and services which do or may affect national security.

In July 2021, the CAC and other related authorities released the draft amendment to the Cybersecurity Review Measures for public comments through July 25, 2021, the final version of which became effective on February 15, 2022. See “Item 4. Information on the Company—B. Business Overview—Government Regulations—Regulation of Internet Security.” We, the PRC Subsidiaries and the Affiliated Entities are subject to enhanced cybersecurity review. As a network platform operator who possesses personal information of more than one million users for purposes of the Cybersecurity Review Measures (2021), we applied for and completed a cybersecurity review with respect to the proposed overseas listing pursuant to the Cybersecurity Review Measures (2021). However, we, the PRC Subsidiaries could become subject to other relevant investigations launched by PRC regulators in the future. Any other non-compliance with the related laws and regulations may result in fines or other penalties, including suspension of business, website closure, removal of our applications from the relevant application stores, and revocation of prerequisite licenses, as well as reputational damage or legal proceedings or actions against us, which may materially adversely affect our business, financial condition or results of operations.

On June 10, 2021, the SCNPC promulgated the PRC Data Security Law, which took effect in September 2021. The PRC Data Security Law imposes data security and privacy obligations on entities and individuals carrying out data activities, and introduces a data classification and hierarchical protection system based on the importance of data in economic and social development, and the degree of harm it will cause to national security, public interests, or legitimate rights and interests of individuals or organizations when such data is tampered with, destroyed, leaked, illegally acquired or used. The PRC Data Security Law also provides for a national security review procedure for data activities that may affect national security and imposes export restrictions on certain data and information.

As uncertainties remain regarding the interpretation and implementation of these laws and regulations, there can be no assurance that we will comply with such regulations in all respects, and we may be ordered to rectify or terminate any actions that are deemed illegal by regulatory authorities. We may also become subject to fines and/or other sanctions which may materially adversely affect our business, operations and financial condition.

While we have taken various measures to comply with applicable data privacy and protection laws and regulations, our current security measures and those of our third-party service providers may not always be adequate for the protection of customers, employees or company data. We may be a target for computer hackers, foreign governments or cyber terrorists in the future.

Unauthorized access to our proprietary internal and customer data may be obtained through break-ins, sabotage, breach of secure network by an unauthorized party, computer viruses, computer denial-of-service attacks, employee theft or misuse, breach of the security of the networks of third-party service providers, or other misconduct. Because the techniques used by computer programmers who may attempt to penetrate and sabotage proprietary internal and customer data change frequently and may not be recognized until launched against a target, we may be unable to anticipate these techniques.

Unauthorized access to our proprietary internal and customer data may also be obtained through inadequate use of security controls. Any of such incidents may harm our reputation and adversely affect our business and results of operations. In addition, we may be subject to negative publicity about security and privacy policies, systems, or measurements. Any failure to prevent or mitigate security breaches, cyber-attacks or other unauthorized access to our systems or disclosure of our customers’ data, including their personal information, could result in loss or misuse of such data, interruptions to the service system, diminished customer experience, loss of customer confidence and trust or impairment of technology infrastructure, and harm our reputation and business, resulting in significant legal and financial exposure and potential lawsuits.

As online insurance business evolves, we believe that increased regulation by the PRC or other governments of data privacy on the internet is likely. We may become subject to new laws and regulations applying to the solicitation, collection, processing or use of personal or consumer information that could affect how we store, process and share data with customers, partners and third-party providers. We generally strive to comply with laws and industry standards and are subject to the terms of our own privacy policies.

Compliance with any additional laws, along with the push for comprehensive data protection regulation, could be expensive, and may place restrictions on the conduct of our business and the manner in which we interact with customers and ecosystem participants. Any failure by us or our ecosystem partners to comply with applicable regulations could result in regulatory enforcement actions against us and adversely impact our reputation.

PRC regulations relating to investments in offshore companies by PRC residents may subject PRC-resident beneficial owners or the PRC Subsidiaries to liability or penalties, limit our ability to inject capital into the PRC Subsidiaries or limit the PRC Subsidiaries’ ability to increase their registered capital or distribute profits to us, or may otherwise adversely affect our business and financial condition.

On July 4, 2014, SAFE issued the Circular on Relevant Issues Concerning Foreign Exchange Administration on Domestic Residents’ Offshore Investment and Financing and Roundtrip Investment through Special Purpose Vehicles (“Circular 37”). Circular 37 replaced the Notice on Issues Relating to the Administration of Foreign Exchange in Fund-Raising and Reverse Investment Activities of Domestic Residents Conducted Through Offshore Special Purpose Companies (“Notice 75”), which became effective on November 1, 2005.

Circular 37 stipulates that prior to establishing or assuming control of an offshore company (the “Offshore SPV”), for financing that Offshore SPV with assets of, or equity interests in, an enterprise in the PRC, each PRC resident (whether a natural or legal person) who is a beneficial owner of the Offshore SPV must complete prescribed registration procedures with the local branch of SAFE. Pursuant to Circular 37, PRC residents must amend their SAFE registrations under certain circumstances, including upon any injection of equity interests in, or assets of, a PRC enterprise to the Offshore SPV or upon any material change in the capital of the Offshore SPV (including a transfer or swap of shares, a merger or division).

On February 13, 2015, SAFE issued the Notice on Further Simplifying and Improving Policies for the Foreign Exchange Administration of Direct Investment (“Notice 13”). Notice 13 states that local PRC banks will examine and handle foreign exchange registrations for overseas direct investment, including the initial foreign exchange registration and amendment registration, from June 1, 2015. However, substantial uncertainties remain with respect to the interpretation and implementation of this notice by governmental authorities and banks.

On December 26, 2017, the NDRC issued the Measures for the Administration of Overseas Investment of Enterprises (“Measures 11”), which became effective from March 1, 2018. Measures 11 states that PRC enterprises must obtain approval from the NDRC or file with the NDRC their offshore investments made through controlled Offshore SPVs.

Pursuant to the Measures 11 and the Measures for the Administration of Outbound Investment published by the MOFCOM in September 2014, any outbound investment of PRC enterprises must be approved by or filed with MOFCOM, NDRC or their local branches. State-owned enterprises may also be required to complete approval or filing procedures with state-owned assets supervision and administration authorities with respect to certain outbound direct investments.

We have requested that our current shareholders and beneficial owners who, to our knowledge, are PRC residents complete the foreign exchange registrations and that those who, to our knowledge, are PRC enterprises comply with outbound investment related regulations. However, we may not be fully aware of the identities of beneficial owners who are PRC residents. We do not have control over our beneficial owners and cannot guarantee that all of our beneficial owners who are PRC residents will comply with the requirements under Circular 37 or related SAFE rules, or other outbound investment related regulations.

If any of our beneficial owners who are PRC residents fail to comply with Circular 37 or related SAFE rules or other outbound investment related regulations, the PRC Subsidiaries could be subject to fines and legal penalties. Failure to comply with Circular 37 or related SAFE rules or other outbound investment related regulations could be deemed as evasion of foreign exchange controls and subject us to liability under PRC law. As a result, SAFE could restrict our foreign exchange activities, including dividends and other distributions made by the PRC Subsidiaries to us and our capital contributions to the PRC Subsidiaries.

If any of our beneficial owners who are PRC residents fail to comply with Measures 11, the investments of such beneficial owners could be subject to suspension or termination, while such beneficial owners could be subject to warnings or applicable criminal liabilities. Any of the foregoing could materially adversely affect our operations, acquisition opportunities and financing alternatives.

Failure to comply with the registration requirements for employee stock ownership plans or share option plans may subject us and our PRC equity incentive plan participants to fines and other legal or administrative sanctions.

Pursuant to Circular 37, PRC residents who participate in share incentive plans in overseas non-publicly-listed companies due to their position as director, senior management or employee of the PRC Subsidiaries of overseas companies may submit applications to SAFE or its local branches for foreign exchange registration before exercising rights. Our directors, executive officers and other employees who are PRC residents that have been granted options may follow Circular 37 to apply for foreign exchange registration.

We and our directors, executive officers and other employees who are PRC residents that have been granted options are subject to the Notice on Issues Concerning the Foreign Exchange Administration for Domestic Individuals Participating in Stock Incentive Plan of Overseas Publicly Listed company, issued by SAFE in February 2012. According to the Notice, employees, directors, supervisors and other management members participating in any stock incentive plan of an overseas publicly listed company who are PRC residents must register with SAFE through a domestic qualified agent and complete certain other procedures.

Failure to complete SAFE registrations may subject our employees, directors, supervisors and other management members participating in our stock incentive plans to fines and legal sanctions or limit the PRC Subsidiaries’ ability to distribute dividends to us. Failure to complete SAFE registrations may also limit our ability to make payments under the share incentive plans or receive dividends or sales proceeds related thereto, or to contribute additional capital into the PRC Subsidiaries and the Affiliated Entities in China. In addition, we face regulatory uncertainties that could restrict our ability to adopt additional share incentive plans for our directors and employees under PRC law.

We may be treated as a resident enterprise for PRC tax purposes under the PRC Enterprise Income Tax Law and may therefore be subject to PRC income tax.

Under the PRC Enterprise Income Tax Law effective from January 1, 2008 and last amended on December 29, 2018, as well as its implementation rules effective from January 1, 2008 and amended on April 23, 2019, an enterprise established outside of the PRC with a “de facto management body” in the PRC is considered a resident enterprise and will be subject to a 25% enterprise income tax on its global income. The implementation rules define the term “de facto management body” as an establishment that carries out substantial and overall management and control over the manufacturing and operations, personnel, accounting and properties of an enterprise.

The State Administration of Taxation has issued guidance, known as Circular 82, which provides certain specific criteria for determining whether the “de facto management body” of a Chinese-controlled offshore-incorporated enterprise is located in China. Circular 82 only applies to offshore enterprises controlled by PRC enterprises, not those, such as us, controlled by foreign enterprises or individuals.

However, the determining criteria set forth in Circular 82 may reflect the State Administration of Taxation’s general position on how the “de facto management body” test should determine the tax resident status of offshore enterprises, regardless of whether they are controlled by PRC enterprises. We may be considered a PRC tax resident under the new tax law and may become subject to the uniform 25% enterprise income tax on their global income, which could materially adversely affect their results of operations.

Dividends payable to foreign investors and gains on the sale of Class A Ordinary Shares by foreign investors may become subject to PRC tax law.

Under the PRC Enterprise Income Tax Law and its implementing rules, in general, a 10% PRC withholding tax is applicable to dividends payable to investors that are non-resident enterprises that do not have an establishment or place of business in the PRC, or have such establishment or place of business but the dividends are not effectively connected with such establishment or place of business, in each case to the extent such dividends are derived from sources within the PRC. Similarly, any gain realized on the transfer of Class A Ordinary Shares by such investors is also subject to PRC tax at a current rate of 10%, subject to any reduction or exemption set forth in relevant tax treaties, if such gain is regarded as income derived from sources within the PRC.

If we are deemed as a PRC resident enterprise, dividends paid on the Class A Ordinary Shares, and any gain realized from the transfer of the Class A Ordinary Shares, will be treated as income derived from sources within the PRC and be subject to PRC taxation. Furthermore, if we are deemed as a PRC resident enterprise, dividends payable to individual investors who are non-PRC residents and any gain realized on the transfer of the Class A Ordinary Shares by such investors may be subject to PRC tax at a current rate of 20%, subject to any reduction or exemption set forth in applicable tax treaties.

If we or any of our subsidiaries established outside China are considered a PRC resident enterprise, it is unclear whether holders of the Class A Ordinary Shares can claim the benefit of income tax treaties or agreements entered into between China and other countries or areas. If dividends payable to non-PRC investors or gains from the transfer of the Class A Ordinary Shares by such investors are subject to PRC tax, the value of your investment in the Class A Ordinary Shares may decline significantly.

Our shareholders face uncertainties with respect to indirect transfers of equity interests in PRC resident enterprises by their non-PRC holding companies.

On February 3, 2015, the State Administration of Taxation issued the Circular on Issues of Enterprise Income Tax on Indirect Transfers of Assets by Non-PRC Resident Enterprises (“Circular 7”), which replaced or supplemented certain previous rules under the Notice on Strengthening Administration of Enterprise Income Tax for Share Transfers by Non-PRC Resident Enterprises (the “Circular 698”), issued by the State Administration of Taxation on December 10, 2009. Circular 7 sets out a wider scope of indirect transfer of PRC assets that might be subject to PRC enterprise income tax. Circular 7 also includes detailed guidelines regarding when such indirect transfer is considered to lack a bona fide commercial purpose and thus regarded as avoiding PRC tax. On October 17, 2017, the SAT issued the Announcement on Issues Relating to Withholding at Source of Income Tax of Non-resident Enterprises (the “SAT Circular 37”), which came into effect on December 1, 2017 and was amended on June 15, 2018. SAT Circular 37 further clarifies the practices and procedures for withholding non-resident enterprise income tax.

The conditional reporting obligation of the non-PRC investor under Circular 698 is replaced by a voluntary reporting by the transferor, the transferee or the underlying PRC resident enterprise transferred. Using a “substance over form” principle, PRC tax authorities may disregard the existence of the overseas holding company if the company lacks a reasonable commercial purpose and was 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, currently at a rate of 10%, and the transferee has an obligation to withhold tax from the sale proceeds.

Gains from the sale of shares by investors through a public stock exchange are not subject to the PRC enterprise income tax pursuant to Circular 7 where such shares were acquired in a transaction through a public stock exchange.

There remains uncertainty as to the application of Circular 7 and the SAT Circular 37. PRC tax authorities may determine that Circular 7 and the SAT Circular 37 are applicable to offshore restructuring transactions or sale of the shares of offshore subsidiaries where non-resident enterprises, as the transferors, were involved. PRC tax authorities may pursue such non-resident enterprises with respect to a filing regarding the transactions and request the PRC Subsidiaries to assist in the filing.

As a result, our non-resident subsidiaries in such transactions may risk being subject to filing obligations or being taxed under Circular 7 and the SAT Circular 37, unless it can be justified that the transactions are of reasonable business purposes such as group restructuring or other allowed circumstances. Practically, there has been no major transaction of similar nature challenged by the PRC tax authorities. However, given the increasingly tightened tax administration in China and the uncertainties under Circular 7, we cannot assure you that there is no tax reporting or settlement risk for such transactions.

Governmental control of currency conversion may limit the ability of us, the PRC Subsidiaries and the Affiliated Entities to utilize our net revenues effectively and our ability to transfer cash among the group, across borders, and to investors and affect the value of your investment.

The PRC government imposes controls on the convertibility of Renminbi into foreign currencies and, in certain cases, the remittance of currency out of China. The PRC Subsidiaries receive substantially all of their net revenue in Renminbi. Under the current corporate structure, we primarily rely on dividend payments from the PRC Subsidiaries to fund any cash and financing requirements we may have.

The Renminbi is convertible under the “current account,” which includes dividends, trade and service-related foreign exchange transactions, but not under the “capital account,” which includes foreign direct investment and loans, including loans we may secure from or for our onshore subsidiaries or the Affiliated Entities. Certain PRC Subsidiaries may purchase foreign currency for settlement of “current account transactions” without the approval of SAFE by complying with certain procedural requirements.

However, PRC governmental authorities may limit or eliminate the ability of the PRC Subsidiaries and the Affiliated Entities to purchase foreign currencies for current account transactions. Foreign exchange transactions under the capital account remain subject to limitations and require approvals from, or registration with, SAFE and other relevant PRC governmental authorities.

Since a significant amount of the PRC Subsidiaries’ revenue is denominated in Renminbi, any existing and future restrictions on currency exchange may limit their ability to utilize cash generated in Renminbi to fund their business activities outside of the PRC or pay dividends in foreign currencies to the shareholders, including holders of the Class A Ordinary Shares. These restrictions may also limit our ability to obtain foreign currency through debt or equity financing for the PRC Subsidiaries and the Affiliated Entities.

Fluctuations in the value of the Renminbi may materially adversely affect your investment.

The value of the Renminbi against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in political and economic conditions in China and by China’s foreign exchange policies. With the development of the foreign exchange market and progress towards interest rate liberalization and Renminbi internationalization, the PRC government may announce further changes to the exchange rate system, and the Renminbi may appreciate or depreciate significantly against the U.S. dollar. It is difficult to predict how market forces or PRC or U.S. government policy may impact the exchange rate between the Renminbi and the U.S. dollar.

Significant revaluation of the Renminbi may materially adversely affect your investment. For example, to the extent that we need to convert U.S. dollars received from offshore financing activities into Renminbi for the operations of the PRC Subsidiaries and the Affiliated Entities, appreciation of the Renminbi against the U.S. dollar would decrease the Renminbi amount that we would have received from the conversion. Conversely, if we, the PRC Subsidiaries and the Affiliated Entities convert Renminbi into U.S. dollars for the purpose of making payments for dividends on the Class A Ordinary Shares or for other business purposes, appreciation of the U.S. dollar against the Renminbi would reduce the U.S. dollar amount available to us, the PRC Subsidiaries and the Affiliated Entities.

Limited hedging options are available in China to reduce our exposure to exchange rate fluctuations. As of the date of this Report, we have not entered into any material hedging transactions to reduce our exposure to foreign currency exchange risk. While we may enter into 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. In addition, currency exchange losses may be magnified by PRC exchange control regulations that restrict our ability to convert Renminbi into foreign currency.

The PCAOB has historically been unable to inspect our auditor in relation to their audit work performed for the financial statements of CCT included elsewhere in this Report, and the inability of the PCAOB to conduct inspections of our auditor in the past has deprived investors with the benefits of such inspections.

The independent registered public accounting firm that issues the audit report of CCT included elsewhere in this 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. Our auditor is located in China, a jurisdiction where the PCAOB was historically unable to conduct inspections and investigations completely before the end of 2022. As a result, we and investors in our securities are deprived of the benefits of such PCAOB inspections. The inability of the PCAOB to conduct inspections of auditors in China in the past 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 have been 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 China, and we use an accounting firm headquartered in one of these jurisdictions to issue an audit report on our financial statements filed with the SEC, we and investors in our securities would be deprived of the benefits of such PCAOB inspections again, which could cause investors and potential investors in our securities to lose confidence in our audit procedures and reported financial information and the quality of our financial statements. Furthermore, trading in our securities on any U.S. stock exchange or the U.S. over-the-counter market may be prohibited under the HFCAA if the PCAOB is unable to inspect or investigate completely auditors located in China for two consecutive years. As a result the value of our securities will decline significantly or become worthless.

Trading in our securities on any U.S. stock exchange or the U.S. over-the-counter market may be prohibited under the HFCAA if the PCAOB is unable to inspect or investigate completely auditors located in China for two consecutive years. The delisting of our securities, or the threat of being delisted, may materially and adversely affect the value of your investment.

The HFCAA stipulates that if the SEC determines that we have filed audit reports issued by a registered public accounting firm that has not been subject to inspection by the PCAOB for two consecutive years beginning in 2022, the SEC shall prohibit our securities from being traded on a national securities exchange or in the over-the-counter trading market in the United States.

In August 2022, the PCAOB, the CSRC and the Ministry of Finance of the PRC signed the Statement of Protocol, which establishes a specific and accountable framework for the PCAOB to conduct inspections and investigations of PCAOB-governed accounting firms in mainland China and Hong Kong. On December 15, 2022, the PCAOB announced that it was able to secure complete access to inspect and investigate PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong completely in 2022. On December 29, 2022, the Consolidated Appropriations Act, 2023 was signed into law by President Biden. The CAA, among other things, reduced the number of consecutive non-inspection years required for triggering the prohibitions under the HFCAA as it was originally passed from three years to two, and thus, reduced the time before our securities may be prohibited from trading or delisted. The PCAOB Board vacated its previous 2021 determinations that the PCAOB was unable to inspect or investigate completely registered public accounting firms headquartered in mainland China and Hong Kong. However, whether the PCAOB will continue to be able to satisfactorily conduct inspections of PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong is subject to uncertainties and depends on a number of factors out of our and our auditor’s control. The PCAOB continues to demand complete access in mainland China and Hong Kong moving forward and is making plans to resume regular inspections in early 2023 and beyond, as well as to continue pursuing ongoing investigations and initiate new investigations as needed. The PCAOB has also indicated that it will act immediately to consider the need to issue new determinations with the HFCAA if needed. Because our registered accounting firm is headquartered in Shanghai, China, if the PRC government adopts positions at any time in the future that would prevent the PCAOB from continuing to inspect or investigate completely accounting firms headquartered in mainland China or Hong Kong, or if we fail to, among others, meet the PCAOB’s requirements, including retaining a registered public accounting firm that the PCAOB determines it is able to inspect and investigate completely, we will be identified as a “Commission-identified Issuer” following the filing of the annual report for the relevant fiscal year. In accordance with HFCAA, our securities will be delisted from the Nasdaq Stock Market, and will not be permitted for trading over the counter if we are identified as a Commission-identified Issuer for two consecutive years under the HFCAA and the CAA. If our securities are prohibited from trading in the United States, we cannot assure you that such securities will be listed on a non-U.S. exchange or that a market for our securities will develop outside of the United States. Such a prohibition would substantially impair your ability to sell or purchase our securities when you wish to do so, and the risk and uncertainty associated with delisting would have a negative impact on the price of our securities. Moreover, the HFCAA, CAA or other efforts to increase U.S. regulatory access to audit information could cause investor uncertainty for affected issuers, including us, and the market price of our securities could be adversely affected. Also, such a prohibition would significantly affect our ability to raise capital on acceptable terms, or at all, which would have a material adverse impact on our business, financial condition, and prospects.

Proceedings instituted by the SEC against the “big four” PRC-based accounting firms, including our independent registered public accounting firm, could result in financial statements being determined to not be in compliance with the requirements of the Exchange Act.

In December 2012, the SEC brought administrative proceedings against the “big four” PRC-based accounting firms, including our independent registered public accounting firm, alleging that they had violated U.S. securities laws and the SEC’s rules and regulations thereunder by failing to provide to the SEC the firms’ audit work papers and other documents related to certain other PRC-based companies that are publicly traded in the United States.

On January 22, 2014, the administrative law judge presiding over the matter rendered an initial decision that each of the firms had violated the SEC’s rules of practice by failing to produce audit papers and other documents to the SEC. The initial decision censured each of the firms and barred them from practicing before the SEC for a period of six months. The decision was neither final nor legally effective until reviewed and approved by the SEC, and on February 12, 2014, the PRC-based accounting firms appealed to the SEC against this decision.

On February 6, 2015, the four PRC-based accounting firms each agreed to a censure and to pay a fine to the SEC to settle the dispute and avoid suspension of their ability to practice before the SEC and audit U.S.-listed companies. The settlement required the firms to follow detailed procedures and to seek to provide the SEC with access to PRC-based firms’ audit documents via the CSRC. Under the terms of the settlement, the underlying proceeding against the four PRC-based accounting firms was deemed dismissed with prejudice four years after entry of the settlement. The four-year mark occurred on February 6, 2019. Despite the Statement of Protocol, it remains uncertain whether the SEC will further challenge the four PRC-based accounting firms’ compliance with U.S. laws in connection with U.S. regulatory requests for audit work papers or if the results of such a challenge would result in the SEC imposing penalties such as suspensions.

If additional remedial measures are imposed on the PRC-based accounting firms, including our independent registered public accounting firm, we could be unable to timely file future financial statements in compliance with the requirements of the Exchange Act. Moreover, any negative news about any such future proceedings against these accounting firms may cause investor uncertainty regarding China-based, United States-listed companies and the market price of our securities may be adversely affected. A determination that we have not timely filed financial statements in compliance with the SEC requirements could ultimately lead to the delisting of our securities from the Nasdaq Stock Market or deregistration from the SEC, or both, which would substantially reduce or effectively terminate the trading of our securities in the United States.

The enforcement of the PRC Labor Contract Law and other labor-related regulations in the PRC may adversely affect our business and results of operations. Failure to make adequate contributions to employee benefit plans as required by PRC regulations may subject us to penalties.

The Standing Committee of the National People’s Congress enacted the Labor Contract Law in 2008, and amended it on December 28, 2012. The Labor Contract Law introduced specific provisions related to fixed-term employment contracts, part-time employment, probationary periods, consultation with labor unions and employee assemblies, employment without a written contract, dismissal of employees, severance, and collective bargaining to enhance previous PRC labor laws.

Under the Labor Contract Law, an employer must sign an unlimited-term labor contract with any employee who has worked for the employer for ten consecutive years. Furthermore, if an employee requests or agrees to renew a fixed-term labor contract that has already been entered into twice consecutively, the resulting contract, with certain exceptions, must have an unlimited term, subject to certain exceptions.

With certain exceptions, an employer must pay severance to an employee where a labor contract is terminated or expires. In addition, PRC governmental authorities have introduced various new labor-related regulations since the effectiveness of the Labor Contract Law. Under the PRC Social Insurance Law and the Administrative Measures on Housing Fund, employees must participate in pension insurance, work-related injury insurance, medical insurance, unemployment insurance, maternity insurance, and housing funds. Employers must apply for social insurance registration and open housing fund accounts for the employees and are required, together with their employees or separately, to pay the social insurance premiums and housing funds for their employees.

Certain of the PRC Subsidiaries and the Affiliated Entities have not made full contributions to social security insurance plans and housing provident fund for our employees in compliance with the relevant PRC regulations. As a result, we may be required to make up the contributions for these plans as well as to pay late fees and fines.

In addition, certain of the PRC Subsidiaries and the Affiliated Entities provide social security insurance through third-party human resources agencies to pay social insurance premiums and make contributions to housing funds. Under the agreements entered into between the third-party human resources agencies and the PRC Subsidiaries, the Affiliated Entities and their relevant subsidiaries, the third-party human resources agencies are obligated to pay social insurance premiums and housing funds for employees of these entities. Such arrangement may be deemed as a failure to comply with the relevant PRC laws and regulations which require an employer to pay social insurance premiums and make contributions to housing funds. Furthermore, if the third-party human resource agencies fail to pay the social insurance premiums or housing fund contributions for and on behalf of employees as required under applicable PRC laws and regulations, the PRC Subsidiaries, the Affiliated Entities and their subsidiaries may be subject to penalties imposed by the local social insurance authorities and the local housing fund management centers for failing to discharge their obligations to pay social insurance and housing funds as an employer. In addition, we have accrued in the financial statements but not made full contributions to the social insurance plans and the housing provident fund for employees as required by the relevant PRC laws and regulations. As of this Report, we are not aware of any notice from regulatory authorities or any claim or request from these employees in this regard.

As the interpretation and implementation of these regulations are evolving, employment practices of the PRC Subsidiaries and the Affiliated Entities may not be at all times deemed in compliance with the regulations. As a result, these entities could be subject to penalties or incur significant liabilities in connection with labor disputes or investigations.

There are uncertainties under the PRC laws relating to the procedures for U.S. regulators to investigate and collect evidence from companies located in the PRC.

Shareholder claims or regulatory investigation that are common in the United States generally are difficult to pursue as a matter of law or practicality in China. For instance, in China, there are significant legal and other obstacles to providing information needed for regulatory investigations or litigations initiated outside China. 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 mutual and practical cooperation mechanism.

According to Article 177 of the PRC Securities Law (the “Article 177”), which became effective in March 2020, no overseas securities regulator is allowed to directly conduct investigation or evidence collection activities within the territory of the PRC. Accordingly, without PRC government approval, no entity or individual in China may provide documents and information relating to securities business activities to overseas regulators when it is under direct investigation or evidence discovery conducted by overseas regulators, which could present significant legal and other obstacles to obtaining information needed for investigations and litigation conducted outside of China. The inability for an overseas securities regulator to directly conduct investigation or evidence collection activities within China may further increase difficulties faced by you in protecting your interests. Furthermore, as of the date of this Report, there have not been implementing rules or regulations regarding the application of Article 177, and, accordingly, it remains unclear as to how it will be interpreted, implemented or applied by relevant government authorities. As such, there are also uncertainties as to the procedures and requisite timing for the overseas securities regulatory agencies to conduct investigations and collect evidence within the territory of the PRC. If the U.S. securities regulatory agencies are unable to conduct such investigations, there exists a risk that they may determine to suspend or de-register our registration with the SEC and may also delist our securities from trading market within the United States. See also “— Risks Related to Our Securities — You may face difficulties in protecting your interests, and your ability to protect your rights through U.S. courts may be limited, because we are incorporated under the law of the Cayman Islands, and will conduct substantially all of our operations in China, and a majority of our directors and executive officers will reside outside of the United States.”

Risks Related to Our Securities

The price of our securities may be volatile, and the value of our securities may decline.

We cannot predict the prices at which our securities will trade. The price of our securities may not bear any relationship to the market price at which our securities will trade immediately after the Business Combination or to any other established criteria of the value of our business and prospects, and the market price of our securities following the Business Combination may fluctuate substantially and may be lower than the price agreed by Prime Impact and CCT in connection with the Business Combination. In addition, the trading price of our securities following the Business Combination could be subject to fluctuations in response to various factors, some of which are beyond its control. These fluctuations could cause you to lose all or part of your investment. Factors that could cause fluctuations in the trading price of our securities include the following:

The process of taking a company public by means of a business combination with a special purpose acquisition company is different from taking a company public through an IPO and may create risks for our unaffiliated investors.

A conventional initial public offering (an “IPO”) involves a company engaging underwriters to purchase its shares and resell them to the public. An underwritten offering imposes statutory liability on the underwriters for material misstatements or omissions contained in the registration statement unless they are able to sustain the burden of proving that they did not know and could not reasonably have discovered such material misstatements or omissions. This is referred to as a “due diligence” defense and results in the underwriters undertaking a detailed review of an IPO company’s business, financial condition and results of operations. Going public via a business combination with a special purpose acquisition company, such as Prime Impact, does not involve any underwriters and may therefore result in less careful vetting of information that is presented to the public.

In addition, going public via a business combination with a special purpose acquisition company does not involve a bookbuilding process as is the case in an IPO. In any IPO, the initial value of a company is set by investors who indicate the price at which they are prepared to purchase shares from the underwriters. In the case of a business combination involving a special purpose acquisition company, the value of the target company is established by means of negotiations between the target company and the special purpose acquisition company. The process of establishing the value of a target company in a business combination may be less effective than an IPO bookbuilding process and also does not reflect events that may have occurred between the date of the business combination agreement and the closing of the transaction. In addition, while IPOs are frequently oversubscribed, resulting in additional potential demand for shares in the aftermarket following an IPO, there is no comparable process of generating investor demand in connection with a business combination between a target company and a special purpose acquisition company, which may result in lower demand for our securities after the Closing, which could in turn decrease liquidity and trading prices as well as increase trading volatility.

The Warrants to purchase Class A Ordinary Shares will increase the number of shares eligible for future resale in the public market and result in dilution to our shareholders.

Upon the consummation of the Business Combination, outstanding Prime Impact Warrants were assumed by us and converted into corresponding warrants to purchase an aggregate of 13,663,325 Class A Ordinary Shares, after giving effect to the forfeiture of 2,860,561 Private Warrants pursuant to the terms of the Sponsor Support Agreement. The Assumed Public Warrants will not become exercisable until 30 days after the Closing, and will expire five years after the completion of the Business Combination. Each Assumed Public Warrant will entitle the holder thereof to purchase one Class A Ordinary Share at a price of $11.50 per whole share, subject to adjustment. The Assumed Public Warrants may be exercised only for a whole number of Class A Ordinary Shares. To the extent such warrants are exercised, additional Class A Ordinary Shares will be issued, which will result in dilution to the then-existing holders of Class A Ordinary Shares and increase the number of shares eligible for resale in the public market. Sales of substantial numbers of such shares in the public market could adversely affect the market price of Class A Ordinary Shares. The exclusive forum provision in the amended and restated warrant agreement can result in increased costs to investors to bring a claim.

The warrant agreement relating to the Assumed Public Warrants provides that we agree that any action, proceeding or claim against us arising out of or relating in any way to such agreement will be brought and enforced in the courts of the State of New York or the United States District Court for the Southern District of New York, and that we irrevocably submit to such jurisdiction, which jurisdiction will be the exclusive forum for any such action, proceeding or claim. This exclusive forum provision could limit Assumed Public Warrant holders’ ability to obtain what they believe to be a favorable judicial forum for disputes related to the A&R Warrant Agreement.

In connection with the Business Combination, we entered into the A&R Warrant Agreement on August 7, 2023, which relates to the Assumed Public Warrants. The A&R Warrant Agreement provides that any action, proceeding or claim against us arising out of or relating in any way to such agreement will be brought and enforced in the courts of the State of New York or the United States District Court for the Southern District of New York, which will be the exclusive forum for any such action, proceeding or claim. This provision will apply to claims under the Securities Act but, as discussed below, will not apply to claims under the Exchange Act.

Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. As a result, the exclusive forum provision in the A&R Warrant Agreement will not apply to suits brought to enforce any duty or liability created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction. Accordingly, the exclusive forum provision does not designate the courts of the State of New York as the exclusive forum for any derivative action arising under the Exchange Act, as there is exclusive federal jurisdiction in that instance.

Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder. As a result, the enforceability of the exclusive forum provision in the A&R Warrant Agreement is uncertain, and a court may determine that such provision will not apply to suits brought to enforce any duty or liability created by the Securities Act or any other claim for which the federal and state courts have concurrent jurisdiction. Further, compliance with the federal securities laws and the rules and regulations thereunder cannot be waived by investors in our securities.

The exclusive forum provision in the A&R Warrant Agreement may limit a shareholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes related to the A&R Warrant Agreement, which may discourage such lawsuits against us and our directors or officers. Alternatively, if a court were to find this exclusive forum provision inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business, financial condition and results of operations and result in a diversion of the time and resources of our management and board of directors.

We may redeem your unexpired Assumed Public Warrants prior to their exercise at a time that is disadvantageous to you, thereby making your Assumed Public Warrants worthless.

After the Closing, we have the ability to redeem the outstanding Assumed Public Warrants at any time after they become exercisable and prior to their expiration, at a price of $0.01 per warrant, if, among other things, the Reference Value (as defined in the A&R Warrant Agreement) equals or exceeds $18.00 per share (as adjusted for share sub-divisions, share capitalizations, reorganizations, recapitalizations and the like). If and when the Assumed Public Warrants become redeemable, we may exercise such redemption right even if it is unable to register or qualify the underlying securities for sale under all applicable state securities laws. Redemption of the outstanding Assumed Public Warrants as described above could force you to (1) exercise your warrants and pay the exercise price therefor at a time when it may be disadvantageous for you to do so, (2) sell your warrants at the then-current market price when you might otherwise wish to hold your warrants or (3) accept the nominal redemption price which, at the time the outstanding warrants are called for redemption, is expected to be substantially less than the market value of the Assumed Public Warrants. None of the assumed private placement warrants will be redeemable so long as they are held by our sponsors or their permitted transferees.

In addition, we will have the ability to redeem the outstanding Assumed Public Warrants at any time after they become exercisable and prior to their expiration, at a price of $0.10 per warrant if, among other things, the Reference Value equals or exceeds $10.00 per share (as adjusted for share sub-divisions, share dividends, rights issuances, reorganizations, recapitalizations and the like). In such a case, the holders will be able to exercise their warrants prior to redemption for a number of Class A Ordinary Shares determined based on the redemption date and the fair market value of such Class A Ordinary Shares. The value received upon exercise of the warrants (1) may be less than the value the holders would have received if they had exercised their warrants at a later time where the underlying share price is higher and (2) may not compensate the holders for the value of the warrants, including because the number of Class A Ordinary Shares to be received is capped at 0.361 shares of Class A Ordinary Shares per warrant (subject to adjustment) irrespective of the remaining life of the warrants.

We will be a foreign private issuer, and as a result, will not be subject to U.S. proxy rules and will be subject to Exchange Act reporting obligations that, to some extent, are more lenient and less frequent than those of a U.S. domestic public company.

We currently report under the Exchange Act as a non-U.S. company with foreign private issuer status. Because we qualify as a foreign private issuer under the Exchange Act, we are exempt from certain provisions of the Exchange Act that are applicable to U.S. domestic public companies, including, among others, (1) the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act, (2) the sections of the Exchange Act requiring insiders to file public reports of their share ownership and trading activities and liability for insiders who profit from trades made in a short period of time, and (3) the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q containing unaudited financial and other specified information. In addition, foreign private issuers are not required to file their annual report on Form 20-F until 120 days after the end of each fiscal year, while U.S. domestic issuers that are accelerated filers are required to file their annual report on Form 10-K within 75 days after the end of each fiscal year, and U.S. domestic issuers that are large accelerated filers are required to file their annual report on Form 10-K within 60 days after the end of each fiscal year. As a result of all of the above, you may not have the same protections afforded to shareholders of a company that is not a foreign private issuer.

As a company incorporated in the Cayman Islands, we are permitted to adopt certain home country practices in relation to corporate governance matters that differ significantly from the Nasdaq Stock Market corporate governance listing standards; these practices may afford less protection to shareholders than they would enjoy if we complied fully with the Nasdaq Stock Market corporate governance listing standards.

Our securities are listed on the Nasdaq Stock Market. The Nasdaq Stock Market corporate governance listing standards permit a foreign private issuer such as 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 Nasdaq Stock Market corporate governance listing standards.

For instance, we are not required to:

We do not intend to have a compensation committee consisting entirely of independent directors. We may also continue to rely on this and other exemptions available to foreign private issuers in the future, and to the extent that we choose to do so, our shareholders may be afforded less protection than they otherwise would have under the Nasdaq Stock Market Rules applicable to U.S. domestic issuers.

You may face difficulties in protecting your interests, and your ability to protect your rights through U.S. courts may be limited, because we are incorporated under the law of the Cayman Islands, and will conduct substantially all of our operations in China, and a majority of our directors and executive officers will reside outside of the United States.

We are an exempted company limited by shares incorporated under the laws of the Cayman Islands. We conduct a majority of our operations through the PRC Subsidiaries and the Affiliated Entities in China. Substantially all of our assets are located outside of the United States. A majority of our officers and directors reside outside the United States and a substantial portion of the assets of those persons are located outside of the United States. As a result, it could be difficult or impossible for you to bring an action against the us or against these individuals outside of the United States in the event that you believe that your rights have been infringed upon under the applicable securities laws or otherwise. Even if you are successful in bringing an action of this kind, the laws of the Cayman Islands and of the PRC could render you unable to enforce a judgment against the relevant assets or the assets of the relevant directors and officers.

In addition, our corporate affairs are governed by our Amended and Restated Memorandum and Articles of Association, the Cayman Companies Act and the common law of the Cayman Islands. The rights of investors to take action against our 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 may not be as clearly established as they would be under statutes or judicial precedent in some jurisdictions in the United States. In particular, the Cayman Islands has a different body of securities laws than the United States. Some U.S. states, such as Delaware, may have more fully developed and judicially interpreted bodies of corporate law than the Cayman Islands. In addition, Cayman Islands companies may not have standing to initiate a shareholder derivative action in a federal court of the United States.

Shareholders of Cayman Islands exempted companies like us have no general rights under Cayman Islands law to inspect corporate records or to obtain copies of lists of shareholders of these companies (save for the memorandum and articles of association, the register of mortgages and charges, and special resolutions of our shareholders). Our directors have discretion under the Amended and Restated Memorandum and Articles of Association to determine whether or not, and under what conditions, our corporate records may be inspected by our shareholders, but we are not obliged to make them available to the shareholders. This may make it more difficult for you to obtain the information needed to establish any facts necessary for a shareholder’s motion or to solicit proxies from other shareholders in connection with a proxy contest.

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. To the extent 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. See “— As a company incorporated in the Cayman Islands, we are permitted to adopt certain home country practices in relation to corporate governance matters that differ significantly from the Nasdaq Stock Market corporate governance listing standards; these practices may afford less protection to shareholders than they would enjoy if we complied fully with the Nasdaq Stock Market corporate governance listing standards.”

As a result of all of the above, Our shareholders may have more difficulty in protecting their interests in the face of actions taken by management, members of the board of directors or controlling shareholders than they would as Public Shareholders of a company incorporated in the United States.

The Amended and Restated Memorandum and Articles of Association contain certain provisions, including anti- takeover provisions that limit the ability of shareholders to take certain actions and could delay or discourage takeover attempts that shareholders may consider favorable.

The Amended and Restated Memorandum and Articles of Association contain provisions that could have the effect of rendering more difficult, delaying, or preventing an acquisition that shareholders may consider favorable, including transactions in which shareholders might otherwise receive a premium for their shares. These provisions could also limit the price that investors might be willing to pay in the future for the Class A Ordinary Shares, and therefore depress the trading price of the Class A Ordinary Shares. These provisions could also make it difficult for shareholders to take certain actions, including electing directors who are not nominated by us or taking other corporate actions, including effecting changes in our management. See “Item 10. Additional Information—B. Memorandum and Articles of Association.” These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in our board of directors or management.

A market for our securities may not develop or be sustained, which would adversely affect the liquidity and price of our securities.

The price of our securities may fluctuate significantly due to the market’s reaction to the Business Combination and general market and economic conditions. A substantial amount of our Ordinary Shares will be subject to transfer restrictions following the Business Combination. An active trading market for our securities following the Business Combination may never develop or, if developed, may not be sustained. In addition, the price of our securities may vary due to general economic conditions and forecasts, our general business condition and the release of its financial reports. Additionally, if our securities are not listed on the Nasdaq Stock Market and are quoted on over-the-counter market, the liquidity and price of our securities may be more limited than if our securities were quoted or listed on the Nasdaq Stock Market or another national securities exchange. You may be unable to sell your securities unless a market can be established or sustained.

If securities or industry analysts do not publish or cease publishing research or reports about us, our business, our market or competitors, or if they change their recommendations regarding our securities adversely, the price and trading volume of our securities could decline.

The trading market for our securities will be influenced by the research and reports that industry or securities analysts may publish about us, our business, our market or competitors. If any of the analysts who may cover us change their recommendation regarding our securities adversely, or provide more favorable relative recommendations about our competitors, the price of our securities would likely decline. If any analyst who may cover us were to cease their coverage or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause the price or trading volume of our securities to decline.

Additional disclosure requirements to be adopted by and regulatory scrutiny from the SEC in response to risks related to companies with substantial operations in China could increase our compliance costs, subject it to additional disclosure requirements, and/or suspend or terminate our future securities offerings, resulting in difficulties in our capital-raising efforts.

On July 30, 2021, in response to the recent regulatory developments in China and actions adopted by the PRC government, the Chairman of the SEC issued a statement asking the SEC staff to seek additional disclosures from offshore issuers associated with China-based operating companies before their registration statements will be declared effective. As such, we may be subject to additional disclosure requirements and review that the SEC or other regulatory authorities in the United States may adopt for companies with China-based operations, which could increase our compliance costs, subject us to additional disclosure requirements, and/or suspend or terminate our future securities offerings, resulting in difficulties in our capital-raising efforts.

If we fail to implement and maintain effective internal controls to remediate the material weaknesses over financial reporting, we may be unable to accurately report our results of operations, meet our reporting obligations or prevent fraud, and investor confidence and the market price of the Class A Ordinary Shares may be materially adversely affected.

Prior to the completion of the Business Combination, CCT was a private company with limited accounting and financial reporting personnel and other resources with which it addresses its internal control over financial reporting. In connection with the audit of its consolidated financial statements as of and for the year ended December 31, 2021, CCT and its independent registered public accounting firm identified two material weaknesses in its internal control over financial reporting. As defined in the standards established by the PCAOB, a “material weakness” is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.

The material weaknesses that have been identified relate to (1) CCT’s lack of sufficient accounting and financial reporting personnel with requisite knowledge of and experience in the application of U.S. GAAP related to accounting treatment for certain equity transactions, leases and expected credit losses of receivables, and (2) CCT’s lack of formal financial closing policies and effective control over periodic financial closing procedures, which resulted in adjustments related to revenue, cost of sales and expenses cut-off at period end. CCT is in the process of implementing a number of measures to address the material weaknesses identified. See “Item.5 Operating and Financial Review and Prospects—Internal Control Over Financial Reporting.” However, CCT cannot guarantee that these measures may fully remediate the material weaknesses in its internal control over financial reporting, or CCT may not be able to conclude that they have been fully remediated.

We are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act and the rules and regulations of the Nasdaq Stock Market. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal controls over financial reporting. Commencing with its fiscal year ending December 31, 2024, we must perform system and process evaluation and testing of our internal controls over financial reporting to allow management to report on the effectiveness of our internal controls over financial reporting in our Form 20-F filing for that year, as required by Section 404 of the Sarbanes-Oxley Act.

Once we cease to be an “emerging growth company” as the term is defined in the JOBS Act, our independent registered public accounting firm must attest to and report on the effectiveness of our internal control over financial reporting. Our management and independent registered public accounting firm may conclude that our internal control over financial reporting is not effective. As a result, we may incur significant expenses and devote substantial effort to expand our accounting and finance functions. Prior to the Business Combination, CCT was previously not required to test its internal controls within a specified period, and as a result, following the Business Combination, we may experience difficulty in meeting these reporting requirements in a timely manner.

Our internal control over financial reporting will not prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Because of the inherent limitations in control systems, misstatements due to error or fraud could occur in the future, and a control system could fail to detect control issues and fraud.

If we fail to comply with the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner, or to maintain proper and effective internal controls, we may not produce accurate financial statements in a timely manner. As a result, the market price of the Class A Ordinary Shares may decline and we could be subject to sanctions or investigations by the Nasdaq Stock Market, SEC or other regulatory authorities.

Our principal shareholders, including our founder Mr. Lei Zhang, have the ability to exert significant influence over important corporate matters that require approval of shareholders, which may deprive you of an opportunity to receive a premium for the Class A Ordinary Shares and materially reduce the value of your investment.

Our outstanding share capital consists of Class A Ordinary Shares and Class B Ordinary Shares. Each Class A Ordinary Share is entitled to one vote and each Class B Ordinary Share is entitled to three votes at general meetings of our shareholders. Mr. Lei Zhang will beneficially own all of Class B Ordinary Shares, representing approximately 24.4% of our issued and outstanding share capital, and approximately 49.2% of voting power. This concentration of ownership and the protective provisions in the Amended and Restated Memorandum and Articles of Association may discourage, delay or prevent a change in control, which could have the dual effect of depriving our shareholders of an opportunity to receive a premium for their shares as part of a sale and reducing the price of the Class A Ordinary Shares. As a result of the foregoing, the value of your investment could be materially reduced.

The issuance of additional share capital in connection with financings, acquisitions, investments, our equity incentive plans or otherwise will dilute all other shareholders.

We expect to issue additional share capital in the future that will result in dilution to all other shareholders. We also expect to grant equity awards to key employees under the 2023 Equity Incentive Plan. We may also raise capital through equity financings in the future. As part of our business strategy, we may acquire or make investments in companies, solutions or technologies and issue equity securities to pay for any such acquisition or investment. Any such issuances of the additional share capital may cause shareholders to experience significant dilution of their ownership interests and the per share value of the Class A Ordinary Shares to decline.

We do not intend to pay dividends before we become profitable, and as a result, your ability to achieve a return on your investment in the foreseeable future will depend on appreciation in the price of the Class A Ordinary Shares.

We do not intend to pay any cash dividends before we become profitable, which may not occur in the foreseeable future. Any determination to pay dividends in the future will be at the discretion of our board of directors. Accordingly, you may need to rely on sales of the Class A Ordinary Shares after price appreciation, which may never occur, as the only way to realize any future gains on your investment.

A significant portion of our outstanding shares may not be immediately resold but may be sold into the market in the near future. This could cause the market price of the Class A Ordinary Shares to drop significantly, even if our business is doing well.

All former shareholders of CCT were subject to lock-up and transfer restrictions with respect to the Ordinary Shares they received upon the closing of the Business Combination. On September 12, 2023, we, Prime Impact and CCT entered into certain irrevocable waiver to release, on a pro rata basis, 2,874,556 Class A Ordinary Shares to be issued to existing shareholders of CCT from the lock-up and transfer restrictions set forth in certain Shareholder Support Agreements in connection with the Business Combination to satisfy the initial listing requirements of the Nasdaq Capital Market. Immediately after the Closing of the Business Combination, 4,261,052 Class A Ordinary Shares (the “Sponsor Shares”), as well as 2,860,561 Assumed Public Warrants (the “Sponsor Warrants,” and together with the Sponsor Shares, the “Sponsor Securities”) held by the Sponsor are subject to lock-up and transfer restrictions pursuant to the terms of the Sponsor Support Agreement dated January 29, 2023, as amended on September 13, 2023, which may be release until the earliest of (1) the consummation of a change of control of us after the Acquisition Closing, (2) the first date that the closing price of the Class A Ordinary Shares equals or is greater than $12.50 per share (as adjusted for share sub-divisions, share capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within any 30- trading day period after the first anniversary of Acquisition Closing, (3) with respect to twenty seven and one half percent (27.5%) of the Sponsor Securities six months after the Acquisition Closing, (4) with respect to an additional twenty seven and one half percent (27.5%) of the Sponsor Securities twelve months after the Acquisition Closing, and (5) with respect to forty five percent (45.0%) of the Sponsor Securities twenty four months after the Acquisition Closing.

Pursuant to the A&R Registration Rights Agreement, we have agreed that we will file with the SEC (at our sole cost and expense) a resale registration statement, and we will use our commercially reasonable efforts to have the resale registration statement declared effective by the SEC as soon as reasonably practicable after the filing thereof. In certain circumstances, certain shareholders that are parties to the A&R Registration Rights Agreement can demand up to three underwritten offerings, and all of holders of Registration Rights can demand three block trades within any 12-month period and will be entitled to customary piggyback registration rights. Furthermore, we have granted registration rights substantially on the same terms as those stipulated in the A&R Registration Rights Agreement to the PIPE Investor, the Backstop Investor (with respect to 500,000 Class A Ordinary Shares issued pursuant to the Backstop Private Placement) and the Sponsor (with respect to the 634,228 Class A Ordinary Shares issued pursuant to the Sponsor Private Placement).

Additionally, we will likely register for resale Class A Ordinary Shares subject to the assumed CCT Options and assumed CCT Restricted Shares under CCT’s 2019 Equity Incentive Plan, as well as shares held by CCT’s affiliates that were subject to a lock-up.

We are an “emerging growth company,” and the reduced reporting and disclosure requirements applicable to emerging growth companies may make our securities less attractive to investors.

We are an “emerging growth company,” as defined in the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies,” including the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. We do not intend to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of our financial statements with certain other public companies difficult or impossible because of the potential differences in accounting standards used.

We will remain an emerging growth company until the earlier of: (1) the last day of the fiscal year (i) following the fifth anniversary of the consummation of the Business Combination, (ii) in which we have total annual gross revenue of at least $1.235 billion, or (iii) in which we are deemed to be a large accelerated filer, which means the market value of our common equity that is held by non-affiliates exceeds $700 million as of the last business day of its most recently completed second fiscal quarter; and (2) the date on which we have issued more than $1.00 billion in non-convertible debt securities during the prior three-year period.

Investors may find our securities less attractive, and there may be a less active trading market for our securities, and the price of such securities may be more volatile.

We will incur increased costs as a result of operating as a public company, and our management will be required to devote substantial time to comply with a public company’s responsibilities and corporate governance practices.

As a public company, we will incur significant legal, accounting and other expenses, which we expect to further increase after we are no longer an “emerging growth company.” The Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of Nasdaq, and other applicable securities rules and regulations impose various requirements on public companies. Our management and other personnel are not experienced in managing a public company and will be required to devote a substantial amount of time to compliance with these requirements. Moreover, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly.

In the past, shareholders of some public companies brought securities class action suits against these companies following periods of instability in the market price of these companies’ securities. Our involvement in a class action suit could divert a significant amount of our management’s attention and other resources from our business, which could harm our results of operations and require us to incur significant expenses to defend the suit.

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 materially adversely affect our financial condition and results of operations.

If we are characterized as a passive foreign investment company (“PFIC”) for U.S. federal income tax purposes, U.S. Holders may experience adverse U.S. federal income tax consequences.

A non-U.S. corporation generally will be treated as a PFIC for U.S. federal income tax purposes, in any taxable year if either (1) at least 75% of its gross income for such year is passive income or (2) at least 50%of the value of its assets (generally based on an average of the quarterly values of the assets) during such year is attributable to assets that produce or are held for the production of passive income. The determination of whether we will be treated as a PFIC for the taxable year that includes the Business Combination will depend on a number of factors, including the timing of the Business Combination and the amount of cash held by Prime Impact and CCT and its subsidiaries at the time of the Business Combination, among others. Accordingly, there can be no assurances in this regard or any assurances that we will not be treated as a PFIC in the taxable year that includes the Business Combination or any future taxable year. Moreover, the application of the PFIC rules is subject to uncertainty in several respects, and there can be no assurance that the Internal Revenue Service (the “IRS”) will not take a contrary position or that a court will not sustain such a challenge by the IRS.

Following the consummation of the Business Combination, whether we or any of our subsidiaries are a PFIC for any taxable year is a factual determination that depends on, among other things, the composition of its income and assets, and the market value of its securities. Changes in our composition, the composition of our income or the composition of its assets may cause us to be or become a PFIC for the current or subsequent taxable years. Whether we are treated as a PFIC for U.S. federal income tax purposes is a factual determination that must be made annually at the close of each taxable year and, thus, is subject to significant uncertainty.

If we are a PFIC for any taxable year, a U.S. Holder of our securities may be subject to adverse tax consequences and may incur certain information reporting obligations. For a further discussion, see “Item.10 Additional Information — E. Taxation — U.S. Federal Income Taxation — Certain Material U.S. Federal Income Tax Consequences — Passive foreign investment company rules.” U.S. Holders of our securities are strongly encouraged to consult their tax advisors regarding the potential application of these rules to us and the ownership of our securities.

ITEM 4. INFORMATION ON THE COMPANY

Corporate History

The VIE commenced our auto insurance business in September 2014. In September 2018, CCT was incorporated under the laws of the Cayman Islands as the ultimate offshore holding company of its PRC Subsidiaries. In October 2018, Cheche HK, a wholly-owned subsidiary in Hong Kong, was established. In October 2018, Cheche HK established WFOE, Cheche Ningbo, a wholly-owned subsidiary in the PRC. In December 2020, Cheche HK established another wholly-owned subsidiary in the PRC, Baodafang.

We conduct our business in China primarily through the Affiliated Entities, which operate the relevant applications and website, www.chechegroup.com. Due to PRC laws and regulations restricting foreign ownership of companies that engage in internet and other related businesses, WFOE has entered into a series of contractual arrangements with the VIE and its shareholders. The VIE holds ICP licenses as an internet content provider in China. As a result of our direct ownership in WFOE and the contractual arrangements with the VIE, We are considered the primary beneficiary of the VIE. We treat the Affiliated Entities as our consolidated affiliated entities under U.S. GAAP, and have consolidated the financial results of these entities in its consolidated financial statements in accordance with U.S. GAAP. Consolidation of VIE under U.S. GAAP generally occurs if we or our subsidiaries (1) have an economic interest in the VIE that provides significant exposure to potential losses or benefits from the VIE and (2) have power over the most significant economic activities of the VIE. See “— C. Organizational Structure—Contractual Arrangements with the VIE and its Shareholders.”

We are an exempted company incorporated in the Cayman Islands with limited liability on January 3, 2023 for the purpose of effecting the Business Combination. Our principal executive office is 8/F, Desheng Hopson Fortune Plaza, 13-1 Deshengmenwai Avenue, Xicheng District, Beijing 100088, People’s Republic of China and its telephone number is +86 10 5083-0911. Our website address is IR@chechegroup.com. The information contained on the website does not form a part of, and is not incorporated by reference into, this Report.

Business Combination with Prime Impact

On September 14, 2023, we consummated the previously announced business combination with Prime Impact, pursuant to the Business Combination Agreement dated January 29, 2023, by and among Prime Impact, the Company, Merger Sub, and CCT. Pursuant to the Business Combination Agreement, the Business Combination were effected in two steps. On September 14, 2023 (the “Closing Date”), (1) Prime Impact merged with and into the Company (the “Initial Merger”), with the Company surviving the Initial Merger as a publicly traded entity (the time at which the Initial Merger became effective is referred to herein as the “Initial Merger Effective Time”); and (2) immediately following the Initial Merger, Merger Sub merged with and into CCT (the “Acquisition Merger” and, together with the Initial Merger, the “Mergers,” and together with all other transactions contemplated by the Business Combination Agreement, the “Business Combination”), with CCT surviving the Acquisition Merger as a wholly owned subsidiary of the Company.

At the Initial Merger Effective Time, pursuant to the Initial Merger: (1) each ordinary share of the Company, par value $0.00001 per share, issued and outstanding immediately prior to the Initial Merger Effective Time were redeemed for par value; (2) each then issued and outstanding Class A ordinary share of Prime Impact, par value $0.0001 per share and Class B ordinary share of Prime Impact, par value $0.0001 per share, were canceled and convert automatically, on a one-for-one basis, into one Class A ordinary share of the Company, par value $0.00001 per share (the “Class A Ordinary Shares”); and (3) each then issued, outstanding and unexercised whole warrant exercisable for one Class A ordinary share of Prime Impact (including public warrants sold as part of the units in Prime Impact’s initial public offering, and warrants sold to the Prime Impact Cayman LLC (the “Sponsor”), collectively, the “Prime Impact Warrants”) were assumed and converted automatically into one whole warrant exercisable for one Class A Ordinary Share (each resulting warrant, an “Assumed Public Warrant”).

On the Closing Date and immediately prior to the effective time of the Acquisition Merger (the “Acquisition Merger Effective Time”), each preferred share of CCT then issued and outstanding immediately prior to the Acquisition Merger Effective Time were convert automatically into a number of ordinary shares, par value $0.00001 per share, of CCT at the then-effective conversion rate in accordance with CCT’s sixth amended and restated articles of association (the “Conversion”).

At the Acquisition Merger Effective Time, pursuant to the Acquisition Merger: (1) each ordinary share of CCT, par value $0.00001 per share (the “CCT Ordinary Shares”), including CCT Ordinary Shares resulting from the Conversion, that were (i) then issued and outstanding and (ii) held in CCT’s treasury, were canceled and converted into the right to receive a number of Class A Ordinary Shares based on the Per Share Merger Consideration (as defined herein); (2) each then issued and outstanding CCT Ordinary Share held by Mr. Lei Zhang and Mutong Holding Limited (“CCT Founder Shares”) were canceled and converted into the right to receive a number of Class B ordinary shares of the Company, par value $0.00001 per share (the “Class B Ordinary Shares”), based on the Per Share Merger Consideration; (3) each outstanding and unexercised warrant of CCT (the “CCT Warrant”) were assumed by the Company and converted into a warrant to acquire Class A Ordinary Shares (each resulting warrant, an “Assumed CCT Warrant”); (4) each CCT Option (as defined herein) to purchase a CCT Ordinary Share that was outstanding and unexercised were assumed and converted into an option to purchase such number of Class A Ordinary Shares based on the Per Share Merger Consideration; and (5) each CCT Restricted Share (as defined herein) that was issued and outstanding were converted into such number of Class A Ordinary Shares based on the Per Share Merger Consideration, subject to the terms and conditions that applied to the corresponding CCT Restricted Share Awards (as defined herein).

Additional Agreements in connection with the Business Combination

This section describes the material provisions of certain additional agreements entered into pursuant to or in connection with the Business Combination Agreement.

Shareholder Support Agreement

In connection with the execution of the Business Combination Agreement, CCT has delivered to Prime Impact the Shareholder Support Agreement, pursuant to which, among other things, the Written Consent Parties, whose ownership interests collectively represent the outstanding CCT Ordinary Shares and CCT Preferred Stock (voting on an as-converted basis) sufficient to approve the Business Combination on behalf of CCT, will agree to support the approval and adoption of the transactions contemplated by the Business Combination Agreement, including agreeing to execute and deliver the Written Consent within 48 hours of the Registration Statement becoming effective. The Support Agreement will terminate upon the earliest to occur of (a) the Acquisition Merger Effective Time, (b) the date of the termination of the Business Combination Agreement in accordance with its terms, and (c) the effective date of a written agreement of Prime Impact, CCT, and the Written Consent Parties terminating the Support Agreement. For details for the terms of the Shareholder Support Agreement, please refer to Exhibit 4.12 to this Report.

Release of Lock-up and Transfer Restrictions

On September 12, 2023, we, Prime Impact and CCT entered into certain irrevocable waiver to release, on a pro rata basis, 2,874,556 Class A Ordinary Shares to be issued to existing shareholders of the CCT from the lock-up and transfer restrictions set forth under Section 2.1 (b) of certain Shareholder Support Agreements to satisfy the initial listing requirements of the Nasdaq Capital Market. For details for the terms of the irrevocable waiver, please refer to Exhibit 4.16 to this Report.

Sponsor Support Agreement

In connection with the execution of the Business Combination Agreement, the Sponsor and certain officers, directors and advisors of Prime Impact entered into a Sponsor Support Agreement (the “Sponsor Support Agreement”) with Prime Impact and the Company, pursuant to which, among other things, certain of Prime Impact’s officers and directors have agreed to (a) waive the anti-dilution rights set forth in Prime Impact’s organizational documents, (b) vote all of their Prime Impact Class A Ordinary Shares and Prime Impact Class B Ordinary Shares in favor of the Business Combination and (c) waive, for no consideration, their redemption rights with respect to their Prime Impact Class B Ordinary Shares and any Public Shares they own in connection with the consummation of the Business Combination.

In connection with the Business Combination, Sponsor agrees to (1) forfeit and surrender, for no consideration, 2,557,736 of its Prime Impact Class B Ordinary Shares and 2,860,561 Prime Impact Warrants prior to the Initial Merger, (2) if the Aggregate Capital Raised is less than $50 million, forfeit and surrender, for no consideration, effective as of immediately prior to the Initial Merger Effective Time, an additional 1,203,315 Prime Impact founder shares. The Sponsor and certain officers and directors of Prime Impact have agreed, among other things, to impose certain transfer restrictions with respect to the Prime Impact Founder Earn Back Shares as follows: (a) the Lockup Shares will be subject to a six month lock-up; and (b) the Lockup Shares will be released from such lockup if Class A Ordinary Shares equals or exceeds $12.50 for at least 20 trading days out of any 30 consecutive trading days commencing after the Closing Date. If earlier, each of the foregoing lock-up periods would terminate on the date after the Closing on which a Change of Control (as defined in the Sponsor Support Agreement) of the Company occurs.

On September 13, 2023, the Sponsor, Prime Impact, CCT and the Company entered into an amendment to the Sponsor Support Agreement, pursuant to which the Sponsor agreed, among other things, that it shall not transfer the 4,261,052 Class A Ordinary Shares held by the Sponsor (the “Sponsor Shares”), as well as 2,860,561 Assumed Public Warrants held by the Sponsor (the “Sponsor Warrants,” and together with the Sponsor Shares, the “Sponsor Securities”) until the earlier of (1) the consummation of a change of control of us after the Acquisition Closing, (2) the first date that the closing price of the Class A Ordinary Shares equals or is greater than $12.50 per share (as adjusted for share sub-divisions, share capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within any 30- trading day period after the first anniversary of Acquisition Closing, (3) with respect to twenty seven and one half percent (27.5%) of the Sponsor Securities six months after the Acquisition Closing, (4) with respect to an additional twenty seven and one half percent (27.5%) of the Sponsor Securities twelve months after the Acquisition Closing, and (5) with respect to forty five percent (45.0%) of the Sponsor Securities twenty four months after the Acquisition Closing.

For details for the terms of the Sponsor Support Agreement and its amendment, please refer to Exhibits 4.13 and 4.14 to this Report.

A&R Registration Rights Agreement

In connection with the Acquisition Closing, the IPO Registration Rights Agreement were amended and restated, and the Company and the Registration Rights Holders entered into the A&R Registration Rights Agreement on September 14, 2023. Pursuant to the A&R Registration Rights Agreement, we have agreed that, within 30 days after the Closing Date (or within 90 days following the Closing Date if we are required to include therein additional financial information that is not included in the Registration Statement at the time of the Closing), we will use commercially reasonable efforts to file with the SEC (at our sole cost and expense) the resale registration statement (the “Resale Registration Statement”), and we will use our commercially reasonable efforts to have the Resale Registration Statement declared effective as soon as reasonably practicable after the filing thereof. In certain circumstances, certain shareholders that are parties to the A&R Registration Rights Agreement can demand up to three underwritten offerings, and all of holders of Registration Rights can demand three block trades within any 12-month period and will be entitled to customary piggyback registration rights. For details for the terms of the A&R Registration Rights Agreement, please refer to Exhibit 4.2 to this Report.

PIPE and Backstop Agreements

On September 11, 2023, the Company entered into a certain Subscription Agreement (the “Subscription Agreement”) with Prime Impact and certain leading global investor (the “PIPE Investor”), pursuant to which, among other things, the PIPE Investor agreed to subscribe for and purchase, and the Company agreed to issue and sell to the PIPE Investor, an aggregate of 1,300,000 Class A Ordinary Shares, at a purchase price equal to $10.00 per share (the “Private Placement”) in connection with a financing effort related to the transactions contemplated by the Business Combination Agreement. The Private Placement was closed concurrently with the closing of the Business Combination.

In addition to the Private Placement, on September 11, 2023, the Company entered into a certain Backstop Agreement (the “Backstop Agreement”) with Prime Impact and a certain investor (the “Backstop Investor”), pursuant to which, among other things, the Backstop Investor agreed (1) to purchase Class A ordinary shares of Prime Impact with an aggregate market value of no less than US$5.0 million (“SPAC Shares”) in open market or private transactions, (2) not to redeem or transfer any SPAC Shares purchased pursuant to the Backstop Agreement until and after the consummation of the Business Combination, and (3) to subscribe for and purchase an aggregate of 500,000 Class A Ordinary Shares, at a purchase price equal to $10.00 per share (the “Backstop Private Placement”) in connection with a financing effort related to the transactions contemplated by the Business Combination Agreement.

On September 14, 2023, the Company entered into a certain Sponsor Subscription Agreement (the “Sponsor Subscription Agreement”) with Prime Impact and the Sponsor, pursuant to which, among other things, the Sponsor agreed to subscribe for and purchase, and the Company agreed to issue and sell to the Sponsor, an aggregate of 634,228 Class A Ordinary Shares, at a purchase price equal to $10.00 per share (the “Sponsor Private Placement”) in connection with the settlement of the SPAC transaction expenses as contemplated under the Business Combination Agreement and a letter agreement by and among, Company, Prime impact and other relevant parties. The Sponsor Private Placement was closed concurrently with the closing of the Business Combination.

For details for the terms of the Subscription Agreement, the Backstop Agreement and the Sponsor Subscription Agreement, please refer to Exhibits 4.3, 4.4 and 4.5 to this Report.

Letter Agreement

On September 13, 2023, the Sponsor, Prime Impact, CCT and the Company entered into a letter agreement pursuant to which, among other things, the parties agreed that following the consummation of the Business Combination, the greater of (i) the sum of (1) the balance of Trust Fund following the exercise of Redemption Rights on September 8, 2023 (which, for the avoidance of doubt, shall not include any reversal of Redemption Rights after September 8, 2023), and (2) US$1.0 million funded by the Company, and (ii) the balance of Trust Fund following the exercise of Redemption Rights as of the Closing minus the reversal of Redemption Rights effected by the Backstop Investor (as defined in the Backstop Agreement), shall be used for the payment of the SPAC Transaction Expenses (including any promissory note extended by the Sponsor to SPAC) (such greater amount, the “Closing Trust Amount”). As a result, each of Prime Impact, the Company, CCT and the Sponsor agreed that the Overage Amount, as previously defined in Section 9.03 of the Business Combination Agreement, shall now mean the excess of (1) SPAC Transaction Expenses, over (2) the combined proceeds from (x) the Closing Trust Amount, plus (y) the gross proceeds raised from the portion of the PIPE Investment that was procured through the efforts led by the SPAC, its Affiliates and/or Representative. The Overage Amount shall be borne and paid by the Sponsor, in exchange for such number of Surviving Company Class A Ordinary Shares equal to the quotient obtained by dividing (1) the Overage Amount, by (2) US$10.00, in each case, pursuant to the terms and conditions of a subscription agreement consistent with the terms of the subscription agreements entered into pursuant to the Private Placement. It is expected that the Sponsor would purchase approximately 633,643 Class A Ordinary Shares pursuant thereto. For details for the terms of the letter agreement, please refer to Exhibit 4.17 to this Report.

The following discussion reflects our business following the Business Combination. Unless the context otherwise requires, all references in this section to “we,” “us,” “our” refer collectively to CCT, the PRC Subsidiaries and the Affiliated Entities prior to the completion of the Business Combination and Cheche Group Inc., the PRC Subsidiaries and the Affiliated Entities following the consummation of the Business Combination.

Overview

We are an exempted company with limited liability incorporated under the laws of the Cayman Islands with no substantive operation. We carry out our business in China primarily through WFOE and its contractual arrangements, commonly known as the VIE Structure, with the Affiliated Entities. See “—C. Organizational Structure—Contractual Arrangements with the VIE and its Shareholders.” We are China’s largest independent technology-empowered platform for auto insurance transaction services by digital auto insurance transaction premiums and fourth-largest insurance technology company by gross written premiums in 2021, according to iResearch. Capitalizing on its leading position in auto insurance transaction services, we have evolved into a nationally leading platform with a nationwide network that offers a full suite of services and products for digital insurance transactions and insurance SaaS solutions in China.

China’s auto insurance market is the second-largest in the world based on insurance premiums in 2021, according to iResearch. However, for years the way that insurance policies have been quoted, compared, underwritten and purchased remained opaque, cumbersome and manual. See “—Market Opportunities.” We started our business in 2014 with the goal of transforming China’s auto insurance market and digitalizing the end-to-end insurance purchase process in a way that is transparent, accessible and efficient. Since our inception, we have consistently invested in data technology to improve the way insurance carriers attract and connect with consumers online as digitalization in China’s insurance market accelerates.

We offer unified, cloud-based platform that we believe delivers considerable value propositions to each of the participants in its ecosystem, including insurance carriers, insurance intermediaries, third-party platforms, referral partners and consumers. These participants access and utilize our flagship digital insurance transaction products Easy-Insur (车保易) and Insurance Marketplace, as well as the insurance SaaS solution products Digital Surge (澎湃保) and Sky Frontier (天境) on our platform, respectively. These products are designed and programmed in different forms, including mobile, web, WeChat and third-party applications. The open architecture of our platform also enables interoperability of these products with numerous applications, systems and other offerings adopted by our ecosystem participants.

Harnessing the power of technology and our nationwide service network, the digital insurance transaction products offered on our platform connect our ecosystem participants through diversified referral and marketing channels:

Our platform facilitates a broad range of auto insurance transactions covering over 4,200 vehicle makes as of December 31, 2022. We have diversified our platform with a broad and growing suite of non-auto insurance products. Our strong foothold in the auto insurance market and trusted brand helps to expand product offerings and enhance cross-selling potential as our platform grows. Through Easy-Insur and Insurance Marketplace, we offer approximately 70 types of non-auto insurance products underwritten by a broad range of insurance carriers, including both standard and customized non-auto products, such as non-auto P&C products as of December 31, 2022.

We are also an innovator in China’s insurance SaaS solutions market. We have leveraged our technology capabilities and understanding of China’s insurance industry to develop and launch two cloud-based SaaS solution products for insurance carriers and intermediaries. One SaaS solution product is an intelligent one-stop SaaS solution product that helps insurance intermediaries enhance operating efficiency and meet evolving regulatory requirements, while the other is an AI-based, analytics-driven recommendation SaaS engine that helps insurance carriers optimize underwriting and pricing strategies through market analytics and insights.

Our platform is powered by data. Through machine learning, we analyze a substantial amount of data to gain insights into the underwriting guidelines of insurance carriers and the needs and preferences of our referral partners, consumers and other ecosystem participants. This enables us to facilitate the underwriting approval process, enhance user experience and provide pricing recommendations to insurance carriers. As we continue to process data, our algorithms have become more powerful, which is a trend we expect to continue. We believe that our data analytics capabilities give us a significant competitive advantage.

Our data processing and analytics capabilities are supported by our advanced technology infrastructure. Our technology systems use an automated operations, maintenance and management framework. These systems are agnostic and can easily integrate with the vast majority of types of IT infrastructure used by insurance carriers and allow for automating smooth and uninterrupted periodic upgrades without human intervention.

We have created a unique ecosystem with powerful, self-reinforcing network effects. Our ecosystem participants include insurance carriers, third-party platforms, referral partners, insurance intermediaries and consumers. See “—Ecosystem” for our value proposition for each type of ecosystem participant.

We have scaled our business in a capital-efficient manner. We facilitated the issuance of insurance policies with gross premiums of RMB11.1 billion and RMB16.6 billion in 2021 and 2022, respectively. The number of policies written through our platform in 2021 and 2022 was approximately 7.8 million and 12.3 million, respectively. Our growth is propelled by rapid expansion in the number of our referral partners, which reached over 939,000 as of December 31, 2022. Our track record of strong growth required minimal marketing efforts and was largely organic, with a substantial amount of business generated through word-of-mouth referrals. In 2021 and 2022, substantially all of the insurance transaction volumes on our platform came from our referral partner base. CCT’s net revenue was RMB1,735.4 million and RMB2,679.1 million in 2021 and 2022, respectively. CCT’s gross profit was RMB80.8 million and RMB142.3 million in 2021 and 2022, respectively. CCT’s net loss was RMB146.5 million and RMB91.0 million in 2021 and 2022, respectively.

Market Opportunities

Auto insurance is the largest sector in China’s P&C insurance market, with attractive growth characteristics and market fundamentals. China had the world’s largest auto market by auto sales and number of vehicles in 2021, according to iResearch. As auto insurance coverage is mandatory by law, demand for auto insurance is considerably stable and inelastic. Auto insurance is also usually the first insurance policy that many people purchase in their lives. As a result, the process of purchasing auto insurance significantly influences people’s general attitude towards insurance.

China’s auto insurance market is the second-largest in the world, according to iResearch. Total auto insurance premiums in China reached approximately RMB777.3 billion in 2021, representing approximately 66.6% of China’s total P&C insurance premiums, according to iResearch. iResearch also projected China’s auto insurance market to reach approximately RMB1.1 trillion in 2026.

We created our platform to serve and grow with our ecosystem participants. We believe that secular trends in the insurance industry will provide strong tailwinds for its business.

We believe that digitalization will transform the insurance industry in China. As a result, technology platforms with comprehensive products and services, proprietary technical infrastructure, robust data analytics, unparalleled user experience and strong brand recognition hold a competitive advantage in China’s insurance market.

Ecosystem

As China’s largest independent technology-empowered platform for auto insurance transaction services measured by digital auto insurance transaction premiums and fourth largest insurance technology company measured by gross written premiums in 2021, according to iResearch, we aim to empower China’s insurance distribution and services value chain through data and technology. Our ecosystem participants, including insurance carriers, insurance intermediaries, third-party platforms, referral partners and consumers, seamlessly interconnect through our platform.

As of December 31, 2022, we collaborated with approximately 100 insurance carriers, 4,400 insurance intermediaries and 480 third-party platforms, and worked with approximately 939,000 referral partners on our platform. Our proven data and technology capabilities benefit the entire insurance value chain.

Utilizing our unique data analytics technologies, complex proprietary algorithms and extensive national network, we currently offer digital insurance transaction products—Easy-Insur and Insurance Marketplace and insurance SaaS solution products—Digital Surge and Sky Frontier.

We leverage the advantages of our platform to grow our business and launch new services and products, which draws more insurance carriers, third-party platforms, referral partners and insurance intermediaries to our platform, which in turn attracts more consumers. This virtuous circle strengthens our competitive advantages, enhances our value propositions to ecosystem participants and empowers our ecosystem to grow.

Value Propositions

Value propositions for insurance carriers

Provide access to diversified touch points for consumer acquisition

Our platform provides insurance carriers access to diversified distribution channels, allowing them to lower consumer acquisition costs. We collaborate with insurance referral partners, which include insurance brokers and auto service professionals from a wide range of customer touchpoints, to connect insurance carriers with insurance purchasers, enabling insurance carriers to broaden their consumer reach.

Expedite policy underwriting and issuance

Our platform is highly scalable and can easily integrate with the IT infrastructure of most insurance carriers. We had integrated our platform with the core technology systems of approximately 60 insurance carriers in China as of December 31, 2022. Through our digital insurance transaction products, we offer insurance carriers a digital channel to target desired consumers and distribute products cost-effectively, allowing carriers to replace inefficient and expensive insurance agents that manually complete and deliver insurance policies without having to invest in the technology and infrastructure to build and operate their own online distribution networks.

We analyze a substantial amount of data to gain insights into the underwriting guidelines of insurance carriers and have built a “rules engine” based on these insights. Through such rules engine, we provide referral partners and consumers suggestions to adjust their policy application requests before submitting them to insurance carriers customers, which significantly helps increase favorable underwriting decisions and allows carriers to issue more policies.

Optimize product pricing and control risks without incurring additional technology and infrastructure investments

Through its AI-based, analytics-driven SaaS solution product Sky Frontier, we automate real-time analytics to omnichannel market data in China’s insurance industry, enabling insurance carriers to develop superior strategies in product design and pricing while achieving significant competitive advantages, improving profitability and enhancing risk management. For example, embedded with advanced analytical models, the built-in data-driven AI prediction engine of Sky Frontier uses machine learning to screen and capture product and transaction data in our ecosystem. The prediction engine then utilizes such data and analytics to deliver price recommendations by region to insurance carriers, allowing insurance carriers to better manage pricing strategies across different regions and acquire customers more effectively while enhancing risk controls.

Increase revenue and improve economics

By connecting insurance carriers directly with a large number of insurance consumers that match desired consumer profiles, we enable insurance carriers to significantly increase revenue from policy premiums. Moreover, we provide insurance carriers with better economics. Insurance carriers usually require teams of employees to verify, compare and process consumer data across multiple distribution channels. Our platform digitalizes and automates the insurance policy issuance processes, enabling insurance carriers to significantly increase efficiency and reduce labor costs.

Value propositions for third-party platforms

Improve customer services

We provide direct access to insurance products underwritten by leading insurance carriers to customers of third-party platform partners, including automotive industry players, such as leading EV manufacturers, ride-hailing and consumer internet companies, enabling such third-party platform partners to better serve their customers and expand the scope of services to customers.

Diversify income sources to achieve better economics

We pay third-party platform partners fees for referring insurance consumers who purchase insurance products through our platform. This allows our third-party platform partners to generate additional income, diversify revenue sources and achieve better financial performance.

Value propositions for insurance referral partners

Offer competitive and diverse insurance products

Our platform allows referral partners to facilitate sales of a wide range of competitive insurance products to consumers. As of December 31, 2022, we had approximately 70 auto and non-auto insurance products underwritten by approximately 100 insurance carriers that are available on our platform to our referral partners. Our auto insurance products cover a comprehensive range of vehicle makes, models and styles, while its non-auto insurance products include both standardized and customized products. Our platform enables referral partners to address a wide range of their customers’ insurance needs by offering different types of insurance products across the auto and non-auto segments and achieve greater transaction volumes and repeat purchases.

Provide an easy-to-use digital experience to enhance customer conversions

Our flagship digital insurance transaction product Easy-Insur provides referral partners with an easy-to-use user experience, allowing them to submit insurance policy applications on behalf of customers through a few simple steps. Easy-Insur provides insurance options in a few minutes, allowing referral partners to help their customers facilitate the entire insurance policy issuance process at car dealerships, repair shops, car washes, gasoline stations and other insurance servicing situations. This helps referral partners substantially enhance their customer conversions.

Provide a more efficient and transparent process for selling insurance

We believe that traditional insurance agencies often work with only a few insurance carriers, limiting consumers to only a few choices. Our platform allows referral partners to swiftly obtain accurate and transparent quotes from multiple insurance carriers with a few simple steps, significantly enhancing efficiency and transparency.

Diversify income sources and achieve better economics

We pay referral partners services fees for referring insurance consumers and facilitating their purchase of insurance products through its platform. This enables our referral partners to diversify their income and achieve better economics from their existing customer base.

Value propositions for insurance intermediaries

Enable automation of core processes and improve operating efficiency

Insurance intermediaries in China have historically faced significant challenges in addressing inefficiencies in their back-office and other core business functions. Through our intelligent cloud-based one-stop SaaS solution product, Digital Surge, we aim to address the unmet needs for digital solutions from over 30,000 insurance intermediaries in China, and enable them to automate and optimize their core business processes. Digital Surge provides operations management, billing management, data management, human resources management, transaction management and report management functions to insurance intermediaries to improve the effectiveness and efficiency of their back-office business units. As the data analytics algorithms embedded in Digital Surge further develop, automation and streamlining across these multiple functions of Digital Surge are expected to increase.

Fulfill regulatory digitalization requirements at zero to low costs

In January 2021, the China Banking and Insurance Regulatory Commission published the Measures for Supervision of Digitalization of Insurance Intermediaries (the “Measures”), requiring insurance intermediaries to adopt a digital information system that meets regulatory requirements by February 1, 2022. By subscribing to Digital Surge, insurance intermediaries can meet these mandatory digitalization requirements at minimal or zero costs. In addition, the built-in report management function of Digital Surge automatically generates periodic operations reports that allow insurance intermediaries to satisfy regulatory reporting requirements at low cost.

Enhance competitiveness and diversity of insurance product offerings at minimum costs

For small to medium-sized insurance intermediaries whose business scales are not large enough to obtain from carriers insurance products that are as competitive and diverse as those offered on our platform, we provide access to the extensive insurance product pool on our platform through Digital Surge. Leveraging our extensive partnerships with insurance carriers and licensing capabilities, we allow these insurance intermediaries to sell more competitive and diverse insurance products without requiring these insurance intermediaries to incur significant business development costs.

Value propositions for insurance consumers

Offer competitive pricing

Through partnerships with approximately 100 insurance carriers as of December 31, 2022, we generally offer consumers insurance policies on more favorable terms at better prices than traditional insurance agents. In locations where certain local insurance intermediaries enjoy more favorable policy arrangements with local insurance carriers, we cooperate with these intermediaries to enable our consumers to benefit from more favorable policy arrangements, including better pricing terms.

Access to a comprehensive and diversified suite of insurance products

Our platform grants consumers access to a comprehensive and diversified suite of insurance products, covering both auto and non-auto segments. As of December 31, 2022, we had over 70 auto and non-auto insurance products underwritten by approximately 100 insurance carriers on its platform. Our auto insurance product offerings cover a wide range of vehicle makes, models and styles, and our non-auto insurance product offerings include both standardized and customized products, covering extensive types of products such as non-auto P&C insurance.

Provide a digital, transparent and informed transaction experience

Our digital insurance transaction products enable consumers to easily shop auto- and non-auto insurance products and submit insurance policy applications through a few simple steps. With the pre-verification of consumer information available in some of our digital insurance transaction products, a consumer typically needs to provide fewer lines of information to complete an insurance policy application, as compared to a traditional insurance purchase process, which often times requires manual inputs. As a result, consumers usually complete an insurance purchase in one or few attempts on our platform, as opposed to multiple attempts typically required in other insurance purchase methods.

Whereas traditionally consumers approached several insurance agents, each of which had a limited range of products from a limited number of carriers, our platform allows consumers to obtain rapid, accurate and transparent quotes from multiple insurance carriers at the same time, make an informed purchase decision and obtain an insurance policy within minutes. As a result, our platform reduces the time that consumers typically need to spend on finding insurance agents and comparing products and quotes from different insurance carriers.

Services and Products

We offer the following digital insurance transaction services and SaaS solution services to our ecosystem participants:

The following table sets forth the services provided through our digital insurance transaction products and SaaS solutions, the ecosystem participants on each of the digital insurance transaction products and the users of each of our SaaS solution services.

Digital insurance transaction services and products

Auto insurance transaction services and products

We provide auto insurance transaction services mainly through two products:

Easy-Insur and Insurance Marketplace digitalize various processes of facilitating the issuance of auto insurance. Connected to mobile applications, web-based terminals and APIs of insurance carriers, Easy-Insur and Insurance Marketplace enable referral partners and consumers to swiftly access quotes for insurance premiums, apply for auto insurance policies offered by a broad range of insurance carriers and pay premiums to insurance carriers. Through Easy-Insur and Insurance Marketplace, consumers can complete the auto insurance policy purchase process within minutes, with a team of service experts to provide real-time, quick and high-quality support to consumers.

Our data processing and analytic capabilities and proprietary algorithms efficiently match consumers with insurance policy options based on their individual circumstances and needs. This process decreases the time needed to compare insurance carriers, enhances user experience and increases the likelihood that users will purchase policies through our digital insurance transaction products.

The auto insurance products offered through Easy-Insur and Insurance Marketplace include:

The following steps show how referral partners apply for an auto insurance policy on behalf of consumers through Easy-Insur.

Consumers who directly apply for auto insurance policies through Insurance Marketplace go through similar procedure as illustrated above, though on Insurance Marketplace, consumers fill out the relevant information and complete the entire insurance purchase process by themselves. These simple key steps demonstrate the speed and convenience of our digital insurance transaction products.

Easy-Insur and Insurance Marketplace provide post-purchase renewal services. One to three months before an auto insurance policy purchased through Easy-Insur or Insurance Marketplace is due for renewal, Easy-Insur and Insurance Marketplace automatically send reminders to referral partners and consumers and offer available renewal prices, allowing them to renew policies immediately with a quick decision. This process is much more challenging for traditional insurance agencies, which typically lack the systems and processes to send reminders in an accurate, timely and efficient manner.

We have been continually improving the user experience of our digital insurance transaction products, which have attracted an increasing number of referral partners and consumers. Easy-Insur had approximately 739,000 and 939,000 referral partners as of December 31, 2021 and 2022, respectively. Referral partners that use Easy-Insur include individual insurance practitioners and other individuals from a broad range of consumer touchpoints. See “—Ecosystem—Referral Partners.” In 2021 and 2022, gross written premiums of auto insurance policies sold on our digital insurance transaction products were RMB8,881.2 million and RMB12,907.9 million, respectively.

Non-auto insurance transaction services and products

We also provide non-auto insurance transaction services, we offer approximately 70 types of non-auto insurance products underwritten by a broad range of insurance carriers, including both standard and customized non-auto products, such as non-auto P&C products as of December 31, 2022.

Easy-Insur provides quotes for insurance premiums of standard non-auto insurance policies. Our referral partners also help consumers select non-auto insurance policies and pay premiums to insurance carriers through Easy-Insur. The process for purchasing non-auto insurance is similar to the process for purchasing auto insurance described above.

Our referral partners can also submit quote requests for non-standard non-auto insurance through Easy-Insur or directly through our local service personnel. Immediately upon receiving a quote request, our local service personnel obtain quick and accurate quotes from insurance carrier partners and recommend suitable non-standard non-auto insurance products to referral partners. Our local service personnel also help referral partners and consumers negotiate prices and other terms of the non-standard non-auto insurance and guide them through the insurance policy purchase process.

We also consider the demand, preferences and feedback from ecosystem participants. We believe this leads to higher customer satisfaction and distinguishes us from other non-auto insurance platforms that simply offer homogeneous non-auto insurance products available in the market. We also closely monitor non-auto insurance market dynamics and frequently updates its product listings on Easy-Insur.

In 2021 and 2022, gross written premiums of non-auto insurance policies sold on our insurance transaction products amounted to RMB2,210.3 million and RMB3,648.2 million, respectively.

SaaS solution services and products

Committed to re-shaping the insurance distribution and empowering the value chain through technology, we have launched our proprietary insurance-related SaaS solutions designed for insurance intermediaries and insurance carriers. By launching these SaaS solutions, we aim to capitalize on our technology capabilities and deep understanding of China’s insurance industry.

Digital Surge

Insurance intermediaries in China have historically faced significant challenges in addressing the inefficiencies in their back-office and other core business functions. In December 2020, we launched Digital Surge, an intelligent cloud-based one-stop SaaS solution, to improve the operating efficiency of insurance intermediaries by digitalizing their core business processes, including product management, contract management, billing management and regulatory reporting. The following chart sets forth the key product features of Digital Surge.

In January 2021, the China Banking and Insurance Regulatory Commission published the Measures for Supervision of Digitalization of Insurance Intermediaries (the “Measures”), requiring insurance intermediaries to adopt a digital information system. We believe these heightened regulatory requirements have increased and will continually increase the demand for solutions that help intermediaries meet regulatory requirements and increase operating efficiency.

Over 20,000 insurance intermediaries in China have unmet needs for digital solutions. Digital Surge operates a freemium business model, through which it offers most functions on a complimentary basis to expand customer base, and only charges a premium for selected transaction functions. We have quickly expanded the customer base of Digital Surge through referrals by our ecosystem participants, industrial organizations and local regulatory authorities and promotional activities such as product presentation events.

We offer Digital Surge which primarily consists of the following seven key modules:

The introduction of Digital Surge to the market allows us to diversify our product offerings and revenue sources. Through Digital Surge, we also accumulate more insurance transaction-related data insights from which we can leverage to optimize our algorithms and derive value. We believe that as more insurance intermediaries use Digital Surge and sell insurance products under our contracts with insurance carriers, our bargaining power with insurance carriers should increase, enabling us to obtain more favorable policy terms for insurance products and create more value for its ecosystem participants.

Sky Frontier

In March 2021, we launched Sky Frontier, an AI-based, analytics-driven pricing recommendation engine, to help insurance carriers optimize underwriting and pricing strategies and control risks. Sky Frontier is embedded with a data-driven AI prediction engine that uses machine learning to screen and capture extensive and multi-dimensional product and transaction data in our ecosystem. Through its prediction engine’s automated analytics, Sky Frontier provides pricing insights and strategies to insurance carriers using the following clusters of data:

Sky Frontier provides insurance carriers with more granular risk segmentation and greater pricing precision based on an analysis of the vast amount of transaction data in our ecosystem through machine learning technology. Sky Frontier assigns vehicle makes and models into different risk categories for different insurance carriers based on algorithms tailored to each insurance carrier’s specific circumstances, including user and strategy preferences. This process enables insurance carriers to optimize their underwriting and pricing strategies as well as decision-making process. In addition, pricing has become a key competitive differentiator for insurance carriers, which in turn drives an increase in demand for intelligent SaaS solutions that help insurance carriers optimize underwriting and pricing strategies. We believe that the comprehensive reform provides a significant market opportunity for Sky Frontier.

Current key features of Sky Frontier include:

Ecosystem

We have created a vibrant insurance ecosystem. Our insurance transaction services, comprehensive insurance offering, proven data and technology capabilities and advanced AI-enabled SaaS capabilities serve as the basis of our ecosystem.

Our platform attracts and connects key participants in our ecosystem, including insurance carriers, insurance intermediaries, third-party platforms, referral partners and consumers. The interactions among our ecosystem participants form a powerful flywheel, benefitting each ecosystem participant and providing us with significant monetization opportunities. The following graphic depicts the key participants and self-reinforcing network effect of our ecosystem to drive growth:

Insurance carriers

We believe we are the “go-to” digital channel partner for auto insurance carriers in China. As of December 31, 2022, we established relationships with a broad and diversified network of 100 insurance carriers of all sizes, including group-wide insurance conglomerates and other medium sized and small insurance carriers.

Digital insurance transaction services

Top insurance carriers in China have increasingly relied on us to facilitate sales of insurance products. In 2022, we facilitated auto insurance transactions with aggregate premiums of RMB12.9 billion, representing an increase of 45.3% from aggregate premiums of RMB8.9 billion in 2021.

We are one of the very few innovative digital platforms for auto insurance transaction services that connect to the core technology systems of all of China’s top 20 property and casualty (“P&C”) insurance carriers in terms of gross written premiums in 2021. As of December 31, 2022, we had connected our platform to the core transaction systems of approximately 60 insurance carriers in China.

Integrating our platform with the transaction systems of insurance carriers allows us to swiftly provide consumers quotes for insurance policies and reduces the time required to deliver insurance policies, increasing efficiency, transparency and consumer satisfaction. We provide quotes for insurance policies within an average of a few minutes, significantly shorter than the time that is typically required to obtain insurance premium quotes though traditional auto insurance distribution channels.

Under PRC law, an insurance carrier can only issue auto insurance policies in the provinces, autonomous regions and municipalities where it is incorporated or has established branches. We partner with insurance carriers (including their provincial and municipal branches) to digitally facilitate the sale of auto and non-auto insurance products.

Through our nationwide network, our local branches had entered into over 1,700 contracts with insurance carrier customers for the sale of auto and non-auto insurance products as of December 31, 2022. This allows us to obtain more favorable terms for insurance policies because such insurance carrier customers typically have more flexibility in pricing specific insurance policies.

Insurance carrier customers typically pay us different transaction service fees in different geographic markets based on the intensity of competition, the number of locally registered vehicles, applicable regulatory requirement, and other factors. In 2021 and 2022, the transaction fee rate that we received from insurance carriers averaged 15.3% and 15.8%, respectively.

SaaS solution services

We offer Sky Frontier, an AI-based, analytics-driven pricing recommendation engine, to help insurance carriers optimize underwriting and pricing strategies. See “—Services and Products—SaaS Solution Services and Products—Sky Frontier.”

We typically enter into SaaS service agreements with subscribers of Sky Frontier for a fixed term of one year. As of December 31, 2022, we had already entered into SaaS service agreements with approximately 90 insurance carrier customers. We generally charge Sky Frontier’s subscribers a yearly flat fee. In 2021 and 2022, the subscription revenue generated from Sky Frontier amounted to approximately RMB21.9 million and RMB51.2 million, respectively.

Third-party platforms

We selectively partner with third-party platforms to attract users to our platform. We provide the users of third-party platforms direct access to insurance products underwritten by leading insurance carriers and facilitates their purchase of insurance. Our third-party platform partners include automotive industry players, such as leading EV manufacturers, ride-hailing and consumer internet companies.

Our partnerships with EV manufacturers empower EV manufacturers to address the challenges they face with respect to auto insurance. By partnering with us, EV manufacturers that generally sell direct to consumers can easily deploy our one-stop EV insurance solutions and deliver EV consumers streamlined auto insurance services ranging from insurance purchases to claims and after-sales support, without the need to acquire insurance brokerage licenses, negotiate packages for EV insurance products with insurance carriers, or establish insurance service networks and retain relevant personnel on their own. We believe that the compliant, transparent, standardized and smart EV insurance solutions offered by us allow EV manufacturers to transform the way they connect with consumers over the EV life span, achieve consumer-centric service innovation, increase consumer loyalty, and obtain sustainable competitive advantage in the rapidly evolving EV sector.

We typically enter into partnership agreements with our third-party platform partners for a term ranging from one year to three years. As of December 31, 2022, we had entered into partnership agreements with over 480 third-party platforms. We typically pay service fees to these third-party platforms for insurance transactions completed by their users through its platform.

Referral partners

Our referral partners direct consumers interested in insurance products to our platform. Referral partners use Easy-Insur to obtain insurance quotes for consumers and help consumers purchase insurance policies. Cooperation with referral partners allows us to access a large and growing consumer base.

We attract referral partners through third-party platform partners, promotional events, training courses and seminars. We also integrate Easy-Insur with applications and systems of third-party platform partners through APIs, enabling users of these platforms to be directed automatically to Easy-Insur to become referral partners and use Easy-Insur for insurance quotes and insurance transaction services. We also attract referral partners by conducting promotional activities with consumer internet companies at auto-related locations, such as automobile dealerships, vehicle repair and maintenance centers and car washes and gasoline stations. As of December 31, 2022, we had over 939,000 referral partners.

As part of the registration process on Easy-Insur, we enter into user agreements with our referral partners. We typically pay referral partners following their successful facilitation of an insurance transaction. The referral services fees we pay these referral partners vary in different geographic markets based on the intensity of competition, the number of locally registered vehicles and other factors.

Insurance intermediaries

As of December 31, 2022, we collaborated with approximately 4,400 insurance intermediaries.

We offer Digital Surge, an intelligent cloud-based one-stop SaaS solution product, to help insurance intermediaries digitalize their operations to meet heightened regulatory requirements and increase operation efficiency. See “—Services and Products—SaaS Solution Services and Products—Digital Surge.”

We typically enter into SaaS service agreements with subscribers of Digital Surge for a fixed term of one year. As of December 31, 2022, we had entered into SaaS service agreements with over 4,300 insurance intermediaries.

Customers may subscribe for Digital Surge’s functions, many of which are offered on a complimentary basis. If a customer has subscribed for Digital Surge and elected to use charged transaction functions, such customer will be charged an annual fee, which may vary based on the type of charged services such customer selects. In 2021 and 2022, subscription revenue from Digital Surge amounted to RMB8.0 million and RMB8.6 million, respectively.

Consumers

We attract consumers to our platform primarily through referral partners and third-party platforms. We believe that our consumers are typically tech-savvy people who seek transparency, affordability and convenience in their insurance purchase experience, with a strong preference for digital transactions.

Nationwide Network

Under PRC law, an insurance agent must obtain a license to sell insurance products. In addition, an insurance agent can only conduct businesses in the provinces, autonomous regions and municipalities where it is incorporated or has established branches.

We have established an extensive nationwide network, consisting of approximately 110 branches licensed to sell insurance policies in 24 provinces, autonomous regions and municipalities in China and over 400 service personnel as of December 31, 2022.

Through our nationwide network, we enter into contracts with insurance carrier customers and facilitate the issuance and delivery of insurance policies to consumers.

Our service personnel at local branches visit our insurance carrier customers regularly to promote and collect feedback about the digital insurance transaction and/or SaaS solution services provided to such insurance carrier customers and obtain the latest insurance product offerings and insurance policy updates from such carriers.

CCT believes that its nationwide network enables it to enhance relationships with and obtain more favorable terms from insurance carrier customers and keep abreast of the latest insurance product and policy information. Our local service personnel also hold educational seminars and networking events for referral partners and consumers and help them negotiate customized non-auto products with insurance carrier customers.

Data, Technology and Infrastructure

CCT believes that its data processing and analytic capabilities and proprietary technology represent the key to its success, which enable CCT to improve the experience it offers to its ecosystem participants.

Data advantage

Data process and analysis

As we continue to accumulate data from transactions completed by our ecosystem participants, our algorithms become more powerful. We believe our data analytics capabilities allow us to achieve a significant competitive advantage.

Data processed by us include:

We analyze such data to:

Algorithms

We utilize data analytics across our products. Our proprietary algorithms benefit from years of data accumulation and analysis, which are continually enriched with new data collected from our ecosystem participants and refined by our in-house data analytics team.

Through machine learning, we analyze data to gain insights into the underwriting guidelines of our insurance carrier partners. We believe that we are the only insurance technology platform in China that has built a “rules engine” based on these insights. Through the rules engine, which is embedded in each of our digital insurance transaction products, we provide referral partners and consumers suggestions to adjust their quote request entries before submitting them to insurance carriers, which we believe helps increase favorable underwriting decisions and enhance user experience.

For example, a vehicle model usually comes with various body and engine styles. The categories of vehicle styles, however, are not uniformly recognized among insurance carriers. Each auto insurance carrier in China has set its own rules to determine the style of a vehicle. As a result, different insurers may price insurance for a vehicle differently based on their own respective rules.

Immediately upon receiving the vehicle information provided by referral partners and consumers on Easy-Insur and Insurance Marketplace, our algorithms automatically suggest the specific style of vehicle to include in the quote requests based on our insights into insurance carriers’ rules for determining vehicle styles. This process enables referral partners and consumers to obtain more accurate quotes based on the style of vehicle.

Through the algorithms for our digital insurance transaction products, we present personalized insurance policy options to referral partners and consumers and matches them with insurance carriers most likely to provide the right coverage at a competitive price. These algorithms consider vehicle information provided by referral partners and consumers, referral partners’ preferences and economics as well as our own profit margins. We believe that the accuracy of the matches provided by our algorithms will further improve over time as we expand insurance carrier coverage in our ecosystem and further accumulate data insights.

We use machine learning through Sky Frontier to capture pricing coefficients from a significant number of transactions and quotes completed through our ecosystem and derive price recommendations by region for insurance carriers. Our algorithms also generate unique risk analytics for each auto make and model based on multi-dimensional data provided by referral partners and consumers, including driver profile and behavior, vehicle information, historical claims and other factors.

Data security and privacy

We deploy a variety of technical solutions to prevent and detect vulnerabilities in user privacy and data security, such as encryption, firewalls, vulnerability scanning and log audit. We have established stringent internal protocols with strictly defined and layered access authority.

We strictly control and manage the use of data within our various departments and output of data within our ecosystem. In addition, we conduct regular penetration testing performed by our own information security department and third-party testing companies.

Technology and infrastructure

“Solid Rock” (磐石) is our fundamental operating system. Built upon unique data analytics technologies and complex proprietary algorithms, “Solid Rock” supports the primary functions of our platform, such as automatic vehicle searches, quotes, order displays, error checks, generation of text messages and verification codes and channel management.

As of December 31, 2022, we had connected its “Solid Rock” (磐石) system with the core transaction systems of approximately 60 insurance carriers in China. Integration with insurance carriers’ transaction systems requires strong and long-term relationships with insurance carriers, as well as technology capabilities to integrate with different transaction systems used by insurance carriers in China. We believe this differentiates us from our competitors and is a key factor for our success.

We work with insurance carriers to establish:

We maintain APIs to help ensure the stability of data transferred to and from insurance carriers. We also have a rapid software development cycle to increase the efficiency and capacity of our system.

We designed our technology systems to be partner-agnostic, modular, scalable, stable, robust and sustainable. Our technology systems utilize an automated operation, maintenance and management framework. These systems are easily adaptable to other types of IT infrastructure used by our insurance carriers, regardless of how old or complex, and allow for automating smooth and uninterrupted upgrades on a continual basis.

It usually takes only one to two weeks for us to customize our connection hubs and complete a connection with the core transaction system of a new insurance carrier. In terms of system upgrades, we typically complete an automatic system upgrade for our platform within an hour and in any event no later than 24 hours.

For example, auto insurance carriers in China were required to update their systems in accordance with the Guiding Opinions on Implementing Comprehensive Reform of Auto Insurance issued by CBIRC on September 19, 2020 (the “Guiding Opinions”). Following the issuance of the Guiding Opinions, CCT not only upgraded its technology systems overnight to synchronize with nine insurance carriers’ updated transaction systems, but also completed technology upgrades to simultaneously adapt to the updated transaction systems of all other insurance carrier partners within two months. As of 2022, our technology systems underwent approximately 6,880 smooth and uninterrupted updates, including updates to support new functions of the digital insurance transaction and insurance SaaS solution products, as well as updates to synchronize with the changes in our insurance carrier partners’ transaction systems or policies.

Cloud providers such as Alibaba Cloud host our applications, websites, APIs, software and supporting services. Cloud computing allows us to efficiently allocate our IT resources, improve the management of our systems and lower our labor costs.

As of December 31, 2022, we had a team of 104 research and development personnel, accounting for 44.8% of our total number of headquarters employees, responsible for developing, maintaining and improving our technology infrastructure, including applications, websites, APIs, software and technology systems.

In 2021 and 2022, CCT’s research and development expenses were RMB46.8 million and RMB49.9 million, accounting for 19.8% and 19.3% of its total operating expenses.

Marketing

We focus our marketing efforts on engaging insurance carriers, referral partners, insurance intermediaries and insurance consumers. We have a dedicated marketing team at our headquarters, which formulates and executes our overall sales, marketing and branding strategies.

Our service personnel at local branches visit our insurance carrier partners regularly to promote our services and products and hold educational seminars and networking events to attract referral partners. We also promote our products and services by attending conferences and industry exhibitions and through word-of-mouth referrals. We also utilize targeted advertisement placements for the “Cheche” brand and Easy-Insur, to increase brand exposure, build trust among potential users and improve user conversion.  

When expanding into a region, we typically hire a team of marketing personnel to promote our services and products to local businesses and other referral partners.

Competition

We face competition principally from other auto insurance transaction services providers, including:

We may face new competition as we introduce new services or products, as our existing services and products evolve, or as other companies introduce new services and products.

While the insurance industry is evolving rapidly and is becoming increasingly competitive, we believe that we compete favorably because of our strong technology and infrastructure capabilities, deep connections with insurance carriers and extensive distribution network.

Intellectual Property

We seek to protect our intellectual property through a combination of patent protection, copyrights, trademarks, service marks, domain names, trade secret laws, confidentiality procedures and contractual restrictions.

As of December 31, 2022, we had registered 69 trademarks, 150 software copyrights and 10 domain names, including chechegroup.com, in China. Information contained on, or that can be accessed through our website is not incorporated by reference into this Report and you should not consider such information to be part of this Report.

We enter into confidentiality agreements with our key employees. In addition, the cooperation agreements that we enter into with our business partners include confidentiality provisions.

Insurance

We provide social security insurance including pension insurance, unemployment insurance, work-related injury insurance and medical insurance for our employees. We do not maintain property insurance or business interruption insurance, nor do we maintain product liability insurance or key-man life insurance. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business and Industry—We may not have sufficient insurance coverage.” We consider our insurance coverage to be in line with the industry practice as well as the customary practice in China.

Seasonality

We experience seasonality in our business, as a result of seasonality in vehicle sales and the promotional activities of auto insurance carriers in China. Traditionally, higher levels of vehicle sales in China occur in September and October, which drives significant increases in sales of auto insurance policies.

As a result, we typically record higher transaction volumes and revenue during the second half of each year. However, we have a limited operating history, and the seasonal trends that we have experienced in the past may not be representative.

Government Regulations

Set forth below is a summary of the most significant rules and regulations that affect our business activities in China, or the rights of our shareholders to receive dividends and other distributions from us.

Regulations of the Insurance Industry

The insurance industry in the PRC is highly regulated. In connection with the Institutional Reform Program of the State Council released by National People’s Council on March 17, 2018, the CBIRC was established by a merger of China’s banking and insurance regulators: the China Banking Regulatory Commission and the China Insurance Regulatory Commission (the “CIRC”).

Subordinate to, and with the authorization of, the State Council, the CBIRC functions as a centralized institution with administrative oversight and competence over the banking and insurance industry. The CBIRC and its dispatch offices constitute the regulatory system for the insurance industry. Its major regulatory duties with respect to the insurance industry include:

Fundamental Regulation of Insuring Activities

The legal framework for monitoring and administering insuring activities within the territory of the PRC is underpinned by laws and regulations, including the Insurance Law of the People’s Republic of China (the “PRC Insurance Law”), and administrative regulations, departmental provisions and other regulatory documents in accordance with the PRC Insurance Law.

As the fundamental insurance law of the PRC, the PRC Insurance Law is the most important law in the regulatory and legal framework for the PRC insurance industry. The Standing Committee of the National People’s Congress approved the PRC Insurance Law on June 30, 1995. The PRC Insurance Law became effective on October 1, 1995 and was amended in 2002, 2009, 2014 and 2015.

Regulation of Insurance Brokerages

The principal regulation governing insurance brokerages is the Provisions on the Regulation of Insurance Brokers, effective from May 1, 2018. According to this regulation, “insurance brokers” refer to institutions, including insurance brokerage companies and their branches, that receive commissions for providing intermediary services for insurance contracts between applicants and insurance companies on behalf of applicants.

To establish an insurance brokerage company that conducts business in regions outside the province, autonomous region, municipality directly under the central government, or city specifically designated in the state plan where its business is registered, the minimum registered is RMB50 million. The registered capital of an insurance brokerage company must be paid-in monetary capital. An insurance brokerage company must obtain a license to operate an insurance brokerage business within the PRC.

An insurance brokerage company may conduct the following insurance brokering businesses:

We plan to expand our business to engage in insurance brokerage activities and apply for an insurance brokerage license with the CBIRC in the future, and will be subject to additional rules and regulations as an insurance brokerage.

Regulation of Insurance Agencies

The principal regulation governing professional insurance agencies is the Provisions on the Regulation of Insurance Agencies, effective from January 1, 2021. The Provisions on the Regulation of Insurance Agencies regulate market access, operating rules, market exit, monitoring and inspection, and legal obligations for insurance agencies.

According to the Provisions on the Regulation of Insurance Agencies, “insurance agencies” refers to organizations or individuals that are entrusted by an insurance company and collect commissions from the insurance company to handle the insurance business on an agency basis within the scope authorized by the insurance company, including professional insurance agencies, sideline insurance agencies and individual insurance agents.

To establish a professional insurance agency, the minimum registered capital depends on its business region. For professional insurance agencies whose business regions are not limited to the province, autonomous region, municipality directly under the central government, or city specifically designated in the state plan where they are registered, the minimum registered capital should be RMB50 million, while for those operating within the province, autonomous region, municipality directly under the central government, or city specifically designated in the state plan where they are registered, the minimum registered capital should be RMB20 million. The registered capital of a professional insurance agency must be paid-in monetary capital. An insurance professional agency must obtain an Insurance Agent Operating License.

A professional insurance agency may engage in the following insurance agency businesses:

According to the Notice to Overhaul Chaotic Auto Insurance Market (the “Overhaul Notice”), promulgated by the CIRC on July 6, 2017, all property insurance companies must intensify their compliance management and control of vehicle insurance intermediary businesses, and comply with authorization and management responsibilities applicable to intermediaries and individuals. Property insurance companies may not entrust any institution without lawful qualification to conduct insurance sale activities, or pay vehicle insurance service charges to unqualified institutions, directly or in a disguised way.

Property insurance companies may not entrust or permit any cooperative intermediary to delegate vehicle insurance agency rights to any other institution. A property insurance company may entrust a third-party internet platform to provide webpage-linking services, but may not entrust or permit any third-party internet platform without a lawful qualification as an insurance intermediary to engage in insurance sale activities on its website, including trial calculations of insurance premiums, price quotations and comparisons, business promotions and fund payments.

Property insurance companies must submit for approval of the terms and premium ratios for vehicle insurance. Any property insurance company, insurance intermediary or individual may not grant or undertake to grant benefits not specified in an insurance contract to the policyholder or the insured, including by returning cash or providing prepaid cards, negotiable securities, insurance products, coupons or other property, or offsetting premiums by reward points or exchanging reward points for goods. Property insurance companies, insurance intermediaries or individuals may not pay interest or benefits not specified in an insurance contract in a disguised way such as by allowing the insured to participate in a promotional campaign organized by any other institution or individual.

According to the Guiding Opinions on Implementation of the Comprehensive Reform of Vehicle Insurance promulgated by the CBIRC on September 2, 2020, insurance companies and intermediaries will be under simultaneous investigation and handling in the vehicle insurance field, to severely crack down on the illegal acts such as obtaining service charges by fabricating intermediary business, issuing false invoices and bundled sales. In addition, it is imperative to promote insurance companies and intermediaries to improve the connection of information systems, to regulate the settlement and payment of service charges, and prohibit the advance payment by sales personnel. Insurance intermediaries are prohibited from carrying out non-local vehicle insurance business.

Pursuant to the Administrative Measures for Insurance Sales Activities (Draft for Comment) issued by the CBIRC on July 19, 2022, insurance companies and insurance intermediaries shall not engage in insurance sales practices beyond the scope of business and regional scope approved by the law and regulatory system as well as regulatory agencies. Insurance sales personnel shall not engage in insurance sales practices beyond the scope of authorization of their respective institutions. Insurance companies and insurance intermediaries should strengthen the management of insurance sales channel business, implement the responsibility for insurance sales channel business compliance, improve the supervision of insurance sales channel compliance, and shall not use the insurance sales channel to carry out illegal and irregular activities.

Regulations of Informatization Work of Insurance Intermediaries

According to the Regulation of Informatization Work of Insurance Intermediaries promulgated by the CBIRC on January 5, 2021, insurance intermediaries are required to apply modern information technologies to business processing, operation management and internal control, to continuously improve operational efficiency, optimize the allocation of internal resources and improve the level of risk prevention.

Insurance intermediaries shall perform the following obligations:

Based on aforesaid principal obligations, insurance intermediaries shall, in particular, protect personal information in the process of collecting and handling such information. Without permission or authorization, an insurance intermediary shall not collect personal information irrelevant to the services it provides, or collect, use, provide or dispose of personal information in violation of the laws, administrative regulations or contractual stipulations, or divulge or distort personal information.

Where the informatization work of insurance intermediaries fails to meet the requirements of the Regulation of Informatization Work of Insurance Intermediaries, they shall be deemed as failing to meet the requirements of Articles 7, 12 and 18 of the Provisions on the Regulation of Insurance Agencies, Articles 7 and 16 of the Provisions on the Regulation of Insurance Brokers, Articles 16 and 18 of the Provisions on the Regulation of Insurance Assessors and other relevant conditions and shall not engage in insurance intermediary business.

Regulation of Services Provided by Professional Insurance Agency and Its Practitioners

Based on the Provisions on the Regulation of Insurance Agencies, professional insurance agencies and practitioners may not take the following deceptive actions in insurance agency activities:

A professional insurance agency may not sign insurance contracts on behalf of a contributor. On April 2, 2019, the CBIRC issued a Notice to Rectify the Irregularities in the Insurance Intermediary Market (the “Rectify Notice”), requiring all insurance companies and insurance intermediaries to conduct self-inspections to determine whether their practices violate relevant regulations.

According to the Rectify Notice, among other matters, insurance intermediaries and insurance agencies must rectify any non-compliance practices, such as granting or undertaking to grant policyholders, insured parties or beneficiaries benefits other than those agreed in the insurance contracts, failure to register the sales persons engaged by the insurance intermediaries with the CBIRC’s Insurance Intermediaries Regulatory Information System, or hiring sales person with bad conduct or who do not have professional knowledge necessary for insurance sales. As of the date this Report, we have completed the applicable rectification measures.

On June 23, 2020, the CBIRC further issued the Notice to Follow-up Review of the Rectification of Market Chaos in Banking and Insurance Industries (the “Review Notice”), requiring all banking and insurance institutions to carry out strict self-examination and self-rectification. According to the Review Notice, among other matters, insurance companies and insurance intermediaries must rectify any non-compliance practices, such as misleading consumers to buy insurance products by making false publicity on the grounds that the sales of insurance products are about to be stopped or the premium rates are about to be adjusted, maliciously misleading or instigating clients to cancel insurance policies, making consumers suffer from unnecessary losses of contractual rights and interests, or disclosing client information in violation of regulations. We have completed the self-examination and self-rectification work and reported the same to the CBIRC.

Regulation of Foreign Investment in the Insurance Brokerage and Insurance Agency Industry

Pursuant to the Announcement of the China Insurance Regulatory Commission on Permitting Foreign Insurance Brokerage Companies to Establish Solely Foreign-invested Insurance Brokerage Companies, effective from December 11, 2006, in accordance with the related commitments of China for accession to the WTO, foreign insurance brokerage companies may establish wholly foreign-funded insurance brokerage companies in accordance with PRC laws and there are no restrictions other than those on establishment conditions and business scope. Pursuant to the Notice of the China Banking and Insurance Regulatory Commission on Widening the Scope of Business of Foreign-funded Insurance Brokerage Companies issued on and effective from April 27, 2018, foreign-funded insurance brokerage institutions that have obtained insurance brokerage business permits upon approval by the insurance regulatory authority of the State Council may engage in the same businesses as a PRC domestic insurance brokerage company.

Pursuant to the Public Announcement of the China Insurance Regulatory Commission on Relevant Matters Concerning the Application of the Insurance Agencies in Hong Kong and Macao for Establishing Solely-Invested Insurance Agencies in the Mainland issued on December 26, 2007, from January 1, 2008, local professional insurance agencies in Hong Kong or Macao which meet the requirements may apply for the establishment of solely-invested insurance agencies in the mainland of the PRC. Pursuant to the Supplements and Amendments VIII to the Mainland’s Specific Commitments on Liberalization of Trade in Services for Hong Kong and the Supplements and Amendments VIII to the Mainland’s Specific Commitments on Liberalization of Trade in Services for Macao, qualified insurance brokerage institutions in Hong Kong or Macao may establish solely-invested insurance agencies in Guangdong province (including Shenzhen) for practicing within Guangdong province. Pursuant to the Notice of the China Banking and Insurance Regulatory Commission on Allowing Overseas Investors to Operate Insurance Agent Business in China, effective from June 19, 2018, overseas insurance agency entities operating an insurance agency business for three or more years outside China and foreign-funded insurance companies in China which have operated for three or more years may apply to CBIRC to establish a foreign-invested insurance agency within China.

Qualification Management for Directors, Supervisors and Senior Management Personnel

Based on the Provisions on the Regulation of Insurance Agencies, “senior managers of a professional insurance agency” refers to the following personnel:

The senior management personnel of a professional insurance agency must meet the criteria stipulated in the Provisions on the Regulation of Insurance Agencies and approved by the CBIRC.

Qualification Management for Practitioners of Insurance Agencies

Based on the Provisions on the Regulation of Insurance Agencies, the CBIRC is authorized by law and the State Council to exercise centralized supervision and administration competence over practitioners of insurance agencies by category. Under the Provisions on the Regulation of Insurance Agencies, the term “practitioners of insurance agencies” refers to individuals of insurance agencies who engage in sale of insurance products or the relevant loss survey.

Based on the Provisions on the Regulation of Insurance Agencies, the Circular of the China Insurance Regulatory Commission on Issues concerning the Administration of Insurance Intermediary Practitioners promulgated by the CIRC on August 3, 2015 and Notice on Cancelling and Adjusting a Group of Administrative Approval Items promulgated by the CIRC on August 7, 2015, prior to practice of practitioners of insurance agencies, the employer should file practice registration information for such personnel on the CBIRC insurance intermediaries monitoring information system, without requiring a qualification certificate as a prerequisite for practice registration management.

Professional insurance agencies, including us, are obligated to monitor the sales activities of the salespersons and restrict and prohibit the misconduct of such insurance sales practitioners employed by or cooperated with such professional insurance agencies. Any failure to do so may result in rectification orders, penalties or fines to the practitioners of insurance agencies and the professional insurance agencies themselves.

Regulation of Insurance Premium Rates

Pursuant to the PRC Insurance Law, insurance companies must formulate insurance clauses and insurance premium rates fairly and reasonably.

Based on the Administrative Measures for the Insurance Clauses and Premium Rates of Property Insurance Companies, effective from October 1, 2021, the Circular on Issues Concerning the Implementation of the Administrative Measures for the Insurance terms and Premium Rates of Property Insurance Companies, effective from May 1, 2010, and the Circular on Issues concerning Further Strengthening and Improving the Regulation of Products of Property Insurances Companies, effective from March 1, 2020, insurance clauses and insurance premium rates for the following property insurance products must be reported to the CBIRC for approval:

If insurance companies modify approved insurance clauses or insurance premium rates, they must submit the modifications for approval. In addition, insurance companies should report insurance clauses and insurance premium rates for insurance products outside the scope set out above to the CBIRC or, as the case may be, the local CBIRC bureau for filing within 10 business days after the implementation. In case of revisions or amendments to insurance liabilities in insurance clauses or insurance premium rates that have been filed, such revisions or amendments shall be filed again.

Pursuant to the Guidelines for the Development of Insurance Products by Property Insurance Companies promulgated by the CIRC on December 30, 2016 and effective from January 1, 2017, insurance premium rates must meet the principles of rationality, fairness and adequacy.

Pursuant to the Circular of the General Office of the China Banking and Insurance Regulatory Commission on Matters relating to Further Tightened Regulation of Vehicle Insurance, promulgated and implemented by the CBIRC on January 14, 2019, property and casualty insurance companies must establish terms and premium rates for automobile insurance policies in strict compliance with PRC laws and regulations. Insurance companies are strictly prohibited from conducting the following activities:

Pursuant to the Circular of the General Office of the China Banking and Insurance Regulatory Commission on Matters relating to Further Tightened Regulation of Vehicle Insurance, property and casualty insurance companies must strengthen the veracity of their business and financial data and ensure timely and truthful accounting journal entries of all operating costs and expenses. Insurance companies are strictly prohibited from conducting the following activities:

Pursuant to the Guiding Opinions on Implementation of the Comprehensive Reform of Vehicle Insurance, property insurance companies shall take the following actions for the sake of consumers:

Regulation of Internet Insurance

On December 7, 2020, CBIRC issued Measures for the Regulation of Internet Insurance Businesses (the “Internet Insurance Measures”). Pursuant to the Internet Insurance Measures, no institutions or individuals other than insurance institutions, which refer to insurance companies, insurance agency companies, insurance brokerage companies and other qualified insurance intermediaries, may engage in the internet insurance business. Under the Internet Insurance Measures, an insurance institution may sell insurance products or provide insurance brokerage services via the Internet and self-service terminal equipment, so that consumers can independently learn the product information and complete insurance purchase on their own through such insurance institution’s self-operated network platform or the self-run network platforms of other insurance institutions. However, the insurance application pages must belong to the self-run network platform of such insurance institution. “Self-operated online platforms” refer to online platforms set up by insurance institutions with independent operation and complete data authority. Self-operated online platforms shall effectively isolate from its affiliated parties such as shareholders, actual controllers and senior executives of the company in such aspects as finance, business, information system and customer information protection etc.

An insurance institution conducting Internet insurance businesses and its self-operated network platform shall meet the following conditions:

According to the Internet Insurance Measures, “Internet insurances companies” can be established upon special approval by the CBIRC and registered in accordance with the law without establishing branches and specialize in carrying out Internet insurance business nationwide in order to promote the integration and innovation of insurance business with the Internet, big data and other new technologies. An Internet insurance company shall not sell insurance products offline or through other insurance institutions.

In addition, an Internet enterprise is allowed to use the self-operated network platform to sell Internet insurance products and provide insurance services as an insurance agent, provided that such Internet enterprise shall obtain the insurance agency operating license for operating insurance agency business.

Non-insurance institutions may not carry out Internet insurance business, including but not limited to the following commercial acts: (i) providing consulting services for insurance products; (ii) comparing insurance products, trial calculation of insurance premiums and comparing quotations; (iii) designing insurance purchase plans for insurance applicants; (iv) going through insurance purchase formalities on behalf of clients; and (v) collecting insurance premiums as an agent.

The Internet Insurance Measures provides that the CBIRC and its local offices are responsible for the development of the regulatory system for Internet insurance business in an overall manner, and the CBIRC and its local offices shall, in accordance with the division of regulatory work for insurance institutions, implement daily monitoring and regulation of Internet insurance business.

Regulation of Anti-money laundering

Based on the Circular on Strengthening Work of Anti-Money Laundering in Insurance Industry, promulgated on August 10, 2010 by the CIRC, and Administrative Measures for the Anti-money Laundering Work in the Insurance Industry, effective from October 1, 2011, the CBIRC organizes, coordinates and directs policies concerning anti-money laundering in the insurance industry. Under these measures, insurance companies, insurance asset management companies, professional insurance agencies and insurance brokers are required to materially improve their anti-money laundering related internal control competence on the basis of real-name policy issuance and on the principle of complete customer materials, traceable transaction records and regulated funds operation.

Based on provisions of the Administrative Measures for the Anti-money Laundering Work in the Insurance Industry, insurance companies carrying out the insurance business via professional insurance agencies or financial institution-based insurance joint offering agencies must include anti-money laundering provisions in their cooperation agreements. Professional insurance agencies and brokers must establish anti-money laundering internal control systems and prohibit equity investments with funds from illicit sources.

Senior management personnel of professional insurance agencies and brokers must be versed in anti-money laundering laws and regulations. Professional insurance agencies and brokers must provide anti-money laundering training and education, properly manage major money laundering cases involving itself, facilitate anti-money laundering monitoring and inspection, administrative investigation and investigation of criminal activities involving money laundering, and keep confidential any information related to lawful anti-money laundering initiatives.

Pursuant to the Circular on Strengthening Work of Anti-Money Laundering in Insurance Industry, equity investments in insurance intermediaries and equity structure changes therein should be in line with relevant requirements on fund sources in anti-money laundering laws and regulations of the PRC.

Regulation of Value-added Telecommunications Services and Foreign Investment Restrictions

On September 25, 2000, the Telecommunications Regulations of the People’s Republic of China (the “Telecom Regulations”), the primary governing law on telecommunication services, were issued by the PRC State Council. The Telecom Regulations were most recently amended and became effective on February 6, 2016. The Telecom Regulations set out the general framework for the provision of telecommunication services by PRC companies. Under the Telecom Regulations, telecommunications service providers are required to procure operating licenses prior to commencing operations.

The Telecom Regulations draw a distinction between “basic telecommunications services” and “value-added telecommunications services”. The Catalog of Telecommunications Business was issued as an attachment to the Telecom Regulations to categorize telecommunications services as basic or value-added. Information services via public communication networks, such as fixed networks, mobile networks and the internet, are classified as value-added telecommunications services.

On March 1, 2009, the MIIT issued the Administrative Measures for Telecommunications Business Operating Permit (the “Telecom Permit Measures”), which took effect on April 10, 2009. The Telecom Permit Measures were amended and became effective on September 1, 2017. The Telecom Permit Measures confirm that there are two types of telecom operating licenses for operators in China, namely, licenses for basic telecommunications services and licenses for value-added telecommunications services (the “VATS License”).

The operating scope of a license describes the permitted activities of the enterprise to which it is granted. An approved telecommunication services operator must conduct its business in accordance with the specifications listed in its VATS License. In addition, a VATS License’s holder is required to obtain approval from the original permit-issuing authority in respect of any change to its shareholders.

On July 13, 2006, the MIIT issued the Circular on Strengthening the Administration of Foreign Investment in and Operation of Value-added Telecommunications Business (the “MIIT Circular”), which requires foreign investors to set up foreign-invested enterprises and obtain a VATS License to conduct any value-added telecommunications business in China. Under the MIIT Circular, a domestic company that holds a VATS License is prohibited from leasing, transferring or selling the license to foreign investors in any form and from providing any assistance, including providing resources, sites or facilities, to foreign investors that conduct value-added telecommunications business illegally in China.

Furthermore, the relevant trademarks and domain names used in a value-added telecommunications business must be owned by the local VATS License holder or its shareholders. The MIIT Circular further requires each VATS License holder to have the necessary facilities for its approved business operations and to maintain such facilities in the regions covered by its license.

Pursuant to the Provisions on Administration of Foreign Invested Telecommunications Enterprises promulgated by the State Council on December 11, 2001 and amended on September 10, 2008, February 6, 2016 and March 29, 2022 and Notice of Removing the Restrictions on Foreign Equity Ratios in Online Data Processing and Transaction Processing (Operating E-commerce) Business promulgated by MIIT on June 19, 2015, the ultimate foreign equity ownership in a value-added telecommunications services provider may not exceed 50%, except for online data processing and transaction processing businesses (operating e-commerce business) which may be 100% owned by foreign investors. Moreover, for a foreign investor to acquire any equity interest in a value-added telecommunications business in China, it must satisfy a number of stringent performance and operational experience requirements, including demonstrating good track records and experience in operating value-added telecommunications business overseas. On March 29, 2022, the State Council issued the Decision to Amend and Abolish Certain Administrative Regulations, which makes amendments to the Provisions on Administration of Foreign Invested Telecommunications Enterprises. The amendments include, among others, removing the performance and operational experience requirements for main foreign investors that invest in PRC companies conducting value-added telecommunication business as set out in the Provisions on Administration of Foreign Invested Telecommunications Enterprises. The amended Provisions on Administration of Foreign Invested Telecommunications Enterprises took effect on May 1, 2022.

Foreign investors must obtain approvals from the MIIT and the Ministry of Commerce (the “MOFCOM”) or their authorized local counterparts, which retain considerable discretion in granting approvals. Pursuant to publicly available information, the PRC government has issued telecommunications business operating licenses to Sino-foreign joint ventures in very limited circumstances. The Special Administrative Measures for Access of Foreign Investment (Negative List) (2021 Edition), promulgated on December 27, 2021 and effective on January 1, 2022, also imposes the 50% restrictions on foreign ownership in value-added telecommunications business except for operating e-commerce business, domestic multi-party communication business, information storage and re-transmission business and call center business.

On September 25, 2000, the State Council promulgated the Administrative Measures on Internet Information Services (the “Internet Measures”), which were amended in January 2011. Under the Internet Measures, “internet information services” refer to the provision of information through the internet to online users, and are divided into “commercial internet information services” and “non-commercial internet information service”. Commercial Internet information services operators must obtain a license for provision of commercial internet information services (the “ICP License”), from the relevant government authorities before engaging in any commercial internet information services operations within the PRC.

Pursuant to the Internet Insurance Measures, self-operated internet platforms through which insurance institutions conduct internet insurance business must meet certain requirements such as obtaining ICP Licenses or making ICP filings and maintaining sound internet operation systems and information security systems. As of the date of this Report, the VIE and its subsidiaries have obtained the ICP licenses for our digital platforms.

Regulation of Internet Content Providers

The content of internet information is highly regulated in China. Pursuant to the Internet Measures, the PRC government may shut down the websites of ICP License holders and revoke their ICP Licenses if they produce, reproduce, disseminate or broadcast information that is prohibited by law or administrative regulations. Commercial internet information services operators are also required to monitor their websites. They may not post or disseminate any content that falls within the prohibited categories, and must remove any such content from their websites, save the relevant records and report violations to the relevant governmental authorities.

According to the Cybersecurity Law of the People’s Republic of China promulgated by the Standing Committee of the National People’s Congress on November 7, 2016 and effective from June 1, 2017, network service providers must comply with laws and regulations and ensure network security, effectively respond to cybersecurity incidents, prevent illegal and criminal activities committed on the network, and maintain the integrity, confidentiality and availability of network data.

On June 14, 2022, the CAC promulgated the Administrative Provisions on Mobile Internet Application Information Services (the “Mobile Application Administrative Provisions”), which took effect on August 1, 2022 and has replaced its previous version promulgated on June 28, 2016, to strengthen the regulation of mobile application information services. Pursuant to the Mobile Application Administrative Provisions, an internet application program provider must verify a user’s identity based on its mobile phone number, ID number, unified social credit code and other identifying information. An internet application program provider must not conduct false advertising or bundled installation, and shall process personal information under the principles of legitimacy, rightfulness, necessity and good faith, have clear and reasonable purposes, disclose processing rules, comply with the relevant provisions on the scope of necessary personal information, regulate personal information processing activities, and take necessary measures to ensure the security of personal information, and shall not, for any reason, force users to consent to personal information processing, or refuse users to use their basic functions and services on the ground that users do not agree to provide unnecessary personal information. The Mobile Application Administrative Provisions further clarifies the obligations of internet application program providers to protect minors and to inform the users and report to the governmental authorities upon the risk of application security.

In December 2016, the MIIT promulgated the Interim Measures on the Administration of Pre-Installation and Distribution of Applications for Mobile Smart Terminals (the “Mobile Application Interim Measures”), which took effect on July 1, 2017. The Mobile Application Interim Measures requires, among others, that internet information service providers must ensure that a mobile application, as well as its ancillary resource files, configuration files and user data can be uninstalled by a user on a convenient basis, unless it is a basic function software, which refers to a software that supports the normal functioning of hardware and operating systems of a mobile smart device.

Regulation of Privacy Protection

The Law of the People’s Republic of China on Protection of Consumer Rights and Interests, promulgated by the Standing Committee of the National People’s Congress on October 31, 1993 and amended on August 27, 2009 and October 25, 2013, specifies that the personal information of consumers provided in purchasing and using commodities or receiving services shall be under the protection of the law, as follows:

The Provisions on the Technical Measures for the Protection of the Security of the Internet promulgated by the Ministry of Public Security on December 13, 2005 and effective from March 1, 2006 provide initial requirements on supervising the security of internet information. Providers of internet services and enterprise users of the network must establish appropriate management systems. The information registered by users may not be publicized or divulged without the approval of the users, unless it is otherwise specified by any law or administrative regulation. The providers of internet services and enterprise users of the network must adopt technical measures for the protection of internet security in accordance with relevant laws and regulations and shall not take technical measures to intervene the users’ freedom and confidentiality of communication under the pretext of protecting the security of the internet.

Under the Several Provisions on Regulating the Market Order of Internet Information Services effective from March 15, 2012, an internet information service provider may not collect any user’s personal information or provide any such information to third parties without the user’s consent. It must also expressly inform the user of the method, content and purpose of the collection and processing of such user’s personal information and may only collect such information as necessary for the provision of its services.

The Decision on Strengthening Information Protection on Networks promulgated by the Standing Committee of the National People’s Congress on December 28, 2012, provides basic principles for protecting electronic information by which citizens can be identified and which involves the individual privacy of citizens.

The Provisions on Protecting the Personal Information of Telecommunications and Internet Users promulgated by the MIIT on July 16, 2013 and effective from September 1, 2013 further improve the personal information protection system of telecommunications and internet industries and specify the scope and obligation subjects of personal information protection of telecommunications and internet users, rules on collection and use of users’ personal information by telecommunications service operators and providers of internet information services and agent management and information security guarantee measures.

The Cybersecurity Law imposes certain data protection obligations on network operators, including that network operators may not disclose, tamper with, or damage users’ personal information that they have collected, and are obligated to delete unlawfully collected information and to amend incorrect information. Moreover, internet operators may not provide users’ personal information to others without consent. Exempted from these rules is information irreversibly processed to preclude identification of specific individuals. Also, the Cybersecurity Law imposes breach notification requirements that will apply to breaches involving personal information.

With respect to the security of information collected and used by mobile apps, pursuant to the Announcement of Conducting Special Supervision against the Illegal Collection and Use of Personal Information by Apps, which was issued on January 23, 2019, app operators should collect and use personal information in compliance with the Cybersecurity Law and should be responsible for the security of personal information obtained from users and take effective measures to strengthen the personal information protection. Furthermore, app operators must not force their users to make authorization by means of bundling, suspending installation or in other default forms and should not collect personal information in violation of laws, regulations or breach of user agreements. Such regulatory requirements were emphasized by the Notice on the Special Rectification of Apps Infringing upon User’s Personal Rights and Interests, which was issued by MIIT on October 31, 2019. On November 28, 2019, the CAC, MIIT and the SAMR jointly issued the Measures to Identify Illegal Collection and Usage of Personal Information by Apps, which lists six types of illegal collection and usage of personal information, including “not publishing rules on the collection and usage of personal information,” “failing to expressly state the purpose, method and scope of collecting and using personal information,” “collecting or using personal information without the consent of users,” “collecting personal information unrelated to the services they provide in violation of the principle of necessity,” “providing others with personal information without the consent” “failure to provide the function of deleting or correcting personal information in accordance with the law or failure to disclose the information on complaints and whistleblowing reports”.

Pursuant to the Ninth Amendment to the PRC Criminal Law, issued by the Standing Committee of the National People’s Congress on August 29, 2015, and became effective on November 1, 2015, any internet service provider that fails to fulfill its obligations related to internet information security administration as required under applicable laws and refuses to rectify upon orders shall be subject to criminal penalty. In addition, Interpretations of the Supreme People’s Court and the Supreme People’s Procuratorate on Several Issues Concerning the Application of Law in the Handling of Criminal Cases Involving Infringement of Personal Information, issued on May 8, 2017, and effective as of June 1, 2017, clarified certain standards for the conviction and sentencing of the criminals in relation to personal information infringement. In addition, on May 28, 2020, the National People’s Congress adopted the PRC Civil Code, which came into effect on January 1, 2021. Pursuant to the PRC Civil Code, the personal information of a natural person shall be protected by the law. Any organization or individual shall legally obtain such personal information of others when necessary and ensure the safety of such information, and shall not illegally collect, use, process or transmit personal information of others, or illegally purchase or sell, provide or make public personal information of others.

On August 20, 2021, the Standing Committee of the National People’s Congress promulgated the Personal Information Protection Law of the PRC (the “Personal Information Protection Law”), which became effective on November 1, 2021. The Personal Information Protection Law requires, among others, that (i) the processing of personal information should have a clear and reasonable purpose which should be directly related to the processing purpose, in a method that has the least impact on personal rights and interests, and (ii) the collection of personal information should be limited to the minimum scope necessary to achieve the processing purpose to avoid the excessive collection of personal information. Different types of personal information and personal information processing will be subject to various rules on consent, transfer, and security. Entities handling personal information bear responsibilities for their personal information handling activities, and shall adopt necessary measures to safeguard the security of the personal information they handle. Otherwise, the entities handling personal information could be ordered to correct, or suspend or terminate the provision of services, and face confiscation of illegal income, fines or other penalties.

The General Administration of Quality Supervision, Inspection and Quarantine and Standardization Administration issued the Standard of Information Security Technology Personal Information Security Specification (2017 edition), which took effect in May 2018, and the Standard of Information Security Technology Personal Information Security Specification (2020 edition), which took effect in October 2020. Pursuant to these standards, any entity or person who has the authority or right to determine the purposes for and methods of using or processing personal information are seen as a personal data controller. Such personal data controller is required to collect information in accordance with applicable laws, and prior to collecting such data, the information provider’s consent is required.

The Measures for the Regulation of Internet Insurance Business, promulgated by CBIRC on December 7, 2020 and effective on February 1, 2021, specify that when concluding insurance contracts and providing insurance services (i.e. the internet insurance business) by relying on the internet, insurance institutions shall not damage the legitimate rights and interests of consumers and public interest. Insurance institutions shall:

Regulation of Internet Security

The Decision Regarding the Safeguarding of Internet Security, enacted by the Standing Committee of the National People’s Congress on December 28, 2000, and amended with immediate effect on August 27, 2009, makes it unlawful to: (i) gain improper entry into a computer or system of strategic importance; (ii) disseminate politically disruptive information; (iii) leak state secrets; (iv) spread false commercial information; or (v) infringe intellectual property rights.

The Provisions on Technological Measures for Internet Security Protection, promulgated on December 13, 2005 by the Ministry of Public Security require internet service providers and organizations that use interconnection implementing technical measures for internet security protection, such as technical measures for preventing any matter or act that may endanger network security, for example, computer viruses, invasion or attacks to or destruction of the network. All internet access service providers are required to take measures to keep a record of and preserve user registration information. Under these measures, value-added telecommunications services license holders must regularly update information security and content control systems for their websites and must also report any public dissemination of prohibited content to local public security authorities. If a value-added telecommunications services license holder violates these measures, the Ministry of Public Security and the local security bureaus may revoke its operating license and shut down its websites.

On July 1, 2015, the Standing Committee of the National People’s Congress issued the PRC National Security Law, which came into effect on the same day. The National Security Law provides that the state shall safeguard the sovereignty, security and cyber security development interests of the state, and that the state shall establish a national security review and supervision system to review, among other things, foreign investment, key technologies, internet and information technology products and services, and other important activities that are likely to impact national security of China.

The Cybersecurity Law applies to the construction, operation, maintenance and use of networks as well as the supervision and administration of cybersecurity in China. The Cybersecurity Law defines “networks” as systems that are composed of computers or other information terminals and relevant facilities used for the purpose of collecting, storing, transmitting, exchanging and processing information in accordance with certain rules and procedures. “Network operators,” who are broadly defined as owners and administrators of networks and network service providers, are subject to various security protection-related obligations, including: (i) complying with security protection obligations in accordance with tiered cybersecurity system’s protection requirements, which include formulating internal security management rules and manuals, appointing cybersecurity responsible personnel, adopting technical measures to prevent computer viruses and cybersecurity endangering activities, adopting technical measures to monitor and record network operation status and cybersecurity events; (ii) formulating cybersecurity emergency response plans, timely handling security risks, initiating emergency response plans, taking appropriate remedial measures and reporting to regulatory authorities; and (iii) providing technical assistance and support for public security and national security authorities for protection of national security and criminal investigations in accordance with the law. The Cybersecurity Law sets high requirements for the operational security of facilities deemed to be part of the PRC’s “critical information infrastructure”. These requirements include data localization, i.e., storing personal information and important business data in China, and national security review requirements for any network products or services that may impact national security. Among other factors, “critical information infrastructure” is defined as critical information infrastructure, that will, in the event of destruction, loss of function, or data breach, result in serious damage to national security, the national economy and people’s livelihoods, or the public interest. Network service providers who do not comply with the Cybersecurity Law may be subject to fines, suspension of their businesses, shutdown of their websites, and revocation of their business licenses. On September 14, 2022, the CAC released the Notice on Seeking Public Comments on the Decision on Amending the Cybersecurity Law of the People’s Republic of China (Draft for Public Comments), which would impose more stringent legal liabilities and raise the upper limit of monetary fines for serious violation of the security protection obligations of network operation, network information, critical information infrastructure and personal information under the Cybersecurity Law to RMB50 million or 5% of the company’s total sales from the previous year.

On December 28, 2021, the CAC, the National Development and Reform Commission (the “NDRC”), the MIIT, and several other PRC governmental authorities jointly issued the Cybersecurity Review Measures (2021), which became effective on February 15, 2022 and replaced the Measures for Cybersecurity Review promulgated on April 13, 2020. Pursuant to Cybersecurity Review Measures (2021), critical information infrastructure operators that purchase network products and services and network platform operators engaging in data processing activities are subject to cybersecurity review under the Cybersecurity Review Measures (2021) if such activities affect or may affect national security. According to the Cybersecurity Review Measures (2021), before purchasing any network products or services, a critical information infrastructure operator shall assess potential national security risks that may arise from the launch or use of such products or services, and apply for a cybersecurity review with the cybersecurity review office of CAC if national security will or may be affected. In addition, network platform operators who possess personal information of more than one million users, and intend to be listed on a foreign stock exchange must be subject to the cybersecurity review. The relevant government authorities may initiate the cybersecurity review against the relevant operators if the authorities believe that the network products or services or data processing activities of such operators affect or may affect national security.

On June 10, 2021, the Standing Committee of the National People’s Congress promulgated the PRC Data Security Law, which became effective in September 2021. The Data Security Law requires data processing, which includes the collection, storage, use, processing, transmission, provision and publication of data, to be conducted in a legitimate and proper manner. The Data Security Law provides for data security and privacy obligations on entities and individuals carrying out data processing activities. The Data Security Law also introduces a data classification and hierarchical protection system based on the importance of data in economic and social development, and the degree of harm it may cause to national security, public interests, or legitimate rights and interests of individuals or organizations if such data are tampered with, destroyed, leaked, illegally acquired or illegally used. The appropriate level of protection measures is required to be taken for each respective category of data. For example, a processor of important data is required to designate the personnel and the management body responsible for data security, carry out risk assessments of its data processing activities and file the risk assessment reports with the competent authorities. State core data, i.e. data having a bearing on national security, the lifelines of national economy, people’s key livelihood and major public interests, shall be subject to stricter management system. Moreover, the Data Security Law provides a national security review procedure for those data activities which affect or may affect national security and imposes export restrictions on certain data and information. In addition, the Data Security Law also provides that any organization or individual within the territory of the PRC shall not provide any foreign judicial body and law enforcement body with any data without the approval of the competent PRC governmental authorities. Violation of Data Security Law may subject the relevant entities or individuals to warning, fines, and business suspension, revocation of permits or business licenses, or even criminal liabilities.

On August 16, 2021, the CAC, NDRC, MIIT, the Ministry of Public Security and the Ministry of Transport jointly issued the Several Provisions on the Management of Automobile Data Security (for Trial Implementation), which was implemented on October 1, 2021. According to Several Provisions on the Management of Automobile Data Security, automobile data processors including automobile manufacturers, components and parts and software suppliers, dealers, maintenance organizations, and ride-hailing and sharing service enterprises shall process automobile data in a lawful, legitimate, specific and clear manner, and such data include personal information and important data involved during the design, production, sales, use, operation and maintenance, among others, of vehicles. Automobile data processors shall obtain individual consent for processing personal information or rely on other legal bases in accordance with applicable laws and regulations. Illegal automobile data processors shall bear administrative punishment by laws and if a crime is committed, shall bear criminal liability.

The Opinions on Lawfully and Strictly Cracking Down Illegal Securities Activities, promulgated by the General Office of the Central Committee of the Communist Party of China and the General Office of the State Council on July 6, 2021, called for the enhanced administration and supervision of overseas-listed China-based companies, proposed to revise the relevant regulation governing the overseas issuance and listing of shares by such companies and clarified the responsibilities of competent domestic industry regulators and government authorities. The aforesaid Opinions also called for the improvement of the relevant laws and regulations on data security, cross-border data flow and confidential information management, and proposed to revise the provisions on strengthening confidentiality and archive administration of overseas issuance and listing of securities, to consolidate responsibility for information security of overseas listed companies, and to strengthen the standardized management of the cross-border information provision mechanism and process.

On July 30, 2021, the State Council promulgated the Regulations for the Security Protection of Critical Information Infrastructure, which became effective on September 1, 2021, referring “critical information infrastructures” as important network facilities and information systems in important industries including public communications and information services, as well as those that may seriously endanger national security, national economy, people’s livelihood, or public interests in the event of damage, loss of function, or data breach. Pursuant to the Regulations for the Security Protection of Critical Information Infrastructure, the relevant government authorities are responsible for stipulating rules for the identification of critical information infrastructures with reference to several factors set forth therein and further identifying the critical information infrastructure in the related industries in accordance with such rules. The relevant authorities must also notify operators of the determination as to whether they are categorized as critical information infrastructure operators.

On November 14, 2021, the CAC published the Administration Regulations on Cyber Data Security (Draft for Comments), providing that data processors conducting the following activities must apply for cybersecurity review: (i) merger, reorganization, or division of internet platform operators that have acquired a large number of data resources related to national security, economic development, or public interests affects or may affect national security; (ii) a foreign listing by data processors processing over one million users’ personal information; (iii) listing in Hong Kong that affects or may affect national security; or (iv) other data processing activities that affect or may affect national security. The CAC solicited comments until December 13, 2021, but there is no timetable as to when it will be enacted.

On September 17, 2021, the CAC and other eight government authorities jointly issued the Guiding Opinions on Strengthening the Comprehensive Governance of Network Information Service Algorithms, with the aim to, within three years, gradually establish a comprehensive governance pattern for algorithm security with a complete governance mechanism, a refined regulatory system and a standardized algorithm ecosystem. According to the Guiding Opinions on Strengthening the Comprehensive Governance of Network Information Service Algorithms, enterprises shall establish an algorithm security accountability system and a system for the review of scientific and technological ethics, enhance the organizational structure for algorithm security, intensify efforts in the prevention of risks and the handling of hidden dangers, and increase the capacity and level in handling algorithm security emergencies. Enterprises shall raise their awareness of responsibility and assume primary responsibilities for outcomes caused by the application of algorithms.

On December 31, 2021, the CAC, the MIIT, the Ministry of Public Security, the Ministry of State Security promulgated the Administrative Provisions on Internet Information Service Algorithm Recommendation, which implements classification and hierarchical management for algorithm recommendation service providers based on varies criteria. Moreover, it requires algorithmic recommendation service providers to provide users with options that are not specific to their personal characteristics, or provide users with convenient options to cancel algorithmic recommendation services. If the users choose to cancel the algorithm recommendation service, the algorithm recommendation service provider shall immediately stop providing relevant services. Algorithmic recommendation service providers shall also provide users with the function to select, modify or delete user labels which are used for algorithmic recommendation services.

On July 7, 2022, the CAC promulgated the Measures for the Security Assessment of Cross-Border Transfer of Data, which took effect on September 1, 2022. The Measures aims to regulate the cross-border transfer of data, providing that, among other things, data processors that provide data overseas must apply for security assessment if: (i) the data processors provide important data overseas; (ii) the critical information infrastructure operators and the data processors that process personal information of more than 1 million people provide personal information overseas; (iii) the data processors, which have provided personal information of 100,000 people or sensitive personal information of 10,000 people overseas since January 1 of the previous year, provide personal information overseas; and (iv) other situations required to apply for security assessment as stipulated by the CAC and related authorities. Besides, the Measures also requires data processors to carry out self-assessment of the risk of providing data overseas before applying for the security assessment.

Regulation of Company Establishment and Foreign Investment

The establishment, operation and management of companies in China is governed by the PRC Company Law, as amended in 1999, 2004, 2005, 2013 and 2018. According to the PRC Company Law, companies established in the PRC are either limited liability companies or joint stock limited liability companies. The PRC Company Law applies to both PRC domestic companies and foreign-invested companies.

On March 15, 2019, National People’s Congress published the Foreign Investment Law, and on December 26, 2019, the State Council promulgated the Implementing Rules of the Foreign Investment Law (the “Implementing Rules”), both of which became effective on January 1, 2020. The Foreign Investment Law replaced the trio of laws regulating foreign investment in China: the Sino-foreign Equity Joint Venture Enterprise Law, the Sino-foreign Cooperative Joint Venture Enterprise Law and the Wholly Foreign-invested Enterprise Law. The Foreign Investment Law stipulates that “foreign investments” refer to any direct or indirect investment activities conducted by any foreign individual, enterprise, or organization (collectively referred to as “foreign investors”) in the PRC, which includes any of the following circumstances:

The Implementing Rules introduce a see-through principle and further provide that foreign-invested enterprises that invest in the PRC shall also be governed by the Foreign Investment Law and the Implementing Rules.

The Foreign Investment Law stipulates that a “negative list” is applied in certain industry sectors. The “negative list” set out in the Foreign Investment Law classifies the relevant prohibited and restricted industries into the Catalog of Prohibitions and the Catalog of Restrictions, respectively. Where any foreign investor directly or indirectly holds shares, equity, properties or other interests in any enterprise within the PRC, such enterprise is not allowed to invest in any sector set out in the Catalog of Prohibitions.

Foreign investors may invest in sectors set out in the Catalog of Restrictions, subject to certain conditions. Foreign investors may invest in any sector beyond the “negative list” and shall manage such investments on the same basis as domestic investments.

On December 27, 2021, the NDRC and the MOFCOM promulgated the Special Entry Management Measures (Negative List) for the Access of Foreign Investment (2021 version) (the “2021 Negative List”), which took effect on January 1, 2022. In addition, the NDRC and the MOFCOM promulgated the Encouraged Industry Catalogue for Foreign Investment (2022 version) (the “Encouraged Industry Catalogue”), which was promulgated on October 26, 2022 and took effect on January 1, 2023. Industries not listed in the 2021 Negative List and Encouraged Industry Catalogue are generally open for foreign investments unless specifically restricted by other PRC laws. Where a foreign investor invests in the sectors specified in the Catalog of Prohibitions, the relevant competent departments shall order it to stop the investment activities, and dispose of the shares, properties or other necessary measures within a time limit to restore the state before the investment is implemented and the illegal income shall be confiscated (if any). Where the investment activities of a foreign investor violate the restrictive special management measures stipulated in the sectors specified in the Catalog of Restrictions, the relevant competent departments shall order it to make corrections and take necessary measures to meet the requirements for access to special management measures. Where the offender refuses to make corrections, punishments are implemented according to the preceding provisions for the offender of the Catalog of Prohibitions.

Pursuant to the Foreign Investment Law and the Implementing Rules, and the Information Reporting Measures for Foreign Investment jointly promulgated by the MOFCOM and the SAMR, which took effect on January 1, 2020, a foreign investment information reporting system shall be established and foreign investors or foreign-invested enterprises shall report investment information to competent commerce departments of the government through the enterprise registration system and the enterprise credit information publicity system, and the administration for market regulation shall forward the above investment information to the competent commerce departments in a timely manner. In addition, the MOFCOM shall set up a foreign investment information reporting system to receive and handle the investment information and inter-departmentally shared information forwarded by the administration for market regulation in a timely manner. The foreign investors or foreign-invested enterprises shall report the investment information by submitting reports including initial reports, change reports, deregistration reports and annual reports.

In addition, the Foreign Investment Law and the Implementing Rules also specify other protective rules and principles for foreign investors and their investments in the PRC, including, among others, that local governments shall abide by their commitments to the foreign investors; except for special circumstances, in which case statutory procedures shall be followed and fair and reasonable compensation shall be made in a timely manner, expropriation or requisition of the investment of foreign investors is prohibited; mandatory technology transfer is prohibited, etc.

The Foreign Investment Law does not indicate what actions must be taken by existing companies with a VIE structure to obtain the market entry clearance if such VIE structure is deemed as a method of foreign investment. If the VIE structure were deemed as a method of foreign investment, and any of the business operation of CCT were to fall in the “negative list,” and if the interpretation and implementation of the Foreign Investment Law and the final “negative list” mandated further actions, such as the current MOFCOM market entry clearance, to be completed by companies with an existing VIE structure like CCT, CCT would face uncertainties as to whether such clearance could be timely obtained, or at all. See “Item 3. Key Information — Risk Factors — Risks Related to Our Corporate Structure — If the PRC government determines that the contractual arrangements in relation to the VIE structure do not comply with PRC regulatory restrictions on foreign investment in certain industries, or if these regulations or the way they are interpreted change, we, our subsidiaries and the Affiliated Entities could be subject to severe penalties or be forced to relinquish their interests in those operations, and the Class A Ordinary Shares may decline in value or become worthless.”

Regulation of Foreign Exchange

Regulations on Foreign Currency Exchange

Pursuant to the Foreign Exchange Administration Regulations, as amended on August 5, 2008, Renminbi is freely convertible for current account items, including the distribution of dividends, interest payments, trade and service-related foreign exchange transactions, but not for capital account items, such as direct investments, loans, repatriation of investments and investments in securities outside of China, unless prior approval is obtained from SAFE and prior registration with SAFE is made.

SAFE promulgated the Notice of the State Administration of Foreign Exchange on Reforming the Administration of Foreign Exchange Settlement of Capital of Foreign Invested Enterprises (“SAFE Circular 19”), effective on June 1, 2015. SAFE further promulgated the Notice of the State Administration of Foreign Exchange on Reforming and Standardizing the Foreign Exchange Settlement Management Policy of Capital Account (“SAFE Circular 16”), effective on June 9, 2016, which, among other things, amend certain provisions of Circular 19. According to SAFE Circular 19 and SAFE Circular 16, the flow and use of the Renminbi capital converted from foreign currency denominated registered capital of a foreign-invested company is regulated such that Renminbi capital may not be used for business beyond its business scope or to provide loans to persons other than affiliates unless otherwise permitted under its business scope. Violations of SAFE Circular 19 or SAFE Circular 16 could result in administrative penalties.

In 2012, SAFE promulgated the Circular of Further Improving and Adjusting Foreign Exchange Administration Policies on Foreign Direct Investment (“Circular 59”), as amended in May 2015. Pursuant Circular 59, the opening of various special purpose foreign exchange accounts, the reinvestment of RMB proceeds by foreign investors in the PRC and remittance of foreign exchange profits and dividends by a foreign-invested enterprise to its foreign shareholders no longer require the approval or verification of SAFE.

SAFE also promulgated the Circular on Printing and Distributing the Provisions on Foreign Exchange Administration over Domestic Direct Investment by Foreign Investors and the Supporting Documents in May 2013, as amended in October 2018 and December 2019. The circular specifies that the administration by SAFE or its local branches over direct investment by foreign investors in the PRC shall be conducted by way of registration and banks shall process foreign exchange business relating to the direct investment in the PRC based on registration information provided by SAFE and its branches.

In February 2015, SAFE promulgated the Notice on Further Simplifying and Improving the Foreign Exchange Management Policies for Direct Investment (“SAFE Circular 13”), which took effect on June 1, 2015 and amended in December 2019. SAFE Circular 13 delegates the power to enforce the foreign exchange registration in connection with inbound and outbound direct investments under relevant SAFE rules from local branches of SAFE to banks, further simplifying the foreign exchange registration procedures for inbound and outbound direct investments.

On January 26, 2017, SAFE issued the Notice on Improving the Examination of Authenticity and Compliance to Further Promote Foreign Exchange Control (“SAFE Circular 3”), which stipulates several capital control measures with respect to the outbound remittance of profit from domestic entities to offshore entities, including:

Moreover, pursuant to SAFE Circular 3, domestic entities shall make detailed explanations of the sources of capital and utilization arrangements, and provide board resolutions, contracts and other proof when completing the registration procedures in connection with an outbound investment.

Regulation of Dividend Distributions

The principal regulations governing distribution of dividends of foreign-invested enterprises include the PRC Company Law, the Foreign Investment Law of the PRC, and the Implementing Rules. Under these laws and regulations, foreign-invested enterprises in China may pay dividends only out of their accumulated after-tax profits, if any, determined in accordance with PRC accounting standards and regulations.

In addition, enterprises in China are required to allocate at least 10% of their respective accumulated profits each year, if any, to fund certain reserve funds until these reserves have reached 50% of the registered capital of the enterprises. Companies may, at their discretion, allocate a portion of their after-tax profits based on PRC accounting standards to staff welfare and bonus funds. These reserves are not distributable as cash dividends.

Regulations on Foreign Exchange Registration of Overseas Investment by PRC Residents

SAFE promulgated the Circular on Relevant Issues Relating to Domestic Resident’s Investment and Financing and Roundtrip Investment through Special Purpose Vehicles (“SAFE Circular 37”), in July 2014. SAFE Circular 37 requires PRC residents or entities to register with SAFE or its local branch in connection with their establishment or control of an offshore entity established for the purpose of overseas investment or financing. In addition, such PRC residents or entities must update their SAFE registrations when the offshore special purpose vehicle undergoes material events relating to any change of basic information (including change of such PRC citizens or residents, name and operation term), increases or decreases in investment amount, transfers or exchanges of shares, or mergers or divisions.

SAFE Circular 37 was issued to replace the Notice on Relevant Issues Concerning Foreign Exchange Administration for PRC Residents Engaging in Financing and Roundtrip Investments via Overseas Special Purpose Vehicles (“SAFE Circular 75”), issued by SAFE in October 2005. SAFE further enacted SAFE Circular 13, which allows PRC residents or entities to register with qualified banks in connection with their establishment or control of an offshore entity established for the purpose of overseas investment or financing. However, remedial registration applications made by PRC residents that previously failed to comply with SAFE Circular 37 continue to fall under the jurisdiction of the relevant local branch of SAFE.

In the event that a PRC shareholder holding interests in a special purpose vehicle fails to fulfill the required SAFE registration, the PRC subsidiaries of that special purpose vehicle may be prohibited from distributing profits to the offshore parent and from carrying out subsequent cross-border foreign exchange activities, and the special purpose vehicle may be restricted in its ability to contribute additional capital into its PRC subsidiary. Failure to comply with the various SAFE registration requirements described above could result in liability under PRC law for evasion of foreign exchange controls.

Regulation of Stock Incentive Plans

In February 2012, SAFE promulgated the Notice on Foreign Exchange Administration of PRC Residents Participating in Share Incentive Plans of Offshore Listed Companies (the “Stock Option Rules”). Under the Stock Option Rules and other relevant rules and regulations, PRC residents, which means the PRC citizens and non-PRC citizens residing in China for a continuous period of not less than one year, who participate in a stock incentive plan in an overseas publicly-listed company are required to register with SAFE or its local branches and complete certain other procedures. Participants of a stock incentive plan who are PRC residents must retain a qualified PRC agent, which could be a PRC subsidiary of the overseas publicly-listed company or another qualified institution selected by the PRC subsidiary, to conduct SAFE registration and other procedures with respect to the stock incentive plan on behalf of its participants. The participants must also retain an overseas entrusted institution to handle matters in connection with their exercise of stock options, the purchase and sale of corresponding stocks or interests and fund transfers.

In addition, The PRC agent is required to amend the SAFE registration with respect to the stock incentive plan if there is any material change to the stock incentive plan, the PRC agent or the overseas entrusted institution or other material changes. The PRC agent must, on behalf of the PRC residents who have the right to exercise the employee share options, apply to SAFE or its local branches for an annual quota for the payment of foreign currencies in connection with the PRC residents’ exercise of the employee share options.

The foreign exchange proceeds received by the PRC residents from the sale of shares under the stock incentive plans granted and dividends distributed by the overseas listed companies must be remitted into the bank accounts in the PRC opened by the PRC agents before distribution to such PRC residents. In addition, SAFE Circular 37 provides that PRC residents who participate in a share incentive plan of an overseas unlisted special purpose company may register with SAFE or its local branches before exercising rights.

Regulation of Tax

Enterprise Income Tax

Under the Enterprise Income Tax Law of the PRC (the “EIT Law”), which was promulgated on March 16, 2007, became effective on January 1, 2008 and amended on February 24, 2017 and December 29, 2018, and the Implementing Rules of the Enterprise Income Law of the PRC (the “Implementing Rules of the EIT Law”), which was promulgated on December 6, 2007, became effective on January 1, 2008 and amended on April 23, 2019, enterprises are classified as resident enterprises and non-resident enterprises. PRC resident enterprises typically pay an enterprise income tax at the rate of 25% while non-PRC resident enterprises without any branches in the PRC should pay an enterprise income tax in connection with their income from the PRC at the tax rate of 10%.

An enterprise established outside of the PRC with its “de facto management bodies” located within the PRC is considered a “resident enterprise,” meaning that it can be treated in a manner similar to a PRC domestic enterprise for enterprise income tax purposes. The Implementing Rules of the EIT Law define a de facto management body as a managing body that in practice exercises “substantial and overall management and control over the production and operations, personnel, accounting, and properties” of the enterprise.

The EIT Law and the Implementation Rules of the EIT Law permit certain “high and new technology enterprises with strong support from PRC government (“High and New Technology Enterprise”)” that independently own core intellectual property and meet statutory criteria, to enjoy a 15% preferential enterprise income tax rate. In January 2016, the State Administration of Taxation (the “SAT”), the Ministry of Science and Technology and the Ministry of Finance jointly issued the Administrative Rules for the Certification of High and New Technology Enterprises, specifying the criteria and procedures for the certification of High and New Technology Enterprises.

Withholding Tax on Dividend Distribution

The EIT Law prescribes a standard withholding tax rate of 20% on dividends and other China-sourced income of non-PRC resident enterprises which have no establishment or place of business in the PRC, or if established, the relevant dividends or other China-sourced income are in fact not associated with such establishment or place of business in the PRC. However, the Implementation Rules of the EIT Law reduced the income tax rate from 20% to 10%, which is normally applicable to dividends payable to investors that are “non-resident enterprises,” and gains derived by such investors, which (1) do not have an establishment or place of business in the PRC or (2) have an establishment or place of business in the PRC, but the relevant income is not effectively connected with the establishment or place of business to the extent such dividends and gains are derived from sources within the PRC. Such withholding tax on the dividends may be further reduced pursuant to a tax treaty between China and other jurisdictions.

Pursuant to the Arrangement between Mainland China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and Tax Evasion on Income (the “Double Tax Avoidance Arrangement”), the withholding tax rate in respect to the payment of dividends by a PRC enterprise to a Hong Kong enterprise is reduced to 5% from a standard rate of 10% if the Hong Kong enterprise directly holds at least 25% of the PRC enterprise. However, pursuant to the Notice of the State Administration of Taxation on the Issues concerning the Application of the Dividend Clauses of Tax Agreements (“Circular 81”), issued on February 20, 2009 by the SAT, if the relevant PRC tax authorities determine, in their discretion, that a company benefits from such reduced income tax rate due to a structure or arrangement that is primarily tax-driven, such PRC tax authorities may adjust the preferential tax treatment.

According to the Circular on Several Questions regarding the “Beneficial Owner” in Tax Treaties (“Circular 9”), which was issued on February 3, 2018 by the SAT and took effect on April 1, 2018, when determining the applicant’s status as a “beneficial owner” with respect to the tax treatment of dividends, interest or royalties under certain tax treaties, several factors, including whether the applicant is obligated to pay more than 50% of his or her income over a twelve-month period to residents of a third country or region, whether the business operated by the applicant constitutes actual business activities; and whether the counterparty country or region to the tax treaty does not levy any tax, exempts the relevant income from tax or levies tax at an extremely low rate, will be taken into account and be analyzed according to the actual circumstances of specific cases. If the applicant’s status is not qualified as “beneficiary owner,” it may not enjoy the concessions under the Double Tax Avoidance Arrangement.

In October 2019, the State Administration of Taxation promulgated the Announcement on Issuing the Measures for the Administration of Non-Resident Taxpayers’ Enjoyment of the Treatment under Treaties (“Circular 35”), which became effective on January 1, 2020. Circular 35 provides that applicant who intend to prove his or her “beneficial owner” status shall gather and retain relevant documents, and shall submit the relevant documents to the competent tax bureau upon post-request by such tax bureau.

Accordingly, Cheche Technology (HK) Limited, our subsidiary in Hong Kong, may be able to enjoy the 5% withholding tax rate for the dividends they receive from WFOE and Baodafang Technology Co., Ltd., if it satisfies the conditions prescribed under Circular 81 and other relevant tax rules and regulations. However, according to Circular 81, Circular 9 and Circular 35, if the relevant tax authorities consider the transactions or arrangements we have are for the primary purpose of enjoying a favorable tax treatment, the relevant tax authorities may adjust the favorable withholding tax in the future.

Value-added Tax

According to the Provisional Regulations on Value-added Tax, which was promulgated by the State Council on December 13, 1993 and was amended in 2008, 2016 and 2017, and the Implementing Rules of the Provisional Regulations on Value-added Tax, which was promulgated by the Ministry of Finance on December 25, 1993 and subsequently amended by the Ministry of Finance and the State Administration of Taxation on December 15, 2008 and October 28, 2011, all taxpayers selling goods, providing processing, repairing or replacement services or importing goods within the PRC shall pay value-added tax (the “VAT”). Unless provided otherwise, the rate of VAT is 17% on sales and 6% on the services. On April 4, 2018, Ministry of Finance and the SAT jointly promulgated the Circular of the Ministry of Finance and the State Administration of Taxation on Adjustment of Value-Added Tax Rates (the “Circular 32”), according to which (i) for VAT taxable sales acts or import of goods originally subject to VAT rates of 17% and 11% respectively, such tax rates shall be adjusted to 16% and 10%, respectively; (ii) for purchase of agricultural products originally subject to tax rate of 11%, such tax rate shall be adjusted to 10%; (iii) for purchase of agricultural products for the purpose of production and sales or consigned processing of goods subject to tax rate of 16%, such tax shall be calculated at the tax rate of 12%; (iv) for exported goods originally subject to tax rate of 17% and export tax refund rate of 17%, the export tax refund rate shall be adjusted to 16%; and (v) for exported goods and cross-border taxable acts originally subject to tax rate of 11% and export tax refund rate of 11%, the export tax refund rate shall be adjusted to 10%. Circular 32 took effect on May 1, 2018 and shall supersede existing provisions which are inconsistent with Circular 32.

Since January 1, 2012, the Ministry of Finance and the State Administration of Taxation have implemented the Pilot Plan for Imposition of Value-Added Tax to Replace Business Tax (the “VAT Pilot Plan”), which imposes VAT in lieu of business tax for certain “modern service industries” in certain regions and eventually expanded to nation-wide application in 2013.

On March 23, 2016, the Ministry of Finance and the State Administration of Taxation jointly issued the Circular of Full Implementation of Business Tax to Value-added Tax Reform which confirms that business tax will be completely replaced by the VAT from May 1, 2016.

On March 20, 2019, the Ministry of Finance, the State Administration of Taxation and the General Administration of Customs jointly promulgated the Announcement on Relevant Policies for Deepening Value-Added Tax Reform, which took effect on April 1, 2019 and provides that (1) with respect to VAT taxable sales acts or import of goods originally subject to VAT rates of 16% and 10% respectively, such tax rates shall be adjusted to 13% and 9%, respectively; (2) with respect to purchase of agricultural products originally subject to tax rate of 10%, such tax rate shall be adjusted to 9%; (3) with respect to purchase of agricultural products for the purpose of production or consigned processing of goods subject to tax rate of 13%, such tax shall be calculated at the tax rate of 10%; (4) with respect to export of goods and services originally subject to tax rate of 16% and export tax refund rate of 16%, the export tax refund rate shall be adjusted to 13%; and (5) with respect to export of goods and cross-border taxable acts originally subject to tax rate of 10% and export tax refund rate of 10%, the export tax refund rate shall be adjusted to 9%.

Regulations related to income tax for share transfer

On February 3, 2015, the State Administration of Taxation issued the Announcement on Several Issues Concerning the Enterprise Income Tax on Indirect Transfer of Assets by Non-Resident Enterprises (“Circular 7”), which partially replaced and supplemented previous rules under the Notice of the State Administration of Taxation on Strengthening the Administration of Enterprise Income Tax on Income from Equity Transfer by Non-Resident Enterprises (“Circular 698”), issued by the SAT on December 10, 2009. Circular 7 provided comprehensive guidelines relating to, and heightened the mainland Chinese tax authorities’ scrutiny over, indirect transfers of taxable assets (including assets of organizations and premises in PRC, immovable property in the PRC, equity investments in PRC resident enterprises) by a non-resident enterprise in China.

Under Circular 7, the tax authorities in China are entitled to reclassify the nature of an indirect transfer of taxable assets in China. For instance, when a non-resident enterprise transfers equity interests in an overseas holding company that directly or indirectly holds certain taxable assets in China and if the transfer is believed by the Chinese tax authorities to have no reasonable commercial purpose other than to evade enterprise income tax, the Circular 7 allows the Chinese tax authorities to reclassify the indirect transfer of taxable assets in China into a direct transfer and therefore impose a 10% rate of PRC enterprise income tax on the non-resident enterprise. However, Circular 7 contains certain exemptions, including:

On October 17, 2017, the SAT issued Announcement of the State Administration of Taxation on Issues Concerning the Withholding of Non-resident Enterprise Income Tax at Source (“SAT Bulletin 37”), which came into effect on December 1, 2017 and concurrently abolished Circular 698 and certain provisions of Circular 7, and was amended by the Announcement of the State Administration of Taxation on Revising Certain Taxation Normative Documents issued on June 15, 2018 by the SAT. SAT Bulletin 37 further clarifies the practice and procedure of the withholding of non-resident enterprise income tax. Pursuant to SAT Bulletin 37, where the party responsible for the deduction of such income tax did not or was unable to make such deduction, the non-resident enterprise receiving such income should declare and pay the taxes that should have been deducted to the relevant tax authority.

By promulgating and implementing these circulars, the PRC tax authorities have enhanced their scrutiny over the direct or indirect transfer of equity interests or other taxable assets in a PRC resident enterprise by a non-resident enterprise. Under Circular 7 and SAT Bulletin 37, where a non-resident enterprise transfers the equity interests or other taxable assets of a PRC resident enterprise indirectly by disposition of the equity interests of an overseas holding company, the non-resident enterprise, being the transferor, or the transferee, or the PRC entity which directly owned the taxable assets may report to the relevant tax authority this indirect transfer. Using a “substance over form” principle, the PRC tax authority may re-characterize such indirect transfer as a direct transfer of the equity interests in the PRC tax resident enterprise and other properties in China. As a result, gains derived from such indirect transfer may be subject to PRC tax at a rate of up to 10%.

Regulations Related to M&A Rules and Overseas Listing

On August 8, 2006, six PRC governmental and regulatory agencies, including MOFCOM and CSRC, promulgated the Rules on Mergers and Acquisition of Domestic Enterprises by Foreign Investors (the “M&A Rules”), effective as of September 8, 2006 and later revised on June 22, 2009, which governs the mergers and acquisitions of domestic enterprises by foreign investors. The M&A Rules, among other things, requires that if an overseas company established or controlled by PRC companies or individuals intends to acquire equity interests or assets of any other PRC domestic company affiliated with such PRC companies or individuals, such acquisition must be submitted to MOFCOM for approval.

The M&A Rules also require that an offshore special purpose vehicle formed for overseas listing purposes and controlled directly or indirectly by the PRC individuals or companies shall obtain the approval of the CSRC prior to overseas listing and trading of such special purpose vehicle’s securities on an overseas stock exchange. On July 6, 2021, General Office of the State Council and General Office of the Central Committee of the Communist Party of China issued the Opinions on Lawfully and Strictly Cracking Down Illegal Securities Activities. The opinions emphasized the need to strengthen the administration over illegal securities activities and the supervision on overseas listings by China-based companies and proposed to take effective measures, such as promoting the construction of relevant regulatory systems to deal with the risks and incidents faced by China-based overseas-listed companies. Please refer to “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China.”

On February 17, 2023, the CSRC promulgated Trial Administrative Measures of the Overseas Securities Offering and Listing by Domestic Companies (the “Overseas Listing Trial Measures”) and relevant five guidelines, which became effective on March 31, 2023.

The Overseas Listing Trial Measures will comprehensively improve and reform the existing regulatory regime for overseas offering and listing of PRC domestic companies’ securities and will regulate both direct and indirect overseas offering and listing of PRC domestic companies’ securities by adopting a filing-based regulatory regime.

According to the Overseas Listing Trial Measures, 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 relevant information. The Overseas Listing Trial Measures provides that an overseas listing or offering is explicitly prohibited, if any of the following: (1) such securities offering and listing is explicitly prohibited by provisions in laws, administrative regulations and relevant state rules; (2) the intended securities offering and listing may endanger national security as reviewed and determined by competent authorities under the State Council in accordance with law; (3) the domestic company intending to make the securities offering and listing, or its controlling shareholder(s) and the actual controller, have committed relevant crimes such as corruption, bribery, embezzlement, misappropriation of property or undermining the order of the socialist market economy during the latest three years; (4) the domestic company intending to make the securities offering and listing is currently under investigations for suspicion of criminal offenses or major violations of laws and regulations, and no conclusion has yet been made thereof; or (5) there are material ownership disputes over equity held by the domestic company’s controlling shareholder(s) or by other shareholder(s) that are controlled by the controlling shareholder(s) and/or actual controller.

The Overseas Listing Trial Measures also provides that if the issuer meets both of the following criteria, the overseas securities offering and listing conducted by such issuer will be deemed as indirect overseas offering by PRC domestic companies: (1) 50% or more of any of the issuer’s operating revenue, total profit, total assets or net assets as documented in its audited consolidated financial statements for the most recent fiscal year is accounted for by domestic companies; and (2) the main parts of the issuer’s business activities are conducted in mainland China, or its main place(s) of business are located in mainland China, or the majority of senior management staff in charge of its business operations and management are PRC citizens or have their usual place(s) of residence located in mainland China. Where an issuer submits an application for initial public offering to competent overseas regulators, such issuer must file with the CSRC within three business days after such application is submitted. In addition, the Overseas Listing Trial Measures provide that the direct or indirect overseas listings of the assets of domestic companies through one or more acquisitions, share swaps, transfers or other transaction arrangements shall be subject to filing procedures in accordance with the Overseas Listing Trial Measures. The Overseas Listing Trial Measures also requires subsequent reports to be filed with the CSRC on material events, such as change of control or voluntary or forced delisting of the issuer(s) who have completed overseas offerings and listings.

On the same day, the CSRC also held a press conference for the release of the Overseas Listing Trial Measures and issued the Notice on Administration for the Filing of Overseas Offering and Listing by Domestic Companies, which, among others, clarifies that (1) on or prior to the effective date of the Overseas Listing Trial Measures, domestic companies that have already submitted valid applications for overseas offering and listing but have not obtained approval from overseas regulatory authorities or stock exchanges may reasonably arrange the timing for submitting their filing applications with the CSRC, and must complete the filing before the completion of their overseas offering and listing; (2) a six-month transition period will be granted to domestic companies which, prior to the effective date of the Overseas Listing Trial Measures, have already obtained the approval from overseas regulatory authorities or stock exchanges (such as the completion of hearing in the  market of Hong Kong or the completion of registration in the market of the United States), but have not completed the indirect overseas listing; if domestic companies fail to complete the overseas listing within such six-month transition period, they shall file with the CSRC according to the requirements; and (3) the CSRC will solicit opinions from relevant regulatory authorities and complete the filing of the overseas listing of companies with contractual arrangements which duly meet the compliance requirements, and support the development and growth of these companies by enabling them to utilize two markets and two kinds of resources.

Regulation of Employment

Pursuant to the PRC Labor Law, the PRC Labor Contract Law and the Implementing Regulations of the PRC Labor Contracts Law, labor relationships between employers and employees must be executed in written form. Wages may not be lower than the local minimum wage and must be paid to employees in a timely manner. Employers are prohibited from forcing employees to work above certain time limit and shall pay employees for overtime work in accordance to national regulations. In addition, employers must establish a system for labor safety and sanitation, strictly abide by state standards and provide relevant education to its employees. Employees are also required to work in safe and sanitary conditions.

Under PRC laws, rules and regulations, including the Social Insurance Law, the Interim Regulations on the Collection and Payment of Social Security Funds as amended in 2019, and the Regulations on the Regulations on Management of Housing Provident Fund as amended in 2019, employers are required to contribute, on behalf of their employees, to a number of social security funds, including funds for basic pension insurance, unemployment insurance, basic medical insurance, occupational injury insurance, maternity leave insurance and housing funds. These payments are made to local administrative authorities and any employer who fails to contribute may be fined and ordered to pay the deficit amount.

According to the Reform Plan of Tax Collection systems of State and Local Taxation promulgated by the General Office of the Central Committee of the Communist Party of China and the General Office of the State Council on July 20, 2018, from January 1, 2019, the social insurance premiums such as basic endowment insurance premiums, basic medical insurance premiums, unemployment insurance premiums, employment injury insurance premiums, and maternity insurance premiums will be collected by the tax authorities.

Regulation of Intellectual Property

Trademark

Based on the Trademark Law of the PRC promulgated by the Standing Committee of the National People’s Congress on August 23, 1982, and amended on February 22, 1993, October 27, 2001, August 30, 2013 and April 23, 2019, respectively, and the Implementing Regulations for the Trademark Law of the PRC promulgated by the State Council on April 29, 2014 and took effect on May 1, 2014, the rightful holder of a registered trademark shall have the right to exclusive use of such registered trademark. The valid period for registered trademark is 10 years from the date of approval and registration; to renewal trademark registration upon expiration, the trademark registrant should follow the provisions to manage renewal twelve months before expiration; if it is not processed within the period, a six-month extension period shall be given.

The valid period for each renewal is ten years from the next day after the previous expiration date. If renewal is not managed after expiration, the registered trademark shall be canceled. The SAMR shall sanction any infringement of trademark by law; where suspected crime is involved, the perpetrator shall be promptly apprehended by judicial agency for legal proceedings.

Copyright

Based on the Copyright Law of the PRC promulgated by the Standing Committee of the National People’s Congress on September 7, 1990, and amended on October 27, 2001, February 26, 2010, November 11, 2020, respectively, and effective from June 1, 2021, and the Implementing Regulations of the Copyright Law of the PRC promulgated by the State Council on January 30, 2013 and took effect on March 1, 2013, Chinese citizens, legal persons or any other organization shall be entitled to copyright of its work whether or not such work is published. Copyrights cover the following forms of creative works: literature, art, natural science, engineering technology works, writing, narration, music, drama, opera, dance and acrobatic works, fine art and architectural works, photography, films and cinematography works, drawings of engineering designs and product designs and other works as prescribed by laws and administrative regulations. Perpetrators infringing on copyright or copyright related rights shall be held liable for actual damage to the copyright owner, and may be fined, and have illegal income, pirate copies and properties used for illegal activity confiscated.

In order to further implement the Regulations on Computer Software Protection, promulgated by the State Council on June 4, 1991 and amended on December 20, 2001, January 8, 2011 and January 30, 2013, respectively, the National Copyright Administration issued the Measures for the Registration of Computer Software Copyright on April 6, 1992 and amended on February 20, 2002, which specify detailed procedures and requirements with respect to the registration of software copyrights.

Patent

According to the Patent Law of the PRC (the “Patent Law”), promulgated by the Standing Committee of the National People’s Congress on March 12, 1984 and amended on September 4, 1992, August 25, 2000, December 27, 2008 and October 17, 2020, respectively, the State Intellectual Property Office is responsible for administering patent law in the PRC. The patent administration departments of provincial, autonomous region or municipal governments are responsible for administering patent law within their respective jurisdictions. The Chinese patent system adopts a first-to-file principle, which means that when more than one person file different patent applications for the same invention, only the person who files the application first is entitled to obtain a patent of the invention. To be patentable, an invention or a utility model must meet three criteria: novelty, inventiveness and practicability. A patent is valid for twenty years in the case of an invention, ten years in the case of utility models and fifteen years in case of designs.

Domain Name

The MIIT promulgated the Measures on Administration of Internet Domain Names (the “Domain Name Measures”), on August 24, 2017, which took effect on November 1, 2017 and replaced the Administrative Measures on China Internet Domain Names promulgated by MIIT on November 5, 2004. According to the Domain Name Measures, the MIIT is in charge of the administration of PRC internet domain names. The domain name registration follows a first-to-file principle. Applicants for registration of domain names shall provide the true, accurate and complete information of their identities to domain name registration service institutions. The applicants will become the holder of such domain names upon the completion of the registration procedure.

Regulation of Leasing

According to the Civil Code of the PRC (the “Civil Code”), which took effect from January 1, 2021, the lessee may sublease the leased premises to a third party, subject to the consent of the lessor. Where the lessee subleases the premises, the lease contract between the lessee and the lessor remains valid. The lessor is entitled to terminate the lease agreement if the lessee subleases the premises without the prior consent of the lessor.

In the case of a change of ownership of the leased property during the lease term, the effectiveness of the lease agreement shall not be affected. Pursuant to the Civil Code, if a mortgaged property has been leased and possessed by the lessee prior to the creation of the mortgage, the lease relationship shall not be affected by the mortgage.

Pursuant to the Administrative Measures for Commodity Housing Tenancy issued by the Ministry of Housing and Urban-Rural Development on December 1, 2010 and came into effect on February 1, 2011, the  parties to a housing tenancy shall go through the housing tenancy registration formalities with the competent construction (real estate) departments of the municipalities directly under the central government, cities and counties where the housing is located within 30 days after the housing tenancy contract is signed. Where the content of the housing tenancy registration is altered, or the housing tenancy contract is renewed or terminated, the parties concerned shall, within 30 days, undertake housing tenancy registration amendment, renewal or termination formalities at the department which originally registered the housing tenancy.

The competent construction (real estate) departments of the government of the municipalities directly under the Central Government, cities and counties shall urge those who do not register on time to make corrections within a specified time limit. The departments will impose a fine below RMB1,000 on individuals who fail to make corrections within the specified time limit, and a fine between RMB1,000 and RMB10,000 on companies which fail to make corrections within the specified time limit.

Upon consummation of the Business Combination, CCT became our wholly-owned subsidiary. The following diagram depicts a simplified organizational structure of the Company as of the date of this Report. These subsidiaries are also set forth in Exhibit 8.1 to this Report.

Contractual arrangements with the VIE and its shareholders

As a Cayman Island company, we are classified as a foreign enterprise under PRC laws and regulations, and WFOE is a foreign invested entity (an “FIE”). FIEs are subject to a number of restrictions under PRC laws and regulations. In particular, the Affiliated Entities hold ICP licenses for internet information services, which are classified as value-added telecommunication services (Category II). As these services are subject to strict business licensing requirements, including limitations on foreign ownership and in order to have greater flexibility in carrying out business and implementing business strategies in compliance with PRC laws and regulations, we and the PRC Subsidiaries operate our businesses in China mainly through the VIE and its subsidiaries. As of December 31, 2021 and 2022, the VIE and its subsidiaries accounted for an aggregate of 56.7% and 78.6%, respectively, of consolidated total assets and 84.4% and 85.4%, respectively, of consolidated total liabilities of CCT. In 2021 and 2022, the VIE and its subsidiaries accounted for an aggregate of 99.5% and 94.6%, respectively, of consolidated total net revenues of CCT.

The VIE and its subsidiaries are domestic PRC companies. WFOE has entered into a series of contractual arrangements with the VIE and its shareholders, through which we are able to consolidate the financial results of the VIE and its subsidiaries. These contractual arrangements allow us to:

As a result of these contractual arrangements, we are considered the primary beneficiary of the VIE and consolidate the VIE’s results of operations in its financial statements under U.S. GAAP. However, these contractual arrangements may not be as effective in providing operational control as direct ownership and the use of the contractual arrangements exposes us to certain risks. For example, the VIE or its shareholders may breach the contractual arrangements with WFOE. In such cases, we and the PRC Subsidiaries would have to rely on legal remedies under PRC law, which may not always be effective, particularly in light of uncertainties in the PRC legal system. See “Risk Factors—Risks Related to Our Corporate Structure.”

The following is a summary of the currently effective contractual arrangements by and among WFOE (Cheche Ningbo), the VIE (Beijing Cheche) and the VIE’s shareholders.

Agreements that provide us and the PRC Subsidiaries with effective control over the VIE and its subsidiaries

Equity Interest Pledge Agreements. The VIE and its shareholders entered into certain equity interest pledge agreements with WFOE, dated October 10, 2019, June 18, 2021 and November 14, 2022, respectively. Pursuant to the equity interest pledge agreements, the shareholders of the VIE have pledged all of their equity interests in the VIE to guarantee the VIE and its shareholders’ performance of their obligations under the relevant contractual arrangements, which include the exclusive business cooperation agreement, exclusive option agreements and power of attorney. If the VIE or any of its shareholders breaches its contractual obligations under these agreements, WFOE, as pledgee, will have the right to auction or sell all or part of the pledged equity interests of the VIE and receive proceeds from such auction or sale.

Each of the shareholders of the VIE agrees that, during the term of the equity interest pledge agreement, such shareholder will not transfer the pledged equity interests or create or allow creation of any encumbrance on the pledged equity interests without the prior written consent of WFOE. WFOE is entitled to all dividends and other distributions on the pledged equity interests declared by the VIE unless prohibited by applicable laws and regulations.

The equity interest pledge agreements will remain effective until the VIE and its shareholders discharge all their obligations under the contractual arrangements. Such pledge of equity interests in the VIE has been registered with the relevant offices of the SAMR in accordance with the PRC Civil Code.

Power of Attorney. Pursuant to the shareholders’ power of attorney among WFOE, the VIE and shareholders of the VIE, dated October 10, 2019, June 18, 2021 and November 14, 2022, respectively, each shareholder of the VIE has irrevocably appointed WFOE to act as such shareholder’s exclusive attorney-in-fact to exercise all shareholder rights, including the right to attend and vote on shareholders’ meetings and appoint directors and executive officers. Each power of attorney will remain in force as long as the shareholder remains a shareholder of the VIE.

Agreement that allows us and the PRC Subsidiaries to receive economic benefits from the VIE and its subsidiaries

Exclusive Business Cooperation Agreement. Pursuant to the exclusive business cooperation agreement dated November 22, 2018, WFOE has the exclusive right to provide the VIE with technical support, consulting services and other services. In exchange, WFOE is entitled to receive a service fee from the VIE on an annual basis and at an amount equal to 100% of the consolidated profit of the VIE, offset by the total accumulative losses (if any) for the previous years of the VIE and its subsidiaries and reduced by any working capital for operation, costs, taxes and other statutory contributions.

The VIE has granted WFOE the exclusive right to purchase any or all of their business or assets at the lowest price permitted under PRC law. This agreement remains effective unless otherwise agreed among the parties.

Agreements that provide us and the PRC Subsidiaries with the option to purchase the equity interest in the VIE

Exclusive Option Agreements. Pursuant to the exclusive option agreements among us, WFOE, the VIE and shareholders of the VIE, dated October 10, 2019, June 18, 2021 and November 14, 2022, respectively, the shareholders of the VIE have irrevocably granted WFOE an exclusive option to purchase, by itself or by persons designated by it, at its discretion at any time, to the extent permitted under PRC law, all or part of such shareholders’ equity interests in the VIE.

The purchase price of the equity interests in the VIE shall be equal to the amount of registered capital contributed by such shareholder in the VIE for such purchased equity interests (or such price may be as set forth in the equity transfer agreement to be executed between WFOE (or any person designated by it) and such shareholder of the VIE, provided that such price does not violate PRC laws and regulations and is acceptable to WFOE).

Without WFOE’s prior written consent, the VIE and its shareholders have agreed not to amend the VIE’s articles of association, increase or decrease the VIE’s registered capital, change the VIE’s structure or registered capital in another manner, sell or otherwise dispose of the VIE’s material assets or beneficial interests in the VIE, create or allow any encumbrance on the VIE’s material assets or provide any loans.

WFOE is entitled to all dividends and other distributions declared by the VIE, and the shareholders of the VIE have agreed to pay any such dividends or distributions to WFOE or any other person designated by WFOE. The exclusive option agreements will remain effective until all equity interests of the VIE held by its shareholders have been transferred or assigned to WFOE or its designated person.

Spousal Consent Letter. Each spouse of the relevant individual shareholders of the VIE has signed a spousal consent letter. Under the spousal consent letter, the signing spouse unconditionally and irrevocably agreed that the disposition of the equity interest in the VIE which is held by and registered under the name of his or her spouse shall be made pursuant to the above-mentioned equity interest pledge agreements, exclusive option agreements, shareholders’ power of attorney and exclusive business cooperation agreement, as amended from time to time. Moreover, the spouse undertook not to take any action in relation to such equity interest held by and registered under the name of his or her spouse.

We are headquartered in Beijing and had leased an aggregate of 9,388.7 square meters of office space in 24 provinces, autonomous regions and municipalities in China as of December 31, 2022. We lease our premises through lease agreements with unrelated third parties.

ITEM 4A. UNRESOLVED STAFF COMMENTS

None.

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

Following the Business Combination, our business is conducted through CCT, the PRC Subsidiaries, which are the direct wholly-owned subsidiaries of CCT, and the Affiliated Entities. You should read the following discussion and analysis of the financial condition and results of operations of CCT in conjunction with its consolidated financial statements and the related notes included elsewhere in this Report. This discussion contains forward-looking statements that involve risks and uncertainties about our business and operations. The actual results of CCT and the timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those we describe under “Item 3. Key Information — D. Risk Factors” and elsewhere in this Report.

Key Factors Affecting CCT’s Results of Operations

CCT believes the following factors significantly affect its results of operations:

Market conditions in China

CCT derives most of its revenues from facilitating insurance transactions on its platform, particularly auto insurance transactions. As such, CCT’s results of operations substantially depend on the growth of the automobile, auto insurance and digital auto insurance transaction markets in China.

CCT expects the growing number of automobiles in China to drive significant demand for auto insurance. It also expects that recent developments in the new energy vehicle sector with favorable government policies will drive the growth of China’s automobile industry.

The PRC government requires each automobile owner to purchase statutory automobile liability insurance and renew its auto insurance policy every year. CCT expects that the growth in automobile ownership will result in more purchases and renewals of statutory automobile liability insurance as well as other commercial auto insurance. The total number of vehicles sold in China is expected to grow from 26.3 million in 2021 to 33.0 million in 2026, according to iResearch. China’s auto insurance industry has expanded in recent years, driven by its rapid economic growth, increasing disposable income, urbanization, the growing number of automobiles and the increasing ease in purchasing auto insurance. China’s auto insurance industry is expected to grow from RMB777.3 billion in 2021 to RMB1.1 trillion in 2026, according to iResearch.

CCT also believes that the increasing digitalization of auto insurance in China will drive demand for its auto insurance transaction services. Driven by technological advancements, policy reforms and more standardized digital operations, digital transaction volumes for auto insurance in China grew from RMB85.2 billion in 2018 to RMB270.9 billion in 2021, and are expected to grow to RMB832.0 billion in 2026, according to iResearch. The digital transaction penetration rate for auto insurance in China, defined as the amount of auto insurance premiums transacted digitally during a certain period, divided by the total premiums in the auto insurance industry during such period, increased from 10.9% in 2018 to 34.8% in 2021 and is expected to further grow to 72.9% in 2026, according to iResearch.

CCT has broadened its service and solution offerings in recent years to include services and solutions other than auto insurance transaction services. In particular, CCT commenced its non-auto P&C insurance transaction services in 2016, and insurance SaaS solutions in 2020. CCT is also co-developing digital products with its insurance carrier partners and large third-party technology platforms to enhance the breadth of their product and service offerings. These include innovative insurance products, such as embedded digital distributions to address the evolving needs of China’s insurance consumers. CCT’s growth also depends on the growth of the non-auto P&C insurance, insurance SaaS solutions and insurance technology services industries in China, and its ability to diversify its distributions and integrate technology capabilities among such different sectors and develop innovative insurance products.

The non-auto insurance market in China includes non-auto P&C and life & health insurance and has been developing rapidly. Non-auto insurance premiums in China grew from RMB3.0 trillion in 2018 to RMB3.7 trillion in 2021 at a CAGR of 7.1% and are expected to reach RMB5.8 trillion in 2026 at a CAGR of 9.2%. Growth of the non-auto insurance market and CCT’s ability to capitalize on industry trends will significantly affect demand for its services and solutions and financial results.

Insurance premiums and transaction service fees

CCT generates revenue primarily from transaction service fees paid by insurance carriers and certain intermediaries, typically calculated as a percentage of the insurance premiums paid by consumers. Insurance premiums and transaction service fee rates CCT charges for its insurance transaction services fluctuate based on regulatory requirements, prevailing economic conditions, the competitive landscape, the volume of business that CCT generates, the availability of comparable services from CCT’s competitors and other factors.

CCT derives the majority of its insurance transaction service revenue from facilitating auto insurance transactions. Laws and regulations governing China’s auto insurance industry may significantly affect the premiums of auto insurance policies charged by insurance carriers and service fee rates CCT charges for auto insurance transactions. For example, historically, the PRC government has imposed stringent reporting requirements on the terms of auto insurance products sold by insurance carriers and rules regulating actuarial and pricing practices of insurance carriers and intermediaries, which have resulted in industry-wide decreases in the transaction service fee rates charged by industry participants, including CCT. CCT’s results of operations from auto insurance transactions have been affected by, and will continue to depend on laws and regulations governing China’s auto insurance industry and their impacts on the transaction service fees CCT can charge.

Similarly, the service fee rates CCT charges for insurance transactions other than auto insurance transactions, including non-auto P&C insurance transactions, may also fluctuate based on factors such as changes in industry regulations and reforms, pricing strategies of CCT’s competitors, changes in sales and marketing policies and product demand from consumers, among others.

Collaboration with insurance carriers and insurance intermediaries.

CCT provides insurance transaction services and insurance SaaS solutions to insurance carriers, and insurance transaction services and insurance SaaS solutions to certain insurance intermediaries. As a result, CCT’s revenue growth depends on its ability to maintain relationships with these insurance carriers and insurance intermediaries. As of December 31, 2022, CCT collaborated with approximately 100 insurance carriers and 4,400 insurance intermediaries.

CCT needs to provide high quality insurance transaction services and SaaS solutions and help them reach and serve their target consumers. This affects whether insurance carriers or other insurance intermediaries will sell insurance products through CCT’s platform or use its SaaS solutions and the rates of transaction service fees, system purchase prices and subscription fees CCT receives. Any significant changes to CCT’s relationships with insurance carriers and other insurance intermediaries could materially impact its revenue and financial performance.

Collaboration with referral partners and third-party platforms

CCT collaborates with referral partners and third-party platforms to attract and acquire insurance consumers, facilitate transactions of a variety of insurance products to consumers, and retain such consumers on CCT’s platform. The number, type and productivity of CCT’s referral partners and third-party platform partners significantly affect its revenue and results of operations. To achieve profitability, CCT intends to retain and expand the base of its referral partners and third-party platform partners as well as their productivity in a cost-effective manner.

A large component of CCT’s operating costs are the referral fees paid to its referral partners. In light of the intense competition for referral partners in the insurance industry and rising salaries in China, CCT has proactively adjusted its referral fee rates in recent years to acquire and retain productive referral partners, which has increased its operating costs. CCT plans to optimize its referral fee rates for referral partners in response to market conditions and requirements in the future, which may increase its operating costs.

CCT’s product and service offerings

CCT’s revenue growth depends on its ability to improve existing products, services and solutions, enhance user experience and capture new opportunities to expand into additional insurance markets and services. CCT derives a majority of its revenues from facilitating auto insurance transactions. As such, CCT’s financial performance depends in part on its ability to collaborate with its insurance carrier partners to offer auto insurance products attractive to auto insurance consumers.

In addition to auto insurance products, CCT has been facilitating the sale of non-auto P&C insurance products since 2016 and life & health insurance products since 2019. CCT has also started to provide technology services to insurance carriers since 2016 as well as insurance SaaS solutions to insurance intermediaries and insurance carriers since December 2020 and March 2021, respectively. As CCT’s service and solution offerings may have different pricing strategies and cost structures, expansion of its business and changes to revenue mix may affect its financial position and profitability.

CCT’s results of operations also depend upon its ability to diversify its distribution channels and product offerings. CCT believes the large base of its existing referral partners and third-party platforms presents CCT with significant opportunities to distribute various non-auto P&C insurance products and enables it to strengthen relationships with insurance carriers and referral partners, and increase engagement between referral partners and their customers. CCT also believes its extensive partnership network of insurance carriers and insurance intermediaries allows it to facilitate selling insurance SaaS solutions to these insurance carriers and insurance intermediaries as CCT has established relationships with them on its insurance transaction service offerings.

Operating efficiency of CCT’s platform

CCT has incurred significant costs and expenses in building its platform, growing its user and partnership base and developing capabilities in data analytics and technology. CCT’s business model is highly scalable, and its platform supports its continued growth. While CCT expects its operating costs to increase in absolute terms as its business expands, CCT also expects them to decrease as a proportion of its revenues as it improves the operating efficiency of its platform and achieves more economies of scale.

For CCT’s insurance transaction service business, which requires significant costs and expenses to acquire users and facilitate insurance transactions for these users on its platform, CCT pays referral fees to its referral partners, which constitute the largest component of its operating costs. CCT plans to enlarge it user base and optimize referral fees as a percentage of its total revenues by expanding its user base acquisition channels and collaborating with more influential third-party platform partners. In addition, CCT intends to optimize collaboration with third-party platforms and referral partners to improve user base acquisition and conversion, and diversify offerings among auto and non-auto P&C insurance products, to improve its operating margins for insurance transaction service.

For CCT’s insurance SaaS solutions business, it actively engages in selling and marketing efforts to capture marketing opportunities from which it can effectively increase its customer base, while focusing on more precise and effective ways of acquiring insurance intermediary and insurance carrier customers. As CCT’s insurance SaaS solutions business grows, it expects to improve the efficiency and utilization of CCT’s personnel and scale to achieve greater operating leverage.

Impact of COVID-19

The COVID-19 pandemic has severely impacted China and the rest of the world, and it has resulted in quarantines, travel restrictions, and the temporary closure of offices and facilities in China and many other countries. CCT’s business has not, to date, experienced material disruptions in insurance transaction volumes or insurance SaaS product subscriptions due to the COVID-19 pandemic.

However, the extent to which the COVID-19 pandemic may impact CCT’s long-term results remains uncertain, and CCT is closely monitoring the impact of COVID-19 pandemic internally. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business and Industry—The COVID-19 pandemic could adversely affect our business, operating results and financial condition.”

Key Components of Results of Operations

Net Revenues

Net revenues include insurance transaction services income, SaaS income and others. The following table sets forth a breakdown of CCT’s revenues for the periods indicated.

For CCT’s insurance transaction services business, it charges insurance carrier customers and other intermediaries a percentage of the insurance premiums generated from insurance transactions facilitated through its platform. Revenue generated from insurance transaction services is primarily affected by (1) the number of policies written through CCT’s platform, which increased by 57.7% from 7.8 million in 2021 to 12.3 million in 2022, (2) the gross premiums of transactions written through CCT’s platform, which increased by 49.5%, from RMB11.1 billion in 2021 to RMB16.6 billion in 2022, and (3) the gross premium written through referrals of referral partners, for which CCT tends to charge a higher percentage of premiums. Gross premiums written through referral partners increased by 56.4% from RMB10.1 billion in 2021 to RMB15.8 billion in 2022. CCT’s service fee rate remained relatively stable at 15.3% and 15.8% in 2021 and 2022, respectively.

For CCT’s insurance SaaS solution business, it offers subscription services to its cloud-based insurance SaaS solutions, including Sky Frontier and Digital Surge, and derives revenue from charging insurance carrier customers and insurance intermediaries services fees for using Sky Frontier and Digital Surge, respectively. Revenue generated from SaaS solution business is primarily affected by the number of paying customers and unit price for SaaS Solutions. Revenue generated from Sky Frontier increased from RMB21.9 million in 2021 to RMB51.2 million in 2022, primarily due to the combined effect of an increase in the number of paying customers from 49 in 2021 to 72 in 2022, as well as an increase in unit price resulting from upgraded functionality and improved market demand. Revenue generated from Digital Surge increased from RMB8.0 million in 2021 to RMB8.6 million in 2022, primarily driven by an increase in the number of paying customers from 130 in 2021 to 355 in 2022, partially offset by a decrease in unit price, as CCT lowered the subscription fee for certain paid functions in 2022 to attract more paying customers for Digital Surge.

Revenues from other services include (1) fees generated from CCT’s provision of technical services to insurance carriers and intermediaries, through which CCT develops digital insurance products and management systems for certain insurance carrier customers, and (2) fees generated from CCT’s customer service to third-party companies.

Cost of Revenues

CCT collaborates with referral partners and other third parties in the provision of insurance transaction services and SaaS services. CCT’s cost of revenues primarily consists of cost of referral partners, service fee paid to third-party payment platforms, and other costs. These costs are charged to the consolidated statements of operations and comprehensive loss as incurred.

Cost of referral partners refers to referral fees paid by CCT to referral partners and third-party platform partners, as a certain percentage of the insurance transaction service income generated from the insurance transactions referred by them. CCT’s referral partners increased from over 739,000 as of December 31, 2021 to 939,000 as of December 31, 2022. As CCT continues to scale its business, CCT is able to improve its ability to negotiate more favorable referral fee rates with referral partners and third-party platform partners, which enables CCT to reduce referral fee rate for each transaction and manage its costs of revenues for referral partners.

Service fee paid to third-party payment platforms refer to fees charged by such payment platforms with respect to the referral fee payments CCT makes to referral partners through such third-party payment platforms.

Other costs primarily include (1) customer service costs, (2) amortization and depreciation, (3) salary and welfare benefits, (4) cloud service fees and (5) tax and surcharges.

Selling and marketing expenses

CCT’s selling and marketing expenses primarily consist of advertising and promotional expenses, salary and welfare benefits and share-based compensation expenses to the CCT’s sales and marketing personnel. Advertising and promotional expenses consist primarily of costs for the promotion of corporate image, online platform and mobile applications.

General and administrative expenses

CCT’s general and administrative expenses primarily consist of share-based compensation expenses, salary and welfare benefits, professional service fees, amortization expenses and related expenses for employees involved in general corporate functions, including finance, legal and human resources; and costs associated with use by these functions of facilities and equipment, such as traveling and general expenses.

Research and development expenses

CCT’s research and development expenses primarily consist of salary and welfare benefits and subcontracted development expenses incurred for the development and enhancement to the CCT’s online platform, including SaaS platform, and mobile application.

Share-based compensation expenses

CCT periodically grant share-based awards, such as restricted shares and share options to eligible employees, directors and non-employees. In accordance with ASC 718 Stock Compensation, CCT recorded share-based compensation expense on the grant date of the equity interests to its employees equal to the estimated fair-value of such equity interests at the measurement date. The share-based compensation expense was recorded in cost of revenues, selling and marketing expenses, general and administrative expenses and research and development expenses on the consolidated statements of operations and comprehensive loss.

In November 2015, CCT adopted the 2015 Incentive Plan to grant options to relevant directors, officers, senior management, employees and non-employees. Option awards were granted with an exercise price determined by the board of directors of Cheche. In January 2020, the 2015 Incentive Plan was terminated with the concurrent grant of replacement awards under the 2019 Incentive Plan of CCT. In January 2020, CCT adopted the 2019 Incentive Plan to grant options and restricted ordinary shares to relevant directors, officers, other employees and non-employees. Option awards were granted with an exercise price determined by the board of directors. The options granted under the 2019 Incentive Plan typically becomes vested upon grant. The restricted shares granted under the 2019 Incentive Plan typically could either be granted with terms that (1) immediately vested upon grant; (2) 25% vested on each anniversary or 6.25% vested on each quarter for vesting schedule of four years; or (3) 50% vested on each anniversary for vesting schedule of two years.

The weighted average grant date fair value of options granted in 2021 and 2022 was RMB0.3904 (US$0.0573) and RMB0.3870 (US$0.0568), respectively. The fair values of the options granted are estimated on the dates of grant using the binomial option pricing model with the following assumptions used.

The following table sets forth the breakdown of share-based compensation expenses by CCT’s expense line items for the periods presented.

Discussion of Certain Balance Sheet Items

The following is a discussion of selected balance items that are material to CCT. This information should be read together with CCT’s consolidated financial statements and related notes included elsewhere in this Report.

Accounts Receivable

Accounts receivable mainly represents amount due from insurance transaction services customers. The increase in the accounts receivable was primarily due to business growth as shown in the increase in revenue, in particular in the insurance transaction services.

The following table sets forth the aging analysis of accounts receivable.

CCT’s insurance transaction service customers accounted for 98.1% and 98.7% of the total accounts receivable balance as of December 31, 2021 and 2022 respectively. These insurance transaction service customers are mainly group-wide insurance carrier conglomerates in China with a contractual and customary payment terms that generally range from 30 to 180 days. The accounts receivable that is more than 6 months old are mainly due from a branch of an insurance carrier conglomerate who operates in a province that had an extended period under a government mandated Covid-19 quarantine lock-down measures, from August to December 2022. During the lock-down period for that province, no movements beyond the residential buildings were permitted. As a result, businesses and banks could not process normal scheduled payments. It was a unique situation similar to a force majeure, rather than a credit default. In fact, these balances were substantially collected subsequent to the lock-down measures being lifted at the end of 2022. CCT determined that this balance was recoverable. As of May 15, 2023, RMB323.4 million of CCT’s accounts receivable as of December 31, 2022 was subsequently collected by CCT. No amount of accounts receivable has been written off (i.e., charged-off against the allowance) for the periods presented in the Report.

Accounts Payable

Accounts payable mainly includes payment to the cost of referral partners. Accounts payable increased by RMB46.9 million from RMB180.3 million as of December 31, 2021 to RMB227.2 million as of December 31, 2022, primarily due to an increase in cost of referral partners, which was consistent with CCT’s overall revenue growth.

Results of Operations

The following table sets forth a summary of CCT’s consolidated results of operations for the periods presented, in absolute amount and as a percentage of its operating revenue. You should read this information in conjunction with CCT’s consolidated financial statements and related notes included elsewhere in this Report. The results of operations in any period are not necessarily indicative of the results that may be expected for any future period.

Non-GAAP financial measure

CCT uses adjusted net loss, a non-GAAP financial measure, in evaluating its results of operations and for financial and operational decision-making purposes. Adjusted net loss represents net loss excluding share-based compensation expenses, amortization of intangible assets related to acquisition, change in fair value of warrant, changes in fair value of amounts due to related party and listing related professional fees. Such adjustments have no impact on income tax.

CCT presents the non-GAAP financial measure because it is used by CCT’s management to evaluate its operating performance and formulate business plans. Adjusted net loss enables CCT’s management to assess its results of operations without considering the impact of non-cash share-based compensation expenses, amortization of intangible assets related to acquisition, changes in fair value of warrant, changes in fair value of amounts due to related party and non-recurring expenses. CCT believes that adjusted net loss helps identify underlying trends in its business that could otherwise be distorted by the effect of certain expenses that are included in net loss. CCT also believes that the use of such non-GAAP measure facilitates investors’ assessment of CCT’s operating performance. Adjusted net loss should not be considered in isolation or construed as an alternative to net loss or any other measure of performance or as an indicator of CCT’s operating performance. Investors are encouraged to review the reconciliation of CCT’s historical non-GAAP financial measures to the most directly comparable GAAP measures. Adjusted net loss presented here may not be comparable to similarly titled measures presented by other companies. Other companies may calculate similarly titled measures differently, limiting their usefulness as comparative measures to CCT’s data. CCT encourages investors and others to review its financial information in its entirety and not rely on a single financial measure.

The table below sets forth a reconciliation of CCT’s net loss to adjusted net loss for the years indicated:

Year Ended December 31, 2022 Compared to Year Ended December 31, 2021

Net revenues. CCT’s net revenues increased by 54.4%, from RMB1,735.4 million in 2021 to RMB2,679.1 million in 2022, primarily due to (1) the increased amount of premiums of the insurance transactions conducted through its platform by referral partners and third-party platform partners; and (2) an increase in revenue generated from SaaS solutions.

Cost of revenues. CCT’s cost of revenues increased by 53.3% from RMB1,654.6 million in 2021 to RMB2,536.7 million in 2022, which was consistent with the growth of its business volume and revenue.

Selling and marketing expenses. CCT’s selling and marketing expenses increased by 26.2%, from RMB110.1 million in 2021 to RMB139.0 million in 2022, primarily due to (1) an increase of RMB14.3 million in marketing expenses, as CCT strategically increased its marketing and publicity efforts to improve its corporate image, online platform and mobile applications since the second half of 2021, and (2) an increase of RMB14.4 million in staff expenses, primarily due to increases in headcount in the selling and marketing related department and related expenses; partially offset by a decrease of RMB2.0 million in labor service fee and a decrease of RMB1.6 million in share-based compensation expenses. 

General and administrative expenses. CCT’s general and administrative expenses decreased by 12.9%, from RMB79.7 million in 2021 to RMB69.4 million in 2022, primarily due to (1) a decrease of RMB2.5 million in staff expenses, primarily due to decreases in headcount in the general and administrative related department, (2) a decrease of RMB2.7 million in fees related to financing activities, and (3) a decrease of RMB2.4 million in depreciation and amortization.

Research and development expenses. CCT’s research and development expenses increased by 6.6%, from RMB46.8 million in 2021 to RMB49.9 million in 2022, primarily due to an increase in staff costs of RMB8.3 million, as a result of increases in headcount in the research and development department and related expenses; partially offset by a decrease in system development service fee of RMB4.9 million.

Interest expense. CCT’s interest expense decreased by 49.2%, from RMB6.5 million in 2021 to RMB3.3 million in 2022, primarily due to the repayment of loan principal.

Net loss. As a result of the foregoing, CCT incurred a net loss of RMB91.0 million in 2022, as compared to a net loss of RMB146.5 million in 2021.

Liquidity and Capital Resources

In 2022, CCT’s principal source of liquidity was cash generated from financing activities in 2021. During the year ended December 31, 2021, CCT’s principal sources of liquidity were net proceeds from the issuance of preferred shares of RMB653.2 million, cash received from long-term borrowings from a third party of RMB19.1 million, and proceeds from short-term borrowings of RMB10.0 million.

As of December 31, 2021 and 2022, CCT had cash and cash equivalents of RMB362.4 million and RMB114.9 million, respectively. As of December 31, 2021 and 2022, CCT had amounts due to related party of RMB53.0 million and RMB59.9 million, respectively.

CCT anticipates that it will be able to meet its financing needs for the next twelve months following the Business Combination with existing cash balances. However, CCT may require additional funding due to changing business conditions or other future developments, including any investments or acquisitions it may pursue. If CCT’s existing cash resources are insufficient to meet its working capital requirements, CCT may seek to issue equity or equity-linked securities or debt securities or obtain financing from banks and other third parties. Following the Business Combination, the sale of equity or equity-linked securities would result in additional dilution to our shareholders, while the incurrence of indebtedness could subject us to operating and financial covenants that restrict our operations and ability to pay dividends to our shareholders.

The following table sets forth a summary of CCT’s cash flows for the periods indicated:

Operating Activities

Net cash used in operating activities in 2022 was RMB158.9 million, primarily due to a net loss of RMB91.0 million, partially offset by (1) adjustments primarily consisting of share-based compensation expense of RMB16.2 million, amortization of right-of-use asset of RMB8.2 million, changes in fair value of amounts due to related party of RMB6.5 million, amortization of intangible assets of RMB2.1 million and depreciation of property equipment and leasehold improvement of RMB1.2 million, partially offset by foreign exchange gains of RMB13.4 million, and (2) net cash outflow of RMB88.2 million from changes in operating assets and liabilities, primarily driven by an increase of RMB116.0 million in accounts receivable, an increase of prepayments and other current assets of RMB8.7 million, partially offset by an increase of RMB46.9 million in accounts payable and an increase of RMB11.0 million in salary and welfare benefits payable.

Net cash used in operating activities in 2021 was RMB187.6 million, primarily due to a net loss of RMB146.5 million, and (1) adjustments primarily consisting of share-based compensation expense of RMB18.5 million, changes in fair value of amounts due to related party of RMB11.2 million, amortization of right-of-use asset of RMB11.0 million, amortization of intangible assets of RMB2.2 million and depreciation of property equipment and leasehold improvement of RMB1.7 million, and (2) net cash outflow of RMB83.5 million from changes in operating assets and liabilities primarily driven by an increase of RMB164.8 million in accounts receivable, a decrease of RMB16.1 million in accrued expenses and other current liabilities and a decrease of RMB10.6 million in lease liabilities, partially offset by an increase of RMB96.4 million in accounts payable and an increase of RMB11.4 million in salary and welfare benefits payable.

Investing Activities

Net cash generated from investing activities in 2022 was RMB27.7 million, primarily due to cash received from maturities of short-term investments of RMB211.4 million, and partially offset by the placement of short-term investments of RMB182.5 million.

Net cash used in investing activities in 2021 was RMB65.3 million, primarily due to the placement of short-term investments.

Financing Activities

Net cash used in financing activities in 2022 was RMB159.0 million, primarily due to cash payments of redemption of Series C convertible redeemable preferred shares of RMB137.2 million.

Net cash generated from financing activities in 2021 was RMB583.7 million, primarily due to net proceeds from issuance of Series C and Series D convertible redeemable preferred shares of RMB653.2 million, cash received from long-term borrowings from a third party of RMB 19.1 million, cash received from short-term borrowings of from bank RMB10.0 million, and partially offset by cash repayment of borrowings of RMB68.6 million.

Capital Expenditures

CCT incurs capital expenditures primarily for purchases of property, equipment and software. CCT’s capital expenditures were RMB1.6 million and RMB1.2 million in 2021 and 2022, respectively. CCT will continue to make capital expenditures to meet the expected growth of its business.

Contractual Obligations

The following table sets forth CCT’s contractual obligations as of December 31, 2022:

Taxation

Cayman Islands

We are an exempted company incorporated in the Cayman Islands. Under the laws of the Cayman Islands, we are not subject to tax on income or capital gains, nor are we subject to withholding tax on any payment of dividends. The Cayman Islands enacted the International Tax Co-operation (Economic Substance) Act (2021 Revision) together with the Guidance Notes published by the Cayman Islands Tax Information Authority from time to time. A Cayman Islands company is required to comply with the economic substance requirements from July 1, 2019 and make an annual report in the Cayman Islands as to whether or not it is carrying on any relevant activities and if it is, it must satisfy an economic substance test.

Hong Kong

Our subsidiary incorporated in Hong Kong is subject to Hong Kong profit tax at a rate of 16.5% on its taxable income generated from operations in Hong Kong. Starting from the financial year commencing on April 1, 2018, the two-tiered profits tax regime took effect, under which the tax rate is 8.25% for assessable profits on the first HK$2 million and 16.5% for any assessable profits in excess of HK$2 million. It is not subject to withholding tax on any payment of dividends.

PRC

We are subject to VAT at the rate of 6% on its services and solutions less any deductible VAT already paid. CCT is also subject to surcharges on VAT payments in accordance with PRC law.

Under the PRC Enterprise Income Tax Law (the “EIT Law”), the PRC Subsidiaries are subject to enterprise income tax at a statutory rate of 25%. The VIE in the PRC, Cheche Technology, qualified as a “High and New Technology Enterprise” and was entitled to a preferential enterprise income tax rate of 15% from 2019 to 2021 and from 2022 to 2024.

The EIT Law also imposes a withholding income tax of 10% on dividends distributed by a foreign-invested entity (“FIE”) to its immediate holding company outside of China, if such immediate holding company is considered as a non-resident enterprise without any establishment or place within China or if the received dividends have no connection with the establishment or place of such immediate holding company within China, unless such immediate holding company’s jurisdiction of incorporation has a tax treaty with China that provides for a different withholding arrangement. The Cayman Islands, where we were incorporated, does not have such tax treaty with China. According to the arrangement between Mainland China and Hong Kong Special Administrative Region on the Avoidance of Double Taxation and Prevention of Fiscal Evasion in August 2006, dividends paid by a FIE in China to its immediate holding company in Hong Kong will be subject to withholding tax at a rate of no more than 5% if all the requirements are satisfied. To the extent that the PRC Subsidiaries, VIE and its subsidiaries have undistributed earnings, we will accrue appropriate expected withholding tax associated with repatriation of such undistributed earnings. As of December 31, 2021 and 2022, CCT did not record any such withholding tax of the PRC Subsidiaries, VIE and its subsidiaries in the PRC as they are still in accumulated deficit position.

Off-Balance Sheet Arrangements

CCT has not entered, and does not expect to enter, into any off-balance sheet arrangements. CCT also has not entered into any financial guarantees or other commitments to guarantee the payment obligations of third parties. In addition, CCT has not entered into any derivative contracts indexed to equity interests and classified as shareholders’ equity.

Furthermore, CCT does not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. CCT does not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to it or that engages in leasing, hedging or research and development services with it.

Holding Company Structure

We are a Cayman Islands holding company with no substantive operations. We carry out our business through the VIE and its subsidiaries in China, due to PRC regulatory restrictions on direct foreign ownership of companies that engage in VATS and other internet related business. We rely on dividends and other distributions from CCT and its operating subsidiaries to pay dividends to our shareholders and service our outstanding debts. Our ability to pay dividends depends upon dividends received from the PRC Subsidiaries. If the PRC Subsidiaries or any newly formed subsidiaries incur debt in the future, the instruments governing their debt may restrict their ability to pay dividends to us.

In addition, the PRC Subsidiaries may pay dividends only out of their retained earnings, if any, in accordance with PRC accounting standards and regulations. Under PRC law, each of the PRC Subsidiaries and the Affiliated Entities 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. Although the statutory reserves can be used, among other ways, to increase registered capital and eliminate future losses in excess of retained earnings of the respective companies, the reserve funds are not distributable as cash dividends except in the event of liquidation.

Remittance of dividends by a wholly foreign-owned company out of China is subject to examination by the banks designated by the SAFE.

As of December 31, 2021 and 2022, the VIE and its subsidiaries accounted for an aggregate of 56.7% and 78.6%, respectively, of the consolidated total assets and 84.4% and 85.4%, respectively, of the consolidated total liabilities. In 2021 and 2022, the VIE and its subsidiaries accounted for an aggregate of 99.5% and 94.6%, respectively, of consolidated total net revenues of CCT.

Internal Control over Financial Reporting

Prior to the Business Combination, CCT was a private company with limited accounting and financial reporting personnel and other resources to address its internal control over financial reporting. As defined in the standards established by the Public Company Accounting Oversight Board of the United States, a “material weakness” is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.

The material weaknesses identified by CCT and its independent registered public accounting firm relate to (1) CCT’s lack of sufficient accounting and financial reporting personnel with requisite knowledge of and experience in application of U.S. GAAP related to accounting treatment for certain equity transactions, leases and expected credit losses of receivables, and (2) CCT’s lack of formal financial closing policies and effective control over periodic financial closing procedures, which resulted in adjustments related to revenue, cost of sales and expenses cut-off at period end.

To remedy CCT’s identified material weaknesses, we have begun to, and will continue to (1) hire additional competent accounting staff with appropriate knowledge and experience of U.S. GAAP and SEC financial reporting requirements and strengthen period-end financial reporting controls and procedures; (2) establish an ongoing program to provide sufficient and appropriate training for financial reporting and accounting personnel, especially training related to U.S. GAAP and SEC financial reporting requirements; and (3) assign clear roles and responsibilities for accounting and financial reporting staff to address accounting and financial reporting issues.

However, we cannot assure that we will remediate our material weaknesses in a timely manner, or at all. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Securities—If we fail to implement and maintain effective internal controls to remediate the material weaknesses over financial reporting, we may be unable to accurately report our results of operations, meet our reporting obligations or prevent fraud, and investor confidence and the market price of the Class A Ordinary Shares may be materially adversely affected.”

Emerging Growth Company Status

As a company with less than $1.235 billion in revenue for its last fiscal year, we qualify as an “emerging growth company” pursuant to the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other requirements otherwise applicable to public companies. These provisions include exemption from the auditor attestation requirement under Section 404 of the Sarbanes-Oxley Act of 2002, in the assessment of an emerging growth company’s internal control over financial reporting.

The JOBS Act also provides that an emerging growth company does not need to comply with new or revised financial accounting standards until the date that a private company is otherwise required to comply with such new or revised accounting standards. We will take advantage of the extended transition period. As a result of this election, our financial statements may not be comparable to other public companies that comply with the public company effective dates for these new or revised accounting standards.

Critical Accounting Policies

In preparing CCT’s consolidated financial statements and related notes, CCT must make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities and reported revenues and expenses. CCT has based its estimates on historical experience and other assumptions that it believes reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions and differences may be material to the consolidated financial statements.

An accounting policy is considered to be critical if:

CCT believes that the following critical accounting policies require significant judgments and estimates and assumptions in preparing its consolidated financial statements. You should read the following descriptions of critical accounting policies, judgments and estimates in conjunction with CCT’s consolidated financial statements and related notes included elsewhere in this Report.

Revenue recognition

Revenue is the transaction price CCT expects to be entitled to in exchange for the promised services in a contract in the common course of CCT’s activities and is recorded net of VAT. The services to be accounted for mainly include insurance transaction services, SaaS services and other services.

The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, CCT applies the following steps:

Step 1: Identify the contract(s) with a customer;

Step 2: Identify the performance obligations in the contract