Financial Performance - The diluted earnings per share for 2023 remained at 1,090,335 thousand shares, consistent with 2022[2]. - The company reported a net profit attributable to equity holders of RMB 46.5 million for the year, compared to RMB 41.1 million in the previous year, representing an increase of 13.4%[77]. - The total operating income for the year ended December 31, 2023, was RMB 653,131 thousand, reflecting a 5% increase from the previous year[143]. - The net profit attributable to the company's equity holders was RMB 46,451 thousand, representing a 13% increase compared to RMB 41,057 thousand in the previous year[143]. - Basic earnings per share increased to RMB 0.043, up 13% from RMB 0.038 in the prior year[145]. - The company reported a significant increase in net profit for the year, which was RMB 66,664 thousand, up from RMB 60,348 thousand in the previous year, reflecting an increase of approximately 10.8%[160]. Loans and Credit Losses - The total amount of loans granted to customers as of December 31, 2023, was RMB 1,842,019 thousand, an increase from RMB 1,617,499 thousand in 2022[23]. - The expected credit loss for non-current non-collateralized loans as of December 31, 2023, was RMB 211,344 thousand, reflecting a significant change from previous periods[14]. - The company reported a credit loss of RMB 1,500 thousand for the year, compared to a gain of RMB 2,243 thousand in the previous year[5]. - The company anticipates a total expected credit loss of RMB 1,084,847 thousand for the entire duration of the loans, indicating a substantial impact on financial performance[17]. - The company experienced a decrease in credit loss provisions due to the termination of loans granted, amounting to RMB 180,850 thousand[14]. - The company reported a credit impairment loss of RMB 84,874 thousand, compared to RMB 74,712 thousand in 2022, indicating a rise of about 13.5%[160]. Assets and Liabilities - Total assets as of December 31, 2023, reached RMB 3,300,657 thousand, an 11% increase from RMB 2,985,146 thousand in 2022[143]. - Total liabilities increased by 30% to RMB 1,135,039 thousand from RMB 873,816 thousand in the previous year[143]. - The company's total equity as of December 31, 2023, was RMB 1,191.7 million, compared to RMB 1,197.6 million in the previous year, indicating a slight decrease of 0.5%[66]. - The company's total current assets reached RMB 2,701,885,000 in 2023, compared to RMB 2,348,149,000 in 2022, which is an increase of approximately 15.1%[148]. - The company's investment properties amounted to RMB 186,473,000 in 2023, slightly down from RMB 192,969,000 in 2022, indicating a decrease of approximately 3.0%[148]. Cash and Cash Equivalents - As of December 31, 2023, the total cash and cash equivalents amounted to RMB 142.4 million, a decrease of 54.0% from RMB 309.1 million in the previous year[64]. - The company reported a significant decrease of 54% in bank deposits and cash equivalents, totaling RMB 142,427 thousand compared to RMB 309,139 thousand in 2022[143]. - Cash and cash equivalents at the end of the year were RMB 137,274 thousand, down from RMB 196,805 thousand in 2022, a decrease of about 30.2%[167]. Borrowings - The total bank borrowings as of December 31, 2023, were RMB 934.2 million, an increase of 28.1% from RMB 729.2 million in the previous year[68]. - The company had a non-current bank loan of RMB 351.6 million with a fixed annual interest rate of 4.3% as of December 31, 2023[69]. - The company has secured bank borrowings of RMB 88.0 million, guaranteed by its ultimate shareholders, indicating continued support from major stakeholders[81]. - The company reported a significant increase in financial liabilities, totaling RMB 146.2 million as of December 31, 2023, compared to RMB 90.8 million in the previous year, representing a 61% increase[83]. Business Operations - The company has successfully expanded its microfinance operations, establishing a new pawn shop in Fuzhou, Fujian Province, and transforming a small loan company into a technology-focused small loan company in Suzhou[86]. - The company aims to expand its business coverage to key cities in China, including Suzhou, Chengdu, Wuhan, Hefei, Wuxi, Changsha, Nanchang, and Fuzhou, positioning itself as a leading provider of inclusive financial services[104]. - The group operates through two business segments, maintaining the same structure as in 2022[180]. - The group engages in lending services primarily through mortgage and non-mortgage loans to customers in China[187]. Interest Income - Interest income from customer loans was RMB 279,576 thousand, up from RMB 258,848 thousand in the previous year[130]. - Interest income from real estate mortgage loans reached RMB 98.4 million, a significant increase from RMB 57.0 million in the previous year, reflecting a 73% growth[87]. - The company has issued new non-mortgage loans totaling RMB 571 million, with interest income from non-mortgage loans at RMB 24.9 million, slightly up from RMB 24.6 million in the previous year[87]. - The company reported interest income of RMB 42,830 thousand from technology micro-loans, remaining stable compared to the previous year[124]. Risk Management - The company’s non-mortgage loans face risks including regulatory policy changes, credit policy changes, and liquidity risks[109]. - The company is focusing on risk control for non-secured loans by closely monitoring the actual operating conditions of customers[118]. - The measurement of expected credit losses involves significant judgments, including the use of future cash flow discount models to predict future cash flows from loans granted[193]. - The group’s expected credit loss model incorporates macroeconomic conditions and borrower credit behavior, including the probability of customer defaults[192].

Investment Activities - As of June 30, 2023, the total number of new investments increased to 3, up from 1 in the previous year, with the total investment amount (principal) rising to RMB 21 million from RMB 9 million[3] - The total principal amount of investments at the end of the reporting period reached RMB 81 million, compared to RMB 24 million in the previous year[3] - The total number of new investments in special asset investment business increased significantly, indicating a strategic focus on expanding investment activities[3] Financial Performance - The operating revenue for the inclusive finance division was RMB 11,690 thousand, showing a slight decline compared to the previous year, while the pre-tax loss decreased to RMB 7,108 thousand, attributed to increased rental income and fair value gains from stocks[15] - The group reported net cash inflow from investing activities of RMB 13.942 million, primarily due to successful disposals of certain special asset investment projects[89] - Operating revenue for the six months ended June 30, 2023, was RMB 317,157,000, representing a 4% increase from RMB 305,419,000 in the same period of 2022[180] - Profit attributable to owners of the company increased by 52% to RMB 27,619,000 compared to RMB 18,149,000 in the previous year[180] - Basic earnings per share rose by 47% to RMB 0.025 from RMB 0.017 year-on-year[180] Risk Management - The company’s risk management includes regular assessments of credit risk exposure for financial assets, with evaluations conducted at least every six months[20] - The company closely monitors the credit risk of small and medium-sized enterprises (SMEs) by assessing their financial reports monthly or quarterly[47] - The company has implemented a comprehensive risk management system covering all employees, products, and processes, including quarterly post-loan checks and reviews[48] - The company’s strategy includes continuous monitoring of clients' business operations and financial conditions to mitigate credit risks[68] Borrowings and Debt Management - As of June 30, 2023, the company's total borrowings amounted to RMB 193.0 million, down from RMB 197.0 million as of December 31, 2022, with a repayment plan over 12 years at a floating interest rate of 35 basis points below the People's Bank of China’s benchmark rate[51] - The company’s bank borrowings as of June 30, 2023, included RMB 50.0 million, a decrease from RMB 105.0 million as of December 31, 2022, secured by RMB 52.1 million in restricted bank deposits[52] - The capital-to-debt ratio of the company stood at 17.63% as of June 30, 2023, with a strategy to maintain this ratio below 50%[56] - The fixed annual interest rate on other borrowings remained at 9.0% as of June 30, 2023[55] - Non-current bank borrowings as of June 30, 2023, amounted to RMB 193 million, a slight decrease from RMB 197 million at the end of 2022[143] - Current bank borrowings decreased to RMB 328,897 thousand from RMB 402,128 thousand year-over-year[143] Customer and Market Development - The insurance agency business recorded a total of 182 transactions, generating sales revenue of RMB 415 thousand, reflecting an increase compared to the same period last year[8] - The company emphasizes customer outreach and internal integration, leading to an increase in product variety and sales performance in the insurance agency sector[8] - The company is expanding its product offerings in inclusive finance, including the introduction of a "cloud pawning" business model for movable property loans[193] - The company aims to enhance its position as a leading provider of inclusive financial services in China, focusing on small and medium-sized enterprises[194] Employee and Operational Metrics - Employee compensation and benefits for the six months ended June 30, 2023, amounted to RMB 19,300 thousand, a decrease of RMB 597 thousand compared to the same period last year[115] - The group has increased its full-time employees to 150 as of June 30, 2023, up from 147 as of December 31, 2022[132] Asset Management - As of June 30, 2023, the group had net cash inflow from operating activities of RMB 44.834 million, a significant improvement compared to a net outflow of RMB 18.947 million in the same period last year[88] - The group has no unutilized credit facilities as of June 30, 2023, consistent with the previous year[75] - The fair value of the group's investments as of June 30, 2023, was below 5% of total assets[84] - The group aims to maintain a strong capital ratio to support business operations and maximize shareholder value through prudent financial policies[144] Strategic Initiatives - The overseas financial business is currently managed directly by the headquarters, which serves as a strategic incubator for new business initiatives[10] - The group has initiated the establishment of pawn companies in provincial capital cities to explore new business opportunities[119] - The group plans to expand its financing leasing services to support the development of small and medium-sized enterprises[108] - The group is actively expanding its financial services, including pawn, micro-lending, commercial factoring, and financing leasing[158] - The group is focused on enhancing its marketing efforts and expanding its business scale in the commercial factoring sector[155]

Interim Results Announcement Summary [Disclaimer and Report Title](index=1&type=section&id=Disclaimer%20and%20Report%20Title) This announcement details the interim results and a supplemental disclosure for China Huirong Financial Holdings Limited for the six months ended June 30, 2023 - This announcement is the interim results announcement and a supplemental announcement for disclosable transactions of China Huirong Financial Holdings Limited for the six months ended June 30, 2023[7](index=7&type=chunk) - Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, making no representation as to its accuracy or completeness[6](index=6&type=chunk) [Key Financial Highlights](index=1&type=section&id=Key%20Financial%20Highlights) For the six months ended June 30, 2023, revenue increased by 4% to RMB 317,157 thousand, profit attributable to owners surged by 52% to RMB 27,619 thousand, and basic earnings per share grew by 47% to RMB 0.025 Key Financial Data for the Six Months Ended June 30 | Indicator | 2023 (RMB '000) | 2022 (RMB '000) | Change % | | :--- | :--- | :--- | :--- | | Operating Revenue | 317,157 | 305,419 | 4% | | Operating Expenses | 202,974 | 191,717 | 6% | | Profit Attributable to Owners of the Company | 27,619 | 18,149 | 52% | | Basic Earnings Per Share (RMB) | 0.025 | 0.017 | 47% | | **Financial Position (Period End):** | | | | | Total Assets | 2,975,311 | 2,985,146 | 0% | | Total Liabilities | 834,324 | 873,816 | -5% | | Loans to Customers | 2,120,233 | 2,107,055 | 1% | | Bank Balances and Cash | 287,205 | 309,139 | -7% | | Net Assets | 2,140,987 | 2,111,330 | 1% | Interim Condensed Consolidated Financial Statements [Interim Condensed Consolidated Statement of Comprehensive Income](index=2&type=section&id=Interim%20Condensed%20Consolidated%20Statement%20of%20Comprehensive%20Income) For the six months ended June 30, 2023, the Group's operating revenue increased to RMB 317,157 thousand, driven by interest and goods sales, with profit for the period at RMB 36,527 thousand Summary of Interim Condensed Consolidated Statement of Comprehensive Income (For the Six Months Ended June 30) | Indicator | 2023 (RMB '000) | 2022 (RMB '000) | | :--- | :--- | :--- | | Interest Income | 128,610 | 125,126 | | Revenue from Sales of Goods | 187,980 | 178,474 | | Consulting Fee Income | 109 | 723 | | Handling Fee Income | 415 | 1,096 | | Finance Lease Income | 43 | — | | Operating Revenue | 317,157 | 305,419 | | Operating Costs | (202,974) | (191,717) | | Net Investment Income/(Loss) | 3,994 | (286) | | Credit Impairment Losses | (39,453) | (39,966) | | Other Operating Income/(Expenses) | 5,215 | (1,711) | | Net Operating Income | 83,939 | 73,650 | | Administrative Expenses | (39,774) | (34,514) | | Other Gains, Net | 949 | 1,755 | | Share of Net Profit of Joint Ventures | 2,134 | — | | Profit Before Income Tax | 47,248 | 40,891 | | Income Tax Expense | (10,721) | (12,399) | | Profit for the Period | 36,527 | 28,492 | | Profit Attributable to Owners of the Company | 27,619 | 18,149 | | Profit Attributable to Non-controlling Interests | 8,908 | 10,343 | | Basic Earnings Per Share (RMB) | 0.025 | 0.017 | | Diluted Earnings Per Share (RMB) | 0.025 | 0.017 | [Interim Condensed Consolidated Statement of Financial Position](index=4&type=section&id=Interim%20Condensed%20Consolidated%20Statement%20of%20Financial%20Position) As of June 30, 2023, the Group's total assets were RMB 2,975,311 thousand, total liabilities RMB 834,324 thousand, and total equity RMB 2,140,987 thousand Summary of Interim Condensed Consolidated Statement of Financial Position (As of June 30) | Indicator | 2023 (RMB '000) | 2022 (RMB '000) | | :--- | :--- | :--- | | **Assets** | | | | Property, Plant and Equipment | 54,486 | 54,682 | | Right-of-use Assets | 16,029 | 17,690 | | Investments Accounted for Using the Equity Method | 8,934 | 26,005 | | Investment Properties | 192,969 | 192,969 | | Intangible Assets | 770 | 1,127 | | Non-current Loans to Customers | 272,251 | 258,969 | | Finance Lease Receivables (Non-current) | 9,404 | — | | Deferred Income Tax Assets | 96,400 | 85,555 | | Other Non-current Assets | 718 | — | | **Total Non-current Assets** | **651,961** | **636,997** | | Inventories | 13,761 | 2,163 | | Other Current Assets | 55,722 | 66,127 | | Fee Receivables | 162 | 3 | | Current Loans to Customers | 1,847,982 | 1,848,086 | | Finance Lease Receivables (Current) | 9,640 | — | | Financial Assets at Fair Value Through Profit or Loss | 108,878 | 122,631 | | Bank Balances and Cash | 287,205 | 309,139 | | **Total Current Assets** | **2,323,350** | **2,348,149** | | **Total Assets** | **2,975,311** | **2,985,146** | | **Equity** | | | | Equity Attributable to Owners of the Company | 1,870,986 | 1,872,587 | | Non-controlling Interests | 270,001 | 238,743 | | **Total Equity** | **2,140,987** | **2,111,330** | | **Liabilities** | | | | Lease Liabilities (Non-current) | 2,078 | 2,597 | | Borrowings (Non-current) | 193,000 | 197,000 | | Deferred Income Tax Liabilities | 21,931 | 18,508 | | **Total Non-current Liabilities** | **217,009** | **218,105** | | Other Current Liabilities | 62,250 | 90,835 | | Current Income Tax Liabilities | 23,907 | 28,127 | | Amounts Due to Related Parties | 633 | 633 | | Dividends Payable | 30,481 | 1,261 | | Lease Liabilities (Current) | 1,897 | 2,627 | | Borrowings (Current) | 498,147 | 532,228 | | **Total Current Liabilities** | **617,315** | **655,711** | | **Total Liabilities** | **834,324** | **873,816** | | **Total Equity and Liabilities** | **2,975,311** | **2,985,146** | Notes to Interim Condensed Consolidated Financial Information [General Information and Basis of Preparation](index=6&type=section&id=General%20Information%20and%20Basis%20of%20Preparation) The company, incorporated in the Cayman Islands, primarily offers secured and unsecured lending services in mainland China, with interim financial information prepared under HKAS 34 - The Company was incorporated in the Cayman Islands as an exempted company with limited liability on November 11, 2011, and listed on The Stock Exchange of Hong Kong Limited on October 28, 2013[17](index=17&type=chunk)[18](index=18&type=chunk) - The Group primarily provides lending services through secured and unsecured loans to customers in mainland China[36](index=36&type=chunk) - The interim condensed consolidated financial information has been prepared in accordance with Hong Kong Accounting Standard 34 "Interim Financial Reporting" issued by the Hong Kong Institute of Certified Public Accountants and on a going concern basis, with accounting policies consistent with those applied in the consolidated financial statements for the year ended December 31, 2022[19](index=19&type=chunk)[37](index=37&type=chunk)[38](index=38&type=chunk) [Significant Accounting Policies and Estimates](index=6&type=section&id=Significant%20Accounting%20Policies%20and%20Estimates) The Group has adopted new or revised standards applicable to the current reporting period, with no significant impact expected, and management's key accounting estimates remain consistent with the prior year - The Group did not need to change its accounting policies or make retrospective adjustments upon adopting new and revised standards, and other standards not yet effective are not expected to have a significant impact on the Group in the current or future reporting periods[20](index=20&type=chunk)[61](index=61&type=chunk) - The significant judgments and key sources of estimation uncertainty made by management in preparing the interim condensed consolidated financial information are the same as those applied in the consolidated financial statements for the year ended December 31, 2022[21](index=21&type=chunk)[63](index=63&type=chunk) [Segment Information](index=7&type=section&id=Segment%20Information) The Group manages its operations through two segments: Inclusive Finance, providing lending services, and Ecological Finance, focusing on supply chain technology, factoring, and equity investments - The Group manages its businesses through two operating and reportable segments for the six months ended June 30, 2023: Inclusive Finance Business Segment and Ecological Finance Business Segment[23](index=23&type=chunk)[64](index=64&type=chunk) - The Inclusive Finance Business Segment primarily provides lending services in China, including secured and unsecured loans[65](index=65&type=chunk) - The Ecological Finance Business Segment primarily focuses on supply chain technology, technology-assisted lending, factoring, insurance brokerage, and equity investment businesses[40](index=40&type=chunk) Summary of Segment Results (For the Six Months Ended June 30) | Indicator | Inclusive Finance Business Segment (2023) | Ecological Finance Business Segment (2023) | Headquarters and Others (2023) | Total (2023) | | :--- | :--- | :--- | :--- | :--- | | External Operating Revenue (RMB '000) | 105,975 | 205,941 | 5,241 | 317,157 | | External Operating Costs (RMB '000) | (4,799) | (189,293) | (8,882) | (202,974) | | Net Investment Income (RMB '000) | 1 | 304 | 3,689 | 3,994 | | Credit Impairment Losses (RMB '000) | (40,863) | (1,186) | 2,596 | (39,453) | | Profit/(Loss) Before Income Tax (RMB '000) | 41,944 | 12,412 | (7,108) | 47,248 | | **Segment Assets (Period End)** | | | | | | Segment Assets (RMB '000) | 1,540,763 | 833,798 | 607,338 | 2,975,311 | | Segment Liabilities (RMB '000) | (215,096) | (207,034) | (418,248) | (834,324) | [Revenue and Cost Analysis](index=10&type=section&id=Revenue%20and%20Cost%20Analysis) For the six months ended June 30, 2023, interest income primarily derived from customer loans, and goods sales revenue was RMB 187,980 thousand, while consulting and handling fee income decreased [Interest Income](index=10&type=section&id=Interest%20Income) Total interest income for the six months ended June 30, 2023, was RMB 128,610 thousand, mainly from secured and unsecured customer loans Interest Income Details (For the Six Months Ended June 30) | Source | 2023 (RMB '000) | 2022 (RMB '000) | | :--- | :--- | :--- | | Secured Loans to Customers | 82,639 | 74,978 | | Unsecured Loans to Customers | 43,125 | 47,209 | | Bank Deposit Interest Income | 2,846 | 2,939 | | **Total** | **128,610** | **125,126** | [Revenue and Cost of Goods Sold](index=10&type=section&id=Revenue%20and%20Cost%20of%20Goods%20Sold) For the six months ended June 30, 2023, revenue from sales of goods was RMB 187,980 thousand, with cost of goods sold at RMB 185,782 thousand, both increasing year-on-year Revenue and Cost of Goods Sold (For the Six Months Ended June 30) | Indicator | 2023 (RMB '000) | 2022 (RMB '000) | | :--- | :--- | :--- | | Revenue from Sales of Goods — as principal | 187,980 | 178,474 | | Cost of Goods Sold — as principal | (185,782) | (177,099) | [Consulting and Handling Fee Income](index=10&type=section&id=Consulting%20and%20Handling%20Fee%20Income) For the six months ended June 30, 2023, loan consulting fee income significantly decreased to RMB 109 thousand, and handling fee income, mainly from insurance brokerage, also decreased to RMB 415 thousand Consulting Fee Income (For the Six Months Ended June 30) | Source | 2023 (RMB '000) | 2022 (RMB '000) | | :--- | :--- | :--- | | Loan Consulting Fee Income | 109 | 723 | Handling Fee Income (For the Six Months Ended June 30) | Source | 2023 (RMB '000) | 2022 (RMB '000) | | :--- | :--- | :--- | | Guarantee Business Handling Fee Income | — | 755 | | Insurance Brokerage Handling Fee Income | 415 | 341 | | **Total** | **415** | **1,096** | [Expenses and Other Income](index=11&type=section&id=Expenses%20and%20Other%20Income) For the six months ended June 30, 2023, total interest expense increased, net investment income turned positive, credit impairment losses slightly decreased, and other operating income significantly improved [Interest Expense](index=11&type=section&id=Interest%20Expense) Total interest expense for the six months ended June 30, 2023, increased to RMB 17,192 thousand, primarily due to higher bank borrowing interest expenses Interest Expense Details (For the Six Months Ended June 30) | Source | 2023 (RMB '000) | 2022 (RMB '000) | | :--- | :--- | :--- | | Bank Borrowing Interest Expense | 12,302 | 14,379 | | Micro-credit Company Borrowing Interest Expense | 2,033 | 3 | | Other Borrowing Interest Expense | 2,432 | — | | Other Interest Expense | 425 | 236 | | **Total** | **17,192** | **14,618** | [Net Investment Income/(Loss)](index=11&type=section&id=Net%20Investment%20Income%2F%28Loss%29) For the six months ended June 30, 2023, net investment income was RMB 3,994 thousand, a turnaround from a net loss in the prior year, mainly driven by fair value changes in financial assets at FVTPL Net Investment Income/(Loss) Details (For the Six Months Ended June 30) | Source | 2023 (RMB '000) | 2022 (RMB '000) | | :--- | :--- | :--- | | Fair Value Change Gain/(Loss) — Financial Assets at FVTPL | 5,608 | (626) | | Net (Loss)/Gain on Disposal of Financial Assets | (1,937) | 340 | | Others | 323 | — | | **Total** | **3,994** | **(286)** | [Credit Impairment Losses](index=12&type=section&id=Credit%20Impairment%20Losses) For the six months ended June 30, 2023, credit impairment losses slightly decreased to RMB 39,453 thousand, primarily from customer loans Credit Impairment Losses Details (For the Six Months Ended June 30) | Source | 2023 (RMB '000) | 2022 (RMB '000) | | :--- | :--- | :--- | | Credit Impairment Losses on Loans to Customers | 39,371 | 41,170 | | Credit Impairment Losses on Financial Guarantees | — | (1,359) | | Credit Impairment Losses on Other Current Assets | 82 | 155 | | **Total** | **39,453** | **39,966** | [Other Operating Income/(Expenses)](index=12&type=section&id=Other%20Operating%20Income%2F%28Expenses%29) For the six months ended June 30, 2023, other operating income significantly improved to RMB 5,215 thousand, primarily due to rental income and net gains from disposal of repossessed assets Other Operating Income/(Expenses) Details (For the Six Months Ended June 30) | Source | 2023 (RMB '000) | 2022 (RMB '000) | | :--- | :--- | :--- | | Net Gain/(Loss) on Disposal of Repossessed Assets | 1,015 | (2,367) | | Rental Income | 3,681 | 399 | | Others | 519 | 257 | | **Total** | **5,215** | **(1,711)** | [Other Gains, Net](index=12&type=section&id=Other%20Gains%2C%20Net) For the six months ended June 30, 2023, other gains, net, decreased to RMB 949 thousand, mainly from net exchange gains Other Gains, Net Details (For the Six Months Ended June 30) | Source | 2023 (RMB '000) | 2022 (RMB '000) | | :--- | :--- | :--- | | Net Exchange Gains | 880 | 1,755 | | Government Grants | 69 | — | | **Total** | **949** | **1,755** | [Income Tax Expense](index=12&type=section&id=Income%20Tax%20Expense) For the six months ended June 30, 2023, income tax expense decreased to RMB 10,721 thousand, with mainland China operations taxed at 25% and Hong Kong profits at 16.5% Income Tax Expense Details (For the Six Months Ended June 30) | Source | 2023 (RMB '000) | 2022 (RMB '000) | | :--- | :--- | :--- | | Current Income Tax | 18,143 | 8,875 | | Deferred Income Tax | (7,422) | 3,524 | | **Total** | **10,721** | **12,399** | - The Group's income tax provision for its operations in mainland China has been calculated based on the estimated taxable profit at the applicable corporate income tax rate of **25%** in accordance with existing laws, interpretations, and practices[109](index=109&type=chunk) - For the six months ended June 30, 2023, the applicable Hong Kong profits tax rate for taxable profits earned or derived in Hong Kong by the Group was **16.5%**[58](index=58&type=chunk) [Earnings Per Share](index=3&type=section&id=Earnings%20Per%20Share) For the six months ended June 30, 2023, profit attributable to owners was RMB 27,619 thousand, resulting in basic earnings per share of RMB 0.025, with diluted EPS being the same due to no dilutive potential ordinary shares Earnings Per Share Calculation (For the Six Months Ended June 30) | Indicator | 2023 (RMB '000) | 2022 (RMB '000) | | :--- | :--- | :--- | | Profit Attributable to Owners of the Company for the Period | 27,619 | 18,149 | | Weighted Average Number of Ordinary Shares in Issue ('000 shares) | 1,090,335 | 1,090,335 | | Basic Earnings Per Share (RMB) | 0.025 | 0.017 | | Diluted Earnings Per Share (RMB) | 0.025 | 0.017 | - The Group has not issued any categories of potential dilutive ordinary shares, therefore, diluted earnings per share are the same as basic earnings per share[86](index=86&type=chunk) [Dividends](index=14&type=section&id=Dividends) On July 7, 2023, the company paid a dividend of HKD 0.03 per ordinary share, totaling HKD 32.7 million (equivalent to RMB 29.2 million), for the operating results as of December 31, 2022 - At the Company's annual general meeting held on June 12, 2023, a dividend of **HKD 0.03** per ordinary share, totaling **HKD 32.7 million** (equivalent to **RMB 29.2 million**), was proposed for the operating results as of December 31, 2022, and was paid on July 7, 2023[87](index=87&type=chunk)[112](index=112&type=chunk) [Assets Breakdown](index=15&type=section&id=Assets%20Breakdown) The Group's non-current assets primarily include property, plant and equipment, right-of-use assets, investments accounted for using the equity method, investment properties, and loans to customers [Property, Plant and Equipment](index=15&type=section&id=Property%2C%20Plant%20and%20Equipment) As of June 30, 2023, the carrying value of property, plant and equipment was RMB 54,486 thousand, mainly comprising buildings, vehicles, and electronic equipment Carrying Value of Property, Plant and Equipment (As of June 30) | Category | 2023 (RMB '000) | 2022 (RMB '000) | | :--- | :--- | :--- | | Buildings | 50,108 | 50,583 | | Vehicles | 442 | 258 | | Electronic Equipment and Others | 3,936 | 3,841 | | **Total** | **54,486** | **54,682** | [Leases](index=16&type=section&id=Leases) As of June 30, 2023, right-of-use assets had a carrying value of RMB 16,029 thousand, primarily land use rights and properties, with current lease liabilities at RMB 1,897 thousand and non-current at RMB 2,078 thousand Carrying Value of Right-of-use Assets (As of June 30) | Category | 2023 (RMB '000) | 2022 (RMB '000) | | :--- | :--- | :--- | | Land Use Rights | 12,088 | 12,259 | | Properties | 3,941 | 5,431 | | **Total** | **16,029** | **17,690** | Lease Liabilities (As of June 30) | Category | 2023 (RMB '000) | 2022 (RMB '000) | | :--- | :--- | :--- | | Current | 1,897 | 2,627 | | Non-current | 2,078 | 2,597 | | **Total** | **3,975** | **5,224** | - As of June 30, 2023, land use rights of **RMB 193.0 million** were pledged as collateral for non-current dedicated borrowings used to finance the construction and operation costs of Huirong Financial Tower[96](index=96&type=chunk) [Investments Accounted for Using the Equity Method](index=17&type=section&id=Investments%20Accounted%20for%20Using%20the%20Equity%20Method) As of June 30, 2023, investments accounted for using the equity method decreased significantly to RMB 8,934 thousand, mainly due to capital reduction and dividends received Changes in Investments Accounted for Using the Equity Method (For the Six Months Ended June 30) | Item | 2023 (RMB '000) | 2022 (RMB '000) | | :--- | :--- | :--- | | As at January 1 | 26,005 | 17,475 | | Capital Contribution | — | 13,490 | | Capital Reduction | (17,071) | — | | Profit for the Period | 2,134 | — | | Dividends Received | (2,134) | — | | **As at June 30** | **8,934** | **30,965** | - The Group has joint control over Suzhou Cibei, hence the investment is accounted for using the equity method[98](index=98&type=chunk) [Investment Properties](index=18&type=section&id=Investment%20Properties) As of June 30, 2023, the fair value of investment properties was RMB 192,969 thousand, remaining stable, with Huirong Financial Tower pledged for non-current dedicated bank borrowings Fair Value of Investment Properties (As of June 30) | Category | 2023 (RMB '000) | 2022 (RMB '000) | | :--- | :--- | :--- | | Huirong Financial Tower | 191,289 | 191,289 | | Others | 1,680 | 1,680 | | **Total** | **192,969** | **192,969** | - Huirong Financial Tower is pledged as collateral for non-current dedicated bank borrowings of **RMB 193.0 million**, which were used to finance its construction and operation costs[102](index=102&type=chunk)[394](index=394&type=chunk) [Loans to Customers](index=19&type=section&id=Loans%20to%20Customers) As of June 30, 2023, net loans to customers totaled RMB 2,120,233 thousand, with current loans at RMB 1,847,982 thousand and non-current at RMB 272,251 thousand, and interest rates ranging from 5.5% to 54.0% Net Loans to Customers (As of June 30) | Category | 2023 (RMB '000) | 2022 (RMB '000) | | :--- | :--- | :--- | | **Non-current** | | | | Unsecured Loans | 278,619 | 264,828 | | Less: Provision for Expected Credit Losses | (6,368) | (5,859) | | **Non-current Loans to Customers, Net** | **272,251** | **258,969** | | **Current** | | | | Loans to Customers, Gross | 2,593,766 | 2,558,086 | | Less: Provision for Expected Credit Losses | (745,784) | (710,000) | | **Current Loans to Customers, Net** | **1,847,982** | **1,848,086** | | **Total Loans to Customers, Net** | **2,120,233** | **2,107,055** | - For the six months ended June 30, 2023, fixed annual interest rates for real estate mortgage loans and equity pledge loans ranged from **8.0% to 24.0%**, chattel mortgage loans from **8.0% to 54.0%**, guarantee loans from **5.5% to 18.0%**, and other unsecured loans from **8.0% to 16.0%**[104](index=104&type=chunk) [Deferred Income Tax](index=22&type=section&id=Deferred%20Income%20Tax) As of June 30, 2023, net deferred income tax assets were RMB 96,400 thousand, primarily from expected credit losses and deductible losses, while net deferred income tax liabilities were RMB 21,931 thousand, mainly from investment property gains Composition of Deferred Income Tax Assets (As of June 30) | Item | 2023 (RMB '000) | 2022 (RMB '000) | | :--- | :--- | :--- | | Expected Credit Losses on Financial Assets | 95,589 | 85,525 | | Net Losses from Financial Instruments at FVTPL | — | 981 | | Deductible Losses | 4,708 | 6,151 | | **Total Deferred Income Tax Assets** | **100,297** | **92,657** | | Offset against Deferred Income Tax Liabilities | (3,897) | (7,102) | | **Net Deferred Income Tax Assets** | **96,400** | **85,555** | Composition of Deferred Income Tax Liabilities (As of June 30) | Item | 2023 (RMB '000) | 2022 (RMB '000) | | :--- | :--- | :--- | | Net Gains on Investment Properties | 24,925 | 24,925 | | Net Gains from Financial Instruments at FVTPL | 903 | 685 | | **Total Deferred Income Tax Liabilities** | **25,828** | **25,610** | | Offset against Deferred Income Tax Assets | (3,897) | (7,102) | | **Net Deferred Income Tax Liabilities** | **21,931** | **18,508** | [Financial Assets at Fair Value Through Profit or Loss](index=24&type=section&id=Financial%20Assets%20at%20Fair%20Value%20Through%20Profit%20or%20Loss) As of June 30, 2023, financial assets at fair value through profit or loss totaled RMB 108,878 thousand, mainly comprising equity securities and structured deposits, with RMB 20.0 million of structured deposits pledged for bank borrowings Financial Assets at Fair Value Through Profit or Loss (As of June 30) | Category | 2023 (RMB '000) | 2022 (RMB '000) | | :--- | :--- | :--- | | Equity Securities | 88,259 | 72,129 | | Structured Deposits | 20,619 | 50,502 | | **Total** | **108,878** | **122,631** | - As of June 30, 2023, **RMB 20.0 million** of structured deposits were pledged as collateral for the Group's **RMB 20.0 million** bank borrowings[165](index=165&type=chunk) [Bank Balances and Cash](index=24&type=section&id=Bank%20Balances%20and%20Cash) As of June 30, 2023, total bank balances and cash decreased to RMB 287,205 thousand, with RMB 52.1 million in restricted bank time deposits pledged for bank borrowings Bank Balances and Cash by Currency (As of June 30) | Currency | 2023 (RMB '000) | 2022 (RMB '000) | | :--- | :--- | :--- | | Renminbi | 282,037 | 299,772 | | US Dollar | 3,850 | 6,835 | | Hong Kong Dollar | 1,318 | 2,532 | | **Total** | **287,205** | **309,139** | - As of June 30, 2023, time deposits of **RMB 52.1 million** were restricted as collateral for the Group's **RMB 50.0 million** bank borrowings[194](index=194&type=chunk) [Equity and Liabilities Breakdown](index=26&type=section&id=Equity%20and%20Liabilities%20Breakdown) As of June 30, 2023, the company's share capital remained stable, share premium and other reserves were unchanged, and total borrowings were RMB 691,147 thousand, with a decrease in other current liabilities [Share Capital and Reserves](index=26&type=section&id=Share%20Capital%20and%20Reserves) As of June 30, 2023, the company's issued and fully paid share capital remained at 1,090,335,000 ordinary shares, totaling RMB 8,662 thousand, with no changes in ordinary shares, share premium, or other reserves during the period Share Capital (As of June 30) | Category | Number of Shares | Ordinary Shares (HKD) | Ordinary Shares (RMB) | | :--- | :--- | :--- | :--- | | As at June 30, 2023 | 1,090,335,000 | 10,903,350 | 8,662,017 | | As at December 31, 2022 | 1,090,335,000 | 10,903,350 | 8,662,017 | - There were no changes in ordinary shares during the period[168](index=168&type=chunk) - Share premium, capital reserve, statutory reserve, general reserve, and share-based payment reserve totaled **RMB 1,197,600 thousand**, consistent with the beginning of the year[196](index=196&type=chunk) [Borrowings](index=26&type=section&id=Borrowings) As of June 30, 2023, the Group's total borrowings were RMB 691,147 thousand, including RMB 193,000 thousand in non-current bank borrowings and RMB 498,147 thousand in current borrowings, with several bank borrowings secured by assets or third-party guarantees Borrowings Details (As of June 30) | Category | 2023 (RMB '000) | 2022 (RMB '000) | | :--- | :--- | :--- | | **Non-current** | | | | Bank Borrowings | 193,000 | 197,000 | | **Current** | | | | Bank Borrowings | 328,897 | 402,128 | | Borrowings from Other Companies | 52,000 | 52,000 | | Borrowings from Micro-credit Companies | 67,500 | 45,500 | | Borrowings from Employees within the Group | 49,750 | 32,600 | | **Total Current Borrowings** | **498,147** | **532,228** | | **Total Borrowings** | **691,147** | **729,228** | - **RMB 193.0 million** of non-current dedicated borrowings are secured by Huirong Financial Tower and bear a floating interest rate of the People's Bank of China's five-year loan prime rate minus 35 basis points[170](index=170&type=chunk)[414](index=414&type=chunk) - Multiple bank borrowings are pledged by restricted bank time deposits, structured deposits, or guaranteed by Jiangsu Wuzhong Jiaye Group Co., Ltd., the ultimate shareholder, Jiangsu Wuzhong Group Co., Ltd., and Suzhou Guofa Financing Guarantee Co., Ltd[171](index=171&type=chunk)[172](index=172&type=chunk)[173](index=173&type=chunk)[198](index=198&type=chunk)[199](index=199&type=chunk)[200](index=200&type=chunk)[415](index=415&type=chunk)[421](index=421&type=chunk) [Other Current Liabilities](index=28&type=section&id=Other%20Current%20Liabilities) As of June 30, 2023, total other current liabilities decreased to RMB 62,250 thousand, primarily including payables for construction, prepayments from financial asset transferees, and sales prepayments Other Current Liabilities Details (As of June 30) | Item | 2023 (RMB '000) | 2022 (RMB '000) | | :--- | :--- | :--- | | Payables for Construction | 19,958 | 34,844 | | Prepayments from Financial Asset Transferees | 22,146 | 25,471 | | Sales Prepayments | 7,004 | 8,609 | | Accrued Employee Benefits | 4,371 | 7,871 | | Business Tax and Other Taxes Payable | 1,511 | 1,992 | | Redemption Deposits | 290 | — | | Other Financial Liabilities | 6,970 | 12,048 | | **Total** | **62,250** | **90,835** | [Contingent Liabilities and Commitments](index=28&type=section&id=Contingent%20Liabilities%20and%20Commitments) As of June 30, 2023, the Group had no significant contingent liabilities, and total capital commitments were RMB 37,495 thousand, mainly for agreed capital injections into several investees - As of June 30, 2023, the Group had no significant contingent liabilities[177](index=177&type=chunk)[204](index=204&type=chunk)[418](index=418&type=chunk) Capital Commitments Details (As of June 30) | Investee Company Name | 2023 (RMB '000) | 2022 (RMB '000) | | :--- | :--- | :--- | | Suzhou Cibei | 20,495 | 20,495 | | Qianhui Tongcui | 10,000 | 10,000 | | Tiankai Huirui | — | 10,000 | | Kangli Junzhuo | 5,000 | 8,000 | | Qianrong Yuanfeng | — | 8,000 | | Zhongxin Hengyuan | 2,000 | 2,000 | | **Total** | **37,495** | **58,495** | Management Discussion and Analysis [Business Review and Development](index=30&type=section&id=Business%20Review%20and%20Development) The Group's overall operations significantly improved year-on-year, driven by its dual-wheel strategy of Inclusive Finance and Ecological Finance, with progress across various business segments - The Company, guided by a nationwide orientation and leveraging its Hong Kong listed company platform, adheres to a dual-wheel strategy of Inclusive Finance and Ecological Finance to provide comprehensive financial services to SMEs and individuals[182](index=182&type=chunk) - During the reporting period, the Company's overall operating performance significantly improved compared to the same period last year, adhering to the operating philosophy of "intensive operation and refined management"[208](index=208&type=chunk) [Inclusive Finance Business Segment](index=30&type=section&id=Inclusive%20Finance%20Business%20Segment) The Inclusive Finance Business Segment, operating across multiple platforms, offers pawn, micro-credit, relending fund, art investment, and luxury goods sales services, primarily addressing short-term funding needs for SMEs and individuals - The Inclusive Finance Business Segment primarily provides lending services to customers through secured loans (real estate mortgage loans, chattel mortgage loans) and unsecured loans (equity pledge loans, guarantee loans, and other unsecured loans), focusing on solving short-term operational turnover problems for SMEs and short-term funding needs for individuals[183](index=183&type=chunk) - Currently, the business primarily covers Suzhou, Chengdu, Wuhan, Hefei, Wuxi, Changsha, and Nanchang, continuously striving to become a leading inclusive financial service provider in China[184](index=184&type=chunk) [Pawn Business](index=31&type=section&id=Pawn%20Business) Pawn business includes real estate mortgage, chattel mortgage, and unsecured loans, with real estate mortgage loan balance rising but interest income falling, while chattel mortgage and unsecured loans saw increases in both balance and interest income Pawn Business Loan Details (As of June 30) | Indicator | 2023 | 2022 | | :--- | :--- | :--- | | Total New Real Estate Mortgage Loans Granted | 298 | 342 | | Total New Chattel Mortgage Loans Granted | 1,697 | 1,140 | | Total New Real Estate Mortgage Loan Amount (RMB million) | 211 | 205 | | Total New Chattel Mortgage Loan Amount (RMB million) | 164 | 58 | | Real Estate Mortgage Loan Balance at Period End (Principal, RMB million) | 708 | 687 | | Chattel Mortgage Loan Balance at Period End (Principal, RMB million) | 158 | 79 | | Real Estate Mortgage Loan Interest Income (RMB '000) | 48,159 | 50,991 | | Chattel Mortgage Loan Interest Income (RMB '000) | 11,190 | 6,802 | | Total New Unsecured Loans Granted | 20 | 25 | | Total New Unsecured Loan Amount (RMB million) | 362 | 401 | | Unsecured Loan Balance at Period End (Principal, RMB million) | 397 | 375 | | Unsecured Loan Interest Income (RMB '000) | 12,464 | 11,997 | - The decrease in real estate mortgage loan interest income was primarily due to the recovery of some large loans in the third stage, leading to a reduction in discounted interest income reversal[241](index=241&type=chunk) - The significant increase in chattel mortgage loan balance and interest income was mainly due to intensified marketing efforts, focus on art pawn business, and the creation of a "cloud pawn" platform[243](index=243&type=chunk) - The increase in unsecured loan balance and interest income was primarily due to slightly increased loan support for long-term cooperative clients[245](index=245&type=chunk) [Micro-credit Business](index=35&type=section&id=Micro-credit%20Business) Micro-credit business ended the period with a balance of RMB 416 million and interest income of RMB 20,579 thousand, a year-on-year increase, driven by interbank funding, business expansion, and successful loan recovery Micro-credit Business Operating Performance (As of June 30) | Indicator | 2023 | 2022 | | :--- | :--- | :--- | | Total New Loans Granted | 67 | 111 | | Total New Loan Amount (RMB million) | 194 | 187 | | Balance at Period End (Principal, RMB million) | 416 | 349 | | Interest Income (RMB '000) | 20,579 | 19,744 | - The increase in micro-credit business interest income was primarily due to obtaining interbank funding, expanding business scale, and achieving breakthroughs in the recovery of existing loans[223](index=223&type=chunk) - The future development direction is to increase services for technology-driven and low-carbon SMEs, fulfilling the social responsibility of inclusive finance in promoting regional economic development, while maintaining stable dividend returns for shareholders[224](index=224&type=chunk) [Relending Fund Business](index=37&type=section&id=Relending%20Fund%20Business) Relending fund business ended the period with a balance of RMB 45 million, a significant increase, but interest income decreased significantly to RMB 3,856 thousand, due to short loan terms and the recovery of large loans Relending Fund Business Operating Performance (As of June 30) | Indicator | 2023 | 2022 | | :--- | :--- | :--- | | Total New Loans Granted | 453 | 312 | | Total New Loan Amount (RMB million) | 2,214 | 1,937 | | Balance at Period End (Principal, RMB million) | 45 | 13 | | Interest Income (RMB '000) | 3,856 | 6,234 | - The significant increase in the relending fund business balance at period-end was primarily due to the business's characteristics of short loan terms and high turnover rate, leading to large fluctuations in the period-end balance[228](index=228&type=chunk) - The significant decrease in relending fund business interest income was mainly due to the recovery of some large loans in the third stage, leading to a reduction in discounted interest income reversal[228](index=228&type=chunk) [Art Investment Business](index=39&type=section&id=Art%20Investment%20Business) Art investment business had an outstanding amount of RMB 148 million and operating income of RMB 9,502 thousand, a year-on-year increase, driven by deeper cooperation with auction houses and expanded investment scale Art Investment Business Operating Performance (As of June 30) | Indicator | 2023 | 2022 | | :--- | :--- | :--- | | Total New Art Transactions | 6 | 4 | | Total New Art Transaction Amount (RMB million) | 68 | 54 | | Art Transaction Outstanding Amount at Period End (RMB million) | 148 | 131 | | Art Operating Income (RMB '000) | 9,502 | 8,404 | - The increase in art operating income was primarily due to the Company deepening cooperation with major auction houses and effectively expanding its art investment scale after validating its business model[231](index=231&type=chunk) [Luxury Goods Sales Business](index=40&type=section&id=Luxury%20Goods%20Sales%20Business) Luxury goods sales business recorded 648 transactions and sales revenue of RMB 7,502 thousand, a year-on-year increase, primarily due to opening mall stores and increased natural customer traffic Luxury Goods Sales Business Operating Performance (As of June 30) | Indicator | 2023 | 2022 | | :--- | :--- | :--- | | Total Transactions | 648 | 175 | | Sales Revenue (RMB '000) | 7,502 | 5,129 | - The increase in luxury goods sales revenue was primarily due to the Company opening mall stores, which led to increased natural customer traffic[290](index=290&type=chunk) [Ecological Finance Business Segment](index=41&type=section&id=Ecological%20Finance%20Business%20Segment) The Ecological Finance Business Segment, driven by innovation, engages in commercial factoring, finance leasing, supply chain management, equity investment, special asset investment, and insurance agency businesses, focusing on integrating internal and external resources for performance breakthroughs - The Ecological Finance Business Segment, relying on multiple platforms and adhering to an innovation-led ecological finance philosophy, highly values the interactive integration of internal and external resources, conducting commercial factoring, finance leasing, supply chain management, equity investment, special asset investment, and insurance agency businesses[235](index=235&type=chunk) [Commercial Factoring Business](index=41&type=section&id=Commercial%20Factoring%20Business) Commercial factoring business ended the period with a balance of RMB 359 million, interest income of RMB 15,525 thousand, and service fee income of RMB 1,882 thousand, all increasing year-on-year due to continuous bank financing and business expansion Commercial Factoring Business Operating Performance (As of June 30) | Indicator | 2023 | 2022 | | :--- | :--- | :--- | | Total New Accounts Receivable Transfer Transactions | 16 | 8 | | Total New Accounts Receivable Transfer Amount (RMB million) | 108 | 66 | | Balance at Period End (Principal, RMB million) | 359 | 304 | | Interest Income (RMB '000) | 15,525 | 14,435 | | Service Fee Income (RMB '000) | 1,882 | 1,297 | - The increase in interest income was primarily due to continuous bank financing and further expansion of business scale[266](index=266&type=chunk) - The future development direction is to focus on promoting multi-dimensional financing, continue to expand business scale, strengthen digitalization, and build a rich and diverse product system[238](index=238&type=chunk) [Financial Leasing Business](index=43&type=section&id=Financial%20Leasing%20Business) The financial leasing business, officially established in H1 2023, added 2 new transactions totaling RMB 19 million, with a period-end balance of RMB 19 million and interest income of RMB 43 thousand Financial Leasing Business Operating Performance (As of June 30) | Indicator | 2023 | 2022 | | :--- | :--- | :--- | | Total New Financing Transactions | 2 | — | | Total New Financing Transaction Amount (RMB million) | 19 | — | | Balance at Period End (RMB million) | 19 | — | | Interest Income (RMB '000) | 43 | — | - Huifang Rongzu was officially established and its team assembled in H1 2023 after being approved by the Jiangsu Provincial Local Financial Supervision and Administration Bureau[271](index=271&type=chunk) - The future development direction is to support innovation and entrepreneurship of SMEs and assist industrial transformation and upgrading, focusing on advanced manufacturing, healthcare, and public utilities[271](index=271&type=chunk) [Supply Chain Management Business](index=45&type=section&id=Supply%20Chain%20Management%20Business) Supply chain management business completed 538 transactions, with sales revenue of RMB 187,980 thousand, a year-on-year increase, driven by focusing on high-margin businesses and adjusting product category structures Supply Chain Management Business Operating Performance (As of June 30) | Category | 2023 | 2022 | | :--- | :--- | :--- | | Total Transactions | 538 | 419 | | Grain and Oil Business Total Transactions | 98 | 109 | | Fresh Produce Business Total Transactions | 314 | 77 | | Baijiu Business Total Transactions | 109 | 55 | | Other Business Total Transactions | 17 | 178 | | Sales Revenue (RMB '000) | 187,980 | 178,474 | | Grain and Oil Sales Revenue | 116,818 | 125,571 | | Fresh Produce Sales Revenue | 24,284 | 11,881 | | Baijiu Sales Revenue | 905 | 926 | | Other Sales Revenue | 45,973 | 40,096 | - The increase in sales revenue was primarily due to focusing on high-margin businesses and adjusting the business structure of different product categories[301](index=301&type=chunk) - The future development direction is to independently build a supply chain SaaS platform, innovate in digital finance, and expand more product categories[302](index=302&type=chunk) [Equity Investment Business](index=46&type=section&id=Equity%20Investment%20Business) Equity investment business added RMB 21 million in new investments, with a period-end investment principal of RMB 81 million, having partnered with six experienced equity investment institutions Equity Investment Business Operating Performance (As of June 30) | Indicator | 2023 | 2022 | | :--- | :--- | :--- | | Total New Investment Amount (Principal, RMB million) | 21 | 9 | | Investment Principal Amount at Period End (Principal, RMB million) | 81 | 24 | | Investment Income (RMB '000) | — | — | - As of June 30, 2023, Huifang Rongcui has partnered with six experienced equity investment institutions, with an intended subscription of **RMB 75 million** and actual investment of **RMB 68 million**[277](index=277&type=chunk) - The future development direction is to further strengthen cooperation with experienced equity investment institutions, accelerate the implementation of a dual-GP cooperation model, and deeply participate in equity investment projects directly or indirectly[279](index=279&type=chunk) [Special Asset Investment Business](index=48&type=section&id=Special%20Asset%20Investment%20Business) Special asset investment business ended the period with an investment amount of RMB 7 million, a decrease year-on-year, but investment income increased to RMB 2,456 thousand, as some projects were successfully disposed of Special Asset Investment Business Operating Performance (As of June 30) | Indicator | 2023 | 2022 | | :--- | :--- | :--- | | Total New Investment Transactions | — | 2 | | Total New Investment Amount (RMB million) | — | 16 | | Investment Amount at Period End (RMB million) | 7 | 32 | | Investment Income (RMB '000) | 2,456 | — | - The increase in investment income was primarily due to the successful disposal of some investment projects, leading to capital recovery and gradually emerging investment benefits[281](index=281&type=chunk) - The future development direction is to actively participate in the special asset circulation market in Jiangsu Province, explore potential projects, and deeply cultivate debt through bankruptcy, pre-reorganization, and other methods, building a deep cooperation network across upstream asset, midstream capital, and downstream disposal ends[282](index=282&type=chunk) [Insurance Agency Business](index=49&type=section&id=Insurance%20Agency%20Business) Insurance agency business recorded 182 transactions and sales revenue of RMB 415 thousand, a year-on-year increase, driven by focusing on external client expansion, internal integration, and increased product variety Insurance Agency Business Operating Performance (As of June 30) | Indicator | 2023 | 2022 | | :--- | :--- | :--- | | Total Transactions | 182 | 174 | | Sales Revenue (RMB '000) | 415 | 341 | - The increase in sales revenue was primarily due to the Company focusing on external client expansion, strengthening internal integration, and increasing product variety[284](index=284&type=chunk) - The future development direction is to strive for new co-insurance partnerships, introduce competitive agent teams, and explore life insurance agency business[285](index=285&type=chunk) [Headquarters and Others](index=50&type=section&id=Headquarters%20and%20Others) Headquarters serves as an incubator for the company's strategic new businesses, with overseas financial business currently managed directly by headquarters as an attempt at global development - Headquarters serves as an incubator for the Company's strategic new businesses, undertaking the phased cultivation function of innovative businesses, with overseas financial business currently managed directly by headquarters as an attempt at global development[339](index=339&type=chunk) [Overseas Financial Business](index=50&type=section&id=Overseas%20Financial%20Business) Overseas financial business ended the period with a balance of HKD 26 million and interest income of HKD 754 thousand, flat year-on-year, with business expansion affected by increased overseas financing costs due to Fed rate hikes Overseas Financial Business Operating Performance (As of June 30) | Indicator | 2023 | 2022 | | :--- | :--- | :--- | | Total New Loans Granted | 1 | — | | Total New Loan Amount (HKD million) | 20 | — | | Balance at Period End (Principal, HKD million) | 26 | 26 | | Interest Income (HKD '000) | 754 | 754 | - Overseas financial business showed no significant change in performance during the reporting period, and business expansion was affected by increased overseas financing costs due to multiple Fed rate hikes[314](index=314&type=chunk) - The future development direction is to seek layout opportunities in pawn and digital assets in more overseas countries and regions such as Macau and Singapore[314](index=314&type=chunk) [Financial Review](index=51&type=section&id=Financial%20Review) As of June 30, 2023, the Group's operating revenue and profit attributable to owners increased, driven by expanded debt and investment businesses, loan recovery, and fair value gains on financial assets [Overall Financial Data](index=51&type=section&id=Overall%20Financial%20Data) As of June 30, 2023, the Group's operating revenue was RMB 317,157 thousand, and profit attributable to owners was RMB 27,619 thousand, both showing year-on-year increases Overall Financial Data (For the Six Months Ended June 30) | Indicator | 2023 (RMB '000) | 2022 (RMB '000) | | :--- | :--- | :--- | | Operating Revenue | 317,157 | 305,419 | | Net Operating Income | 83,939 | 73,650 | | Net Assets | 2,140,987 | 2,075,674 | | Administrative Expenses | 39,774 | 34,514 | | Income Tax Expense | 10,721 | 12,399 | | Profit Attributable to Owners of the Company | 27,619 | 18,149 | | Basic Earnings Per Share (RMB) | 0.025 | 0.017 | - The increase in operating revenue was primarily due to higher interest income and revenue from sales of goods, while the increase in profit attributable to owners was mainly due to expanded debt and investment businesses, progress in existing loan recovery, and fair value gains on financial assets at FVTPL[342](index=342&type=chunk) [Financial Analysis by Business Segment](index=52&type=section&id=Financial%20Analysis%20by%20Business%20Segment) Inclusive Finance saw increased revenue but decreased pre-tax profit due to higher credit impairment losses, while Ecological Finance experienced significant increases in both revenue and pre-tax profit, and Headquarters and Others reduced pre-tax losses Inclusive Finance Business Segment Financial Data (For the Six Months Ended June 30) | Indicator | 2023 (RMB '000) | 2022 (RMB '000) | | :--- | :--- | :--- | | Operating Revenue | 106,039 | 105,616 | | Operating Costs | (8,138) | (7,101) | | Other Non-operating Losses | (55,957) | (45,818) | | Profit Before Tax | 41,944 | 52,697 | - The increase in Inclusive Finance Business Segment operating revenue was primarily due to the expansion of pawn and micro-credit businesses and increased operating income from art investment, while the decrease in pre-tax profit was mainly due to increased credit impairment losses[343](index=343&type=chunk) Ecological Finance Business Segment Financial Data (For the Six Months Ended June 30) | Indicator | 2023 (RMB '000) | 2022 (RMB '000) | | :--- | :--- | :--- | | Operating Revenue | 206,202 | 194,352 | | Operating Costs | (193,174) | (182,172) | | Other Non-operating Losses | (616) | (5,351) | | Profit Before Tax | 12,412 | 6,829 | - The increase in Ecological Finance Business Segment operating revenue was primarily due to higher income from commercial factoring, finance leasing, supply chain management, and special asset investment businesses, with the significant increase in pre-tax profit attributed to these revenue increases[321](index=321&type=chunk) Headquarters and Others Financial Data (For the Six Months Ended June 30) | Indicator | 2023 (RMB '000) | 2022 (RMB '000) | | :--- | :--- | :--- | | Operating Revenue | 11,690 | 11,910 | | Operating Costs | (8,882) | (8,623) | | Other Non-operating Losses | (9,916) | (21,922) | | Loss Before Tax | (7,108) | (18,635) | - The reduction in pre-tax loss for Headquarters and Others was primarily due to increased rental income from Huirong Financial Tower and fair value change gains on equity investments[322](index=322&type=chunk) [Credit Risk Management](index=54&type=section&id=Credit%20Risk%20Management) The Group analyzes credit risk exposure for financial assets, measuring impairment provisions using an expected credit loss model, and maintains a comprehensive credit risk management and internal control system - As of June 30, 2023, the Group's impairment provisions for secured and unsecured loans to customers totaled **RMB 752,152 thousand**, representing approximately **26.19%** of the total loans to customers (before provisions), with the overall impairment provision increasing by **RMB 36,293 thousand** compared to the end of the previous year[329](index=329&type=chunk) - The Group has established clear guidelines, policies, and measures for the entire loan process, from credit risk assessment and loan origination to post-loan monitoring and risk management[358](index=358&type=chunk) [Loan Classification and Impairment Provisions](index=54&type=section&id=Loan%20Classification%20and%20Impairment%20Provisions) The Group measures expected credit loss provisions using an ECL model, assessing secured and unsecured loans separately, with increases in Stage 1 and 2 provisions due to higher loan balances and Stage 3 unsecured loan provisions due to updated supporting documents Loans to Customers and Expected Credit Loss Provisions (As of June 30) | Category | Stage 1 (RMB '000) | Stage 2 (RMB '000) | Stage 3 (RMB '000) | Total (RMB '000) | | :--- | :--- | :--- | :--- | :--- | | **Gross Carrying Amount of Loans to Customers** | | | | | | Secured | 837,131 | 11,900 | 803,954 | 1,652,985 | | Unsecured | 960,080 | 35,309 | 224,011 | 1,219,400 | | **Total** | **1,797,211** | **47,209** | **1,027,965** | **2,872,385** | | **Expected Credit Loss Provisions** | | | | | | Secured (Stage 1 & 2) | 13,179 | | 488,545 | 501,724 | | Secured (Stage 3) | | | | | | Unsecured (Stage 1 & 2) | 37,562 | | 212,866 | 250,428 | | Unsecured (Stage 3) | | | | | | **Total** | **50,741** | **11,724** | **701,411** | **752,152** | | **Carrying Value** | **1,758,194** | **35,485** | **326,554** | **2,120,233** | - The increase in Stage 1 and Stage 2 expected credit loss provisions was primarily due to the increase in the balance of Stage 1 and Stage 2 loans to customers compared to the end of the previous year[330](index=330&type=chunk) - The increase in expected credit loss provisions for unsecured loans was mainly due to updating the expected credit loss provisions based on supporting documents such as customer bankruptcy liquidation plans[331](index=331&type=chunk) [New Litigation Loans](index=58&type=section&id=New%20Litigation%20Loans) For the six months ended June 30, 2023, new litigation-involved secured loan balances decreased to RMB 31,460 thousand, with no new litigation-involved unsecured loans New Litigation Loans (For the Six Months Ended June 30) | Category | 2023 | 2022 | | :--- | :--- | :--- | | Number of New Secured Loan Customers | 35 | 33 | | New Secured Loan Balance (RMB '000) | 31,460 | 59,130 | | Number of New Unsecured Loan Customers | — | — | | New Unsecured Loan Balance (RMB '000) | — | — | - The balance of new litigation-involved secured loans decreased compared to the same period last year, with no new litigation-involved unsecured loans[357](index=357&type=chunk) [Credit Risk Management and Internal Control Framework](index=58&type=section&id=Credit%20Risk%20Management%20and%20Internal%20Control%20Framework) The Group has established clear guidelines for credit risk assessment, loan origination, post-loan monitoring, and risk management across its lending business units, supported by internal control measures for comprehensive risk management - The Group's lending business primarily includes four business units: pawn business, micro-credit business, and overseas financial business; relending fund business; commercial factoring business; and financial leasing business[375](index=375&type=chunk) - The Group has established clear guidelines, policies, and measures for the entire loan process, from credit risk assessment and loan origination to post-loan monitoring and risk management[358](index=358&type=chunk) - Key internal control measures include separation of credit assessment and loan origination processes, multi-level loan approval policies, post-loan monitoring and management procedures, a comprehensive management system with an early warning system, and policies for identifying and writing off defaulted debts and bad debts[428](index=428&type=chunk)[429](index=429&type=chunk) [Pawn, Micro-credit, and Overseas Financial Businesses](index=58&type=section&id=Pawn%2C%20Micro-credit%2C%20and%20Overseas%20Financial%20Businesses) These business units offer secured and unsecured loans, with credit risk assessed based on collateral value, client credit, repayment ability, and industry outlook, including regular client credit risk evaluations and legal recourse for overdue loans - Pawn business primarily includes providing real estate mortgage loans, chattel mortgage loans, and unsecured loans (mainly equity pledge loans)[376](index=376&type=chunk) - Micro-credit business primarily includes providing real estate mortgage loans and unsecured loans (mainly guarantee loans and credit loans)[377](index=377&type=chunk) - Overseas financial business includes providing unsecured loans, mainly guarantee loans[360](index=360&type=chunk) - Credit risk assessment is a comprehensive evaluation based on multiple factors, including the value of collateral provided, the client's credit record, the client's repayment ability, and an analysis of the client's industry and prospects[379](index=379&type=chunk) [Relending Fund Business](index=62&type=section&id=Relending%20Fund%20Business) Relending fund business provides short-term loans to SMEs to ease their "repay first, then borrow" pressure, with credit risk assessment involving basic information and bank feedback, and a comprehensive monitoring and early warning system in place - The Group primarily conducts relending fund business through Huifang Rongtong as the legal entity, providing short-term loan funds to SMEs that wish to renew but find it difficult to fully repay their previous loans[3](index=3&type=chunk) - The Group provides short-term loan funds to SMEs for repaying maturing loans, alleviating the common "repay first, then borrow" cash flow pressure faced by SMEs in the loan issuance process in China[387](index=387&type=chunk) - The Group implements comprehensive tracking and supervision of relending funds, establishing an early warning mechanism for enterprise risks and changes in SMEs that expose the Group to further credit risk[438](index=438&type=chunk) [Commercial Factoring Business](index=64&type=section&id=Commercial%20Factoring%20Business) Commercial factoring credit risk assessment categorizes clients and debtors into manufacturing/service or project-based enterprises, evaluating them based on establishment year, credit history, reputation, product quality, and market conditions, with close monitoring of operations and solvency - The Group categorizes clients and debtors into manufacturing (or service-oriented) enterprises and project-based enterprises, evaluating them based on two different sets of standards: establishment year, credit record, social reputation, product quality, and market conditions[459](index=459&type=chunk) - The Group closely monitors and tracks disputes between clients and debtors regarding accounts receivable or deterioration in debtors' financial conditions, and will take timely measures to address such risks[443](index=443&type=chunk) [Financial Leasing Business](index=65&type=section&id=Financial%20Leasing%20Business) Financial leasing loan origination considers client industry, reputation, cash flow, solvency, and lease asset liquidity, requiring deposits and potentially additional collateral or guarantees, with regular reviews of lessee operations and solvency - Financial leasing loan origination considers the client's industry and reputation, cash flow, solvency, and the liquidity of the leased assets[463](index=463&type=chunk) - Clients are required to pay a deposit to the Group as security for fulfilling their obligations under the finance lease agreement, and the Company may also require additional collateral or guarantees from lessees and third parties[435](index=435&type=chunk) - The Group regularly reviews the lessee's operating conditions, solvency, credit status, and changes in debts and credits; if the lessee fails to pay any installment or fulfill any obligation under the finance lease arrangement, the Group has the right to demand timely payment or immediately dispose of the relevant leased assets unilaterally[436](index=436&type=chunk) [Internal Control Measures](index=66&type=section&id=Internal%20Control%20Measures) The Group employs various internal control measures, including separation of credit assessment and loan origination, multi-level approval, post-loan monitoring, an early warning system, and bad debt write-off policies, to establish a comprehensive, all-encompassing risk management system - The Group implements separation of credit assessment and loan origination processes, establishes multi-level loan approval policies, and clarifies responsibilities for different positions[428](index=428&type=chunk) - Post-loan monitoring and management procedures are implemented for continuous monitoring and management of credit risk and the entire loan process, with quarterly post-loan inspections and reviews[428](index=428&type=chunk) - A comprehensive management system with an early warning system is established to store all business information and documents related to loan transactions, and policies for identifying and writing off defaulted debts and bad debts are promulgated[429](index=429&type=chunk) [Capital Expenditure](index=69&type=section&id=Capital%20Expenditure) For the six months ended June 30, 2023, the Group's capital expenditure increased to RMB 14,190 thousand, primarily for property, plant and equipment, intangible assets, and investment properties - Capital expenditure for the six months ended June 30, 2023, was **RMB 14,190 thousand**, compared to **RMB 9,088 thousand** in the same period last year[425](index=425&type=chunk) - Our capital expenditure primarily includes property, plant and equipment, intangible assets, and investment properties[425](index=425&type=chunk) [Foreign Exchange Exposure](index=69&type=section&id=Foreign%20Exchange%20Exposure) For the six months ended June 30, 2023, the Group recorded net exchange gains of RMB 880 thousand, a decrease year-on-year, and faces no significant foreign exchange risk as its business transactions are primarily in RMB - For the six months ended June 30, 2023, the Group recorded net exchange gains of **RMB 880 thousand**, a decrease compared to net exchange gains of **RMB 1,755 thousand** in the same period last year[401](index=401&type=chunk) - The Group primarily conducts its business transactions in Renminbi, therefore, it does not face significant foreign exchange risk and has not undertaken any related hedging[401](index=401&type=chunk)[426](index=426&type=chunk) [Pledged Assets](index=69&type=section&id=Pledged%20Assets) As of June 30, 2023, the Group had RMB 203.4 million in land use rights and investment properties pledged for RMB 193.0 million in bank borrowings, with additional structured deposits and restricted bank time deposits pledged for other bank borrowings - As of June 30, 2023, the Group's land use rights and investment properties totaling **RMB 203.4 million** were pledged as collateral for the Group's **RMB 193.0 million** bank borrowings[402](index=402&type=chunk) - As of June 30, 2023, the Group's **RMB 20.0 million** structured deposits were pledged as collateral for the Group's **RMB 20.0 million** bank borrowings[402](index=402&type=chunk) - As of June 30, 2023, **RMB 50.0 million** bank borrowings were pledged by the Group's **RMB 52.1 million** restricted bank time deposits[402](index=402&type=chunk) [Significant Investments, Acquisitions and Disposals](index=70&type=section&id=Significant%20Investments%2C%20Acquisitions%20and%20Disposals) Huifang Rongzu was officially established in May 2023 to conduct finance leasing business with a registered capital of RMB 170 million, 70% held by Huifang Technology, aiming to serve the real economy, with no other significant acquisitions or disposals during the period - Huifang Rongzu was officially established on May 16, 2023, and commenced finance leasing business in China on May 24, 2023, after being approved by the Jiangsu Provincial Local Financial Supervision and Administration Bureau on May 8, 2023[405](index=405&type=chunk) - Huifang Rongzu's total registered capital is **RMB 170,000,000**, with Huifang Technology, a wholly-owned subsidiary of the Company, holding **70%** of the shares[405](index=405&type=chunk) - The Group's strategy is to leverage its years of accumulated corporate client resources to serve the development of the real economy, providing personalized finance leasing services for the industrial upgrading of SMEs[416](index=416&type=chunk) [Contingent Liabilities, Contractual Commitments, Cash Flow Analysis](index=71&type=section&id=Contingent%20Liabilities%2C%20Contractual%20Commitments%2C%20Cash%20Flow%20Analysis) As of June 30, 2023, the Group had no significant contingent liabilities, capital commitments totaled RMB 37,495 thousand, and the period saw net cash inflows from operating and investing activities, with net cash outflow from financing activities [Contingent Liabilities](index=71&type=section&id=Contingent%20Liabilities) As of June 30, 2023, the Group had no significant contingent liabilities - As of June 30, 2023, the Group had no significant contingent liabilities[418](index=418&type=chunk) [Commitments](index=71&type=section&id=Commitments) As of June 30, 2023, the Group's total capital commitments were RMB 37,495 thousand, primarily for agreed capital injections into Suzhou Cibei, Qianhui Tongcui, Kangli Junzhuo, and Zhongxin Hengyuan Capital Commitments Details (As of June 30) | Investee Company Name | 2023 (RMB '000) | 2022 (RMB '000) | | :--- | :--- | :--- | | Suzhou Cibei | 20,495 | 20,495 | | Qianhui Tongcui | 10,000 | 10,000 | | Tiankai Huirui | — | 10,000 | | Kangli Junzhuo | 5,000 | 8,000 | | Qianrong Yuanfeng | — | 8,000 | | Zhongxin Hengyuan | 2,000 | 2,000 | | **Total** | **37,495** | **58,495** | [Cash Flow Analysis](index=72&type=section&id=Cash%20Flow%20Analysis) As of June 30, 2023, the Group's cash and cash equivalents increased by RMB 36,006 thousand, with net cash inflows from operating and investing activities and net cash outflow from financing activities Cash Flow Summary (For the Six Months Ended June 30) | Item | 2023 (RMB '000) | 2022 (RMB '000) | | :--- | :--- | :--- | | Net Cash Inflow/(Outflow) from Operating Activities | 44,834 | (18,947) | | Net Cash Inflow/(Outflow) from Investing Activities | 13,942 | (26,907) | | Net Cash Outflow from Financing Activities | (22,876) | (1,399) | | Net Increase/(Decrease) in Cash and Cash Equivalents | 35,900 | (47,253) | | Effect of Exchange Rate Changes on Cash and Cash Equivalents | 106 | 934 | - Net cash inflow from operating activities was primarily due to optimized product structure and improved operating conditions[427](index=427&type=chunk) - Net cash inflow from investing activities was primarily due to capital recovery from the successful disposal of some projects in the Group's special asset investment business[447](index=447&type=ch

Financial Performance - The company reported a significant increase in revenue for the fiscal year ending December 31, 2022, with a total revenue of approximately 1.2 billion, representing a year-over-year growth of 15%[22]. - For the fiscal year ending December 31, 2022, the company's operating revenue was RMB 2,900 million, reflecting a growth of 5.3% compared to 2021[180]. - The profit attributable to equity holders was RMB 490 million, down from RMB 560 million in 2021, representing a decrease of 12.5%[180]. - The total amount of new movable property loans issued reached RMB 152 million, a significant increase from RMB 36 million in the previous year[187]. - The total amount of commercial factoring business continued to grow steadily, exceeding RMB 320 million[187]. - The company achieved interest income of RMB 36.753 million from microloans, slightly down from RMB 36.962 million in the previous year[196]. User Growth and Market Expansion - User data showed an increase in active users by 20% year-over-year, reaching a total of 5 million active users by the end of 2022[22]. - Market expansion plans include entering two new international markets by Q3 2023, aiming to increase market share by 8% in these regions[22]. - The company operates in key regions including Suzhou, Chengdu, Wuhan, Hefei, Wuxi, Changsha, Nanchang, and Hong Kong, aiming for market expansion[147]. Future Projections and Strategies - The company provided a positive outlook for the next fiscal year, projecting a revenue growth of 10% to 12% based on current market trends and user acquisition strategies[22]. - New product launches are expected to contribute an additional 200 million in revenue, with a focus on expanding the product line in the fintech sector[22]. - The company plans to enhance its management level and explore new business avenues to increase profitability contributions from new businesses[182]. - The company aims to expand its supply chain management business in the consumer goods sector, which has become a new source of revenue growth[187]. Research and Development - The company is investing in new technology development, allocating 5% of its annual revenue towards R&D to enhance its service offerings and improve user experience[22]. Corporate Governance and Compliance - The company has established a new audit committee to enhance corporate governance and ensure financial transparency, comprising independent non-executive directors[16]. - The management team emphasized the importance of risk management and compliance, with a dedicated team overseeing these areas to mitigate potential financial risks[22]. - The independent non-executive directors confirmed that transactions during the reporting year were conducted under fair and reasonable terms, benefiting shareholders[118]. - The company is committed to maintaining high standards of corporate governance to protect shareholder interests and enhance corporate value[130]. Financial Management and Investments - The company is considering strategic acquisitions to bolster its market position, with a budget of up to 300 million allocated for potential mergers and acquisitions in the next year[22]. - Retained earnings will primarily be used for business development and/or acquisitions within mainland China[26]. - The total capital commitment for the proposed partnership is RMB 20,000,000, with the company's commitment being RMB 12,000,000[76]. - The management fee for the investment fund is set at 2% of the total capital commitment annually, capped at 10% of the total capital commitment over the fund's duration[137]. Shareholder Information - The board has proposed a final dividend of HKD 0.03 per share for the year ended December 31, 2022, compared to HKD 0.04 in 2021, with an estimated total payout of approximately HKD 32,710,050 based on 1,090,335,000 shares issued[26]. - The company maintains a minimum public float of 25% as required by the listing rules[140]. Operational Enhancements - The company is focused on building a young and professional workforce to enhance its operational capabilities and innovation[182]. - The company has implemented a comprehensive risk management system covering all employees, products, and processes[187]. - The company emphasizes a strategy of "intensive operation and refined management" to address customer needs and deepen business integration[182]. Loan and Client Information - The company reported a total of 554 clients in real estate mortgage loans, with the top five clients accounting for 41.11% of the total outstanding balance[189]. - The company issued 212 new microloans totaling RMB 458 million, compared to 158 loans totaling RMB 333 million in the previous year[196]. - The outstanding balance of microloans at the end of the reporting period was RMB 407 million, up from RMB 339 million in the previous year[196].

Financial Performance - External operating income for 2022 was 624,474 million, a decrease from 367,825 million in 2021, reflecting a decline of approximately 41.5%[1] - Net income for 2022 was 3,787 million, compared to 534 million in 2021, indicating a significant increase[3] - The company reported a pre-tax profit of 87,468 million for 2022, compared to 146,513 million in 2021, indicating a decrease of approximately 40.2%[10] - The company’s net income tax expense for the year ended December 31, 2022, was RMB 27,120 million, compared to RMB 45,799 million in the previous year, indicating a decrease of 40.9%[34] - The company’s net profit attributable to shareholders decreased by 53% to RMB 41,057,000, down from RMB 87,169,000 in the previous year[39] - Total comprehensive income for the year was RMB 60,348 thousand, compared to RMB 100,714 thousand in 2021, reflecting a decline of about 40%[64] Assets and Liabilities - Total assets as of December 31, 2022, were 2,985,146 million, compared to 2,836,195 million in 2021, representing an increase of about 5.3%[3] - Total liabilities as of December 31, 2022, were 873,816 million, compared to 742,461 million in 2021, indicating an increase of approximately 17.7%[3] - The total fair value of investment properties as of December 31, 2022, was RMB 203,698 million, compared to RMB 203,698 million as of December 31, 2021, showing stability in property valuation[23] - The total deferred tax assets as of December 31, 2022, amounted to RMB 92,657 million, a slight decrease from RMB 95,060 million as of December 31, 2021[25] - The company’s total liabilities decreased from RMB 51,484 million as of January 1, 2022, to RMB 60,469 million as of December 31, 2022, reflecting a net increase of RMB 3,346 million[20] Income and Expenses - Interest income from customer loans was 258,848 million in 2022, down from 269,276 million in 2021, a decline of about 3.2%[7] - The company reported a significant increase in consulting fee income, rising to 1,377 million in 2022 from 601 million in 2021, an increase of approximately 129.5%[7] - The total rental income for the year ended December 31, 2022, was RMB 3,165 million, compared to RMB 492 million in the previous year, showing significant growth[31] - Interest income for the year was RMB 258,848,000, with interest expenses amounting to RMB 31,877,000, resulting in a net interest income of RMB 226,971,000[39] Credit and Impairment - Credit impairment losses totaled 74,712 million in 2022, up from 153,849 million in 2021, showing a decrease of approximately 51.5%[1] - The company reported a credit loss of RMB 76,395 million on customer loans as of December 31, 2022, down from RMB 154,244 million in the previous year, indicating a reduction of 50.5%[30] - The company experienced a credit impairment loss of RMB 74,712,000, a decrease from RMB 153,849,000 in the previous year, indicating improved credit quality[39] Investments - As of December 31, 2022, the total value of investments accounted for using the equity method increased to RMB 26,005 million from RMB 17,475 million, reflecting a growth of 48.7%[22] - The net profit for the period from investments accounted for using the equity method was RMB 1,716 million, with dividends paid amounting to RMB 1,716 million, resulting in no net change in the investment value[22] - The group reported a loss provision of 218,257 million RMB as of December 31, 2022, reflecting the expected credit loss from loans granted[126] Cash Flow - For the year ended December 31, 2022, the net cash flow from operating activities was a cash outflow of RMB 102,492 thousand, compared to an inflow of RMB 98,459 thousand for the year ended December 31, 2021[98] - The net cash outflow from investing activities was RMB 26,188 thousand, significantly improved from RMB 75,669 thousand in the previous year[98] - Cash inflow from financing activities amounted to RMB 89,577 thousand, a decrease from RMB 108,418 thousand in the prior year[98] - The total cash and cash equivalents at the end of the year was RMB 196,805 thousand, down from RMB 234,781 thousand at the beginning of the year[98] Business Strategy and Operations - The company plans to focus on expanding its market presence and enhancing its product offerings in the upcoming fiscal year[1] - The group operates primarily through two business segments: Inclusive Finance and Ecological Finance, providing loan services mainly in China[122] - The company primarily provides lending services through mortgage and non-mortgage loans to customers in China[105] - The company aims to enhance its digital infrastructure and diversify its product offerings in the commercial factoring sector[179] Dividends - The company proposed a dividend of HKD 0.03 per share, totaling approximately HKD 32.7 million (equivalent to RMB 29.2 million) for the year ended December 31, 2022[50] - The company declared dividends amounting to RMB 37,329 thousand, compared to RMB 48,952 thousand in the previous year, indicating a reduction of about 23.5%[96] - The company distributed dividends to non-controlling interests amounting to RMB 10,200 thousand, compared to RMB 61,250 thousand in the previous year[98] Risk Management - The company emphasizes the importance of monitoring risks in its small loan business, including real estate valuation risk and credit risk[165] - The factoring business faced risks including credit risk, accounts receivable risk, and regulatory policy changes, with comprehensive internal control measures implemented to manage these risks[197][198] Market and Clientele - The company has a total of 16 clients in the factoring business, with the top five clients accounting for 60% of the year-end principal balance[196] - The supply chain management business has established partnerships with well-known companies such as ZTE Corporation and Yihai Kerry Arawana Holdings, covering various consumer goods sectors[199]

Financial Performance - Operating revenue for the six months ended June 30, 2022, was RMB 305,419,000, representing a 127% increase compared to RMB 134,754,000 in the same period of 2021[12]. - Operating expenses surged to RMB 191,717,000, a significant increase of 1,221% from RMB 14,509,000 year-on-year[12]. - Profit attributable to owners of the company reached RMB 18,149,000, marking a 23% increase from RMB 14,776,000 in the previous year[12]. - Basic earnings per share increased by 21% to RMB 0.017 from RMB 0.014[12]. - Total assets as of June 30, 2022, were RMB 2,846,077,000, showing a slight increase of 0% from RMB 2,836,195,000 at the end of 2021[12]. - The overall operating revenue for the company reached RMB 305,419, an increase from RMB 134,754 in the previous year, primarily due to a significant rise in supply chain revenue[79]. - The net profit attributable to equity holders was RMB 18,149, up from RMB 14,776 year-on-year, mainly due to a reduction in credit impairment losses[79]. Loan and Mortgage Activities - Loans granted to customers amounted to RMB 1,929,962,000, reflecting a 6% increase from RMB 1,815,077,000[12]. - Total new mortgage loans issued in the first half of 2022 amounted to RMB 263 million, a decrease of 36.5% compared to RMB 414 million in 2021[18]. - The balance of real estate mortgage loans as of June 30, 2022, was RMB 687 million, down from RMB 870 million in the previous year, representing a decline of 21%[21]. - Interest income from real estate mortgage loans was RMB 25,172 thousand, a decrease from RMB 27,729 thousand in the same period last year, reflecting a decline of 9.2%[21]. - The balance of personal goods mortgage loans reached RMB 79 million, an increase from RMB 47 million in the previous year, marking a growth of 68.1%[23]. - Interest income from personal goods mortgage loans increased to RMB 6,802 thousand, up from RMB 5,496 thousand, representing a rise of 23.7%[23]. - The balance of non-mortgage loans remained stable at RMB 375 million, with interest income dropping significantly to RMB 11,997 thousand, down from RMB 21,206 thousand, a decline of 43.5%[27]. Business Strategy and Development - The company aims to enhance its position as a leading provider of inclusive financial services in China, focusing on small loans, pawn services, and asset investments[2]. - The management strategy emphasizes value creation, refined management, and the exploration of new business areas, including financing consulting and art auction services[14][15]. - The company is committed to supporting small and micro enterprises and individuals facing financial difficulties through its diverse financial services[14]. - The company aims to expand its operations by establishing 1 to 2 new pawn shops in provincial capital cities annually, targeting a network of 10 to 12 cities by 2025[22]. - The company plans to enhance digital capabilities in its stores to improve customer satisfaction in the personal goods mortgage segment[26]. - The company plans to enhance digital construction in the small loan business and increase service efforts for technology-driven and low-carbon SMEs, fulfilling its social responsibility in promoting inclusive finance[34]. Risk Management and Credit Loss Provisions - The expected credit loss provision for loans granted to customers as of June 30, 2022, totaled RMB 678,078 thousand, representing approximately 26% of the outstanding loans before provisions[98]. - The total expected credit loss provision increased by RMB 33,597 thousand compared to the end of the previous year[98]. - The expected credit loss provision for collateralized loans was RMB 457,810 thousand as of June 30, 2022, compared to RMB 389,812 thousand at the end of the previous year[97]. - The expected credit loss provision for non-collateralized loans was RMB 220,268 thousand as of June 30, 2022, compared to RMB 254,669 thousand at the end of the previous year[97]. - The increase in expected credit loss provisions for the first and second stages was primarily due to the deterioration of some customers' operating conditions due to the COVID-19 pandemic and an increase in the loan balance compared to the end of the previous year[98]. - The group conducts due diligence on SMEs applying for refinancing funds, ensuring compliance with bank management requirements[148]. - Continuous credit risk assessments are conducted based on clients' credit records, repayment sources, and significant events affecting collateral[139]. Business Segments and Performance - The ecological finance division achieved operating revenue of RMB 194,352, a substantial increase from RMB 8,856 in the previous year, driven by significant growth in supply chain management and commercial factoring[83][84]. - The inclusive finance division reported operating revenue of RMB 105,616, a decrease from RMB 116,054, attributed to lower interest income from non-collateral loans and small loans[80][82]. - The total number of new loans issued in the small loan business increased to 111 in the first half of 2022, up from 89 in the same period of 2021, representing a growth of 24.7%[30]. - The total amount of new loans issued reached RMB 187 million in the first half of 2022, slightly up from RMB 185 million in the same period of 2021, indicating a growth of 1.1%[30]. - The total number of new loans issued in the refinancing fund business increased significantly to 312 in the first half of 2022, compared to 220 in the same period of 2021, representing a growth of 41.8%[36]. - Total amount of new loans issued in the refinancing fund business reached RMB 1,937 million in the first half of 2022, a substantial increase from RMB 1,151 million in the same period of 2021, indicating a growth of 68.3%[36]. Corporate Governance and Shareholder Information - The board is committed to maintaining high standards of corporate governance to protect shareholder interests and enhance corporate value[199]. - The corporate governance practices are based on the principles and code provisions set out in Appendix 14 of the Listing Rules[200]. - As of June 30, 2022, major shareholders include Xiaolai Investment Co., Ltd. with a 23.85% stake and Zhu Tianxiao with a 29.81% stake in the company[182]. - The board members hold a total of 4,330,000 shares, representing 0.39% of the issued shares as of June 30, 2022[177]. Operational Challenges and Future Outlook - The company will continue to monitor the impact of the pandemic on the macro economy and review the effectiveness of risk control policies[172]. - The company faces various risks in its art investment and luxury goods sales, including regulatory changes and market liquidity risks[44][47]. - The company aims to strengthen its marketing team and focus on luxury goods sales and art investment, targeting breakthroughs in both scale and quality within the year[172]. - The company has established partnerships with several prominent firms, including ZTE Corporation and New Hope Group, to expand its supply chain management operations[58].

Financial Performance - Operating revenue for 2021 was RMB 367,825,000, an increase of 41.6% compared to RMB 259,806,000 in 2020[11] - Profit attributable to equity holders was RMB 87,169,000, a significant increase from RMB 2,216,000 in 2020, representing a growth of 3,833.6%[11] - Total assets reached RMB 2,836,195,000, up from RMB 2,532,555,000 in 2020, indicating a growth of 12.0%[11] - The company reported a continuous improvement in asset quality and profitability, establishing itself as a comprehensive financial service provider[21] - The company’s future outlook is optimistic, aiming for a fruitful year ahead with a focus on value creation and innovation[21] - The company’s capital debt ratio stood at 26.18% as of December 31, 2021, indicating a policy to maintain a low capital debt ratio[111] - The company reported a net foreign exchange loss of RMB 3.30 million for the year ended December 31, 2021, a decrease from a net foreign exchange gain of RMB 18.01 million in the previous year[108] Loan and Mortgage Activities - The company granted loans to customers amounting to RMB 1,815,077,000, slightly up from RMB 1,814,211,000 in 2020[11] - In 2021, the company issued a total of 782 new real estate mortgage loans, an increase from 527 in 2020, while new consumer goods mortgage loans decreased to 693 from 856[25] - The total amount of new real estate mortgage loans issued reached RMB 619 million, up from RMB 405 million in 2020, while new consumer goods mortgage loans amounted to RMB 36 million, compared to RMB 26 million in the previous year[25] - As of December 31, 2021, the outstanding balance of real estate mortgage loans was RMB 744 million, remaining stable compared to 2020, with interest income from real estate mortgage loans increasing to RMB 65,035 thousand from RMB 60,393 thousand[28] - As of December 31, 2021, the company's collateralized loan balance for consumer goods was RMB 39 million, with interest income of RMB 4,384 thousand, a decrease compared to 2020[33] - The non-collateralized loan balance as of December 31, 2021, was RMB 386 million, with interest income of RMB 37,335 thousand, also showing a decline compared to 2020[34] - The total number of new small loans issued as of December 31, 2021, was 158, with a total amount of RMB 333 million, a decrease from 2020[36] - The small loan business had an ending balance of RMB 339 million as of December 31, 2021, with interest income of RMB 36,962 thousand, which increased compared to 2020[40] - The collateralized loans for agriculture had an ending balance of RMB 116 million as of December 31, 2021, with an annual interest rate of 9%-18%[37] - Total number of new loans granted in 2021 was 388, an increase from 370 in 2020[42] - Total amount of new loans granted in 2021 was RMB 2,252 million, a decrease from RMB 2,328 million in 2020[42] Business Expansion and Strategy - The registered capital for commercial factoring increased to RMB 170 million, reflecting strategic investment from state-owned enterprises[17] - The registered capital for Huifang Supply Chain was raised to RMB 400 million, indicating ongoing business expansion[17] - The company established a new pawn shop in Changsha, becoming the only approved pawn company in Hunan province in the past year[17] - The company aims to expand its pawn business by establishing 1-2 new pawn companies in provincial capital cities each year, targeting a network covering 10-12 cities by 2025[29] - The company’s strategy focuses on enhancing management efficiency through restructuring its business units into two main divisions: Inclusive Finance and Ecological Finance[21] - The company emphasizes a dual-driven strategy of inclusive finance and ecological finance to provide comprehensive financial services to SMEs and individuals[21] - The company aims to enhance its digital infrastructure and diversify its product offerings in the commercial factoring business to drive future growth[63] - The supply chain management business plans to develop a proprietary supply chain SaaS platform and expand into more product categories[68] - The company aims to enhance its brand position in the industry through a national strategy for its pawn business and to develop its art investment and luxury goods sales[134] Investment and Asset Management - The company established partnerships with state-owned asset management companies, enhancing its special asset investment business capabilities[72] - The equity investment business made two new investments totaling RMB 15 million in 2021, with the total investment amount at year-end also being RMB 15 million[69] - The company has established partnerships with two seasoned equity investment institutions, with an intended subscription of RMB 20 million and actual investment of RMB 15 million in 2021[69] - In 2021, the total number of new investments in special asset investment business was 9, with a total investment amount of RMB 16 million[71] - The company invested approximately RMB 155 million in the Zhonghui Financial Building project, which has a total construction area of 17,894.27 square meters, aimed at attracting financial enterprises[121] Operational Efficiency and Management - The company restructured its business divisions, merging three divisions into two, enhancing operational efficiency[17] - The company has implemented comprehensive internal control measures for loan management, including pre-loan separation and tiered approval processes[40] - The company aims to ensure asset quality stability through strict management of overdue loans and real-time monitoring of business processes and risks[40] - The company plans to continue promoting refined management to achieve revenue growth and cost reduction in the future[90] - The management team is focused on expanding the company's operations and enhancing its market presence through strategic decision-making[167] Corporate Governance and Management Team - The company has established an audit committee to assist the board in reviewing financial information and internal controls[169] - The remuneration committee is responsible for reviewing the remuneration policies and structures for directors and senior management[172] - The nomination committee evaluates the composition of the board and provides recommendations for director appointments[173] - The management team is led by Chairman Wu Min, who joined the group in January 2011 and oversees operations and decision-making on important matters[167] - The company has a diverse board with independent non-executive directors serving in various capacities across multiple listed companies[156][157] - The company has a structured approach to governance with independent directors ensuring compliance with listing rules[157] Future Outlook and Development - The company plans to propose a dividend of HKD 0.04 per share at the annual general meeting, totaling HKD 43.6 million (approximately RMB 38 million)[133] - The company will continue to seek new business development opportunities and focus on value creation, innovation, brand enhancement, and team building[134] - The future direction of the insurance agency business includes expanding market cooperation with foreign enterprises and large corporate groups[76] - The overseas financial business aims to explore opportunities in pawn and digital asset sectors once travel restrictions are lifted[82] - Future development directions include strengthening cooperation with experienced equity investment institutions and exploring dual GP cooperation models[69]

[Company Information](index=4&type=section&id=%E5%85%AC%E5%8F%B8%E8%B3%87%E6%96%99) The report provides fundamental corporate governance and operational information, including board members, committees, company secretary, registered office, principal place of business, auditor, and principal bankers - The report provides basic corporate governance and operational information, including the board of directors, committee members, company secretary, registered office, principal place of business, auditor, and principal bankers[5](index=5&type=chunk)[6](index=6&type=chunk)[7](index=7&type=chunk) [Financial Highlights](index=6&type=section&id=%E8%B2%A1%E5%8B%99%E6%91%98%E8%A6%81) The company's financial performance in the first half of 2021 showed a significant increase in profit attributable to owners despite a slight revenue decline, while total assets and net assets grew modestly Summary of Operating Results (For the six months ended June 30) | Indicator | 2021 (RMB thousands) | 2020 (RMB thousands) | Change | | :--- | :--- | :--- | :--- | | Operating Revenue | 134,754 | 138,174 | -2% | | Operating Expenses | 14,509 | 22,832 | -36% | | Profit Attributable to Owners of the Company | 14,776 | 893 | 1,555% | | Basic Earnings Per Share (RMB yuan) | 0.014 | 0.001 | 1,300% | Summary of Financial Position | Indicator | As of June 30, 2021 (RMB thousands) | As of December 31, 2020 (RMB thousands) | Change | | :--- | :--- | :--- | :--- | | Total Assets | 2,712,986 | 2,532,555 | 7% | | Loans to Customers | 1,888,767 | 1,814,211 | 4% | | Bank Balances and Cash | 417,597 | 434,080 | -4% | | Net Assets | 1,948,514 | 1,941,898 | 0% | [Management Discussion and Analysis](index=7&type=section&id=%E7%AE%A1%E7%90%86%E5%B1%A4%E8%A8%8E%E8%AB%96%E8%88%87%E5%88%86%E6%9E%90) [Business Review and Development](index=7&type=section&id=1.%20%E6%A5%AD%E5%8B%99%E5%9B%9E%E9%A1%A7%E8%88%87%E7%99%BC%E5%B1%95) During the reporting period, the company's business operations showed a strong recovery, with significant growth in the Inclusive Finance segment, continuous innovation in Technology Finance, and a shift towards self-operated business in Insurance Agency, alongside new ventures in art, distressed asset, and equity investments - The company's overall operating strategy focuses on comprehensive marketing and robust risk control, showing business recovery amidst an improving macroeconomic environment, and actively expanding into new areas such as art, distressed asset, and equity investments[12](index=12&type=chunk) [Inclusive Finance Business Segment](index=7&type=section&id=1.1%20%E6%99%AE%E6%83%A0%E9%87%91%E8%9E%8D%E4%BA%8B%E6%A5%AD%E9%83%A8) The Inclusive Finance Business Segment, a core business, provides mortgage and non-mortgage loans to SMEs and individuals through platforms like Wuzhong Pawn, Dongshan Microcredit, and Huifang Rongtong, achieving significant growth in real estate mortgage loans and Dongshan Microcredit business due to improved pandemic conditions and tighter credit policies Wuzhong Pawn Loan Granting Status (For the six months ended June 30) | Item | 2021 (RMB millions) | 2020 (RMB millions) | | :--- | :--- | :--- | | **New Mortgage Loans** | | | | Real Estate Mortgage Loan Amount | 396 | 149 | | Personal Property Mortgage Loan Amount | 33 | 25 | | Number of Real Estate Mortgage Loans | 447 | 169 | | Number of Personal Property Mortgage Loans | 1,478 | 1,747 | | **New Non-Mortgage Loans** | | | | Total Amount | 328 | 401 | | Total Number of Loans | 23 | 39 | Huifang Rongtong Re-lending Fund New Loan Status (For the six months ended June 30) | Item | 2021 (RMB millions) | 2020 (RMB millions) | | :--- | :--- | :--- | | Total Amount of New Loans Granted | 1,151 | 1,243 | | Total Number of New Loans Granted | 220 | 182 | | Period-end Balance | 60 | 103 | Dongshan Microcredit New Loan Status (For the six months ended June 30) | Item | 2021 (RMB millions) | 2020 (RMB millions) | | :--- | :--- | :--- | | Total Amount of New Loans Granted | 185 | 126 | | Total Number of New Loans Granted | 89 | 59 | | Period-end Balance | 362 | 375 | [Technology Finance Business Segment](index=10&type=section&id=1.2%20%E7%A7%91%E6%8A%80%E9%87%91%E8%9E%8D%E4%BA%8B%E6%A5%AD%E9%83%A8) The Technology Finance Business Segment, a strategic emerging business, focuses on commercial factoring, supply chain management, and Hong Kong money lending, with commercial factoring new business volume decreasing year-on-year due to reliance on bank financing, and Hong Kong loan balance at RMB 22 million Commercial Factoring Business Operations (For the six months ended June 30) | Item | 2021 (RMB millions) | 2020 (RMB millions) | | :--- | :--- | :--- | | Total Number of New Accounts Receivable Factoring Businesses | 5 | 8 | | Total Amount of New Accounts Receivable Factoring Businesses | 27 | 86 | - Hong Kong operations continued to hold a money lender's license, with an outstanding loan balance of **RMB 22 million** as of June 30, 2021[29](index=29&type=chunk) [Insurance Agency Business Segment](index=11&type=section&id=1.3%20%E4%BF%9D%E9%9A%AA%E4%BB%A3%E7%90%86%E4%BA%8B%E6%A5%AD%E9%83%A8) The Insurance Agency Business Segment, under Huifang Anda, expands into co-insurance, government and state-owned platforms, and foreign enterprises, covering property, credit guarantee, liability, and personal insurance - The Insurance Agency Business Segment, guided by principles of 'credibility, responsibility, professionalism, and compliance,' actively integrates government and insurance company resources to act as an agent for various insurance businesses[31](index=31&type=chunk) [Financial Review](index=11&type=section&id=2.%20%E8%B2%A1%E5%8B%99%E5%9B%9E%E9%A1%A7) In the first half of 2021, the company's operating revenue slightly decreased by 2% to RMB 135 million, while profit attributable to equity holders surged by 1,555% to RMB 14.78 million, with the Inclusive Finance segment being the primary profit driver and Technology Finance turning profitable Overall Financial Data (For the six months ended June 30) | Indicator | 2021 (RMB thousands) | 2020 (RMB thousands) | | :--- | :--- | :--- | | Operating Revenue | 134,754 | 138,174 | | Net Operating Income | 68,816 | 29,324 | | Administrative Expenses | 31,395 | 28,776 | | Income Tax Expense | 12,083 | 7,488 | | Profit Attributable to Equity Holders | 14,776 | 893 | | Basic Earnings Per Share (RMB yuan) | 0.014 | 0.001 | Pre-tax Profit/(Loss) by Business Segment (For the six months ended June 30) | Business Segment | 2021 (RMB thousands) | 2020 (RMB thousands) | | :--- | :--- | :--- | | Inclusive Finance Business Segment | 46,303 | 26,625 | | Technology Finance Business Segment | 1,632 | (616) | | Insurance Agency Business Segment | (1,323) | (1,498) | | Headquarters and Others | (11,465) | (12,705) | [Credit Risk](index=13&type=section&id=3.%20%E4%BF%A1%E7%94%A8%E9%A2%A8%E9%9A%AA) As of June 30, 2021, the company's total gross book value of loans to customers was RMB 2.545 billion, with impairment provisions totaling RMB 656 million, a provision coverage ratio of approximately 25.79%, and a significant decrease in new litigation-involved loan balances, indicating strengthened risk control Credit Risk Exposure of Loans to Customers (As of June 30, 2021) | Expected Credit Loss Stage | Gross Book Value (RMB thousands) | Loss Allowance (RMB thousands) | Carrying Value (RMB thousands) | | :--- | :--- | :--- | :--- | | Stage 1 (12-month ECL) | 1,388,873 | (30,391) | 1,358,482 | | Stage 2 (Lifetime ECL) | 30,811 | (6,742) | 24,069 | | Stage 3 (Lifetime ECL) | 1,125,477 | (619,261) | 506,216 | | **Total** | **2,545,161** | **(656,394)** | **1,888,767** | - As of June 30, 2021, the Group's total impairment provisions increased by **RMB 52.72 million** from the end of last year, reaching **RMB 656 million**[48](index=48&type=chunk) New Litigation-Involved Loans (For the six months ended June 30) | Item | 2021 (RMB thousands) | 2020 (RMB thousands) | | :--- | :--- | :--- | | New Litigation-Involved Mortgage Loan Balance | 13,080 | 38,494 | | New Litigation-Involved Non-Mortgage Loan Balance | 0 | 21,591 | [Borrowings](index=16&type=section&id=4.%20%E5%80%9F%E6%AC%BE) As of June 30, 2021, the Group's total borrowings increased to RMB 675 million from RMB 510 million at the end of 2020, with non-current bank borrowings primarily for headquarters building construction, and a capital gearing ratio (net debt/equity) of 34.66% Borrowing Structure | Item | June 30, 2021 (RMB thousands) | December 31, 2020 (RMB thousands) | | :--- | :--- | :--- | | **Non-current** | | | | Bank Borrowings | 95,380 | 50,380 | | **Current** | | | | Bank Borrowings | 568,380 | 436,489 | | Microcredit Company Borrowings | 3,000 | 23,500 | | Other Company Borrowings | 8,500 | — | | **Total** | **675,260** | **510,369** | - The Group's capital gearing ratio is **34.66%**, with a policy to maintain a low capital gearing ratio[55](index=55&type=chunk) [Capital Expenditure](index=17&type=section&id=5.%20%E8%B3%87%E6%9C%AC%E9%96%8B%E6%94%AF) For the six months ended June 30, 2021, the company's capital expenditure significantly increased to RMB 18.23 million, primarily for property, plant and equipment, intangible assets, and construction in progress, compared to RMB 2.34 million in the prior period - Capital expenditure during the reporting period was **RMB 18.23 million**, a significant year-on-year increase from **RMB 2.34 million** in the prior period[57](index=57&type=chunk) [Foreign Exchange Exposure](index=17&type=section&id=6.%20%E5%A4%96%E5%8C%AF%E9%A2%A8%E9%9A%AA%E6%9B%9D%E5%8F%A3) During the reporting period, the Group recorded a net exchange loss of RMB 2.75 million, compared to a net exchange gain of RMB 11.36 million in the prior period, but does not face significant foreign exchange risk or engage in hedging due to primary transactions being in RMB - For the six months ended June 30, 2021, the Group recorded a net exchange loss of **RMB 2.751 million**, compared to a net exchange gain of **RMB 11.357 million** in the prior period[58](index=58&type=chunk) [Pledged Assets](index=17&type=section&id=7.%20%E6%8A%B5%E6%8A%BC%E8%B3%87%E7%94%A2) As of June 30, 2021, the Group had assets valued at RMB 462 million pledged or mortgaged for bank borrowings, including land use rights, structured deposits, and time deposits - To obtain bank borrowings, the Group pledged land use rights valued at **RMB 34.2 million**, and pledged structured deposits valued at **RMB 140 million** and time deposits valued at **RMB 287 million**[59](index=59&type=chunk) [Significant Investments, Acquisitions and Disposals](index=18&type=section&id=8.%20%E9%87%8D%E5%A4%A7%E6%8A%95%E8%B3%87%E3%80%81%E6%94%B6%E8%B3%BC%E5%8F%8A%E5%87%BA%E5%94%AE) To achieve diversified development, the Group established three new companies during the reporting period, focusing on art investment, distressed asset investment, and equity investment, to explore new growth opportunities - Established Nanjing Yiling with a registered capital of **RMB 55 million** and a 55% stake, to expand into the art finance market[63](index=63&type=chunk) - Established Suzhou Cibei with a registered capital of **RMB 50 million** and a committed capital contribution of **RMB 45 million**, to venture into distressed asset investment and disposal[64](index=64&type=chunk) - Established Huifang Rongcui with a registered capital of **RMB 100 million** and a committed capital contribution of **RMB 90 million**, to conduct direct equity investments and FOF investments, seizing opportunities in new energy, intelligent manufacturing, and healthcare industries[65](index=65&type=chunk) [Contingent Liabilities, Contractual Commitments, Cash Utilization Analysis](index=19&type=section&id=9.%20%E6%88%96%E7%84%B6%E8%B2%A0%E5%82%B5%E3%80%81%E5%90%88%E7%B4%84%E8%B2%AC%E4%BB%BB%E3%80%81%E7%8F%BE%E9%87%91%E4%BD%BF%E7%94%A8%E5%88%86%E6%9E%90) As of the end of the reporting period, the Group had no significant contingent liabilities, with total capital commitments of RMB 180 million primarily for the China Huirong headquarters building construction and capital injections into new subsidiaries, and net cash outflow from operating activities of RMB 107 million mainly due to increased loans to customers Capital Commitments (As of June 30, 2021) | Item | Unaudited (RMB thousands) | | :--- | :--- | | China Huirong Headquarters Building | 44,534 | | Huifang Rongcui | 90,000 | | Suzhou Cibei | 34,870 | | Nanjing Yiling | 10,250 | | **Total** | **179,654** | Cash Flow Summary (For the six months ended June 30) | Item | 2021 (RMB thousands) | 2020 (RMB thousands) | | :--- | :--- | :--- | | Net Cash (Outflow)/Inflow from Operating Activities | (107,104) | 425,679 | | Net Cash Outflow from Investing Activities | (28,360) | (2,336) | | Net Cash Inflow/(Outflow) from Financing Activities | 122,664 | (523,010) | | Net Decrease in Cash and Cash Equivalents | (12,800) | (99,667) | [Human Resources and Employee Benefits](index=20&type=section&id=10.%20%E4%BA%BA%E5%8A%9B%E8%B3%87%E6%BA%90%E8%88%87%E5%83%B1%E5%93%A1%E7%A6%8F%E5%88%A9) As of June 30, 2021, the Group had 138 full-time employees, a decrease of 2 from the beginning of the year, reflecting ongoing human resource optimization, with total staff costs and benefits amounting to RMB 17.75 million, an increase of RMB 0.835 million year-on-year - As of June 30, 2021, the Group had **138** full-time employees, a decrease from **140** at the end of 2020[75](index=75&type=chunk) - For the six months ended June 30, 2021, staff costs and benefits amounted to **RMB 17,753 thousand**, an increase of **RMB 835 thousand** year-on-year[75](index=75&type=chunk) [Future Plans for Significant Investments](index=20&type=section&id=11.%20%E9%87%8D%E5%A4%A7%E6%8A%95%E8%B3%87%E4%B9%8B%E6%9C%AA%E4%BE%86%E8%A8%88%E5%8A%83) Beyond disclosed capital commitments, the Group currently has no other significant investment or capital asset acquisition plans but will continue to seek new business development opportunities - The Group will continue to seek new business development opportunities, but currently has no other significant investment plans beyond the disclosed capital commitments[76](index=76&type=chunk) [Events After Reporting Period](index=21&type=section&id=12.%20%E5%A0%B1%E5%91%8A%E6%9C%9F%E5%BE%8C%E4%BA%8B%E9%A0%85) Subsequent to the reporting period, Huida Factoring completed a capital increase, introducing Suzhou Wuzhong Urban Construction Investment Development Co., Ltd. as a new shareholder, reducing the company's stake to 52.94%, and the Group injected RMB 9 million into the newly established Huifang Rongcui for equity investment - On July 2, 2021, Huida Factoring completed a capital increase, introducing a new state-owned shareholder, reducing the Company's shareholding from **60.00%** to **52.94%**[78](index=78&type=chunk) - On July 26, 2021, the Group injected **RMB 9.0 million** into Huifang Rongcui to commence equity investment business[79](index=79&type=chunk) [Future Outlook](index=21&type=section&id=%E6%9C%AA%E4%BE%86%E5%B1%95%E6%9C%9B) The company will continue to deepen the development of its business segments, with Inclusive Finance focusing on small, diversified loans and national brand expansion, Technology Finance leveraging state-owned participation for financing, Insurance Agency exploring new co-insurance models, and headquarters advancing refined management, aiming for headquarters building completion, and fostering new investment businesses - Inclusive Finance: Adhere to the principles of small, diversified, and short-term loans, promoting national brand expansion for pawn businesses Technology Finance: Centered on commercial factoring within supply chain scenarios, leveraging state-owned participation advantages to secure bank financing Insurance Agency: Explore new co-insurance cooperation models and increase the proportion of self-operated business Headquarters and Others: Advance the construction of the headquarters building and cultivate emerging businesses such as art, distressed asset, and equity investments[81](index=81&type=chunk)[82](index=82&type=chunk) [Other Information](index=22&type=section&id=%E5%85%B6%E4%BB%96%E8%B3%87%E6%96%99) [Directors' and Chief Executive's Interests in Shares and Share Options](index=22&type=section&id=%E8%91%A3%E4%BA%8B%E5%8F%8A%E6%9C%80%E9%AB%98%E8%A1%8C%E6%94%BF%E4%BA%BA%E5%93%A1%E6%96%BC%E8%82%A1%E4%BB%BD%E3%80%81%E7%9B%B8%E9%97%9C%E8%82%A1%E4%BB%BD%E5%8F%8A%E5%82%B5%E5%88%B8%E4%B9%8B%E6%AC%8A%E7%9B%8A%E5%8F%8A%E6%B7%A1%E5%80%89) This section details the interests of the company's directors and chief executive in the shares, underlying shares, and debentures of the company and its associated corporations as of June 30, 2021, including directly held ordinary shares and interests through share option schemes - Disclosed the number of ordinary shares and share options held by several directors, including Mr. Wu Min and Mr. Zhang Changsong[86](index=86&type=chunk) [Major Shareholders' Shareholding Status](index=24&type=section&id=%E4%B8%BB%E8%A6%81%E8%82%A1%E6%9D%B1%E6%8C%81%E8%82%A1%E6%83%85%E6%B3%81) As of June 30, 2021, the report lists major shareholders holding 5% or more interest in the company, including Xiaolai Investment Limited (23.90%), Baoxiang Investment Limited (7.77%), Miracle Capital Limited (6.57%), and their ultimate beneficial owners Major Shareholders' Shareholding Percentage (As of June 30, 2021) | Shareholder Name/Ultimate Controller | Shareholding Percentage | | :--- | :--- | | Xiaolai Investment Limited (Zhu Tianxiao) | 23.90% | | Xilai Investment Limited (Zhu Tianxiao) | 5.98% | | Baoxiang Investment Limited (Zhang Xiangrong) | 7.77% | | Miracle Capital Limited (Ge Jian) | 6.57% | | Nanfang Dayang Investment Limited (Chen Yannan) | 5.98% | [Share Option Scheme](index=25&type=section&id=%E8%B3%BC%E8%82%A1%E6%AC%8A%E8%A8%88%E5%8A%83) The company adopted a 10-year share option scheme in 2014, with 50 million options granted as of June 30, 2021, of which 26.25 million remain unexercised, representing approximately 2.41% of issued share capital, with an exercise price of HKD 0.62 per share and expiring by September 12, 2021 - As of June 30, 2021, **26,249,000** share options remained unexercised under the share option scheme[101](index=101&type=chunk)[115](index=115&type=chunk) - The exercise price for granted share options is **HKD 0.62** per share, exercisable before September 12, 2021[113](index=113&type=chunk) [Corporate Governance Practices](index=28&type=section&id=%E4%BC%81%E6%A5%AD%E7%AE%A1%E6%B2%BB%E5%B8%B8%E8%A6%8F) During the reporting period, the company consistently complied with the Corporate Governance Code, with the only deviation being the combined roles of Chairman and Chief Executive Officer held by Mr. Wu Min, a structure the Board deems effective for strategy execution - The company deviated from the Corporate Governance Code's requirement for separate roles of Chairman and Chief Executive Officer, with Mr. Wu Min holding both positions[126](index=126&type=chunk) [Dividends](index=29&type=section&id=%E8%82%A1%E6%81%AF) The Board does not recommend the payment of an interim dividend for the six months ended June 30, 2021 - The Board does not recommend the payment of an interim dividend for 2021[131](index=131&type=chunk) [Interim Financial Information](index=30&type=section&id=%E4%B8%AD%E6%9C%9F%E8%B2%A1%E5%8B%99%E8%B3%87%E6%96%99) [Review Report on Interim Financial Information](index=30&type=section&id=%E4%B8%AD%E6%9C%9F%E8%B2%A1%E5%8B%99%E8%B3%87%E6%96%99%E7%9A%84%E5%AF%A9%E9%96%B1%E5%A0%B1%E5%91%8A) PricewaterhouseCoopers, the company's auditor, reviewed the interim financial information in accordance with Hong Kong Standard on Review Engagements 2410, finding no matters that would lead them to believe the interim financial information was not prepared in all material respects in accordance with Hong Kong Accounting Standard 34 - The auditor, PricewaterhouseCoopers, issued an unqualified review report on the interim financial information[135](index=135&type=chunk) [Interim Condensed Consolidated Statement of Comprehensive Income](index=31&type=section&id=%E4%B8%AD%E6%9C%9F%E7%B0%A1%E6%98%8E%E5%90%88%E4%BD%B5%E7%B6%9C%E5%90%88%E6%94%B6%E7%9B%8A%E8%A1%A8) For the six months ended June 30, 2021, the company recorded operating revenue of RMB 135 million, profit for the period of RMB 23.06 million, with RMB 14.78 million attributable to owners of the company, and basic earnings per share of RMB 0.014 Key Items from Interim Condensed Consolidated Statement of Comprehensive Income (For the six months ended June 30) | Item | 2021 (RMB thousands) | 2020 (RMB thousands) | | :--- | :--- | :--- | | Operating Revenue | 134,754 | 138,174 | | Net Operating Income | 68,816 | 29,324 | | Profit Before Income Tax | 35,147 | 12,270 | | Profit for the Period | 23,064 | 4,782 | | Profit Attributable to Owners of the Company | 14,776 | 893 | [Interim Condensed Consolidated Statement of Financial Position](index=32&type=section&id=%E4%B8%AD%E6%9C%9F%E7%B0%A1%E6%98%8E%E5%90%88%E4%BD%B5%E8%B2%A1%E5%8B%99%E7%8B%80%E6%B3%81%E8%A1%A8) As of June 30, 2021, the company's total assets were RMB 2.713 billion, total liabilities RMB 764 million, and total equity RMB 1.949 billion, with net loans to customers, a core asset, at RMB 1.889 billion Key Items from Interim Condensed Consolidated Statement of Financial Position | Item | As of June 30, 2021 (RMB thousands) | As of December 31, 2020 (RMB thousands) | | :--- | :--- | :--- | | **Assets** | | | | Loans to Customers | 1,888,767 | 1,814,211 | | Total Assets | 2,712,986 | 2,532,555 | | **Equity and Liabilities** | | | | Total Liabilities | 764,472 | 590,657 | | Total Equity | 1,948,514 | 1,941,898 | | Total Equity and Liabilities | 2,712,986 | 2,532,555 | [Interim Condensed Consolidated Statement of Cash Flows](index=36&type=section&id=%E4%B8%AD%E6%9C%9F%E7%B0%A1%E6%98%8E%E5%90%88%E4%BD%B5%E7%8F%BE%E9%87%91%E6%B5%81%E9%87%8F%E8%A1%A8) For the six months ended June 30, 2021, operating activities resulted in a net cash outflow of RMB 107 million, primarily due to increased loans to customers; investing activities had a net outflow of RMB 28.36 million; and financing activities generated a net inflow of RMB 123 million, with cash and cash equivalents at period-end totaling RMB 90.88 million Summary of Interim Condensed Consolidated Statement of Cash Flows (For the six months ended June 30) | Item | 2021 (RMB thousands) | 2020 (RMB thousands) | | :--- | :--- | :--- | | Net Cash (Outflow)/Inflow from Operating Activities | (107,104) | 425,679 | | Net Cash Outflow from Investing Activities | (28,360) | (2,336) | | Net Cash Inflow/(Outflow) from Financing Activities | 122,664 | (523,010) | | Cash and Cash Equivalents at Period-end | 90,883 | 81,098 | [Notes to Interim Condensed Consolidated Financial Information](index=37&type=section&id=%E4%B8%AD%E6%9C%9F%E7%B0%A1%E6%98%8E%E5%90%88%E4%BD%B5%E8%B2%A1%E5%8B%99%E4%BF%A1%E6%81%AF%E9%99%84%E8%A8%BB) The financial notes detail the basis of financial statement preparation, significant accounting policies, financial risk management, segment information, and specifics of each statement item, including credit risk exposure, fair value hierarchy of financial instruments, detailed performance of business segments, loan portfolio details and provisions, borrowing structure, and related party transactions - Notes provide detailed disclosure of the Group's three main operating segments: Inclusive Finance Business Segment, Technology Finance Business Segment, and Insurance Agency Business Segment, along with their respective revenue, profit, asset, and liability information[198](index=198&type=chunk)[199](index=199&type=chunk)[200](index=200&type=chunk) - Note 28 details the classification of loans to customers (mortgage/non-mortgage), aging analysis, overdue status, and changes in expected credit loss provisions, which are central to understanding the company's asset quality[264](index=264&type=chunk)[274](index=274&type=chunk)[277](index=277&type=chunk) - Notes 34 and 37 disclose the company's borrowing details and significant related party transactions, including guarantees from related parties, which are crucial for assessing the company's financing capabilities and potential risks[313](index=313&type=chunk)[323](index=323&type=chunk) [Definitions](index=83&type=section&id=%E9%87%8B%E7%BE%A9) This section provides clear definitions for specific terms used throughout the report, such as 'the Company,' 'the Group,' 'the Board,' 'Listing Rules,' and abbreviations for various subsidiaries - This section provides clear definitions for specific terms used in the report, such as 'the Company,' 'the Group,' 'the Board,' 'Listing Rules,' and abbreviations for various subsidiaries[331](index=331&type=chunk)

Financial Performance - Operating revenue for 2020 was RMB 259.8 million, a decrease of 24.6% from RMB 344.1 million in 2019[8] - Profit attributable to equity holders was RMB 2.2 million, down 95.6% from RMB 50.4 million in 2019[8] - Total assets decreased to RMB 2.53 billion from RMB 3.00 billion in 2019, a decline of 15.6%[8] - Cash and cash equivalents dropped to RMB 434.1 million from RMB 1.05 billion in 2019, a decrease of 58.6%[8] - Total liabilities decreased to RMB 590.7 million from RMB 1.05 billion in 2019, a decline of 43.8%[8] - The company reported a pre-tax loss of RMB 45,458,000 for 2020, compared to a loss of RMB 8,083,000 in 2019[50] - The company’s total assets as of December 31, 2020, were RMB 1,941,898 thousand, slightly down from RMB 1,948,444 thousand in 2019[45] - The net asset value remained relatively stable, with a slight decrease from RMB 1,948,444 thousand in 2019 to RMB 1,941,898 thousand in 2020[45] - Operating costs increased significantly to RMB 21,504,000 in 2020 from RMB 7,253,000 in 2019, indicating a rise of approximately 196.5%[50] - The total impairment provision for loans as of December 31, 2020, was RMB 603,670,000, which accounted for about 24.97% of the total loans granted[56] Loan Activity - Loans granted to customers increased to RMB 1.81 billion from RMB 1.70 billion in 2019, an increase of 6.4%[8] - In 2020, the total amount of new real estate mortgage loans granted was RMB 405 million, an increase from RMB 329 million in 2019, with the number of loans rising from 386 to 527[25] - The total amount of new non-mortgage loans granted was RMB 784 million in 2020, down from RMB 922 million in 2019, with the number of loans increasing from 47 to 65[25] - The total amount of new loans granted by the Huifang Rongtong fund was RMB 2,328 million in 2020, a slight decrease from RMB 2,620 million in 2019, while the number of loans increased from 253 to 370[30] - The total amount of new loans granted by Dongshan Microfinance was RMB 341 million in 2020, significantly down from RMB 941 million in 2019, with the number of loans decreasing from 623 to 159[34] - New mortgage loans added in 2020 amounted to RMB 19,384,000, a significant decrease from RMB 132,385,000 in 2019[58] - Dongshan Small Loan issued new loans totaling RMB 341 million in 2020, a decrease from RMB 941 million in 2019, attributed to tightened regulatory policies[35] - The number of new loans issued by Dongshan Small Loan fell to 159 in 2020 from 623 in 2019, reflecting a significant decline in lending activity[35] Strategic Initiatives - The company plans to enhance its market competitiveness and expand its national strategy in 2021[17] - The registered capital for commercial factoring increased to RMB 100 million following the introduction of state-owned strategic investment[16] - The company aims to optimize human resources and reduce administrative and interest expenses significantly compared to 2019[16] - The company is focusing on expanding into art pawn, special asset management, and equity investment sectors[17] - The company aims to enhance its position as a leading provider of inclusive financial services in China, focusing on small and medium-sized enterprises and individuals[24] - The company has established strategic partnerships with over 30 banks to enhance its lending capabilities and service offerings[30] - The company is actively seeking alternative products to replace the halted lending business due to regulatory changes[35] - The company plans to continue promoting refined management to achieve revenue growth and cost reduction in the future[50] Human Resources and Management - The workforce decreased to 140 full-time employees, down from 161 in the previous year, with employee compensation and benefits expenses amounting to approximately RMB 28,416 thousand[78] - The management team emphasized the importance of risk management, with a new framework being introduced to mitigate potential financial risks[87] - The company has established an Audit Committee to assist the Board in reviewing financial reporting, risk management, and internal controls[104] - The Compensation Committee is responsible for reviewing the remuneration policies for directors and senior management, ensuring transparency in the compensation process[105] - The Nomination Committee evaluates the composition of the Board and provides recommendations for the appointment of directors[106] Future Outlook - The company provided a positive outlook for the next fiscal year, projecting a revenue growth of 10% to 12%[86] - New product launches are expected to contribute an additional $50 million in revenue over the next year[86] - The company is investing in technology development, with a budget allocation of $10 million for R&D in the upcoming year[86] - Market expansion plans include entering two new regions, aiming for a 5% market share within the first year[86] - The company is considering strategic acquisitions to enhance its service offerings, with a target of identifying at least three potential candidates by Q3[86] - A new marketing strategy is being implemented, focusing on digital channels, which is expected to increase customer engagement by 30%[86] - The company aims to reduce operational costs by 8% through efficiency improvements in the supply chain[86] Shareholder Information - Major shareholders include 膀来投资有限公司 with 260,000,000 shares (23.90%) and 喜来投资有限公司 with 65,000,000 shares (5.98%)[159] - The company reported a total of 1,087,769,000 shares issued as of December 31, 2020[156] - The company’s major shareholders are primarily controlled by朱天晓, who has a beneficial interest in 325,000,000 shares (29.88%)[159] - The company has a stock option plan with various directors holding options totaling 6,000,000 shares[150] - The share option plan allows for the issuance of options to any employee or director of the group, regardless of their employment status[166] - The largest customer accounted for 11.2% of the total interest income from customer loans for the year ended December 31, 2020, while the top five customers collectively represented 27.0% of the total interest income from customer loans[185] Compliance and Governance - The company has disclosed no interests held by directors in the company's shares as defined under the Securities and Futures Ordinance[98] - The company has maintained compliance with the listing rules regarding the disclosure of directors' interests[98] - The company confirmed compliance with the disclosure requirements under Chapter 14A of the Listing Rules regarding related party transactions[199] - The company did not enter into any arrangements allowing directors to acquire securities of the company for the year ended December 31, 2020[193] - There were no significant contracts entered into between the company and its controlling shareholders for the year ended December 31, 2020[194] - The company has established a compensation committee to review its compensation policies based on overall performance and market comparisons[187]

Financial Performance - Operating revenue for the six months ended June 30, 2020, was RMB 138,174,000, a decrease of 23% compared to RMB 178,659,000 in 2019[10]. - Profit attributable to owners of the company for the same period was RMB 893,000, down 97% from RMB 31,141,000 in 2019[10]. - Total operating revenue for the first half of 2020 was RMB 138,174 thousand, a decrease of 22.7% compared to RMB 178,659 thousand in 2019[35]. - The net profit for the six months ended June 30, 2020, was RMB 4,782,000, a significant decline of 87.8% compared to RMB 39,208,000 in the previous year[154]. - The total comprehensive income for the period was RMB 4,782,000, down from RMB 39,208,000 in the prior year[154]. - The company did not recommend the payment of an interim dividend for the six months ended June 30, 2020[145]. Assets and Liabilities - Total assets as of June 30, 2020, were RMB 2,525,818,000, a decrease of 16% from RMB 3,001,631,000 at the end of 2019[10]. - Total liabilities were RMB 588,910 thousand, down from RMB 1,053,187 thousand, showing a reduction of approximately 44%[158]. - The total equity as of June 30, 2020, was RMB 1,936,908 thousand, compared to RMB 1,948,444 thousand as of December 31, 2019, a decrease of approximately 1%[158]. - The equity attributable to owners of the company was RMB 1,779,248 thousand, slightly down from RMB 1,793,103 thousand, a decrease of about 1%[161]. Loans and Credit Management - Loans granted to customers increased by 6% to RMB 1,803,589,000 from RMB 1,703,704,000 in 2019[10]. - The total amount of new loans issued by Huifang Rongtong was RMB 1,243 million, a decrease from RMB 1,339 million in the previous year, while the number of new loans increased to 182 from 106[19]. - The total amount of new loans issued by Dongshan Microfinance was RMB 126 million, a significant decrease from RMB 451 million in the previous year, attributed to tightened regulatory policies[23]. - The impairment provision for loans as of June 30, 2020, was RMB 564,338 thousand, accounting for about 23.83% of the total loans granted before provisions, which is an increase of RMB 98,294 thousand compared to the end of the previous year[56]. - The expected credit loss for the period was RMB 79,097,000, an increase of 26.3% from RMB 62,639,000 in the previous year[154]. Operational Efficiency - The company reported a significant reduction in operating expenses, which were RMB 22,832,000, down 46% from RMB 41,968,000 in 2019[10]. - The management is confident that adhering to its existing development strategy will create sustainable value for shareholders[12]. - The company has focused on cost control and budget management in response to the challenges posed by the COVID-19 pandemic[12]. - Administrative expenses decreased to RMB 28,776 thousand from RMB 36,563 thousand in 2019, reflecting cost control measures[35]. Business Development and Strategy - The company aims to enhance its position as a leading provider of inclusive financial services in China, with operations covering Suzhou, Hong Kong, Chengdu, Wuxi, and Hefei[13]. - The company plans to continue exploring new business development opportunities and will focus on expanding its influence and recognition in the microfinance sector[86]. - The company aims to enhance its financing capabilities and service depth in commercial factoring while establishing a supply chain data platform in the fast-moving consumer goods sector[86]. - The company is actively seeking alternative products to replace the discontinued small loan business due to regulatory changes[24]. Shareholder Information - Major shareholder 膀　陈投資有限公司 holds 260,000,000 shares, accounting for 23.90% of the total shares[105]. - Major shareholder 朱天曉 has a beneficial interest in 325,000,000 shares, representing 29.88% of the total shares[105]. - Major shareholder 喜來投資有限公司 owns 65,000,000 shares, which is 5.98% of the total shares[105]. - Major shareholder 奇蹟資本有限公司 holds 71,500,000 shares, accounting for 6.57% of the total shares[105]. - The company has a significant ownership structure with multiple shareholders holding over 5% of the shares, indicating a concentrated ownership[105]. Cash Flow and Financing - Net cash inflow from operating activities for the six months ended June 30, 2020, was RMB 425,679 thousand, primarily due to the lifting of restrictions on domestic equity investments[79]. - Net cash outflow from financing activities was RMB 523,010 thousand, mainly due to the repayment of bank loans to reduce financial costs[80]. - The company received RMB 851,554 thousand from borrowings, a decrease from RMB 1,251,343 thousand in the previous year[171]. - The company repaid borrowings amounting to RMB 1,357,267 thousand, compared to RMB 1,041,540 thousand in the same period of 2019[171]. Compliance and Governance - The company has complied with the corporate governance code principles and rules, except for the separation of the roles of chairman and CEO[137]. - All directors confirmed compliance with the standard code of conduct for securities trading during the six-month period ending June 30, 2020[138]. - The company’s independent auditor did not find any issues that would lead them to believe the interim financial information was not prepared in accordance with the relevant accounting standards[151].