Core Points - The newly released "Interim Measures for the Supervision and Administration of Local Asset Management Companies" establishes a regulatory framework that significantly transforms the local non-performing asset disposal industry [1][2][3] - The measures impose strict operational requirements, including a 30% threshold for core business, a leverage cap of three times net assets, and a 10% concentration limit on single client financing [1][5][6] Regulatory Background - The introduction of the measures is a response to long-standing issues in the industry, such as deviation from core business and regulatory arbitrage [2][3] - A report indicated that many local AMCs have engaged in unauthorized external financing, with significant amounts of funds becoming non-performing or overdue [2][3] Business Focus and Risk Management - The measures require local AMCs to focus on core activities related to the acquisition, management, and disposal of non-performing assets, mandating that at least 30% of new investments be allocated to these activities [4][7] - The measures also set limits on single client financing to mitigate concentration risks and enhance overall risk management [5][6] Industry Impact - The new regulations are expected to accelerate industry differentiation, with weaker local AMCs facing greater pressure to transform or exit the market [11][12] - Statistics show that the average financial non-performing asset ratio for local AMCs has been above 30% from 2021 to 2023, indicating a trend of increasing reliance on non-performing assets [9][10] Financial Performance - Local AMCs have shown stable asset growth, but net profit has declined, indicating a "growth without profit" scenario [8] - The average leverage ratio among local AMCs remains high, with only a few companies maintaining an asset-liability ratio below 50% [10][12] Future Outlook - The measures are anticipated to compel AMCs to innovate their asset management business models and improve their management capabilities [12] - The industry is likely to see increased consolidation, with poorly performing AMCs facing potential exit or integration [12]

Investment Overview - The company plans to invest 60 million RMB to establish a wholly-owned subsidiary named Xiamen Xatong Recycling Technology Co., Ltd. (tentative name) to enhance its secondary resource recovery capabilities and expand its recycling business [1][2] - The investment does not constitute a related party transaction or a major asset restructuring as defined by relevant regulations [1][2] Subsidiary Details - The registered capital of the new subsidiary will be 60 million RMB, funded entirely through cash [2][3] - The subsidiary will focus on the recycling, disposal, and regeneration of used batteries, particularly in the electric vehicle sector, and will also engage in the research and production of nickel sulfate, cobalt sulfate, and lithium carbonate [2][3] Strategic Rationale - The establishment of the subsidiary aligns with national policies encouraging the comprehensive recycling of resources, particularly as the demand for cobalt, nickel, and lithium rises [3][4] - The market for used lithium-ion battery recycling in China is expected to grow significantly, with projections indicating a recovery volume of 4.246 million tons by 2030 [3][4] Impact on the Company - The new subsidiary is expected to strengthen the company's supply chain and enhance its competitive position in the recycling industry [4] - The establishment will not adversely affect the company's financial status or operational results, and it will be included in the company's consolidated financial statements [4]