Company: XHG
Filing Date: 2025-01-22
Form Type: 20-F
Source: 0001213900-25-005499
Chunk: 51

Company: XChange TEC.INC
Filing Date: 2025-01-22
Form: 20-F
Item: Item 3
Chunk 51
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As a result, our non-resident subsidiaries in
such transactions may risk being subject to filing obligations or being taxed under Circular 7 and the SAT Circular 37, unless it can
be justified that the transactions are of reasonable business purposes such as group restructuring or other allowed circumstances. Practically,
there has been no major transaction of similar nature challenged by the PRC tax authorities. However, given the increasingly tightened
tax administration in China and the uncertainties under Circular 7, we cannot assure you that there is no tax reporting or settlement
risk for such transactions.

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

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

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

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

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

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

The value of the Renminbi against the U. S.