Company: DSWL
Filing Date: 2025-07-29
Form Type: 20-F
Source: 0001174947-25-001096
Chunk: 32

Company: DESWELL INDUSTRIES INC
Filing Date: 2025-07-29
Form: 20-F
Item: Item 3
Chunk 32
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idiaries in China by means of capital contributions, the capital contributions must through record-filingprocedures from competent administration for market regulation. SAFE issued the Circular on the Management Concerning the Reform of the Payment and Settlement of Foreign Currency Capital of Foreign-InvestedEnterprises, or SAFE Circular19, which took effect on June 1, 2015. SAFE Circular 19 allows for the use of RMB converted from the foreign currency-denominatedcapital for equity investments in the PRC provided that such usage shall fall into the scope of business of the foreign-investedenterprise, which will be regarded as the reinvestment of foreign-investedenterprise. In addition, SAFE promulgated the Circular Regarding Further Promotion of the Facilitation of Cross-BorderTrade and Investment on October 23, 2019, or SAFE Circular28, pursuant to which all foreign-investedenterprises can make equity investments in the PRC with their capital funds in accordance with the law. The Circular Regarding Further Optimizing the Cross-borderRMB Policy to Support the Stabilization of Foreign Trade and Foreign Investment jointly promulgated by the PBOC, NDRC, the Ministry of Commerce, the State-ownedAssets Supervision and Administration Commission of the State Council, the China Banking and Insurance Regulatory Commission and SAFE on December 31, 2020 and effective on February 4, 2021 allows the non-investmentforeign-investedenterprises to make domestic reinvestment with RMB capital in accordance with the law on the premise that they comply with prevailing regulations and the invested projects in China are authentic and compliant. In addition, if a foreign-investedenterprise uses RMB income under capital accounts to conduct domestic reinvestment, the invested enterprise is not required to open a special deposit account for RMB capital.

Due to the restrictions imposed on loans in foreign currencies extended to any PRC domestic companies, we may not be able to make such loans to the subsidiaries of our wholly foreign-ownedsubsidiaries in China.

Because of these restrictions and requirements, we cannot assure you that we will be able to complete the necessary government registrations or record-filingson a timely basis, with respect to any regulated future loans to our PRC subsidiaries or future capital contributions by us to our wholly foreign-ownedsubsidiaries in China. As a result, uncertainties exist as to our ability to provide prompt financial support to our PRC subsidiaries. If we fail to complete such registrations or record-filings, our ability to use foreign currency to finance our PRC