Company: LICN
Filing Date: 2025-04-29
Form Type: 20-F
Source: 0001213900-25-036244
Chunk: 77

Company: Lichen International Ltd
Filing Date: 2025-04-29
Form: 20-F
Item: Item 11
Chunk 77
---
Item
11. Quantitative and Qualitative Disclosures About Market Risk

Foreign Exchange Risk

All of our revenues and substantially
all of our expenses are denominated in RMB. In our consolidated financial statements, our financial information that uses RMB as the functional
currency has been translated into U. S. dollars. We do not believe that we currently have any significant direct foreign exchange risk
and have not used any derivative financial instruments to hedge exposure to such risk.

The value of the RMB against
the U. S. dollar and other currencies is affected by, among other things, changes in China’s political and economic conditions. The
PRC government allowed the RMB to appreciate by more than 20% against the U. S. dollar between July 2005 and July 2008. Between July 2008
and June 2010, the exchange rate between the RMB and the U. S. dollar had been stable and traded within a narrow band. Since June 2010,
the PRC government has allowed the RMB to appreciate slowly against the U. S. dollar, though there have been periods when the RMB has depreciated
against the U. S. dollar. In particular, on August 11, 2015, the PBOC allowed the RMB to depreciate by approximately 2% against the U. S.
dollar. It is difficult to predict how long the current situation may last and when and how the relationship between the RMB and the U. S.
dollar may change again.

To the extent that we need
to convert U. S. dollars into RMB for our operations, appreciation of the RMB against the U. S. dollar would have an adverse effect on the
RMB amount we receive from the conversion. Conversely, if we decide to convert RMB into U. S. dollars, appreciation of the U. S. dollar
against the RMB would have a negative effect on the U. S. dollar amounts available to us.

Interest rate risk

Interest rate risk is the
risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Our
interest rate risk arises primarily from short-term borrowings. Borrowings issued at variable rates and fixed rates expose us to cash
flow interest rate risk and fair value interest rate risk respectively.

Inflation Risk

We are also exposed to inflation
risk. Inflationary factors, such as increases in labor costs,