Company: XHG
Filing Date: 2025-01-22
Form Type: 20-F
Source: 0001213900-25-005499
Chunk: 4

Company: XChange TEC.INC
Filing Date: 2025-01-22
Form: 20-F
Item: Item 3
Chunk 4
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. The PRC regulatory
authorities could disallow the Current VIE structure at any time in the future. If the PRC government deems that our contractual arrangements
with the Current VIEs do not comply with PRC regulatory restrictions on foreign investment in the relevant industries, or if these regulations
or the interpretation of existing regulations change or are interpreted differently in the future, we could be subject to severe penalties
and may incur substantial costs to enforce the terms of the arrangements, or be forced to relinquish our interests in those operations.
Our Cayman Islands holding company, our subsidiaries, the Current VIEs, and investors in our securities (including the ADS) face uncertainty
with respect to potential future actions by the PRC government that could affect the enforceability of the contractual arrangements with
the Current VIEs and, consequently, significantly affect the financial performance of our company and the Current VIEs as a whole. For
details, see “ Item 3. Key Information - D. Risk Factors - Risks Related to Our Corporate Structure.”

The following diagram illustrates our corporate
structure, including our principal subsidiaries as of the date of this annual report.

Equity
Interest

VIE
contractual arrangement

Permissions Required from the PRC Authorities

We conduct our business in China through our subsidiaries
and the Current VIEs. We are required to obtain certain permissions from the PRC authorities to operate, issue securities to foreign investors,
and transfer certain data. The PRC government has exercised, and may continue to exercise, substantial influence or control over virtually
every sector of the Chinese economy through regulation and state ownership. Our ability to operate in China may be undermined if our subsidiaries
or the Current VIEs are not able to obtain or maintain approvals to operate in China. The central or local governments could impose new,
stricter regulations or interpretations of existing regulations that could require additional expenditures, and efforts on our part to
ensure our compliance with such regulations or interpretations. To operate our general business activities currently conducted in mainland
China, each of the Current VIEs is required to obtain a business license from the local counterpart of the State Administration for Market
Regulation, or SAMR. Each of the Current VIEs has obtained a valid business license from the local SAMR, and no application for any such
license has been denied. In addition, the Current VIEs are also required to obtain insurance agency operating licenses pursuant to the
PRC laws. As of the date of this annual report