UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



FORM 20-F



(Mark One)



| ̈ | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ------------------------------------------------------------------------------------------------



or



|x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ------------------------------------------------------------------------------------



For the fiscal year
ended December 31, 2018.



or



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------



or



| ̈ | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | -------------------------------------------------------------------------------------------



Date of event requiring this shell company
report



For the transition
period from _______________ to _______________



Commission file number: 001-34873



ChinaCache International Holdings Ltd.

(Exact name of Registrant as specified
in its charter)



N/A

(Translation of Registrant’s
name into English)



Cayman Islands

(Jurisdiction of incorporation or
organization)



Section A, Building 3, Dian Tong Creative
Square

No. 7 Jiuxianqiao North Road, Chaoyang
District

Beijing, 100015, China

(Address of principal executive offices)



Bin Liu, Acting Chief Executive Officer

Tel: +86 (10) 6408 5088

Fax: +86 (10) 6408 5888

Section A, Building 3, Dian Tong Creative
Square

No. 7 Jiuxianqiao North Road, Chaoyang
District

Beijing, 100015, China

(Name, Telephone, Email and/or Facsimile
number and Address of Company Contact Person)



Securities registered or to be registered pursuant to Section 12(b)
of the Act:



|Title of each class                                                                                                                                                                                                                                                          | Name of each exchange on which registered                    
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------
|                                                                                                                                                                                                                                                                             |                                                              
|American depositary shares, each
                                                    representing 16 ordinary shares
                                                    Ordinary shares, par value
                                                    US$0.0001 per share* | None
                                                    None



*



Securities registered or to be registered pursuant to Section 12(g)
of the Act:



None

(Title of Class)



Securities for which there is a reporting obligation pursuant
to Section 15(d) of the Act:



None

(Title of Class)



Indicate the number of outstanding shares
of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.







429,404,977 ordinary shares, par value US$0.0001
per share, as of December 31, 2018







Indicate by check mark if the registrant
is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes   ̈    No  x



If this report is an annual or transition
report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.  Yes   ̈    No  x



Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

Yes  x    No   ̈



Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T
(§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to
submit such files).  Yes  x    No   ̈



Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer or an emerging growth company. See the definitions
of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2
of the Exchange Act:



|Large accelerated filer     ̈ | Accelerated filer     ̈ | Non-accelerated filer    x | Emerging growth company     ̈
|---------------------------- | ---------------------- | -------------------------- | ----------------------------



If an emerging growth company that prepares
its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended
transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a)
of the Exchange Act.   ̈



† The term “new or revised
financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting
Standards Codification after April 5, 2012.



Indicate by check mark which basis of accounting
the registrant has used to prepare the financial statements included in this filing:



|U.S. GAAP    x | International Financial
        Reporting Standards as issued by the International Accounting Standards Board     ̈ | Other     ̈
|-------------- | ------------------------------------------------------------------------------------------------------------------ | ----------



If “Other” has been checked
in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.



 ̈ Item 17     ̈
Item 18



If this is an annual report, indicate by
check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).



Yes   ̈    No  x


















TABLE OF CONTENT



|INTRODUCTION                                      | 1                                                                           
|------------------------------------------------- | ----------------------------------------------------------------------------
|                                                  |                                                                             
|SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS | 1                                                                           
|                                                  |                                                                             
|PART I.                                           | 2                                                                           
|                                                  |                                                                             
|ITEM 1.                                           | Identity of Directors, Senior Management and Advisers                       
|                                                  |                                                                             
|ITEM 2.                                           | Offer Statistics and Expected Timetable                                     
|                                                  |                                                                             
|ITEM 3.                                           | Key Information                                                             
|                                                  |                                                                             
|ITEM 4.                                           | INFORMATION ON THE COMPANY                                                  
|                                                  |                                                                             
|ITEM 4A.                                          | UNRESOLVED STAFF COMMENTS                                                   
|                                                  |                                                                             
|ITEM 5.                                           | OPERATING AND FINANCIAL REVIEW AND PROSPECTS                                
|                                                  |                                                                             
|ITEM 6.                                           | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES                                  
|                                                  |                                                                             
|ITEM 7.                                           | MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS                           
|                                                  |                                                                             
|ITEM 8.                                           | FINANCIAL INFORMATION                                                       
|                                                  |                                                                             
|ITEM 9.                                           | THE OFFER AND LISTING                                                       
|                                                  |                                                                             
|ITEM 10.                                          | ADDITIONAL INFORMATION                                                      
|                                                  |                                                                             
|ITEM 11.                                          | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                  
|                                                  |                                                                             
|ITEM 12.                                          | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES                      
|                                                  |                                                                             
|PART II.                                          |                                                                             
|                                                  |                                                                             
|ITEM 13.                                          | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES                             
|                                                  |                                                                             
|ITEM 14.                                          | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
|                                                  |                                                                             
|ITEM 15.                                          | CONTROLS AND PROCEDURES                                                     
|                                                  |                                                                             
|Item 16A.                                         | AUDIT COMMITTEE FINANCIAL EXPERT                                            
|                                                  |                                                                             
|Item 16B.                                         | CODE OF ETHICS                                                              
|                                                  |                                                                             
|Item 16C.                                         | PRINCIPAL ACCOUNTANT FEES AND SERVICES                                      
|                                                  |                                                                             
|Item 16D.                                         | EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES                  
|                                                  |                                                                             
|Item 16E.                                         | PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS      
|                                                  |                                                                             
|Item 16F.                                         | CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT                                
|                                                  |                                                                             
|Item 16G.                                         | CORPORATE GOVERNANCE                                                        
|                                                  |                                                                             
|Item 16H.                                         | MINE SAFETY DISCLOSURE                                                      
|                                                  |                                                                             
|Item
    17.                                      | FINANCIAL STATEMENTS                                                        
|                                                  |                                                                             
|Item 18.                                          | FINANCIAL STATEMENTS                                                        
|                                                  |                                                                             
|Item 19.                                          | EXHIBITS                                                                    





i







INTRODUCTION



In this annual report, except where the
context otherwise requires and for purpose of this annual report only:



| | · | “ADSs” refers to American depositary shares, each of which represents 16 ordinary shares;
| | - | -----------------------------------------------------------------------------------------



| | · | “Beijing Blue I.T.” means Beijing Blue I.T. Technologies Co., Ltd.;
| | - | -------------------------------------------------------------------



| | · | “Beijing Jingtian” means Beijing Jingtian Technologies Co., Ltd.;
| | - | -----------------------------------------------------------------



| | · | “ChinaCache,” “we,” “us,” “our company,” and “our” refer to ChinaCache International Holdings Ltd., its subsidiaries and its consolidated variable interest entities;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | “China” or “PRC” refers to the People’s Republic of China, excluding, for purposes of this annual report only, Taiwan, Hong Kong and Macau;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------



| | · | “ChinaCache Beijing” means ChinaCache Network Technology (Beijing) Co., Limited;
| | - | --------------------------------------------------------------------------------



| | · | “ChinaCache Hong Kong” means ChinaCache Networks (Hong Kong) Limited;
| | - | ---------------------------------------------------------------------



| | · | “ChinaCache Shouming” means ChinaCache Shouming Technology (Beijing) Co., Limited;
| | - | ----------------------------------------------------------------------------------



| | · | “Renminbi” or “RMB” refers to the legal currency of China;
| | - | ----------------------------------------------------------



| | · | “U.S.” refers to the United States of America;
| | - | ----------------------------------------------



| | · | “U.S. GAAP” refers to generally accepted accounting principles in the U.S.;
| | - | ---------------------------------------------------------------------------



| | · | “US$,” “dollars” or “U.S. dollars” refers to the legal currency of the U.S.;
| | - | ----------------------------------------------------------------------------



| | · | “Xin Run” means ChinaCache Xin Run Technology (Beijing) Co., Limited; and
| | - | -------------------------------------------------------------------------



| | · | all discrepancies in any table between the amounts identified as total amounts and the sum of the amounts listed therein are due to rounding.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------



SPECIAL NOTE REGARDING FORWARD-LOOKING
STATEMENTS



This annual report on Form 20-F contains
forward-looking statements that relate to our current expectations and views of future events. The forward-looking statements are
contained principally in the items entitled “Information on the Company,” “Risk Factors,” “Operating
and Financial Review and Prospects,” “Financial Information” and “Quantitative and Qualitative Disclosures
About Market Risk.” Our forward-looking statements relate to events that involve known and unknown risks, uncertainties and
other factors, including those listed under “Risk Factors,” which may cause our actual results, performance or achievements
to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.
These statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigations Reform Act
of 1995. You can identify some of these forward-looking statements by words or phrases such as “may,” “will,”
 “expect,” “anticipate,” “aim,” “estimate,” “intend,” “plan,”
 “believe,” “is/are likely to,” “potential,” “continue” or other similar expressions,
although not all forward-looking statement contain these words. Forward-looking statements include, but are not limited to, statements
relating to:



| | · | our goals and strategies;
| | - | -------------------------



| | · | our expansion plans;
| | - | --------------------



| | · | our future business development, financial condition and results of operations;
| | - | -------------------------------------------------------------------------------



| | · | the expected growth of the content and application delivery services market;
| | - | ----------------------------------------------------------------------------



| | · | our expectations regarding demand for, and market acceptance of, our services;
| | - | ------------------------------------------------------------------------------



| | · | our expectations regarding keeping and strengthening our relationships with customers;
| | - | --------------------------------------------------------------------------------------



| | · | our plans to invest in research and development to enhance our solution and service offerings; and
| | - | --------------------------------------------------------------------------------------------------



| | · | general economic and business conditions in the regions where we provide our solutions and services.
| | - | ----------------------------------------------------------------------------------------------------



We would like to caution you not to
place undue reliance on forward-looking statements and you should read these statements in conjunction with the risk factors
disclosed in “Item 3 Key Information — D. Risk Factors.” Those risks are not exhaustive. We operate in an
emerging and evolving environment. New risk factors emerge from time to time and it is impossible for our management to
predict all risk factors, nor can we assess the impact of all factors on our business or the extent to which any factor, or
combination of factors, may cause actual results to differ materially from those contained in any forward-looking statement.
We do not undertake any obligation to update or revise the forward-looking statements except as required under applicable
law. You should read this annual report and the documents that we reference in this annual report completely and with the
understanding that our actual future results may be materially different from what we expect.















PART
I.



|ITEM 1. | Identity of Directors, Senior Management and Advisers
|------- | -----------------------------------------------------



Not applicable.



|ITEM 2. | Offer Statistics and Expected Timetable
|------- | ---------------------------------------



Not applicable.



|ITEM 3. | Key Information
|------- | ---------------



|A. | Selected Financial Data
|-- | -----------------------



The following table presents the selected
consolidated financial information of our company. Our selected consolidated financial data presented below for the years ended
December 31, 2016, 2017 and 2018 and our balance sheet data as of December 31, 2017 and 2018 have been derived from our
audited consolidated financial statements included elsewhere in this annual report. Our selected consolidated financial data presented
below for the year ended December 31, 2014 and 2015and our balance sheet data as of December 31, 2014, 2015 and 2016
have been derived from our audited consolidated financial statements which are not included in this annual report. Our audited
consolidated financial statements are prepared in accordance with U.S. GAAP.



You should read the summary consolidated
financial information in conjunction with our consolidated financial statements and related notes and “Item 5. Operating
and Financial Review and Prospects” included elsewhere in this annual report. Our historical results are not necessarily
indicative of our results expected for future periods.



|                                                                   |  | For the year ended December 31,                               |          
|------------------------------------------------------------------ |  | ------------------------------------------------------------- | ---------
|                                                                   |  | 2014                                                          |          
|                                                                   |  | RMB                                                           |          
|                                                                   |  | (in thousands, except for shares, per share and per ADS data) |          
|Consolidated Statement of Comprehensive Loss Data:                 |  |                                                               |          
|Net Revenues:                                                      |  |                                                               |          
|Third party customers                                              |  |                                                               | 1,384,273
|A related party customer                                           |  |                                                               | —        
|Total Net Revenues:                                                |  |                                                               | 1,384,273
|Cost of revenues(1)(3)                                             |  |                                                               | (966,558 
|Gross profit (loss)                                                |  |                                                               | 417,715  
|Other operating income (loss)                                      |  |                                                               | —        
|Operating expenses:(1)                                             |  |                                                               |          
|Sales and marketing expenses(1)                                    |  |                                                               | (127,843 
|General and administrative expenses(1)                             |  |                                                               | (144,003 
|Provision (recovery of provision) for doubtful accounts receivable |  |                                                               | (46,977  
|Transaction tax on assets transfer                                 |  |                                                               | —        
|Research and development expenses(1)                               |  |                                                               | (116,381 





2







|                                                      |  | For the year ended December 31,                               |            
|----------------------------------------------------- |  | ------------------------------------------------------------- | -----------
|                                                      |  | 2014                                                          |            
|                                                      |  | RMB                                                           |            
|                                                      |  | (in thousands, except for shares, per share and per ADS data) |            
|Consolidated Statement of Comprehensive Loss Data:    |  |                                                               |            
|Impairment of long-lived assets                       |  |                                                               | —          
|Impairment of long-term investment                    |  |                                                               | —          
|Operating loss                                        |  |                                                               | (17,489    
|Interest income                                       |  |                                                               | 5,529      
|Interest expense                                      |  |                                                               | (8,220     
|Other (expense) income                                |  |                                                               | 6,298      
|Foreign exchange (loss) gain                          |  |                                                               | 3,944      
|Loss from continuing operations before income taxes   |  |                                                               | (9,938     
|Income tax (expense) benefit                          |  |                                                               | 3,097      
|Net loss                                              |  |                                                               | (6,841     
|Net loss attributable to the non-controlling interest |  |                                                               | —          
|Net loss attributable to the Company’s shareholders   |  |                                                               | (6,841     
|Loss per ordinary share:                              |  |                                                               |            
|Basic                                                 |  |                                                               | (0.02      
|Diluted                                               |  |                                                               | (0.02      
|Loss per ADS(2)                                       |  |                                                               |            
|Basic                                                 |  |                                                               | (0.27      
|Diluted                                               |  |                                                               | (0.27      
|Shares used in basic loss per share computation       |  |                                                               | 403,401,928
|Shares used in diluted loss per share computation     |  |                                                               | 403,401,928



|(1) | Includes share-based compensation expenses as follows:
|--- | ------------------------------------------------------





|                                                                                            |  | For the year ended December 31, |       
|------------------------------------------------------------------------------------------- |  | ------------------------------- | ------
|                                                                                            |  | 2014                            |       
|                                                                                            |  | RMB                             |       
|                                                                                            |  | (in thousands)                  |       
|Allocation of share-based compensation expenses:                                            |  |                                 |       
|Cost of revenues                                                                            |  |                                 | 951   
|Sales and marketing expenses                                                                |  |                                 | 2,167 
|General and administrative expenses                                                         |  |                                 | 10,612
|Research and development expenses                                                           |  |                                 | 3,307 
|Total share-based compensation expenses included in cost of revenues and operating expenses |  |                                 | 17,037



|(2) | Each ADS represents 16 ordinary shares.
|--- | ---------------------------------------



|(3) | Includes amount to a related party of nil, nil and nil for the years ended December 31, 2016, 2017 and 2018, respectively.
|--- | --------------------------------------------------------------------------------------------------------------------------





3







A summary of our selected consolidated balance
sheet data is as follows:



|                                              |  | For the year ended December 31, |          
|--------------------------------------------- |  | ------------------------------- | ---------
|                                              |  | 2014                            |          
|                                              |  | RMB                             |          
|                                              |  | (in thousands)                  |          
|Consolidated Balance Sheet Data:              |  |                                 |          
|Cash and cash equivalents                     |  |                                 | 375,879  
|Restricted Cash                               |  |                                 |          
|Accounts receivable, net                      |  |                                 | 319,494  
|Assets held for sale                          |  |                                 | —        
|Total current assets                          |  |                                 | 864,815  
|Property, plant and equipment, net            |  |                                 | 418,886  
|Cloud infrastructure construction in progress |  |                                 | 283,475  
|Intangible assets, net                        |  |                                 | 10,321   
|Total assets                                  |  |                                 | 1,731,208
|Liabilities held for sale                     |  |                                 | —        
|Total current liabilities                     |  |                                 | 864,105  
|Total liabilities                             |  |                                 | 896,261  
|Total shareholders’ equity                    |  |                                 | 834,947  



Exchange Rate Information





A majority of our operations are conducted
in China and our revenues are mainly denominated in RMB. This annual report contains translations of RMB amounts into U.S. dollars
at specific rates solely for the convenience of the reader. Unless otherwise noted, all translations from RMB to U.S. dollars and
from U.S. dollars to RMB in this annual report were made at a rate of RMB6.8755 to US$1.00, the exchange rate set forth in the
H.10 statistical release of the Board of Governors of the Federal Reserve System on December 31, 2018. We make no representation
that any RMB or U.S. dollar amounts could have been, or could be, converted into U.S. dollars or RMB, as the case may be, at any
particular rate, the rates stated below, or at all. The PRC government imposes control over its foreign currency reserves in part
through direct regulation of the conversion of RMB into foreign exchange and through restrictions on foreign trade. On November
22, 2019, the certified exchange rate was RMB7.0389 to US$1.00.



The following table sets forth information
concerning exchange rates between the RMB and the U.S. dollar for the periods indicated. These rates are provided solely for your
convenience and are not necessarily the exchange rates that we used in this annual report or will use in the preparation of any
other periodic reports or any other information to be provided to you. The source of these rates is the Federal Reserve Statistical
Release.



|Period                              |  | Period End |        |  | Average(1) |  |        | Low |  |  | High   | 
|----------------------------------- |  | ---------- | ------ |  | ---------- |  | ------ | --- |  |  | ------ | 
|2014                                |  |            | 6.2046 |  |            |  | 6.1704 |     |  |  | 6.0402 | 
|2015                                |  |            | 6.4778 |  |            |  | 6.2869 |     |  |  | 6.1870 | 
|2016                                |  |            | 6.9430 |  |            |  | 6.6549 |     |  |  | 6.4480 | 
|2017                                |  |            | 6.5063 |  |            |  | 6.7350 |     |  |  | 6.4773 | 
|2018                                |  |            | 6.8755 |  |            |  | 6.6292 |     |  |  | 6.2649 | 
|October                             |  |            | 6.9737 |  |            |  | 6.9191 |     |  |  | 6.8680 | 
|November                            |  |            | 6.9558 |  |            |  | 6.9367 |     |  |  | 6.8894 | 
|December                            |  |            | 6.8755 |  |            |  | 6.8837 |     |  |  | 6.8343 | 
|2019                                |  |            |        |  |            |  |        |     |  |  |        | 
|January                             |  |            | 6.6958 |  |            |  | 6.7863 |     |  |  | 6.6958 | 
|February                            |  |            | 6.6912 |  |            |  | 6.7367 |     |  |  | 6.6822 | 
|March                               |  |            | 6.7112 |  |            |  | 6.7119 |     |  |  | 6.6916 | 
|April                               |  |            | 6.7347 |  |            |  | 6.7161 |     |  |  | 6.6870 | 
|May                                 |  |            | 6.9027 |  |            |  | 6.8519 |     |  |  | 6.7319 | 
|June                                |  |            | 6.8650 |  |            |  | 6.8977 |     |  |  | 6.8510 | 
|July                                |  |            | 6.8833 |  |            |  | 6.8775 |     |  |  | 6.8487 | 
|August                              |  |            | 7.1543 |  |            |  | 7.0629 |     |  |  | 6.8972 | 
|September                           |  |            | 7.1477 |  |            |  | 7.1137 |     |  |  | 7.0659 | 
|October                             |  |            | 7.0379 |  |            |  | 7.0961 |     |  |  | 7.0379 | 
|                                    |  |            |        |  |            |  |        |     |  |  |        | 
|November (through November 22) 2019 |  |            | 7.0389 |  |            |  | 7.0168 |     |  |  | 6.9766 | 



Source: Federal Reserve Statistical Release



|(1) | Annual averages were calculated by using the average of the exchange rates on the last day of each month during the relevant year. Monthly averages are calculated by using the average of the daily rates during the relevant month.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|B. | Capitalization and Indebtedness
|-- | -------------------------------



Not applicable.





4







|C. | Reasons for the Offer and Use of Proceeds
|-- | -----------------------------------------



Not applicable.



|D. | Risk Factors
|-- | ------------



Risks Related to Our Business and Industry



We have incurred losses in the past and may incur losses
in the future. There is substantial doubt about our ability to continue as a going concern.





We had net losses in recent years. For the three years ended December 31, 2016, 2017 and 2018, our net loss was RMB914.3 million,
RMB371.2 million and RMB25.8 million (US$3.8 million), respectively. As of December 31, 2018, we had an accumulated deficit
of RMB2,096.4million (US$304.9 million) and a deficit in working capital of RMB1,004.8 million (US$146.1 million). In 2018,
we had net cash used in operating activities of RMB41.97 million (US$6.1 million), net cash used in investing activities of
RMB160.8 million (US$23.4 million) and net cash provided by financing activities of RMB140.86 million (US$20.45 million).
We cannot anticipate when, if ever, we will become profitable. Although we have improved the efficiency of our networks and
operations and adopted related cost reduction measures, we cannot assure you that we will continue to achieve such efficiency
or sustain such cost reductions. If we are unable to generate revenues that significantly exceed our costs and expenses, we
will continue to incur losses in the future.



Our ability to continue as a going concern
is dependent upon our continued operations, which in turn is dependent upon our ability to meet our financial requirements. Our
ability to meet the working capital requirements is subject to the risks relating to the demand for and prices of our services
in the market, the economic conditions in our target markets, the construction and successful operation of our cloud infrastructure
projects, the timely collection of payment from our customers and the availability of additional funding. In the next twelve months,
we will use the cash inflows to be funded by a combination of sources, including a) the advance of RMB80 million (US$11.6 million)
to be received from a third party buyer for a selling cloud infrastructure building under construction and later another RMB1,150
million (US$16.7 million) for the completion of the whole deal, b) negotiation with vendors for more favorable payment terms Together
with our existing cash and cash equivalents, bank borrowing and the anticipated improvement in the cash inflow from the operations,
we expect to have sufficient capital to meet our anticipated working capital requirements and capital expenditure for at least
the next 12 months.



The audited consolidated financial statements
included in this annual report on Form 20-F were prepared on the basis of our continuing as a going concern. Facts and circumstances
including recurring losses, negative working capital and net cash outflows raise substantial doubt about our ability to continue
as a going concern. In particular, there can be no assurance that the credit facilities can be drawn down in a timely manner, the
cash flows from CDN operations can be improved as planned or the afore-mentioned financing measures can be achieved as expected.
If we become unable to continue as a going concern, we may have to liquidate our assets, and the value we receive for our assets in
liquidation or dissolution could be significantly lower than the values reflected in our audited consolidated financial statements.
Our lack of cash resources and our potential inability to continue as a going concern may materially and adversely affect the price
of our ADSs and our ability to raise new capital or to continue our operations.





5







We generate substantially all of our revenues from sales
of content and application delivery total solutions, and the failure of the market for these services to expand as we expect or
the reduction in spending on these services by our current or potential customers would seriously harm our business.



We have generated substantially all of our
revenues from sales of content and application delivery total solutions. We expect such services to continue to be the primary
source of our revenues in the foreseeable future. Our success, therefore, depends on our customers’ continued and increasing
reliance on the internet for delivery of services and applications and our ability to deliver these services and applications cost-effectively.
Factors that may have a general tendency to limit or reduce the number of users relying on the internet for services and applications
or the number of providers making services and applications available online would harm our business. As the content and application
delivery services industry is still emerging, our success also depends on our ability to convince potential customers to entrust
their services and applications to an external service provider, that content and application delivery technologies and services
are valuable and that it is more cost-effective for them to utilize external services than for them to develop similar services
in-house. A decline in the demand for content and application delivery services in general would negatively affect demand for our
services. Even if demand for our services continues to grow, this demand may not grow as quickly as we anticipate. The influence
of any of these factors may cause our current or potential customers to reduce their spending on our services, which would have
a material adverse impact on our business, results of operations and financial condition.



Our costs and expenses may increase, and our results of
operations may be adversely affected if we cannot pass on the increased costs to our customers.





We invest heavily in capital equipment and
infrastructure to increase our network capacity. For example, we had capital expenditures of RMB576.5 million, RMB45.7 million
and RMB 336.1 million (US$48.9 million) in 2016, 2017 and 2018, respectively, which relate to our additions of intangible assets,
property and equipment as well as construction in progress. In 2019 and beyond, we may increase our costs and expenses, including
investments in cloud infrastructure and additional bandwidth, servers and other equipment. In particular, we plan to continue the
development of our internet data centers (IDC), High Performance Cloud Cache, or HPCC, and Bandwidth Schedule Platform to optimize
bandwidth usage and improve network efficiency in order to meet the needs of new product development and our evolving businesses.
We expect these projects, upon completion, to result in substantial increase in IDC related sales revenues and reduction in our
future operation expenses and capital expenditures on equipment. However, since the aforementioned technologies are relatively
new, we cannot assure you that their implementation will benefit us with the cost and expense reduction as expected, or at all.
Furthermore, our capital expenditures are based upon our assumptions regarding the potential future demand. If we overestimate
future demand for our services, we may not be able to achieve acceptable rates of return on our capital expenditures and our results
of operations may suffer dramatically. In addition, if our bandwidth and other third-party providers raise the prices of their
services and products, we will incur increased costs in order to provide our services. If we cannot pass on the increased costs
and expenses to our customers, or if our costs to deliver our services do not decline commensurate with any future declines in
the prices we charge our customers, we may fail to achieve profitability.



If we are unable to attract new customers or to retain
existing customers, our revenues may decline.



To increase our revenues, we plan to sell
additional services to existing customers, encourage existing customers to increase their purchase volume and attract new customers.
If our existing and prospective customers do not perceive our services to be of sufficiently high value and quality, we may not
be able to sell additional services to our current customers, retain our current customers or attract new customers. We typically
sell our services pursuant to service agreements that are generally one year in duration. Although most of our service agreements
contain renewal provisions, our customers have no obligation to renew the contracts after the expiration of their initial commitment
period, and these service agreements may not be renewed at the same or higher level of service, if at all. Moreover, some of our
service agreements provide that customers have the right to cancel their service agreements prior to the expiration of the terms
of their agreements under certain circumstances. This, in addition to the changing competitive landscape in our market, means that
we may not accurately predict future customer renewal rates. Our customers’ renewal rates may decline or fluctuate as a result
of a number of factors, including their level of satisfaction or dissatisfaction with our services, the prices of our services,
the prices of services offered by our competitors and reductions in our customers’ spending levels. In 2016, 2017 and 2018,
32.7%, 36.4% and 12.1%, respectively, of our total number of customers decided not to renew their contracts with us. If we cannot
attract a sufficient number of new customers, control our existing customer attrition rate, or increase the purchase volume of
our existing customers to cover the loss of existing customers, our revenues may decline and our business will suffer. In addition,
we plan to attract additional customers for our cloud infrastructure and charge fees for facilities development and/or on-going
management and operation. If we cannot attract enough customers for our cloud infrastructure project, we may not be able to recoup
our investments and our profitability in connection with this business line will suffer adverse impact, which will in turn affect
our overall results of operation.





6







We may lose customers if they elect to develop solutions
internally for the delivery of their own content and applications.



Our customers and potential customers may
decide to develop their own content and applications delivery service solutions rather than outsource these solutions to service
providers like us. This is particularly true as our customers expand their operations and begin expending greater resources on
delivering their internet services and applications using their own resources. If we fail to offer services that are competitive
to in-house developed solutions, we may continue to lose customers or fail to attract customers that develop their own solutions
in-house, and our business and financial results would suffer.



The decline in the price of our services could negatively
impact our gross margins.



The average prices we can charge for our
content and application delivery total solutions have declined, and are expected to decline over time, as a result of, among other
things, the increasing number of new entrants into the CDN market and continued competition of pricing in the marketplace. Also,
we may be forced to reduce the price of our services due to reduced bargaining power with our customers. If the price that we are
able to charge customers falls to a greater extent than we anticipate and we are not able to offset this decline with reduction
in our cost of revenues, our results of operations would be adversely affected.



Rapidly evolving technologies or new business models could
cause demand for our services to decline or become obsolete.



Third parties may develop technological
or business model innovations that address internet services and applications delivery requirements in a manner that is, or is
perceived to be, the equivalent or superior to our services. For instance, companies are looking to offer internet-related solutions,
such as peer-to-peer file sharing networks, to address certain content and application delivery needs. Our existing and future
competitors may introduce new products or services that compete with or surpass the quality, price or performance of our services.
We may not anticipate such developments and our services may be unable to adequately compete with these potential solutions. In
addition, our customers’ business models may change in ways that we do not anticipate and these changes could reduce or eliminate
our customers’ demand for our services. If this occurred, we could lose customers or potential customers, and our business
and financial results would suffer. As a result of these or similar potential developments, it is possible that competitive dynamics
in our market may require us to reduce our prices, which could harm our revenue, gross margin and results of operations.



If we are unable to successfully develop new services
and enhancements to existing services or fail to predict and respond to emerging technological trends and customers’ changing
needs, our results of operations may suffer.







The market for content and application delivery
services is characterized by rapidly changing technology, evolving customer needs and requirements, and frequent new product and
service introductions. Our results of operations depend on our ability to develop and introduce new services into existing and
emerging markets. The process of developing new technologies is complex and uncertain. We must commit significant resources to
developing new services or enhancements to our existing services before we are able to develop services that are widely accepted
by the market. For example, individuals are increasingly using mobile devices to access internet content. Our ability to provide
new and innovative solutions to address challenges posed by mobile device users is important to our future growth potential. Furthermore,
we may not successfully execute our technology initiatives or our new services initiatives, such as the internet exchange and data
center business, because of unexpected complexities in planning or timing, technical hurdles that we fail to overcome in a timely
manner, misunderstandings about market demand or a lack of appropriate resources. In 2015 and 2016, we experienced an interruption
in our services to our clients as a result of technical difficulties we encountered when migrating our services from our existing
platform to our high capacity platform. Due to the resulting decrease in user traffic, our revenue from this line of business
was adversely affected in 2015, 2016 and 2017. In 2016, 2017 and 2018, we continued improving the performance of the HPCC
platform for a number of products including downloading, VOD and webpage services and in these areas the capacity of the platform
reached its designed level. We also improved the performance of the platform’s certain technical specifications such
as the response time and achieved progresses into 2017. However, because the technology underlying our HPCC platform is relatively
new, we may face new technical issues in the future. If we fail to timely and effectively address those issues as they arise,
our system performance may be affected, resulting in further decrease in customer traffic and loss in our number of customers.
This may in turn materially and adversely affect our results of operations. Failures in execution or market acceptance of
new services we introduce could also result in competitors providing those solutions before we do, which could lead to loss of
market share, revenues and earnings.





7







We may continue to record impairments charges in
the future.



If our business conditions deteriorate, our long-lived assets need to be reviewed for possible impairment.
An impairment loss needs to be recognized to the extent that the carrying amount exceeds the fair value. In the year
ended December 31, 2018, we did not record any impairment
of long-lived assets, however, we cannot guarantee that we will not incur increased impairment loss in the future, for
various reasons including, but not limited to, a sustained decline in the price of our securities, strategic decisions made in
response to changes in economic and competitive conditions, any material adverse change in our relationship with significant customers
or the impact of the economic environment on our customer base. If we record significant impairment charges, our results
of operations may be materially and adversely affected.



The internet and internet-based services in China may
fail to grow as quickly as expected.



Our future success depends on the growth
of the internet in China. In particular, our business strategy and growth depends on the continued development and utilization
of internet-based services such as online games, rich media content, online advertising, e-commerce and mobile internet. Online
games, rich media content, e-commerce and mobile internet are relatively new developments in China and may be impacted by regulatory
changes in China. Our business prospects and future growth could suffer if the internet or the markets for these internet-based
services in China fail to grow as quickly as anticipated. Furthermore, even if the internet and internet-based services in China
grow as expected, we may fail to successfully implement our growth strategies, which could have a material adverse impact over
our business prospects, results of operations and financial condition.



Many of our existing and potential customers are pursuing
emerging or unproven business models which, if unsuccessful, could lead to a substantial decline in demand for our services.



Because the proliferation of broadband internet
connections and the subsequent monetization of internet services and applications are relatively recent phenomena in China, the
business models of many of our existing and potential customers primarily focus on the delivery of internet content and applications
to users and remain unproven. For example, user-generated content websites, media companies and online game operators have been
among our customers and are pursuing emerging strategies for monetizing their internet services and applications or traffic on
their websites. These companies will not continue to purchase our content and application delivery total solutions if their internet
services or applications fail to generate a sufficient return on their investment or if their own business models fail to succeed.
Moreover, some of our existing and potential customers are pursuing business in areas which have undefined regulatory parameters
in China, and such companies face a risk of having their activities restricted or shut down for regulatory reasons. A reduction
in spending on our services by our existing and potential customers or our customers’ inability or refusal to pay us due
to their own financial condition or other reasons would harm our results of operations, financial condition and liquidity, and
our growth and prospects may be materially and adversely affected.



We depend on a limited number of customers for a substantial
portion of our revenues, and the loss of, or a significant shortfall in demand from, these customers could significantly harm our
results of operations.



During any given fiscal period, a relatively
small number of customers typically account for a significant percentage of our revenue. Our five largest customers contributed
48.2%,  57.2 % and 68.5% of our total net revenues for the years ended December 31, 2016, 2017 and 2018, respectively. In
the past, our top five customers have continually changed, and we also have experienced significant fluctuations in our individual
customers’ usage of our services. Our large customers may decrease the amount of services they purchase from us, ask for
price reduction or may stop purchasing our services altogether as a result of a number of factors, including their level of satisfaction
or dissatisfaction with our services, the prices of our services, the prices of services offered by our competitors and reductions
in our customers’ spending levels.





8







Our operating costs, although with a forecast
of downward tendency in the mid- to long term, are relatively fixed in the near term. As a consequence, we may not be able to adjust
our expenses in the short term to address the unanticipated loss of a large customer during any particular period. As such, we
may experience significant and unanticipated fluctuations in our results of operations which may cause us to not meet our expectations
or those of stock market analysts, which could cause our stock price to decline.



Our business substantially depends on telecommunications
carriers and other third-party providers for communications and storage capacity. Any change that adversely affects our communications
and storage capacity could result in interruptions in our services.



Our business and operations are dependent
upon telecommunications carriers and other third-party providers for communications and storage capacity, including bandwidth,
servers and other equipment. We obtain all of our bandwidth from telecommunications carriers who are compliant with Chinese laws
and regulations. We purchase servers and other equipment from suppliers and deploy our servers in numerous third-party co-location
facilities. In addition, we need access to end-user access networks operated by telecommunications carriers and internet service
providers, or ISPs, in order to complete the delivery of internet content and applications to end-users.



We believe that we currently have good business
relationships with telecommunications carriers and major third-party providers, and we have access to adequate communications and
storage capacity to provide our services. However, there can be no assurance that we will always be able to secure communications
and storage capacity on commercially acceptable terms, and that we are adequately prepared for unexpected increases in bandwidth
demands or unplanned network interruptions. Furthermore, the changes in regulatory environment and the operating policies of the
telecommunications carriers could also adversely affect our business relationships with telecommunications carriers and third-party
service providers. If we are unable to obtain transmission capacity on terms commercially acceptable to us or at all, our business
and financial results could suffer.



In the past, system disruptions in the networks
of certain regional telecommunications carriers and ISPs have affected our ability to provide our services. Some telecommunications
carriers or ISPs may also take measures, such as the deployment of filters, that could degrade, disrupt or increase the cost of
our or our customers’ access to networks operated by them. Telecommunications carriers and ISPs could also decide to limit
or prohibit the use of their networks to support or facilitate our services, or charge additional fees to us, our customers or
end-users in connection with our services. Third-party suppliers may not be able to meet our demand for servers or other equipment
in a timely manner. In addition, as we deploy our servers in numerous third-party co-location facilities, any system outages or
other disruptions in these third-party facilities could constrain our ability to deliver our services. Any of these interruptions,
interferences or restrictions could result in a loss of existing customers, increased costs and impairment of our ability to attract
new customers, thereby harming our revenues and growth.



A severe or prolonged downturn in the global or Chinese
economy could materially and adversely affect our business and our financial condition.



The global macroeconomic environment is
facing challenges, including the end of quantitative easing by the U.S. Federal Reserve and the economic slowdown in the Eurozone
since 2014. The growth of the Chinese economy has slowed since 2012 and such slowdown may continue. According to the National Bureau
of Statistics of China, China’s gross domestic product (GDP) growth was 6.9% in 2017 and 6.6% in 2018. There is considerable
uncertainty over the long-term effects of the monetary and fiscal policies adopted by the central banks and financial authorities
of some of the world’s leading economies, including the U.S. and China. Economic conditions in China are sensitive to global
economic conditions, as well as changes in domestic economic and political policies and the expected or perceived overall economic
growth rate in China. Since March 2018, there has been growing concerns over foreign trade conflicts between China and the United
States and some European and Asian countries, and the United States government is seen as becoming more stringent on Chinese high-tech
companies offering substitute technology, products and services in the U.S. The trade frictions have evolved unfortunately into
a larger scale trade war in late 2018, market access to these countries by Chinese companies has been severely impacted or completed
stemmed, thus inflicting unexpected severe blow to Chinese high-tech companies may include ChinaCache in future.  ChinaCache
has business presence in the United States and some European and Asian countries and some of the customers from the afore-mentioned
countries contributed significant percentage of ChinaCache’s total revenue. If such trade war continues to escalate and governments
of these countries opt to adopt restrict measures against ChinaCache, among like Chinese high-tech companies, our global market
share, number of international customers will decline, impacting our business, financial conditions and results of operations to
an extent beyond our best estimate.





9







To the extent customers are unable to profitably
monetize the content we deliver on their behalf due to an economic slowdown or otherwise, they may reduce or eliminate the traffic
we deliver on their behalf. Such reductions in traffic would lead to a reduction in our revenues. Additionally, in economic downturns,
we may experience the negative effects of increased competitive pricing pressure, customer loss, slowdown in commerce over the
internet and corresponding decrease in traffic delivered over our network and failures by customers to pay amounts owed to us on
a timely basis or at all. Suppliers on which we rely for servers, bandwidth, co-location and other services could also be negatively
impacted by economic conditions which, in turn, could have a negative impact on our operations or expenses. Any prolonged slowdown
in the global or Chinese economy may have a negative impact on our business, results of operations and financial condition, and
continued turbulence in the international markets may adversely affect our ability to access the capital markets to meet liquidity
needs.



We expect to continue to experience intense competition.



We compete in a market that is intensely
competitive and rapidly changing. We have experienced and expect to continue to experience intense competition. In China, and in
our existing CDN business, we primarily compete with domestic content and application delivery service providers, some of which
boast abundance of financing and are industry leaders in the field of cloud hosting and electronic commerce. Although multinational
companies currently do not have a significant presence in the content and application delivery services market in China, in part
due to regulatory restrictions in China’s telecommunications sector, we may face competition from multinational companies
if regulatory restrictions in China are lifted in the future. Also, as a result of the growth of the content delivery services
market, a number of companies are currently attempting to enter our market, either directly or indirectly, some of which may become
significant competitors in the future. Some of our current or potential competitors may have greater financial, marketing and other
resources than we do and may have stronger governmental support. Some of our competitors may offer lower prices on competing services
in order to gain market share. Our competitors may be able to respond more quickly than we can to new or emerging technologies
and changes in customer requirements. Furthermore, some of our current or potential competitors may bundle their offerings with
other services, software or hardware in a manner that may discourage content providers from purchasing the services that we offer.
Increased competition could result in price reductions and revenue decline, loss of customers and loss of market share, which could
harm our business, financial condition and results of operations.



Any unplanned interruption in the functioning of our network
or services could lead to significant costs and disruptions.



Our business is dependent on providing
our customers with fast, efficient and reliable delivery of internet content and applications. Many of our customers depend on
our services to operate their businesses. Consequently, any disruption of our services could have a material impact on our customers’
businesses. Our network or services could be disrupted by numerous events, including natural disasters, power losses, changes
in our service providers’ practices and failure of our software or network. From time to time, we need to correct errors
and defects in our platform software or in other aspects of our network. There may be errors and defects originating with third-party
networks or software on which we rely that harm our ability to deliver our services. We may also experience disruptions caused
by software viruses or other attacks by unauthorized users. Despite our significant capital investments, we may have insufficient
communications and server capacity to address these or other disruptions, which could result in interruptions in our services.
Any widespread interruption of the functioning of our networks and related services for any reason would reduce our revenues and
could harm our business and financial results. In 2016, the internet connection at one of our third-party co-location facilities
was interrupted for several hours and as a result our services to certain customers were affected. This is a one-time incident
and did not have any material impact on our business or results of operation. In 2017 and 2018 there’re no recurring
like incidents. If in the future similar incidents or a more widespread interruption occurred or if we failed to deliver internet
services and applications to users as expected during a high-profile media event or well-publicized circumstance, our reputation
could be severely damaged. Moreover, any disruptions could undermine confidence in our services and cause us to lose customers
or make it more difficult to attract new ones, either of which could harm our business and results of operations.





10







The occurrence of cyber incidents, or a deficiency in
our cybersecurity, could disrupt our services, cause damage to our brand and adversely affect our results of operations.



Our computer networks may be vulnerable
to cyber incidents, including but not limited to unauthorized access, computer hacking, computer viruses and other security problems
caused by unauthorized access to, or improper use of, systems by third parties or employees. A hacker who circumvents our cybersecurity
measures could misappropriate proprietary information or cause interruptions, malfunctions or disruptions to our operations. Our
electronic data may also be vulnerable to attacks, unauthorized access and misappropriation, which may corrupt our electronic data.
We have not experienced a major cybersecurity breach to date. However, if a major cybersecurity breach were to occur, the losses
or liabilities associated with such breach could have a material adverse effect on our business. We have implemented solutions,
processes, and procedures to help mitigate our exposure to these types of cybersecurity risks, but these measures do not guarantee
that we will not in the future experience a major cybersecurity breach. Actual or perceived concerns that our systems may be vulnerable
to such cyber-attacks or disruptions may deter customers from using our solutions or services and could result in our customers
making claims for damages. As a result, we may be required to devote significant incremental amounts of resources to protect against
the threat or perceived threat of these cybersecurity risks or to alleviate problems caused by cyber incidents, if and when they
were to occur.



We may have difficulty scaling and adapting our existing
network to accommodate increased traffic and technology advances or changing business requirements.



Our services are complex and are designed
to be deployed in and across numerous large and complex networks. Our network must perform well and be reliable in order for us
to be successful. The greater the user traffic and the greater the complexity of our products and services, the more resources
we will need to invest in additional network capacity and support. We have spent and expect to continue to spend on the purchase
and lease of equipment and data centers and the upgrade of our technology and network to handle increased traffic over our network
and to roll out new products and services. This expansion is expensive and complicated and could result in inefficiencies, operational
failures or defects in our network and related software. If we do not expand successfully, or if we experience inefficiencies and
operational failures, the quality of our products and services and user experience could decline. These occurrences could damage
our reputation and lead to a loss of current and potential customers. We must continuously upgrade our network in order to keep
pace with our customers’ evolving demands. Cost increases or the failure to accommodate increased traffic or these evolving
business demands without disruption could harm our results of operations and financial condition.



If we fail to manage future growth effectively, our business
and results of operations could be adversely affected.



Starting from 2015, we have spent significantly
on the continued development of internet data centers in order for the company to enhance its capability to offer CND, IDC, cloud
hosting, or a portfolio of service packages. The planned service capability enhancement initiatives have placed, and will continue
to place, substantial demands on our managerial, operational, technological, financial and other resources. Our planned service
enhancement requires us to rapidly build up a wealth of knowledge on the targeted service offering and at the same time offer consistent
and high quality service to customers for existing business.  Our future results of operations depend to a large extent on
our ability to manage this technical enhancement successfully. Risks that we face in undertaking this expansion include:



| | · | training new sales personnel to become productive and generate revenue;
| | - | -----------------------------------------------------------------------



| | · | controlling expenses and investments in anticipation of expanded operations;
| | - | ----------------------------------------------------------------------------



| | · | implementing and enhancing our network;
| | - | ---------------------------------------



| | · | launching new products and services; and
| | - | ----------------------------------------



| | · | addressing new markets.
| | - | -----------------------





11







A failure to manage our growth effectively
could materially and adversely affect our business, results of operations or financial condition.



Any difficulties identifying and consummating future acquisitions
or integrating current and future acquisitions may have a material and adverse effect on our business, results of operations or
financial condition.



Selective acquisitions and strategic investments
form part of our strategy to further expand our business. However, acquisitions present challenges, including the difficulty of
integrating the operations and personnel of the acquired companies, the potential disruption of our ongoing business, the potential
distraction of management, expenses related to the acquisition, potential unknown liabilities or penalties associated with acquired
businesses. Any inability to integrate operations or personnel in an efficient and timely manner could harm our results of operations.



We may be unsuccessful in identifying and
consummating future acquisitions and strategic investments, which could impair our growth potential. In addition, future acquisitions
and strategic investments will require the use of our available cash or dilutive issuances of securities. We may also experience
significant turnover from the acquired operations or from our current operations as we integrate businesses. Such difficulties
in identifying and consummating future acquisitions and strategic investments or any difficulties encountered in integrating current
and future acquisitions may have a material and adverse effect on our business, results of operations or financial condition.



Our results of operations may fluctuate in the future.
This may result in significant volatility in, and otherwise adversely affect, the market for our ADSs.



On September 4, 2019, Nasdaq issued a letter
to the Company stating that the Nasdaq Hearings Panel  has determined to delist the Company’s shares from the
Nasdaq Stock Market. We are planning to apply to the OTC QB market.



Our results of operations may fluctuate
as a result of various factors, many of which are outside of our control. These fluctuations are often not seasonable but could
result in significant volatility in, and otherwise adversely affect, the market price of our ordinary shares.   Fluctuations
in our results of operations may be due to a number of factors, including:



| | · | our ability to increase sales to existing customers and attract new customers;
| | - | ------------------------------------------------------------------------------



| | · | the loss of major customers, or a significant variation in their use of our services;
| | - | -------------------------------------------------------------------------------------



| | · | service outages or security breaches;
| | - | -------------------------------------



| | · | the amount and timing of operating costs and capital expenditures related to the maintenance and expansion of our business, operations and network;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------



| | · | the occurrence of significant events in a particular period that results in an increase in the use of our services, such as a major media event or a customer’s online release of a new or updated video game;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | changes in our pricing policies or those of our competitors;
| | - | ------------------------------------------------------------



| | · | share-based compensation expenses associated with attracting and retaining key personnel;
| | - | -----------------------------------------------------------------------------------------



| | · | limitations of the capacity of our platform and related systems;
| | - | ----------------------------------------------------------------



| | · | the timing of costs related to the development or acquisition of technologies, services or businesses;
| | - | ------------------------------------------------------------------------------------------------------



| | · | general economic, industry, market and regulatory conditions and those conditions specific to internet usage and online businesses;
| | - | -----------------------------------------------------------------------------------------------------------------------------------



| | · | reduced usage of our services by our customers. and
| | - | ---------------------------------------------------



| | · | the results of the legal proceedings involving Xin Run and BFSMC and other unresolved material legal proceedings  as described further below.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------



Our revenues and results of operations may
vary significantly in the future and period-to-period comparisons of our results of operations may not be meaningful. You should
not rely on the results of one period as an indication of future performance.





12







We may face intellectual property infringement claims
that could be time-consuming and costly to defend. If we fail to defend ourselves against such claims, we may lose significant
intellectual property rights and may be unable to continue providing our services.



Our technologies and business methods may
be subject to third-party claims or rights that limit or prevent their use. Companies, organizations or individuals, including
our competitors, may hold or obtain patents or other proprietary rights that would prevent, limit or interfere with our ability
to make, use or sell our services or develop new services, which could make it more difficult for us to operate our business. Intellectual
property registrations or applications by others relating to the type of services that we provide may give rise to potential infringement
claims against us. In addition, due to being a public company, we may face a higher risk of being subject to intellectual property
infringement claims from third parties. The global content and application delivery services industry is characterized by the existence
of a large number of patents, trademarks and copyrights and by frequent litigation based on allegations of infringement or other
violations of intellectual property rights. We expect that infringement claims may further increase as the number of products,
services and competitors in our market increases. Further, continued success in this market may provide an impetus to those who
might use intellectual property litigation as a tool against us.



It is critical that we use and develop our
technology and services without infringing the intellectual property rights of third parties, including but not limited to patents,
copyrights, trade secrets and trademarks. Intellectual property litigation is expensive and time-consuming and could divert management’s
attention from our business. Any successful infringement claim against us, whether with or without merit, could, among others things,
require us to pay substantial damages, develop non-infringing technology or enter into royalty or license agreements that may not
be available on acceptable terms, if at all, and cease making, licensing or using products that have infringed a third party’s
intellectual property rights. Protracted litigation could also result in existing or potential customers deferring or limiting
their purchase or use of our products until resolution of such litigation, or could require us to indemnify our customers against
infringement claims in certain instances. Any intellectual property litigation could have a material adverse effect on our business,
results of operations or financial condition.



We have patents, patent applications and
software copyright registrations in China and the U.S. relating to the technologies used in our business. Certain U.S.-based companies
have been granted patents or have licensed patents in the U.S. relating to the content and application delivery business. In the
past, we have conducted substantially all of our business operations in China. We primarily rely upon our local business partners
in the U.S. to address our content and application delivery needs in those markets. However, the possibility of intellectual property
rights infringement claims against us may still increase as we expand outside China.



If we fail to defend ourselves against any
intellectual property infringement claim, we may lose significant intellectual property rights and may be unable to continue providing
our services, which could have a material adverse effect on our results of operations and business prospects.



We may not be able to prevent others from unauthorized
use of our intellectual property.



We rely on a combination of patent, copyright,
trademark, software registration and trade secret laws, as well as nondisclosure agreements and other methods to protect our intellectual
property rights. As of the date of this annual report, we have 57 PRC patents, two U.S. patents, 50 software copyright registrations.
To protect our trade secrets and other proprietary information, employees, consultants, advisors and collaborators are required
to enter into confidentiality agreements. However, a patent filing may not result in an issued patent and an issued patent may
not sufficiently protect our intellectual property rights and our current patent portfolio may not be broad enough to protect our
technologies. In addition, implementation of intellectual property-related laws in China has historically been lacking, primarily
because of ambiguities in the PRC laws and difficulties in enforcement. Accordingly, intellectual property rights and confidentiality
protections in China may not be as effective as in the U.S. or other countries, and infringement of intellectual property rights
continues to pose a serious risk of doing business in China. Policing unauthorized use of proprietary technology is difficult and
expensive. The steps we have taken may be inadequate to prevent the misappropriation of our proprietary technology. Reverse engineering,
unauthorized copying or other misappropriation of our proprietary technologies could enable third parties to benefit from our technologies
without paying us for doing so, which could harm our business and competitive position. Although we are not currently involved
in any litigation with respect to intellectual property, we may need to enforce our intellectual property rights through litigation.
Litigation relating to our intellectual property may not prove successful and might result in substantial costs and diversion of
resources and management attention.





13









If our ability to deliver services and applications in
popular proprietary formats is restricted or becomes cost-prohibitive, demand for our services could decline, we could lose customers
and our financial results could suffer.



Our business partially depends on our ability
to deliver internet services and applications in all major formats. If our legal right or technical ability to store and deliver
internet services and applications in one or more popular proprietary formats, such as Adobe Flash or Windows Media, is limited,
our ability to serve our customers in these formats would be impaired and the demand for our content and application delivery total
solutions by customers using these formats would decline. Owners of proprietary formats may be able to block, restrict, or impose
fees or other costs on, our use of such formats, which could lead to additional expenses for us and for our customers, or which
could prevent our delivery of this type of internet services and applications altogether. Such interference could result in a loss
of existing customers, increased costs and impairment of our ability to attract new customers, which would harm our revenues, results
of operations and growth.



If we are unable to retain our key employees and hire
qualified sales and technical personnel, our ability to compete could be harmed.



Our future success depends upon the continued
services of our executive officers and other key technology, sales, marketing and support personnel who have critical industry
experience and relationships that they rely on in implementing our business plan. We do not have “key person” insurance
policies covering any of our officers or other key employees, and we therefore have no way of mitigating our financial loss were
we to lose their services. The loss of the services of any of our key employees could disrupt our operations, delay the development
and introduction of our services, and negatively impact our ability to sell our services. There is increasing competition for qualified
individuals with the specialized knowledge relevant to providing content and application network services and this competition
affects both our ability to retain key employees and hire new ones. If we cannot identify and hire additional qualified employees,
or if we fail to provide appropriate training, career opportunities or otherwise motivate and retain our quality employees, we
may not be able to successfully execute our growth strategies and our business could suffer.



We may not be able to recoup our investment in international
expansions.



As part of our growth strategy, we may continue
to expand our international network. Such expansion could require us to make significant expenditures, including the purchase of
additional network equipment and the hiring of local employees, in advance of generating any revenues. As a consequence, we may
fail to achieve profitability or recoup our investment in international locations.



If we fail to maintain a strong brand identity, our business
may not grow and our financial results may be adversely impacted.



Maintaining and enhancing the value of our
 “ChinaCache” and “Blue I.T.” brands is important to attracting customers. Our success in maintaining brand
awareness and recognition in the content and application delivery services market in China will depend on our ability to consistently
provide high-quality, value-added services and solutions. As our business grows, we plan to continue to focus our efforts to establish
a wider recognition of our “ChinaCache” and “Blue I.T.” brands to attract potential customers, which may
require additional marketing resources. We cannot assure you that we will effectively allocate our resources for these activities
or succeed in maintaining and broadening our brand recognition and appeal. If we fail to maintain a strong brand identity, our
business and financial results may be adversely impacted.





14









If we are required to seek additional funding, such funding
may not be available on commercially acceptable terms, if at all.



We may need to obtain additional funding
due to a number of factors beyond our control, including a shortfall in revenues, increased expenses, increased investment in capital
equipment or the acquisition of significant businesses or technologies. In addition, although we have completed building constructions
for our cloud infrastructure, we may need to incur substantial investments in the future to equip the buildings with hardware according
to potential customers’ specifications. Also, we utilized the funds prepaid by People.cn and Beijing Federation of Supply
and Marketing Cooperatives, or BFSMC, for the construction of the buildings to be sold to People.cn and BFSMC, respectively. Under
our agreement with BFSMC, we agreed to sell two buildings to a subsidiary of BFSMC through transferring the equity interest of
our subsidiary Beijing Zhao Du, the owner of the buildings. In addition, we agreed to lease back the buildings from the subsidiary
of BFSMC starting from an agreed earlier date. We also reached a supplemental company letter with BFSMC, pursuant to which we agreed
that September 30, 2015 should be deemed as the date of delivery as long as we complete the actual delivery of the buildings
as well as the equity transfer by December 31, 2016. If the equity transfer and other agreed procedures are completed on time,
our liabilities shall be deemed fully discharged. However, BFSMC has not accepted the buildings by December 31, 2016 due to
our disagreement with BFSMC on the standard of delivery and acceptance of the buildings. Therefore, we re-negotiated with BFSMC
and reached a series of new agreements with BFSMC in July 2017. Pursuant to the new agreements, BFSMC agreed to make the payments
of RMB105.6 million to us immediately upon the completion of equity transfer of Beijing Zhao Du. Although we have completed the
transfer of the equity interest in Beijing Zhao Du and the ownership of the buildings in July 2017, BFSMC failed to make the
payments of RMB105.6 million to us as agreed. We have filed a lawsuit with the court, claiming the payment of the outstanding amount
of consideration and the interest accrued thereon in August 2017. In September 2017, BFSMC filed a counterclaim to sue
for, among others, the late delivery penalties and other relating losses. Thereafter we filed a motion to dismiss BFSMC’s
counterclaim arguing that the court does not have the jurisdiction. In April 2018, we were notified by the court that our motion
was rejected and Xin Run’s bank deposits and other assets in a total amount of approximately RMB 50.5 million were sealed
up, distrained or frozen by the court. On April 24, 2018, we amended our claim requesting, among other things, the defendant pay
the additional purchase price of RMB96 million, damages for breach of contract in an amount of RMB14.4 million and the relating
interest of RMB8.86 million. Management is of the view that these proceedings are at a preliminary stage, therefore it is impossible
at this stage to properly evaluate the outcome. Therefore, no provision has been made for this case.





In October 2017, a subsidiary of BFSMC filed
a lawsuit against Xin Run in the Shunyi District Court of Beijing requesting Xin Run pay overdue rent and the relating interest.
At present, the second instance of this case has been completed. Unfortunately, we lost, and the court ruled that Xin Run should
pay overdue rent from October 2017 to June 2018 in an amount equal to RMB64.8 million and the relevant interest thereon. The subsidiary
of BFSMC has applied to the competent court for compulsory execution of the court decision. Liability equal to the sentenced amount
has been recorded in the balance sheet as of December 31, 2018 under other payables to offset consideration received for disposal
of Zhao Du and Shuo Ge in the expectation to net settle with BFSMC.



In addition, in June, 2019, the foregoing
subsidiary of BFSMC filed another lawsuit against Xin Run in the Shunyi District Court of Beijing requesting Xin Run pay overdue
rent from July 2018 to March 2019 in an amount equal to RMB64.8 million and the relating interest thereon. Management is of the
view that these proceedings are at a preliminary stage, therefore it is impossible at this stage to properly evaluate the outcome.
Liability equal to the sentenced amount has been recorded in the balance sheet as of December 31, 2018 under other payables to
offset consideration received for disposal of Zhao Du and Shuo Ge in the expectation to net settle with BFSMC.



Please see “Item 8. Financial information
 — A. Consolidated Statements and Other Financial Information-Legal Proceedings-Litigation” for more information. With
respect to the sale of data center building to People.cn, on December 29, 2017, Xin Run entered into a framework agreement with
People.cn, under which, among others, Xin Run will transfer 100% equity interest in Beijing Shuoge Technology Co., Ltd. to People.cn
subject to terms and conditions to be set forth in a definitive equity transfer agreement. On April 3, 2019, Xin Run entered into
a definitive equity transfer agreement and other relevant documents with People.cn, pursuant to which, among others, Xin 
Run agrees to transfer 100% equity interest in Beijing Shuoge Technology Co., Ltd. to People.cn and return RMB73.2 million prepaid
by People.cn before December 31, 2024.





We believe that our cash and cash equivalents,
and anticipated cash from operating and financing activities will be sufficient to fund our operations and proposed capital expenditures
for at least the next 12 months. If for unforeseen circumstances we do need to obtain additional funding, it may not be available
on commercially acceptable terms, if at all. If we are unable to obtain sufficient funding, our business would be harmed. Even
if we are able to find outside funding sources, we may be required to issue securities in a transaction that could be highly dilutive
to our investors or we may be required to issue securities with greater rights than the securities we have outstanding today. We
may also be required to take other actions that could lessen the value of our ADSs, including borrowing money on terms that are
not favorable to us. If we are unable to generate or raise capital that is sufficient to fund our operations, we may be required
to curtail operations, reduce our capabilities or cease operations in certain jurisdictions or completely.



If our preferential tax treatment for ChinaCache Beijing
and Beijing Blue I.T. becomes unavailable, our results of operations may be materially and adversely affected.



The Enterprise Income Tax Law, effective
as of January 1, 2008, as recently amended on December 29, 2018, permits certain “high and new enterprises strongly
supported by the state” which hold independent ownership of core intellectual property and simultaneously meet a list of
other financial or non-financial criteria to enjoy a reduced 15% enterprise income tax rate subject to certain qualification criteria.
In November 2013, ChinaCache Beijing obtained the certificate of “high and new- technology enterprise” jointly
issued by the Beijing Science and Technology Commission, Beijing Finance Bureau, Beijing Administration of State Taxation and
Beijing Administration of Local Taxation, and has since then continued to qualify as a “high and new- technology enterprise”
and been entitled to a reduced income tax rate of 15%. In December 2016, ChinaCache Beijing was recognized as a “high
and new technology enterprise” again and became eligible for a preferential tax rate of 15% effective from 2016 to 2019.
ChinaCache Beijing is currently in the process of applying for the renewal of such certification.We cannot assure you that ChinaCache
Beijing will continue to be recognized as a “high and new- technology enterprise” and enjoy the tax benefits from
2020 and forward.





15







In November 2012, Beijing Blue I.T.
was recognized as a “high and new- technology enterprise” and was eligible for a preferential tax rate of 15% effective
retrospectively from 2012 to 2014. In July 2015, Beijing Blue I.T. was recognized as a “high and new- technology enterprise”
again and became eligible for a preferential tax rate of 15% effective from 2015 to 2017. In October 2018, Beijing Blue I.T. was
recognized as a “high and new- technology enterprise” once again and became eligible for a preferential tax rate of
15% effective from 2018 to 2020.



In December 2013, Beijing Blue I.T.
was recognized as a key software enterprise covered by the national planning layout scheme, or Key Software Enterprise, jointly
by the National Development and Reform Commission, the Ministry of Industry and Information Technology, or the MIIT, Ministry of
Commerce and State Administration of Taxation, or the SAT, which entitled it to enjoy a preferential income tax rate of 10% for
2013 and 2014. According to a Circular issued by the MIIT and the SAT on Matters relating to Preferential Corporate Income Tax
Policies for Software Enterprises in May 27, 2015, the recognition of “Key Software Enterprise” was stopped since
May 2015. In May 2016, Ministry of Finance, SAT, National Development and Reform Commission and MIIT jointly issued a
circular to restart the recognition of Key Software Enterprise. Companies may be entitled to the preferential tax rate of 10%,
at time of tax return filing, by filing application with the tax authority with supporting documentation proving its qualifications
to be a “Key Software Enterprise” during its annual income tax settlement process. Beijing Blue I.T. plans to file
application for the preferential tax benefit of 10% rate in due time and when such tax benefits policy is still effective.



For the year ended December 31, 2018, our
other PRC subsidiaries would be subject to an enterprise income tax rate of 25%, unless they are qualified as Small Scale and
Low Profit Enterprises which would be entitled to exempt fifty percent (50%) of their income from tax and enjoy a reduced enterprise
income tax rate of 20%. See “Item 5. Operating and Financial Review and Prospects—A. Operating Results —Taxation
 — PRC.”



If our preferential tax treatment of ChinaCache
Beijing and Beijing Blue I.T. becomes unavailable, their enterprise income tax rate would increase to 25% and thus our income tax
expenses would increase, which may have a material adverse effect on our net income and results of operations.



Failure to maintain effective internal control over financial
reporting could have a material and adverse effect on the trading price of our ADSs.



We are subject to the reporting obligations
under the U.S. securities laws. Although our management concluded that we maintained effective internal control over financial
reporting as of December 31, 2018, we cannot assure you that we will maintain effective internal control over financial reporting
on an ongoing basis. If we fail to maintain effective internal control over financial reporting, we will not be able to conclude
that we have effective internal control over financial reporting in accordance with the Sarbanes-Oxley Act of 2002 in our future
annual report on Form 20-F covering the fiscal year in which this failure occurs. Effective internal control over financial
reporting is necessary for us to produce reliable financial reports. Any failure to maintain effective internal control over financial
reporting could result in the loss of investor confidence in the reliability of our financial statements, which in turn could have
a material and adverse effect on the trading price of our ADSs. Furthermore, we may need to incur additional costs and use additional
management and other resources as our business and operations further expand or in an effort to remediate any material control
weakness that may be identified in the future.





16







We have granted, and may continue to grant, stock options
and restricted share units under our stock incentive plans, resulting in increased share based compensation expenses and, therefore,
adversely affecting our results of operations.



We have adopted a total of four stock incentive
plans, in the years 2007, 2008, 2010 and 2011. As of December 31, 2018, there were outstanding options to purchase 38,240,288
of our ordinary shares and 67,691,120 vested restricted share units granted in accordance with these plans. See “Item 6
Directors, Senior Management and Employees — B. Compensation — Stock Incentive Plans.” For the years ended December 31,
2016 ,2017 and 2018, we recorded RMB85.0 million, RMB10.9 million and RMB 3.9 million (US$0.6million), respectively, in share-based
compensation expenses for employees. If we grant more stock options or restricted share units to attract and retain key personnel,
the expenses associated with share based compensation may adversely affect our results of operations. However, if we do not grant
stock options or restricted share units or reduce the number of stock options or restricted share units that we grant, we may
not be able to attract and retain key personnel.



We may incur losses due to business interruptions resulting
from occurrence of natural catastrophes, acts of terrorism or fires, and we have limited insurance coverage.



The occurrence of natural catastrophes such
as earthquakes, floods, typhoons or any acts of terrorism may result in significant property damages as well as loss of revenues
due to interruptions in our business operations. In addition, the provision of our services depends on the continuing operation
of our information technology and communications systems, which are also vulnerable to damage or interruption from natural catastrophes
and acts of terrorism. Some of our data centers are located in areas with a high risk of typhoons or earthquakes. Our disaster
recovery planning cannot account for every conceivable possibility. Any damage to or failure of our systems could result in interruptions
in our services, which could reduce our revenues and profits, and our brand could be damaged if people believe our systems are
unreliable.



The insurance industry in China is not fully
developed. Insurance companies in China offer limited business insurance products. While business disruption insurance may be available
to a limited extent in China, we have determined that the risks of disruption and the difficulties and costs associated with acquiring
such insurance render it commercially impractical for us to have such insurance. As a result, we do not have any business liability,
disruption or litigation insurance coverage for our operations in China. Any business disruption or litigation might result in
our incurring substantial costs and the diversion of resources.



We face risks related to natural disasters, health epidemics
and other outbreaks, which could significantly disrupt our operations.



Our business could be materially and adversely
affected by natural disasters or the outbreak of health epidemic. Any such occurrences could cause severe disruption to our daily
operations, and may even require a temporary closure of our facilities. In May 2008, a severe earthquake hit part of Sichuan
province in southwestern China, and in April 2010, another severe earthquake hit part of Qinghai province in western China,
and in August 2014, another strong earthquake hit part of Yunnan province in southern China, each of which resulted in significant
casualties and property damage. While we did not suffer any loss or experience any significant increase in cost resulting from
these earthquakes, if a similar disaster were to occur in the future affecting Beijing or another city where we have major operations
in China, our operations could be materially and adversely affected due to loss of personnel and damages to property. In addition,
any outbreak of avian flu, severe acute respiratory syndrome (SARS), influenza A (H1N1), H7N9, Ebola, or other adverse public health
epidemic in China may have a material and adverse effect on our business operations. These occurrences could require the temporary
closure of our offices or prevent our staff from traveling to our customers’ offices to provide on-site services. Such closures
could severely disrupt our business operations and adversely affect our results of operations.





17











We are subject to China’s anti-corruption laws and
the U.S. Foreign Corrupt Practices Act. Our failure to comply with these laws could result in penalties, which could harm our reputation
and have an adverse effect on our business, results of operations and financial condition.



We are subject to the U.S. Foreign Corrupt
Practices Act, or the FCPA, which generally prohibits companies and anyone acting on their behalf from offering or making improper
payments or providing benefits to foreign officials for the purpose of obtaining or keeping business, along with various other
anti-corruption laws, including China’s anti-corruption laws. Our company policies strictly prohibit any such conduct and
require that we the Company, our employees and intermediaries comply with the FCPA and other anti-corruption laws to which we are
subject. There is, however, no assurance that such policies or procedures will work effectively all the time or protect us against
liability under the FCPA or other anti-corruption laws for actions taken by our employees and intermediaries with respect to our
business or any businesses that we may acquire. We operate in the content and application delivery services industry in China and
generally purchase bandwidth from state or government-owned telecommunications carriers and provide a portfolio of services and
solutions to government agencies. This puts us in frequent contact with persons who may be considered “foreign officials”
under the FCPA, resulting in an elevated risk of potential FCPA violations. If we are found to be not in compliance with the FCPA
and other applicable anti-corruption laws governing the conduct of business with government entities or officials, we may be subject
to criminal and civil penalties and other remedial measures, which could have an adverse impact on our business, financial condition
and results of operations. Any investigation of any potential violations of the FCPA or other anti-corruption laws by U.S. or foreign
authorities, including Chinese authorities, could adversely impact our reputation, cause us to lose customer sales and access to
end-user access networks, and lead to other adverse impacts on our business, financial condition and results of operations.



Risks Related to Our Corporate Structure



If the PRC government finds that the arrangements that
establish the structure for operating our business do not comply with PRC government restrictions on foreign investment in the
telecommunications business, we could be subject to severe penalties.



The PRC government regulates telecommunications-related
businesses through strict business licensing requirements and other government regulations. These laws and regulations also include
limitations on foreign ownership of PRC companies that engage in telecommunications-related business. Specifically, foreign investors
are not allowed to own more than a 50% equity interest in any PRC company engaging in value-added telecommunications business,
except for those engaged in e-commerce business, domestic multi-party communications services business, store-and-forward business
and call center business, which may be 100% owned by foreign investors, and any such foreign investor must have experience in
providing value-added telecommunications services overseas and maintain a good track record in accordance with the Special Administrative
Measures for Entry of Foreign Investment (Negative List) (2019 Version), or the Negative List, which became effective on July
30, 2019 and replaced the Special Administrative Measures for Entry of Foreign Investment (Negative List) (2018 Version), and
other applicable laws and regulations. In addition, on January 31, 2019, the State Council published its approval of Fully Promoting
the Comprehensive Pilot Program for Expanding the Opening Up of Service Industry in Beijing, pursuant to which Beijing lifts foreign
ownership limits on internet access service industry (only the service of providing users with internet access) in certain pilot
zones in Beijing. Nevertheless, since this approval is recently published and the local authorities in Beijing has not promulgated
any implementing rules or guidelines as of the date of this annual report, it remains uncertain as to the interpretation and implementation
of this new policy in many aspects, such as whether the abovementioned requirements provided by the Foreign Investment Telecommunications
Rules for a major foreign investor and the MIIT approval will still apply in Beijing.



Because we are a Cayman Islands company,
we are classified as a foreign enterprise under PRC laws and regulations, and our PRC subsidiaries, ChinaCache Beijing and Xin
Run, are foreign-invested enterprises. To comply with PRC laws and regulations, we conduct our content and application delivery
total solution business and the other telecommunications-related businesses in China through a set of contractual arrangements
with each of Beijing Blue I.T., Beijing Jingtian and ChinaCache Shouming and their respective shareholders. These contractual arrangements
provide us with effective control over Beijing Blue I.T., Beijing Jingtian and ChinaCache Shouming. For a description of these
contractual arrangements, see “Item 4. Information on the Company —C. Organizational Structure — Contractual
Arrangements with Our Consolidated Variable Interest Entities.”



The MIIT issued a circular in July 2006
requiring a foreign investor to set up a foreign-invested enterprise and obtain a value-added telecommunications business operating
license, or VAT license, in order to conduct any value-added telecommunications business in China. Pursuant to this circular, a
domestic VAT license holder is prohibited from leasing, transferring or selling the license to foreign investors in any form, and
from providing any assistance, including providing resources, sites or facilities, to foreign investors that conduct value-added
telecommunications business illegally in China. Furthermore, the relevant trademarks and domain names that are used in the value-added
telecommunications business must be owned by the local VAT license holder or its shareholder. The circular further requires each
VAT license holder to have the necessary facilities for its approved business operations and to maintain such facilities in the
regions covered by its license. In addition, all value-added telecommunications service providers are required to maintain network
and information security in accordance with the standards set forth under relevant PRC regulations. Due to a lack of interpretations
from the regulator, it is unclear what impact this circular will have on us or other similarly situated companies.



18











In the opinion of Han Kun Law Offices, our
PRC legal counsel, except as otherwise disclosed herein (i) the ownership structure of our PRC subsidiary, our PRC consolidated
variable interest entities and their branches and subsidiaries comply with all existing PRC laws and regulations;  (ii) each
of the documents currently effective under the contractual arrangements among us, our PRC subsidiary, PRC consolidated variable
interest entities and their shareholders governed by PRC law are valid, binding and enforceable, and will not result in any violation
of PRC laws or regulations currently in effect and (iii) the business operations of our PRC subsidiary, our PRC consolidated
variable interest entities and their branches and subsidiaries are in all material respects in compliance with existing PRC laws
and regulations and the terms of their licenses and permits. However, there are substantial uncertainties regarding the interpretation
and application of PRC laws and regulations, including the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign
Investors, or the M&A Rules, and the above circular. Accordingly, there can be no assurance that the PRC regulatory authorities
that regulate providers of content and application delivery services and other participants in the telecommunications industry,
in particular, the MIIT, will ultimately take a view that is consistent with the opinion of our PRC legal counsel.



The relevant PRC regulatory authorities
have broad discretion in determining whether a particular contractual structure is in violation of PRC laws and regulations. If
our corporate and contractual structure is deemed by the relevant PRC regulatory authorities to be illegal, either in whole or
in part, we may have to modify such structure to comply with regulatory requirements. However, we cannot assure you that we can
achieve this without material disruption to our business. Further, if our corporate and contractual structure is found to be in
violation of any existing or future PRC laws or regulations, the relevant regulatory authorities would have broad discretion in
dealing with such violations, including:



| | · | revoking our business and operating licenses;
| | - | ---------------------------------------------





| | · | levying fines on us;
| | - | --------------------





| | · | confiscating any of our income that they deem to be obtained through illegal operations;
| | - | ----------------------------------------------------------------------------------------





| | · | shutting down a portion or all of our networks and servers;
| | - | -----------------------------------------------------------





| | · | discontinuing or restricting our operations in China;
| | - | -----------------------------------------------------





| | · | imposing conditions or requirements with which we may not be able to comply;
| | - | ----------------------------------------------------------------------------



| | · | requiring us to restructure our corporate and contractual structure;
| | - | --------------------------------------------------------------------





| | · | restricting or prohibiting our use of the proceeds from a public offering to finance our PRC consolidated variable interest entities’ business and operations; and
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------





| | · | taking other regulatory or enforcement actions that could be harmful to our business.
| | - | -------------------------------------------------------------------------------------



Occurrence of any of these events could
materially and adversely affect our business, financial condition and results of operations.



ChinaCache Beijing’s and Xin Run’s contractual
arrangements with Beijing Blue I.T., Beijing Jingtian and ChinaCache Shouming may result in adverse tax consequences to us.



We could face material and adverse tax consequences
if the PRC tax authorities determine that ChinaCache Beijing’s and Xin Run’s contractual arrangements with Beijing
Blue I.T., Beijing Jingtian and ChinaCache Shouming were not made on an arm’s length basis and adjust our income and expenses
for PRC tax purposes in the form of a transfer pricing adjustment. A transfer pricing adjustment could adversely affect us by (i) increasing
the respective tax liabilities of Beijing Blue I.T., Beijing Jingtian and ChinaCache Shouming without reducing ChinaCache Beijing’s
and Xin Run’s tax liability, which could further result in late payment fees and other penalties to Beijing Blue I.T., Beijing
Jingtian and ChinaCache Shouming for underpaid taxes; or (ii) limiting the ability of ChinaCache Beijing, Xin Run, Beijing
Blue I.T., Beijing Jingtian or ChinaCache Shouming to obtain or maintain preferential tax treatments and other financial incentives.



We rely on contractual arrangements with Beijing Blue
I.T., Beijing Jingtian and ChinaCache Shouming and their respective shareholders for our China operations, which may not be as
effective as direct ownership in providing operational control.



We rely on contractual arrangements with
our consolidated variable interest entities, Beijing Blue I.T., Beijing Jingtian and ChinaCache Shouming, and their respective
shareholders, to operate our business in China. For a description of these contractual arrangements, see “Item 7. Major Shareholders
and Related Party Transactions — B. Related Party Transactions — Contractual Arrangements with Our Consolidated Variable
Interest Entities.” These contractual arrangements may not be as effective as direct ownership in providing us with control
over our consolidated variable interest entities. Under the current contractual arrangements, as a legal matter, if our consolidated
variable interest entities or their shareholders fail to perform their respective obligations under these contractual arrangements,
we may have to incur substantial costs and expend significant resources to enforce such arrangements in reliance on legal remedies
under PRC law. These remedies may not always be effective, particularly in light of uncertainties in the PRC legal system and we
may incur substantial costs and expend significant resources in pursuing such enforcement actions.





19









All of these contractual arrangements are
governed by PRC law and provide for the resolution of disputes through arbitration in the PRC. Accordingly, these contracts would
be interpreted in accordance with PRC law and any disputes would be resolved in accordance with PRC legal procedures. The legal
environment in the PRC is not as developed as in other jurisdictions, such as the U.S. As a result, uncertainties in the PRC legal
system could limit our ability to enforce these contractual arrangements, which may make it difficult to exert effective control
over our consolidated variable interest entities, and our ability to conduct our business may be negatively affected. See “—Risks
Related to Doing Business in China—Uncertainties with respect to the PRC legal system could limit legal protections available
to you and us.”



The shareholders of our consolidated variable interest
entities may have potential conflicts of interest with us, which may materially and adversely affect our business and financial
condition.



The shareholders of our consolidated variable
interest entities, Beijing Blue I.T., Beijing Jingtian and ChinaCache Shouming, are also the founders, directors, executive officers,
employees or shareholders of our company. Conflicts of interests between their roles may arise. We cannot assure you that when
conflicts of interest arise, any or all of these individuals will act in the best interests of our company or that conflicts of
interest will be resolved in our favor. In addition, these individuals may breach or cause our consolidated variable interest entities
to breach the existing contractual arrangements. Currently, we do not have arrangements to address potential conflicts of interest
between these individuals and our company. We rely on these individuals to abide by the laws of the Cayman Islands and China. If
we cannot resolve any conflicts of interest or disputes between us and the shareholders of our two consolidated variable interest
entities, we would have to rely on legal proceedings, which could result in disruption of our business and substantial uncertainty
as to the outcome of any such legal proceedings.



Our ability to enforce the share pledge agreements between
us and the shareholders of Beijing Blue I.T., Beijing Jingtian and ChinaCache Shouming may be subject to limitations based on PRC
laws and regulations.



Pursuant to the share pledge agreements
which our wholly-owned subsidiary ChinaCache Beijing has entered into with Beijing Blue I.T. and Beijing Jingtian and their respective
shareholders, and the share pledge agreement that Xin Run has entered into with ChinaCache Shouming, the shareholders of Beijing
Blue I.T., Beijing Jingtian and ChinaCache Shouming have agreed to pledge their respective equity interests in Beijing Blue I.T.,
Beijing Jingtian and ChinaCache Shouming to ChinaCache Beijing or Xin Run to secure Beijing Blue I.T.’s, Beijing Jingtian’s
and ChinaCache Shouming’s performance of their obligations under the relevant contractual arrangements. The share pledges
of Beijing Blue I.T., Beijing Jingtian and ChinaCache Shouming under these share pledge agreements have been registered with the
relevant local branch of the State Administration for Industry and Commerce, now the State Administration for Market Regulation,
or SAIC.



In addition, when registering the pledges
over the equity interests under the share pledge agreements with the local branch of SAIC, the amount of secured liabilities as
stated on the application forms was RMB40.0 million for Beijing Blue I.T., RMB10.0 million for Beijing Jingtian and RMB10.0 million
for ChinaCache Shouming, corresponding to the pledged equity interests. The share pledge agreements with the shareholders of Beijing
Blue I.T. provide that the pledged equity interest constitutes continuing security for any and all of the payment obligations under
all of the principal service agreements. The share pledge agreements with the shareholders of Beijing Jingtian provide that the
pledged equity interest constitutes continuing security for any and all of payment obligations, including payment of consulting
and service fees, under the business cooperation agreement. The share pledge agreements with the shareholders of ChinaCache Shouming
provide that the pledged equity interest constitutes continuing security for any and all of payment obligations, including payment
of consulting and service fees, under the business cooperation agreement. However, it is possible that a PRC court may take the
position that RMB10.0 million, RMB40.0 million or RMB10.0 million, as applicable, represents the full amount of the collateral
that has been registered and perfected. If this is the case, the obligations that are supposed to be secured in the share pledge
agreements and are in excess of RMB10.0 million, RMB40.0 million or RMB10.0 million, as applicable, could be determined by the
PRC court as unsecured debt, which takes secondary priority comparing with other creditors of secured debts.





20







Risks Related to Doing Business in China



Our business may be adversely affected by government policies
and regulations in China.



Laws and regulations that apply to communications
and commerce conducted over the internet are becoming more prevalent in China, and may impose additional burdens on companies conducting
business online or providing internet-related services such as us and many of our customers. Increased regulation could negatively
affect our business directly, as well as the businesses of our customers, which could reduce their demand for our services.



The PRC government has adopted regulations
governing internet access and the distribution of news and other information over the internet. Under these regulations, internet
content providers and internet publishers are prohibited from posting or displaying over the internet content that, among other
things, violates PRC laws and regulations, impairs the national dignity of China, or is reactionary, obscene, superstitious, fraudulent
or defamatory. Failure to comply with these requirements may result in the revocation of licenses to provide internet content and
other licenses and the closure of the concerned websites. In the past, failure to comply with such requirements has resulted in
the closure of certain websites. In addition, the MIIT has published regulations that subject website operators to potential liability
for content displayed on their websites and the actions of users and others using their systems, including liability for violations
of PRC laws and regulations prohibiting the dissemination of content deemed to be socially destabilizing. The Ministry of Public
Security has the authority to order any local internet service provider to block any internet website at its sole discretion. From
time to time, the Ministry of Public Security has stopped the dissemination over the internet of information which it believes
to be socially destabilizing. The State Secrecy Bureau is also authorized to block any website it deems to be leaking state secrets
or failing to comply with the relevant regulations relating to the protection of state secrets in the dissemination of online information.
Our business may be adversely affected if any of our customers’ websites are restricted, blocked or closed or if we face
liability for content distributed over our network. If we need to take costly measures to reduce our exposure to these risks, or
are required to defend ourselves against such claims, our financial results could be negatively affected.



In April 2007, the General Administration
of Press and Publication of China, now the State Administration of Radio and Television of China, or SAPPRFT, and several other
governmental authorities issued a circular requiring the implementation of an “anti-fatigue system” and a real-name
registration system by all PRC online game operators in an effort to curb addictive game play behaviors of minors under the age
of eighteen. In addition, it is also possible that the PRC government authorities may decide to adopt more stringent policies to
monitor the online game industry as a result of adverse public reaction or otherwise. The implementation of these regulations may
discourage or otherwise prevent or restrict minors from playing online games, which could limit the growth of online game operators,
one of our key customer groups, thus adversely affecting our business and results of operations.



The SAPPRFT and the MIIT issued the Administrative
Measures Regarding Internet Audio-Video Program Services, or the Internet Audio-Video Program Measures, which became effective
on January 31, 2008. Among other things, the Internet Audio-Video Program Measures stipulate that only entities wholly owned
or controlled by state-owned enterprises may apply for the “Internet Audio-Video Program Operating License” to engage
in the production, editing, integration or consolidation, and transfer to the public through the internet, of audio-video programs,
and the provision of audio-video program uploading and transmission services. In addition, the Internet Audio-Video Program Measures
require that, when providing signal transmission for internet Audio-Video programs, network operators are obligated to examine
the licenses or permits of the internet Audio-Video Programs service providers and must provide internet access services within
the scope of such licenses or registration documents. The Internet Audio-Video Program Measures further provide that no entity
may provide signal transmission, internet data center services, fee collection or other financial or technical services to internet
Audio-Video Programs service providers that do not have applicable licenses or permits. Although we do not provide audio-video
programs on our own, our content and application delivery total solutions include provision of technical assistance to customers,
social networking operators in particular, in the uploading and transmission of user-generated content, including audio-video programs.
There are significant uncertainties relating to the interpretation and implementation of the internet Audio-Video Program Measures.
Accordingly, if we are required to verify our customers’ internet Audio-Video Program Operating Licenses, such requirements
may impose additional obligations on us, which may increase our expenses and adversely affect our business and results of operations.
Any of these factors could cause significant disruption to our operations and may materially and adversely affect our business,
financial condition and results of operations.





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Furthermore, the MIIT has strengthened its
oversight on the Internet access service market in recent years, which is underscored by the Circular on Clearing Up and Regulating
the Internet Access Service Market issued by the MIIT in January 2017 and the Circular on Deepening the Work of Clearing Up and
Regulating the Internet Access Service Market issued by the MIIT in April 2018. According to these two circulars, the regulator
has launched a series of inspections and rectifications to regulate the market, which lasts until March 31, 2019. For example,
in February 2018, MIIT issued an internal notice, or the MIIT Internal Notice, pursuant to which telecommunication authorities
will carry out a special enforcement campaign to inspect the operations of certain licensed telecommunications operators according
to applicable regulations and rules, including without limitation, the Circular on Clearing Up and Regulatory the Internet Access
Service Market issued by the MIIT in January 2017. In particular, the authorities will pay special attention to any improper operational
activities, such as unauthorized establishment of transmission network, unlicensed operation of cross-border business and improper
sublease of broadband resources. If the enterprise is found to be engaged in non-compliant operations, it may be subject to various
penalties, including suspension of network access, suspension of approving its application for new operation permit until rectification
being completed, being publicized as an operator with discredit record or non-compliance record, enhanced oversight of the authority
and limitation on new telecommunication business, depending on the seriousness of the violations and the rectification result.
The MIIT Internal Notice mandates that the foregoing inspection and scrutiny to be completed by September 30, 2018. According to
the MIIT Internal Notice, 47 industry players are subject to the special inspection, including one of our VIEs, Beijing Blue I.T.
After the MIIT Internal Notice was issued, we closely communicated with the in-charge authority to clarify the inspection
requirements of the authority and cooperate with them to review our business practices and compliance status. As of the date of
this annual report, we have not received any further investigation notice or rectification order relating thereto from the government
authorities. Nevertheless, we cannot assure you that the government authorities will not conduct similar inspections from time
to time in the future and may determine that we are not in full compliance with the regulatory requirements. If we are found to
violate any operation requirements, we may be imposed any of the administrative penalties mentioned in the MIIT Internal Notice,
which may result in a material and adverse effect on our ability to conduct our operations and our financial conditions.



If we fail to acquire, obtain or maintain applicable telecommunications
licenses, or are deemed by relevant governmental authorities to be operating outside the terms of our existing license, our business
would be materially and adversely affected.



Pursuant to the Telecommunications Regulations
promulgated by the PRC State Council effective from September 2000 and amended in July 2014 and February 2016, respectively,
telecommunications businesses are divided into two categories, namely, (i) “basic telecommunications business,”
which refers to a business that provides public network infrastructure, public data transmission and basic voice communications
services, and (ii) “value-added telecommunications business,” which refers to a business that provides telecommunications
and information services through the public network infrastructure. Pursuant to the VAT license issued to Beijing Blue I.T. by
the MIIT on June 26, 2019, Beijing Blue I.T. is permitted to carry out its domestic fixed-network data transmission business, internet
data center business (excluding internet resource coordination service), content delivery network business, its domestic internet
virtual private networks business and internet access service business under the first category of “value-added telecommunications
business”. Pursuant to the VAT license issued to ChinaCache Shouming by the MIIT on November 28, 2018, ChinaCache Shouming
is permitted to carry out its internet data center business (excluding internet resource coordination service) and internet access
service business under the first category of “value-added telecommunications business”.



On January 17, 2017, the MIIT issued
a Circular on Clearing up and Regulating the Internet Access Service Market, or MIIT Circular No. 32, aiming to regulate illegal
operations in the field of internet data center (IDC) service, internet access (ISP) service and content delivery network (CDN)
service business. In particular, the MIIT Circular No. 32 reiterates that an entity is prohibited from operating any of the
IDC, ISP or CDN services without proper telecommunication business operation permit, or engaging in activities beyond the
permitted business scope or permitted geographical scope specified on its operation permit, nor shall a qualified telecommunication
business operator lease or transfer its qualification or resources to an unauthorized entity in the form of technology cooperation
or in other disguised form. In addition, pursuant to the MIIT Circular No. 32, if an entity had obtained a VAT License for
IDC service business prior to the implementation of the Catalog of Telecommunications Business (2015 Version) and has actually
engaged in CDN service or internet resource coordination business, it must undertake in a written commitment to the issuing authority
of its VAT License by March 31, 2017 that it will satisfy relevant requirements for CDN service or internet resource coordination
service, as applicable, and obtain the corresponding VAT License by the end of 2017. If it fails to obtain the VAT License by the
deadline, it must cease to operate the CDN service and internet resource coordination service business from January 1, 2018.
If an entity fails to submit the above commitment by March 31, 2017, it shall be refrained from engaging in CDN service and
internet resource coordination service since April 1, 2017. Beijing Blue I.T. had submitted the written commitment on March 30,
2017 in compliance with the relevant requirement and has obtained the relevant VAT License for CDN services issued by MIIT on September
18, 2017, which was subsequently amended on February 7, 2018, January 10, 2019. and June 26, 2019.





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However, since China’s content and
application delivery services market is at an early stage of development, the scope of content and application delivery businesses
has been expanding constantly and the concept of content and application delivery services is evolving. We have been continuously
developing our content and application delivery business to better serve our customers, and as a result, we introduce new technologies
and services from time to time to support and improve our current business. We cannot assure you that PRC governmental authorities
will continue to deem of our newly developed technologies, network and services used in our business as a type of value-added telecommunications
business covered under the VAT license of Beijing Blue I.T. and ChinaCache Shouming. As we expand our networks across China, it
is also possible that the MIIT, in the future, may deem our operations to have exceeded the terms of our existing license. Further,
we cannot assure you that Beijing Blue I.T. and ChinaCache Shouming will be able to successfully renew their VAT licenses upon
their expiration, or that their VAT license will continue to cover all aspects of our content and application delivery business
and other telecommunication-related business and operations upon renewal. In addition, new laws, regulations or government interpretations
may also be promulgated from time to time to regulate the content and application delivery business and other telecommunication-related
business or any of our related technology or services, which may require us to obtain additional, or expand existing, operating
licenses or permits. Any of these factors could result in Beijing Blue I.T. or ChinaCache Shouming being disqualified from carrying
out their current business, causing significant disruption to our business operations which may materially and adversely affect
our business, financial condition and results of operations.



Adverse changes in political and economic policies of
the PRC government could have a material adverse effect on the overall economic growth of China, which could reduce the demand
for our services and adversely affect our competitive position.



A large portion of our operations are conducted
in China and a significant part of our sales are made in China. Accordingly, our business, financial condition, results of operations
and prospects are affected significantly by economic, political and legal developments in China. The PRC economy differs from the
economies of most developed countries in many respects, including the amount of government involvement, the level of development,
the growth rate, the control of foreign exchange and allocation of resources. While the PRC economy has grown significantly over
the past several decades, the growth has been uneven across different periods, regions and among various economic sectors of China,
and the rate of growth has been slowing. We cannot assure you that the Chinese economy will continue to grow, or that if there
is growth, such growth will be steady and uniform, or that if there is a slowdown, such a slowdown will not have a negative effect
on our business.



The PRC government exercises significant
control over China’s economic growth through the allocation of resources, controlling payment of foreign currency-denominated
obligations, setting monetary policy and providing preferential treatment to particular industries or companies. It is unclear
whether PRC economic policies will be effective in maintaining stable economic growth in the future. Any slowdown in the economic
growth of China could lead to reduced demand for our solutions, which could materially and adversely affect our business, as well
as our financial condition and results of operations.



Uncertainties with respect to the PRC legal system could
limit legal protections available to you and us.



We conduct our business primarily through
our subsidiaries and consolidated variable interest entities in China. Our operations in China are governed by PRC laws and regulations.
ChinaCache Beijing and Xin Run are foreign-invested enterprise and are subject to laws and regulations applicable to foreign investment
in China and, in particular, laws applicable to foreign-invested enterprises. The PRC legal system is a civil law system based
on written statutes. Unlike the common law system, prior court decisions may be cited for reference but are not binding.





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In 1979, the PRC government began to promulgate
a comprehensive system of laws and regulations governing economic matters in general. The overall effect of legislation over the
past several decades has significantly enhanced the protections afforded to various forms of foreign investments in China. However,
China has not developed a fully integrated legal system, and recently enacted laws and regulations may not sufficiently cover all
aspects of economic activities in China. In particular, because these laws and regulations are relatively new, and because of the
limited volume of published decisions and their nonbinding nature, the interpretation and enforcement of these laws and regulations
involve uncertainties. In addition, the PRC legal system is based in part on government policies and internal rules, some of which
are not published on a timely basis or at all, which may have a retroactive effect. As a result, we may not be aware of our violation
of these policies and rules until some time after the violation. Any administrative and court proceedings in China may be
protracted, resulting in substantial costs and diversion of resources and management attention. However, since PRC administrative
and court authorities have significant discretion in interpreting and implementing statutory and contractual terms, it may be more
difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection we enjoy than in more
developed legal systems. These uncertainties may also impede our ability to enforce the contracts we have entered into. As a result,
these uncertainties could materially and adversely affect our business and results of operations.



Uncertainties exist with respect to the interpretation
and implementation of the newly enacted PRC Foreign Investment Law and its implementation regulation (draft for comments) and how
they may impact the viability of our current corporate structure, corporate governance and business operations.



On March 15, 2019, the National People’s
Congress approved the Foreign Investment Law, which will come into effect on January 1, 2020 and replace the trio of existing
laws regulating foreign investment in China, namely, the Sino-foreign Equity Joint Venture Enterprise Law, the Sino-foreign Cooperative
Joint Venture Enterprise Law and the Wholly Foreign-invested Enterprise Law, together with their implementation rules and ancillary
regulations. On November 1, 2019, Ministry of Justice of PRC promulgated the Implementation Regulation for Foreign Investment Law
(Draft for Comments) drafted by Ministry of Justice of PRC, Ministry of Commerce of PRC and National Development and Reform Commission.



The Foreign Investment Law and its implementation
regulation (draft for comments) embody an expected PRC regulatory trend to rationalize its foreign investment regulatory regime
in line with prevailing international practice and the legislative efforts to unify the corporate legal requirements for both
foreign and domestic investments. However, since it is relatively new, uncertainties still exist in relation to its interpretation
and implementation. For instance, under the Foreign Investment Law, “foreign investment” refers to the investment
activities directly or indirectly conducted by foreign individuals, enterprises or other entities in China. Though it does not
explicitly classify contractual arrangements as a form of foreign investment, there is no assurance that foreign investment via
contractual arrangement would not be interpreted as a type of indirect foreign investment activities under the definition in the
future. In addition, the definition contains a catch-all provision which includes investments made by foreign investors
through means stipulated in laws or administrative regulations or other methods prescribed by the State Council. The Implementation
Regulation for Foreign Investment Law provides that the investment conducted by the enterprise established outside PRC but wholly
owned by Chinese individuals, enterprises or other entities is exempt from the restrictions set forth in the Negative List. However,
from the current draft, such exemption only applies to investment by foreign enterprises wholly owned by the PRC citizens Therefore,
it still leaves leeway for future laws, administrative regulations or provisions promulgated by the Stale Council to provide for
contractual arrangements as a form of foreign investment. In any of these cases, it will be uncertain whether our contractual
arrangements will be deemed to be in violation of the market access requirements for foreign investment under the PRC laws and
regulations. The “variable interest entity” structure, or VIE structure, has been adopted by many PRC-based companies,
including us, to obtain necessary licenses and permits in the industries that are currently subject to foreign investment restrictions
in China. See “—Risks Related to Our Corporate Structure” and “Item 4. Information on the Company —
C. Organizational Structure.”



In addition, the Foreign Investment Law
further specifies that foreign investments shall be conducted in line with the negative list issued by or approved to be issued
by the State Council. If a foreign-invested enterprise proposes to conduct business in an industry subject to foreign investment
 “restrictions” in the “negative list,” the foreign-invested enterprise must meet certain conditions under
the “negative list” before being established. If a foreign-invested enterprise proposes to conduct business in an industry
subject to foreign investment “prohibitions” in the “negative list,” it must not engage in the business.
It is uncertain whether the industry of data center and providing value-added telecommunication services, in which our consolidated
affiliated entities operate, will be subject to the foreign investment restrictions or prohibitions under the “negative list”
to be issued. Furthermore, if future laws, administrative regulations or provisions prescribed by the State Council mandate further
actions to be taken by companies with respect to existing contractual arrangements, we may face substantial uncertainties as to
whether we can complete such actions in a timely manner, or at all. Failure to take timely and appropriate measures to cope with
any of these or similar regulatory compliance challenges could materially and adversely affect our current corporate structure,
corporate governance and business operations.





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We rely principally on dividends paid by our operating
subsidiaries to fund cash and financing requirements, and limitations on the ability of our operating subsidiary to make payments
to us could have a material adverse effect on our ability to conduct our business and fund our operations.



We are a holding company and conduct a significant
part of our business through our operating subsidiaries and consolidated variable interest entities, which are limited liability
companies established in China. We rely principally on dividends paid by our subsidiaries for our cash needs, including the funds
necessary to pay dividends and other cash distributions to our shareholders, to service any debt we may incur and to pay our operating
expenses, if any. The payment of dividends by entities organized in China is subject to certain limitations. In particular, regulations
in China currently permit payment of dividends only out of accumulated profits as determined in accordance with PRC accounting
standards and regulations. Our PRC subsidiaries, ChinaCache Beijing and Xin Run, are also required to set aside at least 10% of
their after-tax profit based on PRC accounting standards each year to its general reserves until the accumulative amount of such
reserves reaches 50% of its registered capital. These reserves are not distributable as cash dividends. In addition, it is required
to allocate a portion of its after-tax profit to its staff welfare and bonus fund at the discretion of its board of directors.



Moreover, if ChinaCache Beijing or Xin Run
incurs debt on its own behalf in the future, the instruments governing the debt may restrict its ability to pay dividends or make
other distributions to us. Any limitation on the ability of ChinaCache Beijing or Xin Run to distribute dividends and other distributions
to us could materially and adversely limit our ability to make investments or acquisitions that could be beneficial to our businesses,
pay dividends or otherwise fund and conduct our business.



Under China’s Enterprise Income Tax Law, we may
be classified as a “resident enterprise” of China. Such classification could result in unfavorable tax consequences
to us and our non-PRC resident shareholders.



Pursuant to the Enterprise Income Tax Law,
an enterprise established outside of China with “de facto management bodies” within China is considered a “resident
enterprise,” meaning that it can be treated in a manner similar to a Chinese enterprise for enterprise income tax purposes.
The term “de facto management body” is defined as the management body that exercises full and substantial control and
overall management over the business, productions, personnel, accounts and properties of an enterprise. The SAT issued SAT Circular
82 in April 2009, which provides certain specific criteria for determining whether the “de facto management body”
of a Chinese-controlled overseas-incorporated enterprise is located in China. In July 2011, the SAT issued additional rules to
provide more guidance on the implementation of SAT Circular 82. The additional rules specify that when provided with a copy
of Chinese tax resident determination certificate from a resident Chinese controlled offshore incorporated enterprise, the payer
should not withhold 10% income tax when paying the Chinese-sourced dividends, interest, royalties, etc. to the Chinese controlled
offshore incorporated enterprise. Although SAT Circular 82 and the additional guidance apply only to overseas registered enterprises
controlled by PRC enterprises, not to those controlled by PRC individuals or foreigners, the criteria set forth in SAT Circular
82 may reflect the SAT’s general position on how the “de facto management body” test should be applied in determining
the tax resident status of offshore enterprises, regardless of whether they are controlled by PRC enterprises or individuals.





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If the PRC tax authorities determine that
we are a “resident enterprise” for PRC enterprise income tax purposes, a number of unfavorable PRC tax consequences
could follow: (i) we may be subject to enterprise income tax at a rate of 25% on our worldwide taxable income as well as PRC
enterprise income tax reporting obligations, and (ii) a 10% withholding tax may be imposed on dividends we pay to our non-PRC
resident shareholders and a 10% PRC tax may apply to gains derived by our non-PRC resident shareholders from transferring our shares
or ADSs, if such income is considered PRC-sourced income. Similarly, such unfavorable tax consequences could apply to our subsidiaries
outside China, including ChinaCache North America Inc. and ChinaCache Network (Hong Kong) Limited or their overseas subsidiaries
if they are deemed to be “resident enterprises” by the PRC tax authorities. Notwithstanding the foregoing provisions,
the Enterprise Income Tax Law also provides that the dividends paid between “qualified resident enterprises” are exempt
from enterprise income tax. If our Cayman Islands holding company is deemed a “resident enterprise” for PRC enterprise
income tax purposes, the dividends it receives from its PRC subsidiaries, ChinaCache Beijing and Xin Run, may constitute dividends
between “qualified resident enterprises” and therefore qualify for tax exemption. However, the definition of qualified
resident enterprises is unclear and the relevant PRC government authorities have not yet issued guidance with respect to the processing
of outbound remittances to entities that are treated as resident enterprises for PRC enterprise income tax purposes. Even if such
dividends qualify as “tax-exempt income,” we cannot guarantee that such dividends will not be subject to any withholding
tax.



Enhanced scrutiny over acquisition transactions by the
PRC tax authorities may have a negative impact on potential acquisitions we may pursue in the future.



In connection with the EIT Law, the Ministry
of Finance and the SAT jointly issued a SAT Circular 59 in April 2009, and the SAT issued a SAT Circular 698 in December 2009.
Both SAT Circular 59 and Circular 698 became effective retroactively on January 1, 2008, and a Public Notice 7 in replacement
of some of the existing rules in Circular 698, which became effective in February 2015.



According to SAT Circular 698, where a non-resident
enterprise transfers the equity interests of a PRC “resident enterprise” indirectly by disposition of the equity interests
of an overseas holding company, the non-resident enterprise, being the transferor, may be subject to PRC enterprise income tax,
if the indirect transfer is considered to be an abusive use of company structure without reasonable commercial purposes. As a result,
gains derived from such Indirect Transfer may be subject to PRC withholding tax at a rate of up to 10%. In addition, the PRC “resident
enterprise” is supposed to provide necessary assistance to support the enforcement of SAT Circular 698.



On February 3, 2015, the SAT issued
a Public Notice Regarding Certain Corporate Income Tax Matters on Indirect Transfer of Properties by Non-Tax Resident Enterprises,
or Public Notice 7. Public Notice 7 has introduced a new tax regime that is significantly different from that under Circular 698.
Public Notice 7 extends its tax jurisdiction to not only indirect transfers set forth under Circular 698 but also transactions
involving transfer of other taxable assets, through the offshore transfer of a foreign intermediate holding company. Public Notice
7 also brings challenges to both the foreign transferor and transferee (or other person who is obligated to pay for the transfer)
of the taxable assets. Where a non-tax resident enterprise conducts an “indirect transfer” by transferring the taxable
assets indirectly by disposing of the equity interests of an overseas holding company, the non-tax resident enterprise being the
transferor, or the transferee, or the PRC entity which directly owned the taxable assets may report to the relevant tax authority
such indirect transfer. Using a “substance over form” principle, the PRC tax authority may re-characterize such indirect
transfer as a direct transfer of the equity interests in the PRC tax resident enterprise and other properties in China. As a result,
gains derived from such indirect transfer may be subject to PRC enterprise income tax, and the transferee or other person who is
obligated to pay for the transfer is obligated to withhold the applicable taxes, currently at a rate of up to 10% for the transfer
of equity interests in a PRC resident enterprise. Nevertheless, Circular 7 has introduced safe harbors for internal group restructurings
and the purchase and sale of equity through a public securities market.





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On October 17, 2017, the State Administration
of Tax issued the Announcement of the State Administration of Taxation on Issues Concerning the Withholding of Non-resident Enterprise
Income Tax at Source, or SAT Bulletin 37, which came into effect on December 1, 2017, as amended on June 15, 2018, and concurrently
abolished Circular 698. The SAT Bulletin 37 further clarifies the practice and procedure of the withholding of non-tax resident
enterprise income tax. Pursuant to Circular 7 and SAT Bulletin 37, both the transferor and the transferee may be subject to penalties
under PRC tax laws if the transferee fails to withhold the taxes and the transferor fails to pay the taxes.



We face uncertainties on the reporting and
consequences on private equity financing transactions, share exchange or other transactions involving the transfer of shares in
our company by investors that are non-PRC resident enterprises, or sale or purchase of shares in other non-PRC resident companies
or other taxable assets by us. Our company and other non-resident enterprises in our group may be subject to filing obligations
or being taxed if our company and other non-resident enterprises in our group are transferors in such transactions, and may be
subject to withholding obligations if our company and other non-resident enterprises in our group are transferees in such transactions,
under Public Notice 7 and/or SAT Bulletin 37. For the transfer of shares in our company by investors that are non-PRC resident
enterprises, our PRC subsidiaries may be requested to assist in the filing under Public Notice 7 and/or SAT Bulletin 37. As a result,
we may be required to expend valuable resources to comply with Public Notice 7 and/or SAT Bulletin 37 or to request the relevant
transferors from whom we purchase taxable assets to comply with these circulars, or to establish that our company and other non-resident
enterprises in our group should not be taxed under these rules and notice, which may have a material adverse effect on our financial
condition and results of operations.



The PRC tax authorities have the discretion
under Public Notice 7 and/or SAT Bulletin 37 to make adjustments to the taxable capital gains based on the difference between the
fair value of the taxable assets transferred and the cost of investment. If the PRC tax authorities make adjustments to the taxable
income of the transactions under Public Notice 7 and/or SAT Bulletin 37, our income tax costs associated with such potential acquisitions
will be increased, which may have an adverse effect on our financial condition and results of operations.



The M&A Rules establish complex procedures for
some acquisitions of Chinese companies by foreign investors, which could make it difficult for us to pursue growth through acquisitions
in China.



The M&A Rules include provisions
that purport to require approval of the Ministry of Commerce for acquisitions by offshore entities established or controlled by
domestic companies, enterprises or natural persons of onshore entities that are related to such domestic companies, enterprises
or natural persons, and prohibit offshore entities from using their foreign-invested subsidiaries in China, or through “other
means,” to circumvent such requirement. As part of our growth strategy, we obtained control over Beijing Jingtian in July 2008
ChinaCache Shouming in October 2018 by entering into contractual arrangements with Beijing Jingtian and its shareholders. We did
not seek the approval of the Ministry of Commerce for this transaction based on the legal advice we obtained from our PRC legal
counsel in those transactions that such approval was unnecessary. However, the M&A Rules also prohibit companies from
using any “other means” to circumvent the approval requirement set forth therein and there is no clear interpretation
as to what constitutes “other means” of circumvention of the requirement under the M&A Rules. The Ministry of Commerce
and other applicable government authorities would therefore have broad discretion in determining whether an acquisition is in violation
of the M&A Rules. If PRC regulatory authorities take a view that is contrary to ours, we could be subject to severe penalties.
In addition, we may in the future grow our business in part by acquiring complementary businesses in China. If we are required
to obtain the approval from the Ministry of Commerce, completion of such transaction may be delayed or even inhibited. Our ability
to expand our business or maintain or expand our market share through future acquisitions would as such be materially and adversely
affected.



In addition, in August 2011 the Ministry
of Commerce issued the Rules of Ministry of Commerce on Implementation of Security Review System of Mergers and Acquisitions
of Domestic Enterprises by Foreign Investors, or the MOFCOM Security Review Rules. The MOFCOM Security Review Rules, effective
from September 1, 2011, require certain merger and acquisition transactions to be subject to merger control review or security
review. The MOFCOM Security Review Rules further provide that, when deciding whether a specific merger or acquisition of a
PRC enterprise by foreign investors is subject to the security review by the Ministry of Commerce, the principle of substance over
form should be applied and foreign investors are prohibited from bypassing the security review requirement by structuring transactions
through proxies, trusts, indirect investments, leases, loans, control through contractual arrangements or offshore transactions.
There is no explicit provision in the MOFCOM Security Review Rules stating that our content and application delivery business
fall into the scope subject to the security review. However, there is a lack of clear statutory interpretation on the implementation
of these new rules, there can be no assurance that the Ministry of Commerce will not apply these rules to our contractual
arrangements with Beijing Blue I.T., Beijing Jingtian and ChinaCache Shouming. If we are found to be in violation of the MOFCOM
Security Review Rules, or fail to obtain any required approvals, the relevant regulatory authorities would have broad discretion
in dealing with such violation, including levying fines, confiscating income, revoking our PRC affiliates’ business or operating
licenses or requiring us to restructure or unwind the relevant ownership structure or operations. Any of these actions could cause
significant disruption to our business operations and may materially and adversely affect our business, financial condition and
results of operations. Further, if the business of any target company that we would like to acquire in the future falls into the
ambit of security review, complying with the requirements of the relevant rules could be prohibitively time consuming or we
may be legally prohibited from acquiring such company either by equity or asset acquisition, capital contribution or through any
contractual arrangement, which could have a material and adverse impact on our ability to expand our business or maintain our market
share.





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PRC regulation of loans and direct investment by offshore
holding companies to PRC entities may delay or prevent us from using the proceeds from a public offering to make loans or additional
capital contributions to our PRC subsidiaries or consolidated variable interest entities, which could materially and adversely
affect our liquidity and our ability to fund and expand our business.



As an offshore holding company, we may make
loans to our PRC subsidiaries, ChinaCache Beijing and Xin Run, or consolidated variable interest entities, or we may make additional
capital contributions to ChinaCache Beijing or Xin Run. Any loans to ChinaCache Beijing or Xin Run or consolidated variable interest
entities are subject to PRC regulations. For example, loans by us to ChinaCache Beijing or Xin Run, each of which is a foreign-invested
enterprise, to finance its activities cannot exceed statutory upper limit and must be filed with the State Administration of Foreign
Exchange through the online filing system of SAFE after the loan agreement is signed and at least three business days prior to
the borrower withdraws any amount from the foreign loan.



We may also decide to finance our operations
in China by means of capital contributions. These capital contributions must be approved by or subsequently filed with the Ministry
of Commerce or its local counterpart. We cannot assure you that we will be able to obtain these government approvals on a timely
basis, if at all, with respect to future capital contributions by us to our PRC subsidiaries. If we fail to receive such approvals,
our ability to use the proceeds from a public offering and to capitalize our PRC operations may be negatively affected, which could
adversely affect our liquidity and our ability to fund and expand our business.



Governmental control of currency conversion may limit
our ability to utilize our revenues.



A significant part of our revenues and expenses
are denominated in Renminbi. Under PRC laws, the Renminbi is currently 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, without the prior approval of the State Administration of Foreign Exchange. Currently,
our PRC subsidiaries, ChinaCache Beijing and Xin Run, may purchase foreign currencies for settlement of current account transactions,
including payments of dividends to us, without the approval of the State Administration of Foreign Exchange. However, foreign exchange
transactions by ChinaCache Beijing or Xin Run under the capital account continue to be subject to significant foreign exchange
controls and require the approval of or need to register or file with PRC governmental authorities, including the State Administration
of Foreign Exchange. In particular, if ChinaCache Beijing or Xin Run borrows foreign currency loans from us or other foreign lenders,
these loans must be filed with the State Administration of Foreign Exchange after the loan agreement is signed and at least three
business days before the borrower draws any amount from the foreign loan, and the accumulative amount of its foreign currency loans
borrowed by ChinaCache Beijing or Xin Run may not exceed a statutory upper limit. If we finance ChinaCache Beijing by means of
additional capital contributions, these capital contributions must be approved by or made post-contribution filing with certain
government authorities. Any existing and future restrictions on currency exchange may affect the ability of our PRC subsidiaries
or consolidated variable interest entities to obtain foreign currencies, limit our ability to meet our foreign currency obligations
or otherwise materially and adversely affect our business.





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In March 2015, SAFE promulgated the
Circular on Reforming the Management Approach Regarding the Foreign Exchange Capital Settlement of Foreign-invested Enterprises,
or SAFE Circular No. 19, which came into effect as of June 1, 2015. SAFE Circular No. 19 provides that, among other
things, a foreign-invested company may convert foreign currency capital in its capital account into RMB on a “at will”
basis. On June 9, 2016, SAFE promulgated the Circular on Reforming and Regulating Policies on the Control over Foreign Exchange
Settlement of Capital Accounts, or SAFE Circular No. 16, to further expand and strengthen such “at will” conversion
reform under SAFE Circular No. 19. SAFE Circular No. 16 provides an integrated standard for conversion of foreign exchange
under capital account items on an “at will” basis which applies to all enterprises registered in the PRC. Pursuant
to SAFE Circular No. 16, in addition to foreign currency capital, enterprises registered in the PRC may also convert their
foreign debts, as well as repatriated funds raised through overseas listing, from foreign currency to RMB on an “at will”
basis. SAFE Circular No. 16 reiterates that the RMB funds so converted shall not be used for the purpose of, whether directly
or indirectly, (i) paying expenditures out of the ordinary course of business or prohibited by laws or regulations; (ii) making
securities investment or other investments (except for banks’ principal-secured products); (iii) extending loans to
non-affiliated enterprises (except as expressly permitted in the business license); and (iv) purchasing non-self-used real
properties (except for real estate enterprises).



On October 23, 2019, SAFE promulgated the
Circular on Further Promoting the Convenience of Cross-border Trade and Investment, or SAFE Circular 28, which came into effect
as of October 23, 2019, to allow the foreign-invested enterprise that are not investment-oriented enterprise (including foreign-funded
investment company, foreign-funded venture capital enterprise and foreign-funded equity investment enterprise) to use the capital
under its capital account to conduct equity investment in PRC, whether by using the foreign currency under the capital account
directly or through settlement of such foreign currency, provided that: (i) there is no violation of the provisions under the
Negative List; and (ii) the investment to be conducted in PRC is true and compliant with Laws.



Fluctuations in exchange rates could have a material adverse
effect on our results of operations and the value of your investment.



The conversion of Renminbi into foreign
currencies, including U.S. dollars, is based on rates set by the People’s Bank of China. The PRC government allowed the Renminbi
to appreciate by more than 20% against the U.S. dollar between July 2005 and July 2008. Between July 2008 and June 2010,
this appreciation was halted and the exchange rate between the Renminbi and the U.S. dollar remained within a narrow band. Since
June 2010, the Renminbi has fluctuated against the U.S. dollar, at times significantly and unpredictably, and in recent years
the RMB has depreciated significantly against the U.S. dollar. Since October 1, 2016, Renminbi has joined the International Monetary
Fund (IMF)’s basket of currencies that make up the Special Drawing Right (SDR), along with the U.S. dollar, the Euro, the
Japanese yen and the British pound. In the fourth quarter of 2016, Renminbi has depreciated significantly in the backdrop of a
surging U.S. dollar and persistent capital outflows of China. With the development of the foreign exchange market and progress
towards interest rate liberalization and Renminbi internationalization, the PRC government may in the future announce further changes
to the exchange rate system and there is no guarantee that Renminbi will not appreciate or depreciate significantly in value against
the U.S. dollar in the future. It is difficult to predict how market forces or PRC or U.S. government policy may impact the exchange
rate between the RMB and the U.S. dollar in the future.



To the extent that we need to convert U.S.
dollars into RMB for capital expenditures and working capital and other business purposes, appreciation of the RMB against the
U.S. dollar would have an adverse effect on the RMB amount we would receive from the conversion. Conversely, if we decide to convert
RMB into U.S. dollars for the purpose of making payments for dividends on our ordinary shares or ADSs, strategic acquisitions or
investments or other business purposes, appreciation of the U.S. dollar against the RMB would have a negative effect on the U.S.
dollar amount available to us.



Very limited hedging transactions are available
in China to reduce our exposure to exchange rate fluctuations. To date, we have not entered into any hedging transactions in an
effort to reduce our exposure to foreign currency exchange risk. While we may decide to enter into hedging transactions in the
future, the availability and effectiveness of these hedging transactions may be limited and we may not be able to successfully
hedge our exposure at all. In addition, our currency exchange losses may be magnified by Chinese exchange control regulations that
restrict our ability to convert Renminbi into foreign currency.



PRC regulations relating to the establishment of offshore
special purpose companies by PRC residents may subject our PRC resident beneficial owners to personal liability and limit our ability
to acquire PRC companies or to inject capital into our PRC subsidiary, limit our PRC subsidiary’s ability to distribute profits
to us, or otherwise materially and adversely affect us.



The SAFE promulgated the Circular on Relevant
Issues Relating to Domestic Resident’s Investment and Financing and Roundtrip Investment through Special Purpose Vehicles,
or SAFE Circular 37, in July 2014 that requires PRC residents or entities to register with SAFE or its local branch in connection
with their establishment or control of an offshore entity established for the purpose of overseas investment or financing. In addition,
such PRC residents or entities must update their SAFE registrations when the offshore special purpose vehicle undergoes material
events relating to any change of basic information (including change of such PRC citizens or residents, name and operation term),
increases or decreases in investment amount, transfers or exchanges of shares, or mergers or divisions.





29









SAFE Circular 37 is issued to replace the
Notice on Relevant Issues Concerning Foreign Exchange Administration for PRC Residents Engaging in Financing and Roundtrip Investments
via Overseas Special Purpose Vehicles, or SAFE Circular 75.



We are aware that our PRC resident beneficial
owners subject to these SAFE registration requirements have registered with the Beijing SAFE branch and will amend the registration
to reflect the recent changes to our corporate structure.  However, we cannot assure you that our current and future beneficial
owners who are PRC residents will continue to comply with Circular 37; nor can we assure you that there will not be further filing
or registration requirements imposed by the PRC government concerning ownership in foreign companies of PRC residents. The failure
or inability of our PRC resident beneficial owners to make any required registrations or comply with these requirements may subject
such beneficial owners to fines and legal sanctions and may also limit our ability to contribute additional capital into or provide
loans to ChinaCache Beijing and Xin Run, and consolidated variable interest entities, limit ChinaCache Beijing’s and Xin
Run’s ability to pay dividends or otherwise distribute profits to us, or otherwise materially and adversely affect us.



Failure to comply with PRC regulations regarding the registration
requirements for stock incentive plans may subject the PRC plan participants or us to fines and other legal or administrative sanctions.



Under the SAFE regulations, PRC residents
who participate in an employee stock ownership plan or stock option plan in an overseas publicly-listed company are required to
register with SAFE or its local branch and complete certain other procedures. Participants of a stock incentive plan who are PRC
residents must retain a qualified PRC agent, which could be a PRC subsidiary of such overseas publicly listed company, to conduct
the SAFE registration and other procedures with respect to the stock incentive plan on behalf of these participants. Such participants
must also retain an overseas entrusted institution to handle matters in connection with their exercise or sale of stock options.
In addition, the PRC agent is required to amend the SAFE registration with respect to the stock incentive plan if there is any
material change to the stock incentive plan, the PRC agent or the overseas entrusted institution or other material changes.



We and our PRC resident employees who participate
in our stock incentive plan are subject to these regulations. We have registered our 2007 Stock Incentive Plan, 2008 Stock Incentive
Plan, 2010 Stock Incentive Plan and 2011 Share Incentive Plan with Beijing branch of SAFE. If we or our PRC resident option grantees
fail to comply with these regulations, we or our PRC resident option grantees may be subject to fines and other legal or administrative
sanctions. See “Item 4. Information on the Company— B. Business Overview — Regulation—Regulations on Employee
Stock Options Granted by Listed Companies.”



Our ability to transfer ownership of the buildings of
our cloud infrastructure may be restricted if we fail to obtain requisite governmental approvals.



In March 2013, we acquired land use
right in Tianzhu Comprehensive Bonded Zone in Beijing, upon which we plan to partner with our clients to construct cloud infrastructure.
We have entered into agreements with two clients, pursuant to which they agreed to purchase part of the cloud infrastructure from
us. The land we acquired for the development of our cloud infrastructure is categorized as land for industrial use and hence if
we need to sell other buildings in the future, the transfer of ownership of the buildings constructed on such land, along with
relevant land use rights, is subject to the prior approval by multiple administrative authorities. If we fail to obtain such approvals,
our ability to transfer ownership of the buildings in our cloud infrastructure to potential investors or clients will be restricted
and our financial condition may thereby be adversely affected. On May 23, 2019, Beijing municipal government issued
two acts “Act No 216” and “Act No 217” forbidding cutting apart of the property right for industrial use,
which means all the buildings registered on the same land use certificate must be sold at one time. These new acts have negatively
impacted the liquidity of the IDC buildings. See “Item 4. Information on the Company — B. Business Overview —
Regulation — Regulations on Transfer of Real Estate Properties”.





30









Risks Related to Our ADSs



The market price for our ADSs has fluctuated and may continue
to be volatile.



The market price for our ADSs has fluctuated
significantly since we first listed our ADSs. The market prices of our ADSs have ranged from US$1.06 to US$1.48 per ADS in 2018.



The market price for our ADSs may be highly
volatile and subject to wide fluctuations in response to factors including the following:



| | · | actual or anticipated fluctuations in our quarterly results of operations;
| | - | --------------------------------------------------------------------------





| | · | changes in financial estimates by securities research analysts;
| | - | ---------------------------------------------------------------





| | · | announcements by us or our competitors of acquisitions, strategic partnerships, joint ventures or capital commitments;
| | - | ----------------------------------------------------------------------------------------------------------------------





| | · | changes in the operating performance or market valuations of other internet content and application delivery service businesses or other internet-related businesses;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------





| | · | addition or departure of key personnel;
| | - | ---------------------------------------





| | · | fluctuations of exchange rates between the RMB and U.S. dollar;
| | - | ---------------------------------------------------------------





| | · | intellectual property litigation;
| | - | ---------------------------------





| | · | general economic or political conditions in China and the U.S.;
| | - | ---------------------------------------------------------------





| | · | changes in governmental regulations; and
| | - | ----------------------------------------





| | · | detrimental negative publicity about us, our products and services, our financial results or our compliance with applicable law.
| | - | --------------------------------------------------------------------------------------------------------------------------------



In addition, the stock market in general,
and the market prices for internet-related companies and companies with operations in China in particular, have experienced volatility
that often has been unrelated to the operating performance of such companies. The securities of some China-based companies that
have listed their securities in the U.S. have experienced significant volatility since their initial public offerings, including,
in some cases, substantial price declines in the trading prices of their securities. The trading performances of these Chinese
companies’ securities after their offerings may affect the attitudes of investors toward Chinese companies listed in the
U.S., which consequently may impact the trading performance of our ADSs, regardless of our actual operating performance. In addition,
any negative news or perceptions about inadequate corporate governance practices or fraudulent accounting, corporate structure
or other matters of other Chinese companies may also negatively affect the attitudes of investors towards Chinese companies in
general, including us, regardless of whether we have conducted any inappropriate activities. Further, the global financial crisis
and the ensuing economic recessions in many countries have contributed and may continue to contribute to extreme volatility in
the global stock markets. These broad market and industry fluctuations may adversely affect operating performance. Volatility or
a lack of positive performance in our ADS price may also adversely affect our ability to retain key employees, most of whom have
been granted options or other equity incentives.



Substantial future sales of our ADSs in the public market,
or the perception that these sales could occur, could cause the price of our ADSs to decline.



Additional sales of our ordinary shares
in the public market, or the perception that these sales could occur, could cause the market price of our ADSs to decline. All
of our shares are freely transferable without restriction or additional registration under the Securities Act of 1933, as amended,
or the Securities Act. If any existing shareholder or shareholders sell a substantial amount of ADSs, the prevailing market price
for our ADSs could be adversely affected. Such sales also might make it more difficult for us to sell equity or equity-related
securities in the future at a time and price that we deem appropriate.





31









We have been named as a defendant in a putative shareholder
class action lawsuit that could have a material adverse impact on our business, financial condition, results of operation, cash
flows and reputation.



We will have to defend against the shareholder class
action lawsuit described in “Item 8. Financial Information—A. Consolidated Statements and Other Financial Information—Legal
Proceedings—Litigation,” including any appeals of such lawsuit should our initial defense be unsuccessful. We may become
subject to similar lawsuits from time to time. In the event that our initial defense of these lawsuits is unsuccessful, there can
be no assurance that we will prevail in any appeal. Any adverse outcome of these cases, including any plaintiff’s appeal
of a judgment in these lawsuits, could have a material adverse effect on our business, financial condition, results of operation,
cash flows and reputation. In addition, there can be no assurance that our insurance carriers will cover all or part of the defense
costs, or any liabilities that may arise from these matters. The litigation process may utilize a significant portion of our cash
resources and divert management’s attention from the day-to-day operations of our company, all of which could harm our business.
We also may be subject to claims for indemnification related to these matters, and we cannot predict the impact that indemnification
claims may have on our business or financial results.



We are a “foreign private issuer,” and have
disclosure obligations that are different from those of U.S. domestic reporting companies; as a result, you should not expect to
receive the same information about us at the same time when a U.S. domestic reporting company provides the information required
to be disclosed.



We are a foreign private issuer and, as
a result, we are not subject to the same requirements that are imposed upon U.S. domestic issuers by the U.S. Securities and Exchange
Commission, or SEC. Under the Securities Exchange Act of 1934, or the Exchange Act, we are subject to reporting obligations that,
to some extent, are more lenient and less frequent than those of U.S. domestic reporting companies. For example, we are not required
to issue quarterly reports or proxy statements. We must file our annual report within four months after the end of our fiscal year,
which is December 31 of each year. We are not required to disclose detailed individual executive compensation information
that is required to be disclosed by U.S. domestic issuers. Further, our directors and executive officers are not required to report
equity holdings under Section 16 of the Securities Act and are not subject to the insider short-swing profit disclosure and
recovery regime. As a foreign private issuer, we are also exempt from the requirements of Regulation FD (Fair Disclosure) which,
generally, are meant to ensure that select groups of investors are not privy to specific information about an issuer before other
investors. We are, however, still subject to the anti-fraud and anti-manipulation rules of the SEC, such as Rule 10b-5
under the Exchange Act. Since many of the disclosure obligations imposed on us as a foreign private issuer are different than those
imposed on U.S. domestic reporting companies, our shareholders should not expect to receive the same information about us and at
the same time as the information received from, or provided by, U.S. domestic reporting companies.



We may be classified as a passive foreign investment company
for U.S. federal income tax purposes, which could result in adverse U.S. federal income tax consequences to U.S. holders of our
ADSs or ordinary shares.



Depending upon the value of our assets,
the market value of our ADSs and ordinary shares and the nature of our assets and income, we could be classified
as a passive foreign investment company (a “PFIC”), for U.S. federal income tax purposes. Based on our income and assets
and the value of our ADSs and ordinary shares, we do not believe that we were a PFIC for the taxable year ended December 31,
2018 and we do not expect to be a PFIC for the current taxable year. However, we can give no assurances with respect to our PFIC
status for past or future taxable years as the PFIC determination is inherently factual and the application of the PFIC rules is
subject to ambiguity in several aspects.



A non-U.S. corporation, such as our company,
will be classified as a PFIC for any taxable year if either (i) at least 75% of its gross income for the taxable year is passive
income or (ii) at least 50% of the value of its assets (based on the average quarterly value of its assets during the taxable
year) is attributable to assets that produce or are held for the production of passive income.



Although the law in this regard is not entirely
clear, we treat Beijing Blue I.T., Beijing Jingtian and ChinaCache Shouming as being owned by us for U.S. federal income tax purposes
because we control their management decisions and we are entitled to substantially all of their economic benefits, and, as a result,
we consolidate these entities’ results of operations in our consolidated U.S. GAAP financial statements. If it were determined,
however, that we are not the owner of Beijing Blue I.T., Beijing Jingtian and ChinaCache Shouming for U.S. federal income tax purposes,
we would likely be treated as a PFIC for our current taxable year and any subsequent taxable year.





32









Because of the uncertainties in the application
of the relevant rules and because PFIC status is a factual determination made annually after the close of each taxable year
on the basis of the composition of our income and the value of our active versus passive assets, there can be no assurance that
we will not be a PFIC for the current year or any subsequent taxable year. The overall level of our passive assets will be affected
by how, and how quickly, we spend our liquid assets and the cash raised in any transaction. Under circumstances where revenues
from activities that produce royalty income significantly increase relative to our revenues from activities that produce non-passive
income or where we determine not to deploy significant amounts of cash in our operations or for other active purposes, our risk
of becoming classified as a PFIC may substantially increase.



If we were to be or become classified as
a PFIC, a U.S. Holder (as defined in “Item 10. Additional Information— E. Taxation—U.S. Federal Income Tax Considerations—General”)
may incur significantly increased U.S. income tax on gain recognized on the sale or other disposition of the ADSs or ordinary shares
and on the receipt of distributions on the ADSs or ordinary shares to the extent such gain or distribution is treated as an “excess
distribution” under the U.S. federal income tax rules. Further, a U.S. Holder will generally be treated as holding an equity
interest in a PFIC in the first taxable year of the U.S. Holder’s holding period in which we become a PFIC and subsequent
taxable years even if, we, in fact, cease to be a PFIC in subsequent taxable years. You are urged to consult your tax advisor concerning
the U.S. federal income tax consequences of acquiring, holding and disposing of ADSs or ordinary shares if we are or become classified
as a PFIC. For more information, see “Item 10. Additional Information— E. Taxation—U.S. Federal Income Tax Considerations—Passive
Foreign Investment Company Considerations.”



Holders of our ADSs may not be able to participate in
rights offerings and may experience dilution of their holdings and may not receive cash dividends if it is impractical to make
them available.



We may from time to time distribute rights
to our shareholders, including rights to acquire our securities. Under the deposit agreement for the ADSs, the depositary will
not offer those rights to ADS holders unless both the rights and the underlying securities to be distributed to ADS holders are
either registered under the Securities Act or exempt from registration under the Securities Act with respect to all holders of
ADSs. We are under no obligation to file a registration statement with respect to any such rights or underlying securities or to
endeavor to cause such a registration statement to be declared effective. In addition, we may not be able to take advantage of
any exemptions from registration under the Securities Act. Accordingly, holders of our ADSs may be unable to participate in our
rights offerings and may experience dilution in their holdings as a result.



In addition, the depositary of our ADSs
has agreed to pay to the holders of ADSs the cash dividends or other distributions it or the custodian receives on our ordinary
shares or other deposited securities after deducting its fees and expenses. The holders of our ADSs will receive these distributions
in proportion to the number of ordinary shares their ADSs represent. However, the depositary may, at its discretion, decide that
it is inequitable or impractical to make a distribution available to any holders of ADSs. For example, the depositary may determine
that it is not practicable to distribute certain property through the mail, or that the value of certain distributions may be less
than the cost of mailing them. In these cases, the depositary may decide not to distribute such property and the holders of our
ADSs will not receive such distribution.



Holders of our ADSs may be subject to limitations on transfer
of their ADSs.



The ADSs represented by the ADRs are transferable
on the books of the depositary. However, the depositary may close its transfer books at any time or from time to time when it deems
expedient in connection with the performance of its duties. In addition, the depositary may refuse to deliver, transfer or register
transfers of ADSs generally when our books or the books of the depositary are closed, or at any time if we or the depositary deem
it advisable to do so because of any requirement of law or of any government or governmental body, or under any provision of the
deposit agreement, or for any other reason.





33







Holders of our ADSs may face difficulties in protecting
their interests, and their ability to protect their rights through the U.S. federal courts may be limited, because we are incorporated
under Cayman Islands law, conduct a significant part of our operations in China and a majority of our officers and directors reside
outside the U.S.



We are incorporated in the Cayman Islands
and substantially all of our assets are located outside of the U.S. We conduct a significant part of our operations in China through
our wholly-owned subsidiaries and VIEs in China. The majority of our officers and directors reside outside the U.S. and a substantial
portion of the assets of those persons are located outside of the U.S. As a result, it may be difficult for the holders of our
ADSs to bring an action against us or against these individuals in the Cayman Islands or in China in the event that they believe
that their rights have been infringed under the securities laws or otherwise. Even if the holders of our ADSs are successful in
bringing an action of this kind, the laws of the Cayman Islands and of China may render the holders of our ADSs unable to enforce
a judgment against our assets or the assets of our directors and officers. In addition, there is uncertainty as to whether the
courts of the Cayman Islands or the PRC would recognize or enforce judgments of U.S. courts against us or such persons predicated
upon the civil liability provisions of the securities laws of the U.S. or any state, and it is uncertain whether such Cayman Islands
or PRC courts would be competent to hear original actions brought in the Cayman Islands or the PRC against us or such persons predicated
upon the securities laws of the U.S. or any state.



Our corporate affairs are governed by our
memorandum and articles of association and by the Companies Law (as amended) and common law of the Cayman Islands. The rights of
shareholders to take legal action against our directors and us, actions by minority shareholders and the fiduciary responsibilities
of our directors to us under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. The common
law of the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands as well as from
English common law, which has persuasive, but not binding, authority on a court in the Cayman Islands. The rights of our shareholders
and the fiduciary responsibilities of our directors under Cayman Islands law are not as clearly established as they would be under
statutes or judicial precedents in the U.S. In particular, the Cayman Islands has a less developed body of securities laws as compared
to the U.S., and provides significantly less protection to investors. In addition, Cayman Islands companies may not have standing
to initiate a shareholder derivative action before the federal courts of the U.S.



As a result of all of the above, our public
shareholders may have more difficulty in protecting their interests through actions against our management, directors or major
shareholders than they would as shareholders of a public company of the U.S.



Our memorandum and articles of association contain anti-takeover
provisions that could adversely affect the rights of holders of our ordinary shares and ADSs.



Our memorandum and articles of association
contain certain provisions that could limit the ability of others to acquire control of our company, including a provision that
grants authority to our board of directors to establish from time to time one or more series of preferred shares without action
by our shareholders and to determine, with respect to any series of preferred shares, the terms and rights of that series. The
provisions could have the effect of depriving our shareholders of the opportunity to sell their shares at a premium over the prevailing
market price by discouraging third parties from seeking to obtain control of our company in a tender offer or similar transactions.



We incur increased costs as a result of being a public
company.



As a public company, we incur significant
accounting, legal and other expenses that we did not incur as a private company. The Sarbanes-Oxley Act, as well as new rules subsequently
implemented by the SEC have detailed requirements concerning corporate governance practices of public companies
including Section 404 of the Sarbanes-Oxley Act relating to internal controls over financial reporting. These rules and
regulations have increased our director and officer liability insurance, accounting, legal and financial compliance costs and have
made certain corporate activities more time-consuming and costly. In addition, we incur additional costs associated with our public
company reporting requirements. We are currently evaluating and monitoring developments with respect to these rules, and we cannot
predict or estimate the amount of additional costs we may incur or the timing of such costs.





34







If securities or industry analysts do not actively follow
our business or if they publish unfavorable research about our business, our ADS price and trading volume could decline.



The trading market for our ADSs depends
in part on the research and reports that securities or industry analysts publish about us or our business. If one or more of the
analysts who covers us downgrades our ADSs or publishes unfavorable research about our business, our ADS price would likely decline.
If one or more of these analysts ceases coverage of our company or fails to publish reports on us regularly, demand for our ADSs
could decrease, which could cause our ADS price and trading volume to decline.



|ITEM 4. | INFORMATION ON THE COMPANY
|------- | --------------------------



|A. | History and Development of the Company
|-- | --------------------------------------



We commenced operations through Beijing
Blue I.T., a company incorporated in China in June 1998. In June 2005, we incorporated ChinaCache International Holdings
Ltd., or ChinaCache Holdings, under the laws of the Cayman Islands to become our offshore holding company through a series of corporate
restructuring transactions.



In August 2005, we established our
wholly-owned PRC subsidiary, ChinaCache Network Technology (Beijing) Limited, or ChinaCache Beijing.



In August 2007, we incorporated ChinaCache
North America, Inc., or ChinaCache U.S., a wholly-owned subsidiary of ChinaCache Holdings, in California, the U.S.



In July 2008, we obtained control over
Beijing Jingtian, through contractual arrangements.



In October 2010, we completed our initial
public offering and our ADSs commenced trading on the Nasdaq Global Market under the symbol “CCIH”.



In July 2011, we established Xin Run,
a PRC-incorporated company, primarily for the purpose of cloud infrastructure business.



In November 2012, we transferred our
equity interests in ChinaCache Beijing and Xin Run to ChinaCache Networks (Hong Kong) Limited, or ChinaCache Hong Kong, a wholly
owned subsidiary of ours.



In November 2013, we established ChinaCache
Ireland Limited, or ChinaCache Ireland, a wholly owned subsidiary of ChinaCache Hong Kong.



In January 2014, our ADSs were transferred
to and listed on the Nasdaq Global Select Market.



In March 2014, we issued and sold an
aggregate of 53,855,569 ordinary shares, represented by 3,365,973 ADSs, to a group of institutional investors affiliated with Wellington
Management Company, LLP for an aggregate purchase price of approximately US$55.0 million.



In March 2014, we repurchased an aggregate
of 28,960,922 ordinary shares of us from certain of our existing shareholders for an aggregate purchase price of approximately
US$29.6 million.



In August 2014, we established (i) Beijing
Shouming Technology Co., Limited, or Beijing Shouming, (ii) Beijing Zhao Du Technology Co., Limited, or Beijing Zhao Du and
(iii) Beijing Shuoge Technology Co., Limited, or Beijing Shuoge, each a 100% subsidiary of Xin Run. In July 2017, Xin
Run transferred all of its equity interests in Beijing Zhao Du to a subsidiary of BFSMC. However, due to the disputes disclosed
in Note [26], the transfer is not yet closed.



In January 2015, ChinaCache Ireland
established a branch office in London. In March 2016, we incorporated ChinaCache Networks (UK) Limited, or ChinaCache UK,
in the United Kingdom and are in the process of transferring our Ireland operations to ChinaCache UK.





35







In September 2015, Xin Run increased
its registered capital by US$0.2 million, which was subscribed by Tianjin Shuishan Technology Co., Ltd, or Tianjin Shuishan, a
PRC company owned by Mr. Song Wang and Ms. Jean Xiaohong Kou. As a result, Xin Run was converted from a wholly foreign-owned
enterprise to a sino-foreign joint venture.



In August 2016, we incorporated ChinaCache
Assets LLC, or CCAL, a wholly owned subsidiary of ChinaCache U.S., in California, the U.S.



In June 2016, ChinaCache Assets LLC, or CCAL purchased two stand-along office condominiums at a price of
US$3.45 million, and sold above-mentioned properties in September 2019 for US$4.8
million.





In October 2018, we obtained control over
ChinaCache Shouming, through contractual arrangements.





In February 2019,the ChinaCache Ireland Limited is dissolved.





Our headquarters are located at Section A,
Building 3, Dian Tong Creative Square, No. 7 Jiuxianqiao  North Road, Chaoyang District, Beijing, PRC. Our telephone
number at this address is +86 10 6408 5088. Beijing Blue I.T. currently has 13 branch offices in 13 cities in China, namely, Beijing,
Tianjin, Shenyang, Harbin, Shanghai, Nanjing, Guangzhou, Shenzhen, Wuhan, Chongqing, Chengdu, Xi’an and Taiyuan. ChinaCache
Beijing currently has two branch offices in Tianjin, and Xin Run currently has one branch office in Tianjin. In addition to ChinaCache
U.S., ChinaCache UK and CCAL, we have three other subsidiaries outside of mainland China, namely ChinaCache Hong Kong Limited,
established in Hong Kong in April 2008, Metasequoia Investment Limited, established in the British Virgin Islands in March 2012,
and JNet Holdings Limited, established in the British Virgin Islands in September 2007. Our agent for service of process in
the U.S. in connection with our registration statement on Form F-1 for our initial public offering is Law Debenture Corporate
Services Inc., located at 400 Madison Avenue, 4th Floor, New York, New York 10017.



|B. | Business Overview
|-- | -----------------



We provide a portfolio of services and solutions
to businesses, government agencies and other enterprises to enhance the reliability and scalability of their online services and
applications and improve end-user experience. Our nationwide service platform, which consists of our network, servers and proprietary
intelligent software, is designed to handle planned and unplanned peaks without significant upfront and ongoing capital outlay
and other investments on the part of our customers.



We began providing content and application
delivery services in China in 2000 and were the first non-carrier company to be licensed by MIIT to provide content and application
delivery services throughout China. As an early mover, we expanded our business along with the internet market growth in China
and have acquired extensive knowledge about the internet infrastructure and telecommunications environment in China. We conduct
our businesses internationally, covering mainland China, other Asian countries, U.S and Europe and our revenues are derived from
all across the above regions. Building on our knowledge and experience, we have developed a portfolio of services and solutions
designed to address complex and unique issues arising from internet infrastructure and to meet the specific needs of the company’s
customers.



As a carrier-neutral service provider, our
network in China is interconnected with those operated by all major telecommunications carriers and local internet service providers
in mainland China. We deploy servers and nodes across networks covering most regions in China and we use a transmission backbone
that connects our nodes and data centers, thereby optimizing our content and applications delivery performance and reliability.
Our wide range of services makes us a top choice for customers requiring content and application delivery total solutions in different
regions in China. We believe that our robust nationwide service platform, which is the result of our significant investments of
capital, time and human resources, is not easy to replicate and provides us with a competitive advantage.



Our Services and Solutions



We provide a portfolio of content and application
delivery total solutions and solutions tailored to our customers’ needs to improve the performance and reliability of their
online services and applications, without significant upfront and ongoing capital outlay and other investments on the part of our
customers. In 2012, we further enhanced the technical sophistication of our content and application delivery total solutions and
rebranded our content delivery network services into “content-aware network service”, which integrates telecommunications
network with internet applications. Our content-aware network service is device-aware, network-aware and application-aware. Our
content-aware network service is device-aware in the sense that we are able to identify each end user device and optimize data
for consumption on such user’s iOS or Android mobile device. Our content-aware network service is network-aware in that its
capabilities enable us to determine what kind of network online content is going through, whether it is a fixed or mobile network,
and whether data is traveling on a 2G, 3G and 4G. Our content-aware network service is application-aware in that through this service
we can provide network services tailored to specific applications such as e-commerce and online video, which require different
capabilities and resources.



36







Rich Media Streaming Services



The live streaming of media files to end-users
has become an important web application. When media files are streamed to an end-user, the files are not stored on the end-user’s
computer, but are played by the end-user’s media player software. We offer a portfolio of rich media streaming services to
improve the transmission efficiency of media files, significantly offloading the pressure at the origin server and improving the
quality of end-user experience. We combine peer-to-peer technology with streaming technology by facilitating data sharing during
the transmission of live streaming content. Through our Rich Media Streaming services, we are able to provide nearly all types
of streaming acceleration services comparing to major market players.



Guaranteed Application Services



Our Guaranteed Application Services are
designed for websites that incorporate applications that have dynamic features, such as on-line booking and ordering, real-time
stock quotes and on-line surveys. Utilizing our widely deployed servers and reliable and legally compliant carrier network, our
services enable interactions between end-users and the origin servers to bypass public network congestion. As a result, we ensure
reliable and efficient application processing and significantly improve end-user experience.



Managed Internet Data Services



Our Managed Internet Data Services are a
 “one-stop-shop” services designed to meet customers’ needs for content and application delivery, network infrastructure
and network security. Managed Internet Data Services are based on a combination of the traditional internet data center services
and our high performance content and application delivery total solutions. The offerings allow us to expand the reach of our content
and application delivery total solutions to customers who wish to take advantage of locating their content and applications in
secure, high-performance facilities. To our best financial advantage, we primarily use third-party facilities for hosting customers’
network and other equipment with redundant power, environmental controls and security protection. In addition, we distinguish ourselves
from conventional internet data services providers by bundling our high performance content and application delivery total solutions
and internet data management services. Customers using our Managed Internet Data Services include enterprises, internet companies,
media and entertainment companies, government agencies and financial institution.



CDN Security Solution



ChinaCache CDN Security Solution is an online
security service that is seamlessly integrated with global CDN network. It is designed to prevent or reduce the ever-increasing
security attacks against online businesses and origin data including DDoS attacks, web application attacks, web crawler attacks,
malicious access and more. In addition, ChinaCache offers value-added services including portal access, attack reports, customized
rules, attack analysis, and flexible storage expansion.



In 2018, we partnered with a security solution
provider to develop a security module for CDN, which enables DDoS protection, web application attack protection, and advanced access
control on Layer 3-7 on the CDN network. The security solution offers end-to-end protection from end-users’ browsers to origin
data while ensuring high performance, high availability, and high level of security.



The solution has been adopted by government
agencies and large enterprises and prevented hundreds of thousands of attacks for our clients. In the near future, ChinaCache can
provide powerful and efficient network security services for more industries, such as gaming, manufacturing, and aviation.



High-speed file transfer service



High-speed file transfer service is a highly
efficient file transfer service jointly launched by ChinaCache and our partner, specifically designed to optimize performance for
large-file, long-distance file transfer scenarios. With a proprietary protocol, customers can migrate data from around the world
more efficiently, regardless of file size, form, distance, and network conditions.



The adaptive rate control technology and
efficient transfer system enable 95% bandwidth utilization. The SDK, user management, task management, configuration management
functions, as well as excellent cross-platform compatibility and security features, can satisfy needs under different applications
in various industries, significantly improves work efficiency and saves time for clients.





37







Internet Exchange



In 2018, ChinaCache built an interconnection
and peering product line based on CHN-IX, its Internet Exchange platform.  ChinaCache’s third major product line in
addition to CDN services and Atecsys data center. The main goal of the interconnection and peering product line is to:



1.       Provide
Internet Exchange services for Chinese internet enterprises.



2.       Address
the connectivity and peering issues caused by hybrid cloud architecture.



3.       Introduce
new internet network structure to better serve the emerging internet applications in Big Data, Artificial Intelligence, and the
Internet of Things.



ChinaCache has built three Internet Exchange
centers in Beijing, Shanghai, and Guangzhou, covering services in more than a dozen major cities in China. In 2018, CHN-IX has
become the top Internet Exchange center in China with more than 200G traffic being exchanged, a 1000% growth comparing to 2017.
Our partners more than doubled to include some of the top Internet Content Providers in China, including Alibaba, Tencent, Baidu,
and JD, and major public cloud providers including Alibaba Cloud, Tencent Cloud, and Baidu Cloud. In addition, small-to-medium
sized Internet Services Providers and medium-to-large sized Internet Data Center providers are also connected to the CHN-IX platform.



The rapid growth of CHN-IX is largely attributed
to the development of emerging technologies and services, such as Big Data, Artificial Intelligence, and the Internet of Things.
In order to provide customers with a more advanced and better experience, internet companies urgently need an efficient and cost-effective
interconnection and peering solution, which can be provided through Internet Exchange platforms. CHN-IX will play a more vital
role in China’s internet structure as emerging internet applications continue with rapid growth.



In addition, ChinaCache developed a hybrid
cloud interconnection with peering solution and value-added services including optimized content distribution for our partners,
helping them improve interconnection efficiency and reduce operation costs.



In 2019, ChinaCache will invest more in
the interconnection and peering product line on platform operations, solutions development, and Internet Exchange Points establishment,
in an effort to provide our partners with a carrier-neutral and resourceful third-party interconnection and peering services.



Value-added Services



We also offer a wide variety
of value-added services, which include the following:



| | · | Geo-Content Acceleration service. Geo-Content Acceleration service enables websites to automatically provide content to end-users corresponding to each end-user’s specific geographic location.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Performance Evaluation Module. Performance Evaluation Module allows our customers to monitor their own websites on a real-time basis and to measure the effect of our services.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Scalable Service Routing service. Scalable Service Routing service provides domain name server resolution and global load balancing for multiple servers located across different regions to address the complex and often-unreliable network issues in China.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Link Anti-Hijack service. Link Anti-Hijack service helps to prevent unauthorized links to content on our customers’ websites.
| | - | -----------------------------------------------------------------------------------------------------------------------------



| | · | NetStorage service. NetStorage service provides high performance data storage over the internet, supported by our network infrastructure with multi-level back-ups and security measures.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | User Behavior Analysis service. User Behavior Analysis service clusters and evaluates the targeted audiences’ specific online behavior to assist our customers to better engage the visitors to their websites and improve the interactions between the websites and their visitors.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Website Performance Evaluation service. Website Performance Evaluation service assists customers to identify popular web content and products and determine the geographical locations of their targeted audiences so as to improve the effectiveness of their online marketing.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | All-around Application Acceleration Solution. Our network service portfolio has expanded from external web site acceleration to the enterprise’s intranet connection, especially for multi-national companies that have globally distributed data hubs. Our service offering provides both secure and accelerated connections between these data hubs.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Cloud Extension Solution. Cloud Extension is developed for cloud hosting service providers to improve their service quality and end user experience. Our Cloud Extension Solution can provide security for cloud applications, and we are able to protect our customers’ data centers through our approximately 20,000 edge servers.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





38







Cloud Infrastructure Development









In early 2013, we acquired land use right
in Tianzhu Comprehensive Bonded Zone in Beijing and intended to develop cloud infrastructure in collaboration with our clients.



China is rapidly adopting a digital lifestyle
and Cloud and new data-intensive technologies, such as AI and big data analytics, are fanning demand for increasing Internet data
center capacity and related services. With ten internet data centers in Beijing hosting capacity for 12,400 racks, a catalyst for
the Company to offer enhance packaged CDN/IDC product services, Xin Run is growing quickly and capturing wide-spread demand from
government agencies and businesses, including several leading Internet and Cloud service enterprises. Against this backdrop, we
see a compelling value proposition as we offer customers total solution services, comprised of our Internet data centers, Cloud
hosting and Internet exchange centers and our extensive content delivery network. We believe this three-layered structured network
will provide an integrated and broad-base of operations from which we can capitalize on our strengths and deliver sustained shareholder
value.



In December 2015, we entered into definitive
agreements for Xin Run, which owns and operates ChinaCache’s Atecsys Cloud Data Center, or Atecsys, for investors to acquire
60% of Xin Run’s equity interest for a total consideration of RMB375 million. The transaction valued Xin Run’s shareholders’
equity (pre-money) at approximately RMB250 million. The agreements were later terminated. As an alternative to the proposed
transaction, on March 6, 2017, the Company announced that it has entered into definitive agreements to sell 79.0% equity interest
of Xin Run to Tianjin Shuishan, Shanghai Qiaoyong Equity Investment Fund Management Co., Ltd., or Shanghai Qiaoyong, and Tianjin
Dingsheng Zhida Technology Co., Ltd., or Tianjin Dingsheng, for a total consideration of RMB221.2 million in cash before fees
and expenses. The newly proposed transaction valued Xin Run’s shareholders’ equity by an independent third-party firm
at approximately RMB280 million. Pursuant to the agreements, Tianjin Shuishan, Shanghai Qiaoyong and Tianjin Dingsheng agreed to
purchase 47.67%, 26.33% and 5.0%, respectively, of the equity interest in Xin Run. The Company’s strategic decision to terminate
the Agreement was approved by board in December 2017 in recognition of the perceived value of the assets in light of increasing
market demand for Internet data center services and the belief that Xin Run can effectively be leveraged as part of the Company’s
offering package to customers, thus better positioning the Company for long-term growth.



In the year of 2019, the management decided
to sell the ownership of the residual IDC building to get enough operational cash flow, focusing on the operation with asset-light
strategy. Several potential buyers finished their on-site due diligences. The Company will submit the best offer to the board for
final decision.





39







Our Customer-tailored Integrated Solutions



We divide our customer base into five industry
groups, and, based on the needs and preferences of customers in each group, we have developed a wide range of integrated solutions
that are tailored to the characteristics of each industry.



Media and Entertainment. As
more and more advertising spending is being shifted to online media, our customers in the media industry are adapting to this trend
and investing significant resources in online content delivery. To capitalize on this opportunity, we customize our services aimed
at media companies, enabling them to carry online broadcasting of major events, such as the CCTV Spring Festival Gala, and other
rich media content to audiences. We customize our Rich Media Streaming Services and File Transfer Services to specifically address
media companies’ rich media delivery needs. In addition, our services for media companies typically include our Link Anti-Hijack
and certain other value-added services. Entertainment or online game operators seek to cost-effectively deliver large files to
hundreds of thousands of game players simultaneously accessing the same online game through different networks. In addition, due
to the unreliable interconnectivity among different telecommunications networks in China, players located in different regions
often cannot simultaneously play in the same game zone. Our online game solution is designed to address these problems by enabling
online game operators to bypass traditional server and bandwidth limitations to ensure reliable and efficient file downloading,
handle peak traffic conditions and substantially increase the level of interconnectivity. Our online game solution typically includes
our Guaranteed Application Services, Web Page Content Services and File Transfer Services and certain other value-added services.



Enterprises.Our enterprise
customers place importance on having their website give visitors from around the world a uniform experience, thereby projecting
a consistent brand image. They also want to minimize or avoid interruptions or delays when implementing major promotions or other
major events on their websites. We tailor our content and application delivery total solutions to address these needs, ensuring
the same satisfactory internet experience for end-users throughout different parts of the world. Our enterprise solution also includes
our Web Page Content Services, Rich Media Streaming Services and additional value-added services.



E-commerce. Companies engaged
in the fast-growing e-commerce sector in China face significant internet-related problems specific to China’s internet infrastructure.
Internet congestion may affect the performance of websites or otherwise reduce the operating efficiency, thereby frustrating consumers.
In addition, e-commerce companies need to effectively control internet security risks. To address the needs of our e-commerce
customers, we have designed our e-commerce solution to allow proactive monitoring and rapid response to security-related incidents
and anomalies. Our server network is designed to reduce the possibility of a single point of failure and reduce the impact of
security attacks. Our e-commerce solution typically includes our Guaranteed Application Services.



Internet and Software Services.Internet portals often provide geographic-specific advertisements or other information and contain rich media content and
applications, which require Rich Media Streaming and Guaranteed Application Services. Software providers typically have significant
download traffic. Surges in traffic due to new software launches or the distribution of security updates can overwhelm traditional
delivery system, impacting website performance and causing end-user downloads to be disrupted or fail. Our internet and software
services solution helps these customers to address these needs. For instance, our Geo-Content Acceleration service enables customers’
websites to automatically provide geographic-specific content to end-users corresponding to each end-user’s specific geographic
location. Our File Transfer Services can significantly increase the speed and reliability of software download.



Mobile Internet. Mobile internet
refers to access to the internet from a mobile device, such as a smartphone. While mobile internet is a fast growing industry in
China, mainstream mobile service providers in China are confronted with certain challenges in capitalizing on this development:
Specifically, when accessing internet content from a mobile device, there are generally internet interconnection bottlenecks with
other networks operated by fixed-line operators and general congestion within the mobile network. Leveraging our carrier-neutral
network, our customized mobile internet solutions effectively address the interconnectivity bottleneck issues by facilitating the
data exchanges between the networks operated by the mobile service providers and those operated by fix-line service providers.





40







Customers and Customer Support



Our customer base has decreased from approximately
1,789 active customers as of December 31, 2017 to approximately 1665 active customers as of December 31, 2018 and includes
some of China’s and the world’s leading companies in the areas of media, mobile internet, online game, e-commerce,
internet and software, enterprises, financial institutions and government agencies.



In 2016, 2017 and 2018 our five
largest customers contributed 48.2%, 57.2% and 68.5%of our total net revenues, respectively.



Our customer contracts typically provide
for a one-year service term, with automatic renewal provisions. For the years ended December 31, 2016, 2017 and 2018, approximately
67.3%,  63.6%, and 87.9% respectively, of our existing customers chose to renew their contract or enter into new contract with
us.



We devote significant resources to developing
customers support and services. We have a dedicated customer service team. Our customers may directly contact the customer service
team to seek assistance or enquire about the status of a reported issue. The team actively follows up with our operations team
to ensure that the problem is addressed in an effective and timely manner. Each of our customer accounts is assigned a service
manager who is responsible for ensuring that all our services are performed in a satisfactory manner. We offer a broad range of
internet-based customer-care tools. We operate, for example, an e-mail service center where our customers can contact and receive
responses from our customer service representatives by e-mail.



We also offer service level agreements on
most of our services to our customers. Such agreements set the expectations on service level between us and our customers and drive
our internal process to meet or exceed the customer’s expectations.



Our Network and Technologies



Inadequate interconnectivity within China’s
public internet infrastructure between different regions of China, among competing telecommunications networks and across different
areas within the same operator network is a significant problem in China. There are several telecommunications carriers that operate
internet backbone in China, including China Telecom, the predominant carrier in Southern China, and China Netcom, the predominant
carrier in Northern China. Each of these companies runs its own independent network, which is constrained by respective networks’
coverage. Different networks must connect to one another in order to allow the users to communicate. Due to inadequate cooperation
among telecommunications carriers, interconnectivity bottlenecks remain a major problem in China, contributing to a slow transmission
speed across services and applications.



As a carrier-neutral service provider, we
have developed an extensive network and a series of innovative technologies to effectively address network complexity issues with
respect to content and applications delivery. Through our highly scalable and intelligent network platform, widely distributed
edge servers and advanced operating support system, among others, we increase the level of interconnectivity and ensure the quality
and reliability of our services.



Our network has the following key elements:





41







Architecture



Our network architecture consists of three
layers: the data center layer, the edge server layer and the peer-assistance layer. The following diagram illustrates our network
architecture:







The first layer of our network architecture
is the data center layer, which is composed of super nodes, clusters of specially-configured servers and storage systems, interconnected
with public networks and other legally compliant transmission backbones. This layer ensures the delivery quality from origin servers
to the super nodes residing at strategic locations throughout China and effectively addresses the issue of inadequate interconnectivity
across different telecommunications carriers in China.



The second layer of our network architecture
is the edge server layer, which is composed of clusters of edge nodes connected to different telecommunications carriers and ISPs.
Each edge node consists of edge servers programmed to answer domain name inquiries, replicate and refresh content, receive and
forward uploads from end-users, record usage information for billing purposes and provide network performance data. The edge server
layer allows end-users to connect to the appropriate ChinaCache edge servers to optimize the performance of the delivery process.



The last layer of our network architecture
is the peer-assistance layer, which is composed of multiple public internet access networks belonging to different service providers.
We do not own or operate any of these internet access networks. Instead, we deploy our peer-assistance technology over this layer
by installing our proprietary software on the operating systems of end-users. As a result, we are able to facilitate data sharing
among network end-users, which significantly improves the user experience and enhances the scalability of our services.





42







Widely Deployed Servers



As of December 31, 2018, we deployed
approximately 15,102 servers in China and over 340 servers overseas.



As a carrier-neutral service provider, our
networks in China are interconnected with: (i) networks operated by all three telecommunications carriers in China, namely
China Telecom, China Unicom and China Mobile; (ii) non-carrier networks operated by China Education and Research Network and
China Science and Technology Network; and (iii) networks operated by major local ISPs, including Beijing Gehua CATV Networks
and Shanghai Oriental Network.



We purchase bandwidth usage, co-location services and data storage from telecommunications carriers or
ISPs. For the years ended December 31, 2016 2017 and 2018, 82%, 81% and 52%, respectively, of our bandwidth, co-location
and data storage fees were paid for services purchased from the three major PRC telecommunications carriers, China Telecom, China
Mobile and China Unicom, through their respective subsidiaries and sales agents. Our agreements with the telecommunication carriers
typically use a standard form provided by the carriers, with pricing terms individually negotiated with the carriers’ local
subsidiaries or sales agents. The agreements are typically of a one-year term with renewal options. We pay monthly service fees
based on the number of internet gateways, bandwidth usage and the number of server clusters.



We have also deployed service nodes in 92cities
worldwide covering Asia, North America, Western Europe, the Middle East and North Africa to allow our customers in China to distribute
internet services and applications to end-users in those regions and vice versa. We have also obtained access to networks operated
by international ISPs through contractual arrangements to further extend the geographic coverage of our services for the benefit
of our customers.



Technologies



Our content-aware network service, is an
enhanced next-generation of CDN technology that improved our capabilities of delivering content and application delivery total
solutions. Our content-aware network service is device-aware, network-aware and application-aware. Our content-aware network service
is device-aware in the sense that we are able to identify each end user device and optimize data for consumption on such user’s
IOS or Android mobile device. Our content-aware network service is network-aware in that its capabilities enable us to determine
what kind of network online content is going through, whether it is a fixed or mobile network, and whether data is traveling on
a 2G, 3G or 4G mobile network. Our content-aware network service is application-aware in that through this service we can provide
network services tailored to specific applications such as e-commerce and online video, which require different capabilities and
resources.



Our key technologies include the following:



Request routing technology.
Our request routing technology routes client requests to an appropriate server for the delivery of content. Utilizing our proprietary
Scalable Service Routing technology, we are able to use a set of metrics, such as network proximity, client perceived latency,
distance and replica server load, to direct users to the most suitable servers that can best serve the request. We have developed
a system that can assess the link quality between users and our servers/nodes, so we can collect the quality topology of China
internet and Global internet.



Content distribution and management
technology. Our content distribution and management technology includes content storage, content outsourcing, content
delivery, and content management technologies. We have developed and deployed various software tools on our platform, such as
Flexible Cache (FC), Purging, Configurations, and Log Configurations, to deliver caching, streaming and dynamic services. We have
also developed a system that meets the demand of governmental administration.



System management technology.
Our system management technology includes our Operational Support Systems, or OSS, and Business Support Systems, or BSS. OSS primarily
deals with supporting processes such as maintaining inventory, providing services, configuring components, security, monitoring
service quality and managing faults. BSS typically deals with customer supporting processes, such as taking orders, processing
bills and collecting payments.





43







Intelligent Traffic adaptive Technology.
Other than HTTP over TCP, we started to explore using UDP based protocols to facilitate fast transmission of service data and internal
communications.



Comprehensive Security CDN protections.Aside from whole network deployment of HTTPS solutions compliant to TLS v1.2 and closely following upcoming TLS v1.3, we
strive to construct a cyber-safe CDN network for customers. By using content hash and signing, we ensure tamper-proof content delivery
chain all the way from source to end user’s terminal. We developed and deployed threat database sync with major rogue-IP
databases and from our own edge warning systems. Along with the threat database, sophisticated access behavior analysis armed with
whole arsenal of web protect techniques can ensure our services availability and protect customers’ source web sites.



Multiple purpose cloud hosting.Stemmed from cache system’s underlying storage module, we gradually rebuilt the storage components into a KV schemed
multiple hosts clusters with flexible deployment choices: either with dedicated storage server or cohabitated with our cache systems.
This storage becomes a vital building block for our customer source solutions, caching systems, and big data solutions.





Research and Development



We believe that the continual development
of our technology will be vital to maintaining our long-term competitiveness. Therefore, we intend to continue to devote a significant
amount of time and resources to carrying out our market-oriented research and development efforts.



Our internal research and development team
consisted of185 engineers as of December 31, 2018, representing approximately 44% of our staff. Our senior management team
leads our research and development efforts and sets strategic initiatives to improve our services and products, focusing on efforts
to sustain our technology leadership, raise our productivity and enhance the competitiveness of our services.



We instituted our ChinaCache Engineering
Process to increase productivity and ensure rapport at workplaces. High-performing leaders at ChinaCache R&D team inspire team
members and ensure them constantly enhance their tech skills. Our ChinaCache Engineering Process is comprised of policies and procedures
that facilitate the exchange of information, the collaboration of research and development activities and joint development of
new services and solutions among our different divisions. With the implementation of these policies and procedures, we shorten
the go-to-market timespan for services and solutions developed, and lower the turnover rate of tech personnel.



Intellectual Property



As of December 31, 2018, we have 56 patents
issued by the State Intellectual Property Offices of China, and two U.S. patents issued by the U.S. Patent and Trademark Office,
all relating to different aspects of content and application delivery service technologies. In addition, we have 23 PRC software
copyright registrations relating to media streaming services, operation support systems, caching services and dynamic content services.
We also have 56 trademark registrations issued by the Trademark Bureau of the State Administration for Industry and Commerce, now
the State Intellectual Property Office under the State Administration for Market Regulation, covering our company name, logo and
service.



We rely on a combination of copyright, patent,
trademark, trade secret and other intellectual property laws, nondisclosure agreements and other protective measures to protect
our intellectual property rights. We generally control access to and use of our proprietary software and other confidential information
through the use of internal and external controls, including physical and electronic security, contractual protections, and intellectual
property law. We have implemented a strict security and information technology management system, including the prohibition of
copying and transferring of codes. We educate our staff on the need to, and require them to, comply with such security procedures.
We also promote protection through contractual prohibitions, such as requiring our employees to enter into confidentiality and
non-compete agreements.





44







Sales and Marketing



We have both domestic and international
sales and marketing teams. Our domestic sales and marketing team is primarily based in four regions in China, namely, Beijing,
Shanghai and Guangzhou and Shenzhen. We also have overseas sales offices in Hong Kong, U.S. and Europe for international business.
We sell our services and solutions through our direct sales force and, to a lesser extent, sale agencies. We up-sell and cross-sell
our broad portfolio of services and solutions to our existing customer base. We actively market our portfolio of services and solutions
through our sales personnel. In addition, in an effort to better anticipate and respond to our customers’ needs, we require
and foster the collaborations among our sales teams, product development teams and research and development teams to develop additional
services and solutions that meet the needs of our customers.



Up to December 31, 2018, we have ten sales
units, with each of these sales units providing our services to a particular type of customers. These ten sales units are (1) North
China sales unit, (2) East China sales unit, (3) South China sales unit, (4) government sales unit, (5) key
account sales unit, (6) key account development unit, (7) Asia sales unit, (8) North America sales unit,  (9) Europe
sales unit.and (10)IX sales unit.



We also utilize a variety of other methods
to raise awareness of our company, our services and our brand. We promote our technologies and solutions to different types of
customers, especially mobile internet and enterprise customers, in various ways, such as customer activities, media publicity and
online coverage. For example, we host and sponsor seminars, conferences and special events, such as our China CDN Summit and US-China
Internet Strategy Summit, to raise our profile with potential customers. We also participate in events, such as Global and CDN
Summit, Mobile World Congress and Global Internet Technology Conference, which are organized by third parties. Additionally, we
collaborate with equipment vendors, software developers, internet solution providers and other companies to market our services.
We release to the public various industry data and the China internet Report on a regular basis by collecting data from our CCIndex.
We also market our company through social media, such as Weibo, WeChat and other mobile APPs. We have a special marketing team
responsible for generating demand for our services and solutions and work with our other teams to secure new customers.



We also have a designated product marketing
team, which mainly focuses on product definition and product analysis. It is also responsible for establishing and maintaining
product quality monitoring system as well as leading the long term product strategy planning. Internally, this team supports and
collaborates with sales, marketing and research and development teams to ensure seamless communication. Externally, it participates
in promotion activities to enhance communications with customers.



Competition



In China, we primarily compete with domestic
content and application delivery service providers. Our primary domestic competitors include ChinaNetCenter, Dnion Technology,
and 21Vianet, which acquired FastWeb in 2012, and Alibaba, which launched its Ali Cloud CDN commercial services in 2014 to offer
third-party CDN services. In March 2015, Tencent also announced its launch of TencentCloud CDN. In addition, a number of small
cloud hosting service companies also began to offer CDN services. We believe that the principal competitive factors affecting the
content and application delivery services market include:





45







| | · | performance, as measured by response time and end-user experience;
| | - | ------------------------------------------------------------------



| | · | quality and reliability of services;
| | - | ------------------------------------





| | · | network coverage and scale;
| | - | ---------------------------



| | · | technologies and network capabilities;
| | - | --------------------------------------



| | · | price;
| | - | ------



| | · | industry knowledge;
| | - | -------------------



| | · | scope and range of service offering; and
| | - | ----------------------------------------



| | · | scalability and flexibility of platforms.
| | - | -----------------------------------------



We believe that, rather than competing head-on
with companies such as Tencent and Alibaba on pricing, we need to promote to customers our technical capability, quality of customer
service, and flexibility of our product offering built on 3-tier internet infrastructure.



We believe that there will be no foreign
competitors with a significant presence in the content and application delivery services market in China in the near future, partly
due to the regulatory barriers in China’s telecommunications sector. However, as China represents a potentially lucrative
market for foreign competitors, some foreign providers may seek to enter the China market by way of collaboration with local CDN
and IDC players. We believe that we are one strong candidate for such partnership with potential international new entrants into
the China market. we have accumulated a deep understanding of the requirements of China’s content and application delivery
services market through our extensive operational experience and have developed a comprehensive suite of services and solutions
tailored to the unique characteristics of the internet market in China.



Regulation



This section sets forth a summary of the
most significant regulations or requirements that affect our business activities in China or our shareholders’ rights to
receive dividends and other distributions from us.



As the content and application delivery
industry is at an early stage of development in China, new laws and regulations may be adopted from time to time that will require
us to obtain additional licenses and permits in addition to those that we currently have, and address new issues that arise from
time to time. As a result, substantial uncertainties exist regarding the interpretation and implementation of current and any future
PRC laws and regulations applicable to the content and application delivery services industry. See “Item 3. Key Information
 — D. Risk Factors — Risks Related to Doing Business in China.”



Regulations on Value-Added Telecommunications Business
and Content and Application Delivery Business



Our content and application delivery business
is regarded as telecommunications services, which are primarily regulated by the MIIT, the Ministry of Commerce, and SAIC. Pursuant
to the applicable PRC laws and regulations, telecommunications businesses are defined as the activities of delivering, transmitting
or receiving voice, text, data, graphics and other form of information via wired or wireless electromagnetic systems or optoelectronic
systems. Telecommunications businesses are divided into two categories under the Telecommunications Regulations, namely (i) the
 “basic telecommunications business,” which refers to the business of providing public network infrastructure, public
data transmission and basic voice communications services, and (ii) “value-added telecommunications business,”
which refers to the telecommunications and information services provided through the public network infrastructure.



In the Telecommunications Services Classification
Catalogue 2015 version promulgated by MIIT in December 2015, the internet data service business and content and application
delivery business is listed under the first category of the value-added telecommunications business. Pursuant to the Value-Added
Telecommunications Business Operating License, or the VAT license, issued to Beijing Blue I.T. by the MIIT on June 26, 2019, Beijing
Blue I.T. is permitted to carry out domestic fixed-network data transmission business, internet data center business (excluding
internet resource coordination service), content delivery network business, domestic internet virtual private networks business
and internet access service business under the first category of “value-added telecommunications business”.





46







Pursuant to the Telecommunications Regulations,
value-added telecommunications services covering two or more provinces, autonomous regions, and/or municipalities directly under
the central government shall be approved by the MIIT, and the providers of such cross-regional value-added telecommunications services
are required to obtain the Cross-Regional Value-Added Telecommunications Business Operating Licenses, or the Cross-Regional VAT
licenses. Value-added telecommunications services covering certain area within one province, autonomous region, and/or municipality
directly under the central government shall be approved by the local telecommunications administration authority of in such region
and the providers of such value-added telecommunications services are required to obtain the VAT licenses. Pursuant to the Administrative
Measures for Telecommunications Business Operating Licenses, Cross-Regional VAT licenses shall be approved and issued by the MIIT
with five-year terms.



Currently, Beijing Blue I.T. holds a Cross-Regional
VAT license, issued by the MIIT with an effective term until September 18, 2022 under the first category of the “value-added
telecommunications services.” As specified in this Cross-Regional VAT license, Beijing Blue I.T. is permitted to carry out
(i) the domestic fixed-network data transmission business throughout China; (ii) internet data center business (excluding
internet resource coordination service) across 16 cities in China; (iii) the content distribution network business throughout
China; (iv) the domestic internet virtual private networks business throughout China; and (v) the internet access business
across 17 provinces in China. ChinaCache Shouming holds a Cross-Regional VAT license, issued by the MIIT with an effective term
until November 28, 2023 under the first category of the “value-added telecommunications services”, and as specified
in this Cross-Regional VAT license, ChinaCache Shouming is permitted to carry out the internet data center business (excluding
internet resource coordination service) as well as the internet access business across 2 provinces in China. Beijing Blue
I.T. also holds an ICP License with an effective term until January 3, 2023. Beijing Jingtian holds an ICP License
with an effective term until August 5, 2024.



On January 17, 2017, the MIIT issued
a Circular on Clearing up and Regulating the Internet Access Service Market, or Circular No. 32, aiming to regulate illegal
operations in the field of internet data center (IDC) service, internet access (ISP) service and content delivery network (CDN)
service businesses. In particular, the MIIT Circular No. 32 reiterates that an entity is prohibited from operating any of
the IDC, ISP or CDN services without proper telecommunication business operation permit, or engaging in activities beyond
the permitted business scope or permitted geographical scope specified on its operation permit, nor shall a qualified telecommunication
business operator lease or transfer its qualification or resources to an unauthorized entity in the form of technology cooperation
or in other disguised form. In addition, pursuant to the MIIT Circular No. 32, if an entity had obtained a VAT License for
IDC service business prior to the implementation of the Catalog of Telecommunications Business (2015 Version) and has actually
engaged in CDN service or internet resource coordination business, it must undertake in a written commitment to the issuing authority
of its VAT License by March 31, 2017 that it will satisfy relevant requirements for CDN service or internet resource coordination
service, as applicable, and obtain the corresponding VAT License by the end of 2017. If it fails to obtain the VAT License by the
deadline, it must cease to operate the CDN service and internet resource coordination service business from January 1, 2018.
If an entity fails to submit the aforesaid commitment by March 31, 2017, it shall be refrained from engaging in CDN service
and internet resource coordination service since April 1, 2017. Beijing Blue I.T. had submitted the written commitment on
March 30, 2017 in compliance with the relevant requirement and has obtained the relevant VAT License issued by the MIIT on
September 18, 2017, subsequently as amended on February 7, 2018 and January 10, 2019. In April 2018, the MIIT issued a Circular
on Deepening the Work of Clearing Up and Regulating the Internet Access Service Market, pursuant to which the regulator has further
launched a series of inspections and rectifications to regulate the market, which lasts until March 31, 2019.



In February 2018, MIIT issued an internal
notice, or the MIIT Internal Notice, pursuant to which telecommunication authorities will carry out a special enforcement campaign
to inspect the operations of certain licensed telecommunications operators according to applicable regulations and rules, including
without limitation, the Circular on Clearing Up and Regulatory the Internet Access Service Market issued by the MIIT in January
2017. In particular, the authorities will pay special attention to any improper operational activities, such as unauthorized establishment
of transmission network, unlicensed operation of cross-border business and improper sublease of broadband resources. If the enterprise
is found to be engaged in non-compliant operations, it may be subject to various penalties, including suspension of network
access, suspension of approving its application for new operation permit until rectification being completed, being publicized
as an operator with discredit record or non-compliance record, enhanced oversight of the authority and limitation on
new telecommunication business, depending on the seriousness of the violations and the rectification result. The MIIT Internal
Notice mandates that the foregoing inspection and scrutiny to be completed by September 30, 2018. According to the MIIT Internal
Notice, 47 industry players are subject to the special inspection, including one of our VIEs, Beijing Blue I.T. After the MIIT
Internal Notice was issued, we closely communicated with the in-charge authority to clarify the inspection requirements
of the authority and cooperate with them to review our business practices and compliance status. As of the date of this annual
report, we have not received any further investigation notice or rectification order relating thereto from the government authorities.





47







In addition, the MIIT and other relevant
regulatory authorities recently published a series of new regulations, policies with respect to the construction, development and
expansion of new and existing data centers. For example, on January 21, 2019, MIIT, National Government Office Administration
and National Energy Administration jointly published the Guidance on Promotion of Green Data Center Construction, pursuant to which
authorities encourage data centers to adhere to certain average levels of energy conservation and aim to reach several goals including,
among others, maintaining the power usage effectiveness (PUE) of newly constructed large and extra-large data centers at or below
1.4 from the year 2022 onward. On September 6, 2018, the General Office of the People’s Government of Beijing Municipality,
or the GOPGB, issued the Beijing Municipality’s Catalogue for the Prohibition and Restriction of Newly Increased Industries
(2018 Edition), or the 2018 Catalogue, which is a revised edition of the catalogue GOPGB issued in 2015. The 2018 Catalogue prohibits
new construction or expansion within Beijing’s certain areas of (i) data centers which are involved in providing Internet
data services or information processing and storage support services, except for cloud computing data centers with PUE lower than
1.4, and (ii) call centers. Furthermore, new construction or expansion of data centers which are involved in providing Internet
data services or information processing and storage support services with PUE lower than 1.4 is also prohibited within the boundaries
of Beijing’s Dongcheng District, Xicheng District, Chaoyang District, Haidian District, Fengtai District, Shijingshan District
and Tongzhou New Town.



Regulations on Internet Information Services



Beijing Blue I.T. operates one website, www.chinacache.com, to provide information related to its
business. Internet information services in China are primarily regulated by the MIIT. Pursuant to the applicable regulations, to
engage in commercial internet information services, the service providers shall obtain a VAT license for internet information services,
or an “ICP License.” Beijing Blue I.T. holds an ICP License, issued by the Beijing Telecommunications Administration
Department, with an effective term until January 3, 2023.Beijing Blue I.T.’s ICP License permits it to carry out commercial
internet information services. Beijing Jingtian holds an ICP License with an effective term until August 5, 2024.



The PRC government regulates and restricts
internet content in China to protect state security and ensure the legality of the internet content. The National People’s
Congress has enacted legislation that may subject to criminal punishment in China any person who: (i) gains improper entry
into a computer or system of strategic importance; (ii) disseminates politically disruptive information; (iii) leaks
state secrets; (iv) spreads false commercial information; or (v) infringes intellectual property rights. The Ministry
of Public Security has also promulgated measures that prohibit use of the internet in ways that, among other things, result in
a leakage of state secrets or a spread of socially destabilizing content. The Ministry of Public Security has supervision and inspection
rights in this regard.



Regulation on Internet Security



On November 7, 2016, the Standing Committee
of the National People’s Congress promulgated the Cyber Security Law, which became effective on June 1, 2017. In accordance
with the Cyber Security Law, internet operators must set up internal security management systems and take technical and other necessary
measures as required by applicable laws and regulations to safeguard the operation of networks, prevent illegal and criminal activities,
and maintain the integrity, confidentiality and usability of network data. In addition, the Cyber Security Law requires internet
operators to make emergency response plans for cyber security incidents and report to the competent governmental departments once
any incident endangering cyber security occurs.



In September 2016, the General Office
of MIIT issued the Trial Administration Measures on the Use and Operation Maintenance of Internet Information Security Management
System. According to these measures, internet operators that are engaged in the internet data center, internet access and content
and application delivery businesses must set up and maintain an internet information security management system. By using the internet
information security management system, such internet operators are obligated to monitor the information they transmit and take
timely measures in relation to any illicit content. Furthermore, such internet operators are also obligated to report security
incidents to the authorities and accept their inspection.



Beijing Blue I.T. has already established
an internet information security management system pursuant to applicable laws and regulations.



On May 2, 2017, the Cyberspace Administration
of China issued the Measures on Security Review of Network Products and Services (for Trial Implementation) which went into effect
on June 1, 2017. According to these Measures, important network products and services purchased by networks and information
system concerning national security and network products and services purchased by operators in certain key industries and sectors
relating to public services and infrastructure or critical information infrastructure in connection with national security are
subject to cybersecurity review. The detailed scope of network products and services subject to security review will be determined
by the relevant critical information infrastructure protection authority.



In November 2017, MIIT promulgated the Circular
on Regulating the Use of Domain Names for Internet Information Services, which became effective on January 1, 2018. Pursuant to
this circular, the ISP service provider shall verify the identity of each internet information service provider. If the internet
information service provider fails to provide its true and accurate identity information, the ISP service provider shall not provide
ISP services to it. In addition, the ISP service provider shall regularly check the status of domain names used by the internet
information service providers, and if relevant domain name is invalid and the real identity information of the user is absent,
it shall cease providing ISP services.





48







Regulations on Foreign Investment in Telecommunications
Enterprises



The PRC government imposes limitations on
foreign ownership of PRC companies that engage in telecommunications-related business. Under the Administrative Rules for
Foreign Investments in Telecommunications Enterprises, a foreign investor is currently prohibited from owning more than 50% of
the equity interest in a PRC company that engages in value-added telecommunications business, except for those engaged in e-commerce
business, domestic multi-party communications services business, store-and-forward business and call center business, which may
be owned more than 50% up to 100% by foreign investors According to the Special Administrative Measures for Entry of Foreign Investment
(Negative List) (2019 Version), or the Negative List, which became effective on July 30, 2019 and replaced the Special Administrative
Measures for Entry of Foreign Investment (Negative List) (2018 Version). In addition, in January 31, 2019, the State Council published
its approval of Fully Promoting the Comprehensive Pilot Program for Expanding the Opening Up of Service Industry in Beijing, pursuant
to which Beijing lifts foreign ownership limits on internet access service industry (only the service of providing users with internet
access) in certain pilot zones in Beijing. Nevertheless, since this approval is recently published and the local authorities in
Beijing has not promulgated any implementing rules or guidelines as of the date of this annual report, it remains uncertain as
to the interpretation and implementation of this new policy in many aspects, such as whether the abovementioned requirements provided
by the Foreign Investment Telecommunications Rules for a major foreign investor and the MIIT approval will still apply in Beijing.



The Circular on Strengthening the Administration
of Foreign Investment in and Operation of Value-Added Telecommunications Business, among others, requires a foreign investor to
set up a foreign-invested enterprise and obtain an operating permit in order to carry out any value-added telecommunications business
in China. Under this circular, a domestic value-added telecommunications service operator that holds a VAT license is prohibited
from leasing, transferring or selling such license to foreign investors, and from providing any assistance in the form of resources,
sites or facilities to foreign investors that conduct value-added telecommunications business illegally in China. Furthermore,
the relevant trademarks and domain names that are used in the value-added telecommunications business of domestic operators must
be owned by such domestic operators or their shareholders. The circular further requires each VAT license holder to have the necessary
facilities for its approved business operations and to maintain such facilities in the regions covered by its VAT license. In addition,
all value-added telecommunications service operators are required to maintain network and information security in accordance with
the standards set forth under relevant PRC regulations. Due to a lack of interpretations from the regulator, it remains unclear
what impact this circular would have on us.



We conduct our businesses in China primarily
through contractual arrangements among us, our wholly-owned PRC subsidiaries, our variable interest entities and their shareholders.
Beijing Blue I.T. holds a Cross-Regional VAT license and currently owns all necessary trademarks and domain names in connection
with our business covered by its VAT license. In the opinion of Han Kun Law Offices, our PRC legal counsel, each of the currently
effective documents under the VIE arrangements among us, our PRC subsidiary, PRC consolidated variable interest entities and their
shareholders governed by PRC law are valid, binding and enforceable, and will not result in any violation of PRC laws or regulations
currently in effect However, there are substantial uncertainties regarding the interpretation and application of PRC laws and regulations.
Accordingly, there can be no assurance that the PRC regulatory authorities may not in the future take a view that is contrary to
the above opinion of our PRC legal counsel. If the PRC government finds that the arrangements that establish the structure for
operating our business do not comply with PRC law and regulations restricting foreign investment in the telecommunications business,
we could be subject to severe penalties.



In addition, the Circular on Strengthening
the Administration of Foreign Investment in and Operation of Value-Added Telecommunications Business provides that domestic telecommunications
companies that intend to be listed overseas must obtain the approval from the MIIT for such overseas listing. Up to the date of
this annual report, the MIIT has not issued any definitive rule concerning whether offerings like ours would be deemed an
indirect overseas listing of our PRC affiliates that engage in telecommunications business. Based on our oral consultation with
certain officials of the MIIT, in practice, our offerings should not be deemed an overseas listing of a domestic company. If the
MIIT subsequently requires that we obtain its approval, it may have a material adverse effect on the trading price of our ADSs.



Regulations on Foreign Exchange Registration of Overseas
Investment by PRC Residents



SAFE issued SAFE Circular on Relevant Issues
Relating to Domestic Resident’s Investment and Financing and Roundtrip Investment through Special Purpose Vehicles, or SAFE
Circular 37, that became effective in July 2014, replacing the previous SAFE Circular 75. SAFE Circular 37 regulates foreign
exchange matters in relation to the use of special purpose vehicles, or SPVs, by PRC residents or entities to seek offshore investment
and financing or conduct round trip investment in China. Under SAFE Circular 37, a SPV refers to an offshore entity established
or controlled, directly or indirectly, by PRC residents or entities for the purpose of seeking offshore financing or making offshore
investment, using legitimate onshore or offshore assets or interests, while “round trip investment” refers to direct
investment in China by PRC residents or entities through SPVs, namely, establishing foreign-invested enterprises to obtain the
ownership, control rights and management rights. SAFE Circular 37 provides that, before making contribution into an SPV, PRC residents
or entities are required to complete foreign exchange registration with SAFE or its local branch. In addition, SAFE issued Circular
on Further Simplifying and Improving the Direct Investment-related Foreign Exchange Administration Policies, or SAFE Circular 13,
which became effective on June 1, 2015. SAFE Circular 13 provides that the foreign exchange registration under domestic direct
investment and the foreign exchange registration under overseas direct investment will be directly reviewed and handled by banks,
cancelling the administrative examination and approval procedure.





49







PRC residents or entities who had contributed
legitimate onshore or offshore interests or assets to SPVs but had not obtained SAFE registration before the implementation of
the SAFE Circular 37 must register their ownership interests or control in the SPVs with SAFE or its local branch. An amendment
to the registration is required if there is a material change with respect to the SPV registered, such as any change of basic information
(including change of the PRC residents, name and operation term), increases or decreases in investment amount, transfers or exchanges
of shares, and mergers or divisions. Failure to comply with the registration procedures set forth in SAFE Circular 37, or making
misrepresentation on or failure to disclose controllers of the foreign-invested enterprise that is established through round-trip
investment, may result in restrictions being imposed on the foreign exchange activities of the relevant foreign-invested enterprise,
including payment of dividends and other distributions, such as proceeds from any reduction in capital, share transfer or liquidation,
to its offshore parent or affiliate, and the capital inflow from the offshore parent, and may also subject relevant PRC residents
or entities to penalties under PRC foreign exchange administration regulations.



We are aware that our PRC resident beneficial
owners subject to these SAFE registration requirements have registered with the Beijing SAFE branch and will amend the registration
to reflect the recent changes to our corporate structure. However, we cannot assure you that our current and future beneficial
owners who are PRC residents will continue to comply with Circular 37; nor can we assure you that there will not be further filing
or registration requirements imposed by the PRC government concerning ownership in foreign companies of PRC residents. See “Item
3. Key Information — D. Risk Factors — Risks Related to Doing Business in China— PRC regulations relating to
the establishment of offshore special purpose companies by PRC residents may subject our PRC resident beneficial owners to personal
liability and limit our ability to acquire PRC companies or to inject capital into our PRC subsidiary, limit our PRC subsidiary’s
ability to distribute profits to us, or otherwise materially and adversely affect us.”



Regulations on Employee Stock Options Granted by Listed
Companies



Pursuant to the Notices on Issues concerning
the Foreign Exchange Administration for Domestic Individuals Participating in Stock Incentive Plans of Overseas Publicly-Listed
Companies, or the Stock Option Rules, which was promulgated by SAFE in February 2012, PRC individuals who are granted shares
or share options under a share incentive plan of a company listed on an overseas stock exchange are required to register with the
SAFE or its local counterparts. Pursuant to the Stock Option Rules, PRC residents participating in the employee stock option plans
of the overseas listed companies shall retain a qualified PRC agent, which could be a PRC subsidiary of such overseas publicly-listed
company or another qualified institution selected by such PRC subsidiary, to conduct the SAFE registration and other procedures
with respect to the stock incentive plans on behalf of these participants. Such participant must also retain an overseas entrusted
institution to handle matters in connection with their exercise of stock options, purchase and sale of corresponding stocks or
interests and fund transfer. In addition, the PRC agents are required to amend the SAFE registration with respect to the stock
incentive plan if there is any material change to the stock incentive plan, the PRC agent, the overseas entrusted institution or
other material change. The PRC agents or the employers shall, on behalf of the PRC residents who have the right to exercise the
employee stock options, apply annually to SAFE or its local offices for a quota for the conversion and/or payment of foreign currencies
in connection with the domestic individuals’ exercise of the employee stock options. The foreign exchange proceeds received
by the PRC residents from sale of shares under the stock option plans granted by the overseas listed companies must be remitted
into the bank accounts in China opened by the PRC agents. In addition, the PRC agents shall file with SAFE or its local branches
each quarter a form in relation to the Domestic Individuals Participating in the Stock Incentive Plans of Overseas Listed Companies.





50







On October 16, 2008, May 22, 2009,
May 28, 2010 and June 20, 2011, we adopted our 2007, 2008 and 2010 Stock Incentive Plans and our 2011 Share Incentive
Plan, respectively. Pursuant to these four plans, we issue employee stock options to our qualified employees and directors on a
regular basis. In the application documents filed with the Beijing office of the State Administration of Foreign Exchange in connection
with the registration of Mr. Song Wang’s and Ms. Jean Xiaohong Kou’s overseas investment in ChinaCache Holdings,
it was indicated that approximately 7% of the share capital of ChinaCache Holdings are reserved for the employee stock options
and service incentive shares. As of the date of this annual report, we have granted employee stock options and incentive shares
within the scope noted in the application documents which were filed with the Beijing office of the State Administration of Foreign
Exchange. After our initial public offering, we have advised our employees and directors participating in the Stock Incentive Plan
to handle foreign exchange matters in accordance with the relevant SAFE rules. We have registered our 2007 Stock Incentive Plan,
2008 Stock Incentive Plan, 2010 Stock Incentive Plan and 2011 Share Incentive Plan with Beijing branch of SAFE. The failure of
our PRC stock options holders to complete their registration pursuant to Stock Option Rules and other foreign exchange requirements
may subject us or our PRC stock options holders to fines and legal sanctions.



Further, a notice concerning the individual
income tax on earnings from employee stock options, jointly issued by the Ministry of Finance and the SAT, provides that domestic
companies that implement employee share option programs shall (1) file the employee share option plans and other relevant
documents to the tax authorities having jurisdiction over them before implementing such employee share option plans; and (2) file
share option exercise notices and other relevant documents to the tax authorities having jurisdiction over them before exercise
by the employees of the share options, and clarify whether the shares issuable under the employee share options mentioned in the
notice are the shares of publicly listed companies.



M&A Regulations and Overseas Listings



The M&A Rules, effective on September 8,
2006 and as amended subsequently, include provisions that purport to require an offshore “special purpose vehicle”
to obtain the approval of the CSRC prior to the listing and trading of such special purpose vehicle’s securities on an overseas
stock exchange. Under the M&A Rules, “special purpose vehicle” is defined as an offshore company directly or indirectly
controlled by PRC domestic companies or individuals for the purposes of listing the equity interest in PRC companies on overseas
stock exchanges. On September 21, 2006, the CSRC published on its official website the procedures regarding its approval of
overseas listings by special purpose vehicles. The approval procedures require the filing of a number of documents and would take
several months. However, it remains unclear whether the M&A Rules and the requirement of the CSRC approval apply. Up to
the date of this annual report, the CSRC has not issued any rules or written interpretation clarifying whether offerings like
our initial public offering are subject to this new procedure.



Regulations on Foreign Currency Exchange



Pursuant to applicable PRC regulations on
foreign currency exchange, Renminbi is freely convertible only to the extent of current account items, such as trade-related receipts
and payments, interest and dividends. Capital account items, such as direct equity investments, loans and repatriation of investment,
unless expressly exempted by laws and regulations, require the prior registration at designated foreign exchange banks for conversion
of Renminbi into a foreign currency, such as U.S. dollars. Payments for transactions that take place within the PRC must be made
in Renminbi. Domestic companies or individuals can repatriate foreign currency payments received from abroad, or deposit these
payments abroad subject to the requirement that such payments by repatriated within a certain period of time. Foreign-invested
enterprises may retain foreign exchange in accounts with designated foreign exchange banks. Foreign currencies received for current
account items can be either retained or sold to financial institutions that have foreign exchange settlement or sales business
without prior approval from the State Administration for Foreign Exchange, subject to certain regulations. Foreign exchange income
under capital account can be retained or sold to financial institutions that have foreign exchange settlement and sales business,
with prior approval from the State Administration for Foreign Exchange, unless otherwise provided.





51







On February 28, 2015, the SAFE promulgated
the Notice on Further Simplifying and Improving the Administration of the Foreign Exchange Concerning Direct Investment, or SAFE
Circular 13. After SAFE Circular 13 became effective on June 1, 2015, instead of applying for approvals regarding foreign
exchange registrations of foreign direct investment and overseas direct investment from SAFE, entities and individuals will be
required to apply for such foreign exchange registrations from qualified banks. The qualified banks, under the supervision of the
SAFE, will directly examine the applications and conduct the registration.



In March 2015, SAFE promulgated the
Circular on Reforming the Management Approach Regarding the Foreign Exchange Capital Settlement of Foreign-invested Enterprises,
or SAFE Circular No. 19, which effected as of June 1, 2015. SAFE Circular No. 19 provides that, among other things,
a foreign-invested company may convert foreign currency capital in its capital account into RMB on a “at will” basis.
On June 9, 2016, SAFE promulgated the Circular on Reforming and Regulating Policies on the Control over Foreign Exchange Settlement
of Capital Accounts, or SAFE Circular No. 16, to further expand and strengthen such “at will” conversion reform
under SAFE Circular No. 19. SAFE Circular No. 16 provides an integrated standard for conversion of foreign exchange under
capital account items on an “at will” basis which applies to all enterprises registered in the PRC. Pursuant to SAFE
Circular No. 16, in addition to foreign currency capital, enterprises registered in the PRC may also convert their foreign
debts, as well as repatriated funds raised through overseas listing, from foreign currency to RMB on an “at will” basis.
SAFE Circular No. 16 reiterates that the RMB funds so converted shall not be used for the purpose of, whether directly or
indirectly, (i) paying expenditures out of the ordinary course of business or prohibited by laws or regulations; (ii) making
securities investment or other investments (except for banks’ principal-secured products); (iii) extending loans to
non-affiliated enterprises (except as expressly permitted in the business license); and (iv) purchasing non-self-used real
properties (except for real estate enterprises). On October 23, 2019, SAFE promulgated the Circular on Further Promoting the Convenience
of Cross-border Trade and Investment, or SAFE Circular 28, which came into effect as of October 23, 2019, to allow the foreign-invested
enterprise that are not investment-oriented enterprise (including foreign-funded investment company, foreign-funded venture capital
enterprise and foreign-funded equity investment enterprise) to use the capital under its capital account to conduct equity investment
in PRC, whether by using the foreign currency under the capital account directly or through settlement of such foreign currency,
provided that: (i) there is no violation of the provisions under the Negative List; and (ii) the investment to be conducted in
PRC is true and compliant with Laws.



Regulations on Dividend Distribution



Under applicable PRC laws and regulations,
foreign-invested enterprises in China may pay dividends only out of their accumulated profits, if any, determined in accordance
with PRC accounting standards and regulations. In addition, foreign-invested enterprises in China are required to allocate at least
10% of their respective accumulated profits each year, if any, to fund statutory reserve funds unless these reserves have reached
50% of the registered capital of the respective enterprises. These reserves are not distributable as cash dividends.



Regulations on Transfer of Real Estate Properties



According to applicable PRC laws and regulations
when a property owner transfers a building, the ownership of the building and the land use right associated with the site on which
the building is situated are transferred simultaneously. Pursuant to the applicable regulations, with respect to the transfer of
land use right and ownership of the above-ground buildings, the parties must enter into a transfer contract in writing and register
the transfer with the relevant property administration authority within 90 days of the execution of the transfer contract. If the
land is divided into several parcels during the transfer and the transferee will obtain a separate land use right certificate for
each parcel of the land so divided, the transfer of land use right and the relevant transfer of the above-ground building must
be approved by the relevant land and housing administration departments of relevant municipal or county level governments.



On October 8, 2010, the Beijing Municipal
Bureau of Land and Resources issued the Notice on Further Strengthening the Administration of Research and Development Projects
and Industrial Projects. Pursuant to the notice, application for transfer of an industrial project must be submitted to Beijing
Municipal Commission of Housing and Urban-Rural Development, which will, after preliminary review together with other relevant
administrative departments, submit the application to the People’s Government of Beijing Municipality for final approval.



On May 23, 2019, Beijing municipal government issued two acts “Act No 216” and “Act
No 217” forbidding cutting apart of the property right for industrial use, which means all the buildings registered on the
same land used certificate must be sold at one time.







52







Regulations on Tax



For a discussion of applicable PRC tax regulations,
see “Item 5. Operating and Financial Review and Prospects — A. Operating Results — Taxation — PRC.”



|C. | Organizational Structure
|-- | ------------------------



The following diagram sets out details of
our subsidiaries and consolidated variable interest entities as of the date of this annual report:









53







Contractual Arrangements with Our Consolidated Variable Interest
Entities



PRC laws and regulations currently restrict
foreign ownership of telecommunications value-added services, including content and application delivery services. Because we are
a Cayman Islands company, we are classified as a foreign enterprise under PRC laws and regulations and our wholly-owned PRC subsidiaries,
ChinaCache Beijing and Xin Run, are foreign-invested enterprises. To comply with PRC laws and regulations, we conduct our operations
in China through a series of contractual arrangements with Beijing Blue I.T., Beijing Jingtian and ChinaCache Shouming, and their
respective shareholders. Beijing Blue I.T. is currently 55% owned by Song Wang, our co-founder, former chairman of our board of
directors, our former chief executive officer and our shareholder, and 45% owned by Jean Xiaohong Kou, our co-founder, former director,
former senior vice president and our shareholder. Beijing Jingtian is 50% owned by Ms. Huiling Ying, and 50% owned by Ms.
Yating Yan, who replaced the previous shareholder and became a shareholder of Beijing Jingtian in January 2019. ChinaCache Shouming
is 99% owned by Ms. Yajun Liu, and 1% owned by Tianjin Dingsheng. All current shareholders of Beijing Blue I.T., Beijing Jingtian
and ChinaCache Shouming are PRC citizen or domestic company wholly owned by PRC citizens and accordingly these three entities are
domestic companies under the PRC laws.





We have been and are expected to continue
to rely on our consolidated variable interest entities to operate our content and application delivery business in China as long
as PRC laws and regulations do not allow us to directly operate such business in China. Our contractual arrangements with Beijing
Blue I.T., Beijing Jingtian and ChinaCache Shouming, and their respective shareholders enable us to:



| | · | exercise effective control over Beijing Blue I.T., Beijing Jingtian and ChinaCache Shouming;
| | - | --------------------------------------------------------------------------------------------



| | · | receive substantially all of the economic benefits of Beijing Blue I.T., Beijing Jingtian and ChinaCache Shouming in consideration for the services provided by our subsidiaries in China, and incur substantially all the losses of Beijing Blue I.T., Beijing Jingtian and ChinaCache Shouming; and
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | have an exclusive option to purchase all of the equity interest in Beijing Blue I.T., Beijing Jingtian and ChinaCache Shouming when and to the extent permitted under PRC law.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Accordingly, under U.S. GAAP, we consolidate
Beijing Blue I.T., Beijing Jingtian and ChinaCache Shouming as our “variable interest entities” in our consolidated
financial statements.



Our contractual arrangements with our consolidated
variable interest entities and their shareholders are described in further detail as follows:



Agreements that Provide Us Effective Control



Share Pledge Agreements. Pursuant
to the share pledge agreements entered into on September 23, 2005 and supplemented on December 19, 2016 among ChinaCache
Beijing, each shareholder of Beijing Blue I.T. and Beijing Blue I.T., each shareholder pledged his or her equity interest in Beijing
Blue I.T. to ChinaCache Beijing to secure Beijing Blue I.T.’s obligations under the exclusive business cooperation agreement
with ChinaCache Beijing. Each shareholder also agreed not to transfer or create any new encumbrance adverse to ChinaCache Beijing
on his or her equity interest in Beijing Blue I.T. without the prior written consent of ChinaCache Beijing. During the term of
the share pledge agreement, ChinaCache Beijing is entitled to all the dividends declared on the pledged equity interest. If Beijing
Blue I.T. fails to perform its contractual obligations, ChinaCache Beijing, as pledgee, will be entitled to certain rights, including
the right to take possession and to dispose of the pledged equity interest. The share pledge agreements shall terminate once Beijing
Blue I.T. fulfilled its obligations under the principal agreements between ChinaCache Beijing and Beijing Blue I.T., including
the full payment of consulting and service fees and license fees under the principal agreements.



Pursuant to the share pledge agreement entered
into on December 3, 2012 among ChinaCache Beijing, Ms. Huiling Ying and Beijing Jingtian, which superseded the share
pledge agreements entered into on July 31, 2008 and the share pledge agreement entered into on January 15, 2019 among ChinaCache
Beijing, Ms. Yating Yan and Beijing Jingtian, each shareholder of Beijing Jingtian pledged his or her equity interest in Beijing
Jingtian to ChinaCache Beijing to secure Beijing Jingtian’s obligations under the exclusive business cooperation agreement
with ChinaCache Beijing. The other terms of the share pledge agreements are substantially the same as those of the share pledge
agreements between ChinaCache Beijing, each shareholder of Beijing Blue I.T. and Beijing Blue I.T.





54









Pursuant to the share pledge agreements
entered into on August 20, 2018 by and among Xin Run, each shareholder of ChinaCache Shouming and ChinaCache Shouming, each shareholder
pledged his or her equity interest in ChinaCache Shouming to Xin Run to secure ChinaCache Shouming’s obligations under the
exclusive business cooperation agreement with Xin Run. The other terms of the share pledge agreements are substantially the same
as those of the share pledge agreements between ChinaCache Beijing, each shareholder of Beijing Blue I.T. and Beijing Blue I.T.



We have registered the pledges of the equity
interests in Beijing Blue I.T., Beijing Jingtian and ChinaCache Shouming with the local counterpart of SAIC.



Irrevocable Power of Attorney.
Each shareholder of Beijing Blue I.T. executed an irrevocable power of attorney on September 23, 2005, which was superseded
by an irrevocable power of attorney executed by such shareholder of Beijing Blue I.T. on December 19, 2016 appointing ChinaCache
Beijing or a person designated by ChinaCache Beijing as his or her attorney-in-fact to attend shareholders’ meetings of Beijing
Blue I.T. and to vote on his or her behalf on all matters requiring shareholder approval, including but not limited to, the sale,
transfer, pledge, or disposition of his or her shareholding in Beijing Blue I.T. The power of attorney remains valid and irrevocable
from the date of its execution, so long as he or she remains the shareholder of Beijing Blue I.T.



Pursuant to the irrevocable power of attorney
entered into on July 31, 2008 by Ms. Huiling Ying and on January 15, 2019 by Ms. Yating Yan, each shareholder of Beijing
Jingtian appointed ChinaCache Beijing or a person designated by ChinaCache Beijing as his or her attorney-in-fact to attend shareholders’
meetings and to vote on his or her behalf on all matters requiring shareholder approval. These powers of attorneys are substantially
the same as those granted by each of the shareholders of Beijing Blue I.T. to ChinaCache Beijing. On May 10, 2010, the board
of directors and the shareholders of ChinaCache Beijing each approved resolutions whereby, among other things, all shareholder
rights that ChinaCache Beijing has in Beijing Blue I.T. pursuant to the irrevocable powers of attorney executed by the shareholders
of Beijing Blue I.T. on September 23, 2005, and all shareholder rights that ChinaCache Beijing has in Beijing Jingtian pursuant
to the irrevocable powers of attorney executed by the shareholders of Beijing Jingtian on July 31, 2008, were re-assigned
to ChinaCache Beijing’s shareholders or a party designated by ChinaCache Beijing’s shareholders.



Each shareholder of ChinaCache Shouming
executed an irrevocable power of attorney on August 20, 2018 appointing Xin Run or a person designated by Xin Run as his or her
attorney-in-fact to attend shareholders’ meetings of ChinaCache Shouming and to vote on his or her behalf on all matters
requiring shareholder approval, including but not limited to, the sale, transfer, pledge, or disposition of his or her shareholding
in ChinaCache Shouming. The power of attorney remains valid and irrevocable from the date of its execution, so long as he or she
remains the shareholder of ChinaCache Shouming.



Exclusive Option Agreements.
On September 23, 2005, ChinaCache Holdings entered into exclusive option agreements with Beijing Blue I.T. and each of its
two shareholders, Mr. Song Wang and Ms. Jean Xiaohong Kou. Such agreements were amended and supplemented on May 10,
2010 and superseded by the exclusive option agreements entered into by and among ChinaCache Holdings, Beijing Blue I.T. and each
of its two shareholders on January 20, 2016 and further superseded by the exclusive option agreements entered into by and
among ChinaCache Holdings, Beijing Blue I.T. and each of its two shareholders on December 19, 2016. Pursuant to these agreements,
the shareholders irrevocably granted ChinaCache Holdings or its designated representative an exclusive option to purchase, when
and to the extent permitted under PRC law, all or part of the equity interest in Beijing Blue I.T. The consideration in excess
of the outstanding loan amount when received by the shareholders upon the exercise of the exclusive option is required to be remitted
to ChinaCache Beijing in accordance with PRC law. The shareholders must remit any funds received from Beijing Blue I.T. to ChinaCache
Beijing in the manner permitted under PRC law, in the event that any distributions are made by Beijing Blue I.T. pursuant to any
written consents by ChinaCache Holdings. ChinaCache Holdings or its designated representative has sole discretion to decide when
to exercise the option and whether in part or in full. The term of these agreements is 10 years and will expire on December 19,
2026. The agreements may be renewed for an additional 10 years at ChinaCache Holdings’ sole discretion, and the times of
such renewals are unlimited.



On December 3, 2012, ChinaCache Beijing
entered into an exclusive option agreement with Beijing Jingtian and Ms. Huiling Ying, which superseded the exclusive option
agreements entered into on July 31, 2008 and their supplementary agreements entered into on May 10, 2010. On January
15, 2019, ChinaCache Beijing entered into an exclusive option agreement with Beijing Jingtian and Ms. Yating Yan. Pursuant to the
exclusive option agreements, the shareholders irrevocably granted ChinaCache Beijing or its designated representative an exclusive
option to purchase, to the extent permitted under PRC law, all or part of the equity interest in Beijing Jingtian. ChinaCache Beijing
has sole discretion to decide when to exercise the option and whether in part or in full. The term of these agreements is 10 years,
which may be renewed at ChinaCache Beijing’s sole discretion. Other terms of the exclusive purchase option agreements with
Beijing Jingtian are substantially the same as those of the agreement between ChinaCache Holdings and Beijing Blue I.T.



On August 20, 2018, Xin Run and ChinaCache
Shouming entered into an exclusive option agreement with each shareholder of ChinaCache Shouming. Pursuant to the exclusive option
agreements, the shareholders irrevocably granted Xin Run or its designated representative an exclusive option to purchase, to the
extent permitted under PRC law, all or part of the equity interest in ChinaCache Shouming. Xin Run has sole discretion to decide
when to exercise the option and whether in part or in full. The term of the exclusive option agreements is 10 years, which may
be renewed at Xin Run’s sole discretion. Other terms of the exclusive purchase option agreements with ChinaCache Shouming
are substantially the same as those of the agreement between ChinaCache Holdings and Beijing Blue I.T.





55







Agreements that Transfer Economic Benefits to Us or Absorb
Losses



Exclusive Business Cooperation Agreement.
Pursuant to the exclusive business cooperation agreement between ChinaCache Beijing and Beijing Blue I.T. entered into on September 23,
2005, ChinaCache Beijing agreed to provide Beijing Blue I.T. with exclusive business support and technical and consulting services,
including technical services, business consultations, intellectual property licensing, equipment or property leasing, marketing
consultancy, system integration, research and development, and system maintenance in return for fees determined at the sole discretion
of ChinaCache Beijing. Beijing Blue I.T. agreed that it will not accept any consultation or services provided by any third party
without ChinaCache Beijing’s prior written consent. ChinaCache Beijing is entitled to have exclusive and proprietary rights
and interests to any intellectual properties or technologies arising out of or created during the performance of this agreement.
Pursuant to the exclusive business cooperation agreement, ChinaCache Beijing and Beijing Blue I.T. entered into the exclusive technical
consultation and training agreement and exclusive technical support and service agreement (both described below), under which service
fees are paid by Beijing Blue I.T. to ChinaCache Beijing. The initial term of the exclusive business cooperation agreement is 10
years and it was extended for another ten years upon ChinaCache Beijing’s written confirmation on September 20 2015,
which will expire on September 23, 2025. Prior to this agreement’s and subsequent agreements’ expiration dates,
ChinaCache Beijing can at its sole discretion renew at a term of its choice through written confirmation.



The exclusive business cooperation agreement
dated July 31, 2008 between ChinaCache Beijing and Beijing Jingtian and the exclusive business cooperation agreement dated
August 20, 2018 between Xin Run and ChinaCache Shouming contain terms substantially similar to those of the exclusive business
cooperation agreement between ChinaCache Beijing and Beijing Blue I.T.



Exclusive Technical Consultation and
Training Agreement.On September 23, 2005, ChinaCache Beijing and Beijing Blue I.T. entered into an exclusive technical
consultation and training agreement. Under this agreement, ChinaCache Beijing agreed to provide Beijing Blue I.T. with evaluation
and analysis of Beijing Blue I.T.’s research and development system, process and results of operations, and training service.
In return, Beijing Blue I.T. agreed to pay ChinaCache Beijing service fees determined at the sole discretion of ChinaCache Beijing.
Beijing Blue I.T. agreed that it will not accept any consultation or services provided by any third party without ChinaCache Beijing’s
prior written consent. ChinaCache Beijing is entitled to have exclusive and proprietary rights and interests arising out of or
created during the performance of this agreement, whether by ChinaCache Beijing or Beijing Blue I.T., including but not limited
to, patent, copyright, and know-how property. The initial term of this agreement was five years and it was extended for another
five years upon ChinaCache Beijing’s written confirmation in September 2010 and was extended again for another five
years upon ChinaCache Beijing’s written confirmation on September 20, 2015 which will expire on September 23, 2020.
The term can be extended at the sole discretion of ChinaCache Beijing by written notice prior to the expiration of the term, and
the extended term shall be determined by ChinaCache Beijing.



Exclusive Technical Support and Service
Agreement. Pursuant to the exclusive technical support and service agreement between ChinaCache Beijing and Beijing Blue
I.T., entered into on September 23, 2005, ChinaCache Beijing has the exclusive right to provide Beijing Blue I.T. with technical
support and services, including but not limited to, research and development of technology, daily maintenance, monitoring, testing
and malfunction resolution of Beijing Blue I.T.’s equipment, and consultation on Beijing Blue I.T.’s network equipment,
products and software. In return, Beijing Blue I.T. agreed to pay ChinaCache Beijing service fees determined at the sole discretion
of ChinaCache Beijing. Beijing Blue I.T. agreed that it will not accept any consultation or services provided by any third party
without ChinaCache Beijing’s prior written consent. ChinaCache Beijing is entitled to have exclusive and proprietary rights
and interests arising out of or created during the performance of this agreement, whether by ChinaCache Beijing or Beijing Blue
I.T., including but not limited to, patent, copyright, and know-how property. The initial term of this agreement was five years
and it was extended for another five years upon ChinaCache Beijing’s written confirmation in September 2010 and was
extended again for another five years upon ChinaCache Beijing’s written confirmation on September 20, 2015 which will
expire on September 23, 2020. The term can be extended solely by ChinaCache Beijing by written notice prior to the expiration
of the term, and the extended term shall be determined by ChinaCache Beijing.



Equipment Leasing Agreement.
Under the equipment leasing agreement between ChinaCache Beijing and Beijing Blue I.T. dated September 23, 2005, ChinaCache
Beijing agreed to lease its equipment to Beijing Blue I.T. and Beijing Blue I.T. agreed to pay the rent within five business days
of the first month of each quarter. Beijing Blue I.T. can only use the equipment to conduct business according to its authorized
business scope. The initial term of this agreement was five years. The agreement may be renewed at ChinaCache Beijing’s sole
discretion. The agreement was extended for another five years upon ChinaCache Beijing’s written confirmation in September 2010
and was extended again for another five years upon ChinaCache Beijing’s written confirmation on September 20, 2015 which
will expire on September 23, 2020. The term can be extended solely by ChinaCache Beijing by written notice prior to the expiration
of the term, and the extended term shall be determined by ChinaCache Beijing.





56







Loan Agreements. Each shareholder
of Beijing Blue I.T. entered into a loan agreement on September 23, 2005 and a supplementary agreement on May 10, 2010
with ChinaCache Holdings. Pursuant to these agreements, ChinaCache Holdings provided an interest-free loan facility of RMB5.5 million
and RMB4.5 million, respectively, to the two shareholders of Beijing Blue I.T., Mr. Song Wang and Ms. Jean Xiaohong Kou,
for the purpose of providing capital to Beijing Blue I.T. to develop its business. In addition, ChinaCache Holdings also agreed
to provide continuous financial support to the shareholders of Beijing Blue I.T. to be used for the operations of Beijing Blue
I.T. The term of the loan agreement is ten years and it was extended for another ten years upon the contracting parties’
written confirmation on September 20, 2015, which will expire on September 23, 2025. The term of the loan agreement may
be extended upon mutual written consent of the parties. On January 20, 2016, each shareholder of Beijing Blue I.T. entered
into another loan agreement with ChinaCache Holdings. Pursuant to these agreements, ChinaCache Holdings provided an interest-free
loan facility of RMB5.5 million and RMB 4.5 million, respectively, to the two shareholders of Beijing Blue I.T., Mr. Song
Wang and Ms. Jean Xiaohong Kou, for the purpose of subscribe for the capital increase of Beijing Blue I.T. The term of the
loan agreement is ten years and expires on January 20, 2026. The term of the loan agreement may be extended upon mutual written
consent of the parties. On December 19, 2016, each shareholder of Beijing Blue I.T. entered into another loan agreement with
ChinaCache Holdings. Pursuant to these agreements, ChinaCache Holdings provided an interest-free loan facility of RMB11 million
and RMB9 million, respectively, to the two shareholders of Beijing Blue I.T., Mr. Song Wang and Ms. Jean Xiaohong Kou,
for the purpose of purchasing the increased capital of Beijing Blue I.T. The term of the loan agreement is ten years and expires
on December 19, 2026. The term of the loan agreement may be extended upon mutual written consent of the parties. In each loan
agreement, the method of repayment shall be at the sole discretion of ChinaCache Holdings and the proceeds from the transfer of
the shareholder’s equity interest in Beijing Blue I.T. to ChinaCache Holdings or another person designated by ChinaCache
Holdings as permitted under PRC law shall be used to repay the loan. The shareholders shall repay the loans immediately upon certain
events, including the shareholder leaving our employment, a third-party filing a claim against the shareholder which exceeds RMB100,000
or ChinaCache Holdings exercising its option to purchase the shareholder’s equity interest in Beijing Blue I.T. pursuant
to the exclusive option agreement described above. Each loan agreement contains a number of covenants that restrict the actions
the shareholders can take or cause Beijing Blue I.T. to take. For example, these covenants provide that the shareholder will:



| | · | not transfer, pledge or otherwise dispose of or encumber his or her equity interest in Beijing Blue I.T. without the prior written consent of ChinaCache Holdings;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | not take any action without the prior written consent of ChinaCache Holdings, if such action will have a material impact on the assets, business and liabilities of Beijing Blue I.T.;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | not vote for, or execute any resolutions to approve, any merger or consolidation with any person, or any acquisition of or investment in any person by Beijing Blue I.T. without the prior written consent of ChinaCache Holdings; and
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | vote to elect the director candidates nominated by ChinaCache Holdings.
| | - | -----------------------------------------------------------------------



Ms. Huiling Ying and Ms. Xinxin
Zheng, who were then shareholders of Beijing Jingtian, entered into a loan agreement on July 31, 2008, which was supplemented
on May 10, 2010 and December 3, 2012 with ChinaCache Beijing. Pursuant to these agreements, ChinaCache Beijing provided
an interest-free loan of RMB4,250,000 to Ms. Xinxin Zheng and Ms. Huiling Ying, as shareholders of Beijing Jingtian at
that time, for their investment in the registered share capital of Beijing Jingtian. On July 1, 2013, as a result of a transfer
by Ms. Xinxin Zheng of all her equity interests in Beijing Jingtian to Mr. Lei Wang. Ms. Zheng and Mr. Wang
entered into a loan assignment agreement, pursuant to which all liabilities of Ms. Zheng under the previous loan agreements
were assigned to and assumed by Mr. Wang. On January 15, 2019, as a result of a transfer by Mr. Lei Wang of all his equity
interests in Beijing Jingtian to Ms. Yating Yan., Mr. Wang and Ms. Yan entered into a loan assignment agreement, pursuant to which
all liabilities of Mr. Wang under the previous loan agreements were assigned to and assumed by Ms. Yan. The other terms
of these agreements are substantially the same as those of the loan agreement and supplementary agreement between ChinaCache Holdings
and the shareholders of Beijing Blue I.T. The term of these loan agreements is ten years from the date of execution. Such agreement
can be extended upon mutual written consent of ChinaCache Beijing and two shareholders of Beijing Jingtian. ChinaCache Holdings
also agreed to provide continuous financial support to the shareholders of Beijing Jingtian to be used for the operations of Beijing
Jingtian and agreed to forego the right to seek repayment in the event that the shareholders of Beijing Jingtian are unable to
repay such funding, to the extent permitted by PRC law.



Each of the shareholders of ChinaCache Shouming,
entered into a loan agreement on August 20, 2018 with Xin Run. Pursuant to these agreements, Xin Run provided an interest-free
loan of RMB9,900,000 to Ms. Yajun Liu and RMB100,000 to Tianjin Dingsheng for their investment in the registered share capital
of ChinaCache Shouming. The other terms of these agreements are substantially the same as those of the loan agreement and supplementary
agreement between ChinaCache Holdings and the shareholders of Beijing Blue I.T. The term of these loans is ten years from the date
of execution.





57







In the opinion of Han Kun Law Offices, our
PRC legal counsel, except as otherwise disclosed herein:



| | · | the ownership structure of our PRC subsidiary, our PRC consolidated variable interest entities and their branches and subsidiaries comply with all existing PRC laws and regulations;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | each and all of the currently effective documents under the VIE arrangements among us, our PRC subsidiary, PRC consolidated variable interest entities and their shareholders governed by PRC law are valid, binding and enforceable, and will not result in any violation of PRC laws or regulations currently in effect; and
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | the business operations of our PRC subsidiary, our PRC consolidated variable interest entities and their branches and subsidiaries are in all material respects in compliance with existing PRC laws and regulations and the terms of their licenses and permits.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



We have been advised by our PRC legal counsel,
however, that there are substantial uncertainties regarding the interpretation and application of current and future PRC laws and
regulations. Accordingly, there can be no assurance that the PRC regulatory authorities, in particular the MIIT, which regulates
providers of content and application delivery services and other participants in the PRC telecommunications industry, and the Ministry
of Commerce, will not in the future take a view that is contrary to the above opinion of our PRC legal counsel. We have been further
advised by our PRC legal counsel that if the PRC government finds that the agreements that establish the structure for operating
our content and application delivery business in China do not comply with PRC government restrictions on foreign investment in
the telecommunications industry, we could be subject to severe penalties including being prohibited from continuing our operations.
See “Item 3. Key Information — D. Risk Factors — Risks Related to Our Corporate Structure—If the PRC government
finds that the arrangements that establish the structure for operating our business do not comply with PRC government restrictions
on foreign investment in the telecommunications business, we could be subject to severe penalties.” In addition, these contractual
arrangements may not be as effective in providing us with control over Beijing Blue I.T., Beijing Jingtian and ChinaCache Shouming
as would direct ownership of such entities. See “Item 3 Key Information — D. Risk Factors — Risks Related to
Our Corporate Structure — We rely on contractual arrangements with Beijing Blue I.T., Beijing Jingtian and ChinaCache Shouming
and their respective shareholders for our China operations, which may not be as effective as direct ownership in providing operational
control.”



|D. | Property, Plants and Equipment
|-- | ------------------------------



Our headquarters are located at Section A,
Building 3, Dian Tong Creative Square, No. 7 Jiuxianqiao North Road, Chaoyang District, Beijing 100015, PRC, where we lease
approximately 5092square meters of office space. As of December 31, 2017, our other offices in mainland China occupied an
aggregate of 945square meters of leased space, and we also leased an aggregate of 532 square feet in the  U.S., London and
Hong Kong. In addition, we owned two office buildings of, in aggregate, approximately 10,000 square meters in California, the U.S.,
to expand our research and development capacity and support our global operations. One of these two buildings is currently leased
out.







We have paid RMB51.9 million to acquire
land use right in relation to approximately 39,000 square meters of land in Tianzhu Comprehensive Bonded Zone in Beijing. See “Item
5. Operating and Financial Review and Prospects — B. Liquidity and Capital Resources — Capital Expenditures.”
In December 2014, we entered into agreements with BFSMC, pursuant to which we agreed to sell to BFSMC one of the data center
buildings with construction areas of approximately 14,208 square meters, which has been constructed on the aforementioned land
in the Tianzhu Comprehensive Bonded Zone. Under our framework agreement with BFSMC, we agreed to sell two buildings to a subsidiary
of BFSMC through transferring the equity interest of our subsidiary Beijing Zhao Du, the owner of the buildings. In addition, we
agreed to lease back the buildings from the subsidiary of BFSMC starting from an agreed earlier date. We also reached a supplemental
company letter with BFSMC, pursuant to which we agreed that September 30, 2015 should be deemed as the date of delivery as
long as we complete the actual delivery of the buildings as well as the equity transfer by December 31, 2016. If the equity
transfer and other agreed procedures are completed on time, our liabilities shall be deemed fully discharged. However, BFSMC has
not accepted the buildings by December 31, 2016 due to our disagreement with BFSMC on the standard of delivery and acceptance
of the buildings. Therefore, we re-negotiated with BFSMC and reached a series of new agreements with BFSMC in July 2017. Pursuant
to the new agreements, BFSMC agreed to make the payments of RMB105.6 million to us immediately upon the completion of equity transfer
of Beijing Zhao Du. Although we have completed the transfer of the equity interest in Beijing Zhao Du and the ownership of the
buildings in July 2017, BFSMC failed to make the payments of RMB105.6 million to us as agreed. We have filed a lawsuit with
the court, claiming the payment of the outstanding amount of consideration and the interest accrued thereon in August 2017.
In September 2017, BFSMC filed a counterclaim to sue for, among others, the late delivery penalties and other relating losses.
Thereafter we filed a motion to dismiss BFSMC’s counterclaim arguing that the court does not have the jurisdiction. Management
is of the view that these proceedings are at a preliminary stage, therefore it is impossible at this stage to properly evaluate
the outcome. Therefore, no provision has been made for this case. In April 2018, we were notified by the court that our motion
was rejected and Xin Run’s bank deposits and other assets in a total amount of approximately RMB 50.5 million were sealed
up, distrained or frozen by the court. On April 24, 2018, we amended our claim requesting, among other things, the defendant pay
the additional purchase price of RMB96 million, damages for breach of contract in an amount of RMB14.4 million and the relating
interest of RMB8.86 million. In addition, in October 2017, a subsidiary of BFSMC filed a lawsuit against Xin Run in the Shunyi
District Court of Beijing requesting Xin Run pay overdue rent and the relating interest . Unfortunately, Xin Run lost, and the
court ruled that Xin Run should pay overdue rent in an amount equal to RMB64.8 million and the relevant interest thereon. The subsidiary
of BFSMC has applied to the competent court for compulsory execution of the court decision. In June 2019, the foregoing subsidiary
of BFSMC filed another lawsuit against Xin Run in the Shunyi District Court of Beijing requesting Xin Run pay overdue rent from
July 2018 to March 2019 in an amount equal to RMB64.8 million and the relating interest thereon. Management is of the view that
these proceedings are at a preliminary stage, therefore it is impossible at this stage to properly evaluate the outcome, however,
the Company accrued the liability accordingly. . Please see “Item 8. Financial Information – A. Consolidated Statements
and Other Financial Information – Legal Proceedings” for more information. In April 2014, we entered into a framework
agreement with People.cn, pursuant to which we agreed to sell to People.cn one of the data center buildings to be constructed in
the Tianzhu Comprehensive Bonded Zone. This building has been put into use. On December 29, 2017, Xin Run entered into a framework
agreement with People.cn, under which, among others, Xin Run will transfer 100% equity interest in Beijing Shuoge Technology Co.,
Ltd. to People.cn subject to terms and conditions to be set forth in a definitive equity transfer agreement. On April 3, 2019,
Xin Run entered into a definitive equity transfer agreement and other relevant documents with People.cn, pursuant to which, among
others, Xin Run agrees to transfer 100% equity interest in Beijing Shuoge Technology Co., Ltd. to People.cn and return RMB73.2
million prepaid by People.cn before December 31, 2024.





58







|ITEM 4A. | UNRESOLVED STAFF COMMENTS
|-------- | -------------------------



None.



|ITEM 5. | OPERATING AND FINANCIAL REVIEW AND PROSPECTS
|------- | --------------------------------------------



The following discussion and analysis
of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and
the related notes included elsewhere in this annual report on Form 20-F. This discussion and analysis may contain forward-looking
statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from
those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Item
3. Key Information — D. Risk Factors” or in other parts of this annual report on Form 20-F.



|A. | Operating Results
|-- | -----------------



Key Factors Affecting Our Results of Operations



Our financial condition and results of operations
are mainly affected by the following factors:



Number of active customers and customer mix



The number of active customers affects our
revenues. We had approximately 1,999, 1,789 and 1,665 active customers as of December 31, 2016, 2017 and 2018, respectively.
Revenues from our top five customers accounted for 48.2%, 57.2% and 68.5%of our total net revenues in 2016, 2017 and 2018, respectively.



Our revenues are also affected by the composition
of our customer base, which we refer to as customer mix. Our revenues in 2018 increased as compared to that in 2017, mainly due
to increase in high-value customers and increase in sales volume. We intend to attract and retain more high-value customers to
increase our revenues and to maintain our margin at a stable level, meanwhile, we target gradual improvement in margins as our
scale grow to stable and maintain an optimal level of customer mix.



Selling price



We operate in a competitive market and we
face pricing pressure for our services. We typically charge customers on a per-gigabit per-second basis for the bandwidth usage
or per-gigabyte basis for traffic volume used. Prices for our services are affected by a variety of factors, including supply and
demand conditions and pricing pressures from our competitors. In recent years, the selling prices for our services have declined.
The price erosion was partially due to price discounts granted at the outset of the arrangement to customers with large contractual
service commitments. Furthermore, increased competition has also caused price declines. We expect that we will continue experiencing
pricing pressure in the future and thus we must reduce our cost of revenues to offset the price decline and to maintain and increase
our gross profit.





59







Cost reductions





Our ability to achieve and increase profitability
depends on our ability to effectively reduce our cost of revenues. Our cost of revenues as a percentage of our total net revenues
decreased from 102.2% in 2016 to 91.7% in 2017, and 72.2% in 2018, primarily as a result of improved bandwidth using efficiency.
  We plan to devote significant resources to enhancing the efficiency of our operations and further to improve our bandwidth
usage.



Components of Results of Operations



Revenues



In 2016, 2017 and 2018, we generated net
revenues of RMB1,054.2 million, RMB852.6million and RMB922.6 million (US$134.2 million) respectively.



Most of our revenues were derived from the
sale of our content and application delivery total solutions to our customers. We typically charge customers on a per-gigabit per-second
basis for the bandwidth usage or per-gigabyte basis for traffic volume used. Our customer service agreements generally commit the
customers to a minimum level of usage and specify the rate that the customers must pay for actual usage above the minimum usage
commitment. These agreements typically provide for a one-year term with a one-year renewal option.



The number of our active customers has decreased
from 1,999 as of December 31, 2016 to 1,789 as of December 31, 2017 and further to 1,665 as of December 31, 2018. We
categorize our customers into five industry groups: internet and software, mobile internet, media and entertainment, enterprises
and e-commerce and government agencies. Due to the changing competition landscape, our sales to customers in the media and entertainment,
internet and software, mobile internet, enterprises and e-commerce industry groups fluctuated over time. During any given period,
a relatively small number of customers typically accounts for a significant percentage of our total net revenues.





60







Cost of Revenues and Operating Expenses



The following table  sets forth, for
the periods indicated, our cost of revenues and operating expenses, in absolute amount and as a percentage of total net revenues:





|                                                                     |  | For the year ended
    December 31, |          
|-------------------------------------------------------------------- |  | ----------------------------------- | ---------
|                                                                     |  | 2016                                |          
|                                                                     |  | RMB                                 |          
|                                                                     |  | (in thousands, except percentages)  |          
|Net Revenues                                                         |  |                                     |          
|Third party customers                                                |  |                                     | 1,054,235
|Total Net Revenues                                                   |  |                                     | 1,054,235
|Cost of revenues(1)(2)                                               |  |                                     |          
|Bandwidth, co-location and storage fees                              |  |                                     | 842,726  
|Depreciation of network equipment                                    |  |                                     | 134,079  
|Payroll and other compensation costs of network operations personnel |  |                                     | 76,702   
|Other cost of revenues                                               |  |                                     | 24,303   
|Total cost of revenues                                               |  |                                     | 1,077,810
|Other operating (income) loss                                        |  |                                     | 19,044   
|Operating expenses(1)                                                |  |                                     |          
|Sales and marketing expenses                                         |  |                                     | 93,603   
|General and administrative expenses                                  |  |                                     | 256,007  
|Provision (recovery of provision) for doubtful accounts receivable   |  |                                     | 9,010    
|Research and development expenses                                    |  |                                     | 104,018  
|Impairment of long-lived assets                                      |  |                                     | 399,094  
|Impairment of long-term investments                                  |  |                                     | 18,240   
|Total operating expenses                                             |  |                                     | 879,972  





|(1) | Includes share-based compensation
    expenses as follows:
|--- | ----------------------------------------------------------





|                                                                                                |  | For the year ended
    December 31, |       
|----------------------------------------------------------------------------------------------- |  | ----------------------------------- | ------
|                                                                                                |  | 2016                                |       
|                                                                                                |  | RMB                                 |       
|                                                                                                |  | (in thousands, except percentages)  |       
|Allocation of share-based compensation expense                                                  |  |                                     |       
|Cost of revenues                                                                                |  |                                     | 5,961 
|Sales and marketing expenses                                                                    |  |                                     | 2,753 
|General and administrative expenses                                                             |  |                                     | 72,483
|Research and development expenses                                                               |  |                                     | 3,828 
|Total share-based compensation expenses included in cost of
    revenues and operating expenses |  |                                     | 85,025





|(2) | Includes amount to a related party of nil, nil
    and nil  for the years ended December 31, 2016, 2017 and 2018, respectively.
|--- | -------------------------------------------------------------------------------------------------------------------------------





61







Cost of Revenues



Our cost of revenues primarily consists
principally of the following:



| | · | bandwidth, co-location and storage fees;
| | - | ----------------------------------------



| | · | depreciation of network equipment;
| | - | ----------------------------------



| | · | payroll and other compensation costs of network operations personnel; and
| | - | -------------------------------------------------------------------------



| | · | other cost and expenses that are directly attributable to the provisions of our content and application delivery total solutions.
| | - | ---------------------------------------------------------------------------------------------------------------------------------





62







Bandwidth, co-location and storage fees
are the amounts we pay to purchase bandwidth usage, co-location services and data storage from telecommunications carriers or
ISPs. For the years ended December 31, 2016 ,2017 and 2018, 82%, 81% and 52%, respectively, of our bandwidth, co-location
and data storage were purchased from three major PRC telecommunications carriers, China Telecom, China Mobile and China Unicom,
through their respective subsidiaries and sale agents. Our agreements with the telecommunication carriers typically use a standard
form provided by the carriers, with pricing terms individually negotiated with the carriers’ local subsidiaries or sale
agents. The agreements are typically of a one-year term with renewal options. We pay monthly service fees based on the number
of internet gateways, bandwidth usage and the number of server clusters.



Depreciation of network equipment expenses
primarily consists of the depreciation associated with our network servers and backbone. In April 2008, we entered into an
agreement with Tong Zhen Networks Co., Ltd., an independent third party, pursuant to which we agreed to lease an optical fiber
cable from Beijing to Hangzhou for a term of 20 years commencing from the date of the agreement. We have prepaid an aggregate amount
of RMB13.1 million in rental fees for the entire 20-year period. We also have the right to renew the lease by notifying the lessor
within 12 months prior to the expiration date of the lease. Depreciation of network equipment and amortization of intangible assets
decrease from RMB134.1 million in 2016 to RMB9.2 million in 2017. There is no impairment occurred in 2018. (2016: RMB399 million
and 2017 RMB 21.8 million). Our depreciation expense in each period is closely correlated to the amount of equipment we purchased.
We had capital expenditures of RMB576.5 million, RMB45.7 million and RMB336.1 million (US$48.9 million) in 2016 2017 and 2018,
respectively.



Our cost of revenues decreased from RMB1,077.8
million in 2016 to RMB781.8million in 2017 and then decreased to RMB 666.2 million (US$96.9 million) in 2018. Our cost of revenues
as a percentage of our total net revenues decreased from 102.2% in 2016 to 91.7% in 2017 and then decreased to 72.2% in 2018.
The decrease from 2017 to 2018 in terms of percentage was primarily due to the improvement of operating efficiency from 2017 to
2018. Overall, we expect that our cost rate will continue to decrease as we expand our operations; however, such improvement is
likely to be partially offset by lower unit price from the existing or potential customers.



Other Operating Loss



Our other operating loss was RMB27.4
million (US$4.0 million) for the year ended December 31, 2018, which was primarily due to the provision of late delivery
penalties accrued on our agreements with BFSMC.



As a percentage of our total net revenues,
our other operating loss was 3.0% for the year ended December 31, 2018.



Operating Expenses



Our operating expenses primarily consist
of sales and marketing expenses, general and administrative expenses and research and development expenses.



Sales and Marketing Expenses.



Our sales and marketing expenses primarily
consist of the following:



| | · | salary and benefit expenses for our sales and marketing staff, including share-based compensation expenses;
| | - | -----------------------------------------------------------------------------------------------------------



| | · | promotion and marketing expenses, including costs for sponsoring special promotional and marketing events and organizing and participating in industry conferences and related expenses for business development activities; and
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | travel-related expenses to support sales and marketing functions.
| | - | -----------------------------------------------------------------



Our sales and marketing expenses
decreased from RMB93.6 million for the year ended December 31, 2016 to RMB61.8 million for the year ended
December 31, 2017 and decrease to RMB 36.4 million (US$5.3 million) for the year ended December 31, 2018. The decrease
from 2017 to 2018 was primarily due to our improved cost control measures, and improved efficiency in the output by sales
staff.





63







As a percentage of our total net revenues,
our sales and marketing expenses decrease from 8.9% for the year ended December 31, 2016 to 7.3% for the year ended December 31,
2017, and decreased to 3.9% for the year ended December 31, 2018. Going forward, we expect our sales and marketing expenses to
decrease in absolute dollar amount as we expect our existing marketing initiatives will be more effectively aligned with CDN business
consolidation while gearing towards promoting internet data center service offerings.



General
and Administrative Expenses.



Our general and administrative expenses
primarily consist of the following:



| | · | salary and benefit expenses for management and administrative staff, including share-based compensation expenses;
| | - | -----------------------------------------------------------------------------------------------------------------



| | · | depreciation of facilities and office equipment; and
| | - | ----------------------------------------------------



| | · | professional service expenses.
| | - | ------------------------------



Our general and administrative expenses
decreased from RMB256.0 million for the year ended December 31, 2016 to RMB142.7 million for the year ended December 31,
2017, and decreased to RMB 128.3 million (US$18.7 million) for the year ended December 31, 2018. The decrease from
2017 to 2018 was primarily due to the improved efficiency in management staff and improved cost control measures



As a percentage of our total net revenues,
our general and administrative expenses decreased from 24.3% for the year ended December 31, 2016 to 16.7% for the year ended
December 31, 2017, and slightly decreased to 13.9% for the year ended December 31, 2018. However, we expect that our
general and administrative expenses in absolute amount will continue to decrease.





Provision for doubtful accounts receivable.Our provision for doubtful accounts receivable increased from RMB9.0 million for the year ended December 31, 2016 to RMB17.5
million for the year ended December 31, 2017 and decrease to RMB1.1 million (US$0.2 million) for the year ended December 31,
2018. The decrease from 2017 to 2018 was primarily due to the improvement of account receivables collectability in 2018.



As a percentage of our total net revenues,
our provision for doubtful accounts receivable increased from 0.8% for the year ended December 31, 2016 to 2.1% for the year
ended December 31, 2017 and decreased to 0.1% for the year ended December 31, 2018.



Research and Development Expenses.
Our research and development expenses primarily consist of payroll and related personnel costs, including share-based compensation
expenses. Research and development costs are expensed as incurred. Our research and development expenses decreased from RMB104.0
million for the year ended December 31, 2016 to RMB81.7 million for the year ended December 31, 2017 and then to RMB
68.4 million (US$10.0 million) for the year ended December 31, 2018.



As a percentage of our total net revenues,
our research and development expenses decreased from 9.9% for the year ended December 31, 2016 to 9.6% for the year ended
December 31, 2017 and decreased to7.4% We anticipate that our research and development expenses will decrease in the absolute
dollar amount as we believe that we will better align our R&D resources to consolidate our product support platforms in response
to a mature CDN market and the need to exercise cost control in all areas of operations.



Impairments of long-lived assets.We recorded the impairment of long-lived assets of RMB399.1 million, RMB21.8 million and nil for the year ended December
31, 2016, 2017 and 2018, respectively, due to the improvement of the operating results and optimistic forecast, we recognize less
impairment charge in fiscal year 2017 and nil in 2018.





64







Impairment of long-term investments.
Our impairment of long-term investments was RMB18.2 million , RMB 3.7 million and nil for the year ended December 31, 2016,
2017 and 2018, respectively.



Critical Accounting Policies



We prepare our financial statements in accordance
with U.S. GAAP, which requires us to make significant judgments, estimates and assumptions that affect, among other things, the
reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the end of each reporting period,
and the reported amounts of revenues and expenses during each reporting period. We continually evaluate these estimates and assumptions
based on the most recently available information, our own historical experience and various other assumptions that we believe to
be reasonable under the circumstances. Since the use of estimates is an integral component of the financial reporting process,
actual results could differ from those estimates.



Some of our accounting policies require
higher degrees of judgment than others in their application. When reviewing our consolidated financial statements, you should consider
our selection of critical accounting policies, the judgment and other uncertainties affecting the application of such policies,
and the sensitivity of reported results to changes in conditions and assumptions. We consider the policies discussed below to be
critical to an understanding of our consolidated financial statements as their application places significant demands on the judgment
of our management. The following descriptions of our critical accounting policies, judgments and estimates should be read in conjunction
with our consolidated financial statements, the risks and uncertainties described under “Item 3. Key Information —
D. Risk Factors” and other disclosures included in this annual report.



Revenue Recognition



We provide a portfolio of content and application
delivery total solutions, including web page content services, file transfer services, rich media streaming services, guaranteed
application delivery, managed internet data services, cloud hosting services, content bridging services, mobile internet solution
and value-added services to our customers to improve the performance, reliability and scalability of their online services and
applications.



On January 1, 2018, we adopted ASU
No. 2014-09, Revenue from Contracts with Customers, (“ASC 606”), which supersedes the revenue recognition requirements
in ASC Topic 605, Revenue Recognition, (“ASC 605”), using the modified retrospective transition method applied to those
contracts which were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented
under ASC 606, while prior period amounts have not been adjusted and continue to be reported in accordance with historic accounting
under ASC 605. The impact of adopting the new revenue standard was not material to consolidated financial statements and there
was no adjustment to beginning retained earnings on January 1, 2018.



Under ASC 606, an entity recognizes revenue
as we satisfy a performance obligation when its customer obtains control of promised goods or services, in an amount that reflects
the consideration that the entity expects to receive in exchange for those goods or services. To determine revenue recognition
for arrangements that an entity determines are within the scope of ASC 606, the entity performs the following five steps: (i) identify
the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price,
including variable consideration, if any; (iv) allocate the transaction price to the performance obligations in the contract; and
(v) recognize revenue when (or as) the entity satisfies a performance obligation. We only apply the five-step model to contracts
when it is probable that the entity will collect the consideration to which it is entitled in exchange for the goods or services
it transfers to the customer.



Once a contract is determined to be within
the scope of ASC 606 at contract inception, we review the contract to determine which performance obligations it must deliver and
which of these performance obligations are distinct. We recognize revenue based on the amount of the transaction price that is
allocated to each performance obligation when that performance obligation is satisfied or as it is satisfied.



We are a principal and records revenue on
a gross basis when we are is primarily responsible for fulfilling the service, have discretion in establish pricing and controls
the promised service before transferring that service to customers. Otherwise, we record revenue at the net amounts as commissions.



We derive revenue primary from the delivery
of CDN, IDC and IX.



We provide CDN services to customers. CDN
is a content distribution network built on the network. Relying on the edge servers deployed in various regions, through load balancing,
content distribution, scheduling and other functional modules of the central platform, CDN enables users to obtain the required
content nearby, reduces network congestion, and improves user access response speed and hit rate.





CDN is a content distribution network built
on the network. Relying on the edge servers deployed in various regions, through load balancing, content distribution, scheduling
and other functional modules of the central platform, CDN enables users to obtain the required content nearby, reduces network
congestion, and improves user access response speed and hit rate. For revenue stream of CDN, the promised service is to provide
CDN service to the customer, which is qualified as a single distinct performance obligation. The contract price is fixed when entered
into by the both parties. CDN services are typically provided to customers over the contract service period and the related revenues
are recognized on a straight-line basis over the term of the contract. The Company is a principal and records revenue for CDN service
on a gross basis.





65









IDC services provide cabinet rental and
bandwidth service to customer. The Company provides two promised services, cabinet rental and bandwidth service. According to 606-10-25-19,
though the service is capable of being distinct as the customer can benefit from the good or service on its own, which is evidenced
by the fact that these two service is capable of being separated by its nature. However, the promise to transfer service is not
distinct within the context of the contract and the goal of IDC is to combine traditional internet data center and content delivery.
The reason why the customers renting the Company’s cabinet is not only to benefit from the Company’s physical hosting
location and maintenance service, but also to enjoy the bandwidth service provided by the Company. It is cost efficient to consume
the Company’s bandwidth service rather than to connect directly to bandwidth service provider such as China Unioncom or China
Mobile. Thus these two promise service within the contract of IDC service-cabinet rental and bandwidth service are not distinct
and shall be identified as one performance obligation.Typically IDC services are provided to customers for a fixed amount over
the contract service period and the related revenues are recognized on a straight-line basis over the term of the contract. The
Group is a principal and records revenue for IDC service on a gross basis.



IX Services allow networks to interconnect
directly, via the exchange, rather than through one or more third-party networks. The primary advantages of direct interconnection
are cost, latency, and bandwidth. Same as IDC, there are two promised service within the contract, one is to provide a port usage
and the other is to provide bandwidth. However, the service is not distinct within context of the contract as the services provided
is highly integrated. Thus only one performance obligation is indentified for IX revenue stream. The contract price is fixed when
entered into by the both parties. IX services are provided to customers over the contract service period and the related revenues
are recognized on a straight-line basis over the term of the contract. The Company is a principal and records revenue for IX service
on a gross basis.



For certain arrangements, customers are
required to pay us before the services are delivered. When either party to a revenue contract has performed, we recognize a contract
asset or a contract liability in the consolidated balance sheet, depending on the relationship between our performance and the
customer’s payment. Contract liabilities were mainly related to fee received for Hosting services to be provided over the
contract period, which were presented as deferred revenue on the consolidated balance sheets.



Fair Value of Financial Instruments



The carrying amounts of financial assets
and liabilities, such as cash and cash equivalents, restricted cash, accounts receivable, other receivables included in prepaid
expenses and other current assets, short-term investments, short term borrowings, accounts payables, balances with related parties
and other payables, approximate their fair values because of the short-term maturity of these instruments. The carrying amounts
of long-term borrowings approximates its fair value since it bears interest rate which approximates market interest rates. Available-for-sale
investments were initially recognized at cost and subsequently remeasured at the end of each reporting period with the adjustment
in its fair value recognized in accumulated other comprehensive income. With the assistance of an independent third-party valuation
firm, we determined the estimated fair value of its available-for-sale investments that are recognized in the consolidated financial
statements.





66







Consolidation of Variable Interest Entity



We have adopted ASC 810-10, “Consolidation:
Overall.” ASC 810-10 requires certain variable interest entities to be consolidated by the primary beneficiary of the entity
if the equity investors in the entity do not have the characteristics of a controlling financial interest or do not have sufficient
equity at risk for the entity to finance its activities without additional subordinated financial support from other parties.



PRC laws and regulations currently restrict
foreign ownership of telecommunications value-added services, including content and application delivery services. To comply with
these foreign ownership restrictions, we operate our business in China through our consolidated variable interest entities, Beijing
Blue I.T., Beijing Jingtian and ChinaCache Shouming, which are wholly owned by PRC citizens. Beijing Blue I.T., Beijing Jingtian
and ChinaCache Shouming hold the licenses and approvals that are required to operate our business. The Company and ChinaCache Beijing
have entered into a series of contractual arrangements with Beijing Blue I.T. and Beijing Jingtian and their shareholders. The
Company and Xin Run have entered into a series of contractual arrangements with ChinaCache Shouming and its shareholders. See “Item
4. Information on the Company — C. Organizational Structure — Contractual Arrangements with Our Consolidated Variable
Interest Entities.” As a result of these contractual agreements, we have the substantial ability to control Beijing Blue
I.T., Beijing Jingtian and ChinaCache Shouming and receive substantially all the profits and absorb all the expected losses of
Beijing Blue I.T., Beijing Jingtian and ChinaCache Shouming. Therefore we are considered the primary beneficiary of Beijing Blue
I.T., Beijing Jingtian and ChinaCache Shouming. Accordingly, Beijing Blue I.T., Beijing Jingtian and ChinaCache Shouming are our
VIEs under U.S. GAAP and we consolidate their results in our consolidated financial statements. In the opinion of our PRC legal
counsel, except as otherwise disclosed herein, the ownership structure of our PRC subsidiary, our PRC consolidated variable interest
entities and their branches and subsidiaries comply with all existing PRC laws and regulations. Any changes in PRC laws and regulations
that affect our ability to control Beijing Blue I.T., Beijing Jingtian and ChinaCache Shouming might preclude us from consolidating
Beijing Blue I.T., Beijing Jingtian in the future and ChinaCache Shouming.



Impairment of Long-lived Assets



We evaluate our long-lived assets or asset
group, including intangible assets with finite lives, for impairment whenever events or changes in circumstances, such as a significant
adverse change to market conditions that will impact the future use of the assets, indicate that the carrying amount of an asset
or a group of long-lived assets may not be recoverable. When these events occur, we evaluate potential impairment by comparing
the carrying amount of the assets to future undiscounted net cash flows expected to result from the use of the assets and their
eventual disposition. If the sum of the expected undiscounted cash flow is less than the carrying amount of the assets, we would
recognize an impairment loss based on the excess of the carrying amount of the asset group over its fair value. For long-lived
assets held for sale, assets are written down to fair value less cost to sell. Fair value is generally determined by discounting
the cash flows expected to be generated by the assets, when the market prices are not readily available for the long-lived assets.



Due to the improvement of the operating
results and optimistic forecast, we did not recognize any impairment charge this year. We determined the fair value of the asset
group using the income approach based on the discounted expected cash flows associated with the asset group. The discounted cash
flow for the asset group were based on three-year projections which is consistent with its remained useful lives of the principal
assets. Cash flow projections were based on past experience, actual results of operations and management best estimates about future
developments as well as certain market assumptions.



We fully impaired the net value of our property
and equipment and intangible assets excluding the PPE of new business of CHN-IX as of December 31, 2018.



Impairment charge was RMB399.1 million,
RMB21.8 million and nil for the year ended December 31, 2016, 2017 and 2018, respectively.





67







Long-lived assets (disposal group) to be disposed of by
sale



We classify long-lived assets and disposal
groups as held for sale if their carrying amounts will be recovered principally through disposal by sale rather than through continuing
use. Such long-lived assets and disposal groups are measured at the lower of their carrying amount and fair value less costs to
sell. Costs to sell are the incremental costs directly attributable to the sale, excluding the finance costs and income tax expense.



The criteria for held for sale classification
is regarded as met only when the sale is highly probable and the asset or disposal group is available for immediate sale in its
present condition. Actions required to complete the sale should indicate that it is unlikely that significant changes to the sale
will be made or that the decision to sell will be withdrawn.



Property and equipment and intangible assets
are not depreciated or amortized once classified as held for distribution.



Assets and liabilities classified as held
for sale are presented separately as current items in the consolidated balance sheets.



A disposal group qualifies as discontinued
operation if it is a component of an entity that either has been disposed of, or is classified as held for sale, and the disposal
represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results.



If circumstances arise that previously were
considered unlikely and, as a result, an entity decides not to sell a long-lived asset or disposal group previously classified
as held for sale, the asset or disposal group would be reclassified as held and used. We measure long-lived assets that are reclassified
on an individually basis at the lower of the following:



| | a. | Its carrying amount before the asset or disposal group was classified as held for sale, adjusted for any depreciation or amortization expense that would have been recognized had the asset or disposal group been continuously classified as held and used; and
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b. | Its fair value at the date of the subsequent decision not to sell.
| | -- | ------------------------------------------------------------------





A disposal group qualifies as discontinued
operation if it is a component of us that either has been disposed of, or is classified as held for sale, and the disposal represents
a strategic shift that has (or will have) a major effect on our operations and financial results.



Available-for-sale investments





Investments not classified as trading or
as held-to-maturity are classified as available-for-sale securities. Such available-for-sale investments are reported at fair value,
with unrealized gains and losses recorded in accumulated other comprehensive loss in shareholders’ deficit. Realized gains
or losses are charged to earnings during the period in which the gain or loss is realized. If we determine a decline in fair value
is other-than-temporary, the cost basis of the individual security is written down to its estimated fair value. The new cost basis
will not be adjusted for subsequent recoveries in fair value. Determination of whether declines in value are other-than-temporary
requires significant judgment. Subsequent increases and decreases in the fair value of available-for-sale securities will be included
in other comprehensive loss except for an other-than-temporary impairment, which would be charged to current period earnings. Impairment
of available-for-sale investment for the years ended December 31, 2016 2017 and 2018 were nil, RMB3.3 million and nil respectively.



Cost Method Investment





Prior to adopting ASC Topic 321 (“ASC
321”), Investments – Equity Securities, on January 1, 2018, we carry at cost its investments in investees that do not
have readily determinable values or investments and over which we do not have significant influence, in accordance with ASC subtopic
325-20 (“ASC 325-20”), Investments-Other: Cost Method Investments. We carry the investment at cost and only adjusts
for other-than-temporary declines in fair value and distributions of earnings that exceed our share of earnings since its investment.



Management regularly evaluates the impairment
of equity investments without readily determinable fair value based on the performance and financial position of the investee
as well as other evidence of market value. Such evaluation includes, but is not limited to, reviewing the investee’s cash
position, recent financing, projected and historical financial performance, cash flow forecasts and financing needs. An impairment
loss is recognized in earnings equal to the excess of the investment’s cost over its fair value at the balance sheet date
of the reporting period for which the assessment is made. The fair value would then become the new cost basis of investment. Impairment
of cost method investment for the years ended December 31, 2016, 2017 and 2018 were RMB18.2 million, RMB0.4 million and nil, respectively.



We adopted ASC 321 on January 1, 2018 and
the cumulative effect of adopting the new standard on opening accumulated deficit is nil. Pursuant to ASC 321, equity investments,
except for those accounted for under the equity method and those that result in consolidation of the investee and certain other
investments, are measured at fair value, and any changes in fair value are recognized in earnings. For equity securities without
readily determinable fair value and do not qualify for the existing practical expedient in ASC Topic 820 (“ASC 820”),
Fair Value Measurements and Disclosures, to estimate fair value using the net asset value per share (or its equivalent) of the
investment, we elected to use the measurement alternative to measure those investments at cost, less any impairment, plus or minus
changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer,
if any. Equity securities with readily determinable fair value are measured at fair values, and any changes in fair value are recognized
in earnings.



Pursuant to ASC 321, for equity investments
measured at fair value with changes in fair value recorded in earnings, we do not assess whether those securities are impaired.
For those equity investments that we elect to use the measurement alternative, we make a qualitative assessment of whether the
investment is impaired at each reporting date.  If a qualitative assessment indicates that the investment is impaired, the
entity has to estimate the investment’s fair value in accordance with the principles of ASC 820. If the fair value is less
than the investment’s carrying value, the entity has to recognize an impairment loss in net income equal to the difference
between the carrying value and fair value.





68







Income Taxes



We follow the liability method in accounting
for income taxes in accordance with ASC topic 740 (“ASC 740”). Under this method, deferred tax assets and liabilities
are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax
rates that will be in effect in the period in which the differences are expected to reverse. We record a valuation allowance against
deferred tax assets if, based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the
deferred tax assets will not be realized.



We adopted ASC 740 to account for uncertainty
in income taxes. ASC 740 clarifies the accounting for uncertainty in income taxes by prescribing the recognition threshold a tax
position is required to meet before being recognized in the consolidated financial statements. We have elected to classify interest
and penalties related to unrecognized tax benefits, if and when required, as part of “interest expense” and “other
expenses,” respectively, in the consolidated statements of comprehensive loss.



Share-based Compensation



Share options and restricted share units
award granted to employees are accounted for under ASC 718 Compensation – Stock Compensation. In accordance with ASC 718,
we determine whether share options or restricted share units award should be classified and accounted for as liability or equity
award. All grants of share options and restricted share units award to employees classified as equity award are recognized in the
financial statements over their requisite service periods based on their grant date fair values.



We have elected to recognize compensation
expenses using the accelerated method for its share options and restricted share units granted. For restricted share awards granted
with performance conditions, we commence recognition of the related compensation expense if it is probable the defined performance
condition will be met. To the extent that we determine that it is probable that a different number of share-based awards will vest
depending on the outcome of the performance condition, the cumulative effect of the change in estimate is recognized in the period
of change. As disclosed in Note 2 (bb) with effect from January 1, 2017, forfeitures are recognized when they occur.



We, with the assistance of an independent
valuation firm, determined the estimated fair values of the share options granted to employees and non-employees using the binomial
option pricing model.





On January 1, 2018, we adopted ASU 2017-09.
The adoption of ASU 2017-09 did not have a material impact on our consolidated financial statements.



Taxation



Cayman Islands





The Cayman Islands currently levies no taxes
on individuals or corporations based upon profits, income, gains or appreciation and there is no taxation in the nature of inheritance
tax or estate duty. There are no other taxes likely to be material to us or an investor in ADSs or ordinary shares levied by the
Government of the Cayman Islands except for stamp duties which may be applicable on instruments executed in, or brought within
the jurisdiction of the Cayman Islands. The Cayman Islands is a party to a double tax treaty entered into with the United Kingdom
in 2010 but otherwise is not party to any double tax treaties. There are no exchange control regulations or currency restrictions
in the Cayman Islands.







69









United States of America



ChinaCache U.S. and CCAL were incorporated
in the State of California in the U.S. and is subject to both California State income tax and U.S. federal income tax on its income
and capital gains under the current laws of the State of California and the U.S.



Hong Kong



The two-tier profits
tax rates system was introduced under the Inland Revenue (Amendment)(No.3) Ordinance 2018 (“the Ordinance”) of Hong
Kong became effective for the assessment year 2018/2019. Under the two-tier profit tax rates regime, the profits tax rate for the
first HKD 2 million of assessable profits of a corporation will be subject to the lowered tax rate, 8.25% while the remaining assessable
profits will be subject to the legacy tax rate, 16.5%.



Our subsidiary in Hong Kong, ChinaCache
Network (Hong Kong) Limited, is subject to a corporate income tax of 16.5% on the estimated assessable profit derived from its
Hong Kong operation.



PRC



ChinaCache Beijing, Beijing Blue I.T., Beijing
Jingtian, Xin Run and ChinaCache Shouming are companies incorporated in the PRC and are subject to PRC enterprise income tax on
their taxable income in accordance with the relevant PRC income tax laws. Pursuant to the PRC Income Tax Laws, the Company’s
PRC subsidiaries and the VIEs are subject to a CIT statutory rate of 25%.





Under the PRC Income
Tax Laws, an enterprise which qualifies as a High and New Technology Enterprise (“the HNTE”) is entitled to a preferential
tax rate of 15% provided it continues to meet HNTE qualification standards on an annual basis. ChinaCache Beijing qualifies as
an HNTE and is entitled for a preferential tax rate of 15% from 2016 to 2021 if it continues to qualify on an annual basis. The
HNTE certificate of ChinaCache Beijing is expiring in 2022 and there exist uncertainties with the reapplication outcome. Beijing
Blue IT qualifies as an HNTE and is entitled for a preferential tax rate of 15% from 2016 to 2020 if it continues to qualify on
an annual basis. The HNTE certificate of ChinaCache Blue IT is expiring in 2021 and there exist uncertainties with the reapplication
outcome.



In accordance with the
PRC Income Tax Laws, enterprises established under the laws of foreign countries or regions but whose “place of effective
management” is located within the PRC are considered PRC tax resident enterprises and subject to PRC income tax at the rate
of 25% on worldwide income. The definition of “place of effective management" refers to an establishment that exercises,
in substance, overall management and control over the production and business, personnel, accounting, properties, etc. of an enterprise.
As of December 31, 2018, no applicable detailed interpretation or guidance has been issued to define “place of effective
management”. Furthermore, as of December 31, 2018, the administrative practice associated with interpreting and applying
the concept of “place of effective management” is unclear. Based on the assessment of facts and circumstances available
at December 31, 2018, management believes none of its non-PRC entities are more likely than not PRC tax resident enterprises. It
is possible the assessment of tax residency status may change in the next twelve months, pending announcement of new PRC tax rules
in the future. The Group will continue to monitor its tax status.









70







In November 2013, ChinaCache Beijing
obtained the certificate of “high and new technology enterprise” jointly issued by the Beijing Science and Technology
Commission, Beijing Finance Bureau, Beijing Administration of State Taxation and Beijing Administration of Local Taxation, and
has since then continued to qualify as a “high and new technology enterprise” and been entitled to a reduced income
tax rate of 15%. In December 2016, ChinaCache Beijing was recognized as a “high and new technology enterprise”
again and became eligible for a preferential tax rate of 15% effective from 2016 to 2019, ChinaCache Beijing is currently in the
process of applying for the renewal of such qualification.



In November 2012, Beijing Blue I.T.
was recognized as a “high and new technology enterprise” and was eligible for a preferential tax rate of 15% effective
retrospectively from 2012 to 2014. In July 2015, Beijing Blue I.T. was recognized as a “high and new technology enterprise”
again and became eligible for a preferential tax rate of 15% effective from 2015 to 2017. In October 2018, Beijing Blue I.T.
was recognized as a “high and new technology enterprise” once again and became eligible for a preferential tax rate
of 15% effective from 2018 to 2020. In December 2013, Beijing Blue I.T. was recognized as a Key Software Enterprise jointly
by the National Development and Reform Commission, the MIIT, Ministry of Commerce and the SAT, which entitled it to enjoy a preferential
income tax rate of 10% for 2013 and 2014. The recognition of “Key Software Enterprise” was stopped since May 2015
and Beijing Blue I.T. has not made such filings with the authorities pursuant to Circular No. 49 yet and therefore does not
enjoy the preferential tax rate of 10% for “Key Software Enterprise”.



For the year ended December 31, 2018, our
other PRC subsidiaries are currently subject to an enterprise income tax rate of 25% unless they are qualified as Small Scale and
Low Profit Enterprises which would be entitled to exempt fifty percent (50%) of their income from tax and enjoy a reduced enterprise
income tax rate of 20%. Our PRC subsidiaries can enjoy such reduced enterprise income tax rate if their financial data are determined
to meet the standard of “small scale and low profit” enterprise when filing with the tax bureau.



Pursuant to the Enterprise Income Tax Law
and its implementation rules, if a non-resident enterprise has not set up an organization or establishment in the PRC, or has set
up an organization or establishment but the income derived has no actual connection with such organization or establishment, it
will be subject to a withholding tax on its PRC-sourced income at a rate of 10%. Pursuant to the Arrangement between Mainland China
and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and Tax Evasion on Income, the withholding
tax rate in respect to the payment of dividends by a PRC enterprise to a Hong Kong enterprise is reduced to 5% from a standard
rate of 10% if the Hong Kong enterprise directly holds at least 25% of the PRC enterprise. Pursuant to the Notice of the State
Administration of Taxation on the Issues concerning the Application of the Dividend Clauses of Tax Agreements, or Circular 81,
a Hong Kong resident enterprise must meet the following conditions, among others, in order to enjoy the reduced withholding tax:
(i) it must directly own the required percentage of equity interests and voting rights in the PRC resident enterprise; and
(ii) it must have directly owned such percentage in the PRC resident enterprise throughout the 12 months prior to receiving
the dividends. There are also other conditions for enjoying the reduced withholding tax rate according to other relevant tax rules and
regulations.



In August 2015, the SAT promulgated
the Administrative Measures for Non-Resident Taxpayers to Enjoy Treatments under Tax Treaties, or Circular 60, which became effective
on November 1, 2015. On October 14, 2019, the SAT promulgated the Administrative Measures for Non-Resident Taxpayers to Enjoy
Treatments, or Circular 35, which will become effective on January 1, 2020 and concurrently abolish Circular 60. Circular 60 and
Circular 35 provide that non-resident enterprises are not required to obtain pre-approval from the relevant tax authority in order
to enjoy the reduced withholding tax rate. Instead, non-resident enterprises and their withholding agents may, by self-assessment
and on confirmation that the prescribed criteria to enjoy the tax treaty benefits are met, directly apply the reduced withholding
tax rate, and file necessary forms and supporting documents when performing tax filings, which will be subject to post-tax filing
examinations by the relevant tax authorities. According to the Circular on Several Questions regarding the “Beneficial Owner”
in Tax Treaties, or Circular 9, which was issued on February 3, 2018 by the SAT and became effective on April 1, 2018, when determining
the applicant’s status of the “beneficial owner” regarding tax treatments in connection with dividends, interests
or royalties in the tax treaties, several factors, including without limitation, whether the applicant is obligated to pay more
than 50% of his or her income in twelve months to residents in third country or region, whether the business operated by the applicant
constitutes the actual business activities, and whether the counterparty country or region to the tax treaties does not levy any
tax or grant tax exemption on relevant incomes or levy tax at an extremely low rate, will be taken into account, and it will be
analyzed according to the actual circumstances of the specific cases. Circular 9 further provides that applicants who intend to
prove his or her status of the “beneficial owner” shall submit the relevant documents to the relevant tax bureau according
to the Circular 60. Accordingly, ChinaCache (Hong Kong), our Hong Kong subsidiary, may be able to enjoy the 5% withholding tax
rate for the dividends they receive from ChinaCache Beijing and Xin Run, our PRC subsidiaries, if it satisfies the conditions prescribed
under Circular 81 and other relevant tax rules and regulations. However, according to Circular 81, Circular 60 and Circular
9, if the relevant tax authorities consider the transactions or arrangements we have are for the primary purpose of enjoying a
favorable tax treatment, the relevant tax authorities may adjust the favorable withholding tax in the future.





71







Under the PRC Enterprise Income Tax Law,
enterprises that are established under the laws of foreign countries or regions and whose “de facto management bodies”
are located within the PRC territory are considered PRC resident enterprises, and will be subject to the PRC enterprise income
tax at the rate of 25% on their worldwide income. Under the implementation rules of the PRC Enterprise Income Tax Law, “de
facto management bodies” are defined as the bodies that have material and overall management and control over the manufacturing
and business operations, personnel and human resources, finances and treasury, and acquisition and disposition of properties and
other assets of an enterprise. We cannot assure you that our Cayman Islands holding company, ChinaCache Holdings will not be deemed
to be a PRC resident enterprise under the PRC Enterprise Income Tax Law and be subject to the PRC enterprise income tax at the
rate of 25% on its worldwide income. It is also unclear whether the dividends ChinaCache Holdings receives from its PRC subsidiary,
ChinaCache Beijing, will constitute dividends between “qualified resident enterprises” and therefore qualify for exemption
from withholding tax, even if ChinaCache Holdings is deemed to be a “resident enterprise” for PRC enterprise income
tax purposes. See “Item 3. Key Information — D. Risk Factors — Risks Related to Doing Business in China —
Under China’s Enterprise Income Tax Law, we may be classified as a ‘resident enterprise’ of China. Such classification
could result in unfavorable tax consequences to us and our non-PRC resident shareholders.”



In November 2011, the PRC Ministry
of Finance and the SAT jointly issued two circulars setting out the details of the pilot VAT reform program, which change the charge
of sales tax from business tax to VAT for certain pilot industries. The pilot VAT reform program initially applied only to the
pilot industries in Shanghai, and have been expanded to eight additional regions, including, among others, Beijing, in 2012. According
to two circulars jointly issued by the PRC Ministry of Finance and the SAT in May and December 2013, the pilot program
has also been expanded nationwide. On April 29, 2014, the Ministry of Finance and the SAT issued the Circular on the Inclusion
of Telecommunications Industry in the Pilot Collection of Value-added Tax in Lieu of Business Tax.  On March 23, 2016,
the Ministry of Finance and the SAT issued the Circular on Comprehensively Promoting the Pilot Program of the Collection of Value-added
Tax in Lieu of Business Tax.  Effective from May 1, 2016, the PRC tax authorities collect VAT in lieu of Business Tax
on a trial basis within the territory of China, and in industries such as construction industries, real estate industries, financial
industries, and living service industries. In November 2017, PRC State Counsel issued State Counsel Order 691 to abolish business
tax, and issued the amendment to Interim Regulations of PRC Value Added Taxes, or the VAT Regulation, pursuant to which certain
other industriesare subject to VAT.



All services provided by ChinaCache Beijing
and Beijing Jingtian and certain services provided by Beijing Blue I.T. fall within the scope of the pilot program, and beginning
in September 2012, revenues generated by these services are subject to VAT instead of business tax. All services provided
by Beijing Blue I.T. fall within the scope of the pilot program on telecom industry, and beginning from June 2014, revenues
generated by these services are subject to VAT instead of business tax.



Inflation



In the last three years, inflation in China
has impacted our results of operations in varying degrees. According to the National Bureau of Statistics of China, the year-over-year
percent changes in the consumer price index for December 2016, 2017 and 2018were 6.8%, 5.8% and 7.9%respectively. We may be
affected significantly if China experiences higher rates of inflation in the future.



Results of Operations



The following table  sets forth a summary
of our consolidated results of operations for the periods indicated both in absolute amount and as a percentage of our total net
revenues. This information should be read together with our consolidated financial statements and related notes included elsewhere
in this annual report.





|                                                                   |  | 2016                               |            |   | 2017 |  |        | 2018 | 
|------------------------------------------------------------------ |  | ---------------------------------- | ---------- | - | ---- |  | ------ | ---- | 
|                                                                   |  | RMB                                |            |   | %    |  |        | RMB  | 
|                                                                   |  | (in thousands, except percentages) |           
|Net revenues                                                       |  |                                    | 1,054,235  |   |      |  | 100    | %    | 
|Cost of revenues(1)(2)                                             |  |                                    | (1,077,810 | ) |      |  | -102.2 | %    | 
|Gross profit (loss)                                                |  |                                    | (23,575    | ) |      |  | -2.2   | %    | 
|Other operating income (loss)                                      |  |                                    | (19,044    | ) |      |  | -1.8   | %    | 
|Operating expenses(1)                                              |  |                                    |            |   |      |  |        |      | 
|Sales and marketing expenses(1)                                    |  |                                    | (93,603    | ) |      |  | -8.9   | %    | 
|General and administrative expenses(1)                             |  |                                    | (256,007   | ) |      |  | -24.3  | %    | 
|Provision (recovery of provision) for doubtful accounts receivable |  |                                    | (9,010     | ) |      |  | -0.8   | %    | 
|Research and development expenses(1)                               |  |                                    | (104,018   | ) |      |  | -9.9   | %    | 
|Impairment of long-lived assets                                    |  |                                    | (399,094   | ) |      |  | -37.9  | %    | 
|Impairment of long term investments                                |  |                                    | (18,240    | ) |      |  | -1.7   | %    | 
|Total operating expenses                                           |  |                                    | (879,972   | ) |      |  | -83.5  | %    | 
|Operating loss                                                     |  |                                    | (922,591   | ) |      |  | -87.5  | %    | 
|Interest income                                                    |  |                                    | 4,669      |   |      |  | 0.4    | %    | 
|Interest expense                                                   |  |                                    | (11,647    | ) |      |  | -1.1   | %    | 
|Other income                                                       |  |                                    | 5,336      |   |      |  | 0.5    | %    | 
|Foreign exchange gain, net                                         |  |                                    | 14,209     |   |      |  | 1.4    | %    | 
|Loss before income taxes                                           |  |                                    | (910,024   | ) |      |  | -86.3  | %    | 
|Income tax benefit (expense)                                       |  |                                    | (4,229     | ) |      |  | -0.4   | %    | 
|Net loss                                                           |  |                                    | (914,253   | ) |      |  | -86.7  | %    | 
|Net loss attributable to the noncontrolling interest               |  |                                    | (776       | ) |      |  | -0.1   | %    | 
|Net loss attributable to ChinaCache                                |  |                                    | (913,477   | ) |      |  | -86.6  | %    | 





|(1) | Includes share-based compensation expenses as follows:
|--- | ------------------------------------------------------





72









|                                                                                           |  | For the year ended December 31, |       
|------------------------------------------------------------------------------------------ |  | ------------------------------- | ------
|                                                                                           |  | 2016                            |       
|                                                                                           |  | RMB                             |       
|                                                                                           |  | (in thousands)                  |       
|Allocation of share-based compensation expenses:                                           |  |                                 |       
|Cost of revenues                                                                           |  |                                 | 5,961 
|Sales and marketing expenses                                                               |  |                                 | 2,753 
|General and administrative expenses                                                        |  |                                 | 72,483
|Research and development expenses                                                          |  |                                 | 3,828 
|Total share-based compensation expense included in cost of revenues and operating expenses |  |                                 | 85,025





|(2) | Includes amount to a related party of nil, nil and nil for the years ended December 31, 2016,  2017 and 2018, respectively.
|--- | ---------------------------------------------------------------------------------------------------------------------------





73







Year Ended December 31, 2018 Compared to Year Ended
December 31, 2017



Net Revenues



Our net revenues increased by 8.2% from
RMB852.6 million for the year ended December 31, 2017 to RMB922.6 million (US$134.2 million) for the year ended December 31,
2018. The increase was primarily due to increase in high value customers and increase in sales volume.



Cost of Revenues



Our cost of revenues decreased by 14.8% from RMB781.8million
for the year ended December 31, 2017 to RMB666.2 million (US$96.9 million) for the year ended December 31, 2018. The decrease
was primarily due to a decrease in our bandwidth, co-location and storage fees of RMB129.1 million (US$18.8 million) or 19.0%,
a decrease of our payroll and other compensation costs of network operations personnel of RMB18.3million (US$2.7 million) or32.4%.
However, the decrease is partially set off by an increase in depreciation of network equipment and amortization of intangible assets
of RMB5.2 million (US$0.8 million) or 56.7%. Cost of revenues included share-based compensation expenses of RMB0.5 million (US$0.1
million) for the year ended December 31, 2018, compared to RMB0.5 million for the year ended December 31, 2017.



Cost of revenues was comprised of the following:





|                                                                        |  | For the Year Ended December 31, |        
|----------------------------------------------------------------------- |  | ------------------------------- | -------
|                                                                        |  | 2017                            |        
|                                                                        |  | RMB                             |        
|                                                                        |  | (in thousands)                  |        
|Bandwidth, co-location and storage fees                                 |  |                                 | 681,134
|Depreciation of network equipment and amortization of intangible assets |  |                                 | 9,244  
|Payroll and other compensation costs of network operations personnel    |  |                                 | 56,455 
|Other cost of revenues                                                  |  |                                 | 34,989 
|Total cost of revenues                                                  |  |                                 | 781,822







Other Operating Loss



Our other operating loss was RMB 27.4 million
(US$4.0million) for the year ended December 31, 2018 which was due to the provision of late delivery penalties accrued upon
our agreement with BFSMC, as compared to our other operating loss of RMB19.5 million for the year ended December 31, 2017.



Operating Expenses



Our operating expenses decreased from RMB329.2
million for the year ended December 31, 2017 to RMB234.2 million (US$34.0 million) for the year ended December 31, 2018. We
expect our operating expense, as percentage of sales revenue, keeps decreasing going forward as we exercise stringent cost control
to fend off margin erosion to CDN business as a result of pricing-centric competition in the market.



Sales and Marketing Expenses. Our
sales and marketing expenses decreased by 41.0% from RMB61.8 million for the year ended December 31, 2017 to RMB36.4 million
(US$5.3 million) for the year ended December 31, 2018. The year-over-year decrease was primarily due to improved cost control measures
implemented throughout our company, and improved efficiency in output by sales staff.



General and Administrative Expenses.
Our general and administrative expenses decreased by 10.1% from RMB142.7 million for the year ended December 31, 2017 to RMB128.3
million (US$18.7 million) for the year ended December 31, 2018, primarily due to: (i) a decrease of RMB21.7 million (US$3.3 million)
in salary expenses as staff number decreased, therefore, the related salaries, social insurance and house funding as well as employee
bonus decreased accordingly; (ii) a decrease of RMB6.8 million (US$1.0 million) in share-based compensation, which was mainly caused
by in fiscal year 2017, 16 million shares of restricted shares was newly granted in the fourth quarter of 2017, with the vesting
period of one month, from January 1, 2017 to December 31, 2017, thus the total expense, amounted to RMB7.0 million was recognized
in December 2017, but no such impact in 2018 ; (iii) the decrease of rental expense of RMB6.6 million (US$1.0 million), and
(iv) an increase of RMB19.7million (US$3.0 million) in other expense, which mainly caused by the Dongfang Bowen advertising fee
incurred in fiscal year 2018.





74









Provision for doubtful accounts receivable.
Our provision for doubtful accounts receivable was RMB1.1 million (US$0.2 million) for the year ended December 31, 2018,
as compared to RMB17.5 million for the year ended December 31, 2017. The decrease from 2017 to 2018 was primarily due to
1) we provided provision for doubtful accounts receivables adopting prudence principal basing on the analysis of customers’
aging in 2017, and 2) the improvement of account receivables collectability in 2018.



Research and Development Expenses.
Our research and development expenses decreased by 16.3% from RMB81.7million for the year ended December 31, 2017 to RMB68.4
million (US$10.0 million) for the year ended December 31, 2018. The decrease was primarily due to improved cost control measures
and improved efficiency in output by R&D staff.



Impairment of long-lived assets.We
recorded the impairment of long-lived assets of RMB21.8 million and nil for the years ended December 31, 2017 and December 31,
2018, respectively. due to the improvement of the operating results and optimistic forecast, we recognize less impairment charge
in fiscal year 2017 and nil in 2018.





Impairment of long term investments.
Our impairment of long term investments was 3.7 million and nil for the years ended December 31, 2017 and December 31, 2018,
respectively.



Operating Loss



As a result of the above, operating loss
for the year ended December 31, 2018 was RMB5.1 million (US$0.7 million), as compared to operating loss for the year ended
December 31, 2017 of RMB277.9 million.



Income Tax Benefit (Expense)



We had income tax expense of RMB0.01 million
(US$0.002 million) for the year ended December 31, 2018, as compared to income tax expense of RMB59.6 million for the year
ended December 31, 2017. Our income tax expense for the year ended December 31, 2018 was mainly composed of RMB 0.01
million (US$0.002 million) of current income tax expense.



Net Loss



As a result of the above, we had net loss
of RMB25.8 million (US$3.8 million) for the year ended December 31, 2018, as compared to a net loss of RMB371.2 million for
the year ended December 31, 2017.



Year Ended December 31, 2017 Compared to Year Ended
December 31, 2016



Net Revenues



Our net revenues decreased by 19.1% from
RMB1,054.2 million for the year ended December 31, 2016 to RMB852.6million for the year ended December 31, 2017. The
decrease was primarily due to the interruption of our services we experienced caused by certain platform issues and intensified
industry competition. The number of our active customers decreased by 10.5% from 1,999 as of December 31, 2016 to 1,789 as
of December 31, 2017.



Cost of Revenues



Our cost of revenues decreased by 27.5%
from RMB1,077.8 million for the year ended December 31, 2016 to RMB781.8million for the year ended December 31, 2017.
The decrease was primarily due to a decrease in our bandwidth, co-location and storage fees of RMB161.6 million, a decrease in
depreciation of network equipment and amortization of intangible assets of RMB124.8 million, an increase of other cost of revenues
of RMB10.7 million, and a decrease of our payroll and other compensation costs of network operations personnel of RMB20.2million.
Cost of revenues included share-based compensation expenses of RMB0.5 million for the year ended December 31, 2017, compared
to RMB6.0 million for the year ended December 31, 2016.



Cost of revenues was comprised of the following:



|                                                                        |  | For the Year Ended December 31, |          
|----------------------------------------------------------------------- |  | ------------------------------- | ---------
|                                                                        |  | 2016                            |          
|                                                                        |  | RMB                             |          
|                                                                        |  | (in thousands)                  |          
|Bandwidth, co-location and storage fees                                 |  |                                 | 842,726  
|Depreciation of network equipment and amortization of intangible assets |  |                                 | 134,079  
|Payroll and other compensation costs of network operations personnel    |  |                                 | 76,702   
|Other cost of revenues                                                  |  |                                 | 24,303   
|Total cost of revenues                                                  |  |                                 | 1,077,810





75









Other Operating Loss



Our other operating loss was RMB19.5 million
for the year ended December 31, 2017 which was due to the provision of late delivery penalties accrued upon our agreement
with BFSMC, as compared to our other operating income of RMB19.0 million for the year ended December 31, 2016.



Operating Expenses



Our operating expenses decreased from RMB880.0
million for the year ended December 31, 2016 to RMB329.2 million for the year ended December 31, 2017, We expect our
operating expense, as percentage of sales revenue, will decrease going forward as we exercise stringent cost control to fend off
margin erosion to CDN business as a result of pricing-centric competition in the market.



Sales and Marketing Expenses. Our
sales and marketing expenses decreased by 34% from RMB93.6 million for the year ended December 31, 2016 to RMB61.8 million
for the year ended December 31, 2017. The year-over-year decrease was primarily due to improved cost control measures implemented
throughout our company.



General and Administrative Expenses.
Our general and administrative expenses decreased by 44% from RMB256.0 million for the year ended December 31, 2016 to RMB142.7
million for the year ended December 31, 2017, primarily due to







76







| | · | a decrease of RMB63.8 million in share-based compensation expenses associated with newly granted restricted share units in 2017;
| | - | --------------------------------------------------------------------------------------------------------------------------------



| | · | a decrease of RMB20.4 million in general operating fees related to reduction of counsel fees;
| | - | ---------------------------------------------------------------------------------------------



| | · | a decrease of RMB81.9 million in salary expenses including option fees related to strategic hires in 2016; and
| | - | --------------------------------------------------------------------------------------------------------------



| | · | a decrease of RMB10.8 million in depreciation of facilities and office
    equipment.
| | - | -------------------------------------------------------------------------------------



Provision for doubtful accounts receivable.
Our provision for doubtful accounts receivable was RMB17.5 million for the year ended December 31, 2017, as compared to RMB9.0
million for the year ended December 31, 2016. The increase from 2016 to 2017 was primarily due to the Company electing to
adopt a more prudent doubtful account provision.



Research and Development Expenses.
Our research and development expenses decreased by 21.4% from RMB104.0 million for the year ended December 31, 2016 to RMB81.7million
for the year ended December 31, 2017. The decrease was primarily due to a decrease of RMB10.8 million of down-sized R&D
staff as a result of the Company’s integrating several development platforms, as well as RMB 12.6 million in depreciation
expense reduction from R&D related asset impairment.



Impairment of long-lived assets.We
recorded the impairment of long-lived assets of RMB399.1 million and RMB21.8 million for the years ended December 31, 2016 and
December 31, 2017, respectively. The result was due to the deterioration of our operating results.





Impairment of long-term investments.
Our impairment of long-term investments was RMB18.2 million and RMB3.7 million for the years ended December 31, 2016 and December
31, 2017, respectively.





Operating Loss



As a result of the above, operating loss
for the year ended December 31, 2017 was RMB 277.9 million, as compared to operating loss for the year ended December 31,
2016 of RMB922.6 million.



Income Tax Expense



We had income tax expense of RMB59.6 million
for the year ended December 31, 2017, as compared to income tax expense of RMB4.2 million for the year ended December 31,
2016. Our income tax expense for the year ended December 31, 2017 was mainly composed of RMB29.4 million of current income
tax expenses and RMB30.2million of deferred tax expenses.



Net Loss



As a result of the above, we had net loss
of RMB371.2million for the year ended December 31, 2017, as compared to a net loss of RMB914.3 million for the year ended
December 31, 2016.





77







|B. | Liquidity and Capital Resources
|-- | -------------------------------



Cash Flows and Working
Capital





To date, we have financed our operations
primarily through cash flows from bank borrowings, operating activities, and the proceeds from our initial public offering in 2010
and subsequent private placement in 2014. In October 2010, we completed our initial public offering in which we issued and
sold 5,923,247 ADSs representing 94,771,952 ordinary shares, resulting in net proceeds to us of approximately US$76.6 million.
In March 2014, we issued and sold an aggregate of 53,855,569 ordinary shares, represented by 3,365,973 ADSs, to a group of
institutional investors affiliated with Wellington Management Company, LLP for an aggregate purchase price of approximately US$55.0
million.





As of December 31, 2018, we had RMB41.1million
(US$6.0million) in cash and cash equivalents.



Our board and management are now reviewing
strategy and priorities for the next 12 months. We will be focusing on a number of business initiatives and strategies to improve
cash revenue from operation assets and operation efficiency, together with obtaining credit facilities. First, we will focus on
generating cash revenue from the improvement of CDN operations to increase our liquidity and reinvest in potential project
pipeline. Second, we plan to negotiate with the suppliers for more favorable payment terms. Third, we plan to sell the ownership
of our residual IDC building to get enough operational cash flow and focus on the asset –light strategy. Lastly, we plan
to better manage our selling and general administrative expenses to improve operation efficiency.



78







We believe that our current cash and cash
equivalents and anticipated cash flow from operations will be sufficient to meet our anticipated cash needs, including our cash
needs for working capital and capital expenditures, for at least the next 12 months. We may, however, require additional
cash due to changing business conditions or other future developments, including any investments or acquisitions we may decide
to pursue. If our existing cash is insufficient to meet our requirements, we may seek to sell additional equity securities or debt
securities or borrow from banks. We cannot assure you that financing will be available in the amounts we need or on terms acceptable
to us, if at all. The sale of additional equity securities, including convertible debt securities, would dilute our shareholders.
The incurrence of debt would divert cash from working capital and capital expenditures to service debt obligations and could result
in operating and financial covenants that would restrict our operations and our ability to pay dividends to our shareholders. If
we are unable to obtain additional equity or debt financing as required, our business, operations and prospects may suffer. See
 “Item 3. Risk Factors — D. Risks Related to Our Business and Industry — We have incurred losses in the past and
may incur losses in the future. There is substantial doubt about our ability to continue as a going concern.”



Although we consolidate the results of Beijing
Blue I.T., Beijing Jingtian and ChinaCache Shouming and their respective subsidiaries, our access to the cash balances or future
earnings of these entities is only through our contractual arrangements with Beijing Blue I.T., Beijing Jingtian and ChinaCache
Shouming and their respective shareholders. See “Item 4. Information on the Company —C. Organizational Structure —
Contractual Arrangements with Our Consolidated Variable Interest Entities.” For restrictions and limitations on liquidity
and capital resources as a result of our corporate structure, see “—Holding Company Structure.”



The following table sets forth a summary
of our cash flows for the periods indicated:





|                                                     |  | For the years ended December 31, |         
|---------------------------------------------------- |  | -------------------------------- | --------
|                                                     |  | 2016                             |         
|                                                     |  | RMB                              |         
|Net cash used in operating activities                |  |                                  | (187,180
|Net cash used in investing activities                |  |                                  | (202,390
|Net cash provided by (used in) financing activities  |  |                                  | (84,645 
|Net increase (decrease) in cash and cash equivalents |  |                                  | (474,215
|Effect of foreign exchange rate changes on cash      |  |                                  | 14,617  
|Cash and cash equivalents at beginning of the period |  |                                  | 616,218 
|Cash and cash equivalents at end of the period       |  |                                  | 156,620 





Operating Activities





Net cash used in operating activities was
RMB41.7 million (US$6.1 million) for the year ended December 31, 2018. Net cash used in operating activities for the year
ended December 31, 2018 reflects a net loss of RMB25.8 million (US$3.8 million), adjusted by reconciling items in the total
amount of RMB31.8 million (US$4.6 million), which primarily include depreciation of property and equipment of RMB12.0 million (US$1.7
million), amortization of intangible assets and land use right of RMB0.8 million (US$0.1million), loss from disposal of property
and equipment of RMB1.5 million (US$0.2 million), allowance for doubtful accounts of RMB1.1 million (US$0.2 million), share-based
compensation expenses of RMB4.2 million (US$0.6 million), interest expense of RMB4.7 million (US$0.7 million), amortization of
other non-current asset of RMB15.2 million (US$2.2 million), amortization of deferred government grant of RMB3.5 million (US$0.5
million) and foreign exchanges gain of RMB4.2 million (US$0.6 million). Additional major factors that affected operating cash flows
for the year ended December 31, 2018 include: (i) an decrease of RMB28.7 million (US$4.2 million) in accounts payable
in connection with accrued bandwidth, co-location and storage expenses to the carriers; (ii) an increase of accrued expenses
and other payables of RMB31.3 million (US$4.6 million) primarily due to the decrease in payables for purchase of property and equipment;
(iii) an increase of RMB50.5 million (US$7.3 million) in accounts receivable primarily; (iv) an increase of RMB13.2 million
(US$1.9million) in prepaid expense and other current assets; and(v)a decrease of RMB 14.4 million (US$2.1 million) in long term
deposits and other non-current assets.



Net cash used in operating activities was
RMB99.0 million for the year ended December 31, 2017. Net cash used in operating activities for the year ended December 31,
2017 reflects a net loss of RMB371.2 million, adjusted by reconciling items in the total amount of RMB105.7 million, which primarily
include depreciation of property and equipment of RMB9.1 million, share-based compensation expenses of RMB10.9 million, impairment
of long-lived assets of RMB21.8 million, impairment of long term investments of RMB3.7 million, foreign exchanges loss of RMB11.0
million, allowance for doubtful accounts of RMB17.5 million, amortization of intangible assets and land use right of RMB2.4 million,
deferred tax expense of RMB30.2million, loss from disposal of property and equipment of RMB0.6 million and interest expense of
RMB4.3million and amortization of deferred government grant of RMB4.6 million. Additional major factors that affected operating
cash flows for the year ended December 31, 2017 include: (i) an increase of RMB60.9 million in accounts payable in connection
with accrued bandwidth, co-location and storage expenses to the carriers; (ii) an increase of accrued expenses and other payables
of RMB61.4 million primarily due to the decrease in payables for purchase of property and equipment; (iii) a decrease of RMB14.0
million in accounts receivable primarily due to improved accounts receivable collection; (iv) a decrease of RMB58.3 million
in long term deposits and other non-current assets; and (v) an increase of RMB26.5 million in prepaid expense and other current
assets





79









Net cash used in operating activities was
RMB187.2 million for the year ended December 31, 2016. Net cash used in operating activities for the year ended December 31,
2016 reflects a net loss of RMB914.3 million, adjusted by reconciling items in the total amount of RMB647.1 million, which primarily
include depreciation of property and equipment of RMB155.2 million, share-based compensation expenses of RMB85.0 million, impairment
of long-lived assets of RMB399.1 million, impairment of long term investments of RMB18.2 million, foreign exchanges gain of RMB14.2
million, allowance for doubtful accounts of RMB9.0 million, amortization of intangible assets and land use right of RMB3.9 million,
gain from sale of short term investments of RMB3.6 million, deferred tax expense of RMB3.1 million, loss from disposal of property
and equipment of RMB2.0 million, amortization of deferred government grant of RMB12 million and interest expense of RMB1.4 million.
Additional major factors that affected operating cash flows for the year ended December 31, 2016 include: (i) an increase
of RMB101.4 million in accounts payable in connection with accrued bandwidth, co-location and storage expenses to the carriers;
(ii) a decrease of accrued expenses and other payables of RMB73.2 million primarily due to the decrease in payables for purchase
of property and equipment; (iii) a decrease of RMB41.8 million in accounts receivable primarily due to improved accounts receivable
collection; (iv) an

increase of RMB4.6 million in Deferred government grant; (v)
an increase of RMB1.2 million in long term deposits and other non-current assets; (vi) an increase of RMB1.1 million in prepaid
expense and other current assets; (vii) an increase of RMB1.1 million in accrued employee benefits.



Investing Activities



Net cash used in investing activities was
RMB160.8 million (US$23.4 million) for the year ended December 31, 2018. Net cash used in investing activities for the year
ended December 31, 2018 resulted primarily from (i) cash paid for cloud infrastructure construction in progress of RMB161.1
million (US$23.4 million);



Net cash used in investing activities was
RMB89.3million for the year ended December 31, 2017. Net cash used in investing activities for the year ended December 31,
2017 resulted primarily from (i) cash paid for cloud infrastructure construction in progress of RMB73.7 million; ; (ii) cash
paid for purchases of property and equipment and intangible assets of RMB15.2 million; and (iii) cash paid for long term
investments of RMB0.4 million





Net cash used in investing activities was
RMB202.4 million for the year ended December 31, 2016. Net cash used in investing activities for the year ended December 31,
2016 resulted primarily from (i) cash paid for cloud infrastructure construction in progress of RMB222.3 million; (ii) cash
paid for purchases of property and equipment and intangible assets of RMB59.2 million and (iii) cash paid for long term investments
of RMB2.2 million; partially offset by cash received from sales of short term investment of RMB80.3 million;;







80







Financing Activities





Our financing activities primarily consist
of sale of our ADSs, capital contributions and borrowings from commercial banks. Net cash provided by financing activities
was RMB140.6 million (US$20.4 million) for the year ended December 31, 2018. Net cash provided by financing activities for
the year ended December 31, 2018 resulted primarily from (i) proceeds from bank borrowings of RMB203.5million (US$29.6
million); and (ii) proceeds from sales and lease back of RMB64.0million (US$9.3 million), partially offset by (i) repayment of
bank borrowings RMB72.8million (US$10.6 million); (ii) payments of capital lease obligation RMB46.5 million (US$6.8 million). and
(iii) borrowing cost RMB7.6 million (US$1.1 million).



Net cash provided by financing activities
was RMB149.0 million for the year ended December 31, 2017. Net cash used in financing activities for the year ended December 31,
2017 resulted primarily from (i) proceeds from bank borrowings of RMB411.7 million, partially offset by (i) repayment of bank borrowings
RMB183.2 million; and (ii) payments of capital lease obligation RMB74.7 million.



Net cash used in financing activities was RMB84.6 million for the year ended December 31, 2016. Net
cash used in financing activities for the year ended December 31, 2016 resulted primarily from (i) payment of capital
lease obligation of RMB74.5 million; (ii) payment for repurchase of ordinary shares of RMB39.4 million; and (iii) repayment
of bank borrowings of RMB7.7 million); partially offset by (i) proceeds from bank borrowings of RMB29.3 million; and (ii) proceeds
from employee share options exercised of RMB7.6 million.



Holding Company Structure



Overview



We are a holding company with no
material operations of our own. We conduct our operations in China through a series of contractual arrangements between our
company, ChinaCache Beijing, which is our wholly-owned PRC subsidiary, Beijing Blue I.T., Beijing Jingtian and ChinaCache
Shouming, which are our consolidated variable interest entities in China, and the respective shareholders of Beijing Blue
I.T., Beijing Jingtian and ChinaCache Shouming. See “Item 4. Information on the Company — C. Organizational
Structure — Contractual Arrangements with Our Consolidated Variable Interest Entities” for a summary of these
contractual arrangements. Beijing Blue I.T. contributed to 61.7%, 54.4% and 36.9% of our total net revenues in 2016, 2017 and
2018, respectively. Beijing Jingtian’s contribution to our total net revenues in 2015, 2016 and 2017 was
immaterial.



Conducting our operations through contractual
arrangements with our consolidated variable interest entities in China entails a risk that we may lose effective control over our
consolidated variable interest entities, which may result in our being unable to consolidate their financial results with our results
and may impair our access to their cash flow from operations and thereby reduce our liquidity. See “Item 3. Key Information
 — D. Risk Factors — Risks Related to Our Corporate Structure” for more information, including the risk factors
titled “If the PRC government finds that the arrangements that establish the structure for operating our business do not
comply with PRC government restrictions on foreign investment in the telecommunications business, we could be subject to severe
penalties” and “We rely on contractual arrangements with Beijing Blue I.T., Beijing Jingtian and ChinaCache Shouming
and their respective shareholders for our China operations, which may not be as effective as direct ownership in providing operational
control.”





81







Dividend Distributions



As a holding company, our ability
to pay dividends and other cash distributions to our shareholders depends solely upon dividends and other distributions paid
to us by our PRC subsidiaries ChinaCache Beijing and Xin Run. The amount of dividends paid by ChinaCache Beijing to us
depends solely on the service fees paid to ChinaCache Beijing from our consolidated variable interest entities, Beijing Blue
I.T., Beijing Jingtian and ChinaCache Shouming. In 2016, 2017 and 2018, the aggregate amount of service fees that
ChinaCache Beijing charged Beijing Blue I.T., Beijing Jingtian and ChinaCache Shouming was RMB46.7 million, RMB32.1 million
and RMB 53.5 million (US$7.8 million), respectively, which accounted for 4.4%, 3.8% and 5.5%, respectively, of our total
net revenues.



Under PRC law, ChinaCache Beijing, Xin Run
and each of our consolidated variable interest entities in China is required to set aside at least 10% of its after-tax profits
each year, if any, to fund a statutory reserve until such reserve reaches 50% of its registered capital. Although the statutory
reserves can be used, among other ways, to increase the registered capital and eliminate future losses in excess of retained earnings
of the respective companies, the reserve funds are not distributable as cash dividends except in the event of liquidation. ChinaCache
Beijing and Xin Run are permitted to pay dividends to us only out of their retained earnings, if any, as determined in accordance
with PRC accounting standards and regulations.



Pursuant to contractual arrangements that
ChinaCache Beijing has with each of Beijing Blue I.T., Beijing Jingtian and ChinaCache Shouming, the earnings and cash of each
of Beijing Blue I.T., Beijing Jingtian and ChinaCache Shouming (including dividends received from their respective subsidiaries)
are used to pay service fees in RMB to ChinaCache Beijing, in the manner and amount set forth in these agreements.



After paying the withholding taxes applicable
to ChinaCache Beijing and Xin Run’s revenue and earnings, making appropriations for its statutory reserve requirement and
retaining any profits from accumulated profits, the remaining net profits of ChinaCache Beijing and Xin Run would be available
for distribution to us, ChinaCache Beijing and Xin Run’s shareholder, although we have not, and do not have such plan at
present to, make such distributions. As of December 31, 2018, the amount of the net assets of ChinaCache Beijing, Xin Run
and our consolidated variable interest entities, which includes the paid-in-capital and statutory reserves of ChinaCache Beijing
and Xin Run and the equity of our consolidated variable interest entities which were restricted due to statutory reserve requirements
and other applicable laws and regulations, and thus not available for distribution, was in aggregate a deficit of RMB471.2 million
(US$68.5 million). We do not believe that these restrictions on the distribution of our net assets will have a significant impact
on our ability to timely meet our financial obligations in the future. See “Item 3. Key Information — D. Risk Factors
 — Risks Related to Doing Business in China—We rely principally on dividends paid by our operating subsidiary to fund
cash and financing requirements, and limitations on the ability of our operating subsidiary to make payments to us could have a
material adverse effect on our ability to conduct our business and fund our operations” for more information.



Furthermore, cash transfers from ChinaCache
Beijing and Xin Run to our subsidiaries outside of China are subject to PRC government control of currency conversion. Restrictions
on the availability of foreign currency may affect the ability of ChinaCache Beijing, Xin Run and our consolidated variable interest
entities to remit sufficient foreign currency to pay dividends or other payments to us, or otherwise satisfy their foreign currency
denominated obligations. See “Item 3. Key Information — D. Risk Factors — Risks Related to Doing Business in
China—Governmental control of currency conversion may limit our ability to utilize our revenues.”



Capital Expenditures



We had capital expenditures of RMB576.5 million, RMB45.7 million and RMB 336.1million (US$48.9 million)
in 2016, 2017 and 2018, respectively, representing 54.7%, 5.4% and 36.4%of our total net revenues for such years, respectively.
Our capital expenditures were primarily for the purchase of land use right, servers, other property and equipment and certain intangible
assets and cash paid for cloud infrastructure construction in progress, for our business. Our capital expenditures have been primarily
funded by net cash provided by financing activities. We expect that our capital expenditures in 2019 will increase from 2018 as
we will focus on completing the cloud infrastructure to prepare the company’s expanded IDC business.



|C. | Research and Development
|-- | ------------------------



Our internal research and development team
consisted of 185 engineers as of December 31, 2018, representing approximately 44% of our work force. Our senior management
team leads our research and development efforts and sets strategic initiatives to improve our services and products, focusing on
efforts to sustain our technology leadership, raise our productivity and enhance the competitiveness of our services. We devote
our market-oriented research and development efforts to focus on bringing innovative services and solutions to the market quickly.
As of the date of this annual report, we have 56 PRC patents, two U.S. patents, 23 software copyright registrations in China relating
to the technologies used in our business.





82









Our research and development expenses primarily
consist of payroll and related personnel costs, including share-based compensation expenses. We incurred RMB104.0 million,  RMB81.7
million and RMB 68.4illion (US$10.0 million) of research and development expenses in 2016 2017 and 2018, respectively.



|D. | Trend Information
|-- | -----------------



Other than as disclosed elsewhere in this
annual report, we are not aware of any trends, uncertainties, demands, commitments or events for the year ended December 31,
2018 that are reasonably likely to have a material adverse effect on our net revenues, income, profitability, liquidity or capital
resources, or that would cause the disclosed financial information to be not necessarily indicative of future operating results
or financial conditions. Off-Balance Sheet Arrangements



Other than the operating lease obligations
and purchase commitments set forth in the table below, we have not entered into any financial guarantees or other commitments to
guarantee the payment obligations of any third parties. We have not entered into any derivative contracts that are indexed to our
shares and classified as shareholder’s equity, or that are not reflected in our consolidated financial statements. Furthermore,
we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity
or market risk support to such entity. Moreover, we do not have any variable interest in any unconsolidated entity that provides
financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services with
us.



|E. | Tabular Disclosure of Contractual Obligations
|-- | ---------------------------------------------



The following table sets forth our contractual
obligations and commercial commitments as of December 31, 2018:





|                               |  | Payment Due by Period |        
|------------------------------ |  | --------------------- | -------
|                               |  | Total                 |        
|                               |  | (in thousands of RMB) |        
|Capital lease obligations(1)   |  |                       | 70,817 
|Operating lease obligations(2) |  |                       | 24,310 
|Purchase commitments(3)        |  |                       | 336,783
|Total                          |  |                       | 431,910



| | (1) | Capital lease obligations refers to our obligations for leasing certain computer equipment and optical fibers.
| | --- | --------------------------------------------------------------------------------------------------------------



| | (2) | Operating lease obligations refers to our future minimum lease payments for office space under non-cancelable operating leases.
| | --- | -------------------------------------------------------------------------------------------------------------------------------



| | (3) | Purchase commitments refers to our commitment to purchase bandwidth and cloud infrastructure from our bandwidth and construction providers.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------



|ITEM 6. | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
|------- | ------------------------------------------



|A. | Directors and Senior Management
|-- | -------------------------------



The following table  sets forth information regarding our current directors and executive officers



|Directors and Executive Officers |  | Age |  | Position/Title                                                                            
|-------------------------------- |  | --- |  | ------------------------------------------------------------------------------------------
|Bang Zhang                       |  | 51  |  | Chairman                                                                                  
|Bin Liu                          |  | 44  |  | Director and Acting Chief Executive Officer                                               
|Xiaoqiang Wei                    |  | 34  |  | Director                                                                                  
|Dong Yu                          |  | 45  |  | Director (Chairman of the Renumeration Committee and Chairman of the Nominating Committee)





83











Mr. Bang Zhang has served as an independent director of ChinaCache
since 2017. Mr. Zhang has more than thirty years of financial experience and currently serves as the Chief Corporate Officer of
Octave Institute, a curated well-being platform that fuses Eastern wisdom with Western science. Previously, Mr. Zhang served in
various capacities as a director, chief financial officer, controller and accounting manager for a number of public and private
companies. Mr. Zhang holds an MBA and is a fellow member of CGMA and CIMA.



Mr. Bin Liu, has served as our acting Chief Executive Officer
since May 17,2019. Mr. Liu joined ChinaCache in 2012 and worked in several different divisions in different roles, including as
the Company’s Vice President, New Products Development. He led a special project to improve HPCC platform performance during
2015 ~2017 and able to guide ChinaCache CDN platform to its leading position in China. Previously, Mr. Liu worked for Ericsson
China as a Senior Solution Manager from 2006 to 2012. Mr. Bin Liu received a master’s degree from Beijing University of Posts
and Telecommunications.



Mr. Xiaoqiang Wei, certified Purchaser (Level 1) in China, PMP
joined ChinaCache in 2005 and worked in several different divisions in different roles, including as the Company’s Vice President,
the Company’s subsidiary general manager. He is leading operating resource management, project evaluation.and operation development
strategy and able to provide constructive advice on the Company’s operation management, project management and exploration
into new development field. Mr. Wei holds a master’s degree.



Mr. Yu, a CPA, based in Shanghai, serves as Vice President of
Finance, APAC Region for Nexans Cable (China) Co., Limited, a regional subsidiary of Nexans S.A. a global player in the cable and
optical fiber industry. Mr. Dong Yu through his deep experience working in the APAC region, brings leadership experience from working
across various commercial, operational and compliance functions.







84









Employment Agreements



We have entered into employment agreements
with each of our executive officers. Under these agreements, each of our senior executive officers is employed for a specified
time period. We may terminate employment for cause, at any time, without advance notice or remuneration, for certain acts of the
executive officer, such as conviction or plea of guilty to a felony or any crime involving moral turpitude, negligent or dishonest
acts to our detriment, or misconduct or a failure to perform agreed duties. In such case, the executive officer will not be entitled
to receive payment of any severance benefits or other amounts by reason of the termination, and the executive officer’s right
to all other benefits will terminate, except as required by any applicable law. We may also terminate an executive officer’s
employment without cause upon one-month advance written notice. In such case of termination by us, we are required to provide compensation
to the executive officer, including severance pay, as expressly required by the applicable law of the jurisdiction where the executive
officer is based. The executive officer may terminate the employment at any time with a one-month advance written notice, if there
is any significant change in the executive officer’s duties and responsibilities inconsistent in any material and adverse
respect with his or her title and position or a material reduction in the executive officer’s annual salary before the next
annual salary review, or if otherwise approved by the board of directors.



Each executive officer has agreed to hold,
both during and after the termination or expiry of his or her employment agreement, in strict confidence and not to use, except
as required in the performance of his or her duties in connection with the employment, any of our confidential information or trade
secrets, any confidential information or trade secrets of our clients or prospective clients, or the confidential or proprietary
information of any third party received by us and for which we have confidential obligations. The executive officers have also
agreed to disclose in confidence to us all inventions, designs and trade secrets which they conceive, develop or reduce to practice
and to assign all right, title and interest in them to us, and assist us in obtaining patents, copyrights and other legal rights
for these inventions, designs and trade secrets.



In addition, each executive officer has
agreed to be bound by non-competition and non-solicitation restrictions during the term of his or her employment and for one year
following the last date of employment. Specifically, each executive officer has agreed not to (i) approach our clients, customers
or contacts or other persons or entities introduced to the executive officer for the purpose of doing business with such persons
or entities that will harm our business relationships with these persons or entities; (ii) assume employment with or provide
services to any of our competitors, or engage, whether as principal, partner, licensor or otherwise, any of our competitors; or
(iii) seek directly or indirectly, to solicit the services of any of our employees who is employed by us on or after the date
of the executive officer’s termination, or in the year preceding such termination.





85







|B. | Compensation
|-- | ------------



For the fiscal year ended December 31,
2018, the aggregate compensation we paid to our executive officers was approximately RMB7.9million (US$1.1 million) and the aggregate
compensation we paid to our non-executive directors for the same period was approximately RMB1.2million (US$0.2 million). For the
same period, we paid RMB0.3million (approximately US$47300 for pension, retirement, medical insurance or other similar benefits
for our executive officers. Other than the amounts stated above, no pension, retirement or similar benefits has been set aside
or accrued for our executive officers or directors.



Stock Incentive Plans



In October 2008, May 2009, May 2010
and July 2011, we adopted our 2007 Stock Incentive Plan, 2008 Stock Incentive Plan, 2010 Stock Incentive Plan and 2011 Share
Incentive Plan, respectively. These four plans are referred to herein as the “Stock Incentive Plans.” The Stock Incentive
Plans were adopted to attract and retain the best available personnel, provide additional incentives to employees, directors and
consultants and promote the success of our business. The Stock Incentive Plans permit the grant of options to purchase our ordinary
shares, share appreciation rights, restricted share units, restricted share units, dividend equivalent rights and other instruments
as deemed appropriate by the administrator under the plans. The maximum aggregate number of ordinary shares that may be issued
pursuant to all awards under the 2007, 2008, 2010 and 2011 plans is 14,000,000 shares, 8,600,000 shares, 9,000,000 shares and 22,000,000
shares, respectively. On July 2, 2012, our shareholders approved amendments to our 2011 plan which provide, in effect, that
the maximum aggregate number of ordinary shares that may be issued pursuant to all awards, or the Award Pool, under the 2011 plan
shall be equal to five percent of the total issued and outstanding ordinary shares as of July 2, 2012; provided that, the
ordinary shares reserved in the Award Pool shall be increased automatically if and whenever the unissued ordinary shares reserved
in the Award Pool accounts for less than one percent of the total then issued and outstanding ordinary shares, as a result of which
increase the unused ordinary shares reserved in the Award Pool immediately after each such increase shall equal to five percent
of the then issued and outstanding ordinary shares.



As of March 31, 2018, we had granted options
to purchase 14,000,000 ordinary shares under our 2007 Stock Incentive Plan, options to purchase 8,600,000 ordinary shares under
our 2008 Stock Incentive Plan, options to purchase 9,099,872 ordinary shares under our 2010 Stock Incentive Plan, and options to
purchase 49,017,808 ordinary shares and 76,634,512 restricted share units under our 2011 Share Incentive Plan.



The following table summarizes, as of December
31, 2018, the stock options granted under our Stock Incentive Plans to our directors and executive officers, directors and executive
officers as a group and other individuals as a group.



|                                  |  | Option Granted |            |  | Exercise Price (US$/Share) |  |                | Vesting Commencement Date |  |  | Date of Grant   |  |  | Date of Expiration |                   
|--------------------------------- |  | -------------- | ---------- |  | -------------------------- |  | -------------- | ------------------------- |  |  | --------------- |  |  | ------------------ | ------------------
|Song Wang                         |  |                | 2,400,000  |  |                            |  | 0.24           |                           |  |  | April 1, 2011   |  |  |                    | June 20, 2011     
|                                  |  |                | 1,600,000  |  |                            |  | 0.24           |                           |  |  | January 1, 2013 |  |  |                    | July 8, 2013      
|                                  |  |                | 320,000    |  |                            |  | 0.24           |                           |  |  | January 1, 2014 |  |  |                    | July 8, 2013      
|                                  |  |                | 1,692,608  |  |                            |  | 0.5294         |                           |  |  | January 1, 2014 |  |  |                    | December 23, 2014 
|                                  |  |                | 8,960,000  |  |                            |  | 0.0725         |                           |  |  | January 1, 2016 |  |  |                    | December 13, 2017 
|                                  |  |                | 2,720,000  |  |                            |  | 0.06625        |                           |  |  | January 1, 2018 |  |  |                    | April 9, 2018     
|                                  |  |                | 800,000    |  |                            |  | 0.06625        |                           |  |  | April 9, 2018   |  |  |                    | April 9, 2018     
|Jean Xiaohong Kou                 |  |                | 430,000    |  |                            |  | 0.24           |                           |  |  | January 1, 2013 |  |  |                    | July 8,2013       
|                                  |  |                | 160,000    |  |                            |  | 0.24           |                           |  |  | January 1, 2014 |  |  |                    | July 8,2013       
|                                  |  |                | 1,440,000  |  |                            |  | 0.06625        |                           |  |  | January 1, 2018 |  |  |                    | April 9, 2018     
|Yunjie Liu                        |  |                | *          |  |                            |  | 0.01           |                           |  |  | April 1, 2007   |  |  |                    | March 31, 2007    
|                                  |  |                | *          |  |                            |  | 0.01           |                           |  |  | October 1, 2007 |  |  |                    | September 30, 2007
|                                  |  |                | *          |  |                            |  | 0.24           |                           |  |  | October 1, 2013 |  |  |                    | July 8, 2013      
|Fuya Zheng                        |  |                | —          |  |                            |  | —              |                           |  |  | —               |  |  |                    | —                 
|Bang Zhang                        |  |                | —          |  |                            |  | —              |                           |  |  | —               |  |  |                    | —                 
|Guangsheng Meng                   |  |                | —          |  |                            |  | —              |                           |  |  | —               |  |  |                    | —                 
|Directors and officers as a group |  |                | 21,882,608 |  |                            |  | 0.01 to 0.5294 |                           |  |  |                 |  |  |                    |                   
|Other individuals as a group(1)   |  |                | 76,435,072 |  |                            |  | 0.01 to 0.5294 |                           |  |  |                 |  |  |                    |                   





86







The following table summarizes, as of the
December 31, 2018, the restricted share units granted under our Stock Incentive Plans to our directors and executive officers,
directors and executive officers as a group and other individuals as a group.



|                                  |  | Restricted Share Units Granted |            |  | Vesting Commencement Date |  |                  | Date of Grant | 
|--------------------------------- |  | ------------------------------ | ---------- |  | ------------------------- |  | ---------------- | ------------- | 
|Song Wang                         |  |                                | 960,000    |  |                           |  | January 1, 2013  |               | 
|                                  |  |                                | 1,600,000  |  |                           |  | January 1, 2014  |               | 
|                                  |  |                                | 3,680,000  |  |                           |  | January 1,2015   |               | 
|                                  |  |                                | 11,440,000 |  |                           |  | January 1,2015   |               | 
|                                  |  |                                | 7,920,000  |  |                           |  | December 1, 2017 |               | 
|Jean Xiaohong Kou                 |  |                                | 320,000    |  |                           |  | January 1, 2013  |               | 
|                                  |  |                                | 1,646,304  |  |                           |  | January 1, 2014  |               | 
|                                  |  |                                | 9,493,328  |  |                           |  | January 1,2015   |               | 
|                                  |  |                                | 1,645,328  |  |                           |  | January 1,2015   |               | 
|                                  |  |                                | 7,933,344  |  |                           |  | December 1, 2017 |               | 
|Yunjie Liu                        |  |                                | —          |  |                           |  | —                |               | 
|Fuya Zheng                        |  |                                | —          |  |                           |  | —                |               | 
|Bang Zhang                        |  |                                | *          |  |                           |  | December 1, 2017 |               | 
|Guangsheng Meng                   |  |                                | —          |  |                           |  | —                |               | 
|Directors and officers as a group |  |                                | 48,078,304 |  |                           |  |                  |               | 
|Other individuals as a group(1)   |  |                                | 29,036,208 |  |                           |  |                  |               | 



*             In
aggregate owns options and/or restricted share units to acquire less than 1% of our outstanding ordinary shares on an as-converted
basis.



|(1) | Includes a director who has left the company.
|--- | ---------------------------------------------



Principal Terms of the 2007, 2008 and 2010 Stock Incentive
Plans



The following paragraphs describe the principal
terms of the 2007, 2008 and 2010 Stock Incentive Plans.



Plan Administration. Our board of
directors or a committee designated by our board will administer the plans. The committee or our board of directors, as appropriate,
will determine the provisions and terms and conditions of each award grant. It shall also have discretionary power to interpret
the terms of the plans.



Award Agreement. Awards granted under
the plans are evidenced by an award agreement that sets forth terms, conditions and limitations for each award. In addition, the
award agreement may also provide that securities granted are subject to a 90-day lockup period following the effective date of
a registration statement filed by us under the Securities Act, if so requested by us or any representative of the underwriters
in connection with any registration of the offering of any of our securities.



Eligibility. We may grant awards
to our employees, directors and consultants, including those of our affiliates. However, we may grant options that are intended
to qualify as incentive share options within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended,
only to our employees.



Acceleration of Awards upon Change in
Control. The outstanding awards will terminate and accelerate upon occurrence of a change-of-control corporate transaction,
including amalgamations, mergers or consolidations, liquidations or dissolutions, sales of substantially all or all of the assets,
reverse takeovers or acquisitions unless the successor entity assumes or replaces our outstanding awards under the plans. If the
successor entity does not assume or replace our outstanding awards, each outstanding award will become fully vested and immediately
exercisable and payable, and will be released from any repurchase or forfeiture rights immediately before the date of the change-of-control
transaction, provided that the grantee’s continuous service with us has not been terminated before that date.





87







Exercise Price and Term of Awards.
The plan administrator shall determine the exercise price and the exercisable term for each option which shall be stated in the
award document. For options that that are intended to qualify as incentive share options within the meaning of Section 422
of the Internal Revenue Code of 1986, as amended, the per share exercise price must not be less than 85% of the fair market value
per share on the date of grant, unless the administrator determines otherwise.



Vesting Schedule. The vesting periods
of the options under the plans are specified in individual award agreements.



Termination of the Plans. Unless
terminated earlier, the stock incentives plans will continue in effect for nine years. Our board of directors has the authority
to amend or terminate the plan subject to shareholder approval to the extent such approval is required by applicable law. Shareholder
approval is required for any amendment to our plans, if the amendment would adversely affect the grantee’s rights under an
outstanding award without the grantee’s written consent, or change the board’s authority to amend the plans subject
to shareholders’ approval.



Principal Terms of the 2011 Share Incentive Plan



The following paragraphs describe the principal
terms of the 2011 Share Incentive Plan.



Plan Administration. The administrator
of the 2011 Share Incentive Plan is our board of directors or the compensation committee of our board. The compensation committee
or our board of directors, as appropriate, determines the provisions and terms and conditions of each award grant, and has discretionary
power to interpret the terms of the plan. The plan administrator may delegate to a committee of one or more members of our board
the authority to grant or amend awards to participants other than independent directors and executive officers of our company.
Any grant or amendment of awards to any member of our board shall require approval by our board in accordance with our company’s
articles of association.



Award Agreement. Awards granted under
the plan are evidenced by an award agreement that sets forth the terms, conditions and limitations for each award, which may include
the term of an award, the provisions applicable in the event the participant’s employment or service terminates, and our
company’s authority to unilaterally or bilaterally amend, modify, suspend, cancel or rescind an award.



Eligibility. We may grant awards
to our employees, directors and consultants, including those of our affiliates. However, options that are intended to qualify as
incentive share options within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended, may not be granted
to employees of our affiliates or to independent directors or consultants.



Acceleration of Awards upon Change in
Control. If the plan administrator anticipates the occurrence, or upon the occurrence, of a corporate transaction, the plan
administrator may, in its sole discretion, provide for (i) any and all awards outstanding to terminate at a specific time
in the future and shall give each participant the right to exercise the vested portion of such awards during a period of time as
the plan administrator shall determine, or (ii) the purchase of any award for an amount of cash equal to the amount that could
have been attained upon the exercise of such award, or (iii) the replacement of such award with other rights or property selected
by the plan administrator in its sole discretion or the assumption of or substitution of such award by the successor or surviving
corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices, or
(iv) payment of award in cash based on the value of shares on the date of the corporate transaction plus reasonable interest
on the award through the date when such award would otherwise be vested or have been paid in accordance with its original terms,
if necessary to comply with Section 409A of the Internal Revenue Code of 1986.



Exercise Price and Term of Awards.
The exercise price per share subject to an option shall be determined by the plan administrator and set forth in the award agreement
which may be a fixed or variable price related to the fair market value of the ordinary shares. The exercise price per share subject
to an option may be amended or adjusted in the absolute discretion of the plan administrator, the determination of which shall
be final, binding and conclusive. For options that are intended to qualify as incentive share options within the meaning of Section 422
of the Internal Revenue Code of 1986, as amended, the exercise price of any incentive share option granted to any individual who,
at the date of grant, owns shares possessing more than ten percent of the total combined voting power of all classes of our shares
may not be less than 110% of fair market value on the date of grant and such option may not be exercisable for more than five years
from the date of grant.





88







Vesting Schedule. In general, our
plan administrator determines or the evidence of the award specifies, the vesting schedule.



Termination of the Plan. The plan
will expire on, and no award may be granted pursuant to the plan after, June 3, 2020. Awards that are outstanding after such
date shall remain in force according to the terms of the plan and the applicable award agreement.



|C. | Board Practices
|-- | ---------------



Board of Directors



Our board of directors currently consists of four directors. A director is not required to hold any shares
in the company by way of qualification. Under our memorandum and articles of association, subject to any separate requirement for
audit committee approval or compensation committee approval or unless disqualified by the chairman of the relevant board meeting,
so long as a director discloses the nature of his or her interest in any contract, proposal or arrangement (including arrangement
with respect to compensation to himself or herself or any other members of the board) in which he or she is materially interested,
such a director may vote in respect of such contract, proposal or arrangement and may be counted in the quorum at such a meeting.
A director may exercise all the powers of the company to borrow money, mortgage its undertaking, property and uncalled capital,
and issue debentures or other securities whenever money is borrowed or as security for any obligation of the company or of any
third party. None of our non-executive directors has a service contract with us that provides for benefits upon termination of
service.



Committees of the Board of Directors



We have established three committees under
the board of directors: the audit committee, the compensation committee and the nominating and corporate governance committee.
We have adopted a charter for each of the three committees. Each committee’s members and functions are described below.







Audit Committee. Our audit committee consists
of Mr. Bang Zhang, and Mr. Dong Yu. Mr. Bang Zhang is the chairman of our audit committee. The purpose of the audit committee is
to assist our board of directors with its oversight responsibilities regarding: (i) the integrity of our financial statements,
(ii) our compliance with legal and regulatory requirements, (iii) the independent auditor’s qualifications and
independence and (iv) the performance of our internal audit function and independent auditor. The audit committee is responsible
for, among other things:









| | · | appointing the independent auditors and pre-approving all auditing and non-auditing services permitted to be performed by the independent auditors;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------



| | · | reviewing with the independent auditors any audit problems or difficulties and management’s response;
| | - | -----------------------------------------------------------------------------------------------------



| | · | discussing the annual audited financial statements with management and the independent auditors;
| | - | ------------------------------------------------------------------------------------------------



| | · | reviewing the adequacy and effectiveness of our accounting and internal control policies and procedures and any steps taken to monitor and control major financial risk exposures;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | reviewing and approving all proposed related party transactions;
| | - | ----------------------------------------------------------------



| | · | meeting separately and periodically with management and the independent auditors; and
| | - | -------------------------------------------------------------------------------------



| | · | monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of our procedures to ensure proper compliance.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------





89















Compensation Committee. Mr. Dong
Yu is the chairman of our compensation committee. The compensation committee assists the board in reviewing and approving the compensation
structure, including all forms of compensation, relating to our directors and executive officers. Our Chief Executive Officer may
not be present at any committee meeting during which his compensation is deliberated. The compensation committee is responsible
for, among other things:







| | · | reviewing and approving, or recommending to the board for its approval, the compensation for our chief executive officer and other executive officers;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | reviewing and recommending to the board for determination with respect to the compensation of our non-employee directors;
| | - | -------------------------------------------------------------------------------------------------------------------------



| | · | reviewing periodically and approving any incentive compensation or equity plans, programs or similar arrangements; and
| | - | ----------------------------------------------------------------------------------------------------------------------



| | · | selecting compensation consultant, legal counsel or other adviser only after taking into consideration all factors relevant to that person’s independence from management.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------





Nominating and Corporate Governance Committee..
Mr. Dong Yu is the chairman of our nominating and corporate governance committee. The nominating and corporate governance
committee assists the board of directors in selecting individuals qualified to become our directors and in determining the composition
of the board and its committees. The nominating and corporate governance committee is responsible for, among other things:





| | · | selecting and recommending to the board nominees for election by the shareholders or appointment by the board;
| | - | --------------------------------------------------------------------------------------------------------------



| | · | reviewing annually with the board the current composition of the board with regards to characteristics such as independence, knowledge, skills, experience and diversity;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | making recommendations on the frequency and structure of board meetings and monitoring the functioning of the committees of the board; and
| | - | ------------------------------------------------------------------------------------------------------------------------------------------



| | · | advising the board periodically with regards to significant developments in the law and practice of corporate governance as well as our compliance with applicable laws and regulations, and making recommendations to the board on all matters of corporate governance and on any remedial action to be taken.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Duties of Directors



Under Cayman Islands law, our directors
have a duty of loyalty to act honestly in good faith with a view to our best interests. Our directors also have a duty to exercise
the skill they actually possess and such care and diligence that a reasonably prudent person would exercise in comparable circumstances.
In fulfilling their duty of care to us, our directors must ensure compliance with our memorandum and articles of association. A
shareholder has the right to seek damages if a duty owed by our directors is breached.



Terms of Directors and Officers



Our officers are elected by and serve at
the discretion of the board of directors. Our directors are not subject to a term of office and hold office until such time as
they are removed from office by special resolution or the unanimous written resolution of all shareholders. We do not have a mandatory
retirement age for directors. A director will be removed from office automatically if, among other things, the director (i) becomes
bankrupt or makes any arrangement or composition with his creditors; or (ii) dies or is found by our company to be or becomes
of unsound mind.



|D. | Employees
|-- | ---------



We had 861, 611 and 418 employees as of
December 31, 2016,  2017 and 2018, respectively. The following table sets forth the number of our employees by function as
of December 31, 2018:



|Functional Area               |  | Number of Employees |     |  | % of Total | 
|----------------------------- |  | ------------------- | --- |  | ---------- | 
|Customer service              |  |                     | 91  |  |            | 
|Sales and marketing           |  |                     | 80  |  |            | 
|Research and development      |  |                     | 185 |  |            | 
|Management and administration |  |                     | 62  |  |            | 
|Total                         |  |                     | 418 |  |            | 





90









Of our total employees as of December 31,
2018, 356 were located in Beijing, 31 were located in other cities throughout China and 31 were located outside China. We remunerate
our employees with a base salary as well as performance-based bonuses. We have also granted stock options to management and key
employees in order to reward their performance and provide them with equity incentives. In February 2016, about 30 of our
employees-initiated arbitration for labor dispute against Xin Run, Beijing Shouming, Beijing Zhao Du and Xin Run’s Tianjin
Branch with Shunyi Labor Dispute Arbitration Committee and Chaoyang Labor Dispute Arbitration Committee.  They withdrew the
arbitration request in June 2016 and later re-initiated the arbitration proceeding in May 2017. The arbitrators ruled that
our subsidiaries should pay compensation in the amount of approximately RMB0.6 million to those employees. The arbitration award
was supported by the judgement of trial court.  We have appealed the judgement to the appellate court in October 2017
and the appellate court dismissed the appeal and sustained the original judgement in October and November 2017. We believe that
these are isolated cases and that our employee relations are good.



Our full-time employees in the PRC participate
in a government mandated defined contribution plan pursuant to which certain pension benefits, medical care, unemployment insurance,
employee housing fund and other welfare benefits are provided to employees. Chinese labor regulations require that our PRC subsidiaries
make contributions to the government for these benefits based on a fixed percentage of the employees’ salaries.





|E. | Share Ownership
|-- | ---------------



Please refer to “Item 7 — Major
Shareholders and Related Party Transactions.”



|ITEM 7. | MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
|------- | -------------------------------------------------



|A. | Major Shareholders
|-- | ------------------



The following table sets forth information
with respect to the beneficial ownership of our ordinary shares as of March 31, 2019, by each of our directors and executive officers,
and the beneficial ownership of our ordinary shares as of March 31, 2019 by each person known to us to own beneficially more than
5.0% of our ordinary share:



The calculations in the table below are
based on 453,902,034 ordinary shares outstanding as of March 31, 2019 for the purpose of calculating the beneficial ownership in
the following table. Beneficial ownership is determined in accordance with the rules and regulations of the SEC. In computing
the number of shares beneficially owned by a person and the percentage ownership of that person, we have included shares that the
person has the right to acquire within 60 days following March 31, 2019, including through the exercise of any option, warrant
or other right or the conversion of any other security. These shares, however, are not included in the computation of the percentage
ownership of any other person.



|                                                |  | Ordinary Shares Beneficially Owned |           
|----------------------------------------------- |  | ---------------------------------- | ----------
|                                                |  | Number                             |           
|Directors and Executive Officers:               |  |                                    |           
|Song Wang(1)                                    |  |                                    | 86,600,733
|Jean Xiaohong Kou(2)                            |  |                                    | 86,600,733
|Yunjie Liu                                      |  |                                    | —         
|Fuya Zheng                                      |  |                                    | —         
|Bang Zhang                                      |  |                                    | *         
|All Directors and Executive Officers as a Group |  |                                    | 86,920,733
|Principal Shareholders:                         |  |                                    |           
|Consolidated Capital Holdings Ltd.(1)(2)(3)     |  |                                    | 56,543,248
|Investor AB(4)                                  |  |                                    | 42,391,092
|FIL Limited(5)                                  |  |                                    | 40,300,208





91







|* | Less than 1%.
|- | -------------



|(1) | Consists of (i) 56,487,472 ordinary shares and 3,486 ADSs representing 55,776 ordinary shares directly held by Consolidated Capital Holdings Ltd., (ii) 313,293 ordinary shares directly held by Harvest Century International Ltd., (iii) 18,864,096 ordinary shares that Mr. Song Wang has the right to acquire upon exercise or vesting of equity incentive awards within 60 days after March 31, 2018,  and (iv) 10,880,096 ordinary shares that Mr. Wang’s wife, Ms. Jean Xiaohong Kou has the right to acquire upon exercise or vesting of equities incentive awards within 60 days after March 31, 2018. Song Wang and Jean Xiaohong Kou possess the power to direct the voting and disposition of the shares owned by Consolidated Capital Holdings Ltd. and Harvest Century International Ltd. through Hong Song Family Trust and are deemed to have shared voting and investment power over the shares held by Consolidated Capital Holdings Ltd. and Harvest Century International Ltd. The business address for Mr. Wang is Section A, Building 3, Dian Tong Creative Square, No. 7 Jiuxianqiao North Road, Chaoyang District, Beijing 100015, China.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | See Note (1) above. Mr. Song Wang and Ms. Jean Xiaohong Kou are husband and wife, and may be deemed to share beneficial ownership of the shares and ADSs held by each other. The business address for Ms. Kou is Section A, Building 3, Dian Tong Creative Square, No. 7 Jiuxianqiao North Road, Chaoyang District, Beijing 100015, China.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(3) | The business address for Consolidated Capital Holdings Ltd. is c/o Jean Xiaohong Kou, Section A, Building 3, Dian Tong Creative Square, No. 7 Jiuxianqiao North Road, Chaoyang District, Beijing 100015, China.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(4) | Consists of (i) 22,954,468 ordinary shares and 419,996 ADSs, representing 6,719,936 ordinary shares held by Investor Investments Asia Limited, (ii) 9,836,608 ordinary shares and 180,005 ADSs representing 2,880,080 ordinary shares held by Investor Group Asia, L.P., as reported in a Schedule 13G/A filed on February 14, 2018 by Investor AB. We refer to these funds collectively as Investor AB Funds. The business address for Investor AB Funds is Arsenalsgatan 8C, S-103, 32 Stockholm, Sweden. Investor AB, a limited liability company incorporated under the laws of Sweden, through one or more intermediate entities, possesses the sole power to vote and the sole power to direct the disposition of all the shares held by Investor AB Funds. Investor Group Asia, L.P. is a Guernsey limited partnership.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(5) | Consists of 40,300,208 ordinary shares beneficially owned by FIL Limited as reported in a Schedule 13G/A filed on February 13, 2018 by FIL Limited and other filers. The business address for FIL Limited is Pembroke Hall, 42, Crow Lane, Hamilton, Bermuda.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



To our knowledge, as of March
31, 2019, 386,583,680 of our ordinary shares, or approximately 85.2% of our total outstanding ordinary shares, was held by one
of our record holders The number of beneficial owners of our ADSs in the U.S. is likely to be much larger than the number of record
holders of our ordinary shares in the U.S. To our knowledge, we are not owned or controlled, directly or indirectly, by another
corporation, by any foreign government or by any other natural or legal persons, severally or jointly. None of our shareholders
has different voting rights from other shareholders. We are not aware of any arrangement that may, at a subsequent date, result
in a change of control of our company.



|B. | Related Party Transactions
|-- | --------------------------



Contractual Arrangements with Our Consolidated Variable Interest
Entities



See “Item 4. Information on the Company
 — C. Organizational Structure — Contractual Arrangements with Our Consolidated Variable Interest Entities.”



Employment Agreements



See “Item 6. Directors, Senior Management
and Employees — A. Directors and Senior Management — Employment Agreements.”





92







Stock Incentive Plans



See “Item 6. Directors, Senior Management
and Employees — B. Compensation — Stock Incentive Plans.”



Private Placement



In March 2014, we issued and sold an
aggregate of 53,855,569 ordinary shares, represented by 3,365,973 ADSs, to a group of institutional investors affiliated with Wellington
Management Company, LLP for an aggregate purchase price of approximately US$55.0 million in reliance on Regulation D under the
Securities Act. In connection with the transaction, we have agreed to give the institutional investors the preemptive rights to
subscribe for the new shares that may be issued by us in proportion to their shareholdings, and certain registration rights, including
the filing with the SEC of a registration statement shortly after the filing of this annual report covering the resale of all of
the shares acquired by the institutional investors in the transaction. Pursuant to the registration rights we granted to these
institutional investors, we filed a registration statement on Form F-3 in April 2014 with respect to the proposed sale
from time to time by such institutional investors of up to 3,365,973 ADSs of ours.



Share Repurchase



Under our share repurchased programs established
in December 2014, August 2015 and December 2015, respectively, we had repurchased an aggregate of 44,562,816 ordinary
shares of us, represented by 2,785,176 ADSs, in the open market for an aggregate purchase price of approximately US$21 million
as of March 31, 2016. We have not made any repurchase of our shares since March 31, 2016.



Transaction with Related Parties



In 2015 and 2016, Flashapp Inc., or Flashapp,
provided services to us in the amount of RMB0.1 million and nil, respectively. As of December 31, 2016, we did not have any
payables to Flashapp. The board of directors of Flashapp shall consist of five persons, where we, as a majority of Series A
Preferred Shares, may appoint two directors. We, through the directors appointed, have the ability to exercise significant influence
over the operating and financial policies of Flashapp and hence, Flashapp is a related party of us.



In September 2015, Xin Run increased
its registered capital by US$0.2 million, which was subscribed by Tianjin Shuishan and thus Xin Run was converted from a wholly
foreign-owned enterprise to a sino-foreign joint venture with ChinaCache Networks (Hong Kong) Limited and Tianjin Shuishan each
holding 99% and 1%, respectively, of its equity interest. In December 2015, we entered into definitive agreements for Xin
Run, pursuant to which Tianjin Shuishan, KPIW (Beijing) Investment Fund Co., Ltd. and Tianjin Dingsheng will subscribe for
36%, 22% and 2%, respectively, of the post-investment equity interest in Xin Run for a consideration of RMB225.0 million, RMB137.5
million and RMB12.5 million, respectively. The agreements were later terminated. In March 2017, we entered into another set
of definitive agreements for Xin Run, pursuant to which Tianjin Shuishan, Shanghai Qiaoyong and Tianjin Dingsheng will purchase
47.7%, 26.3% and 5.0%, respectively, of the equity interest in Xin Run for a consideration of RMB133.5 million, RMB73.7 million
and RMB14.0 million, respectively. Tianjin Shuishan is owned by Mr. Song Wang and Ms. Jean Xiaohong Kou. On December
28, 2017, the board of approval to terminate the translation. On March 23, 2018, we entered into a termination agreement with relevant
parties and terminated the equity transfer of  Xin Run



|C. | Interests of Experts and Counsel
|-- | --------------------------------



Not applicable.



|ITEM 8. | FINANCIAL INFORMATION
|------- | ---------------------



|A. | Consolidated Statements and Other Financial Information
|-- | -------------------------------------------------------



Please refer to Item 18.





93







Legal Proceedings





We and certain of our current and former
officers and directors have been named as defendants in a shareholder class action lawsuit filed in the U.S. District Court for
the Central District of California (the “District Court”): Xu v. ChinaCache International Holdings Ltd., et al., Civil
Action No. 2:15-cv-07952-CAS-RAO (C.D. Cal.) (filed on October 9, 2015).  The action — purportedly brought
on behalf of a class of persons who allegedly suffered damages as a result of their trading activities related to our ADSs from
March 27, 2015 to August 20, 2015 — alleges that certain of our statements in press releases, quarterly earnings
calls, and an SEC filing contained misstatements or omissions related to our High Performance Cloud Cache platform and asserts
claims under Sections 10(b) and 20(a) of the U.S. Securities Exchange Act.  On January 5, 2016, the District
Court appointed a lead plaintiff and approved the lead plaintiff’s selection of lead counsel.  On February 19,
2016, the lead plaintiff filed a First Amended Complaint.  On August 15, 2016, the District Court dismissed without prejudice
the First Amended Complaint against our Company. On September 14, 2016, the lead plaintiff filed the Second Amended Complaint.
On January 9, 2017, the District Court dismissed the Second Amended Complaint without prejudice, allowing plaintiff to file
the Third Amended Complaint on or before January 30, 2017. On February 28, 2017, the lead plaintiff filed a motion for
judgment on the pleadings, which the District Court granted on March 1, 2017. On March 6, 2017, the lead plaintiff filed
a notice of appeal of the District Court’s order granting our company’s motion to dismiss and other related orders
to the U.S. Court of Appeals for the Ninth Circuit (the “Court of Appeals”). On September 13, 2017, the lead plaintiff
filed with the Court of Appeals a motion for extension of time to file its opening brief, reporting to the Court of Appeals that
the lead plaintiff and we have reached an agreement in principle for the settlement of the purported class action, which settlement
would require approval by the District Court.  On September 14, 2017, the Court of Appeals granted the lead plaintiff’s
motion for extension of time to file its opening brief. On February 14, 2018, the lead plaintiff filed an unopposed motion to remand
the case to the District Court for the limited purpose of enabling the District Court to consider the parties’ settlement
agreement, which motion was granted by the Court of Appeals on March 6, 2018. On March 28, 2018, the lead plaintiff filed an unopposed
motion for preliminary approval of class action settlement in the District Court, requesting that the District Court a) preliminarily
approve a settlement agreement that the parties reached to settle the case for USD 990,000, b) certify the proposed settlement
class for settlement purposes only, c) approve the parties’ proposed form and method of giving settlement class members notice
of the action and proposed settlement, and d) set a hearing at which the District Court will consider whether to grant final approval
of the settlement, dismiss claims against defendants, approve the release of claims against all released parties, enter judgment,
and award attorneys’ fees and expenses to co-lead counsel. On August 13, 2018, the Court approved the settlement agreement
and dismissed the action and all claims against each and all of the defendants.



We and certain of our current and former
officers and directors have been named as defendants in a shareholder class action lawsuit filed in the U.S. District Court for
the Central District of California (the “Central California District Court”): William Likas v. ChinaCache International
Holdings Ltd. et al, Civil Action No. 2:2019-cv-06942 (C.D. Cal.) (filed on August 9, 2019).  The action—purportedly
brought on behalf of a class of persons who allegedly suffered damages as a result of their trading activities related to our ADSs
from April 10, 2015 to May 17, 2019—alleges that certain of our public statements and filings contained materially false
and misleading statements misstatements or omissions in violation of U.S. securities laws.  Back on June 12, 2019, another
plaintiff had filed a substantially identical putative shareholder class action lawsuit against us and certain of our current and
former officers and directors in the U.S. District Court for the Southern District of New York; on August 30, 2019, the plaintiff
voluntarily dismissed that lawsuit.  On October 2, 2019, the Central California District Court appointed a group of two purported
shareholders of the Company as the Lead Plaintiff of the class. On November 13, 2019, the Central California District Court entered
an order to show cause, ordering plaintiff to show cause in writing on or before November 20, 2019 why this action should not be
dismissed for lack of prosecution.



We believe the case is without merit and
intend to defend the action vigorously. For risks and uncertainties relating to the pending cases against us, please see “Item
3. Key Information—D. Risk Factors—Risks Related to Our ADSs—We have been named as a defendant in a putative
shareholder class action lawsuit that could have a material adverse impact on our business, financial condition, results of operation,
cash flows and reputation.”



We may become subject to legal proceedings,
investigations and claims incidental to the conduct of our business from time to time.





In July 2017, a claim was raised by the
construction company of the data center buildings against Xin Run, for the alleged non-payment of construction fees of RMB73.9
million and the relating interest. In July 2019, Xin Run reached an agreement for settlement of the case with this construction
company, under which Xin Run agrees to pay RMB33.7 million. The Company has fully accrued the amount as liability accordingly.
Such construction company has applied to the competent court for compulsory execution of the agreement for settlement of this
case.



In August 2017, our PRC subsidiary,
Xin Run, initiated a lawsuit against BFSMC in Beijing, arising out of the sales of data center buildings. We sought the payment
of purchase price in the amount of RMB105.6 million and the relating interest. In September 2017, BFSMC filed the statement
of defense and made a counterclaim, claiming, among others, the late delivery penalties and relating losses in the total amount
of approximately RMB50.5 million. Thereafter we filed a motion to dismiss BFSMC’s counterclaim arguing that the court does
not have the jurisdiction. In April 2018, we were notified by the court that our motion was dismissed and as a result, the lawsuit
is currently pending. In addition, Xin Run’s bank deposits and other assets in a total amount of approximately RMB 50.5
million were sealed up, distrained or frozen by the court. On April 24, 2018, we amended our claim requesting, among other things,
the defendant pay the additional purchase price of RMB96 million, damages for breach of contract in an amount of RMB14.4 million
and the relating interest of RMB8.86 million. Management is of the view that these proceedings are at a preliminary stage, therefore
it is impossible at this stage to properly evaluate the outcome. Therefore, no provision has been made for this case.



In October 2017, a subsidiary of BFSMC
filed a lawsuit against Xin Run in the Shunyi District Court of Beijing requesting Xin Run pay overdue rent and the relating interest.
At present, the second instance of this case has been completed. Unfortunately, we lost, and the court ruled that Xin Run should
pay overdue rent from October 2017 to June 2018 in an amount equal to RMB64.8 million and the relevant interest thereon. The subsidiary
of BFSMC has applied to the competent court for compulsory execution of the court decision. Liability equal to the sentenced amount
has been recorded in the balance sheet as of December 31, 2018 under other payables to offset consideration received for disposal
of Zhao Du and Shuo Ge in the expectation to net settle with BFSMC.



In June 2019, the foregoing subsidiary
of BFSMC filed another lawsuit against Xin Run in the Shunyi District Court of Beijing requesting Xin Run pay overdue rent from
July 2018 to March 2019 in an amount equal to RMB64.8 million and the relating interest thereon. Management is of the view that
these proceedings are at a preliminary stage, therefore it is impossible at this stage to properly predict the result and potential
financial impact of this pending claim, if any. Liability of the six-month rent in 2018 has been recorded in the balance sheet
as of December 31, 2018 under other payables to offset consideration received for disposal of Zhao Du and Shuo Ge in the expectation
to net settle with BFSMC.



In April 2019, a trading company filed
a lawsuit against our PRC subsidiary, Xin Run, in the Beijing No.4 Intermediate People’s Court, requesting Xin Run to pay
purchase price and relevant liquidated damage in a total amount of approximately RMB37.2 million. In June 2019, Xin Run and such
trading company reached an agreement for settlement of the case, under which Xin Run agrees to pay such trading company purchase
price of RMB20.2 million and the relating interest of RMB6.0million. The Company has accrued the amount as other payables, however,
Xin Run only settled RMB2.0 million subsequently.



In April 2019, a technology company filed
a lawsuit in Shanghai Minhang District People’s Court against Beijing Blue I.T., demanding payment of service fee and relevant
liquidated damage in a total amount of approximately RMB28.3 million. The court rendered a judgment on the case in October, 2019,
which ruled that Beijing Blue I.T. should pay relevant service fee, liquidated damage and costs of legal proceedings. We have
appealed the judgment to a higher court. Management is of the view that these proceedings are at a preliminary stage, therefore
it is impossible at this stage to properly predict the result and potential financial impact of this pending claim, if any. The
Company accrued the 2018 service fee, amounted to RMB18.7 million as liability in balance sheet for the year ended December 31,
2018.



In August 2019, a building materials technology
company initiated a lawsuit against Xin Run in the Beijing Shunyi District People’s Court to request payment of approximately
RMB35.6 million that should be paid by Xin Run to a third party, as such third party was obligated to pay the same amount to the
building materials technology company, and the relating cost of the lawsuit. We filed a motion to dismiss the case for lack of
jurisdiction, which was granted by the court and as a result, this lawsuit is still pending. Management is of the view that these
proceedings are at a preliminary stage, therefore it is impossible at this stage to properly predict the result and potential
financial impact of this pending claim, if any. However, the amount has been accrued as other payables.



In June 2019, a computer company filed
a lawsuit against Xin Run in the Beijing Shunyi District People’s Court, requesting Xin Run to pay overdue construction
fees and relevant interest in a total amount of approximately RMB74.6 million. As of the date hereof, this lawsuit is still pending.
Management is of the view that these proceedings are at a preliminary stage, therefore it is impossible at this stage to properly
predict the result and potential financial impact of this pending claim, if any. However, the Company has accrued most of the
amount as other payables.



In June 2019, such computer company filed
another lawsuit against Xin Run in the Beijing Haidian District People’s Court, requesting Xin Run to pay overdue equipment
purchase payment and relevant interest in a total amount of approximately RMB40.8 million. We filed a motion to dismiss the case
for lack of jurisdiction, which was granted by the court and as a result, this lawsuit is still pending. Management is of the
view that these proceedings are at a preliminary stage, therefore it is impossible at this stage to properly predict the result
and potential financial impact of this pending claim, if any. However, the Company has accrued most of the amount as other payables.













94











In October 2019, another technology company
filed a lawsuit against Xin Run in the Beijing Shunyi District People’s Court, requesting Xin Run to pay overdue construction
fees and liquidated damage in a total amount of approximately RMB20.5 million. As of the date hereof, this lawsuit is still pending.
Management is of the view that these proceedings are at a preliminary stage, therefore it is impossible at this stage to properly
predict the result and potential financial impact of this pending claim, if any. However, the Company has accrued the amount as
other payables.



In November 2019, a commercial bank filed
a lawsuit with respect to financial loan agreement dispute against Xin Run, Mr. Song Wang and Ms. Jean Xiaohong Kou in the Fushun
Intermediate People's Court of Liaoning Province. As of the date hereof, we have not received the any documents relating to this
lawsuit from the court.



In addition, according to court decisions
issued in certain legal proceedings, an aggregate amount of RMB12.0 million and RMB4.3 million in bank accounts of Beijing Blue
I.T. and Xin Run, is currently frozen and restricted to be used, respectively.



In view of the nature of the above unresolved
claims, both factual and legal, that were raised in the proceedings and given the stage of the proceedings, it is impossible at
this stage to properly evaluate the prospect of the lawsuits being successful. See “Item3. Key Information — D. Risk
Factor — If we are required to seek additional funding, such funding may not be available on commercially acceptable terms,
if at all”.







95







Dividend Policy



We do not have any present plan to pay any
dividends on our ordinary shares in the foreseeable future. We currently intend to retain most, if not all, of our available funds
and any future earnings to operate and support our business.



Our board of directors has complete discretion
whether to distribute dividends. Even if our board of directors decides to pay dividends, the form, frequency and amount will depend
upon our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions
and other factors that the board of directors may deem relevant.



Holders of our ADSs will be entitled to
receive dividends, if any, subject to the terms of the deposit agreement, to the same extent as the holders of our ordinary shares.
Cash dividends will be paid to the depositary in U.S. dollars, which will distribute them to the holders of ADSs according to the
terms of the deposit agreement. Other distributions, if any, will be paid by the depositary to the holders of ADSs by any means
it deems legal, fair and practical.



We are a holding company incorporated in
the Cayman Islands. We rely on dividends from our subsidiaries in China for our cash needs. Our PRC subsidiaries are required to
comply with applicable PRC regulations when it pays dividends to us. See “Item 3. Key Information — D. Risk Factors
 — Risks Relating to Doing Business in China — We rely principally on dividends paid by our operating subsidiary to
fund cash and financing requirements, and limitations on the ability of our operating subsidiary to make payments to us could have
a material adverse effect on our ability to conduct our business and fund our operations.”



|B. | Significant Changes
|-- | -------------------



Except as disclosed elsewhere in this annual
report, we have not experienced any significant changes since the date of our audited consolidated financial statements included
in this annual report.



|ITEM 9. | THE OFFER AND LISTING
|------- | ---------------------



|A. | Offering and Listing Details
|-- | ----------------------------



See “— C. Markets.”



|B. | Plan of Distribution
|-- | --------------------



Not applicable.



|C. | Markets -
|-- | ---------





Our ADSs, each representing 16 of our ordinary
shares, were formerly listed on the Nasdaq Global Select Market. On Spetmber 4, 2019, the Nasdaq Hearings Panel determined to delist
the the Company’s securities from The Nasdaq Stock Market. Suspension of trading in the shares was effective at the open
of business on September 6, 2019. Our ADSs currently trade under the symbol “CCIH” in The Over The Counter –
Pink Sheets. The following table provides the high and low trading prices for our ADSs since the date of our initial public offering.









96







The last reported closing price for our
ADSs on May 10, 2019 was US$1.21 per ADS.



|                              |  | Market Price (US$) |      
|----------------------------- |  | ------------------ | -----
|                              |  | High               |      
|Annual High and Low           |  |                    |      
|Fiscal Year 2014              |  |                    | 29.34
|Fiscal Year 2015              |  |                    | 15.69
|Fiscal Year 2016              |  |                    | 10.48
|Fiscal Year 2017              |  |                    | 3.05 
|Fiscal Year 2018              |  |                    | 4.75 
|Quarterly Highs and Lows      |  |                    |      
|First Fiscal Quarter of 2017  |  |                    | 2.80 
|Second Fiscal Quarter of 2017 |  |                    | 1.78 
|Third Fiscal Quarter of 2017  |  |                    | 1.17 
|Fourth Fiscal Quarter of 2017 |  |                    | 3.05 
|First Fiscal Quarter of 2018  |  |                    | 2.89 
|Second Fiscal Quarter of 2018 |  |                    | 1.41 
|Third Fiscal Quarter of 2018  |  |                    | 1.43 
|Fourth Fiscal Quarter of 2018 |  |                    | 1.64 
|First Fiscal Quarter of 2019  |  |                    | 1.36 
|Monthly Highs and Lows        |  |                    |      
|October 2018                  |  |                    | 1.23 
|November 2018                 |  |                    | 1.51 
|December 2018                 |  |                    | 1.64 
|January 2019                  |  |                    | 1.19 
|February 2019                 |  |                    | 1.21 
|March 2019                    |  |                    | 1.36 
|April 2019                    |  |                    | 1.38 
|May (through May 10) 2019     |  |                    | [  ] 



|D. | Selling Shareholders
|-- | --------------------



Not applicable.



|E. | Dilution
|-- | --------



Not applicable.



|F. | Expenses of the Issue
|-- | ---------------------



Not applicable.



|ITEM 10. | ADDITIONAL INFORMATION
|-------- | ----------------------



|A. | Share Capital
|-- | -------------



Not applicable.



|B. | Memorandum and Articles of Association
|-- | --------------------------------------



We are a Cayman Islands company and our
affairs are governed by our amended and restated memorandum and articles of association, as amended from time to time, and the
Companies Law (2018 Revision) of the Cayman Islands, which is referred to below as the Companies Law.



The following are summaries of the material
provisions of our amended and restated memorandum and articles of association and the Companies Law insofar as they relate to the
material terms of our ordinary shares.



Registered Office and Objects



Our registered office in the Cayman Islands
is located at Conyers Trust Company (Cayman) Limited at Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman KY1-1111, Cayman
Islands. As set forth in clause 3 of our amended and restated memorandum of association, the objects for which our company is established
are unrestricted.





97







Board of Directors



See “Item 6. Directors, Senior Management
and Employees — C. Board Practices — Board of Directors” and “Item 6. Directors, Senior Management and
Employees — C. Board Practices — Terms of Directors and Officers.”



Ordinary Shares



General. Certificates representing
the ordinary shares are issued in registered form. Our shareholders who are non-residents of the Cayman Islands may freely hold
and vote their shares.



Dividends. The holders of our ordinary
shares are entitled to such dividends as may be declared by our board of directors, subject to the Companies Law.



Voting Rights. Each ordinary share
is entitled to one vote on all matters upon which the ordinary shares are entitled to vote. Voting at any shareholders’ meeting
is by show of hands unless a poll is demanded. A poll may be demanded by at least three shareholders entitled to vote at the meeting,
or one or more shareholders holding at least 10% of the paid up voting share capital or 10% of the total voting rights entitled
to vote at the meeting, present in person or by proxy.



A quorum required for a meeting of shareholders
consists of at least one shareholder present in person or by proxy or, if a corporation or other non-natural person, by its duly
authorized representative, who holds no less than one third of our voting share capital. Shareholders’ meetings are held
annually and may be convened by our board of directors on its own initiative or upon a request to the directors by shareholders
holding in aggregate at least one-third of our voting share capital. Advance notice of at least 14 days is required for the convening
of our annual general meeting and other shareholders’ meetings.



An ordinary resolution to be passed by the
shareholders requires a simple majority of votes cast in a general meeting, while a special resolution requires no less than two-thirds
of the votes cast. A special resolution is required for important matters such as a change of name. Our shareholders may effect
certain changes by ordinary resolution, including increase the amount of our authorized share capital, consolidate and divide all
or any of our share capital into shares of larger amount than our existing shares, and cancel any shares.



Transfer of Shares. Subject to the
restrictions of our memorandum and articles of association, as applicable, any of our shareholders may transfer all or any of his
or her ordinary shares by an instrument of transfer in the usual or common form or any other form approved by our board.



Our board of directors may, in its sole
discretion, decline to register any transfer of any ordinary share which is not fully paid up or on which we have a lien. Our directors
may also decline to register any transfer of any share unless (i) the instrument of transfer is lodged with us, accompanied
by the certificate for the shares to which it relates and such other evidence as our board of directors may reasonably require
to show the right of the transferor to make the transfer; (ii) the instrument of transfer is in respect of only one class
of shares; (iii) the instrument of transfer is properly stamped, if required; (iv) in the case of a transfer to joint
holders, the number of joint holders to whom the share is to be transferred does not exceed four; (v) the shares conceded
are free of any lien in favor of us.



If our directors refuse to register a transfer
they shall, within two months after the date on which the instrument of transfer was lodged, send to each of the transferor and
the transferee notice of such refusal. The registration of transfers may, on 14 days’ notice being given by advertisement
in such one or more newspapers or by electronic means, be suspended and the register closed at such times and for such periods
as our board of directors may from time to time determine, provided, however, that the registration of transfers shall not be suspended
nor the register closed for more than 30 days in any year.





98









Liquidation. On a return of capital
on winding up or otherwise (other than on conversion, redemption or purchase of shares), assets available for distribution among
the holders of ordinary shares shall be distributed among the holders of the ordinary shares on a pro rata basis. If our assets
available for distribution are insufficient to repay all of the paid-up capital, the assets will be distributed so that the losses
are borne by our shareholders proportionately.



Calls on Shares and Forfeiture of Shares.
Our board of directors may from time to time make calls upon shareholders for any amounts unpaid on their shares in a notice served
to such shareholders at least 14 days prior to the specified time of payment. The shares that have been called upon and remain
unpaid on the specified time are subject to forfeiture.



Redemption of Shares. Subject to
the provisions of the Companies Law, we may issue shares on terms that are subject to redemption, at our option or at the option
of the holders, on such terms and in such manner as may be determined by our board of directors.



Variations of Rights of Shares. All
or any of the special rights attached to any class of shares may, subject to the provisions of the Companies Law, be varied either
with the written consent of the holders of a majority of the issued shares of that class or with the sanction of a special resolution
passed at a general meeting of the holders of the shares of that class. The rights conferred upon the holders of the shares of
any class shall not, unless otherwise expressly provided by the terms of issue of the shares of that class, be deemed to be varied
by the creation or issue of further shares ranking in priority to or pari passu with such previously existing shares.



Inspection of Books and Records.
Holders of our ordinary shares have no general right under Cayman Islands law to inspect or obtain copies of our list of shareholders
or our corporate records. However, each annual statement on Form 20-F that we file with the SEC includes, among other things,
annual audited financial statements and certain shareholding information for our directors and officers and principal shareholders.



Anti-Takeover Provisions. Some provisions
of our amended and restated memorandum and articles of association may discourage, delay or prevent a change of control of our
company or management that shareholders may consider favorable, including provisions that:



| | · | authorize our board of directors to issue preference shares in one or more series and to designate the price, rights, preferences, privileges and restrictions of such preference shares without any further vote or action by our shareholders; and
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | limit the ability of shareholders to requisition and convene general meetings of shareholders.
| | - | ----------------------------------------------------------------------------------------------



However, under Cayman Islands law, our directors
may only exercise the rights and powers granted to them under our amended and restated memorandum and articles of association for
a proper purpose and for what they believe in good faith to be in the best interests of our company.



Limitations on the Right to Own Shares.
There are no limitations on the right to own our ordinary shares.



|C. | Material Contracts
|-- | ------------------



For the two years immediately preceding
the date of this annual report, we have not entered into any material contracts other than in the ordinary course of business and
other than those described below or in “Item 4. Information on the Company” or elsewhere in this annual report.



On December 21, 2017, Xin Run entered
into a loan agreement with Shenyang Rural & Commercial Bank Co., Ltd., Shenhe Branch, under which Xin Run may borrow for
a maximum amount of RMB220 million with the term expiring on December 20, 2022. The loan was guaranteed by certain real
properties and land use rights owned by Xin Run and certain personal properties owned by Mr. Song Wang and Ms. Jean Xiaohong
Kou. On November 4, 2019, we got the advance maturity notice of the loan. And To date, we still pay back the interest on
time. On December 29, 2017, Xin Run entered into a framework agreement with People.cn, under which, among others, Xin Run
will transfer 100% equity interest in Beijing Shuoge Technology Co., Ltd. to People.cn subject to terms and conditions to be
set forth in a definitive equity transfer agreement.



On
September 29, 2018, Xin Run entered into a financial lease contract with Beijing Yizhuang International Financial Lease Co., Ltd.,
or Yizhuang International, under which, Xin Run agrees to sell certain equipment to Yizhuang International for a consideration
of RMB25 million and to lease such equipment and assets from Shunyi Construction Investment for a term of 3 years, and the estimated
total consideration for such lease is approximately RMB27.5 million. On the same day, Xin Run and Yizhuang International entered
into a separate financial lease contract with similar arrangements, under which Xin Run agrees to sell certain equipment to Yizhuang
International for a consideration of RMB9 million and to lease such equipment and assets from Shunyi Construction Investment for
a term of 3 years, and the estimated total consideration for such lease is approximately RMB11 million. The fulfillment of Xin
Run’s obligation under these financial lease contracts was guaranteed by certain equipment of Xin Run, certain equity interest
of Xin Run held by ChinaCache HK and certain accounts receivable of Beijing Blue I.T., and meanwhile, Mr. Song Wang and Ms. Jean
Xiaohong Kou provided guarantee to fulfillment of Xin Run’s obligation under these financial lease contracts.





99







On
November 9, 2018, Xin Run entered into a financial lease contract with Shunyi Construction Investment (Tianjin) Financial Lease
Co., Ltd., or Shunyi Construction Investment, under which, Xin Run agrees to sell certain equipment and other assets to Shunyi
Construction Investment for a consideration of RMB39 million and to lease such equipment and assets from Shunyi Construction Investment
for a term of 3 years, and the estimated total consideration for such lease is approximately RMB44.5 million. The fulfillment
of Xin Run’s obligation under such financial lease contract was guaranteed by certain
real property, land use right and equipment owned by Xin Run, and meanwhile, Mr. Song Wang and Ms. Yating Yan provided guarantee
to fulfillment of Xin Run’s obligation under this financial lease contract.



On
December 27, 2018, Xin Run entered into a financial lease contract with Shunyi Construction Investment, under which, Xin Run agrees
to sell certain equipment and other assets to Shunyi Construction Investment for a consideration of RMB11 million and to lease
such equipment and assets from Shunyi Construction Investment for a term of 3 years, and the estimated total consideration for
such lease is approximately RMB12.5 million. The fulfillment of Xin Run’s obligation
under such financial lease contract was guaranteed by certain real property, land use right and equipment owned by Xin Run, and
meanwhile, Mr. Song Wang and Ms. Yating Yan provided guarantee to fulfillment of Xin Run’s obligation under this financial
lease contract.



On
April 3, 2019, Xin Run entered into an equity transfer agreement with People.cn, pursuant to which, Xin Run agrees to transfer
100% equity interest in Beijing Shuoge Technology Co., Ltd. to People.cn for a consideration of RMB251.8
million and return RMB73.2 million
prepaid by People.cn before December 31, 2024.



|D. | Exchange Controls
|-- | -----------------



The Cayman Islands currently has no exchange
control restrictions. See also “Item 4. Information on the Company— B. Business Overview—Regulation—Regulations
on Foreign Exchange Registration of Overseas Investment by PRC Residents,” “Item 4. Information on the Company—B.
Business Overview—Regulation—Regulations on Foreign Currency Exchange” and “Item 4. Information on the
Company—B. Business Overview—Regulation—Regulations on Dividend Distribution.”



|E. | Taxation
|-- | --------



The following summary of the material Cayman
Islands, People’s Republic of China and U.S. federal income tax consequences of an investment in our ADSs or ordinary shares
is based upon laws and relevant interpretations thereof in effect as of the date of this annual report, all of which are subject
to change. This summary does not deal with all possible tax consequences relating to an investment in our ADSs or ordinary shares,
such as the tax consequences under state, local and other tax laws.



Cayman Islands Taxation



The Cayman Islands currently levies no taxes
on individuals or corporations based upon profits, income, gains or appreciation and there is no taxation in the nature of inheritance
tax or estate duty. There are no other taxes likely to be material to us or an investor in ADSs or ordinary shares levied by the
Government of the Cayman Islands except for stamp duties which may be applicable on instruments executed in, or brought within
the jurisdiction of the Cayman Islands. The Cayman Islands is a party to a double taxation treaty entered into with the United
Kingdom in 2010 but otherwise is not party to any double taxation treaties. There are no exchange control regulations or currency
restrictions in the Cayman Islands.



People’s Republic of China Taxation



Under the PRC enterprise income tax law,
an enterprise established outside the PRC with “de facto management bodies” within the PRC is considered a “resident
enterprise” of the PRC. A circular issued by the SAT on April 22, 2009, or the 2009 Circular, clarified that dividends
and other income paid by certain offshore enterprises controlled by a PRC company or a PRC company group established outside of
the PRC will be considered PRC-source income and subject to PRC withholding tax, currently at a rate of 10%, when paid to non-PRC
resident enterprise shareholders and 20% for shareholders who are non-PRC resident individuals. Under the implementation regulations
to the enterprise income tax law, a “de facto management body” is defined as a body that has material and overall management
and control over the manufacturing and business operations, personnel and human resources, finances and properties of an enterprise.
In addition, the 2009 Circular specifies that certain offshore enterprises controlled by a PRC company or a PRC company group will
be classified as PRC resident enterprises if the following are located or resident in the PRC: senior management personnel and
departments that are responsible for daily production, operation and management; financial and personnel decision making bodies;
key properties, accounting books, the company seal, and minutes of board meetings and shareholders’ meetings; and half or
more of the senior management or directors having voting rights. Although the 2009 Circular only applies to offshore enterprises
controlled by PRC enterprises and not those controlled by PRC individuals, the determining criteria set forth in the 2009 Circular
may reflect the SAT’s general position on how the “de facto management body” test should be applied in determining
the tax resident status of offshore enterprises, regardless of whether they are controlled by PRC enterprises or individuals. We
are incorporated in the Cayman Islands. We believe that we are not a PRC resident enterprise. However, if the PRC tax authorities
determine that we are a PRC resident enterprise for enterprise income tax purposes, we may be required to withhold a 10% withholding
tax from dividends we pay to our non-PRC resident enterprise shareholders and a 20% withholding tax for our non-PRC resident individual
shareholders, including the holders of our ADSs. In addition, non-PRC shareholders may be subject to PRC tax on gains realized
on the sale or other disposition of ADSs or ordinary shares, if such income is treated as sourced from within the PRC. It is unclear
whether our non-PRC shareholders would be able to claim the benefits of any tax treaties between their tax residence and the PRC
in the event that we are treated as a PRC resident enterprise. See “Item 3. Key Information — D. Risk Factors —
Risks Related to Doing Business in China — Under China’s Enterprise Income Tax Law, we may be classified as a ‘resident
enterprise’ of China. Such classification could result in unfavorable tax consequences to us and our non-PRC resident shareholders.”





100







In January 2009, the SAT promulgated
the Provisional Measures for the Administration of Withholding of Enterprise Income Tax for Non-resident Enterprises, or the Non-resident
Enterprises Measures, pursuant to which the entities that have the direct obligation to make certain payments to a non-resident
enterprise shall be the relevant tax withholders for such non-resident enterprise. Further, the Non-resident Enterprises Measures
provides that in case of an equity transfer between two non-resident enterprises which occurs outside China, the non-resident enterprise
which receives the equity transfer payment shall, by itself or engage an agent to, file tax declaration with the PRC tax authority
located at place of the PRC company whose equity has been transferred, and the PRC company whose equity has been transferred shall
assist the tax authorities to collect taxes from the relevant non-resident enterprise. On April 30, 2009, the MOF and the
SAT jointly issued the Notice on Issues Concerning Process of Enterprise Income Tax in Enterprise Restructuring Business, or Circular
59. On December 10, 2009, the SAT issued the Notice on Strengthening the Administration of the Enterprise Income Tax concerning
Proceeds from Equity Transfers by Non-resident Enterprises, or Circular 698. Both Circular 59 and Circular 698 became effective
retroactively as of January 1, 2008. By promulgating and implementing these two circulars, the PRC tax authorities have enhanced
their scrutiny over the direct or indirect transfer of equity interests in a PRC resident enterprise by a non-resident enterprise.



On February 3, 2015, the SAT issued
a Public Notice (2015) No.7, or Public Notice 7, to supersede the existing tax rules in relation to the Indirect Transfer
as set forth in Circular 698, while the other provisions of Circular 698 remain in force. Public Notice 7 introduces a new tax
regime that is significantly different from that under Circular 698. Public Notice 7 extends its tax jurisdiction to capture not
only Indirect Transfer as set forth under Circular 698 but also transactions involving transfer of immovable property in China
and assets held under the establishment and place, in China of a foreign company through the offshore transfer of a foreign intermediate
holding company. Public Notice 7 also addresses the term transfer of the equity interest in a foreign intermediate holding company
widely. In addition, Public Notice 7 provides clearer criteria than Circular 698 on how to assess reasonable commercial purposes
and introduces safe harbor scenarios applicable to internal group restructurings on. However, it also brings challenges to both
the foreign transferor and transferee of the Indirect Transfer as they have to make self-assessment on whether the transaction
should be subject to PRC tax and to file or withhold the PRC tax accordingly.



On October 17, 2017, the State Administration
of Taxation issued the Announcement of the State Administration of Taxation on Issues Concerning the Withholding of Non-resident
Enterprise Income Tax at Source, or SAT Bulletin 37, which came into effect on December 1, 2017 and concurrently abolished the
Non-resident Enterprises Measures and Circular 698. The SAT Bulletin 37 further clarifies the practice and procedure of the withholding
of non-tax resident enterprise income tax. Pursuant to Circular 7 and SAT Bulletin 37, both the transferor and the transferee may
be subject to penalties under PRC tax laws if the transferee fails to withhold the taxes and the transferor fails to pay the taxes.





101







We face uncertainties on the reporting and
consequences on private equity financing transactions, share exchange or other transactions involving the transfer of shares in
our company by investors that are non-PRC resident enterprises, or sale or purchase of shares in other non-PRC resident companies
or other taxable assets by us. Our company and other non-resident enterprises in our group may be subject to filing obligations
or being taxed if our company and other non-resident enterprises in our group are transferors in such transactions, and may be
subject to withholding obligations if our company and other non-resident enterprises in our group are transferees in such transactions,
under Public Notice 7 and/or SAT Bulletin 37. For the transfer of shares in our company by investors that are non-PRC resident
enterprises, our PRC subsidiaries may be requested to assist in the filing under Public Notice 7 and/or SAT Bulletin 37.



The PRC tax authorities have the discretion
under SAT Circular 59, Public Notice 7 and SAT Bulletin 37 to make adjustments to the taxable capital gains based on the difference
between the fair value of the equity interests transferred and the cost of investment.



On May 1, 2017 a SAT Public Notice
(2017) No. 6, or Public Notice 6, came into effect, which supersedes the Public Notice No. 16 issued by SAT on March 18,
2015. Public Notice 6 further regulates the transfer pricing administration, the method and process of special tax investigation,
as well as the management of mutual consultation process. Public Notice 6 provides certain circumstances where the tax authorities
may implement special tax adjustment to the taxable income based on the full amount deducted before tax, including payments to
an overseas related party which does not undertake any function, bear any risk or has no substantial operation or activities and
which do not comply with arm’s-length principles, payments to a related party for non-beneficial services, and royalties
paid to a related party which only owns the legal rights of the intangible assets but has no contribution to the creation of such
intangible assets and which do not comply with arm’s-length principles or royalties paid to a related party where such intangible
assets do not yield any economic benefits and which do not comply with arm’s-length principles. Although we believe all of
our related party transactions, including all payments by our PRC subsidiaries and consolidated affiliated entities to our non-PRC
entities, are made on an arm’s-length basis and our estimates are reasonable, the ultimate decisions by the relevant tax
authorities may differ from the amounts recorded in our financial statements and may materially affect our financial results in
the period or periods for which such determination is made.



U.S. Federal Income Tax Considerations



The following discussion is a summary of
U.S. federal income tax consequences of the ownership and disposition of our ADSs or ordinary  shares by a U.S. Holder described
below that acquires and holds our ADSs or ordinary shares as “capital assets” (generally, property held for investment)
under the U.S. Internal Revenue Code of 1986, as amended, or the Code. This summary is based upon existing U.S. federal tax law
and the regulations, rulings, and decisions thereunder, all of which are subject to differing interpretations or change, possibly
with retroactive effect. This summary does not discuss all aspects of U.S. federal income taxation that may be important to particular
investors in light of their individual investment circumstances, including investors subject to special tax rules (for example,
banks, financial institutions, regulated investment companies or real estate investment trusts, insurance companies, broker-dealers,
traders in securities that elect mark-to-market treatment, partnerships and their partners, tax-exempt organizations (including
private foundations), investors who own (directly, indirectly, or constructively) 5% or more of our stock, investors that will
hold our ADSs or ordinary shares as part of a straddle, hedge, conversion, constructive sale, or other integrated transaction for
U.S. federal income tax purposes, certain expatriates or former long-term residents of the U.S., persons liable for alternative
minimum tax, governments or agencies or instrumentalities thereof, persons holding ADSs or ordinary shares through partnerships
or other pass-through entities, persons who acquired ADSs or ordinary shares pursuant to the exercise of any employee share option
or otherwise as consideration, or investors that have a functional currency other than the U.S. dollar), all of whom may be subject
to tax rules that differ significantly from those summarized below.



In addition, this summary does not discuss
the Medicare tax on net investment income or any state, local, or estate or gift tax considerations and, except for the limited
instances where PRC tax law and potential PRC taxes are discussed below, does not discuss any non-U.S. tax considerations. Each
U.S. Holder is urged to consult its tax advisor regarding the U.S. federal, state, local, and non-U.S. income and other tax considerations
of an investment in our ADSs or ordinary shares.





102







General



For purposes of this summary, a “U.S.
Holder” is a beneficial owner of our ADSs or ordinary shares that is, for U.S. federal income tax purposes, (i) an individual
who is a citizen or resident of the U.S., (ii) a corporation (or other entity treated as a corporation) created in, or organized
under the law of, the U.S. or any state thereof or the District of Columbia, (iii) an estate the income of which is includible
in gross income for U.S. federal income tax purposes regardless of its source, or (iv) a trust (A) the administration
of which is subject to the primary supervision of a U.S. court and which has one or more U.S. persons who have the authority to
control all substantial decisions of the trust or (B) that has otherwise elected to be treated as a U.S. person under applicable
U.S. Treasury regulations.



If a partnership is a beneficial owner of
our ADSs or ordinary shares, the tax treatment of a partner in the partnership will generally depend upon the status of the partner
and the activities of the partnership. Partners of a partnership holding our ADSs or ordinary shares are urged to consult their
tax advisors regarding an investment in our ADSs or ordinary shares.



For U.S. federal income tax purposes, U.S.
Holders of ADSs should be treated as the beneficial owners of the underlying shares represented by the ADSs. The discussion below
assumes that the representations contained in the deposit agreement are true and that the obligations in the deposit agreement
and any related agreement have been and will be complied with in accordance with the terms.



Passive Foreign Investment Company Considerations



A non-U.S. corporation, such as our company,
will be classified as a “passive foreign investment company”, or PFIC, for U.S. federal income  tax purposes for
any taxable year, if either (i) at least 75% of its gross income for such year consists of certain types of “passive”
income or (ii) at least 50% of the value of its assets (determined on the basis of a quarterly average) during such year produce
or are held for the production of passive income. For this purpose, cash and assets readily convertible into cash are categorized
as passive assets and the total value of assets will be calculated with reference to the market value of the corporation. We will
be treated as owning a proportionate share of the assets and earning a proportionate share of the income of any other corporation
in which we own, directly or indirectly, more than 25% (by value) of the stock.



Although the law in this regard is not entirely
clear, we treat Beijing Blue I.T., Beijing Jingtian and ChinaCache Shouming as being owned by us for U.S. federal income tax purposes,
because we control their management decisions and are entitled to substantially all of their economic benefits, and, as a result,
we consolidate these entities’ results of operations in our consolidated, U.S. GAAP financial statements. If it were determined,
however, that we are not the owner of Beijing Blue I.T., Beijing Jingtian and ChinaCache Shouming for U.S. federal income tax purposes,
we would likely be treated as a PFIC for the current year and any other taxable year.



Assuming that we are the owner of Beijing
Blue I.T., Beijing Jingtian and ChinaCache Shouming for U.S. federal income tax purposes, we believe that we primarily operate
as an active provider of content and application delivery total solutions in China. Based on the market price of our ADSs and ordinary
shares, the value of our assets, and the composition of our assets and income, we do not believe that we were a PFIC for the taxable
year ended December 31, 2018 and we do not expect to be a PFIC for the current taxable year. However, we can give no assurances
with respect to our PFIC status for past or future taxable years as the PFIC determination is inherently factual and the application
of the PFIC rules is subject to ambiguity in several aspects.



The determination of whether we are a PFIC
is a fact-intensive determination made annually. Accordingly, no assurance can be given that we are not, or will not, become classified
as a PFIC for the current or any future taxable year due to changes in our asset or income composition. Because the total value
of our assets for purposes of the asset test generally will be calculated with reference to the market value of our equity, a decrease
in the price of our ADSs may also result in our becoming a PFIC. In addition, because of uncertainties in the application of the
relevant rules (as described above), it is possible that the U.S. Internal Revenue Service, or IRS, may successfully challenge
our classification of certain income items and assets as non-passive or our valuation of our tangible and intangible assets, each
of which may result in our company becoming classified as a PFIC for the current or any other taxable year. If we are a PFIC for
any taxable year during which you hold our ADSs or ordinary shares, you will become subject to special tax rules discussed
below. You are urged to consult with your tax advisor regarding the consequences of potentially holding an interest in a PFIC,
and the ramifications of making a “deemed sale” election, as discussed further below.





103







The discussion below under “Dividends”
and “Sale or Other Disposition of ADSs or Ordinary Shares” assumes that we will not be classified as a PFIC for U.S.
federal income tax purposes. The U.S. federal income tax rules that apply if we are classified as a PFIC for the current or
any subsequent taxable year are generally discussed below under “Passive Foreign Investment Company Rules.”



Dividends



Any cash distributions (including the amount
of any PRC tax withheld if we are deemed to be a resident enterprise under the PRC Enterprise Income Tax Law) paid with respect
to our ADSs or ordinary shares out of our current or accumulated earnings and profits, as determined under U.S. federal income
tax principles, will generally be includible in the gross income of a U.S. Holder as dividend income on the day actually or constructively
received by the U.S. Holder, in the case of ordinary shares, or by the depositary bank, in the case of ADSs. Because we do not
intend to determine our earnings and profits on the basis of U.S. federal income tax principles, any distribution paid will generally
be treated as a “dividend” for U.S. federal income tax purposes. Dividends received with respect to our ADSs or ordinary
shares will not be eligible for the dividends received deduction allowed to corporations.



A non-corporate recipient of dividend income
generally will be subject to tax on dividend income from a “qualified foreign corporation” at the lower capital gain
tax rate applicable to “qualified dividend income,” rather than the marginal tax rates generally applicable to ordinary
income, provided that certain holding period and other requirements are met. U.S. Holders should consult their tax advisors regarding
the availability of the reduced tax rate on dividends in their particular circumstances.



For U.S. foreign tax credit purposes, dividends
generally will be treated as income from foreign sources and generally will constitute passive category income. In the event that
we are deemed to be a PRC resident enterprise under the PRC Enterprise Income Tax Law, a U.S. Holder may be subject to PRC withholding
taxes on dividends paid, if any, on our ADSs or ordinary shares. A U.S. Holder may be eligible, subject to a number of complex
limitations, to claim a foreign tax credit in respect of any non-refundable foreign withholding taxes imposed on dividends received
with respect to our ADSs or ordinary shares. A U.S. Holder who does not elect to claim a foreign tax credit for foreign tax withheld,
may instead claim a deduction, for U.S. federal income tax purposes, in respect of such withholdings, but only for a year in which
such holder elects to do so for all creditable foreign income taxes. The rules governing the foreign tax credit are complex.
U.S. Holders are urged to consult their tax advisors regarding the availability of the foreign tax credit under their particular
circumstances.



Sale or Other Disposition of ADSs or Ordinary Shares



A U.S. Holder will generally recognize capital
gain or loss upon the sale or other disposition of our ADSs or ordinary shares in an amount equal to the difference between the
amount realized upon the disposition and the holder’s adjusted tax basis in such ADSs or ordinary shares. Any capital gain
or loss will be long-term if such ADSs or ordinary shares have been held for more than one year and will generally be U.S. source
gain or loss for U.S. foreign tax credit purposes. Long-term capital gain recognized by non-corporate U.S. Holders is generally
subject to U.S. federal income tax at favorable rates. The deductibility of a capital loss may be subject to limitations. In the
event that we are deemed to be a PRC resident enterprise under the PRC Enterprise Income Tax Law and gain from the disposition
of our ADSs or ordinary shares is subject to tax in the PRC, such gain may be treated as PRC source gain for foreign tax credit
purposes under the U.S.-PRC income tax treaty. U.S. Holders are urged to consult their tax advisors regarding the tax consequences
if a foreign tax is imposed on a disposition of our ADSs or ordinary shares, including the availability of the foreign tax credit
under their particular circumstances.





104







Passive Foreign Investment Company Rules



If we are classified as a PFIC for any taxable
year during which a U.S. Holder holds our ADSs or ordinary shares, unless the U.S. Holder makes a mark-to-market election (as described
below), the U.S. Holder will generally be subject to special tax rules that have a penalizing effect, regardless of whether
we remain a PFIC, on (i) any excess distribution that we make to the U.S. Holder (which generally means any distribution paid
during a taxable year to a U.S. Holder that is greater than 125% of the average annual distributions paid in the three preceding
taxable years or, if shorter, the U.S. Holder’s holding period for the ADSs or ordinary shares), and (ii) any gain realized
on the sale or other disposition, including, under certain circumstances, a pledge, of our ADSs or ordinary shares. Under the PFIC
rules the:



| | · | excess distribution and/or gain will be allocated ratably over the U.S. Holder’s holding period for our ADSs or ordinary shares;
| | - | --------------------------------------------------------------------------------------------------------------------------------



| | · | amount allocated to the current taxable year and any taxable years in the U.S. Holder’s holding period prior to the first taxable year in which we are classified as a PFIC, or a pre-PFIC year, will be taxable as ordinary income;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | the amount allocated to each of the other taxable years will be subject to tax at the highest rate of tax in effect for such U.S. Holder for such year and will be increased by an additional tax equal to interest on the resulting tax deemed deferred with respect to each such other taxable year.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



If we are a PFIC for any taxable year during
which a U.S. Holder holds our ADSs or ordinary shares and any of our non-U.S. subsidiaries is also a PFIC, such U.S. Holder would
be treated as owning a proportionate amount (by value) of the shares of the lower-tier PFIC and would be subject to the rules described
above on certain distributions by a lower-tier PFIC and a disposition of shares of a lower-tier PFIC even though such U.S. Holder
would not receive the proceeds of those distributions or dispositions. U.S. Holders should consult their tax advisors regarding
the application of the PFIC rules to any of our subsidiaries.



If we are a PFIC for any taxable year during
which a U.S. Holder holds our ADSs or ordinary share, our ADSs or ordinary shares generally will continue to be treated as shares
in a PFIC for all succeeding years during which a U.S. Holder holds our ADSs or ordinary shares, unless we cease to be a PFIC and
the U.S. Holder makes a “deemed sale” election with respect to the ADSs or ordinary shares. If you make a deemed sale
election, you will be deemed to have sold the ADSs or ordinary shares you hold at their fair market value as of the last day of
the last year during which we were a PFIC. Any gain from such deemed sale would be taxed as an excess distribution as described
above. You are urged to consult your tax adviser regarding our possible status as a PFIC as well as the benefit of making a deemed
sale election.



As an alternative to the foregoing rules,
a holder of “marketable stock” (as defined below) in a PFIC may make a mark-to-market election with respect to such
stock. If we are a PFIC, and a U.S. Holder makes this election with respect to our ADSs, the holder will generally (i) include
as ordinary income for each taxable year that we are a PFIC the excess, if any, of the fair market value of our ADSs held at the
end of the taxable year over the adjusted tax basis of such ADSs and (ii) deduct as an ordinary loss the excess, if any, of
the adjusted tax basis of our ADSs over the fair market value of such ADSs held at the end of the taxable year, but only to the
extent of the net amount previously included in income as a result of the mark-to-market election. The U.S. Holder’s adjusted
tax basis in our ADSs would be adjusted to reflect any income or loss resulting from the mark-to-market election. If a U.S. Holder
makes a mark-to-market election in respect of our ADSs and we cease to be classified as a PFIC, the holder will not be required
to take into account the mark-to-market gain or loss described above during any period we are not classified as a PFIC. If a U.S.
Holder makes a mark-to-market election, any gain such U.S. Holder recognizes upon the sale or other disposition of our ADSs in
a year when we are a PFIC will be treated as ordinary income and any loss will be treated as ordinary loss, but only to the extent
of the net amount previously included in income as a result of the mark-to-market election. The mark-to-market election is available
only for “marketable stock,” which is stock that is traded in other than de minimis quantities on at least 15 days
during each calendar quarter, or regularly traded, on a qualified exchange or other market, as defined in applicable U.S.
Treasury regulations.



Because, as a technical matter, a mark-to-market
election cannot be made for any lower-tier PFICs that we may own, a U.S. Holder may continue to be subject to the PFIC rules with
respect to such U.S. Holder’s indirect interest in any investments held by us that are treated as an equity interest in a
PFIC for U.S. federal income tax purposes.





105







We do not intend to provide information
necessary for U.S. Holders to make qualified electing fund elections, which, if available, would result in tax treatment different
from the general tax treatment for PFICs described above.



If a U.S. Holder owns our ADSs or ordinary
shares during any taxable year that we are a PFIC, the holder must file an annual report with the IRS. In the case of a U.S. Holder
who has held our ADSs or ordinary shares during any taxable year in respect of which we were classified as a PFIC and continues
to hold such ADSs or ordinary shares (or any portion thereof) and has not previously determined to make a mark-to-market election,
and who is now considering making a mark-to-market election, special tax rules may apply relating to purging the PFIC taint
of such ADSs or ordinary shares. Each U.S. Holder is urged to consult its tax advisor concerning the U.S. federal income tax consequences
of purchasing, holding, and disposing of our ADSs or ordinary shares if we are or become classified as a PFIC, including the possibility
of making a mark-to-market or deemed sale election.



Information Reporting and Backup Withholding



Dividend payments with respect to our ADSs
or ordinary shares and proceeds from the sale, exchange or redemption of our ADSs or ordinary shares may be subject to information
reporting to the IRS and U.S. backup withholding. Backup withholding will not apply, however, to a U.S. Holder who furnishes a
correct taxpayer identification number and makes any other required certification, or who is otherwise exempt from backup withholding.
U.S. Holders should consult their tax advisors regarding the application of the U.S. information reporting and backup withholding
rules.



Backup withholding is not an additional
tax. Amounts withheld as backup withholding may be credited against a U.S. Holder’s U.S. federal income tax liability, and
a U.S. Holder generally may obtain a refund of any excess amounts withheld under the backup withholding rules by filing the
appropriate claim for refund with the IRS and furnishing any required information.



|F. | Dividends and Paying Agents
|-- | ---------------------------



Not applicable.



|G. | Statements by Experts
|-- | ---------------------



Not applicable.



|H. | Documents on Display
|-- | --------------------



We previously filed with the SEC a registration
statement on Form F-1 (Registration No. 333-169288), as amended, including the prospectus contained therein, to register
our ordinary shares. We have also filed with the SEC a related registration statement on F-6 (Registration No. 333-169390)
to register the ADSs. We have previously filed with the SEC a registration statement on Form F-3 (Registration No. 333-195192)
with respect to the proposed sale from time to time by certain of our shareholders of up to 3,365,973 ADSs of ours.



We are subject to the periodic reporting
and other informational requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Under the Exchange
Act, we are required to file reports and other information with the SEC, including filing annually a Form 20-F within four
months after the end of each fiscal year, which is December 31. Copies of reports and other information, when so filed, may
be inspected without charge and may be obtained at prescribed rates at the public reference facilities maintained by the Securities
and Exchange Commission at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. The public may obtain information regarding the
Washington, D.C. Public Reference Room by calling the Commission at 1-800-SEC-0330. The SEC also maintains a website at www.sec.gov
that contains reports, proxy and information statements, and other information regarding registrants that make electronic filings
with the SEC using its EDGAR system. As a foreign private issuer, we are exempt from the rules under the Exchange Act prescribing
the furnishing and content of quarterly reports and proxy statements, and officers, directors and principal shareholders are exempt
from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act.





106







We will furnish Citibank, N.A., the depositary
of our ADSs, with our annual reports, which will include a review of operations and annual audited consolidated financial statements
prepared in conformity with U.S. GAAP, and all notices of shareholders’ meetings and other reports and communications that
are made generally available to our shareholders. The depositary will make such notices, reports and communications available to
holders of ADSs and, upon our written request, will mail to all record holders of ADSs the information contained in any notice
of a shareholders’ meeting received by the depositary from us.



|I. | Subsidiary Information
|-- | ----------------------



Not applicable.



|ITEM 11. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|-------- | ----------------------------------------------------------



Foreign Exchange Risk



Our consolidated financial statements are
expressed in RMB, which is our reporting currency. ChinaCache Holdings, ChinaCache Beijing, Beijing Blue I.T. and Beijing Jingtian
determine their functional currency to be the RMB, while ChinaCache U.S. ChinaCache Network (Hong Kong) Limited, ChinaCache Ireland
and ChinaCache UK determine their functional currency to be the U.S. dollar, Hong Kong dollar, Euro and G.B. pound. However, substantially
all of our businesses are transacted in RMB. We earn substantially all of our revenues and incur most of our expenses in RMB. We
do not believe that we currently have any significant direct foreign exchange risk and have not used any derivative financial instruments
to hedge our exposure to such risk. Although in general, our exposure to foreign exchange risks should be limited, the value of
an investment in our ADSs will be affected by the exchange rate between the U.S. dollar and the RMB because the value of our business
is denominated in RMB, while the ADSs are traded in U.S. dollars.



The conversion of RMB into foreign currencies,
including U.S. dollars, is based on rates set by the People’s Bank of China. The PRC government allowed the Renminbi to appreciate
by more than 20% against the U.S. dollar between July 2005 and July 2008. Between July 2008 and June 2010,
this appreciation was halted and the exchange rate between the Renminbi and the U.S. dollar remained within a narrow band. Since
June 2010, the RMB has fluctuated against the U.S. dollar, at times significantly and unpredictably. It is difficult to predict
how market forces or PRC or U.S. government policy may impact the exchange rate between the RMB and the U.S. dollar in the future.
It is difficult to predict how long the current situation may last and when and how RMB exchange rates may change in the future.
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 for the purpose of making payments for dividends on our ordinary shares or ADSs or for other business purposes, 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



Our exposure to interest rate risk primarily
relates to the interest income generated by excess cash, which is mostly held in interest-bearing bank deposits, and interest expenses
attributable to short term and long term loans. As of December 31, 2017 and 2018, RMB91,587,804and RMB32,097,218 (US$4,668,347),
respectively, were deposited with major financial institutions located in the PRC, RMB2,129,029and RMB8,811,455 (US$1,281,573),
respectively, were deposited with in the major financial institutions located in the Hong Kong Special Administration Region, RMB253,653
and nil, respectively were held in major financial institutions located in Europe, RMB3,077,622 and RMB2,075,976 (US$301,938),
respectively, were deposited with major financial institutions located in the UK and RMB9,661,373 and RMB3,645,608 (US$530,232),
respectively were held in major financial institutions in the United States of America. We have not used derivative financial instruments
in our investment portfolio. Interest earning instruments carry a degree of interest rate risk. We have not been exposed to, nor
do we anticipate being exposed to, material risks due to changes in market interest rates. However, our future interest income
may fall short of expectations due to changes in market interest rates.





107







|ITEM 12. | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
|-------- | ------------------------------------------------------



|A. | Debt Securities
|-- | ---------------



Not applicable.



|B. | Warrants and Rights
|-- | -------------------



Not applicable.



|C. | Other Securities
|-- | ----------------



Not applicable.



|D. | American Depositary Shares
|-- | --------------------------



Fees and Charges



Holders of our ADSs will be required to
pay the following service fees to the depositary bank:



|Service                                                                                          |  | Fees                                                                                          
|------------------------------------------------------------------------------------------------ |  | ----------------------------------------------------------------------------------------------
|Issuance of ADSs                                                                                 |  | Up to U.S. 5¢ per ADS issued                                                                  
|                                                                                                 |  |                                                                                               
|Cancellation of ADSs                                                                             |  | Up to U.S. 5¢ per ADS canceled                                                                
|                                                                                                 |  |                                                                                               
|Distribution of cash dividends or other cash distributions                                       |  | Up to U.S. 5¢ per ADS held                                                                    
|                                                                                                 |  |                                                                                               
|Distribution of ADSs pursuant to stock dividends, free stock distributions or exercise of rights |  | Up to U.S. 5¢ per ADS held                                                                    
|                                                                                                 |  |                                                                                               
|Distribution of securities other than ADSs or rights to purchase additional ADSs                 |  | Up to U.S. 5¢ per ADS held                                                                    
|                                                                                                 |  |                                                                                               
|Depositary Services                                                                              |  | Up to U.S. 5¢ per ADS held on the applicable record date(s) established by the depositary bank



Holders of our ADSs will also be responsible
to pay certain fees and expenses incurred by the depositary bank and certain taxes and governmental charges such as:



| | · | fees for the transfer and registration of ordinary shares charged by the registrar and transfer agent for the ordinary shares in the Cayman Islands (i.e., upon deposit and withdrawal of ordinary shares);
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | expenses incurred for converting foreign currency into U.S. dollars;
| | - | --------------------------------------------------------------------



| | · | expenses for cable, telex and fax transmissions and for delivery of securities;
| | - | -------------------------------------------------------------------------------



| | · | taxes and duties upon the transfer of securities (i.e., when ordinary shares are deposited or withdrawn from deposit); and
| | - | --------------------------------------------------------------------------------------------------------------------------



| | · | fees and expenses incurred in connection with the delivery or servicing of ordinary shares on deposit.
| | - | ------------------------------------------------------------------------------------------------------



Depositary fees payable upon the issuance
and cancellation of ADSs are typically paid to the depositary bank by the brokers (on behalf of their clients) receiving the newly
issued ADSs from the depositary bank and by the brokers (on behalf of their clients) delivering the ADSs to the depositary bank
for cancellation. The brokers in turn charge these fees to their clients. Depositary fees payable in connection with distributions
of cash or securities to ADS holders and the depositary services fee are charged by the depositary bank to the holders of record
of ADSs as of the applicable ADS record date.





108







The depositary fees payable for cash distributions
are generally deducted from the cash being distributed. In the case of distributions other than cash (i.e., stock dividend, rights),
the depositary bank charges the applicable fee to the ADS record date holders concurrent with the distribution. In the case of
ADSs registered in the name of the investor (whether certificated or uncertificated in direct registration), the depositary bank
sends invoices to the applicable record date ADS holders. In the case of ADSs held in brokerage and custodian accounts (via DTC),
the depositary bank generally collects its fees through the systems provided by DTC (whose nominee is the registered holder of
the ADSs held in DTC) from the brokers and custodians holding ADSs in their DTC accounts. The brokers and custodians who hold their
clients’ ADSs in DTC accounts in turn charge their clients’ accounts the amount of the fees paid to the depositary
banks.



In the event of refusal to pay the depositary
fees, the depositary bank may, under the terms of the deposit agreement, refuse the requested service until payment is received
or may set off the amount of the depositary fees from any distribution to be made to the ADS holder.



The fees and charges holders of our ADSs
may be required to pay may vary over time and may be changed by us and by the depositary bank. Holders of our ADSs will receive
prior notice of such changes.



The depositary bank may reimburse us for
certain expenses incurred by us in respect of the ADR program established pursuant to the deposit agreement, by making available
a portion of the depositary fees charged in respect of the ADR program or otherwise, upon such terms and conditions as the Company
and the depositary bank may agree from time to time. In 2018, we received approximately US$347,745, net of applicable withholding
taxes in the U.S., from the depository as reimbursement for our expenses incurred in connection with the establishment and maintenance
of the ADS program.





109







PART
II.



|ITEM 13. | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
|-------- | -----------------------------------------------



None.



|ITEM 14. | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
|-------- | ----------------------------------------------------------------------------



Material Modifications to the Rights of Security Holders



See “Item 10. Additional Information
 — B. Memorandum and Articles of Association — Ordinary Shares” for a description of the rights of securities
holders, which remain unchanged.



Use of Proceeds



The following “Use of Proceeds”
information relates to the registration statement on Form F-1, as amended (File Number: 333-169288), or the F-1 Registration
Statement, in relation to our initial public offering of 5,014,100 ADSs representing 80,225,600 of our ordinary shares, and the
underwriters’ full exercise of their option to purchase from us an additional 909,147 ADSs representing 14,546,352 ordinary
shares, at an initial offering price of US$13.90 per ADS. Our initial public offering closed in October 2010. Merrill Lynch,
Pierce, Fenner & Smith Incorporated and Deutsche Bank Securities Inc. were the representatives of the underwriters for
our initial public offering.



We received net proceeds of approximately
US$74.9 million from our initial public offering. For the period from September 30, 2010, the date that the F-1 Registration
Statement was declared effective by the SEC, As of December 31, 2018, we used net proceeds from our initial public offering
as follows:



| | · | approximately US$28.5 million to expand our research and development efforts and build our cloud infrastructure;
| | - | ----------------------------------------------------------------------------------------------------------------



| | · | approximately US$28.3million capital expenditure for network and other equipment; and
| | - | -------------------------------------------------------------------------------------



| | · | approximately US$18.1 million for general corporate purposes.
| | - | -------------------------------------------------------------



|ITEM 15. | CONTROLS AND PROCEDURES
|-------- | -----------------------



Disclosure Controls and Procedures





Our management, with the participation of our chief executive officer and chief financial officer, has performed an evaluation
of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of
the end of the period covered by this report, as required by Rule 13a-15(b) under the Exchange Act. Based on that evaluation,
our chief executive officer and chief financial officer concluded that our disclosure controls and procedures as of December
31, 2108 were not effective due to the material weakness disclosed below in "Management's Annual Report on Internal Control
over Financial Reporting. Based upon this evaluation, our management, with the participation of our chief executive officer
and chief financial officer, has concluded that, as of the end of the period covered by this annual report, our disclosure
controls and procedures were not effective in ensuring that the information required to be disclosed by us in the reports
that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified
in by the SEC's rules and forms, and that the information required to be disclosed by us in the reports that we file or submit
under the Exchange Act is accumulated and communicated to our management, including our chief executive officer and chief
financial officer, as appropriate, to allow timely decisions regarding required disclosure.





110









Management’s Annual Report on Internal Control over
Financial Reporting



Our management is responsible for establishing
and maintaining adequate internal control over financial reporting. Our internal control system was designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation and fair presentation of its published consolidated
financial statements. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those
systems determined to be effective may not prevent or detect misstatements and can provide only reasonable assurance with respect
to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with
the policies or procedures may deteriorate.



Our management conducted an assessment of
the design and operation effectiveness of our internal control over financial reporting as of December 31, 2018. In making
this assessment, we used the criteria established within the Internal Control—Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). Based on this assessment, we identified
the following material weaknesses, including: i) The Company did not maintain effective controls over certain aspects of the financial
reporting process due to the lack of sufficient complement of personnel with an appropriate level of knowledge and experience in
U.S. GAAP. The Company also lacked the expertise in handling complex accounting and reporting matters in accordance with U.S. GAAP.
ii) The Company did not have enough staff resources in the internal audit department, and internal audit evaluation work was not
performed effectively from 2016 to 2018, and iii) The Company had inadequate risk assessment procedures, including those on identification
and assessment of fraud risks, to cope with the expansion of its business and organization. In particular, the Company did not
put in place an adequate process to continuously assess the legal and compliance and fraud risks associated with the business initiatives
and the related financial impact. our management has concluded that, as of December 31, 2018, our internal control over financial
reporting was ineffective.



Attestation Report of the Registered Public Accounting
Firm



Because the Company is a non-accelerated
filer, this annual report does not include an attestation report of our registered public accounting firm regarding internal control
over financial reporting.







111







Changes in Internal Control over Financial Reporting



There were no changes in our internal controls
over financial reporting that occurred during the period covered by this annual report that have materially affected, or are reasonably
likely to materially affect, our internal controls over financial reporting.



|Item 16A. | AUDIT COMMITTEE FINANCIAL EXPERT
|--------- | --------------------------------



Our board of directors has determined that
Bang Zhang is the chairman of audit committee.



|Item 16B. | CODE OF ETHICS
|--------- | --------------



Our board of directors adopted a code of
business conduct and ethics that applies to our directors, officers, employees and advisors, which became effective upon the completion
of our initial public offering in October 2010.



In November 2016, our board of directors
adopted amendment to the code of business conduct and ethics, which has been posted on our website at www.chinacache.com.



|Item 16C. | PRINCIPAL ACCOUNTANT FEES AND SERVICES
|--------- | --------------------------------------



On December 7, 2018, the Company engaged Grant Thornton China
(“GT”), the China member firm of Grant Thornton International Ltd., to be the Company’s independent registered
public accounting firm, as Ernst & Young Hua Ming LLP (“EY”) formally resigned. On April 8, 2019, the Company engaged
Michael T. Struder CPA P.C. (“MTS”) to be the Company’s independent registered accounting firm, as GT formally
resigned. The changes of the Company’s independent registered public accounting firm from EY to GT to MTS were approved by
the Company’s Audit Committee. The decisions were not made due to any disagreements with EY or GT. As MTS failed to
start their on-site work timely, The Company believed that Studer’s delay of its audit work was unacceptable. As a result,
the Company’s Audit Committee terminated Studer on May 30, 2019.  On July 12, 2019, the Company engaged Marcum
Bernstein Pinchuk LLP (“Marcum BP”) as the Company’s independent registered public accounting firm. The
decision was approved by the Company’s Audit Committee.



The following table sets forth the aggregate
fees by the categories specified below in connection with certain professional services rendered by. Marcum Bernstein Pinchuk LLP (“Marcum
BP”), our independent registered public accounting firm for the years ended December 31, 2017 and 2018. We did not pay
any other fees to our auditors during the periods indicated below.





|              |  | 2017           |     |  | 2018 | 
|------------- |  | -------------- | --- |  | ---- | 
|              |  | US$            |     |  | US$  | 
|              |  | (in thousands) |    
|Audit fees(1) |  |                | 778 |  |      | 
|Tax fees(2)   |  |                | 68  |  |      | 
|Other fees(3) |  |                | -   |  |      | 





|(1) | “Audit fees” represent the aggregate fees billed for professional services rendered by our auditors.
|--- | ----------------------------------------------------------------------------------------------------



|(2) | “Tax fees” represent the aggregate fees billed for professional services rendered by our principal auditors for tax compliance, tax advice and tax planning.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------



|(3) | “Other fees” represent the aggregate fees billed by our principal auditors for services rendered other than services reported under “Audit fees”, “Audit-related fees” and “Tax fees”.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



During the fiscal years ended December 31,
2017 and 2018, we paid EY US$778,000 and US$nil for audit fees, and US$68,000 and US$53,000 for tax fees.



During the fiscal years ended December
31, 2017 and 2018, we paid MTS US$nil and US$165,000 for audit fees.



The policy of our audit committee is to
pre-approve all audit and non-audit services to be provided by our independent registered public accounting firm, including audit
services, audit-related services, tax services and other services are described above, other than those for de minimus services
which are approved by the audit committee prior to the completion of the audit.



|Item 16D. | EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
|--------- | ----------------------------------------------------------



Not applicable.





112







|Item 16E. | PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
|--------- | ----------------------------------------------------------------------



There were no purchases of equity securities
made by or on behalf of us or any “affiliated purchaser” as defined in Rule 10b-18 of the Exchange Act during the fiscal
year ended December 31, 2018.



|Item 16F. | CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
|--------- | --------------------------------------------



(a) In October 2018,
Ernst & Young Hua Ming LLP (“EYHM”) notified us that they would not stand for reappointment as our independent
registered public accounting firm.



On December 7, 2018,
the Company engaged GT, the China member firm of Grant Thornton International Ltd., to be the Company’s independent registered
public accounting firm. The decision to appoint GT was unanimously approved by our audit committee.



The change was not
made due to any disagreements with EYHM. EYHM’s audit reports on our consolidated financial statements for the fiscal years
ended December 31, 2016 and 2017 did not contain an adverse opinion or a disclaimer of opinion, nor were such reports qualified
or modified as to uncertainty, audit scope, or accounting principles, except for the Company’s ability to continue as a going
concern.



During the fiscal
years ended December 31, 2016 and 2017 and the subsequent interim period through December 7, 2018, there were no (i) disagreements
between us and EY on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure,
which disagreements if not resolved to the satisfaction of EY would have caused them to make reference thereto in their reports
on the consolidated financial statements for such years, or (ii) reportable events pursuant to Item 16F(a)(1)(v) of the instructions
to Form 20-F.



During each of the
fiscal years ended December 31, 2016 and 2017, and the subsequent period prior to our engagement of GT, neither we nor anyone
on our behalf consulted GT regarding either (i) the application of accounting principles to a specified transaction, either completed
or proposed; or the type of audit opinion that might be rendered on our financial statements, and neither a written report nor
oral advice was provided to us that GT concluded was an important factor considered by us in reaching a decision as to any accounting,
auditing, or financial reporting issue, (ii) any matter that was the subject of disagreement pursuant to Item 16F(a)(1)(iv) of
the instructions to Form 20-F, or (iii) any reportable events pursuant to Item 16F(a)(1)(v) of the instructions to Form 20-F.



(b) On April 8, 2019, the Company engaged
Michael T. Struder CPA P.C. (“MS”) to be the Company’s independent registered accounting firm, as GT formally
resigned on that date.



The decision to appoint MS was unanimously
approved by our audit committee. The change was not made due to any disagreements with GT. GT did not prepare any audit reports
on our consolidated financial statements for the fiscal years ended December 31, 2016 and 2017.



During the fiscal years ended December 31,
2016 and 2017 and the subsequent interim period from December 7, 2018 through April 8, 2019, there were no (i) disagreements between
us and GT on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure,
or (ii) reportable events pursuant to Item 16F(a)(1)(v) of the instructions to Form 20-F.





We provided a copy of the above statements
to GT and requested that GT furnish a letter addressed to the SEC stating whether it agrees with the above statements, and if not,
stating the respects in which it does not agree. A copy of the letter from GT addressed to the SEC, dated May 13, 2019, is filed
as Exhibit 15.5.



During each of the fiscal years ended December
31, 2016 and 2017, and the subsequent period prior to our engagement of MS, neither we nor anyone on our behalf consulted MS regarding
either (i) the application of accounting principles to a specified transaction, either completed or proposed; or the type of audit
opinion that might be rendered on our financial statements, or (ii) any matter that was either the subject of a disagreement with
GT or a reportable event.



During each of the fiscal years ended December
31, 2016 and 2017 and the subsequent period prior to our engagement of MS, we have not obtained any written report or oral advice
that MS concluded was an important factor considered by us in reaching a decision as to the accounting, auditing or financial reporting
issue.



(c) On July 12, 2019, the Company engaged
Marcum Bernstein Pinchuk LLP (“MarcumBP”) as the Company’s independent registered public accounting firm, as
MS formally resigned.



The decision to appoint MarcumBP was unanimously
approved by our audit committee. The change was not made due to any disagreements with MS. MS did not prepare any audit reports
on our consolidated financial statements for the fiscal years ended December 31, 2016 and 2017.



During the fiscal years ended December
31, 2016 and 2017 and the subsequent period prior to our engagement of MarcumBP, there were no (i) disagreements between us and
MarcumBP on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, or
(ii) reportable events pursuant to Item 16F(a)(1)(v) of the instructions to Form 20-F



During each of the fiscal years ended December
31, 2016 and 2017 and the subsequent period prior to our engagement of MarcumBP, we have not obtained any written report or oral
advice that MS concluded was an important factor considered by us in reaching a decision as to the accounting, auditing or financial
reporting issue.











113









|Item 16G. | CORPORATE GOVERNANCE
|--------- | --------------------



We are incorporated in the Cayman Islands and our corporate governance practices are governed by applicable
Cayman Islands law and our memorandum and articles of association.





|Item 16H. | MINE SAFETY DISCLOSURE
|--------- | ----------------------



Not applicable.



|Item 17. | FINANCIAL STATEMENTS
|-------- | --------------------



We have elected to provide financial statements
pursuant to Item 18.



|Item 18. | FINANCIAL STATEMENTS
|-------- | --------------------



The consolidated financial statements of
ChinaCache International Holdings Limited are included at the end of this annual report.



|Item 19. | EXHIBITS
|-------- | --------



|Exhibit Number |  | Description of Document                                                                                                                                                                                          
|-------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1.1            |  | Fifth Amended and Restated Memorandum and Articles of Association of the Registrant (incorporated herein by reference to Exhibit 3.2 to the registration statement on Form F-1, as amended (File No. 333-169288))
|               |  |                                                                                                                                                                                                                  
|2.1            |  | Registrant’s Specimen American Depositary Receipt (included in Exhibit 4.3) (incorporated herein by reference to Exhibit 4.1 to the registration statement on Form F-1, as amended (File No. 333-169288))        
|               |  |                                                                                                                                                                                                                  
|2.2            |  | Registrant’s Specimen Certificate for Ordinary Shares (incorporated herein by reference to Exhibit 4.2 to the registration statement on Form F-1, as amended (File No. 333-169288))                              





114







|Exhibit Number |  | Description of Document                                                                                                                                                                                                                                                                      
|-------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.3            |  | Deposit Agreement dated September 30, 2010, among the Registrant, the depositary and holder of the American Depositary Receipts (incorporated herein by reference to Exhibit 4.3 to the registration statement on Form S-8 (File No. 333-172962))                                            
|               |  |                                                                                                                                                                                                                                                                                              
|3.1            |  | Certificate of Designation for the Company’s Series A Junior Participating Preferred Shares, dated May 9, 2018  (incorporated herein by reference to Exhibit 3.1 to the Form 6-K filed on May 10, 2018 (File No. 001-34873))                                                                 
|               |  |                                                                                                                                                                                                                                                                                              
|4.1            |  | Third Amended and Restated Investors’ Rights Agreement dated August 13, 2010, among the Registrant, Series A, B and C investors, and other parties thereto (incorporated herein by reference to Exhibit 4.4 to the registration statement on Form F-1, as amended (File No. 333-169288))     
|               |  |                                                                                                                                                                                                                                                                                              
|4.2            |  | 2007 Stock Incentive Plan (incorporated herein by reference to Exhibit 10.1 to the registration statement on Form F-1, as amended (File No. 333-169288))                                                                                                                                     
|               |  |                                                                                                                                                                                                                                                                                              
|4.3            |  | 2008 Stock Incentive Plan (incorporated herein by reference to Exhibit 10.2 to the registration statement on Form F-1, as amended (File No. 333-169288))                                                                                                                                     
|               |  |                                                                                                                                                                                                                                                                                              
|4.4            |  | 2010 Stock Incentive Plan (incorporated herein by reference to Exhibit 10.3 to the registration statement on Form F-1, as amended (File No. 333-169288))                                                                                                                                     
|               |  |                                                                                                                                                                                                                                                                                              
|4.5            |  | 2011 Share Incentive Plan, as amended (incorporated by reference to Exhibit 4.7 to the Registrant’s annual report on Form 20-F, as amended (File No. 001-34873), initially filed with the SEC on April 26, 2013)                                                                             
|               |  |                                                                                                                                                                                                                                                                                              
|4.6            |  | Form of Indemnification Agreement between the Registrant and its directors (incorporated herein by reference to Exhibit 10.4 to the registration statement on Form F-1, as amended (File No. 333-169288))                                                                                    
|               |  |                                                                                                                                                                                                                                                                                              
|4.7            |  | Form of Employment Agreement between the Registrant and an Executive Officer of the Registrant (incorporated herein by reference to Exhibit 10.5 to the registration statement on Form F-1, as amended (File No. 333-169288))                                                                
|               |  |                                                                                                                                                                                                                                                                                              
|4.8            |  | English translation of Loan Agreement dated September 23, 2005, between the Registrant and the shareholders of Beijing Blue I.T. (incorporated herein by reference to Exhibit 10.9 to the registration statement on Form F-1, as amended (File No. 333-169288))                              
|               |  |                                                                                                                                                                                                                                                                                              
|4.9            |  | English translation of Supplementary Agreement to Loan Agreement dated May 10, 2010, between the Registrant and the shareholders of Beijing Blue I.T. (incorporated herein by reference to Exhibit 10.10 to the registration statement on Form F-1, as amended (File No. 333-169288))        
|               |  |                                                                                                                                                                                                                                                                                              
|4.10           |  | Loan Agreements dated January 20, 2016, between the Registrant and each shareholder of Beijing Blue I.T. (incorporated by reference to Exhibit 4.10 to the Registrant’s annual report on Form 20-F (File No. 001-34873), filed with the SEC on April 27, 2016)                               
|               |  |                                                                                                                                                                                                                                                                                              
|4.11           |  | English translation of Share Pledge Agreements dated September 23, 2005 among ChinaCache Beijing, Beijing Blue I.T. and the shareholders of Beijing Blue I.T. (incorporated herein by reference to Exhibit 10.11 to the registration statement on Form F-1, as amended (File No. 333-169288))
|               |  |                                                                                                                                                                                                                                                                                              
|4.12           |  | English translation of Powers of Attorney dated September 23, 2005 by the shareholders of Beijing Blue I.T. (incorporated herein by reference to Exhibit 10.12 to the registration statement on Form F-1, as amended (File No. 333169288))                                                   
|               |  |                                                                                                                                                                                                                                                                                              
|4.13           |  | English translation of Exclusive Business Cooperation Agreement dated September 23, 2005, between ChinaCache Beijing and Beijing Blue I.T. (incorporated herein by reference to Exhibit 10.13 to the registration statement on Form F-1, as amended (File No. 333-169288))                   
|               |  |                                                                                                                                                                                                                                                                                              
|4.14           |  | English translation of Exclusive Technical Consultation and Training Agreement dated September 23, 2005, between ChinaCache Beijing and Beijing Blue I.T. (incorporated herein by reference to Exhibit 10.14 to the registration statement on Form F-1, as amended (File No. 333-169288))    
|               |  |                                                                                                                                                                                                                                                                                              
|4.15           |  | English translation of Exclusive Technical Support and Service Agreement dated September 23, 2005, between ChinaCache Beijing and Beijing Blue I.T. (incorporated herein by reference to Exhibit 10.15 to the registration statement on Form F-1, as amended (File No. 333-169288))          
|               |  |                                                                                                                                                                                                                                                                                              
|4.16           |  | English translation of Equipment Leasing Agreement dated September 23, 2005, between ChinaCache Beijing and Beijing Blue I.T. (incorporated herein by reference to Exhibit 10.16 to the registration statement on Form F-1, as amended (File No. 333-169288))                                





115









|Exhibit Number |  | Description of Document                                                                                                                                                                                                                                                                                                                       
|-------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4.17           |  | English translation of Exclusive Option Agreements dated September 23, 2005, among the Registrant, Beijing Blue I.T. and the shareholders of Beijing Blue I.T. (incorporated herein by reference to Exhibit 10.17 to the registration statement on Form F-1, as amended (File No. 333-169288))                                                
|               |  |                                                                                                                                                                                                                                                                                                                                               
|4.18           |  | English translation of Supplementary Agreements to Exclusive Option Agreement dated May 10, 2010, among the Registrant, Beijing Blue I.T. and the shareholders of Beijing Blue I.T. (incorporated herein by reference to Exhibit 10.18 to the registration statement on Form F-1, as amended (File No. 333-169288))                           
|               |  |                                                                                                                                                                                                                                                                                                                                               
|4.19           |  | Exclusive Option Agreements dated January 20, 2016, among the Registrant, Beijing Blue I.T. and each shareholder of Beijing Blue I.T. (incorporated by reference to Exhibit 4.19 to the Registrant’s annual report on Form 20-F (File No. 001-34873), filed with the SEC on April 27, 2016)                                                   
|               |  |                                                                                                                                                                                                                                                                                                                                               
|4.20           |  | English translation of Loan Agreements dated July 31, 2008, between ChinaCache Beijing and the shareholders of Beijing Jingtian (incorporated herein by reference to Exhibit 10.19 to the registration statement on Form F-1, as amended (File No. 333-169288))                                                                               
|               |  |                                                                                                                                                                                                                                                                                                                                               
|4.21           |  | English translation of Supplementary Agreements to Loan Agreements dated May 10, 2010, among the Registrant, ChinaCache Beijing and the shareholders of Beijing Jingtian (incorporated herein by reference to Exhibit 10.20 to the registration statement on Form F-1, as amended (File No. 333-169288))                                      
|               |  |                                                                                                                                                                                                                                                                                                                                               
|4.22           |  | English translation of Supplementary Agreements to Loan Agreements dated December 3, 2012, between ChinaCache Beijing and the two shareholders of Beijing Jingtian (incorporated by reference to Exhibit 4.25 to the Registrant’s annual report on Form 20-F, as amended (File No. 001-34873), initially filed with the SEC on April 26, 2013)
|               |  |                                                                                                                                                                                                                                                                                                                                               
|4.23           |  | English translation of Loan Assignment Agreement dated July 1, 2013, between Xinxin Zheng and Lei Wang (incorporated by reference to Exhibit 4.26 to the Registrant’s annual report on Form 20-F (File No. 001-34873), filed with the SEC on April 7, 2014)                                                                                   
|               |  |                                                                                                                                                                                                                                                                                                                                               
|4.24           |  | English translation of the Share Pledge Agreements dated December 3, 2012, among ChinaCache Beijing, Beijing Jingtian and the shareholders of Beijing Jingtian (incorporated by reference to Exhibit 4.26 to the Registrant’s annual report on Form 20-F, as amended (File No. 001-34873), initially filed with the SEC on April 26, 2013)    
|               |  |                                                                                                                                                                                                                                                                                                                                               
|4.25           |  | English translation of the Share Pledge Agreement dated July 1, 2013, among ChinaCache Beijing, Beijing Jingtian and Lei Wang (incorporated by reference to Exhibit 4.28 to the Registrant’s annual report on Form 20-F (File No. 00134873), filed with the SEC on April 7, 2014)                                                             
|               |  |                                                                                                                                                                                                                                                                                                                                               
|4.26           |  | English translation of the Powers of Attorney dated July 31, 2008 by the shareholders of Beijing Jingtian (incorporated herein by reference to Exhibit 10.22 to the registration statement on Form F-1, as amended (File No. 333-169288))                                                                                                     
|               |  |                                                                                                                                                                                                                                                                                                                                               
|4.27           |  | English translation of the Power of Attorney dated July 1, 2013 by Lei Wang (incorporated by reference to Exhibit 4.30 to the Registrant’s annual report on Form 20-F (File No. 001-34873), filed with the SEC on April 7, 2014)                                                                                                              
|               |  |                                                                                                                                                                                                                                                                                                                                               
|4.28           |  | English translation of the Exclusive Option Agreements dated December 3, 2012, among ChinaCache Beijing, Beijing Jingtian and the shareholders of Beijing Jingtian (incorporated by reference to Exhibit 4.28 to the Registrant’s annual report on Form 20-F, as amended (File No. 001-34873), initially filed with the SEC on April 26, 2013)
|               |  |                                                                                                                                                                                                                                                                                                                                               
|4.29           |  | English translation of the Exclusive Option Agreement dated July 1, 2013, among ChinaCache Beijing, Beijing Jingtian and Lei Wang (incorporated by reference to Exhibit 4.32 to the Registrant’s annual report on Form 20-F (File No. 00134873), filed with the SEC on April 7, 2014)                                                         
|               |  |                                                                                                                                                                                                                                                                                                                                               
|4.30           |  | English translation of the Exclusive Business Cooperation Agreement dated July 31, 2008, between ChinaCache Beijing and Beijing Jingtian (incorporated herein by reference to Exhibit 10.25 to the registration statement on Form F1, as amended (File No. 333-169288))                                                                       
|               |  |                                                                                                                                                                                                                                                                                                                                               
|4.31           |  | English translation of Optical Fiber Line Lease and Services Agreement dated April 10, 2008, between Beijing Blue I.T. and Tong Zhen Networks Co., Ltd. (incorporated herein by reference to Exhibit 10.38 to the registration statement on Form F-1, as amended (File No. 333-169288))                                                       





116









|Exhibit Number |  | Description of Document                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|-------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4.32           |  | Written Confirmation Concerning Extension of Term of Certain Agreements, dated September 20, 2010 (incorporated by reference to Exhibit 4.37 to the Registrant’s annual report on Form 20-F, as amended (File No. 001-34873), initially filed with the SEC on April 26, 2013)                                                                                                                                                                                                   
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|4.33           |  | Securities Purchase Agreement, dated February 28, 2014, by and among the Registrant and the purchasers of the Registrant’s ordinary shares (incorporated by reference to Exhibit 4.42 to the Registrant’s annual report on Form 20-F (File No. 001-34873), filed with the SEC on April 7, 2014)                                                                                                                                                                                 
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|4.34           |  | Registration Rights Agreement, dated February 28, 2014, by and among the Registrant and the purchasers of the Registrant’s ordinary shares (incorporated by reference to Exhibit 4.43 to the Registrant’s annual report on Form 20-F (File No. 001-34873), filed with the SEC on April 7, 2014)                                                                                                                                                                                 
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|4.35           |  | Form of Share Repurchase Agreements, dated February 28, 2014, by and among the Registrant and the investors as listed at the end of the form and material terms of each Share Repurchase Agreement (incorporated by reference to Exhibit 4.44 to the Registrant’s annual report on Form 20-F (File No. 001-34873), filed with the SEC on April 7, 2014)                                                                                                                         
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|4.36           |  | English summary of Cooperation Agreement, dated December 30, 2014, between ChinaCache Xin Run Technology (Beijing) Co., Ltd. and Beijing Federation of Supply and Marketing Cooperatives (incorporated by reference to Exhibit 4.34 to the Registrant’s annual report on Form 20-F (File No. 001-34873), filed with the SEC on April 10, 2015)                                                                                                                                  
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|4.37           |  | English summary of Lease Agreement, dated December 30, 2014, between ChinaCache Xin Run Technology (Beijing) Co., Ltd. and Beijing Blue I.T. Technology Co., Ltd. (incorporated by reference to Exhibit 4.35 to the Registrant’s annual report on Form 20-F (File No. 001-34873), filed with the SEC on April 10, 2015)                                                                                                                                                         
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|4.38           |  | English summary of Framework Agreement for the Transfer of the Equipment Building and Memorandum dated April 10, 2014, and Payment Agreement No. 1 and Payment Agreement No. 2, dated April 11, 2014 and January 26, 2015, respectively, between ChinaCache Xin Run Technology (Beijing) Co., Ltd and Renminwang Co., Ltd. (incorporated by reference to Exhibit 4.36 to the Registrant’s annual report on Form 20-F (File No. 001-34873), filed with the SEC on April 10, 2015)
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|4.39           |  | Loan Agreements dated December 19, 2016, between the Registrant and each shareholder of Beijing Blue I.T. (incorporated by reference to Exhibit 4.39 to the Registrant’s annual report on Form 20-F (File No. 001-34873), filed with the SEC on November 14, 2017)                                                                                                                                                                                                              
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|4.40           |  | Exclusive Option Agreements dated December 19, 2016, among the Registrant, Beijing Blue I.T. and each shareholder of Beijing Blue I.T. (incorporated by reference to Exhibit 4.40 to the Registrant’s annual report on Form 20-F (File No. 001-34873), filed with the SEC on November 14, 2017)                                                                                                                                                                                 
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|4.41           |  | Supplemental Agreements to the Share Pledge Agreements dated December 19, 2016, among ChinaCache Beijing, Beijing Blue I.T. and the shareholders of Beijing Blue I.T. (incorporated by reference to Exhibit 4.41 to the Registrant’s annual report on Form 20-F (File No. 001-34873), filed with the SEC on November 14, 2017)                                                                                                                                                  
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|4.42           |  | English translation of Share Transfer Agreement dated March 5, 2017, among Shanghai Qiaoyong Equity Investment Fund Management Co., Ltd., Tianjin Shuishan, Tianjin Dingsheng, ChinaCache Networks (Hong Kong) Limited and Xin Run. (incorporated by reference to Exhibit 4.42 to the Registrant’s annual report on Form 20-F (File No. 001-34873), filed with the SEC on November 14, 2017)                                                                                    
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|4.43           |  | Powers of Attorney dated December 19, 2016, by the shareholders of Beijing Blue I.T. (incorporated by reference to Exhibit 4.43 to the Registrant’s annual report on Form 20-F (File No. 001-34873), filed with the SEC on November 14, 2017)                                                                                                                                                                                                                                   
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|4.44           |  | English translation of the Comprehensive Facility Contract dated October 30, 2017, by and between ChinaCache Xin Run Technology (Beijing) Co., Ltd. and Bank of Fushun Limited, Shenyang Branch (incorporated by reference to Exhibit 4.44 to the Registrant’s annual report on Form 20-F (File No. 001-34873), filed with the SEC on November 14, 2017)                                                                                                                        
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|4.45           |  | English translation of the Fixed Asset Loan Contract dated October 30, 2017, by and between ChinaCache Xin Run Technology (Beijing) Co., Ltd. and Bank of Fushun Limited, Shenyang Branch (incorporated by reference to Exhibit 4.45 to the Registrant’s annual report on Form 20-F (File No. 001-34873), filed with the SEC on November 14, 2017)                                                                                                                              





117









|Exhibit Number |  | Description of Document                                                                                                                                                                                                                                                                                                                                                                                                         
|-------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4.46           |  | English translation of the Contract for Mortgage of Maximum Amount dated October 30, 2017, by and between ChinaCache Xin Run Technology (Beijing) Co., Ltd. and Bank of Fushun Limited, Shenyang Branch (incorporated by reference to Exhibit 4.46 to the Registrant’s annual report on Form 20-F (File No. 001-34873), filed with the SEC on November 14, 2017)                                                                
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                 
|4.47           |  | English translation of the Working Capital Loan Contract dated October 30, 2017, by and between ChinaCache Xin Run Technology (Beijing) Co., Ltd. and Bank of Fushun Limited, Shenyang Branch (incorporated by reference to Exhibit 4.47 to the Registrant’s annual report on Form 20-F (File No. 001-34873), filed with the SEC on November 14, 2017)                                                                          
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                 
|4.48           |  | English translation of the Contract for Guarantee of Maximum Amount in favor of ChinaCache Xin Run Technology (Beijing) Co., Ltd.  dated October 30, 2017, by and between Song Wang and Bank of Fushun Limited, Shenyang Branch (incorporated by reference to Exhibit 4.48 to the Registrant’s annual report on Form 20-F (File No. 001-34873), filed with the SEC on November 14, 2017)                                        
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                 
|4.49           |  | English translation of the Termination Agreement, dated March 23, 2018, by and among Shanghai Qiaoyong Equity Investment Fund Management Co., Ltd., Tianjin Shuishan, Tianjin Dingsheng, ChinaCache Networks (Hong Kong) Limited, Song Wang, Jean Xiaohong Kou and Xin Run (incorporated by reference to Exhibit 4.49 to the Registrant’s annual report on Form 20-F (File No. 001-34873), filed with the SEC on April 30, 2018.
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                 
|4.50           |  | English summary of Framework Agreement for the Transfer of 100% Equity Interest in Beijing Shuoge Technology Co., Ltd., dated December 29, 2017, between ChinaCache Xin Run Technology (Beijing) Co., Ltd and Renminwang Co., Ltd. (incorporated by reference to Exhibit 4.50 to the Registrant’s annual report on Form 20-F (File No. 001-34873), filed with the SEC on April 30, 2018.                                        
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                 
|4.51           |  | English translation of the Loan Contract dated December 21, 2017, by and between ChinaCache Xin Run Technology (Beijing) Co., Ltd. and Shenyang Rural & Commercial Bank Co., Ltd., Shenhe Branch (incorporated by reference to Exhibit 4.51 to the Registrant’s annual report on Form 20-F (File No. 001-34873), filed with the SEC on April 30, 2018.                                                                          
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                 
|4.52           |  | English translation of the Pledge Agreement dated December 21, 2017, by and between ChinaCache Xin Run Technology (Beijing) Co., Ltd. and Shenyang Rural & Commercial Bank Co., Ltd., Shenhe Branch (incorporated by reference to Exhibit 4.52 to the Registrant’s annual report on Form 20-F (File No. 001-34873), filed with the SEC on April 30, 2018.                                                                       
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                 
|4.53           |  | English translation of the Guarantee Agreement dated December 21, 2017, by and among Shenyang Rural & Commercial Bank Co., Ltd., Shenhe Branch, Song Wang and Jean Xiaohong Kou (incorporated by reference to Exhibit 4.53 to the Registrant’s annual report on Form 20-F (File No. 001-34873), filed with the SEC on April 30, 2018.                                                                                           
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                 
|4.54           |  | English translation of the Property Supervision Agreement dated December 21, 2017, by and between ChinaCache Xin Run Technology (Beijing) Co., Ltd. and Shenyang Rural & Commercial Bank Co., Ltd., Shenhe Branch (incorporated by reference to Exhibit 4.54 to the Registrant’s annual report on Form 20-F (File No. 001-34873), filed with the SEC on April 30, 2018.                                                         
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                 
|4.55           |  | Rights Agreement, dated as of May 9, 2018, between ChinaCache International Holdings Ltd. and American Stock Transfer & Trust Company, LLC, which includes the form of Rights Certificate as Exhibit A, the form of Summary of Rights as Exhibit B and the form of Certificate of Designation as Exhibit C (incorporated herein by reference to Exhibit 4.1 to the Form 6-K filed on May 10, 2018 (File No. 001-34873))         
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                 
|4.56*          |  | English translation of the Agreement on Transfer of 100% Equity Interests in Beijing Shuoge Technology Co., Ltd., dated April 3, 2019, between ChinaCache Xin Run Technology (Beijing) Co., Ltd. and People.cn Co., Ltd.                                                                                                                                                                                                        
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                 
|4.57*          |  | English translation of the Debt Acknowledgement and Repayment Schedule Agreement, dated April 3, 2019, between ChinaCache Xin Run Technology (Beijing) Co., Ltd. and People.cn Co., Ltd.                                                                                                                                                                                                                                        
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                 
|4.58*          |  | English translation of the Mortgage Contract, dated April 3, 2019, among ChinaCache Xin Run Technology (Beijing) Co., Ltd., People.cn Co., Ltd., and Beijing Blue I.T. Technology Co., Ltd.                                                                                                                                                                                                                                     
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                 
|8.1            |  | List of Subsidiaries and Consolidated Affiliated Entities (incorporated by reference to Exhibit 8.1 to the Registrant’s annual report on Form 20-F (File No. 001-34873), filed with the SEC on November 14, 2017)                                                                                                                                                                                                               
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                 
|11.1           |  | Amended and Restated Code of Business Conduct and Ethics, adopted on November 4, 2016 (incorporated by reference to Exhibit 11.1 to the Registrant’s annual report on Form 20-F (File No. 001-34873), filed with the SEC on April 30, 2018.                                                                                                                                                                                     
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                 
|12.1*          |  | Certification by Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                          
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                 
|12.2*          |  | Certification by Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                          
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                 
|13.1**         |  | Certification by Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                          
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                 
|13.2**         |  | Certification by Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                          
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                 
|15.1*          |  | Consent of Conyers Dill & Pearman                                                                                                                                                                                                                                                                                                                                                                                               
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                 
|15.2*          |  | Consent of Han Kun Law Offices                                                                                                                                                                                                                                                                                                                                                                                                  
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                 
|15.3*          |  | Consent of Marcum Bernstein & Pinchuk LLP                                                                                                                                                                                                                                                                                                                                                                                       
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                 
|15.4*          |  | Letter dated as of November 29, 2019 from Marcum Bernstein & Pinchuk LLP                                                                                                                                                                                                                                                                                                                                                        
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                 
|101.INS*       |  | XBRL Instance Document                                                                                                                                                                                                                                                                                                                                                                                                          
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                 
|101.SCH*       |  | XBRL Taxonomy Extension Schema Document                                                                                                                                                                                                                                                                                                                                                                                         
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                 
|101.CAL*       |  | XBRL Taxonomy Extension Calculation Linkbase Document                                                                                                                                                                                                                                                                                                                                                                           
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                 
|101.DEF*       |  | XBRL Taxonomy Extension Definition Linkbase Document                                                                                                                                                                                                                                                                                                                                                                            
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                 
|101.LAB*       |  | XBRL Taxonomy Extension Label Linkbase Document                                                                                                                                                                                                                                                                                                                                                                                 
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                 
|101.PRE*       |  | XBRL Taxonomy Extension Presentation Linkbase Document                                                                                                                                                                                                                                                                                                                                                                          



|* | Filed herewith.
|- | ---------------



|** | Furnished herewith.
|-- | -------------------





118











SIGNATURES



The registrant hereby certifies that it
meets all of the requirements for filing its annual report on Form 20-F and that it has duly caused and authorized the undersigned
to sign this annual report on its behalf.



|                        | ChinaCache International Holdings Ltd.
|----------------------- | --------------------------------------
|                        |                                       
|                        | By:                                   
|                        |                                       
|                        |                                       
|                        |                                       
|Date: November 29, 2019 |                                       





119
















CHINACACHE INTERNATIONAL HOLDINGS LTD.





CONSOLIDATED FINANCIAL STATEMENTS





For the years ended December 31, 2016, 2017 and 2018

















CHINACACHE INTERNATIONAL HOLDINGS LTD.



INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



|                                                                                                                          | Page     
|------------------------------------------------------------------------------------------------------------------------- | ---------
|                                                                                                                          |          
|Consolidated Financial Statements                                                                                         |          
|                                                                                                                          |          
|Report of Independent Registered Public Accounting Firm                                                                   | F-2      
|                                                                                                                          |          
|Consolidated Balance Sheets as of December 31, 2017 and 2018                                                              | F-3–F-5  
|                                                                                                                          |          
|Consolidated Statements of Operations and Comprehensive Loss for the
    Years     Ended December 31, 2016, 2017 and 2018 | F-6-F-7  
|                                                                                                                          |          
|Consolidated Statements of Cash Flows for the Years Ended December 31, 2016, 2017 and 2018                                | F-8-F-10 
|                                                                                                                          |          
|Consolidated Statements of Changes in Shareholders’ Deficit for the Years Ended December 31, 2016, 2017 and 2018          | F-11     
|                                                                                                                          |          
|Notes to the Consolidated Financial Statements                                                                            | F-12–F-68



F-1







REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM



To the Shareholders and the Board of Directors
of ChinaCache International Holdings Ltd.:





Opinion on the Financial Statements



We have audited the accompanying consolidated
balance sheets of ChinaCache International Holdings Ltd. (the "Company") as of December 31, 2017 and 2018, the related
consolidated statements of operations and comprehensive loss, cash flows and changes in shareholders' deficit for each of the three
years in the period ended December 31, 2018, and the related notes (collectively referred to as the "financial statements").
In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company at December
31, 2017 and 2018 and the results of its operations and its cash flows for each of the three years in the period ended December
31, 2018, in conformity with U.S. generally accepted accounting principles.



The Company’s Ability to Continue as a Going Concern



TThe accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.
As discussed in Note 2 to the financial statements, the Company has suffered recurring losses from operations and, has a working
capital deficiency. These conditions raise substantial doubt about the Company's ability to continue as a going concern. Management's
evaluation of the events and conditions and management's plans regarding these matters are also described in Note 2. The financial
statements do not include any adjustments that might result from the outcome of this uncertainty.



Basis for Opinion



These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our
audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and
are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.



We conducted our audits in accordance with
the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have,
nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required
to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the
effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.



Our audits included performing procedures
to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures
that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures
in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made
by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a
reasonable basis for our opinion.



|/s/ Marcum Bernstein & Pinchuk LLP                 
|---------------------------------------------------
|We have served as the Company’s auditor since 2019.
|Beijing, China                                     
|                                                   
|November 29, 2019                                  





F-2







ChinaCache
International Holdings Ltd.



Consolidated
Balance Sheets

(Amounts
in thousands of Renminbi (“RMB”) and US dollars (“US$”))



|                                                                                                                                                   |  |      |  | As of December 31, |          
|-------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- |  | ------------------ | ---------
|                                                                                                                                                   |  | Note |  | 2017               |          
|                                                                                                                                                   |  |      |  | RMB                |          
|ASSETS:                                                                                                                                            |  |      |  |                    |          
|Current assets:                                                                                                                                    |  |      |  |                    |          
|Cash and cash equivalents                                                                                                                          |  | 4    |  |                    | 106,708  
|Restricted Cash                                                                                                                                    |  | 4    |  |                    |          
|Accounts receivable (net of allowance for doubtful accounts of RMB81,301 and RMB82,366 (US$11,979) as of December 31, 2017 and 2018, respectively) |  | 5    |  |                    | 161,043  
|Prepaid expenses and other current assets                                                                                                          |  | 6    |  |                    | 212,984  
|Amounts due from subsidiaries held for sale                                                                                                        |  | 10   |  |                    | 2,025    
|Assets held for sale                                                                                                                               |  | 10   |  |                    | 581,731  
|                                                                                                                                                   |  |      |  |                    |          
|Total current assets                                                                                                                               |  |      |  |                    | 1,064,491
|                                                                                                                                                   |  |      |  |                    |          
|Non-current assets:                                                                                                                                |  |      |  |                    |          
|Property and equipment, net                                                                                                                        |  | 7    |  |                    | 53,326   
|Intangible assets, net                                                                                                                             |  | 8    |  |                    | 165      
|Land use right, net                                                                                                                                |  | 9    |  |                    | 32,902   
|Cloud infrastructure construction in progress                                                                                                      |  | 11   |  |                    | 416,352  
|Long term investments                                                                                                                              |  | 12   |  |                    | 30,148   
|Long term deposits and other non-current assets                                                                                                    |  |      |  |                    | 8,651    
|                                                                                                                                                   |  |      |  |                    |          
|Total non-current assets                                                                                                                           |  |      |  |                    | 541,544  
|                                                                                                                                                   |  |      |  |                    |          
|TOTAL ASSETS                                                                                                                                       |  |      |  |                    | 1,606,035



F-3







ChinaCache
International Holdings Ltd.



Consolidated
Balance Sheets (CONTINUED)

(Amounts
in thousands of RMB and US$)





|                                                                                                                                                                                                                                    |  |      |  | As of December 31, |          
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- |  | ------------------ | ---------
|                                                                                                                                                                                                                                    |  | Note |  | 2017               |          
|                                                                                                                                                                                                                                    |  |      |  | RMB                |          
|LIABILITIES AND SHAREHOLDERS’ DEFICIT:                                                                                                                                                                                              |  |      |  |                    |          
|Current liabilities:                                                                                                                                                                                                                |  |      |  |                    |          
|Accounts payable (including accounts payable of the VIEs without recourse to the Company of RMB353,133 and RMB316,963 (US$46,100) as of December 31, 2017 and 2018, respectively)                                                   |  |      |  |                    | 367,924  
|Accrued employee benefits (including accrued employee benefits of the VIEs without recourse to the Company of RMB32,783 and RMB24,898 (US$3,621) as of December 31, 2017 and 2018, respectively)                                    |  |      |  |                    | 44,465   
|Accrued expenses and other current liabilities (including accrued expenses and other payables of the VIEs without recourse to the Company of RMB29,728 and RMB38,915 (US$5,660) as of December 31, 2017 and 2018, respectively)     |  | 14   |  |                    | 39,282   
|Other payables (including accrued expenses and other payables of the VIEs without recourse to the Company of RMB15,547 and RMB15,072 (US$2,192) as of December 31, 2017 and 2018, respectively)                                     |  | 15   |  |                    | 1,254,375
|Income tax payable (including income taxes payable of the VIEs without recourse to the Company of RMB10,455 and RMB10,991 (US$1,599) as of December 31, 2017 and 2018, respectively)                                                |  | 21   |  |                    | 78,337   
|Amounts due to related parties (including amounts due to related parties of the VIEs without recourse to the Company of nil and nil as of December 31, 2017 and 2018, respectively)                                                 |  | 22   |  |                    | 18       
|Short-term borrowings (including short-term borrowings of the VIEs without recourse to the Company of RMB9,960 and nil as of December 31, 2017 and 2018, respectively)                                                              |  | 13   |  |                    | 9,960    
|Current portion of long-term borrowings (including current portion of long-term borrowings of the VIEs without recourse to the Company of nil and nil as of December 31, 2017 and 2018, respectively)                               |  | 13   |  |                    | 32,642   
|Current portion of capital lease obligations (including current portion of capital lease obligations of the VIEs without recourse to the Company of RMB42,735 and RMB1,284 (US$187) as of December 31, 2017 and 2018, respectively) |  | 17   |  |                    | 42,735   
|Deferred government grant (including deferred government grant of the VIEs without recourse to the Company of RMB13,000 and RMB1,696 (US$247) as of December 31, 2017 and 2018, respectively)                                       |  | 16   |  |                    | 13,000   
|Amounts due to subsidiaries held for sale (including amount due to a subsidiary held for sale of the VIEs without recourse to the Company of RMB737 and RMB737 (US$107) as of December 31, 2017 and 2018, respectively)             |  | 10   |  |                    | 737      
|Liabilities held for sale (including liabilities held for sale of the VIEs without recourse to the Company of nil and nil as of December 31, 2017 and 2018, respectively)                                                           |  | 10   |  |                    | 3,888    
|                                                                                                                                                                                                                                    |  |      |  |                    |          
|Total current liabilities                                                                                                                                                                                                           |  |      |  |                    | 1,887,363





F-4







ChinaCache International
Holdings Ltd.



Consolidated
Balance Sheets (CONTINUED)

(Amounts
in thousands of RMB and US$)



|                                                                                                                                                                                                                             |  |      |  | As of December 31, |           
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- |  | ------------------ | ----------
|                                                                                                                                                                                                                             |  | Note |  | 2017               |           
|                                                                                                                                                                                                                             |  |      |  | RMB                |           
|LIABILITIES AND SHAREHOLDERS’ DEFICT: (CONTINUED)                                                                                                                                                                            |  |      |  |                    |           
|Non-current liabilities:                                                                                                                                                                                                     |  |      |  |                    |           
|Long-term borrowings (including long-term borrowings of the VIEs without recourse to the Company of nil and nil as of December 31, 2017 and 2018, respectively)                                                              |  | 13   |  |                    | 211,578   
|Non-current portion of capital lease obligations (including non-current portion of capital lease obligations of the VIEs without recourse to the Company of RMB1,421 and nil as of December 31, 2017 and 2018, respectively) |  | 17   |  |                    | 1,421     
|Deferred government grant (including deferred government grant of the VIEs without recourse to the Company of RMB6,580 and RMB14,350  (US$2,087) as of December 31, 2017 and 2018, respectively)                             |  | 16   |  |                    | 6,580     
|                                                                                                                                                                                                                             |  |      |  |                    |           
|Total non-current liabilities                                                                                                                                                                                                |  |      |  |                    | 219,579   
|                                                                                                                                                                                                                             |  |      |  |                    |           
|Total liabilities                                                                                                                                                                                                            |  |      |  |                    | 2,106,942 
|                                                                                                                                                                                                                             |  |      |  |                    |           
|Commitments and contingencies                                                                                                                                                                                                |  | 26   |  |                    |           
|                                                                                                                                                                                                                             |  |      |  |                    |           
|Shareholders’ deficit:                                                                                                                                                                                                       |  |      |  |                    |           
|Ordinary shares (US$0.0001 par value; 1,000,000,000 and 1,000,000,000 shares authorized; 426,267,345 and 429,404,977 shares issued and outstanding as of December 31, 2017 and 2018, respectively)                           |  |      |  |                    | 338       
|Additional paid-in capital                                                                                                                                                                                                   |  |      |  |                    | 1,573,341 
|Treasury stock                                                                                                                                                                                                               |  |      |  |                    | -         
|Statutory reserves                                                                                                                                                                                                           |  |      |  |                    | 1,326     
|Accumulated deficit                                                                                                                                                                                                          |  |      |  |                    | (2,076,151
|Accumulated other comprehensive income                                                                                                                                                                                       |  | 19   |  |                    | 2,559     
|                                                                                                                                                                                                                             |  |      |  |                    |           
|Total ChinaCache International Holdings Ltd. shareholders’ deficit                                                                                                                                                           |  |      |  |                    | (498,587  
|Noncontrolling interest                                                                                                                                                                                                      |  |      |  |                    | (2,320    
|                                                                                                                                                                                                                             |  |      |  |                    |           
|Total shareholder’s deficit                                                                                                                                                                                                  |  |      |  |                    | (500,907  
|                                                                                                                                                                                                                             |  |      |  |                    |           
|TOTAL LIABILITIES AND SHAREHOLDERS’ DEFICIT                                                                                                                                                                                  |  |      |  |                    | 1,606,035 



The accompanying notes are an integral
part of these consolidated financial statements.



F-5







ChinaCache
International Holdings Ltd.



Consolidated
statements of COMPREHENSIVE LOSS

(Amounts in thousands of RMB and US$)





|                                                       |  |      |  | For the years ended December 31, |            
|------------------------------------------------------ |  | ---- |  | -------------------------------- | -----------
|                                                       |  | Note |  | 2016                             |            
|                                                       |  |      |  | RMB                              |            
|Net revenues                                           |  |      |  |                                  | 1,054,235  
|                                                       |  |      |  |                                  |            
|Cost of revenues                                       |  |      |  |                                  | (1,077,810 
|                                                       |  |      |  |                                  |            
|Gross (loss) /profit                                   |  |      |  |                                  | (23,575    
|                                                       |  |      |  |                                  |            
|Other operating loss                                   |  |      |  |                                  | (19,044    
|Sales and marketing expenses                           |  |      |  |                                  | (93,603    
|General and administrative expenses                    |  |      |  |                                  | (256,007   
|Provision for doubtful accounts                        |  |      |  |                                  | (9,010     
|Research and development expenses                      |  |      |  |                                  | (104,018   
|Impairment of long-lived assets                        |  | 7,8  |  |                                  | (399,094   
|Impairment of long-term investments                    |  | 12   |  |                                  | (18,240    
|                                                       |  |      |  |                                  |            
|Operating loss                                         |  |      |  |                                  | (922,591   
|                                                       |  |      |  |                                  |            
|Interest income                                        |  |      |  |                                  | 4,669      
|Interest expense                                       |  |      |  |                                  | (11,647    
|Other income/(loss)                                    |  |      |  |                                  | 5,336      
|Foreign exchange gain/(loss)                           |  |      |  |                                  | 14,209     
|                                                       |  |      |  |                                  |            
|Loss before income taxes                               |  |      |  |                                  | (910,024   
|                                                       |  |      |  |                                  |            
|Income tax expense                                     |  | 21   |  |                                  | (4,229     
|                                                       |  |      |  |                                  |            
|Net loss                                               |  |      |  |                                  | (914,253   
|                                                       |  |      |  |                                  |            
|Less: net loss attributable to noncontrolling interest |  |      |  |                                  | (776       
|                                                       |  |      |  |                                  |            
|Net loss attributable to the Company’s shareholders    |  |      |  |                                  | (913,477   
|Loss per share                                         |  |      |  |                                  |            
|Basic and Diluted                                      |  | 24   |  |                                  | (2.24      
|Shares used in loss per share computations:            |  |      |  |                                  |            
|Basic and Diluted                                      |  | 24   |  |                                  | 408,189,722





F-6







ChinaCache
International Holdings Ltd.



Consolidated
statements of COMPREHENSIVE LOSS (CONTINUED)

(Amounts in thousands of RMB and US$ except
for number of shares and per share data)





|                                                                 |  |      |  | For the years ended December 31, |         
|---------------------------------------------------------------- |  | ---- |  | -------------------------------- | --------
|                                                                 |  | Note |  | 2016                             |         
|                                                                 |  |      |  | RMB                              |         
|Foreign currency translation                                     |  |      |  |                                  | (293    
|Unrealized holding gain (loss) on available-for-sale investments |  | 19   |  |                                  | 659     
|Amounts reclassified from accumulated other comprehensive income |  | 19   |  |                                  | (3,552  
|Total other comprehensive (loss)/income net of tax               |  |      |  |                                  | (3,186  
|Comprehensive loss                                               |  |      |  |                                  | (917,439
|Less: comprehensive loss attributable to noncontrolling interest |  |      |  |                                  | (776    
|Comprehensive loss attributable to the Company’s shareholders    |  |      |  |                                  | (916,663





The accompanying notes are an integral part of these consolidated
financial statements.



F-7







ChinaCache
International Holdings Ltd.



Consolidated
statements of cash flows

(Amounts in thousands of RMB and US$)





|                                                     |  | For the years ended December 31, |         
|---------------------------------------------------- |  | -------------------------------- | --------
|                                                     |  | 2016                             |         
|                                                     |  | RMB                              |         
|Cash flows from operating activities:                |  |                                  |         
|Net loss                                             |  |                                  | (914,253
|Depreciation of property and equipment               |  |                                  | 155,225 
|Amortization of intangible assets and land use right |  |                                  | 3,869   
|Allowance for doubtful accounts                      |  |                                  | 9,010   
|Impairment of long-lived assets                      |  |                                  | 399,094 
|Impairment of long- term investments                 |  |                                  | 18,240  
|Loss/(gain) from disposal of property and equipment  |  |                                  | 2,028   
|Deferred tax expense                                 |  |                                  | 3,125   
|Interest expense adjustment                          |  |                                  | 1,380   
|Foreign exchange (gain)/loss                         |  |                                  | (14,151 
|Gain from sale of short-term investments             |  |                                  | (3,552  
|Share-based compensation                             |  |                                  | 85,025  
|Amortization of other non-current asset              |  |                                  | -       
|Amortization of deferred government grant            |  |                                  | (12,041 
|                                                     |  |                                  |         
|Changes in operating assets and liabilities:         |  |                                  |         
|Accounts receivable                                  |  |                                  | 41,840  
|Prepaid expense and other current assets             |  |                                  | (1,095  
|Long term deposits and other non-current assets      |  |                                  | (1,221  
|Accounts payable                                     |  |                                  | 101,392 
|Accrued employee benefits                            |  |                                  | 1,085   
|Accrued expenses and other payables                  |  |                                  | (73,174 
|Income tax payable                                   |  |                                  | (456    
|Amounts due to related parties                       |  |                                  | -       
|Deferred government grant                            |  |                                  | (11,450 
|                                                     |  |                                  |         
|Net cash used in operating activities                |  |                                  | (187,180



F-8







ChinaCache
International Holdings Ltd.



Consolidated
statements of cash flows (Continued)

(Amounts in thousands of RMB and US$)





|                                                                      |  | For the years ended December 31, |         
|--------------------------------------------------------------------- |  | -------------------------------- | --------
|                                                                      |  | 2016                             |         
|                                                                      |  | RMB                              |         
|Cash flows from investing activities:                                 |  |                                  |         
|Purchases of property and equipment and intangible assets             |  |                                  | (59,234 
|Cash paid for long term investment (Note 12)                          |  |                                  | (2,242  
|Cash receipts from sales of short-term investments                    |  |                                  | 80,380  
|Cash paid for cloud infrastructure construction in progress (Note 11) |  |                                  | (222,292
|Proceeds from disposal of property and equipment                      |  |                                  | 998     
|                                                                      |  |                                  |         
|Net cash used in investing activities                                 |  |                                  | (202,390
|                                                                      |  |                                  |         
|Cash flows from financing activities:                                 |  |                                  |         
|                                                                      |  |                                  |         
|Proceeds from bank borrowings (Note 13)                               |  |                                  | 29,311  
|Borrowing cost                                                        |  |                                  | -       
|Repayment of bank borrowings                                          |  |                                  | (7,680  
|Proceeds from employee share options exercised                        |  |                                  | 7,579   
|Payments of capital lease obligations                                 |  |                                  | (74,453 
|Proceeds from sales and lease back                                    |  |                                  | -       
|Payments for repurchases of ordinary shares                           |  |                                  | (39,402 
|                                                                      |  |                                  |         
|Net cash (used in) / provided by financing activities                 |  |                                  | (84,645 
|                                                                      |  |                                  |         
|Net decrease in cash and cash equivalents                             |  |                                  | (474,215
|Cash and cash equivalents at beginning of the year                    |  |                                  | 616,218 
|Effect of foreign exchange rate changes on cash                       |  |                                  | 14,617  
|Cash, cash equivalents and restricted cash at end of the year         |  |                                  | 156,620 







F-9







ChinaCache
International Holdings Ltd.



Consolidated
statements of cash flows (Continued)

(Amounts in thousands of RMB and US$)





|                                                                                      |  | For the years ended December 31, |        
|------------------------------------------------------------------------------------- |  | -------------------------------- | -------
|                                                                                      |  | 2016                             |        
|                                                                                      |  | RMB                              |        
|Supplemental disclosures of cash flow information:                                    |  |                                  |        
|Interest paid                                                                         |  |                                  | (10,267
|Interest received                                                                     |  |                                  | 4,669  
|                                                                                      |  |                                  |        
|Supplemental disclosures of non-cash activities:                                      |  |                                  |        
|Acquisition of property and equipment included in accrued expenses and other payables |  |                                  | (16,397
|Acquisition of property and equipment through capital leases                          |  |                                  | 59,234 
|Share settlement of individual income tax on exercise of options                      |  |                                  |        





The accompanying notes are an integral
part of these consolidated financial statements.



F-10







ChinaCache
International Holdings Ltd.



Consolidated
statements of CHANGES IN shareholders’ EQUITY/(DEficit)

(Amounts in thousands of RMB and US dollars
US$ except for number of shares)





|                                                                                                       |  |  | Attributable to ChinaCache |   |  |  |                 |  |  |  |                            |  
|------------------------------------------------------------------------------------------------------ |  |  | -------------------------- | - |  |  | --------------- |  |  |  | -------------------------- | -
|                                                                                                       |  |  | Number of
ordinary shares  |   |  |  | Ordinary
shares |  |  |  | Additional
paid-in capital |  
|                                                                                                       |  |  |                            |   |  |  | RMB             |  |  |  | RMB                        |  
|Balance at January 1, 2016                                                                             |  |  | 400,069,875                |   |  |  | 310             |  |  |  | 1,473,468                  |  
|                                                                                                       |  |  |                            |   |  |  |                 |  |  |  |                            |  
|Net loss                                                                                               |  |  | -                          |   |  |  | -               |  |  |  | -                          |  
|Other comprehensive loss                                                                               |  |  |                            |   |  |  |                 |  |  |  |                            |  
|- Foreign currency translation adjustment                                                              |  |  | -                          |   |  |  | -               |  |  |  | -                          |  
|- Unrealized holding gain on available-for-sale investment                                             |  |  | -                          |   |  |  | -               |  |  |  | -                          |  
|- Amounts reclassified from accumulated other comprehensive income                                     |  |  | -                          |   |  |  | -               |  |  |  | -                          |  
|Share-based compensation                                                                               |  |  | -                          |   |  |  | -               |  |  |  | 85,025                     |  
|Repurchase of shares                                                                                   |  |  | (13,730,656                | ) |  |  | -               |  |  |  | -                          |  
|Exercise of employee stock options                                                                     |  |  | 1,325,241                  |   |  |  | 1               |  |  |  | 3,938                      |  
|Restricted shares vested                                                                               |  |  | 33,762,181                 |   |  |  | 23              |  |  |  | (23                        | )
|Shares issued to depository bank                                                                       |  |  | 23,000,000                 |   |  |  | -               |  |  |  | -                          |  
|Settlement of share options exercised and restricted shares vested with shares held by depository bank |  |  | (35,087,422                | ) |  |  | -               |  |  |  | -                          |  
|                                                                                                       |  |  |                            |   |  |  |                 |  |  |  |                            |  
|Balance at December 31, 2016                                                                           |  |  | 409,339,219                |   |  |  | 334             |  |  |  | 1,562,408                  |  
|                                                                                                       |  |  |                            |   |  |  |                 |  |  |  |                            |  
|Net loss                                                                                               |  |  | -                          |   |  |  | -               |  |  |  | -                          |  
|Other comprehensive loss                                                                               |  |  | -                          |   |  |  | -               |  |  |  | -                          |  
|- Foreign currency translation adjustment                                                              |  |  | -                          |   |  |  | -               |  |  |  | -                          |  
|- Unrealized holding gain on available-for-sale investment                                             |  |  | -                          |   |  |  | -               |  |  |  | -                          |  
|- Amounts reclassified from accumulated other comprehensive income                                     |  |  | -                          |   |  |  | -               |  |  |  | -                          |  
|Share-based compensation                                                                               |  |  | -                          |   |  |  | -               |  |  |  | 10,937                     |  
|Restricted shares vested                                                                               |  |  | 20,555,835                 |   |  |  | 4               |  |  |  | (4                         | )
|Settlement of restricted shares vested with shares held by depository bank                             |  |  | (3,627,709                 | ) |  |  | -               |  |  |  | -                          |  
|                                                                                                       |  |  |                            |   |  |  |                 |  |  |  |                            |  
|Balance at December 31, 2017                                                                           |  |  | 426,267,345                |   |  |  | 338             |  |  |  | 1,573,341                  |  
|                                                                                                       |  |  |                            |   |  |  |                 |  |  |  |                            |  
|Net loss                                                                                               |  |  | -                          |   |  |  | -               |  |  |  | -                          |  
|Other comprehensive income                                                                             |  |  | -                          |   |  |  | -               |  |  |  | -                          |  
|- Foreign currency translation adjustment                                                              |  |  | -                          |   |  |  | -               |  |  |  | -                          |  
|Share-based compensation                                                                               |  |  | -                          |   |  |  | -               |  |  |  | 4,157                      |  
|Share settlement of individual income tax on exercise of options                                       |  |  |                            |   |  |  |                 |  |  |  |                            |  
|Exercise of employee stock options                                                                     |  |  | 1,096,896                  |   |  |  | -               |  |  |  | 1,656                      |  
|Restricted shares vested                                                                               |  |  | 2,040,736                  |   |  |  | -               |  |  |  | (1                         | )
|Shares issued to depository bank                                                                       |  |  | -                          |   |  |  | -               |  |  |  | -                          |  
|Settlement of restricted shares vested with shares held by depository bank                             |  |  |                            |   |  |  | -               |  |  |  | -                          |  
|                                                                                                       |  |  |                            |   |  |  |                 |  |  |  |                            |  
|Balance at December 31, 2018                                                                           |  |  | 429,404,977                |   |  |  | 338             |  |  |  | 1,579,153                  |  
|                                                                                                       |  |  |                            |   |  |  |                 |  |  |  |                            |  
|Balance at December 31, 2018 (US$)                                                                     |  |  |                            |   |  |  | 49              |  |  |  | 229,678                    |  





The accompanying notes are an integral
part of these consolidated financial statements



F-11







CHINACACHE
INTERNATIONAL HOLDINGS LTD.



NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2016, 2017 AND 2018



|1. | ORGANIZATION
|-- | ------------



ChinaCache
International Holdings Ltd. (the ‘‘Company’’) was incorporated under the laws of the Cayman Islands on
June 29, 2005 and its principal activity is investment holding. The founders of the Company are Mr. Wang Song and his spouse Kou
Xiaohong (the “Founders”).



The Company
through its subsidiaries and variable interest entities (collectively “the Group”) noted below are principally engaged
in the provision of content and application delivery total solutions in the People’s Republic of China (the “PRC”).



As of December
31, 2018, subsidiaries of the Company and variable interest entities (“VIEs”) where the Company is the primary beneficiary
include the following:





|                                                                                 |  | Date of 
    incorporation |  | Place of 
    incorporation |  | Percentage of  
    ownership |     |     | Principal activities
|-------------------------------------------------------------------------------- |  | -------------------------- |  | --------------------------- |  | ----------------------------- | --- | --- | --------------------
|Subsidiaries                                                                     |  |                            |  |                             |  |                               |     |     |                     
|                                                                                 |  |                            |  |                             |  |                               |     |     |                     
|ChinaCache
    Network Technology (Beijing) Ltd. (“ChinaCache Beijing”)          |  | August 25, 2005            |  | The PRC                     |  |                               | 100 | %   |                     
|                                                                                 |  |                            |  |                             |  |                               |     |     |                     
|ChinaCache North America
    Inc. (“ChinaCache US”)                              |  | August 16, 2007            |  | United States of America    |  |                               | 100 | %   |                     
|                                                                                 |  |                            |  |                             |  |                               |     |     |                     
|JNet Holdings Limited
    (“JNet Holdings”)                                      |  | September 27, 2007         |  | British Virgin Islands      |  |                               | 100 | %   |                     
|                                                                                 |  |                            |  |                             |  |                               |     |     |                     
|ChinaCache Networks
    Hong Kong Ltd. (“ChinaCache HK”)                         |  | April 7, 2008              |  | Hong Kong                   |  |                               | 100 | %   |                     
|                                                                                 |  |                            |  |                             |  |                               |     |     |                     
|ChinaCache Xin Run Technology
    (Beijing) Co., Ltd. (“Xin Run”)                |  | July 18, 2011              |  | The PRC                     |  |                               | 99  | %** |                     
|                                                                                 |  |                            |  |                             |  |                               |     |     |                     
|Metasequoia Investment
    Inc. (“Metasequoia”)                                  |  | March 28, 2012             |  | British Virgin Islands      |  |                               | 100 | %   |                     
|                                                                                 |  |                            |  |                             |  |                               |     |     |                     
|ChinaCache Ireland Limited
    (“ChinaCache IE”) ****                            |  | November 18, 2013          |  | Ireland                     |  |                               | 100 | %   |                     
|                                                                                 |  |                            |  |                             |  |                               |     |     |                     
|Beijing Shou Ming Technology
    Co., Ltd. (“Beijing Shou Ming”)                 |  | August 15, 2014            |  | The PRC                     |  |                               | 99  | %** |                     
|                                                                                 |  |                            |  |                             |  |                               |     |     |                     
|Beijing Shuo Ge Technology
    Co., Ltd. (“Beijing Shuo Ge”) ****                |  | August 15, 2014            |  | The PRC                     |  |                               | 99  | %** |                     
|                                                                                 |  |                            |  |                             |  |                               |     |     |                     
|Beijing Zhao Du Technology
    Co., Ltd. (“Beijing Zhao Du”) ***                 |  | August 15, 2014            |  | The PRC                     |  |                               | 99  | %** |                     
|                                                                                 |  |                            |  |                             |  |                               |     |     |                     
|ChinaCache Networks
    (UK) Limited (“ChinaCache UK”)                           |  | March 10, 2016             |  | England and Wales           |  |                               | 100 | %   |                     
|                                                                                 |  |                            |  |                             |  |                               |     |     |                     
|ChinaCache Assets LLC (“CCAL”)                                                   |  | August 10, 2016            |  | United States of America    |  |                               | 100 | %   |                     
|                                                                                 |  |                            |  |                             |  |                               |     |     |                     
|VIEs                                                                             |  |                            |  |                             |  |                               |     |     |                     
|                                                                                 |  |                            |  |                             |  |                               |     |     |                     
|Beijing Blue I.T. Technologies
    Co., Ltd. (“Beijing Blue IT”) *               |  | June 7, 1998               |  | The PRC                     |  |                               | -   |     |                     
|                                                                                 |  |                            |  |                             |  |                               |     |     |                     
|Beijing Jingtian Technology
    Limited (“Beijing Jingtian”) *                   |  | September 1, 2005          |  | The PRC                     |  |                               | -   |     |                     
|                                                                                 |  |                            |  |                             |  |                               |     |     |                     
|ChinaCache Shouming
    Technology (Beijing) Co., Ltd. (“ChinaCache Shouming”) * |  | June 6, 2018               |  | The PRC                     |  |                               |     |     |                     









F-12







CHINACACHE
INTERNATIONAL HOLDINGS LTD.



NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2016, 2017 AND 2018



|1. | ORGANIZATION (CONTINUED)
|-- | ------------------------



|* | The equity interest
of Beijing Blue IT is held by the Founders, and Beijing Jingtian is held by two individual shareholders. The equity interest of
ChinaCache Shouming is held by Tianjin Ding Sheng Zhi Da Technologies Co., Ltd ("Ding Sheng Zhi Da") and another individual shareholder.
the Founders, Ding Sheng Zhi Da and the three individual shareholders are collectively referred as the "Nominee Shareholders".
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|** | On
                                         November 16, 2015, Xin Run received a capital injection of RMB1,292,000 (US$202,000)
                                         from Tianjin Shuishan Technology Co., Ltd, a PRC Company wholly owned by the Founders.
                                         As a result, the percentage of the Company’s equity ownership in Xin Run and Xin
                                         Run’s wholly-owned subsidiaries, is 99% as of December 31, 2017
                                         and 2018.
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|*** | In July 2017, Xin Run transferred
    all of its equity interests in Beijing Zhao Du to a buyer (Note 10). However, due to the disputes disclosed in Note 26, the
    transfer is not yet closed.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|**** | Subsequently in February
    2019, ChinaCache IE, which has no material operation, was deregistered. In May 2019, Xin Run transferred its 100% equity interests
    in Beijing Shuo Ge to a buyer (Note 27).
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Through
the Company's subsidiaries in the PRC, the Company signed a series of contracts with certain VIEs, specifically Beijing Blue IT
in September 2005, Beijing Jingtian in July 2008, and ChinaCache Shouming September 2018. The following is a summary of the various
VIE agreements:







Exclusive option agreements



Pursuant to the exclusive option agreement amongst the Company and the Nominee Shareholders of Beijing Blue IT in September
2005, the Nominee Shareholders of Beijing Blue IT irrevocably granted the Company or its designated party, an exclusive option
to purchase all or part of the equity interests held by the Nominee Shareholders in Beijing Blue IT, when and to the extent
permitted under PRC law, at an amount equal to either a) the outstanding loan amount pursuant to the loan agreement owed by
the Nominee Shareholders or b) the lowest permissible purchase price as set by PRC law. Such consideration, if in excess of
the outstanding loan amount, when received by the Nominee Shareholders upon the exercise of the exclusive option is required
to be remitted in full to the Company. Beijing Blue IT cannot declare any profit distributions or grant loans in any form
without the prior written consent of the Company. The Nominee Shareholders of Beijing Blue IT must remit in full any funds
received from Beijing Blue IT to the Company, in the event any distributions are made by the Beijing Blue IT pursuant to any
written consents of the Company. Similar exclusive option agreements were signed by ChinaCache Beijing with Beijing Jingtian
in July 2008, and by Xin Run with ChinaCache Shouming in September 2018.



All the afore-mentioned exclusive option agreements were valid for ten years, and can be renewed for an additional ten years
at the sole discretion of the Company/ ChinaCache Beijing /Xin Run, and the times of such renewals are unlimited. The agreement
amongst the Company and the Nominee Shareholders of Beijing Blue IT has been renewed and will expire on January 20, 2026.
The agreement amongst the ChinaCache and the Nominee Shareholders of Beijing Jingtian has been renewed and will expire on
January 15,2029. The agreement amongst the Xin Run and the Nominee Shareholders of ChinaCache Shouming will be expired on
August 20, 2028.



Exclusive business cooperation agreements



Pursuant to the exclusive business cooperation agreement between ChinaCache Beijing/Xin Run and the VIEs, ChinaCache Beijing/Xin
Run is to provide exclusive business support, technical and consulting services including technical services, business consultations,
access to intellectual property licenses, equipment or property leasing, marketing consultancy, system integration, product
research and development and system maintenance in return for fees in an amount as determined and adjustable at the sole discretion
of ChinaCache Beijing/Xin Run. The service fees charged to Beijing Blue IT are based on methods set forth in the technical
support and service agreement and technical consultation and training agreement, as further discussed below, see "Exclusive
technical support and service agreement/Exclusive technical consultation and training agreement/Equipment leasing agreement".
The service fees charged to Beijing Jingtian/ ChinaCache Shouming is based on 100% of their net income respectively.



All the Exclusive business cooperation agreements were valid for ten years, and ChinaCache Beijing/Xin Run can at its sole
discretion renew at a term of its choice through written confirmation. The agreement between ChinaCache Beijing and Beijing
Blue IT has been renewed and will expire on September 23, 2025. The agreement amongst the ChinaCache and the Nominee Shareholders
of Beijing Jingtian has been renewed and will expire on January 15, 2029. The agreement between Xin Run and ChinaCache Shouming
was signed in September 2018, and will be expired on August 20, 2028.



F-13







CHINACACHE
INTERNATIONAL HOLDINGS LTD.



NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2016, 2017 AND 2018



|1. | ORGANIZATION (CONTINUED)
|-- | ------------------------



Exclusive technical support and service
agreement/Exclusive technical consultation and training agreement/Equipment leasing agreement



Pursuant to these agreements between ChinaCache
Beijing and Beijing Blue IT, ChinaCache Beijing is to provide research and development, technical support, consulting, training
and equipment leasing services in return for fees, which is adjustable at the sole discretion of ChinaCache Beijing. The fees charged
to Blue IT include an annual fixed amount and a variable quarterly amount which is determined based on the following factors:



|· | the number of ChinaCache Beijing’s employees who provided the services pursuant to the business cooperation agreement to Beijing Blue IT during the quarter (the “Quarterly Services”) and the qualifications of the employees;
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|· | the number of hours ChinaCache Beijing’s employees spent to provide the Quarterly Services;
|- | -------------------------------------------------------------------------------------------



|· | operating expenses incurred by ChinaCache Beijing to provide the Quarterly Services;
|- | ------------------------------------------------------------------------------------



|· | nature and value of the Quarterly Services; and
|- | -----------------------------------------------



|· | Beijing Blue IT’s operating revenue for the quarter.
|- | ----------------------------------------------------



The original term of each of these three
agreements was five years running from September 23, 2005, and each of the agreements was renewed in September 2010 for a five-year
term which expired on September 23, 2015. In September 2015, each of such agreements was renewed for an additional five years
to September 23, 2020. The term of the equipment leasing agreement can be extended solely by ChinaCache Beijing by written notice
prior to the expiration of the term, and the extended term shall be determined by ChinaCache Beijing.



The exclusive business cooperation agreement,
exclusive technical support and service agreement, exclusive technical consultation and training agreement, and equipment leasing
agreement are collectively referred to as “Service Agreements”.



Loan agreements



The Company provided a loan facility of
RMB10,000,000 to the Nominee Shareholders of Beijing Blue IT for the purpose of providing capital to Beijing Blue IT to develop
its business. In addition, the Company also agreed to provide unlimited financial support to Beijing Blue IT for its operations
and agree to forego the right to seek repayment in the event Beijing Blue IT is unable to repay such funding. The loan agreement
between the Company and the Nominee Shareholders of Beijing Blue IT was valid for ten years and expired on September 23, 2015.
Such agreement was renewed for an additional ten years to September 23, 2025. Such agreement can be extended for another ten years
upon mutual written consent of the Company and the Nominee Shareholders of Beijing Blue IT. On January 20, 2016, the Nominee Shareholders
of Beijing Blue IT entered into another loan agreement with the Company. Pursuant to this agreement, the Company provided an interest-free
loan facility of RMB10,000,000 to the Nominee Shareholders of Beijing Blue IT for the purpose of subscribing for the capital increase
of Beijing Blue IT. The term of the loan agreement is ten years and expires on January 20, 2026. The term of the loan agreement
may be extended upon mutual written consent of the parties. On December 19, 2016, the Nominee Shareholders of Beijing Blue IT entered
into another loan agreement with the Company. Pursuant to this agreement, the Company provided an interest-free loan facility of
RMB20,000,000 to the Nominee Shareholders of Beijing Blue IT for the purpose of purchasing the increased capital of Beijing Blue
IT. The term of the loan agreement is ten years and expires on December 19, 2026. The term of the loan agreement may be extended
upon mutual written consent of the parties.



F-14







CHINACACHE
INTERNATIONAL HOLDINGS LTD.



NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2016, 2017 AND 2018



|1. | ORGANIZATION (CONTINUED)
|-- | ------------------------



Loan agreements (continued)



ChinaCache Beijing also provided a loan
of RMB8,500,000 to the Nominee Shareholders of Beijing Jingtian for their investment in the registered share capital. In addition,
the Company, through ChinaCache Beijing, agreed to provide unlimited financial support to Beijing Jingtian for their operations
and agree to forego the right to seek repayment in the event this VIE are unable to repay such funding. The loan agreement between
ChinaCache Beijing and the Nominee Shareholders of Beijing Jingtian is valid for ten years and expires on December 3, 2022. Such
agreement can be extended upon mutual written consent of ChinaCache Beijing and the Nominee Shareholders of Beijing Jingtian.



Xin Run also provided a loan of
RMB10,000,000 to the Nominee Shareholders of ChinaCache Shouming for their investment in the registered share capital. In
addition, the Company, through Xin Run, agreed to provide unlimited financial support to ChinaCache Shouming for their
operations and agree to forego the right to seek repayment in the event this VIE are unable to repay such funding. The loan
agreement between Xin Run and the Nominee Shareholders of ChinaCache Shouming is valid for ten years and will expire on
August 20, 2028. Such agreement can be extended upon mutual written consent of Xin Run and the Nominee Shareholders of
ChinaCache Shouming.



Power of attorney agreements



The Nominee Shareholders entered into the
power of attorney agreement whereby they granted an irrevocable proxy of the voting rights underlying their respective equity interests
in the VIEs to ChinaCache Beijing/Xin Run, which includes, but are not limited to, all the shareholders’ rights and voting
rights empowered to the Nominee Shareholders by the company law and the Company’s Article of Association. This agreement
remains continuously valid, as long as the Nominee Shareholders continue to be the shareholders of the VIEs.





Subsequently, ChinaCache Beijing/Xin
Run assigned the power of attorney agreement to ChinaCache Beijing/Xin Run’s shareholders or a party designated by
ChinaCache Beijing and Xin Run’s shareholders, to whom it granted an irrevocable proxy of the voting rights underlying
their respective equity interests in the VIEs, which includes, but are not limited to, all the shareholders’ rights and
voting rights empowered to the Nominee Shareholders by the company law and the Company’s Article of Association.



Share pledge agreements



Pursuant to the share pledge agreement
between ChinaCache Beijing/Xin Run, and the Nominee Shareholders of VIEs, the Nominee Shareholders have pledged all their equity
interests in the VIEs to guarantee the performance of the VIEs’ obligations under the Service Agreements.



If the VIEs breach their respective contractual
obligations under the business cooperation agreements, ChinaCache Beijing and/or Xin Run, as pledgee, will be entitled to certain
rights, including the right to sell the pledged equity interests. The Nominee Shareholders of VIEs agreed not to transfer, sell,
pledge, dispose of or otherwise create any new encumbrance on their equity interests in the VIEs without the prior written consent
of ChinaCache Beijing/Xin Run. This agreement is continuously valid until all payments due under the above VIE agreements have
been fulfilled by the VIEs.



Despite the lack of technical majority
ownership, there exists a parent-subsidiary relationship between the Company and the VIEs through the irrevocable power of attorney
agreements, whereby the Nominee Shareholders effectively assigned all of their voting rights underlying their equity interest in
the VIEs to the Company. In addition, the Company, either directly or through ChinaCache Beijing and/or Xin Run, obtained effective
control over the VIEs through the ability to exercise all the rights of the VIEs’ shareholders pursuant to the share pledge
agreements and the exclusive option agreements. The Company demonstrates its ability and intention to continue to exercise the
ability to absorb substantially all of the expected losses directly through the loan agreements. In addition, the Company also
demonstrates its ability to receive substantially all of the economic benefits of the VIEs through ChinaCache Beijing and/or Xin
Run using the Service Agreements. Thus, the Company is the primary beneficiary of the VIEs and consolidates the VIEs under by Accounting
Standards Codification (“ASC”) Subtopic 810-10 (“ASC 810-10”) “Consolidation: Overall”.



F-15







CHINACACHE
INTERNATIONAL HOLDINGS LTD.



NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2016, 2017 AND 2018



|1. | ORGANIZATION (CONTINUED)
|-- | ------------------------



Legal compliance



Assessing the legal validity and compliance
of these above noted arrangements are a precursor to the Company’s ability to consolidate the results of operations and financial
condition of its VIEs. In the opinion of the Company’s management and PRC counsel, (i) the ownership structure of the VIEs
are in compliance with existing PRC laws and regulations; (ii) each of the currently effective documents under the contractual
arrangements among us, our PRC subsidiary, PRC consolidated variable interest entities and their shareholders governed by PRC law
are valid, binding and enforceable, and will not result in any violation of PRC laws or regulations currently in effect; and (iii)
the Company’s business operations are in compliance with existing PRC laws and regulations in all material respects.



However, there is significant consolidation
judgment due to the existence of substantial uncertainties regarding the interpretation and application of current and future PRC
laws and regulations. Accordingly, the Company cannot be assured that PRC regulatory authorities will not ultimately take a contrary
view to its opinion. If the current ownership structure of the Company and its contractual arrangements with its VIEs is found
to be in violation of any existing or future PRC laws and regulations, the Company may be required to restructure its ownership
structure and operations in the PRC. To the extent that changes to and new PRC laws and regulations prohibit the Company’s
VIE arrangements from also complying with the principles of consolidation, then the Company would no longer be able to consolidate
and therefore would have to deconsolidate the financial position and results of operations of its VIEs. In the opinion of management,
the likelihood of loss and deconsolidation in respect of the Company’s current ownership structure or the contractual arrangements
with its VIEs is remote based on current facts and circumstances.



There was no pledge or collateralization
of the VIEs’ assets. Creditors of the VIEs have no recourse to the general credit of the Company, who is the primary beneficiary
of the VIEs, and such amounts have been parenthetically presented on the face of the consolidated balance sheets. The Consolidated
VIEs operate the data centers and own facilities including data center buildings, leasehold improvements, fiber optic cables, computers
and network equipment, which are recognized in the Company’s consolidated financial statements. They also hold certain value-added
technology licenses, registered copyrights, trademarks and registered domain names, including the official website, which are also
considered as revenue-producing assets. However, none of such assets were recorded on the Company’s consolidated balance
sheets as such assets were all acquired or internally developed with insignificant cost and expensed as incurred. In addition,
the Company also hires data center operation and marketing workforce for its daily operations and such costs are expensed when
incurred. The Company has not provided any financial or other support that it was not previously contractually required to provide
to the VIEs during the periods presented.



F-16







CHINACACHE
INTERNATIONAL HOLDINGS LTD.



NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2016, 2017 AND 2018



|1. | ORGANIZATION (CONTINUED)
|-- | ------------------------



Unrecognized revenue-producing assets
held by the VIEs mainly include licenses, such as the Internet Content Provision License, the Value-Added Telecommunication Services
Operating License, the Online Culture Operating Permit, and trademarks, patents, copy rights and the domain names. However, none
of such assets was recorded on the Company’s consolidated balance sheets as such assets were all acquired or internally
developed with insignificant cost and expensed as incurred. Recognized revenue-producing assets held by the VIEs include core
technology, trademarks and domain names. Unrecognized revenue-producing assets, including customer lists for provision of content
and application delivery total solutions, as well as trademarks, are held by ChinaCache Beijing and/or Xin Run.



The following tables represent the financial
information of the consolidated VIEs as of December 31, 2017 and 2018 and for the years ended December 31, 2016, 2017 and 2018
before eliminating the intercompany balances and transactions between the VIEs and other entities within the Group:





|                                                                                                                                                   |  | As of December 31, |        
|-------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------ | -------
|                                                                                                                                                   |  | 2017               |        
|                                                                                                                                                   |  | RMB                |        
|ASSETS:                                                                                                                                            |  |                    |        
|Current assets:                                                                                                                                    |  |                    |        
|Cash and cash equivalents                                                                                                                          |  |                    | 27,113 
|Restricted cash                                                                                                                                    |  |                    | -      
|Accounts receivable (net of allowance for doubtful accounts of RMB80,612 and RMB80,484 (US$11,706) as of December 31, 2017 and 2018, respectively) |  |                    | 76,359 
|Prepaid expenses and other current assets                                                                                                          |  |                    | 45,007 
|Amounts due from inter-companies(1)                                                                                                                |  |                    | 185,801
|                                                                                                                                                   |  |                    |        
|Total current assets                                                                                                                               |  |                    | 334,280
|                                                                                                                                                   |  |                    |        
|Non-current assets:                                                                                                                                |  |                    |        
|Property and equipment, net                                                                                                                        |  |                    | -      
|Intangible assets, net                                                                                                                             |  |                    | -      
|Long term investments                                                                                                                              |  |                    | 10,103 
|Long term deposits and other non-current assets                                                                                                    |  |                    | 7,345  
|                                                                                                                                                   |  |                    |        
|Total non-current assets                                                                                                                           |  |                    | 17,448 
|                                                                                                                                                   |  |                    |        
|TOTAL ASSETS                                                                                                                                       |  |                    | 351,728







F-17







CHINACACHE
INTERNATIONAL HOLDINGS LTD.



NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2016, 2017 AND 2018



|1. | ORGANIZATION (CONTINUED)
|-- | ------------------------





|                                                 |  | As of December 31, |          
|------------------------------------------------ |  | ------------------ | ---------
|                                                 |  | 2017               |          
|                                                 |  | RMB                |          
|LIABILITIES:                                     |  |                    |          
|Current liabilities:                             |  |                    |          
|Short-term borrowings                            |  |                    | 9,960    
|Accounts payable                                 |  |                    | 353,133  
|Accrued employee benefits                        |  |                    | 32,783   
|Accrued expenses and other current liabilities   |  |                    | 29,728   
|Other payables                                   |  |                    | 15,547   
|Income tax payable                               |  |                    | 10,455   
|Amounts due to inter-companies(1)                |  |                    | 499,375  
|Amounts due to subsidiaries held for sale (2)    |  |                    | 737      
|Current portion of capital lease obligations     |  |                    | 42,735   
|Deferred government grant                        |  |                    | 13,000   
|                                                 |  |                    |          
|Total current liabilities                        |  |                    | 1,007,453
|                                                 |  |                    |          
|Non-current liabilities:                         |  |                    |          
|Non-current portion of capital lease obligations |  |                    | 1,421    
|Deferred government grant                        |  |                    | 6,581    
|                                                 |  |                    |          
|Total non-current liabilities                    |  |                    | 8,002    
|                                                 |  |                    |          
|Total liabilities                                |  |                    | 1,015,455



| | (1) | Amount due from/to inter-companies consist of intercompany receivables/payables to the other companies within the Group.
| | --- | ------------------------------------------------------------------------------------------------------------------------



| | (2) | Information with respect to subsidiaries held for sale is discussed in Note 10.
| | --- | -------------------------------------------------------------------------------





|                       |  | For the Years Ended December 31, |         
|---------------------- |  | -------------------------------- | --------
|                       |  | 2016                             |         
|                       |  | RMB’000                          |         
|Net revenues           |  |                                  |         
|-Third party customers |  |                                  | 658,475 
|-Inter-companies       |  |                                  | 321,161 
|Net (loss)/profit      |  |                                  | (627,544



F-18







CHINACACHE
INTERNATIONAL HOLDINGS LTD.



NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2016, 2017 AND 2018



|2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|-- | ------------------------------------------



|(a) | Basis of presentation
|--- | ---------------------





The accompanying consolidated financial
statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S GAAP”).





|(b) | Going concern
|--- | -------------



The Group experienced net loss of approximately RMB914,253,000, RMB371,166,000 and RMB25,813,000 (US$ 3,754,000) for the years
ended December 31, 2016, 2017 and 2018, respectively, negative cash flows from operations of approximately RMB99,039,000 and
RMB41,659,000(US$ 6,059,000) for the years ended December 31, 2017 and 2018, respectively. As of December 31, 2018, the Group
had net current liabilities of approximately RMB1,004,820,000 (US$ 146,146,000). These conditions raised substantial doubt
about the Group's ability to continue as a going concern.



When preparing the consolidated financial
statements as of December 31, 2018 and for the year then ended, the Group ’s management concluded that a going concern basis
of preparation was appropriate after analyzing the cash flow forecast for the next twelve months through November 2020. In preparing
the cash flow analysis, management took into account of a) the advance of RMB80,000,000 (US$11,636,000) to be received from a
third party buyer for selling certain cloud infrastructure buildings under construction and later another RMB1,150,000,000 (US$167,261,000)
could be received for the completeness of the whole deal, and b) improvement in the net cash inflow from the CDN operations as
the Group plans to locate more new customers from 2020 and control its operating costs and negotiate with vendors for more favorable
payment terms.



If the Group fails to achieve these goals,
the Group may need additional financing to execute its business plan. If additional financing is required, the Group cannot predict
whether this additional financing will be in the form of equity, debt, or another form, and the Group may not be able to obtain
the necessary additional capital on a timely basis, on acceptable terms, or at all. In the event that financing sources are not
available, or that the Group is unsuccessful in increasing its gross profit margin and reducing operating losses, the Group may
be unable to implement its current plans for expansion, repay debt obligations or respond to competitive pressures, any of which
would have a material adverse effect on the Group’s business, prospects, financial condition and results of operations.



Management prepared the consolidated financial
statements assuming the Group will continue as a going concern. However, there is no assurance that the measures above can be achieved
as planned. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
If the Group is unable to continue as a going concern, it may have to liquidate its assets and may receive less than the value
at which those assets are carried on the financial statements.





|(c) | Principles of consolidation
|--- | ---------------------------



The consolidated financial statements include
the financial statements of the Company, its subsidiaries and the VIEs for which the Company is the primary beneficiary. All significant
inter-company transactions and balances between the Company, its subsidiaries and the VIEs are eliminated upon consolidation. Results
of acquired subsidiaries or VIEs are consolidated from the date on which control is transferred to the Company.



|(d) | Use of estimates
|--- | ----------------





The preparation of the consolidated financial
statements in conformity with U.S GAAP requires management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements
and the reported amounts of revenues and expenses during the period. Areas where management uses subjective judgment include, but
are not limited to, estimating the useful lives of long-lived assets and intangible assets, impairment of long-term investments,
long-lived assets and intangible assets, allowance for doubtful accounts, accounting for deferred income taxes, and accounting
for share-based compensation arrangements. The valuation of and accounting for the Group’s financial instruments also require
significant estimates and judgments provided by management. Changes in facts and circumstances may result in revised estimates.
Actual results could differ from those estimates, and as such, differences may be material to the consolidated financial statements.



F-19







CHINACACHE
INTERNATIONAL HOLDINGS LTD.



NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2016, 2017 AND 2018



|2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|-- | ------------------------------------------------------



|(e) | Foreign currency
|--- | ----------------



The functional currency of the Company
and each of its subsidiaries and VIEs is the Renminbi (“RMB”), except for ChinaCache US, CCAL, ChinaCache HK, ChinaCache
IE, and ChinaCache UK, which are the United States dollar (“US$”), US$, Hong Kong dollar (“HK$”), Euro
(“EUR”) and Great Britain Pound (“GBP”) respectively, as determined based on the criteria of Accounting
Standards Codification (“ASC”) 830 (“ASC 830”) “Foreign Currency Matters”. The reporting
currency of the Company is also the RMB. Transactions denominated in foreign currencies are re-measured into the functional currency
at the exchange rates prevailing on the transaction dates. Foreign currency denominated financial assets and liabilities are re-measured
at the balance sheet date exchange rate. Exchange gains and losses are included in foreign exchange gains and losses in the consolidated
statements of comprehensive loss.



|(f) | Convenience translation
|--- | -----------------------



Amounts in US$ are presented for the convenience
of the reader and are translated at the noon buying rate of US$1.00 to RMB6.8755 on December 31, 2018 in the City of New York for
cable transfers of RMB as certified for customs purposes by the Federal Reserve Bank of New York. No representation is made that
the RMB amounts could have been, or could be, converted into US$ at such rate.



|(g) | Cash and cash equivalents
|--- | -------------------------



Cash and cash equivalents consist of cash
on hand and demand deposits placed with banks or other financial institutions which are unrestricted as to withdrawal and use and
have original maturities less than three months.



For the purpose of the consolidated statements
of cash flows, cash and cash equivalents also consist of cash and cash equivalents included in assets held for sale.



|(h) | Restricted Cash
|--- | ---------------



Restricted cash relates to special deposit accounts required
by the Education Commission for the purpose of preventing abusive use of tuition and fees of educational and training institutions,
and cash frozen by a court order during the ongoing legal proceedings.



|(i) | Accounts receivable and allowance for doubtful accounts
|--- | -------------------------------------------------------



Accounts receivable are carried at net
realizable value. An allowance for doubtful accounts is recorded in the period when loss is probable based on an assessment of
specific evidence indicating troubled collection, historical experience, accounts aging and other factors. An accounts receivable
is written off after all collection effort has ceased.



F-20







CHINACACHE
INTERNATIONAL HOLDINGS LTD.



NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2016, 2017 AND 2018



|2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|-- | ------------------------------------------------------



|(j) | Property and equipment
|--- | ----------------------



Property and equipment are stated at cost
and are depreciated using the straight-line method over the estimated useful lives of the assets, as follows:



|Optical Fibers                            | 20 years                                                                  
|----------------------------------------- | --------------------------------------------------------------------------
|Computer equipment                        | 3-15 years                                                                
|Furniture, fixtures and office equipment  | 5 years                                                                   
|Motor vehicles                            | 10 years                                                                  
|Leasehold improvements                    | Over the shorter of lease term or the estimated useful lives of the assets
|Freehold land in United States of America | Indefinite                                                                
|Building                                  | 20-40 years                                                               



Repair and maintenance costs are charged
to expense when incurred, whereas the cost of betterments that extend the useful life of property and equipment are capitalized
as additions to the related assets. Retirement, sale and disposals of assets are recorded by removing the cost and related accumulated
depreciation with any resulting gain or loss reflected in the consolidated statements of comprehensive loss.



Property and equipment that are purchased
or constructed which require a period of time before the assets are ready for their intended use are accounted for as construction-in-progress.
Construction-in-progress is recorded at acquisition cost, including installation costs. Construction-in-progress is transferred
to specific property and equipment accounts and commences depreciation when these assets are ready for their intended use. The
amounts of interest that would be capitalized were immaterial during the years ended December 31, 2016, 2017 and 2018.



F-21







CHINACACHE
INTERNATIONAL HOLDINGS LTD.



NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2016, 2017 AND 2018



|2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|-- | ------------------------------------------------------



|(k) | Land use right
|--- | --------------





The land use right represents the amounts
paid and relevant costs incurred for the right to use land in the PRC and are recorded at purchase cost less accumulated amortization.
Amortization is provided on a straight-line basis over the terms of the respective land use right agreement.



|(l) | Intangible assets
|--- | -----------------



Intangible assets are carried at cost less
accumulated amortization and any impairment. Intangible assets with a finite useful life are amortized using the straight-line
method over the estimated economic life of the intangible assets as follows:



|Purchased software | 5 years
|------------------ | -------



|(m) | Long-lived assets (disposal groups) to be disposed of by sale
|--- | -------------------------------------------------------------



The Group classifies long-lived assets
and disposal groups as held for sale if their carrying amounts will be recovered principally through disposal by sale rather than
through continuing use. Such long-lived assets and disposal groups are measured at the lower of their carrying amount and fair
value less costs to sell. Costs to sell are the incremental costs directly attributable to the sale, excluding the finance costs
and income tax expense.



The criteria for held for sale classification
is regarded as met only when the sale is highly probable and the asset or disposal group is available for immediate sale in its
present condition. Actions required to complete the sale should indicate that it is unlikely that significant changes to the sale
will be made or that the decision to sell will be withdrawn.



Property and equipment, land use right
and intangible assets are not depreciated or amortized once classified as held for sale.



Assets and liabilities classified as held
for sale are presented separately as current items in the consolidated balance sheets.



If circumstances arise that previously
were considered unlikely and, as a result, an entity decides not to sell a long-lived asset or disposal group previously classified
as held for sale, the asset or disposal group would be reclassified as held and used. The Group measures long-lived assets that
are reclassified on an individually basis at the lower of the following:



| | a. | Its carrying amount before the asset or disposal group was classified as held for sale, adjusted for any depreciation or amortization expense that would have been recognized had the asset or disposal group been continuously classified as held and used; and
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b. | Its fair value at the date of the subsequent decision not to sell.
| | -- | ------------------------------------------------------------------





A disposal group qualifies as discontinued
operation if it is a component of the Group that either has been disposed of, or is classified as held for sale, and the disposal
represents a strategic shift that has (or will have) a major effect on the Group’s operations and financial results.



F-22







CHINACACHE
INTERNATIONAL HOLDINGS LTD.



NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2016, 2017 AND 2018



|2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|-- | ------------------------------------------------------



|(n) | Impairment of long-lived assets
|--- | -------------------------------





The Group evaluates its long-lived assets
or asset group, including intangible assets with finite lives, for impairment whenever events or changes in circumstances (such
as a significant adverse change to market conditions that will impact the future use of the assets) indicate that the carrying
amount of an asset or a group of long-lived assets may not be recoverable. When these events occur, the Group evaluates for impairment
by comparing the carrying amount of the assets to future undiscounted net cash flows expected to result from the use of the assets
and their eventual disposition. If the sum of the expected undiscounted cash flow is less than the carrying amount of the assets,
the Group would recognize an impairment loss based on the excess of the carrying amount of the asset group over its fair value.
For long-lived assets held for sale, assets are written down to fair value less cost to sell. Fair value is generally determined
by discounting the cash flows expected to be generated by the assets, when the market prices are not readily available for the
long-lived assets. Impairment charge of RMB399,094,000, RMB21,757,000 and nil was recognized from properties and equipment and
intangible assets for the years ended December 31, 2016, 2017 and 2018, respectively.





|(o) | Investments
|--- | -----------



Available-for-sale investments





Investments not classified as trading or
as held-to-maturity are classified as available-for-sale securities. Such available-for-sale investments are reported at fair value,
with unrealized gains and losses recorded in accumulated other comprehensive loss in shareholders’ deficit. Realized gains
or losses are charged to earnings during the period in which the gain or loss is realized. If the Group determines a decline in
fair value is other-than-temporary, the cost basis of the individual security is written down to its estimated fair value. The
new cost basis will not be adjusted for subsequent recoveries in fair value. Determination of whether declines in value are other-than-temporary
requires significant judgment. Subsequent increases and decreases in the fair value of available-for-sale securities will be included
in other comprehensive loss except for other-than-temporary impairment, which would be charged to current period earnings. Impairment
of available-for-sale investments for the years ended December 31, 2016, 2017 and 2018 were nil, RMB 3,290,000 and nil, respectively.



F-23







CHINACACHE
INTERNATIONAL HOLDINGS LTD.



NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2016, 2017 AND 2018



|2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|-- | ------------------------------------------------------



|(o) | Investments (continued)
|--- | -----------------------



Investment in limited partnerships





Where consolidation is not appropriate,
the Group applies the equity method of accounting that is consistent with ASC 323 “Investments - Equity Method and Joint
Ventures” to limited partnerships in which the Group holds either (a) a five percent or greater interest or (b) less than
a five percent interest when the Group has more than virtually no influence over the operating or financial policies of the limited
partnership. The Group considers certain qualitative factors in assessing whether it has more than virtually no influence for
partnership interests of less than five percent. For investments other than those described in (a) and (b) above, the Group applies
the cost method of accounting.



Cost method investment



Prior to adopting ASC Topic 321 (“ASC
321”), Investments – Equity Securities, on January 1, 2018, the Group carries at cost its investments in investees
that do not have readily determinable values or investments and over which the Group does not have significant influence, in accordance
with ASC subtopic 325-20 (“ASC 325-20”), Investments-Other: Cost Method Investments. The Group carries the investment
at cost and only adjusts for other-than-temporary declines in fair value and distributions of earnings that exceed the Group’s
share of earnings since its investment.



Management regularly evaluates the impairment
of equity investments without readily determinable fair value based on the performance and financial position of the investee as
well as other evidence of market value. Such evaluation includes, but is not limited to, reviewing the investee’s cash position,
recent financing, projected and historical financial performance, cash flow forecasts and financing needs. An impairment loss is
recognized in earnings equal to the excess of the investment’s cost over its fair value at the balance sheet date of the
reporting period for which the assessment is made. The fair value would then become the new cost basis of investment. Impairment
of cost method investment for the years ended December 31, 2016, 2017 and 2018 were RMB18,240,000, RMB400,000 and nil, respectively.



The Group adopted ASC 321 on January 1,
2018 and the cumulative effect of adopting the new standard on opening accumulated deficit is nil. Pursuant to ASC 321, equity
investments, except for those accounted for under the equity method and those that result in consolidation of the investee and
certain other investments, are measured at fair value, and any changes in fair value are recognized in earnings. For equity securities
without readily determinable fair value and do not qualify for the existing practical expedient in ASC Topic 820 (“ASC 820”),
Fair Value Measurements and Disclosures, to estimate fair value using the net asset value per share (or its equivalent) of the
investment, the Group elected to use the measurement alternative to measure those investments at cost, less any impairment, plus
or minus changes resulting from observable price changes in orderly transactions for identical or similar investments of the same
issuer, if any. Equity securities with readily determinable fair value are measured at fair values, and any changes in fair value
are recognized in earnings.



Pursuant to ASC 321, for equity investments
measured at fair value with changes in fair value recorded in earnings, the Group does not assess whether those securities are
impaired. For those equity investments that the Group elects to use the measurement alternative, the Group makes a qualitative
assessment of whether the investment is impaired at each reporting date.  If a qualitative assessment indicates that the
investment is impaired, the entity has to estimate the investment’s fair value in accordance with the principles of ASC
820. If the fair value is less than the investment’s carrying value, the entity has to recognize an impairment loss in net
income equal to the difference between the carrying value and fair value.



F-24







CHINACACHE
INTERNATIONAL HOLDINGS LTD.



NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2016, 2017 AND 2018



|2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|-- | ------------------------------------------------------



|(p) | Fair value of financial instruments
|--- | -----------------------------------





The carrying amounts of financial assets
and liabilities, such as cash and cash equivalents, restricted cash, accounts receivable, other receivables included in prepaid
expenses and other current assets, short-term investments, short term borrowings, accounts payables, accrued expenses, balances
with related parties and other payables, approximate their fair values because of the short-term maturity of these instruments.
The carrying amounts of long-term borrowings approximates its fair value since it bears interest rate which approximates market
interest rates. Available-for-sale investments were initially recognized at cost and subsequently remeasured at the end of each
reporting period with the adjustment in its fair value recognized in accumulated other comprehensive income. The Group, with the
assistance of an independent third-party valuation firm, determined the estimated fair value of its available-for-sale investments
that are recognized in the consolidated financial statements.



|(q) | Revenue recognition
|--- | -------------------



The Group provides a portfolio of content
and application delivery total solutions within its one class of services, such as, web page content services; file transfer services;
rich media streaming services; guaranteed application delivery; managed internet data services; cloud services; content bridging
services; mobile internet solution; and value-added services to its customers that in turn improve the performance, reliability
and scalability of their internet services and applications.



On January 1, 2018, the Group adopted ASU
No. 2014-09, Revenue from Contracts with Customers, (“ASC 606”), which supersedes the revenue recognition requirements
in ASC Topic 605, Revenue Recognition, (“ASC 605”), using the modified retrospective transition method applied to those
contracts which were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented
under ASC 606, while prior period amounts have not been adjusted and continue to be reported in accordance with historic accounting
under ASC 605. The impact of adopting the new revenue standard was not material to consolidated financial statements and there
was no adjustment to beginning retained earnings on January 1, 2018.





Under ASC 606, an entity recognizes revenue
as the Company satisfies a performance obligation when its customer obtains control of promised goods or services, in an amount
that reflects the consideration that the entity expects to receive in exchange for those goods or services. To determine revenue
recognition for arrangements that an entity determines are within the scope of ASC 606, the entity performs the following five
steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine
the transaction price, including variable consideration, if any; (iv) allocate the transaction price to the performance obligations
in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company only applies
the five-step model to contracts when it is probable that the entity will collect the consideration to which it is entitled in
exchange for the goods or services it transfers to the customer.



Once a contract is determined to be within
the scope of ASC 606 at contract inception, the Company reviews the contract to determine which performance obligations it must
deliver and which of these performance obligations are distinct. The Company recognizes revenue based on the amount of the transaction
price that is allocated to each performance obligation when that performance obligation is satisfied or as it is satisfied.



The
Company is a principal and records revenue on a gross basis when the Company is primarily responsible for fulfilling the service,
has discretion in establish pricing and controls the promised service before transferring that service to customers. Otherwise,
the Company records revenue at the net amounts as commissions.



The Group generates revenue from CDN, IDC
and IX services under ASC Topic 606:





CDN Services



CDN is a content distribution network built
on the network. Relying on the edge servers deployed in various regions, through load balancing, content distribution, scheduling
and other functional modules of the central platform, CDN enables users to obtain the required content nearby, reduces network
congestion, and improves user access response speed and hit rate. For revenue stream of CDN, the promised service is to provide
CDN service to the customer, which is qualified as a single distinct performance obligation. The contract price is fixed when entered
into by the both parties. CDN services are typically provided to customers over the contract service period and the related revenues
are recognized on a straight-line basis over the term of the contract. The Group is a principal and records revenue for CDN service
on a gross basis.



IDC Services



IDC services provide cabinet rental and
bandwidth service to customer. The Company provides two promised services, cabinet rental and bandwidth service. According to 606-10-25-19,
though the service is capable of being distinct as the customer can benefit from the good or service on its own, which is evidenced
by the fact that these two services are capable of being separated by its nature. However, the promise to transfer service is not
distinct within the context of the contract and the goal of IDC is to combine traditional internet data center and content delivery.
The reason why the customers renting the Company’s cabinet is not only to benefit from the Company’s physical hosting
location and maintenance service, but also to enjoy the bandwidth service provided by the Company. It is cost efficient to consume
the Company’s bandwidth service rather than to connect directly to bandwidth service provider such as China Unioncom or China
Mobile. Thus these two promise service within the contract of IDC service-cabinet rental and bandwidth service are not distinct
and shall be identified as one performance obligation. Typically IDC services are provided to customers for a fixed amount over
the contract service period and the related revenues are recognized on a straight-line basis over the term of the contract. The
Group is a principal and records revenue for IDC service on a gross basis.



IX Services



IX Services allow networks to interconnect
directly, via the exchange, rather than through one or more third-party networks. The primary advantages of direct interconnection
are cost, latency, and bandwidth. Same as IDC, there are two promised service within the contract, one is to provide a port usage
and the other is to provide bandwidth. However, the service is not distinct within context of the contract as the services provided
is highly integrated. Thus only one performance obligation is indentified for IX revenue stream. The contract price is fixed when
entered into by the both parties. IX services are provided to customers over the contract service period and the related revenues
are recognized on a straight-line basis over the term of the contract. The Group is a principal and records revenue for IX service
on a gross basis.





Effective in September 2012, 6% of value-added
tax, or VAT, replaced the original 5% business tax in Beijing as a result of the PRC government’s pilot VAT reform program,
which applies to all services provided by ChinaCache Beijing and Beijing Jingtian and certain services provided by Beijing Blue
IT.



Effective in June 2014, 6% of VAT replaced
the original 3% business tax in Beijing as a result of the PRC government’s pilot VAT reform program on telecom industry,
which applies to all services provided by Beijing Blue IT.



Disaggregation of revenues







The following table illustrates the disaggregation
of revenue by revenue stream and by timing of revenue recognition for the years ended December 31, 2016, 2017 and 2018:





|             |  | For the Years Ended December 31, |          
|------------ |  | -------------------------------- | ---------
|             |  | 2016                             |          
|             |  |                                  | RMB’000  
|CDN Services |  |                                  | 927,903  
|IDC Services |  |                                  | 85,314   
|IX Services  |  |                                  | 41,018   
|Total        |  |                                  | 1,054,235





The following table provides information
about accounts receivables and contract liabilities from contracts with customers:





|                       |  | Years as of December 31, |        
|---------------------- |  | ------------------------ | -------
|                       |  | 2017                     |        
|                       |  | RMB’000                  |        
|Accounts receivables   |  |                          | 161,043
|Advance from customers |  |                          | 10,361 





F-25







CHINACACHE
INTERNATIONAL HOLDINGS LTD.



NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2016, 2017 AND 2018



|2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|-- | ------------------------------------------------------



|(q) | Cost of revenues
|--- | ----------------



Cost of revenue consists primarily of depreciation
of the Group’s long-lived assets, amortization of acquired intangible assets, maintenance, purchase of bandwidth and other
overhead expenses directly attributable to the provision of content and application delivery total solutions.



All the services provided by the Group
in the PRC, including VIEs are subject to VAT. Such VAT (to the extent that is non-deductible) and other surcharges are accrued
and charged to cost of revenues as the related exclusive business support, technical and consulting services are rendered.



|(r) | Advertising expenditures
|--- | ------------------------



Advertising expenditures are expensed as
incurred. Advertising expenditures, included in sales and marketing expenses, amounted to approximately RMB233,018, RMB 200,000
and nil for the years ended December 31, 2016, 2017 and 2018, respectively.





|(s) | Research and development costs
|--- | ------------------------------



Research and development costs consist
primarily of payroll and related personnel costs for minor routine upgrades and related enhancements to the Group’s services
and network. Costs incurred in the development of the Group’s services are expensed as incurred. To date, the amount of
costs qualifying for capitalization has been insignificant.



|(t) | Government grant
|--- | ----------------



Government grant are provided by the relevant
PRC municipal government authorities to subsidize the cost of certain research and development projects. The amount of such government
grant is determined solely at the discretion of the relevant government authorities and there is no assurance that the Group will
continue to receive these government grant in the future. Government grant are recognized when it is probable that the Group will
comply with the conditions attached to them, and the grant are received. When the grant relates to an expense item, it is recognized
as deferred government grant and released to the consolidated statements of comprehensive loss over the period necessary to match
the grant on a systematic basis to the costs that it is intended to compensate, as other operating income. Where the grant relates
to an asset, it is recognized as deferred government grant and released to the consolidated statements of comprehensive loss in
equal amounts over the expected useful life of the related asset, when operational, as other operating income.



Government grant received by the Group
also consist of unrestricted grant which are received on an unsolicited and unconditional basis to support the growth of the Group
and do not relate to the Group 's operating activities. Unrestricted grant is classified as non-operating income and recorded
in other income on the consolidated statements of comprehensive loss upon receipt.



F-26







CHINACACHE
INTERNATIONAL HOLDINGS LTD.



NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2016, 2017 AND 2018



|2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|-- | ------------------------------------------------------



|(u) | Leases
|--- | ------





Leases are classified at the inception
date as either a capital lease or an operating lease. The Group did not enter into any leases whereby it is the lessor for any
of the periods presented. The Group leases equipment under capital lease agreements. As the lessee, a lease is a capital lease
if any of the following conditions exists: a) ownership is transferred to the lessee by the end of the lease term, b) there is
a bargain purchase option, c) the lease term is at least 75% of the property’s estimated remaining economic life, or d) the
present value of the minimum lease payments at the beginning of the lease term is 90% or more of the fair value of the leased property
to the lessor at the inception date. A lease involving integral equipment is a capital lease only if condition (a) or (b) exists.
A capital lease is accounted for as if there was an acquisition of an asset and an incurrence of an obligation at the inception
of the lease.



All other leases are accounted for as
operating leases wherein rental payments are expensed on a straight-line basis over the periods of their respective leases. The
Group leases office space under operating lease agreements. Certain of the lease agreements contain rent holidays. Rent holidays
are considered in determining the straight-line rent expense to be recorded over the lease term. The lease term begins on the
date of initial possession of the lease property for purposes of recognizing lease expense on a straight-line basis over the term
of the lease. The excess of rent expense and rent paid, as the case may be for respective leases, is recorded as deferred rental
included in the prepaid expenses and other current assets in the consolidated balance sheets.



|(v) | Income taxes
|--- | ------------



The Group follows the liability method
in accounting for income taxes in accordance to ASC topic 740 “Taxation” (“ASC 740”), Income Taxes. Under
this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax
bases of assets and liabilities using enacted tax rates that will be in effect in the period in which the differences are expected
to reverse. The Group records a valuation allowance against deferred tax assets if, based on the weight of available evidence,
it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized.



The Group adopted ASC 740 to account for
uncertainty in income taxes. ASC 740 clarifies the accounting for uncertainty in income taxes by prescribing the recognition threshold
a tax position is required to meet before being recognized in the consolidated financial statements. The Group has elected to
classify interest and penalties related to unrecognized tax benefits, if and when required, as part of “interest expense”
and “other expenses,” respectively, in the consolidated statements of comprehensive loss.



|(w) | Share-based compensation
|--- | ------------------------





Share options and restricted share units
award granted to employees are accounted for under ASC 718 “Compensation
 – Stock Compensation”. In accordance with ASC 718,
the Company determines whether share options or restricted share units award should be classified and accounted for as liability
or equity award. All grants of share options and restricted share units award to employees classified as equity award are recognized
in the financial statements over their requisite service periods based on their grant date fair values.



F-27







CHINACACHE
INTERNATIONAL HOLDINGS LTD.



NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2016, 2017 AND 2018



|2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|-- | ------------------------------------------------------



|(w) | Share-based compensation (continued)
|--- | ------------------------------------



The Company has elected to recognize compensation
expenses using the accelerated method for its share options and restricted share units granted. For restricted share awards granted
with performance conditions, the Company commences recognition of the related compensation expense if it is probable the defined
performance condition will be met. To the extent that the Company determines that it is probable that a different number of share-based
awards will vest depending on the outcome of the performance condition, the cumulative effect of the change in estimate is recognized
in the period of change. Forfeitures are recognized when they occur.





The Company, with the assistance of an
independent valuation firm, determined the estimated fair values of the share options granted to employees and non-employees using
the binomial option pricing model.





On January 1, 2018, the Company adopted
ASU 2017-09“Compensation – Stock Compensation: Scope of Modification Accounting”, which provides clarity
and reduces both (1) diversity in practice and (2) cost and complexity when applying the guidance in ASC 718 to a change to the
terms or conditions of a share-based payment award. The adoption of ASU 2017-09 did not have a material impact on the Company’s
consolidated financial statements.



|(x) | Loss per share
|--- | --------------



In accordance with ASC 260, “Earnings
per Share”,basic loss per share is computed by dividing net loss attributable to ordinary shareholders by the weighted
average number of ordinary shares outstanding during the year. Diluted loss per share is calculated by dividing net loss attributable
to ordinary shareholders as adjusted for the effect of dilutive ordinary equivalent shares, if any, by the weighted average number
of ordinary and dilutive ordinary equivalent shares outstanding during the period. Ordinary equivalent shares consist of the ordinary
shares issuable upon the conversion of the share options, using the treasury stock method. Ordinary share equivalents are excluded
from the computation of diluted per share if their effects would be anti-dilutive.



|(y) | Comprehensive loss
|--- | ------------------





Comprehensive loss is defined as the decrease
in equity of the Group during a period from transactions and other events and circumstances excluding transactions resulting from
investments by owners and distributions to owners. Comprehensive loss is reported in the consolidated statements of comprehensive
loss. Accumulated other comprehensive income of the Group includes foreign currency translation adjustments related to ChinaCache
US, CCAL, ChinaCache HK and ChinaCache IE, and ChinaCache UK whose functional currency are US$, US$, HK$, EUR and GBP respectively,
and the change in fair value of available-for-sale investments (Note 12) and their corresponding deferred tax impact, if any.



F-28







CHINACACHE
INTERNATIONAL HOLDINGS LTD.



NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2016, 2017 AND 2018



|2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|-- | ------------------------------------------------------



|(z) | Segment reporting
|--- | -----------------









The Group follows ASC 280, “Segment
Reporting.” The Group’s Chief Executive Officer or chief operating decision-maker reviews the consolidated financial
results when making decisions about allocating resources and assessing the performance of the Group as a whole and hence, the Group
has only one reportable segment. The Group operates and manages its business as a single segment through the provision of a single
class of global services for accelerating and improving the delivery of content and applications over the Internet. As the Group’s
long-lived assets are substantially all located in the PRC, revenues are derived from each subsidiary and most of the services
are provided in PRC, no geographical segments are presented.



|(aa) | Employee benefits
|---- | -----------------



The full-time employees of the Company’s
PRC subsidiaries are entitled to staff welfare benefits including medical care, housing fund, unemployment insurance and pension
benefits, which are government mandated defined contribution plans. These entities are required to accrue for these benefits based
on certain percentages of the employees’ respective salaries, subject to certain ceilings, in accordance with the relevant
PRC regulations, and make cash contributions to the state-sponsored plans out of the amounts accrued. The total amounts for such
employee benefits, which were expensed as incurred, were RMB53,669,000, RMB44,416,000 and RMB29,288,000 (US$4,260,000) for the
years ended December 31, 2016, 2017 and 2018, respectively.



|(bb) | Share repurchase program
|---- | ------------------------



Pursuant to Board of Directors' resolutions
on December 18, 2014 ("2014 Share Repurchase Plan"), August 24, 2015 ("August 2015 Share Repurchase Plan") and December 28, 2015
("December 2015 Share Repurchase Plan"), the Company's management is authorized to repurchase up to US$10 million, US$6 million
and US$5 million of the Company's ADSs (each ADSs represent 16 ordinary shares), respectively. Each of the share repurchase plan
is effective for 12 months.



During the year ended December 31, 2016,
the Company had repurchased 166,802 ADSs amounting to US$1,185,000 (equivalent to RMB7,659,000) and 691,364 ADSs amounting to US$4,912,000
(equivalent to RMB31,743,000) under the August 2015 Share Repurchase Plan and the December 2015 Share Repurchase Plan, respectively.
As of December 31, 2016, all the aforementioned repurchase plans have been completed. During the year ended December 31, 2017 and
2018, there were nil and nil shares were repurchased, respectively.



The Group accounted for those shares repurchase
as treasury stock at cost in accordance to ASC Subtopic 505-30 (“ASC 505-30”), “Treasury Stock”,
and is shown separately in the shareholders’ deficit as the Group has not yet decided on the ultimate disposition of those
ADSs acquired. When the Group uses the treasury stock to settle the exercise of share options and restricted share units vested,
the difference between the proceeds received upon settlement and the repurchase price is debited into accumulated deficit. When
the Group decides to retire the treasury stock, the difference between the par value and the repurchase price is debited into accumulated
deficit.





F-29







CHINACACHE
INTERNATIONAL HOLDINGS LTD.



NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2016, 2017 AND 2018



|2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|-- | ------------------------------------------------------



|(cc) | Recent accounting pronouncement
|---- | -------------------------------



In February 2016, the FASB issued ASU
No. 2016-02 (“ASU 2016-02”), Leases (Topic 842), which requires a lessee to recognize a lease liability and
a right-of-use asset for all leases with lease terms of more than 12 months. This guidance is effective for annual reporting periods
beginning after December 15, 2018, including interim periods within those years, and early adoption is permitted. In January 2018,
the FASB issued ASU No. 2018-01, Leases: Land Easement Practical Expedient, (“ASU 2018-01”), which provides an optional
transition practical expedient for land easements. The effective date of the transition requirements for the amendment is the
same as the effective date and transition requirements in ASU 2016-02. Subsequently, the FASB issued ASU No. 2018-10 Codification
Improvements to Topic 842, Leases, (“ASU 2018-10”), which clarifies certain aspects of the guidance issued in ASU
2016-02; and ASU No. 2018-11, Leases (Topic 842): Targeted Improvements, (“ASU 2018-11”), which provides an additional
transition method and a practical expedient for separating components of a contract for lessors. ASU 2016-02 modifies existing
guidance for off balance sheet treatment of lessees’ operating leases by requiring lessees to recognize lease assets and
lease liabilities. Under ASU 2016-02, lessor accounting is largely unchanged. ASU 2018-10 clarifies certain provisions and correct
unintended applications of the guidance such as the application of implicit rate, lessee reassessment of lease classification,
and certain transition adjustments that should be recognized to earnings rather than to stockholders’ equity. ASU 2018-11
provides an alternative transition method and practical expedient for separating contract components for the adoption of Topic
842. ASU 2018-11, ASU 2018-10, and ASU 2016-02 (collectively, “the new lease standards”) are effective for public
business entities for annual reporting periods and interim periods within those years beginning after December 15, 2018. These
new lease standards become effective for the Group on January 1, 2019. The Group will adopt this standard effective January 1,
2019 using the modified retrospective method, and chose to apply the new standard as of the effective date and will not restate
comparable period. Consequently, all of the Group’s operating lease commitments were recognized as lease liabilities, with
corresponding right-of-use assets, based on the present value of the remaining minimum rental payments under current leasing standards
for existing operating leases. The Group will elect the package of practical expedients permitted under the transition guidance
within the new standard, which permits the Group not to reassess under the new standard its prior conclusions about lease identification,
lease classification and initial direct costs. The Group’s operating leases mainly related to offices and data center space
will be subject to ASU 2016-02 and right-of-use assets and lease liabilities will be recognized on the Group’s consolidated
balance sheet. The Group currently believes the most significant change will be related to the recognition of right-of-use assets
and lease liabilities on the Group’s balance sheet for operating leases. The Group does not expect any material impact on
net assets and the consolidated statement of comprehensive loss as a result of adopting the new standards.



F-30







CHINACACHE
INTERNATIONAL HOLDINGS LTD.



NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2016, 2017 AND 2018



|2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|-- | ------------------------------------------------------



|(cc) | Recent accounting pronouncement (continued)
|---- | -------------------------------------------



In June 2016, the FASB issued ASU No.
2016-13 (“ASU 2016-13”), Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses
on Financial Instruments. ASU 2016-13 changes the impairment model for most financial assets and certain other instruments.
The standard will replace “incurred loss” approach with an “expected loss” model for instruments measured
at amortized cost. For available-for-sale debt securities, entities will be required to record allowances rather than reduce the
carrying amount, as they do today under the other-than-temporary impairment model. The standard is effective for public business
entities for annual periods beginning after December 15, 2019, and interim periods therein. Early adoption is permitted. The Group
is currently evaluating the impact of adopting this standard on its consolidated financial statements.



In June 2018, the FASB issued ASU No.
2018-07 (“ASU 2018-07”), Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based
Payment Accounting. The update was issued as part of the FASB simplification initiative and requires an entity to apply the requirements
of Topic 718 to nonemployee awards, with certain exceptions, which were previously accounted under Topic 505. The amendments in
this update are effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods
within that fiscal year. Early adoption is permitted, but no earlier than an entity’s adoption date of Topic 606. The Group
will evaluate any future grants to non-employees under the updated guidance once effective. The Group is currently evaluating
the impact of adopting this standard on its consolidated financial statements.



F-31







CHINACACHE
INTERNATIONAL HOLDINGS LTD.



NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2016, 2017 AND 2018



|2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|-- | ------------------------------------------------------



|(cc) | Recent accounting pronouncement (continued)
|---- | -------------------------------------------



In August 2018, the FASB issued ASU No.
2018-13 (“ASU 2018-13”), Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure
Requirements for Fair Value Measurement. The amendments in the issued update remove, modify and add disclosure requirements on
fair value measurements in Topic 820 Fair Value Measurements. The amendments in this update are effective for all entities for
fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Certain amendments in the update
should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption.
All other amendments should be applied retrospectively to all periods presented. Early adoption is permitted upon issuance of
this update. An entity is permitted to early adopt any removed or modified disclosures upon issuance of this update and delay
adoption of the additional disclosures until their effective date. The Group is currently evaluating the impact of adopting this
standard on its consolidated financial statements.



In October 2018, the FASB issued ASU No.
2018-17 (“ASU 2018-17”), Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable
Interest Entities. The updated guidance requires entities to consider indirect interests held through related parties under common
control on a proportional basis rather than as the equivalent of a direct interest in its entirety when determining whether a
decision-making fee is a variable interest. The amendments in this update are effective for public business entities for fiscal
years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. These
amendments should be applied retrospectively with a cumulative-effect adjustment to retained earnings at the beginning of the
earliest period presented. The Group is currently evaluating the impact of adopting this standard on its consolidated financial
statements.



Recently issued ASUs by the FASB, except
for the ones mentioned above, have no material impact on the Group’s consolidated results of operations or financial position.



|(dd) | Comparative information
|---- | -----------------------



Certain items in prior years’ consolidated
financial statements have been reclassified to conform to the current year’s presentation to facilitate comparison.





F-32







CHINACACHE
INTERNATIONAL HOLDINGS LTD.



NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2016, 2017 AND 2018



|3. | Concentration of risk
|-- | ---------------------



|(a) | Credit risk
|--- | -----------



Financial instruments that potentially
subject the Group to significant concentrations of credit risk consist primarily of cash and cash equivalents, accounts receivable,
other receivables included in prepaid expenses and other current assets, available-for-sale investments and amounts due from related
parties. As of December 31, 2017 and 2018, RMB91,588,000 and RMB32,097,000 (US$4,668,000), respectively, were deposited with major
financial institutions located in the PRC, RMB2,129,000 and RMB8,811,000 (US$1,282,000), respectively, were deposited with in
the major financial institutions located in the Hong Kong Special Administration Region, RMB253,000 and nil, respectively were
held in major financial institutions located in Europe, RMB3,078,000 and RMB2,076,000 (US$302,000), respectively, were deposited
with major financial institutions located in the UK and RMB9,661,000 and RMB3,646,000 (US$530,000), respectively were held in
major financial institutions in the United States of America. Management believes that these financial institutions are of high
credit quality and continually monitor the credit worthiness of these financial institutions. Historically, deposits in Chinese
banks are secure due to the state policy on protecting depositors’ interests. However, China promulgated a new Bankruptcy
Law in August 2006 that came into effect on June 1, 2007, which contains a separate article expressly stating that the State
Council may promulgate implementation measures for the bankruptcy of Chinese banks based on the Bankruptcy Law. Under the new
Bankruptcy Law, a Chinese bank may go into bankruptcy. In addition, since China’s concession to the World Trade Organization,
foreign banks have been gradually permitted to operate in China and have been significant competitors against Chinese banks in
many aspects, especially since the opening of the Renminbi business to foreign banks in late 2006. Therefore, the risk of bankruptcy
of those Chinese banks in which the Group has deposits has increased. In the event of bankruptcy of one of the banks which holds
the Group’s deposits, it is unlikely to claim its deposits back in full since it is unlikely to be classified as a secured
creditor based on PRC laws.



|(b) | Business, supplier, customer, and economic risk
|--- | -----------------------------------------------



The Group participates in a relatively
young and dynamic industry that is heavily reliant and also susceptible to complementary and/or competitive technological advancements.
The Group believes that changes in any of the following areas could have a material adverse effect on the Group’s future
financial position, results of operations or cash flows:



|(i) | Business Risk - Third parties may develop technological or business model innovations that address content
delivery requirements in a manner that is, or is perceived to be, equivalent or superior to the Group’s services. If competitors
introduce new products or services that compete with, or surpass the quality, price or performance of the Group’s services,
the Group may be unable to renew its agreements with existing customers or attract new customers at the prices and levels that
allow the Group to generate reasonable rates of return on its investment.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(ii) | Supplier Risk - Changes in key telecommunications resources suppliers and certain strategic relationships
with telecom carriers. The Group’s operations are dependent upon communications capacity provided by the third-party telecom
carriers and third-party controlled end-user access network. There can be no assurance that the Group are adequately prepared for
unexpected increases in bandwidth demands by its customers. The communications capacity the Group has leased may become unavailable
for a variety of reasons, such as physical interruption, technical difficulties, contractual disputes, or the financial health
of its third-party providers. Any failure of these network providers to provide the capacity the Group requires may result in a
reduction in, or interruption of, service to its customers. For the years ended on December 31, 2016, 2017 and 2018, 82%, 81% and
52% of bandwidth resources in term of costs were leased from the top five major PRC suppliers.
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-33







CHINACACHE
INTERNATIONAL HOLDINGS LTD.



NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2016, 2017 AND 2018



|3. | Concentration of risk(CONTINUED)
|-- | --------------------------------



|(b) | Business, supplier, customer, and economic risk (continued)
|--- | -----------------------------------------------------------



|(iii) | Customer Risk - Revenue concentration on certain customers. The success of the Group’s business
going forward will rely in part on Group’s ability to continue to obtain and expand business from existing customers while
also attracting new customers. Although the Group has a diversified base of customers covering its one class of services, such
as, web page content services; file transfer services; rich media streaming service; guaranteed application services; managed internet
data services; cloud services; content bridging services; mobile internet solution; and value-added services, the Group does depend
on a limited number of customers for a substantial portion of their revenue, and the loss of, or a significant shortfall in demand
from, these customers could significantly harm the Group’s results of operations. Details of the revenues for customers accounting
for 10% or more of total revenues are as follows:
|----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





|           |  | Years as of December 31, |        
|---------- |  | ------------------------ | -------
|           |  | 2016                     |        
|           |  | RMB’000                  |        
|Customer A |  |                          | 346,764
|Customer B |  |                          | 94,974 
|Customer C |  |                          | *      



Details of the accounts receivables
for customers accounting for 10% or more of total accounts receivable are as follows:





|           |  | Years as of December 31, |       
|---------- |  | ------------------------ | ------
|           |  | 2017                     |       
|           |  | RMB’000                  |       
|Customer A |  |                          | 73,442



*not greater than 10%



|(iv) | Emerging or unproven business models of customers. Many of the Group’s existing and potential customers
are pursuing emerging or unproven business models which, if unsuccessful, could lead to a substantial decline in demand for the
Group’s services, and the Group’s growth and prospects may be materially and adversely affected.
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(v) | Political, economic and social uncertainties. The Group’s operations could be adversely affected
by significant political, economic and social uncertainties in the PRC. Although the PRC government has been pursuing economic
reform policies for more than 20 years, no assurance can be given that the PRC government will continue to pursue such policies
or that such policies may not be significantly altered, especially in the event of a change in leadership, social or political
disruption or unforeseen circumstances affecting the PRC political, economic and social conditions. There is also no guarantee
that the PRC government’s pursuit of economic reforms will be consistent or effective.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-34







CHINACACHE
INTERNATIONAL HOLDINGS LTD.



NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2016, 2017 AND 2018



|3. | Concentration of risk(CONTINUED)
|-- | --------------------------------



|(b) | Business, supplier, customer, and economic risk (continued)
|--- | -----------------------------------------------------------



|(vi) | Regulatory restrictions. The applicable PRC laws, rules and regulations currently prohibit foreign ownership
of companies that provide content and application delivery services. Accordingly, both the Company’s subsidiaries, ChinaCache
Beijing and Xin Run are currently ineligible to apply for the required licenses for providing content and application delivery
services in China. As a result, the Company operates its business in the PRC through its VIEs, which holds the licenses and permits
required to provide content and application delivery services in the PRC. The PRC Government may also choose at any time to block
access to the Company’s customers’ content which could also materially impact the Company’s ability to generate
revenue.
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(c) | Currency convertibility risk
|--- | ----------------------------





Half of the Group’s businesses
are transacted in RMB, which is not freely convertible into foreign currencies. On January 1, 1994, the PRC government abolished
the dual rate system and introduced a single rate of exchange as quoted daily by the People’s Bank of China. However, the
unification of the exchange rates does not imply the convertibility of RMB into US$ or other foreign currencies. All foreign exchange
transactions continue to take place either through the People’s Bank of China or other banks authorized to buy and sell foreign
currencies at the exchange rates quoted by the People’s Bank of China. Approval of foreign currency payments by the People’s
Bank of China or other institutions requires submitting a payment application form together with suppliers’ invoices, shipping
documents and signed contracts.





|(d) | Foreign currency exchange rate risk
|--- | -----------------------------------



From July 21, 2005, the RMB is
permitted to fluctuate within a narrow and managed band against a basket of certain foreign currencies. The depreciation/(appreciation)
of the RMB against US$ was approximately 7.2%, (6.3)% and 5.7% in the years ended December 31, 2016, 2017 and 2018, respectively.
Most of revenues and costs of the Company are denominated in RMB, while a portion of cash and cash equivalents, short-term financial
assets and investments denominated in U.S. dollars. Any significant revaluation of RMB may materially and adversely affect
the Company’s cash flows, revenues, earnings and financial position, and the value of, and any dividends payable on, the
ADS in US$.





F-35







CHINACACHE
INTERNATIONAL HOLDINGS LTD.



NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2016, 2017 AND 2018



|4. | CASH, Cash equivalents and restricted cash
|-- | ------------------------------------------



Cash, cash equivalents and restricted
cash consist of the following:





|                                                             |  | December 31, |        
|------------------------------------------------------------ |  | ------------ | -------
|                                                             |  | 2017         |        
|                                                             |  |              | RMB’000
|Cash and cash equivalents on the consolidated balance sheets |  |              | 106,708



|                |  | December 31, |        
|--------------- |  | ------------ | -------
|                |  | 2017         |        
|                |  |              | RMB’000
|Restricted cash |  |              | -      





As of December 31, 2018, restricted cash
represent the cash frozen by court order for the ongoing legal proceedings.



|5. | ACCOUNTS RECEIVABLE, NET
|-- | ------------------------



Accounts receivable and allowance for
doubtful accounts consist of the following:



|                                      |  | December 31, |        
|------------------------------------- |  | ------------ | -------
|                                      |  | 2017         |        
|                                      |  | RMB’000      |        
|Accounts receivable                   |  |              | 242,344
|Less: allowance for doubtful accounts |  |              | (81,301
|                                      |  |              |        
|                                      |  |              | 161,043



As of December 31, 2017 and 2018, all accounts
receivable were due from third party customers.



An analysis of the allowance for doubtful
accounts is as follows:



|                               |  | December 31, |       
|------------------------------ |  | ------------ | ------
|                               |  | 2017         |       
|                               |  | RMB’000      |       
|Balance, beginning of year     |  |              | 63,921
|Additions for the current year |  |              | 18,432
|Recovery                       |  |              | (1,052
|                               |  |              |       
|Balance, end of year           |  |              | 81,301



The carrying amount of RMB12,989,000 accounts
receivable was pledged by the Company to secure capital lease (Note 17) granted to the Group as of December 31, 2018.





F-36







CHINACACHE
INTERNATIONAL HOLDINGS LTD.



NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2016, 2017 AND 2018





|6. | Prepaid expenses and other current assets, NET
|-- | ----------------------------------------------





Prepaid expenses and other current assets
consist of the following:





|                                              |  | December 31, |        
|--------------------------------------------- |  | ------------ | -------
|                                              |  | 2017         |        
|                                              |  |              | RMB’000
|                                              |  |              |        
|Prepaid expense for bandwidth and servers (i) |  |              | 4,029  
|Staff field advances                          |  |              | 525    
|Capital lease deposits                        |  |              | 29,224 
|Prepaid commission (ii)                       |  |              | 99,700 
|Prepaid service fee                           |  |              | 30,200 
|Other deposit and receivables(iii)            |  |              | 35,933 
|Prepaid income tax                            |  |              | 13,534 
|Prepaid expense and other current assets      |  |              | 213,145
|Provision of doubtful accounts                |  |              | (161   
|Prepaid expense and other current assets, net |  |              | 212,984





|i) | Prepaid expense for bandwidth and servers represents the unamortized portion of prepayments made to the Group’s telecom operators and certain technology companies, who provide the Group with access to bandwidth and network servers.
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|ii) | The balance represents the prepaid commission to an agent for the pending sales of certain cloud infrastructure that were held for sale (Note 10).
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------



|iii) | Other deposit and receivables represent deductible VAT, and other deposits for operation.
|---- | -----------------------------------------------------------------------------------------



|7. | PROPERTY AND EQUIPMENT, NET
|-- | ---------------------------



Property and equipment, including those
held under capital leases, consists of the following:



|                               |  | December 31, |          
|------------------------------ |  | ------------ | ---------
|                               |  | 2017         |          
|                               |  |              | RMB’000  
|                               |  |              |          
|At cost:                       |  |              |          
|Optical fibers                 |  |              | 13,100   
|Computer equipment             |  |              | 928,293  
|Furniture and fixtures         |  |              | 10,612   
|Leasehold improvements         |  |              | 18,769   
|Motor vehicles                 |  |              | 10,157   
|Buildings                      |  |              | 58,150   
|Freehold land                  |  |              | 4,275    
|                               |  |              |          
|                               |  |              | 1,043,356
|                               |  |              |          
|Less: accumulated depreciation |  |              | (587,032 
|Less: impairment               |  |              | (402,998 
|                               |  |              |          
|                               |  |              | 53,326   



F-37







CHINACACHE
INTERNATIONAL HOLDINGS LTD.



NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2016, 2017 AND 2018



|7. | PROPERTY AND EQUIPMENT, NET(CONTINUED)
|-- | --------------------------------------



For the years ended December 31, 2016, 2017 and 2018, depreciation
expenses were RMB155,225,000, RMB9,145,000 and RMB12,017,000 (US$1,747,000), respectively, and were included in the following
captions:



|                                    |  | For the years ended December 31, |        
|----------------------------------- |  | -------------------------------- | -------
|                                    |  | 2016                             |        
|                                    |  | RMB’000                          |        
|                                    |  |                                  |        
|Cost of revenue                     |  |                                  | 130,724
|Sales and marketing expenses        |  |                                  | 138    
|General and administrative expenses |  |                                  | 11,799 
|Research and development expenses   |  |                                  | 12,564 
|                                    |  |                                  |        
|                                    |  |                                  | 155,225



The Group accounted for the leases of
certain computer equipment and optical fibers as capital leases that transfer to the Group substantially all the benefits and
risks incidental to the ownership of assets. The carrying amounts of the Group’s property and equipment held under capital
leases at respective balance sheet dates were as follows:



|                               |  | December 31, |         
|------------------------------ |  | ------------ | --------
|                               |  | 2017         |         
|                               |  | RMB’000      |         
|At Cost:                       |  |              |         
|Optical fibers                 |  |              | 13,100  
|Computer equipment             |  |              | 228,489 
|                               |  |              | 241,589 
|                               |  |              |         
|Less: accumulated depreciation |  |              | (75,427 
|Less: impairment               |  |              | (166,162
|                               |  |              |         
|                               |  |              | -       



Depreciation of property and equipment
held under capital leases were nil, nil and RMB217,000 for the years ended December 31, 2016, 2017 and 2018, respectively.



The carrying amount of buildings mortgaged
by the Group to secure borrowings (Note 13) and capital lease obligation (Note 17) granted to the Group as of December 31, 2017
and 2018 was nil and RMB298,232,000, respectively.



Subsequently, all the buildings were froze sealed up by the court due to the lawsuits by the end of November, 2019 (Note 27).



F-38







CHINACACHE
INTERNATIONAL HOLDINGS LTD.



NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2016, 2017 AND 2018



|8. | INTANGIBLE ASSETS
|-- | -----------------





The Group’s intangible assets represents
software purchased, the following table presents the movement of Group’s intangible assets from January 1, 2017 to December
31, 2018:



|                                                 |  | December 31, |       
|------------------------------------------------ |  | ------------ | ------
|                                                 |  | 2017         |       
|                                                 |  | RMB’000      |       
|                                                 |  |              |       
|Purchased software, net - beginning              |  |              | -     
|Addition                                         |  |              | 993   
|Reclassified from assets held for sale (Note 10) |  |              | 4,258 
|Less: amortization                               |  |              | (1,216
|Less: impairment                                 |  |              | (3,870
|                                                 |  |              |       
|                                                 |  |              | 165   





The Group recognized RMB11,728,000, RMB3,870,000
and nil impairment loss for the years ended December 31, 2016, 2017 and 2018, respectively.



The estimated annual amortization expense
for each of the five succeeding fiscal years is as follow:



|                                  |  | Amortization |   
|--------------------------------- |  | ------------ | --
|                                  |  | RMB’000      |   
|For the years ending December 31, |  |              |   
|2019                              |  |              | 64
|2020                              |  |              | 59
|2021                              |  |              | 8 
|2022                              |  |              | 8 
|2023                              |  |              | 4 



|9. | LAND USE RIGHT
|-- | --------------



|                               |  | December 31 |       
|------------------------------ |  | ----------- | ------
|                               |  | 2017        |       
|                               |  | RMB’000     |       
|Land use right                 |  |             | 34,057
|Less: accumulated amortization |  |             | (1,155
|                               |  |             | 32,902



In 2013, the Group paid RMB51,678,000 to
acquire a land use right of approximately 39,000 square meters of land in Beijing Shunyi District, on which the Group developed
a cloud infrastructure. According to the land use right contract, the Company has a 50-year use right over the land, which is used
as the basis for amortization.



In December 2015, the land use right was
reclassified and included in assets held for sale therefore no amortization was recognized since then. In December 2017, land use
right, excluding land use right held by Beijing Shuo Ge and Beijing Zhao Du, was transferred out from the assets held for sale
and re-designated as assets held for use (Note 10). The Group re-measured the amortization expense that would have been recognized
had the land use right been continuously classified as held and used. Amortization expense for land use right for the years ended
December 31, 2016, 2017 and 2018 was nil, RMB1,155,000 and RMB730,000 (US$106,000), respectively.



The carrying amount of land use right pledged
by the Group to secure borrowings (Note 13) granted to the Group as of December 31, 2017 and 2018 was RMB32,902,000 and RMB32,172,000,
respectively.



Subsequently, all the land use right (excluding land use right held by Beijing Shuo Ge and Beijing Zhao Du) were frozen sealed
up by the court due to the lawsuits (Note 27) on August 1, 2019.



F-39







CHINACACHE
INTERNATIONAL HOLDINGS LTD.



NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2016, 2017 AND 2018



|10. | Assets held for sale / Liabilities held for sale
|--- | ------------------------------------------------





On November 27, 2015, the Group entered
into definitive sale and purchase agreements to dispose of 60% equity interest in its subsidiary, Xin Run, to three parties, including
a 38% interest to a group owned by the Founders (the “2015 Agreement”). Xin Run owns and operates ChinaCache's Atecsys
Cloud Data Center ("Atecsys") and is expected to build China's first Internet Exchange. As a result, assets and liabilities
subject to the purchase and sale agreements were classified as held for sale in the Company’s December 31, 2015 consolidated
balance sheet.



On March 6, 2017, the Group entered into
a new definitive agreement to sell 79% of its equity interest in Xin Run to a group of investors for RMB221 million in cash before
fees and expenses, including 52.67% interest to two companies owned by the Founders (the “2017 Agreement”). The completion
of the transaction was subject to customary closing conditions, including obtaining requisite governmental registration. The transaction
was approved by the Board of Directors of the Company, acting upon the unanimous recommendation of its audit committee, consisting
of independent and disinterested directors. The Group terminated the 2015 Agreement.



Assets and liabilities classified as held
for sale are required to be recorded at the lower of carrying value or fair value less any costs to sell. As of December 31, 2015
and 2016, the carrying value of Xin Run’s net assets were less than fair value less costs to sell, and accordingly, no adjustment
to the asset value was necessary. Xin Run did not meet the criteria to be classified as discontinued operations because it did
not comprise a major component of the Group’s operations.



On December 28, 2017, the Board of Directors
approved to terminate the 2017 Agreement. As a result, all of the assets and liabilities of Xin Run and its subsidiaries were reclassified
as held and used as of December 31, 2017, with the exception of two subsidiaries under Xin Run, Beijing Shuo Ge and Beijing Zhao
Du, which continued to qualify as assets held for sale under existing arrangements with buyers. On March 23, 2018, the Group finalized
the termination agreement with relevant parties.



On December 30, 2014, Xin Run entered into
a definitive sale and leaseback agreement with Beijing Federation of Supply and Marketing Cooperatives (“BFSMC”), according
to which Xin Run should hand over to BFSMC two IDC buildings (5# and 6#) by September 2015 for a consideration of RMB 960 million
through transferring the ownership of the two IDC buildings from Xin Run to Zhao Du, and selling all Zhao Du’s equity interests
to BFSMC. On February 6, 2015, Xin Run entered into a supplementary agreement with BFSMC and one subsidiary of BFSMC, according
to which the subsidiary became the beneficiary of the original arrangement and took over the rights and obligations from February
27, 2015. Consideration of RMB 672 million was received from the subsidiary by September 2015.



In April 2014, Xin Run entered into a framework
agreement with a third-party company, pursuant to which Xin Run agreed to sell the IDC building 3# to it. In August 2014, the Company
established Shuo Ge. The consideration of RMB 325 million was received from the third-party company by January 2015. In July 2015,
Xin Run sold the total CIP along with related land use right of IDC building 3# to Shuo Ge. On December 29, 2017, Xin Run entered
into an equity transfer agreement with the third-party company, under which Xin Run would transfer 100% equity interest in Shuo
Ge to it before September 2018.

As of today, Zhao Du is still in the process
of litigation proceeding with the buyer (Note 26). The disposal of Shuo Ge was completed subsequently in May 2019 (Note 27).



F-40







CHINACACHE
INTERNATIONAL HOLDINGS LTD.



NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2016, 2017 AND 2018



|10. | Assets held for sale / Liabilities held for sale (continued)
|--- | ------------------------------------------------------------



The major classes of assets and liabilities
held for sale were as follows:





|                                               |  | December 31, |        
|---------------------------------------------- |  | ------------ | -------
|                                               |  | 2017         |        
|                                               |  | RMB’000      |        
|Cash and cash equivalents                      |  |              | 1      
|Prepaid expenses and other current assets      |  |              | 15,478 
|Amounts due from the Company                   |  |              | 737    
|Property and equipment (i)                     |  |              | 550,606
|Land use right, net                            |  |              | 14,909 
|Assets held for sale                           |  |              | 581,731
|Accrued expenses and other current liabilities |  |              | 1,863  
|Amounts due to the Company                     |  |              | 2,025  
|Liabilities held for sale                      |  |              | 3,888  







The operating results of the subsidiaries
held for sale during the three years ended December 31, 2018 that are not presented within discontinued operations are summarized
as follow:



|                         |  | For the years ended December 31, |         
|------------------------ |  | -------------------------------- | --------
|                         |  | 2016                             |         
|                         |  | RMB’000                          |         
|                         |  |                                  |         
|Net revenue              |  |                                  | 2,442   
|Loss before income taxes |  |                                  | (107,399



Loss before income taxes attributable to the non-controlling interest for the years ended December 31, 2016, 2017 and 2018 was RMB1,074,000, RMB30,000 and RMB36,000 (US$5,000), respectively.



F-41







CHINACACHE
INTERNATIONAL HOLDINGS LTD.



NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2016, 2017 AND 2018



|11. | CLOUD INFRASTRUCTURE CONSTRUCTION IN PROGRESS
|--- | ---------------------------------------------





|                                              |  | December 31,
|--------------------------------------------- |  | ------------
|                                              |  | 2017        
|                                              |  | RMB’000     
|Cloud infrastructure construction in progress |  |             











As of December 31, 2016, the Group capitalized
direct costs of RMB977,194,000 that were directly attributable to the development of the cloud infrastructure. During the year
ended December 31, 2017, additional costs of RMB35,841,000 were capitalized for buildings completed during the year. Total costs
incurred directly attributable to the development of the cloud infrastructure was RMB1,013,035,000 as of December 31, 2017. Of
which, RMB550,606,000 capitalized for completed buildings held under Beijing Shuo Ge and Beijing Zhao Du was transferred to assets
held for sale property and equipment whereas costs of other completed buildings in the aggregate of RMB39,927,000 and costs of
other completed equipment in the aggregate of RMB6,150,000 were transferred to property and equipment. The remaining RMB416,352,000
capitalized to date for construction in progress was re-designated as cloud infrastructure construction in progress as of December
31, 2017.



During the year ended December 31, 2018,
additional costs of RMB332,906,000 (US$48,419,000) was capitalized for buildings completed. Costs of other completed buildings
in the aggregate of RMB265,532,000 (US$38,620,000) and costs of other completed equipment s in the aggregate of RMB104,078,000
(US$15,137,000) were transferred to property and equipment; RMB91,128,000 (US$13,254,000) was transferred to other non-current
assets. As of December 31, 2018, the remaining RMB289,280,000 (US$42,074,000) capitalized to date for construction in progress
was re-designated as cloud infrastructure construction in progress.



The cloud infrastructure was sealed up
by court subsequently (Note 27).



The carrying amount of cloud infrastructure
construction in progress pledged by the Group to secure borrowings (Note 13) granted to the Group as of December 31, 2017 and 2018
was RMB416,352,000 and RMB289,2800,000, respectively.







F-42







CHINACACHE
INTERNATIONAL HOLDINGS LTD.



NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2016, 2017 AND 2018



|12. | LONG TERM INVESTMENTS
|--- | ---------------------



Long term investments consisted of the
following:





|                                                                                             |  | December 31, |        
|-------------------------------------------------------------------------------------------- |  | ------------ | -------
|                                                                                             |  | 2017         |        
|                                                                                             |  | RMB’000      |        
|Cost method investments:                                                                     |  |              |        
|PRC Fund                                                                                     |  |              | 10,103 
|United States Fund                                                                           |  |              | 20,045 
|Investment in Flashapp Inc. (“Flashapp”)                                                     |  |              | 12,240 
|Investment in ordinary shares of an unlisted company in PRC (“Investee A”)                   |  |              | 6,000  
|Investment in preferred shares of an unlisted company in PRC (“Investee B”)                  |  |              | 400    
|                                                                                             |  |              |        
|Available-for-sale investments:                                                              |  |              |        
|Investment in convertible borrowings of an unlisted company in Cayman Islands (“Investee D”) |  |              | 3,973  
|                                                                                             |  |              |        
|Less: accumulated impairment                                                                 |  |              | (22,613
|Total                                                                                        |  |              | 30,148 





Cost method investments



In 2017, the Group made an additional RMB361,000
(US$53,000) investment in the United States Fund. As of December 31, 2017 and 2018, the Group had made an accumulated investment
in the United States Fund of RMB20,045,000. Given that the Group holds less than five percent interest in each fund, the Group
has accounted for such investments using the cost method.



In 2011, the Company made a 9-year term
investment in the PRC Fund in the amount of RMB 10,103,000. Given that the Company holds less than five percent interest in each
fund, the Company has accounted for such investments using the cost method.



In 2013, the Group entered into an agreement
with Flashapp, a private company in Cayman Island to purchase 13,971,428 Series A Preferred Shares for RMB12,240,000. The Company
has the contingent redemption right on or after five years from the issuance date to request redemption of all its Series A Preferred
Shares holders, at a redemption price equal to 120% of its original issuance price. The Board of Directors of Flashapp shall consist
of five persons, where the Company, as a majority of Series A Preferred Shares may appoint two directors. The Group, through the
directors appointed, has the ability to exercise significant influence over the operating and financial policies of Flashapp and
hence, Flashapp is a related party of the Group. However, the Series A Preferred Shares are not in substance common stock and therefore
the Group has accounted for the investment as cost method investment carried at cost. In 2016, the Group believed that there was
a decline in value that was other than temporary and recorded RMB12,240,000 in “impairment of long-term investments”
in the consolidated statement of comprehensive loss.



On August 25, 2014, the Group entered into
an agreement with an unlisted company in the PRC (“Investee A”) to acquire 6.25% interest for RMB6,000,000. The Company
has accounted for the investment as cost method investments carried at cost. In 2016, the Company believed that there was a decline
in value that was other than temporary, and recorded RMB6,000,000 in “impairment of long-term investments” in the consolidated
statement of comprehensive loss.





Investment in investee B was fully impaired in 2017.



Available for sale investments



On February 19, 2014, the Company entered
into an agreement with a private company in Cayman Islands (“Investee D”) to issue a convertible loan of RMB3,068,000
at an interest rate of US prime rate plus 2% for 2 years. The Company has the right to request conversion of all its convertible
loan upon Investee D’s successful Series A financing, at a price less than 25% of its Series A financing price. The Company
has accounted for the investment in the convertible loan as an available for sale investment where such investment will be carried
at fair value, with unrealized gains and losses reported as other comprehensive income/(loss) in the consolidated statements of
comprehensive loss until realized. In 2016, the Company agreed to extend the terms of the convertible loan to August 19, 2017 and
expected to exercise its conversion option upon the completion of Series A financing. In 2017, the Group believed that there was
a decline in value that was other than temporary, and recorded RMB3,290,000 (US$506,000) in “impairment of long-term investments”
in the consolidated statement of comprehensive loss.



F-43







CHINACACHE
INTERNATIONAL HOLDINGS LTD.



NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2016, 2017 AND 2018



|13. | BORROWINGS
|--- | ----------



|(a) | Short-term borrowings
|--- | ---------------------



Short-term borrowings consisted of the
following:



|                |  | December 31, |      
|--------------- |  | ------------ | -----
|                |  | 2017         |      
|                |  | RMB’000      |      
|                |  |              |      
|Bank loan       |  |              | 9,960
|Other borrowing |  |              | -    
|                |  |              |      
|Total           |  |              | 9,960



On November 14, 2017, the Group entered into a short-term loan agreement with Bank A in PRC for credit loan of RMB9,960,000,
with an interest rate of 7.395% per annum and a maturity term of twelve months. The loan was fully repaid in 2018.





On October 11 and December 29, 2018, the
Group entered into short-term loan agreements with Third-party A in PRC for credit loan of RMB11,850,000 (US$1,723,000) and RMB500,000
(US$73,000) with an interest rate of 12% per annum and a maturity term of four months and fifteen days, respectively. Mr. Wang
Song, the Co-Founder and ex-director of the Company, provided general guarantee for this short-term borrowing.



On December 29, 2018, the Group entered into short-term loan agreement with Third-party B in PRC for credit loan
of RMB1,500,000 (US$218,000) with an interest rate of 12% per annum and a maturity term of one month.



All the short-term borrowings as of December 31, 2018 were fully repaid on due date subsequently.



F-44







CHINACACHE
INTERNATIONAL HOLDINGS LTD.



NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2016, 2017 AND 2018



|13. | BORROWINGS (CONTINUED)
|--- | ----------------------



|(b) | Long-term borrowings
|--- | --------------------



|                          |  | December 31, |        
|------------------------- |  | ------------ | -------
|                          |  | 2017         |        
|                          |  |              | RMB’000
|                          |  |              |        
|Long-term bank loan       |  |              | 209,598
|Long-term other borrowing |  |              | 34,622 
|                          |  |              |        
|Less: current portion     |  |              | (32,642
|                          |  |              |        
|Total                     |  |              | 211,578







On October 30, 2017, the Group obtained
a three-year credit facility of RMB240,000,000 from Bank B in PRC, at 8.00004% per annum. The credit facility includes RMB150,000,000
for working capital and RMB90,000,000 for capital expenditure. The credit facility is secured by Xin Run’s assets, while
Mr. Wang Song and Ms. Kou Xiaohong, the Founders and ex-directors of the Company, takes joint-and-several liability for the repayment
of the loan. The Company paid RMB2,400,000 to a third-party agent in December 2017 as borrowing cost to obtained the facility.
On November 7, 2017, the first RMB150,000,000 was drawn down and used as working capital. On December 13, 2017, the second RMB23,000,000
was drawn down and used for capital expenditure. On January 30, 2018, the third RMB27,000,000 (US$3,927,000) was drawn down and
used for capital expenditure. The borrowing cost paid for the facility was allocated to the draw down and the remaining facility
on a pro rata basis. Borrowing costs allocated to the actual draw down were presented as deductions of the loan carrying value.
The borrowing costs are recognized over the lives of the term loans as interest expense, using the effective interest rate method.



On December 21, 2017, the Group obtained
a five-year credit facility of RMB220,000,000 from Bank C in PRC with a floating rate of 30% above PBOC benchmark interest rate.
The credit facility is for working capital and is secured by Xin Run’s assets, while Mr. Wang Song and Ms. Kou Xiaohong,
the Founders and ex-directors of the Company, take joint-and-several liability for the repayment of the loan. The Group paid RMB6,775,000
as borrowing cost to obtained the facility. On December 21, 2017, the first RMB40,000,000 was drawn down and used as working capital.
On January 15, 2018, the second RMB50,000,000 (US$7,272,000) was drawn down and used as working capital. On May 14, 2018, the third
RMB20,000,000 (US$2,909,000) was drawn down and used as working capital. On June 15, 2018, the fourth RMB90,000,000 (US$13,090,000)
was drawn down and used as working capital. The borrowing cost paid for the facility was allocated to the draw down and the remaining
facility on a pro rata basis. Borrowing cost allocated to the actual draw down was presented as deduction of the loan carrying
value. The borrowing cost is recognized over the life of the term loan as interest expense using the effective interest rate method.



The above loan from Bank B and C are secured
by Xin Run’s building and corresponding land use right in the net carrying value of RMB RMB449,254,000 as of December 31,
2017 and RMB 567,384,000 as of December 31, 2018. (see Note 7,9 and 11)



On September 7, 2017, the Company obtained
a three-year borrowing of RMB38,784,000 from financial institution A in the PRC, at 4.900% per annum. The borrowing is secured
by Xin Run’s assets. The Company paid RMB1,000,000 as borrowing cost recognized over the borrowing term as interest expense
using the effective interest rate method. The loan was fully repaid in 2018.



Future installment payment schedule according to the borrowing
agreements are as follows:





|      |  | December 31, 2018 |        
|----- |  | ----------------- | -------
|      |  |                   | RMB’000
|      |  |                   |        
|2019  |  |                   | 80,000 
|2020  |  |                   | 200,000
|2021  |  |                   | 80,000 
|2022  |  |                   | 20,000 
|      |  |                   |        
|Total |  |                   | 380,000







As the Group failed to repay the loan installment
according to the payment schedule, assets pledged were sealed up both Bank B and C required the Group to repay the remaining loan
(Note 27) on October 28 and October 30, 2019, respectively. The Group was still in the progress negotiating with Bank B and C for
new payment schedule.





F-45







CHINACACHE
INTERNATIONAL HOLDINGS LTD.



NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2016, 2017 AND 2018



|14. | ACCRUED EXPENSES AND OTHER CURRENT liabilitieS
|--- | ----------------------------------------------



Accrued expenses and other current liabilities consisted of the following:





|                       |  | December 31, |       
|---------------------- |  | ------------ | ------
|                       |  | 2017         |       
|                       |  | RMB’000      |       
|                       |  |              |       
|Advance from customers |  |              | 10,361
|Other accrued expenses |  |              | 26,876
|Other tax payables     |  |              | 2,045 
|                       |  |              |       
|                       |  |              | 39,282





Other
accrued expenses represent accrue rental and overdue penalty interest (see Note 27).



|15. | OTHER PAYABLES
|--- | --------------









Other payables consisted of the following:



|                                                                     |  | December 31, |          
|-------------------------------------------------------------------- |  | ------------ | ---------
|                                                                     |  | 2017         |          
|                                                                     |  | RMB’000      |          
|                                                                     |  |              |          
|Payables for purchase of property and equipment                      |  |              | 257,375  
|Consideration received for disposal of Zhao Du and Shuo Ge (Note 10) |  |              | 997,000  
|Other Payables                                                       |  |              | -        
|                                                                     |  |              |          
|                                                                     |  |              | 1,254,375



|16. | DEFERRED GOVERNMENT GRANT
|--- | -------------------------



The following table presents the Group’s deferred government grant as of the respective balance
sheet dates:





|                                                 |  | December 31, |        
|------------------------------------------------ |  | ------------ | -------
|                                                 |  | 2017         |        
|                                                 |  |              | RMB’000
|                                                 |  |              |        
|Beginning balance                                |  |              | 24,208 
|Received during the year                         |  |              | -      
|Recognized as income during the year             |  |              | (4,628 
|                                                 |  |              |        
|Total balance of deferred government grant       |  |              | 19,580 
|Less: current portion                            |  |              | 13,000 
|                                                 |  |              |        
|Balance of non-current deferred government grant |  |              | 6,580  





F-46







CHINACACHE
INTERNATIONAL HOLDINGS LTD.



NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2016, 2017 AND 2018



|16. | DEFERRED GOVERNMENT GRANT (CONTINUED)
|--- | -------------------------------------



During the years ended December 31, 2016, 2017 and 2018, a certain government grants complied with the
attached conditions. Hence, relevant government grants of RMB12,041,000, RMB4,628,000 and RMB3,534,000 (US$514,000) respectively,
were recognized in the consolidated statements of comprehensive loss in other operating income during the years ended December
31, 2016, 2017 and 2018, respectively.



|17. | CAPITAL LEASE OBLIGATIONS
|--- | -------------------------





Certain computer equipment and optical
fibers were acquired through capital leases entered into by the Group. Future minimum lease payments under non-cancellable capital
lease arrangements are as follows:



|                                                 |  | December 31, |        
|------------------------------------------------ |  | ------------ | -------
|                                                 |  | 2017         |        
|                                                 |  |              | RMB’000
|                                                 |  |              |        
|2018                                             |  |              | 43,587 
|2019                                             |  |              | 1,439  
|2020                                             |  |              | -      
|2021                                             |  |              | -      
|                                                 |  |              |        
|Total minimum lease payment                      |  |              | 45,026 
|Less: amount representing interest               |  |              | (870   
|                                                 |  |              |        
|Present value of remaining minimum lease payment |  |              | 44,156 
|Less: current portion                            |  |              | 42,735 
|Non current portion                              |  |              | 1,421  



F-47







CHINACACHE
INTERNATIONAL HOLDINGS LTD.



NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2016, 2017 AND 2018



|18. | SHARE-BASED COMPENSATION
|--- | ------------------------



In order to attract and retain the best
available personnel, provide additional incentives to employees, directors and consultants and promote the success of the Group’s
business, the Group adopted a stock option plan in 2007 (the “2007 Plan”). Under the 2007 Plan, the Group may grant
options to its employees, directors and consultants to purchase an aggregate of no more than 14,000,000 ordinary shares of the
Group, subject to different vesting requirements. The 2007 Plan was approved by the Board of Directors and shareholders of the
Group on October 16, 2008. On May 28, 2009, the Group adopted a new stock option plan (the “2008 Plan”) which allows
the Group to grant options to its employees, directors and consultants to purchase an aggregate of no more than 8,600,000 ordinary
shares of the Group, subject to different vesting requirements. On May 20, 2010, the Group adopted a new stock option plan (the
 “2010 Plan”) which allows the Group to grant options to its employees, directors and consultants to purchase an aggregate
of no more than 9,000,000 ordinary shares of the Group, subject to different vesting requirements. On June 20, 2011, the Group
adopted a new stock option plan (the “2011 Plan”) which allows the Group to grant options to its employees, directors
and consultants to purchase an aggregate of no more than 22,000,000 ordinary shares of the Group, subject to different vesting
requirements. On July 2, 2012, the Group approved amendments to the 2011 Plan which provide, in effect, that the maximum aggregate
number of ordinary shares that may be issued pursuant to all awards (the “Award Pool”) under the 2011 Plan shall be
equal to five percent of the total issued and outstanding ordinary shares as of July 2, 2012; provided that, the ordinary shares
reserved in the Award Pool shall be increased automatically if and whenever the unissued ordinary shares reserved in the Award
Pool accounts for less than one percent of the total then issued and outstanding ordinary shares, as a result of which increase
the unused ordinary shares reserved in the Award Pool immediately after each such increase shall equal to five percent of the
then issued and outstanding ordinary shares.



The 2007 Plan, 2008 Plan, 2010 Plan and
2011 Plan (collectively, the “Option Plans”) will be administered by the Compensation Committee as set forth in the
Option Plans (the “Plan Administrator”). The board of directors of a committee designated by the board will administer
the plan to execute option agreements with those persons selected by the Plan Administrator and issue ordinary shares of the Group
upon exercise of any options so granted pursuant to the terms of an option agreement.



The 2007 and 2008 Option Plans contain
the same terms and conditions. All options granted under the 2007 and 2008 Option Plans have a term of nine years from the option
grant date and have two different vesting schedules: 1) vest 100% on the stated vesting commencement date in the grantee’s
option agreement; or 2) vest 50% on the second anniversary of the stated vesting commencement date and 25% on the third and fourth
anniversaries of the stated vesting commencement date. All options granted under the 2010 Option Plan have a term of seven to ten
years from the option grant date and have three different vesting schedules: 1) vest 100% on the stated vesting commencement date
in the grantee’s option agreement; 2) vest 25% on the first, second, third and fourth anniversaries of the stated vesting
commencement date; or 3) vest 25% on the first anniversary of the stated vesting commencement date and 6.25% every quarter for
each of the second, third and fourth anniversaries of the stated vesting commencement date. All options granted under the 2011
Option Plan have a term of six to ten years from the option grant date and have four different vesting schedules: 1) vest 100%
on the stated vesting commencement date in the grantee’s option agreement; or 2) vest 25% on the first, second, third and
fourth anniversaries of the stated vesting commencement date; or 3) vest 25% on the first anniversary of the stated vesting commencement
date and 6.25% every quarter for each of the second, third and fourth anniversaries of the stated vesting commencement date; or
4) vest one-third on the first, second and third anniversaries of the stated vesting commencement date.



F-48







CHINACACHE
INTERNATIONAL HOLDINGS LTD.



NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2016, 2017 AND 2018



|18. | SHARE-BASED COMPENSATION (CONTINUED)
|--- | ------------------------------------





During the years ended December 31, 2016,
2017 and 2018, the Group granted nil, 15,080,000 and 17,600,000 options, respectively, to a combination of employees and directors
of the Group at exercise prices ranging from US$0.06 to US$0.07. As of December 31, 2018, options to purchase 37,369,229 of ordinary
shares were outstanding and options to purchase 16,222,688 ordinary shares were available for future grant under the Option Plans.



The binomial option pricing model was applied
in determining the estimated fair value of the options granted to employees and non-employees. The model requires the input of
highly subjective assumptions including the estimated expected stock price volatility, the expected price multiple at which employees
are likely to exercise share options. For expected volatilities, the Group has made reference to the historical price volatilities
of ordinary shares of several comparable companies in the same industry as the Group. The risk-free rate for periods within the
contractual life of the option is based on the U.S. Treasury Bills yield in effect at the time of grant.



|(a) | Options Granted to Employees
|--- | ----------------------------



The following table summarized the Group’s employee share option activity under the Option Plans:





|                                                 |  | Number of  options |            |   | Weighted  average  Exercise  price |  |       | Weighted  average  remaining  contractual  term |  |  | Aggregate  intrinsic  value | 
|------------------------------------------------ |  | ------------------ | ---------- | - | ---------------------------------- |  | ----- | ----------------------------------------------- |  |  | --------------------------- | 
|                                                 |  |                    |            |   |                                    |  | (US$) |                                                 |  |  | (Years)                     | 
|                                                 |  |                    |            |   |                                    |  |       |                                                 |  |  |                             | 
|Outstanding, January 1, 2017                     |  |                    | 10,938,077 |   |                                    |  | 0.25  |                                                 |  |  | 4.59                        | 
|                                                 |  |                    |            |   |                                    |  |       |                                                 |  |  |                             | 
|Vested and expected to vest at January 1, 2017   |  |                    | 10,938,077 |   |                                    |  | 0.25  |                                                 |  |  | 4.59                        | 
|                                                 |  |                    |            |   |                                    |  |       |                                                 |  |  |                             | 
|Granted                                          |  |                    | 15,080,000 |   |                                    |  | 0.07  |                                                 |  |  |                             | 
|Forfeited                                        |  |                    | (904,720   | ) |                                    |  | 0.27  |                                                 |  |  |                             | 
|                                                 |  |                    |            |   |                                    |  |       |                                                 |  |  |                             | 
|Outstanding, December 31, 2017                   |  |                    | 25,113,357 |   |                                    |  | 0.14  |                                                 |  |  | 7.26                        | 
|                                                 |  |                    |            |   |                                    |  |       |                                                 |  |  |                             | 
|Vested and expected to vest at December 31, 2017 |  |                    | 25,113,357 |   |                                    |  | 0.14  |                                                 |  |  | 7.26                        | 
|                                                 |  |                    |            |   |                                    |  |       |                                                 |  |  |                             | 
|Exercisable at December 31, 2017                 |  |                    | 16,918,975 |   |                                    |  | 0.22  |                                                 |  |  | 6.14                        | 
|                                                 |  |                    |            |   |                                    |  |       |                                                 |  |  |                             | 
|Granted                                          |  |                    | 17,600,000 |   |                                    |  | 0.06  |                                                 |  |  |                             | 
|Exercised                                        |  |                    | (1,096,896 | ) |                                    |  | 0.08  |                                                 |  |  |                             | 
|Forfeited                                        |  |                    | (4,247,232 | ) |                                    |  | 0.06  |                                                 |  |  |                             | 
|                                                 |  |                    |            |   |                                    |  |       |                                                 |  |  |                             | 
|Outstanding, December 31, 2018                   |  |                    | 37,369,229 |   |                                    |  | 0.11  |                                                 |  |  | -                           | 
|                                                 |  |                    |            |   |                                    |  |       |                                                 |  |  |                             | 
|Vested and expected to vest at December 31, 2018 |  |                    | 37,369,229 |   |                                    |  | 0.11  |                                                 |  |  |                             | 
|                                                 |  |                    |            |   |                                    |  |       |                                                 |  |  |                             | 
|Exercisable at December 31, 2018                 |  |                    | 16,222,688 |   |                                    |  | 0.17  |                                                 |  |  | 5.93                        | 



F-49







CHINACACHE
INTERNATIONAL HOLDINGS LTD.



NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2016, 2017 AND 2018



|18. | SHARE-BASED COMPENSATION (CONTINUED)
|--- | ------------------------------------



|(a) | Options Granted to Employees (continued)
|--- | ----------------------------------------



The aggregated intrinsic value of share
options outstanding and exercisable at December 31, 2018 was calculated based on the closing price of the Group’s ordinary
shares on December 31, 2018 of US$1.06 per ADS (equivalent to US$0.07 per ordinary share). The total intrinsic value of share options
exercised during the years ended December 31, 2016, 2017 and 2018 was RMB3,132,000, nil and RMB502,000, respectively.



As of December 31, 2018, there was RMB2,849,000 (US$414,000) of unrecognized share-based compensation
cost related to share options issued to employees, which are expected to be recognized following the graded vesting method over
the remaining vesting periods of different tranches, ranging from 2 years to 4 years.



The Group calculated the estimated fair
value of the options granted in 2018 using the binomial option pricing model with the following assumptions:



|                                            |  | 2018 |        
|------------------------------------------- |  | ---- | -------
|                                            |  |      |        
|Suboptimal exercise factor                  |  |      | 2.2-2.8
|Risk-free interest rates                    |  |      | 2.78   
|Expected volatility                         |  |      | 88     
|Expected dividend yield                     |  |      | 0      
|Weighted average fair value of share option |  |      | 0.0469 



The total fair value of options vested
during the years ended December 31, 2016, 2017 and 2018 was RMB590,000, RMB2,054,000, and RMB 4,013,000 (US$584,000), respectively.



|(b) | Restricted Share Units Award Granted to Employees
|--- | -------------------------------------------------



On December 23, 2014, the Group issued 11,265,520
units of restricted share units to the employees and directors under the 2011 Plan. The restricted share units shall become vested
in each year of 2014, 2015, 2016 and 2017, respectively.



On December 11, 2015, the Group issued
40,106,656 units of restricted share units to the employees and directors under the 2011 Plan. The restricted share units shall
become vested in each year of 2016, 2017 and 2018, respectively.



On December 13, 2017, the Group issued
16,813,344 units of restricted share units to the employees and directors under the 2011 Plan. The restricted share units shall
become vested in each year of 2018, 2019 and 2020, respectively.



On April 9, 2018, the Group issued 480,000
units of restricted share units to the employees and directors under the 2011 Plan. The restricted share units shall become vested
in each year of 2018, 2019 and 2020, respectively.



As of December 31, 2018, there was RMB300,000 (US$44,000) of
unrecognized share-based compensation cost, related to unvested restricted share units which is expected to be recognized over
a weighted-average period of 2 years.



F-50







CHINACACHE
INTERNATIONAL HOLDINGS LTD.



NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2016, 2017 AND 2018



|18. | SHARE-BASED COMPENSATION (CONTINUED)
|--- | ------------------------------------



|(b) | Restricted Share Units Award Granted to Employees (continued)
|--- | -------------------------------------------------------------



The following table summarized the Group’s
restricted shares award issued under the 2011 Plan:





|                                      |  | Number of
ordinary shares |             |   | Weighted average 
grant date fair value | 
|------------------------------------- |  | ------------------------- | ----------- | - | --------------------------------------- | 
|                                      |  |                           |             |   | (US$)                                   | 
|Outstanding, January 1, 2017          |  |                           | 7,901,127   |   |                                         | 
|                                      |  |                           |             |   |                                         | 
|Expected to vest at January 1, 2017   |  |                           | 7,901,127   |   |                                         | 
|                                      |  |                           |             |   |                                         | 
|Granted                               |  |                           | 16,813,344  |   |                                         | 
|Vested                                |  |                           | (20,555,835 | ) |                                         | 
|Forfeited                             |  |                           | (1,935,168  | ) |                                         | 
|                                      |  |                           |             |   |                                         | 
|Outstanding, December 31, 2017        |  |                           | 2,223,468   |   |                                         | 
|                                      |  |                           |             |   |                                         | 
|Expected to vest at December 31, 2017 |  |                           | 2,223,468   |   |                                         | 
|                                      |  |                           |             |   |                                         | 
|Granted                               |  |                           | 480,000     |   |                                         | 
|Vested                                |  |                           | (1,503,212  | ) |                                         | 
|Forfeited                             |  |                           | (560,256    | ) |                                         | 
|                                      |  |                           |             |   |                                         | 
|Outstanding, December 31, 2018        |  |                           | 640,000     |   |                                         | 
|                                      |  |                           |             |   |                                         | 
|Expected to vest at December 31, 2018 |  |                           | 640,000     |   |                                         | 







The cost of the restricted share units
is determined using the fair value (determined based on the fair market value of the Group’s ordinary shares on the grant
date, or if the grant date is not a trading day then the immediately preceding trading date), net of expected forfeitures. The
aggregate fair value of the unvested restricted share units for the years ended December 31, 2017 and 2018 was RMB1,187,448(US$183,000)
and RMB300,000 (US$44,000), respectively. The total fair value of restricted share units vested during the years ended December
31, 2016, 2017 and 2018 was RMB84,435,000, RMB8,882,000 and RMB144,000 (US$21,000), respectively.



|(c) | Options Granted to Non-employees
|--- | --------------------------------



The aggregated intrinsic value of share
options outstanding and exercisable at December 31, 2018 was calculated based on the closing price of the Group’s ordinary
shares on December 31, 2018 of US$1.06 per ADS (equivalent to US$0.07 per ordinary share). As of December 31, 2018, the Company
had options issued to non-employees outstanding to purchase an aggregate of nil shares with an exercise price below the closing
price of the Company’s ordinary shares on December 31, 2018, resulting in an aggregate intrinsic value of nil.



F-51







CHINACACHE
INTERNATIONAL HOLDINGS LTD.



NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2016, 2017 AND 2018



|18. | SHARE-BASED COMPENSATION (CONTINUED)
|--- | ------------------------------------



On December 31, 2016, the Group granted
restricted share units of 454,912 shares to a former employee, which were immediately vested. The fair market value of the Group’s
ordinary shares on the grant date of RMB1,320,000(US$194,000) was recorded in the “general and administrative expense”
in the consolidated statement of comprehensive loss.



A total
compensation expense relating to all options and restricted share units recognized for the years ended December 31, 2016, 2017
and 2018 is as follows:





|                                    |  | For the years ended December 31, |       
|----------------------------------- |  | -------------------------------- | ------
|                                    |  | 2016                             |       
|                                    |  | (RMB)’000                        |       
|                                    |  |                                  |       
|Cost of revenues                    |  |                                  | 5,961 
|Sales and marketing expenses        |  |                                  | 2,753 
|General and administration expenses |  |                                  | 72,483
|Research and development expenses   |  |                                  | 3,828 
|                                    |  |                                  |       
|                                    |  |                                  | 85,025





F-52







CHINACACHE
INTERNATIONAL HOLDINGS LTD.



NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2016, 2017 AND 2018



|19. | ACCUMULATED OTHER COMPREHENSIVE INCOME
|--- | --------------------------------------



The movement of accumulated other comprehensive
income is as follows:





|                                                                 |  |      |  |  | Foreign 
currency 
translation |  |        | Unrealized/
(realized) 
holding gain 
on available-
for-sale 
investments |  |  | Total   |  
|---------------------------------------------------------------- |  | ---- |  |  | ------------------------------ |  | ------ | ------------------------------------------------------------------------- |  |  | ------- | -
|                                                                 |  | Note |  |  | RMB’000                        |  |        | RMB’000                                                                   |  |  | RMB’000 |  
|Balance as of January 1, 2017                                    |  |      |  |  |                                |  | (189   | )                                                                         |  |  | 905     |  
|Other comprehensive (loss)/income before reclassification        |  |      |  |  |                                |  | 2,748  |                                                                           |  |  | (4,195  | )
|Amounts reclassified from accumulated other comprehensive income |  |      |  |  |                                |  | -      |                                                                           |  |  | 3,290   |  
|Balance as of December 31, 2017                                  |  |      |  |  |                                |  | 2,559  |                                                                           |  |  | -       |  
|Other comprehensive income/(loss) before reclassification        |  |      |  |  |                                |  | (1,037 | )                                                                         |  |  | -       |  
|Amounts reclassified from accumulated other comprehensive income |  |      |  |  |                                |  | -      |                                                                           |  |  | -       |  
|Balance as of December 31, 2018                                  |  |      |  |  |                                |  | 1,522  |                                                                           |  |  | -       |  
|Balance as of December 31, 2018, in US$                          |  |      |  |  |                                |  | 221    |                                                                           |  |  | -       |  





|20. | MAINLAND CHINA EMPLOYEE CONTRIBUTION PLAN
|--- | -----------------------------------------



As stipulated by the regulations of the
PRC, full-time employees of the Group in the PRC participate in a government-mandated multiemployer defined contribution plan
organized by municipal and provincial governments. Under the plan, certain pension benefits, medical care, unemployment insurance,
employee housing fund and other welfare benefits are provided to employees. The Group is required to make contributions to the
plan based on certain percentages of employees’ salaries. The total expenses for the plan were RMB53,669,000, RMB44,416,000
and RMB29,288,000 (US$4,260,000) for the years ended December 31, 2016, 2017 and 2018, respectively.



F-53







CHINACACHE
INTERNATIONAL HOLDINGS LTD.



NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2016, 2017 AND 2018



|21. | INCOME TAXES
|--- | ------------



Enterprise income tax



Cayman Islands



The Company is a tax exempt company incorporated
in the Cayman Islands and conducts substantially all of its business through its subsidiaries and VIEs.



United States of America





ChinaCache North America, Inc. and CCAL
was registered in California, United States of America in 2007 and 2016 respectively. For the years ended December 31, 2016, 2017
and 2018, the entity is subject to both California State Income Tax (8.84%) and Federal Income Tax (graduated income tax rate up
to 34%, 34% and a flat 21% respectively) on its taxable income under the current laws of the state of California and United States
of America.



Hong Kong



The two-tier profits tax rates system was
introduced under the Inland Revenue (Amendment)(No.3) Ordinance 2018 (“the Ordinance”) of Hong Kong became effective
for the assessment year 2018/2019. Under the two-tier profit tax rates regime, the profits tax rate for the first HKD 2 million
of assessable profits of a corporation will be subject to the lowered tax rate, 8.25% while the remaining assessable profits will
be subject to the legacy tax rate, 16.5%.



ChinaCache Networks (Hong Kong) Limited,
the Company’s wholly owned subsidiary incorporated in Hong Kong, is subject to Hong Kong corporate income tax at a rate
of 16.5% on the estimated assessable profits arising in Hong Kong for the years ended December 31, 2016 and 2017, and 8.25% for
the years ended December 31, 2018.



The PRC



The Company’s subsidiaries and the
VIEs that are each incorporated in the PRC are subject to Corporate Income Tax (“CIT”) on the taxable income as reported
in their respective statutory financial statements adjusted in accordance with the new PRC Enterprise Income Tax Laws (“PRC
Income Tax Laws”) effective from January 1, 2008. Pursuant to the PRC Income Tax Laws, the Company’s PRC subsidiaries
and the VIEs are subject to a CIT statutory rate of 25%.





Under the PRC Income Tax Laws, an enterprise
which qualifies as a High and New Technology Enterprise (“the HNTE”) is entitled to a preferential tax rate of 15%
provided it continues to meet HNTE qualification standards on an annual basis. ChinaCache Beijing qualifies as an HNTE and is entitled
for a preferential tax rate of 15% from 2016 to 2021 if it continues to qualify on an annual basis. The HNTE certificate of ChinaCache
Beijing is expiring in 2022 and there exist uncertainties with the reapplication outcome. Beijing Blue IT qualifies as an HNTE
and is entitled for a preferential tax rate of 15% from 2016 to 2020 if it continues to qualify on an annual basis. The HNTE certificate
of ChinaCache Blue IT is expiring in 2021 and there exist uncertainties with the reapplication outcome.





F-54







CHINACACHE
INTERNATIONAL HOLDINGS LTD.



NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2016, 2017 AND 2018



|21. | INCOME TAXES (CONTINUED)
|--- | ------------------------



Enterprise income tax (continued)



In accordance with the PRC Income Tax Laws,
enterprises established under the laws of foreign countries or regions but whose “place of effective management” is
located within the PRC are considered PRC tax resident enterprises and subject to PRC income tax at the rate of 25% on worldwide
income. The definition of “place of effective management" refers to an establishment that exercises, in substance, overall
management and control over the production and business, personnel, accounting, properties, etc. of an enterprise. As of December
31, 2018, no applicable detailed interpretation or guidance has been issued to define “place of effective management”.
Furthermore, as of December 31, 2018, the administrative practice associated with interpreting and applying the concept of “place
of effective management” is unclear. Based on the assessment of facts and circumstances available at December 31, 2018, management
believes none of its non-PRC entities are more likely than not PRC tax resident enterprises. It is possible the assessment of tax
residency status may change in the next twelve months, pending announcement of new PRC tax rules in the future. The Group will
continue to monitor its tax status.



F-55







CHINACACHE
INTERNATIONAL HOLDINGS LTD.



NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2016, 2017 AND 2018



|21. | INCOME TAXES (CONTINUED)
|--- | ------------------------



Loss before income tax expense consists of:



|        |  | For the years ended December 31, |         
|------- |  | -------------------------------- | --------
|        |  | 2016                             |         
|        |  | RMB’000                          |         
|        |  |                                  |         
|Non-PRC |  |                                  | (128,184
|PRC     |  |                                  | (781,840
|        |  |                                  |         
|        |  |                                  | (910,024





The income tax expense comprises of:





|         |  | For the years ended December 31, |      
|-------- |  | -------------------------------- | -----
|         |  | 2016                             |      
|         |  | RMB’000                          |      
|         |  |                                  |      
|Current  |  |                                  | 1,104
|Deferred |  |                                  | 3,125
|         |  |                                  |      
|         |  |                                  | 4,229





A reconciliation of the differences between
the income tax calculated using statutory tax rate and the effective tax rate for the year ended December 31, 2016, 2017 and 2018
is as follows:





|                                                                                 |  | For the years ended December 31, |         
|-------------------------------------------------------------------------------- |  | -------------------------------- | --------
|                                                                                 |  | 2016                             |         
|                                                                                 |  | RMB’000                          |         
|                                                                                 |  |                                  |         
|Loss before income tax expense                                                   |  |                                  | (910,024
|                                                                                 |  |                                  |         
|Income tax computed at PRC statutory tax rate of 25%                             |  |                                  | (227,506
|Preferential tax rates                                                           |  |                                  | 68,685  
|International rate differences                                                   |  |                                  | 22,365  
|Additional 50%/75% tax deduction for qualified research and development expenses |  |                                  | (9,915  
|Non-deductible expenses                                                          |  |                                  | 2,043   
|Effect of changes in tax rates on deferred taxes                                 |  |                                  | (61,978 
|Changes in the valuation allowance                                               |  |                                  | 210,535 
|Income tax expense                                                               |  |                                  | 4,229   





F-56







CHINACACHE
INTERNATIONAL HOLDINGS LTD.



NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2016, 2017 AND 2018



|21. | INCOME TAXES (CONTINUED)
|--- | ------------------------



The components of deferred taxes are as follows:





|                                        |  | For
    the years ended December 31, |         
|--------------------------------------- |  | ------------------------------------ | --------
|                                        |  | 2017                                 |         
|                                        |  | (RMB’000)                            |         
|                                        |  |                                      |         
|Deferred tax assets:                    |  |                                      |         
|- Allowance for doubtful accounts       |  |                                      | 19,553  
|- Deferred revenue                      |  |                                      | 4,895   
|- Accruals                              |  |                                      | 25,256  
|- Tax losses                            |  |                                      | 159,782 
|- Property and equipment                |  |                                      | 3,424   
|- Intangible assets                     |  |                                      | 2,001   
|- Long-term investment impairment       |  |                                      | 1,500   
|- Impairment loss for long-lived assets |  |                                      | 68,508  
|- Unrealized profit                     |  |                                      | 71,760  
|Less: valuation allowance               |  |                                      | (356,679
|                                        |  |                                      |         
|Total Deferred tax assets               |  |                                      | -       







Valuation allowances have been provided
where, based on all available evidence, management determined that deferred tax assets are not more likely than not to be realizable
in future years. The net valuation allowance increased by RMB148,711,000 and decreased by RMB79,052,000 during the years ended
December 31, 2017 and 2018, respectively.





F-57







CHINACACHE
INTERNATIONAL HOLDINGS LTD.



NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2016, 2017 AND 2018



|21. | INCOME TAXES (CONTINUED)
|--- | ------------------------





As of December 31, 2018, the Group has
net operating tax losses carried forward from its PRC subsidiaries of RMB804,755,000, which will expire between 2019 and 2023.
As of December 31, 2018, the Group has net operating tax losses carried forward from its non-PRC subsidiaries of RMB17,663,000 available
to offset future taxable income.



Unrecognized Tax Expense



A roll-forward of accrued unrecognized
tax expense is as follows:





|                                                            |  | December 31, |       
|----------------------------------------------------------- |  | ------------ | ------
|                                                            |  | 2017         |       
|                                                            |  | RMB’000      |       
|                                                            |  |              |       
|Beginning balance                                           |  |              | (8,273
|Increase based on tax positions related to the current year |  |              | -     
|Ending balance                                              |  |              | (8,273







The unrecognized tax expense is mainly
related to under-reported income and transfer pricing for certain subsidiaries and VIEs. The amount of unrecognized tax expense
will change in the next 12 months, pending clarification of current tax law or audit by the tax authorities, however, an estimate
of the range of the possible change cannot be made at this time. For the years ended December 31, 2017 and 2018, there’s
no unrecognized tax expense, if ultimately recognized, will impact the effective tax rate.





The Company recognizes interest accrued
related to unrecognized tax benefits in interest expense and penalties in operating expenses. During the years ended December 31,
2016, 2017, and 2018, the Company recognized approximately RMB 1,510,000, RMB 1,510,000, and RMB 1,510,000 in interest and penalties.
The Company had approximately RMB 12,221,000 and RMB 13,731,000 for the payment of interest and penalties accrued at December 31,
2017 and 2018, respectively.





In accordance with PRC Tax Administration
Law on the Levying and Collection of Taxes, the PRC tax authorities generally have up to five years to assess underpaid tax plus
penalties and interest for PRC entities’ tax filings. In the case of tax evasion, which is not clearly defined in the law,
there is no limitation on the tax years open for investigation. Accordingly, the PRC entities remain subject to examination by
the tax authorities based on the above.



|22. | RELATED PARTY BALANCES AND TRANSACTIONS
|--- | ---------------------------------------



In addition to the information disclosed
elsewhere in the financial statements, the principal related parties with which the Group had transactions during the years presented
are as follows:





|Name of Related Parties |  | Relationship with the Company                
|----------------------- |  | ---------------------------------------------
|                        |  |                                              
|Mr. Wang Song           |  | The Co-Founder and Ex-director of the Company
|Ms. Kou Xiaohong        |  | The Co-Founder and Ex-director of the Company





Subsequently on May 17, 2019 and June 5,
2019, Mr. Song Wang tendered his resignation as the Company’s Chief Executive Officer and the Board as Directors, respectively.
The Co-founder and director Ms. Xiaohong Kong resigned from the management team and the Board on August 15, 2019.



Guarantee provided by related parties
to the Group





Mr. Wang Song and Ms. Kou Xiaohong provided
guarantee for all the bank borrowing from Bank B and Bank C during the year ended December 31, 2017 (Note 13)



Mr. Wang Song provided guarantee for the
short term borrowing from a third-party A in PRC with the amount of RMB 12,350,000 during the year ended December 31, 2018. (Note
13)



Mr. Wang Song provided guarantee for the
capital lease from vendor A with the amount of RMB 39,000,000 during the year ended December 31, 2018.



Mr. Wang Song and Ms. Kou Xiaohong provided
guarantee for the capital lease from vendor B with the amount of RMB 25,000,000 during the year ended December 31, 2018.



The Group had the following related party
balances as of December 31, 2018 and related party transactions during the year then ended:





|                                                          |  | Mr. Wang Song |      |   | Ms. Kou 
Xiaohong |  |     | Total | 
|--------------------------------------------------------- |  | ------------- | ---- | - | ----------------- |  | --- | ----- | 
|Balance as of January 1, 2016, and December 31 2016, 2017 |  |               | -    |   |                   |  | (18 | )     | 
|Expense paid on behalf of the Group                       |  |               | (328 | ) |                   |  |     |       | 
|Expense Reimbursement payment                             |  |               | 277  |   |                   |  |     |       | 
|Balance as of December 31, 2018                           |  |               | (51  | ) |                   |  | (18 | )     | 
|Balance as of December 31, 2018 (US$’000)                 |  |               | (7   | ) |                   |  | (3  | )     | 









In March 2017, the Group entered into a set of definitive agreements for Xin Run, pursuant to which Tianjin Shuishan, Shanghai Qiaoyong and Tianjin Dingsheng will purchase 47.7%, 26.3% and 5.0%, respectively of the equity interest in Xin Run for a consideration of RMB133.5 million, RMB73.7 million and RMB14.0 million, respectively. Tianjin Shuishan is owned by Mr. Wang Song and Ms. Kou Xiaohong. On December 28, 2017, the board approval to terminate the transfer. On March 23, 2018, the Group entered into a termination agreement with relevant parties and terminated the equity transfer of Xin Run





F-58







CHINACACHE
INTERNATIONAL HOLDINGS LTD.



NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2016, 2017 AND 2018



|23. | RESTRICTED NET ASSETS
|--- | ---------------------



The Company’s ability to pay dividends
is primarily dependent on the Company receiving distributions of funds from its subsidiaries. Relevant PRC statutory laws and regulations
permit payments of dividends by the Company’s PRC subsidiaries only out of their retained earnings, if any, as determined
in accordance with PRC accounting standards and regulations. The results of operations reflected in the consolidated financial
statements prepared in accordance with U.S. GAAP differ from those reflected in the statutory financial statements of the Company’s
subsidiaries.



In accordance with the PRC Regulations
on Enterprises with Foreign Investment and the articles of association of the Company’s PRC subsidiaries, a foreign-invested
enterprise established in the PRC is required to provide certain statutory reserves, namely general reserve fund, the enterprise
expansion fund and staff welfare and bonus fund which are appropriated from net profit as reported in the enterprise’s PRC
statutory accounts. A foreign-invested enterprise is required to allocate at least 10% of its annual after-tax profit to the general
reserve until such reserve has reached 50% of its respective registered capital based on the enterprise’s PRC statutory
accounts. Appropriations to the enterprise expansion fund and staff welfare and bonus fund are at the discretion of the board
of directors for all foreign-invested enterprises. The aforementioned reserves can only be used for specific purposes and are
not distributable as cash dividends. ChinaCache Beijing was established as a foreign-invested enterprise and, therefore, is subject
to the above mandated restrictions on distributable profits. As of December 31,2017, and 2018, the Group had appropriated RMB1,326,000
and RMB1,326,000 (US$193,000), respectively in its statutory reserves.



Foreign exchange and other regulations
in the PRC may further restrict the Company's PRC subsidiaries and VIEs from transferring funds to the Company in the form of dividends,
loans and advances. Amounts restricted include paid-in capital and statutory reserves of the Company’s PRC Subsidiaries and
the equity of VIEs, as determined pursuant to PRC generally accepted accounting principles. As of December 31, 2018, restricted
net assets of the Company’s PRC subsidiaries and VIEs were RMB471,213,000 (US$68,535,000).



F-59







CHINACACHE
INTERNATIONAL HOLDINGS LTD.



NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2016, 2017 AND 2018



|24. | LOSS PER SHARE
|--- | --------------



Basic and diluted loss per share for each
of the periods presented are calculated as follows:



|                                                                  |  | For the Year Ended December 31, |            
|----------------------------------------------------------------- |  | ------------------------------- | -----------
|                                                                  |  | 2016                            |            
|                                                                  |  |                                 | (RMB’000)  
|                                                                  |  |                                 |            
|Numerator:                                                        |  |                                 |            
|Net loss attributable to ordinary shareholders:                   |  |                                 | (913,477   
|                                                                  |  |                                 |            
|Denominator:                                                      |  |                                 |            
|Number of shares outstanding, opening                             |  |                                 | 400,165,607
|Weighted average number of shares issued                          |  |                                 | 20,702,130 
|Weighted average number of shares repurchased                     |  |                                 | (12,678,015
|Weighted-average number of shares outstanding – Basic and diluted |  |                                 | 408,189,722
|                                                                  |  |                                 |            
|Loss per share                                                    |  |                                 |            
|-Basic and diluted                                                |  |                                 | (2.24      



The effects of share options have been excluded from the computation
of diluted loss per share for the years ended December 31, 2016, 2017 and 2018 as their effects would be anti-dilutive.



During the years ended December 2016, 2017
and 2018, the Company issued 23,000,000, nil and nil treasury stock to its share depositary bank which will be used to settle share
option awards upon their exercise. No consideration was received by the Company for this issuance of ordinary shares. These ordinary
shares are legally issued and outstanding but are treated as escrowed shares for accounting purposes and therefore, have been excluded
from the computation of loss per share. Any ordinary shares not used in the settlement of share option awards will be returned
to the Company.



During 2018, treasury stock was used to
settle 1,096,896 units of share options and 2,040,736 units of restricted share units vested (2017: exercise of restricted share
units vested 3,627,709, 2016: exercise of share options 1,325,241 and restricted share units vested 33,762,181).





F-60







CHINACACHE
INTERNATIONAL HOLDINGS LTD.



NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2016, 2017 AND 2018



|25. | FAIR VALUE MEASUREMENT
|--- | ----------------------



The Group applies ASC topic 820, “Fair
Value Measurements and Disclosures”. ASC 820 defines fair value, establishes a framework for measuring fair value and
expands disclosures about fair value measurements. ASC 820 requires disclosures to be provided on fair value measurement.



ASC 820 establishes a three-tier fair value
hierarchy, which prioritizes the inputs used in measuring fair value as follows:



Level
1 — Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.



Level 2 — Include other inputs that
are directly or indirectly observable in the marketplace.



Level 3 — Unobservable inputs which
are supported by little or no market activity.



ASC 820 describes three main approaches
to measuring the fair value of assets and liabilities: (1) market approach; (2) income approach and (3) cost approach.
The market approach uses prices and other relevant information generated from market transactions involving identical or comparable
assets or liabilities. The income approach uses valuation techniques to convert future amounts to a single present value amount.
The measurement is based on the value indicated by current market expectations about those future amounts. The cost approach is
based on the amount that would currently be required to replace an asset.



In accordance with ASC 820, the available-for-sale
investment of the mutual fund is classified within Level 1 as the Company measures the fair value using quoted trading prices that
are published on a regular basis. The available-for-sale investment in convertible loan of investee D is classified within Level
3 and determined based on option pricing model using the discount curve of market interest rates. The fair value of the investment
was determined by management with the assistance of an independent third-party valuation firm.



|                                               |  | Investment in the  Investee D |       
|---------------------------------------------- |  | ----------------------------- | ------
|                                               |  | RMB’000                       |       
|                                               |  |                               |       
|Fair value at January 1, and December 31, 2016 |  |                               | 3,973 
|Other than temporary impairment                |  |                               | (3,973
|                                               |  |                               |       
|Fair value at December 31, 2017 and 2018       |  |                               | -     
|Fair value at December 31, 2018 (US$’000)      |  |                               | -     



The Group’s valuation techniques
used to measure the fair value was derived from management’s assumptions of estimations. Changes in the fair value of the
available-for-sale investment will be recorded in other comprehensive income/(loss).



F-61







CHINACACHE
INTERNATIONAL HOLDINGS LTD.



NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2016, 2017 AND 2018



|26. | COMMITMENTS AND CONTINGENCIES
|--- | -----------------------------



|(a) | Operating Leases
|--- | ----------------



The Group leases facilities in the PRC
under non-cancelable operating leases expiring on different dates. Total rental expense under all operating leases was RMB22,846,000,
RMB23,401,000 and RMB16,997,000 (US$2,472,000) for the years ended December 31, 2016, 2017 and 2018, respectively.



As of December 31, 2018, the Group had
future minimum lease payments under non-cancelable operating leases with initial terms of one-year or more in relation to office
premises consist of the following:



|     |  | December 31, 2018 |       
|---- |  | ----------------- | ------
|     |  | RMB’000           |       
|     |  |                   |       
|2019 |  |                   | 13,099
|2020 |  |                   | 5,982 
|2021 |  |                   | 1,082 
|2022 |  |                   | 1,114 
|2023 |  |                   | 1,147 
|2024 |  |                   | 1,886 
|     |  |                   |       
|     |  |                   | 24,310



|(b) | Purchase Commitments
|--- | --------------------



As of December 31, 2018, the Group had
outstanding purchase commitments in relation to bandwidth and cloud infrastructure of RMB336,783,000 (US$48,983,000).



|(c) | Contingencies
|--- | -------------







In August 2017, a subsidiary of the
Company, Xin Run, initiated a lawsuit against BFSMC in Beijing, arising out of the sales of data center buildings. Xin Run sought
the payment of purchase price in the amount of RMB105.6 million and the relating interest. In September 2017, BFSMC filed
the statement of defense and made a counterclaim, claiming, among others, the late delivery penalties and relating losses in the
total amount of approximately RMB50.5 million. Thereafter Xin Run filed a motion to dismiss BFSMC’s counterclaim arguing
that the court does not have the jurisdiction. In April 2018, we were notified by the court that our motion was dismissed and as
a result, the lawsuit is currently pending. In addition, Xin Run’s bank deposits and other assets in a total amount of approximately
RMB50.5 million were sealed up, distrained or frozen by the court. On April 24, 2018, Xin Run amended its claim requesting, among
other things, the defendant pay the additional purchase price of RMB96 million, damages for breach of contract in an amount of
RMB14.4 million and the relating interest of RMB8.86 million. Management is of the view that these proceedings are still pending,
therefore it is impossible at this stage to properly evaluate the outcome. Therefore, no provision has been made for this case.



In October 2017, a subsidiary of BFSMC
filed a lawsuit against Xin Run in the Shunyi District Court of Beijing requesting Xin Run pay overdue rent and the relating interest.
At present, the second instance of this case has been completed. The court has sentenced in support of the plaintiff that Xin Run
should pay overdue rent from October 2017 to June 2018 in an amount equal to RMB64.8 million and the relevant interest thereon.
The subsidiary of BFSMC has applied to the competent court for compulsory execution of the court decision. Liability equal to the
sentenced amount has been recorded in the balance sheet as of December 31, 2018 under other payables to offset consideration received
for disposal of Zhao Du and Shuo Ge in the expectation to net settle with BFSMC. (See note 27)







F-62









CHINACACHE
INTERNATIONAL HOLDINGS LTD.



NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2016, 2017 AND 2018



|27. | SUBSEQUENT EVENT
|--- | ----------------





In addition to the information disclosed
elsewhere in the financial statements, there are the following subsequent events:



On April 3, 2019, after the renegotiation
with the buyer, the consideration for the transaction of disposal Shuo Ge discussed in Note 10 was changed to RMB 251.8 million
and the Group should return the RMB 73.2 million and its related interest of RMB 13.0 million within six years, from January 1,
2019 to Dec 31, 2024. And the Group has reached an exclusive lease-back agreement with this third party to obtain the exclusive
lease-back operation right for the building in the next five years at a total cost of RMB173.1 million.



On May 17, 2019,
the Group received a notice from a government prosecutors’ office in Beijing that the Group was currently under investigation
for allegations of enterprise bribery. The Group has engaged a criminal defense counsel to prepare for the relevant legal proceedings.
By that date, Mr. Song Wang had been arrested and was also currently under investigation for the allegations of enterprise bribery
against the Group. Mr. Song Wang tendered his resignation as the Company’s Chief Executive Officer to the Board on May 17,
2019, then the Board has appointed Mr. Bin Liu as the Company’s Acting Chief Executive Officer. As the legal proceedings
are still at a relatively early stage, the Company is currently unable to assess the likely outcomes of such proceedings. Therefore,
no provision has been made for this case.





On May 20, 2019
the Company received a notification letter (the “Notification Letter”) from The Nasdaq Stock Market, Inc. (the “NASDAQ”)
indicating that the Company is not in compliance with Nasdaq Listing Rule 5250(c)(1) because it did not timely file its annual
report on Form 20-F for the fiscal year ended December 31, 2018 (“2018 Form 20-F”) with the Securities and Exchange
Commission (the “SEC”). The Notification Letter also contains questions (the “Questions”) relating to
the Company’s disclosure of certain recent events (“Recent Disclosure”), including (i) Grant Thornton China’s
resignation as the Company’s independent auditor, (ii) the Company’s engagement with Michael T. Studer CPA P.C. as
independent auditor to the Company and (iii) allegations of enterprise bribery against the Company as well as Mr. Song Wang, the
Company’s Chairman and former Chief Executive Officer. The Notification Letter states that in light of the Company’s
Recent Disclosure, the staff of NASDAQ has determined to apply more stringent criteria and shorten the time period for the Company
to submit its plan to regain compliance (the “Plan”). The Notification Letter further states that the Company must
submit the Plan and its response to the Questions no later than May 31, 2019.



On July 2, 2019
the Company received a notification letter (the “Notification Letter II”) from the NASDAQ that its American depositary
shares would be delisted from the NASDAQ Stock Market. The Notification Letter II states that the Staff of NASDAQ has determined
to deny the Company’s request for an extension of time to regain compliance with the filing requirement in NASDAQ Listing
Rule 5250(c)(1). The Staff also cited two additional bases for delisting, which are (i) non-compliance with NASDAQ Listing Rule
52560(b)(1) due to the Company’s failure to timely disclose certain information regarding the arrest of the Company’s
former chief executive officer Mr. Song Wang and the criminal investigation into the Company as well as (ii) public interest concerns
pursuant to NASDAQ Listing Rule 5101 due to the failure of the Company’s senior management to promptly advise the Company’s
board of directors of Mr. Wang’s arrest and the investigation of the Company.



On September 4, 2019, Nasdaq issued a letter
to the Company stating that The Nasdaq Hearings Panel (the “Panel”) has determined to delist the Company’s shares
from The Nasdaq Stock Market. The delisting determination stated that Nasdaq will complete the delisting by filing a Form 25 with
the SEC after applicable appeal periods have lapsed. Thereafter, the Company intends to work with a market maker to file a Form
211 with FINRA to enable the Company’s shares to begin trading on the over-the-counter markets.



On September 9,
2019, the First Branch of Beijing People's Procurator has presented public prosecution to
the First Intermediate People's Court of Beijing against the Group regarding the case of suspected company bribery.Management
is of the view that these proceedings are at a preliminary stage, therefore it is impossible at this stage to properly evaluate
the outcome. Therefore, no provision has been made for this case.



On November 8, 2019, the Company received
a notification that the Nasdaq has determined to remove from listing the American Depositary Shares of the Company, effective at
the opening of the trading session on November 18, 2019. Based on review of information provided by the Company, Nasdaq Staff determined
that the Company no longer qualified for listing on the Exchange pursuant to Listing Rules 5100, 5250(b)(1) and 5250(c)(1). The
Company was notified of the Staffs determination on July 2, 2019. The Company appealed the determination to a Hearing Panel. Upon
review of the information provided by the Company, the Panel issued a decision dated September 4, 2019, denying the Company continued
listing and notified the Company that trading in the Company’s securities would be suspended on September 6, 2019. The Company
did not request a review of the Panels decision by the Nasdaq Listing and Hearing Review Council. The Listing Council did not call
the matter for review. The Panels Determination to delist the Company became final on October 21, 2019.





In October 2019, Bank C sent notice of
early maturity of loan to Xin Run and asked for the early repayment of bank loans amounted to RMB160 million and related unpaid
interest. In December 2017, the two parties signed RMB220 million bank loan agreement with the term of five years (see Note 13).
As of October 31, 2019, the balance of the borrowing was RMB160 million. As the buildings and land use right that pledged to the
bank has been sealed up by the Shunyi District Court mainly due to the lawsuit with a subsidiary of BFSMC, the bank considered
that Xin Run has defaulted and asked for the immediate repayment of the RMB160 million and related unpaid interest within three
days. And Xin Run did not repay the bank loan yet.



In October 2019, Bank B sent notice of early maturity of loan to Xin Run and asked for the early repayment
of bank loans amounted to RMB 170 million and related unpaid interest immediately, as the buildings and land use right that pledged
to Bank B has been sealed by the court, the bank account in Bank B has been frozen, and Xin Run did not made repayment of loans
according to the repayment plan, which violated the bank facility agreement. And Xin Run did not repay the bank loan yet.







F-63







CHINACACHE
INTERNATIONAL HOLDINGS LTD.



NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2016, 2017 AND 2018



|27. | SUBSEQUENT EVENT (CONTINUED)
|--- | ----------------------------





Other litigation issues



The Company and certain of its current
and former officers and directors have been named as defendants in a shareholder class action lawsuit filed in the U.S. District
Court for the Central District of California (the “Central California District Court”): William Likas v. ChinaCache
International Holdings Ltd. et al, Civil Action No. 2:2019-cv-06942 (C.D. Cal.) (filed on August 9, 2019). The action—purportedly
brought on behalf of a class of persons who allegedly suffered damages as a result of their trading activities related to the Group’s
ADSs from April 10, 2015 to May 17, 2019—alleges that certain of the Group’s public statements and filings contained
materially false and misleading statements or omissions in violation of U.S. securities laws. On October 2, 2019, the Central California
District Court appointed a group of two purported shareholders of the Company as the Lead Plaintiff of the class. On November 13,
2019, the Central California District Court entered an order to show cause, ordering the Lead Plaintiff to explain why this action
should not be dismissed for lack of prosecution because the Lead Plaintiff had not filed a proof of service regarding any defendant.
On November 20, 2019, the Lead Plaintiff submitted a response to the Court’s order to show cause and requested that the Court
allow the Lead Plaintiff to serve the defendants through alternative means. The Court has not ruled on the Lead Plaintiff’s
response or request for alternative service. Back on June 12, 2019, another plaintiff had filed a substantially identical putative
shareholder class action lawsuit against the Group and certain of the Group’s current and former officers and directors in
the U.S. District Court for the Southern District of New York. On August 30, 2019, the plaintiff voluntarily dismissed that lawsuit.



In July 2017, a claim was raised by a construction
company of the cloud infrastructure against Xin Run, for the alleged non-payment of construction fees of RMB73.9 million and the
relating interest. In July 2019, this construction company and Xin Run reached an agreement under the mediation of the Court of
Second Instance to settle this case. Xin Run should pay RMB33.7 million to this construction company. The Company has fully accrued
the amount as liability accordingly. In August 2019, Xin Run repaid RMB10 million, but it did not repay the remaining balance subsequently.
According to the agreement, if Xin Run does not settle the payment on time, it should be doubled the relating interest for the
delaying days. In November, the construction company has applied to the competent court for compulsory execution.



In October 2017, a subsidiary of BFSMC
filed a lawsuit against Xin Run in the Shunyi District Court of Beijing requesting Xin Run pay overdue rent and the relating interest
from October 2017 to June 2018 with amount of RMB64.8 million. The court has sentenced in support of the plaintiff that Xin Run
should pay overdue rent in an amount equal to RMB64.8 million and the relevant interest thereon. The subsidiary of BFSMC has applied
to the competent court for compulsory execution of the court decision. Accordingly, the land use right and relevant buildings owned
by Xin Run has been sealed up by the Shunyi District Court of Beijing. Liability equal to the sentenced amount has been recorded
in the balance sheet as of December 31, 2018 under other payables to offset consideration received for disposal of Zhao Du and
Shuo Ge in the expectation to net settle with BFSMC.



In June 2019, the foregoing subsidiary
of BFSMC filed another lawsuit against Xin Run in the Shunyi District Court of Beijing requesting Xin Run pay overdue rent from
July 2018 to March 2019 with total amount of RMB64.8 million and the relating interest. Xin Run appealed to a higher court and
the result is still pending. Management is of the view that these proceedings are at a preliminary stage, therefore, it is impossible
at this stage to properly evaluate the outcome. Liability of the six-month rent in 2018 has been recorded in the balance sheet
as of December 31, 2018 under other payables to offset consideration received for disposal of Zhao Du and Shuo Ge in the expectation
to net settle with BFSMC.



In April 2019, a trading company filed
a lawsuit against Xin Run for the payment of equipment purchase price and related penalty in a total amount of approximately RMB37.2
million. In June 2019, the trading company and Xin Run reached an agreement under the mediation of the court. According to the
agreement, Xin Run should pay RMB20.2 million and related interest of RMB6.0 million to the trading company. The Company has accrued
the amount as other payables, Xin Run only settled RMB2.0 million subsequently.



In April 2019, a technology company filed
a lawsuit in Shanghai Minhang District People’s Court against Beijing Blue I.T., demanding payment of service fee and relevant
liquidated damage in a total amount of approximately RMB28.3 million. The court rendered a judgment on the case on October 15,
2019, which ruled that Beijing Blue I.T. should pay relevant service fee, liquidated damage and costs of legal proceedings. Beijing
Blue I.T. has appealed the judgment to higher court. Management is of the view that these proceedings are at a preliminary stage,
therefore it is impossible at this stage to properly evaluate the outcome. The Company accrued the 2018 service fee, amounted
to RMB18.7 million as liability in balance sheet for the year ended December 31, 2018.



In June 2019, a computer company
filed a lawsuit against Xin Run requesting for the payment of equipment purchase fee and its related interest in a total amount
of RMB40.8 million. Thereafter Xin Run filed a motion to dismiss the company’s counterclaim arguing that the court does not
have the jurisdiction.



In November 2019, the court made
judgment and agreed to transfer the case to Chaoyang District Court of Beijing. In June 2019, the computer company also filed
a lawsuit against Xin Run requesting for the payment of construction service fee and its related interest in a total amount of
RMB58.1 million. In September 2019, the computer company altered its request for litigation with claiming extra construction fee
with the amount of RMB16.5 million. Xin Run has appealed the judgment to a higher court. Management is of the view that these
proceedings are at preliminary stages, and it is impossible at this stage to properly evaluate the outcome. However, the Company
has accrued most of the amount as other payables.



In August 2019, a building materials technology
company initiated a lawsuit against Xin Run in the Beijing Shunyi District People’s Court to request payment of approximately
RMB35.6 million that should be paid by Xin Run to a third party, as such third party was obligated to pay the same amount to the
building materials technology company, and the relating cost of the lawsuit. Xin Run filed a motion to dismiss the case for lack
of jurisdiction, which was granted by the court and as a result, this lawsuit is still pending. Management is of the view that
these proceedings are at a preliminary stage, therefore it is impossible at this stage to properly evaluate the outcome. However,
the amount has been accrued as other payables.



In October 2019, another technology company
filed a lawsuit against Xin Run in the Beijing Shunyi District People’s Court, requesting Xin Run to pay overdue construction
fees and liquidated damage in a total amount of approximately RMB20.5 million. Xin Run filed a motion to dismiss for lack of jurisdiction.
However, Xin Run were notified by the court that its motion was rejected and certain real-property of XinRun was sealed up by the
court. As of the date hereof, this lawsuit is still pending. Management is of the view that these proceedings are at a preliminary
stage, therefore it is impossible at this stage to properly predict the result and potential financial impact of this pending claim,
if any. However, the Company has accrued the amount as other payables.



In November 2019, a commercial bank filed a lawsuit with respect
to financial loan agreement dispute against Xin Run, Mr. Song Wang and Ms. Jean Xiaohong Kou in the Fushun Intermediate People's
Court of Liaoning Province. As of the date hereof, the Group has not received the any documents relating to this lawsuit from the
court.



In addition, according to court
decisions issued in certain legal proceedings, an aggregate amount of RMB12.0 million and RMB4.3 million in bank accounts of Beijing
Blue I.T. and Xin Run, is currently frozen and restricted to be used, respectively.







F-64







CHINACACHE
INTERNATIONAL HOLDINGS LTD.



NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2016, 2017 AND 2018



|28. | CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY
|--- | -----------------------------------------------------



ConDENSED
BALANCE SHEETS

(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”))





|                                                                                                                                                                                                   |  | As of December 31, |           
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------ | ----------
|                                                                                                                                                                                                   |  | 2017               |           
|                                                                                                                                                                                                   |  | RMB                |           
|ASSETS:                                                                                                                                                                                            |  |                    |           
|Current assets:                                                                                                                                                                                    |  |                    |           
|Cash and cash equivalents                                                                                                                                                                          |  |                    | 1,141     
|Prepaid expenses and other current assets                                                                                                                                                          |  |                    | 1,647     
|                                                                                                                                                                                                   |  |                    |           
|Total current assets                                                                                                                                                                               |  |                    | 2,788     
|                                                                                                                                                                                                   |  |                    |           
|Non-current assets:                                                                                                                                                                                |  |                    |           
|Long term investments                                                                                                                                                                              |  |                    | 20,045    
|Investments in subsidiaries and consolidated VIEs                                                                                                                                                  |  |                    | (514,022  
|                                                                                                                                                                                                   |  |                    |           
|Total non-current assets                                                                                                                                                                           |  |                    | (493,977  
|                                                                                                                                                                                                   |  |                    |           
|TOTAL ASSETS                                                                                                                                                                                       |  |                    | (491,189  
|                                                                                                                                                                                                   |  |                    |           
|LIABILITIES AND SHAREHOLDERS’ DEFECIT:                                                                                                                                                             |  |                    |           
|Current liabilities:                                                                                                                                                                               |  |                    |           
|Accrued expenses and other payables                                                                                                                                                                |  |                    | 7,398     
|                                                                                                                                                                                                   |  |                    |           
|Total current liabilities                                                                                                                                                                          |  |                    | 7,398     
|                                                                                                                                                                                                   |  |                    |           
|Total liabilities                                                                                                                                                                                  |  |                    | 7,398     
|                                                                                                                                                                                                   |  |                    |           
|Shareholders’ deficit:                                                                                                                                                                             |  |                    |           
|Ordinary shares (US$0.0001 par value; 1,000,000,000 and 1,000,000,000 shares authorized; 426,267,345 and 429,404,977 shares issued and outstanding as of December 31, 2017 and 2018, respectively) |  |                    | 338       
|Additional paid-in capital                                                                                                                                                                         |  |                    | 1,573,341 
|Treasury stock                                                                                                                                                                                     |  |                    | -         
|Statutory reserves                                                                                                                                                                                 |  |                    | 1,326     
|Accumulated deficit                                                                                                                                                                                |  |                    | (2,076,151
|Accumulated other comprehensive income                                                                                                                                                             |  |                    | 2,559     
|Total shareholders’ deficit                                                                                                                                                                        |  |                    | (498,587  
|                                                                                                                                                                                                   |  |                    |           
|TOTAL LIABILITIES AND SHAREHOLDERS’ DEFICIT                                                                                                                                                        |  |                    | (491,189  





F-65







CHINACACHE
INTERNATIONAL HOLDINGS LTD.



NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2016, 2017 AND 2018



|28. | CONDENSED FINANCIAL INFORMATION OF THE PARENT company (CONTINUED)
|--- | -----------------------------------------------------------------



CONDENSED STATEMENTS OF COMPREHENSIVE LOSS

(Amounts in thousands of RMB and US$)





|                                                                 |  | For the years ended December 31, |         
|---------------------------------------------------------------- |  | -------------------------------- | --------
|                                                                 |  | 2016                             |         
|                                                                 |  | RMB                              |         
|                                                                 |  |                                  |         
|General and administrative expenses                              |  |                                  | (21,314 
|Research and development expenses                                |  |                                  | -       
|Impairment of long-term investments                              |  |                                  | (12,240 
|                                                                 |  |                                  |         
|Operating loss                                                   |  |                                  | (33,554 
|                                                                 |  |                                  |         
|Interest income                                                  |  |                                  | 18      
|Other income                                                     |  |                                  | 6,593   
|Foreign exchange gain/(loss)                                     |  |                                  | 14,209  
|Share of losses from subsidiaries and consolidated VIEs          |  |                                  | (900,743
|                                                                 |  |                                  |         
|Loss before income taxes                                         |  |                                  | (913,477
|Income tax expense                                               |  |                                  | -       
|                                                                 |  |                                  |         
|Net loss                                                         |  |                                  | (913,477
|                                                                 |  |                                  |         
|Foreign currency translation                                     |  |                                  | (293    
|Unrealized gain/(loss) from available-for-sale investments       |  |                                  | 659     
|Amounts reclassified from accumulated other comprehensive income |  |                                  | (3,552  
|                                                                 |  |                                  |         
|Total other comprehensive (loss)/income, net of tax              |  |                                  | (3,186  
|Comprehensive loss                                               |  |                                  | (916,663





F-66







CHINACACHE
INTERNATIONAL HOLDINGS LTD.



NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2016, 2017 AND 2018



|28. | CONDENSED FINANCIAL INFORMATION OF THE PARENT company (CONTINUED)
|--- | -----------------------------------------------------------------



CONDENSED STATEMENTS OF CASH FLOWS

(Amounts in thousands of RMB and US$)



|                                                     |  | For the years ended December 31, |        
|---------------------------------------------------- |  | -------------------------------- | -------
|                                                     |  | 2016                             |        
|                                                     |  | RMB                              |        
|Net cash used in operating activities                |  |                                  | (15,395
|                                                     |  |                                  |        
|Cash flows from investing activities:                |  |                                  |        
|Cash paid for long term investments                  |  |                                  | (1,842 
|Cash received from sale of short-term investment     |  |                                  | 26,828 
|                                                     |  |                                  |        
|Net cash provided by investing activities            |  |                                  | 24,986 
|                                                     |  |                                  |        
|Cash flows from financing activities:                |  |                                  |        
|Proceeds from employee share options exercised       |  |                                  | 5,427  
|Payment for repurchase of ordinary shares            |  |                                  | (39,402
|                                                     |  |                                  |        
|Net cash used in financing activities                |  |                                  | (33,975
|                                                     |  |                                  |        
|Net (decrease)/increase in cash and cash equivalents |  |                                  | (24,384
|Cash and cash equivalents at beginning of the year   |  |                                  | 46,363 
|Effect of foreign exchange rate changes on cash      |  |                                  | 2,484  
|Cash and cash equivalents at end of the year         |  |                                  | 24,463 



F-67







CHINACACHE INTERNATIONAL HOLDINGS LTD.



NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2016, 2017 AND 2018





|28. | CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY (CONTINUED)
|--- | -----------------------------------------------------------------



|(a) | Basis of presentation
|--- | ---------------------





The condensed financial information
of the Company has been prepared using the same accounting policies as set out in the Company 's consolidated financial statements
except that the Company used the equity method to account for investment in its subsidiaries and VIEs. The Company records its
investment in its subsidiaries and VIEs under the equity method of accounting. Such investment is presented on the balance sheets
as "Investment in subsidiaries" and share of their income as "Share of losses from subsidiaries and Consolidated
VIEs" on the statements of comprehensive loss. The PRC subsidiary and VIEs have restrictions on their ability to pay dividends
to the Company under PRC laws and regulations (Note 22). The subsidiaries and VIEs did not pay any dividends to the Company for
the years presented.





Certain information and footnote
disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted by reference
to the consolidated financial statements.



|(b) | Commitments
|--- | -----------



The Company does not have significant
commitments or long-term obligations as of any of the periods presented.





F-68