Shanghai Dongzheng Automotive Finance Co., Ltd. provided earnings guidance for the year ended 31 December 2021. For the year, the company expects an unaudited net loss ranging from RMB 0.81 billion to RMB 0.87 billion for the year ended 31 December 2021, as compared to the audited net profit of approximately RMB 55 million for the year ended 31 December 2020. The expected loss was mainly due to the following reasons: Increase in the Company's allowances for impairment losses relating to its loans and advances to customers and bills receivable.

The Company noted there is an increase in overdue loans from the Company's dealer customers which may be attributable to (i) the impact of COVID-19 pandemic where car dealers were facing difficult operating environment; and (ii) the aggregate amount (inclusive of interest receivables) due from China ZhengTong Auto Services Holdings Limited (``China ZhengTong'', the controlling shareholder and the largest customer of the Company) and its dealers, of approximately RMB 1.7 billion as at 31 December 2021. As disclosed in the announcements of the Company dated 7 December 2020 and 8 February 2022, the Shanghai Office of China Banking and Insurance Regulatory Commission and the Shanghai Financial Court of the PRC issued the Administrative Decision and the Relevant Rulings respectively (as defined in the announcement of the Company dated 8 February 2022), which ruled that the equity interests in the Company held by China ZhengTong be liquidated through auction. At present, the auction is still in progress, and the amount due from China ZhengTong and its dealers remains outstanding.

In view of the above, the Company is expected to increase the allowances for the impairment losses relating to its loans and advances to customers and bills receivable etc. in the range from RMB 0.86 billion to RMB 0.94 billion as compared to the year 2020; and Decrease in interest net income. Based on the assessment of the economic situation and credit risks, as well as to maintain financial stability of the Company, the Company has been gradually reducing the loan portfolio and, at the same time, repaid all of its outstanding placement from bank during the year, leading to a decrease in net interest income.

It is expected that the Company would record a decrease in net interest income of approximately RMB 0.22 billion for the year ended 31 December 2021 as compared to the year 2020.