Changchai Company Limited Annual Report 2021

CHANGCHAI COMPANY LIMITED

ANNUALREPORT 2021

April 2022

1Changchai Company Limited Annual Report 2021

Table of Contents

Part I Important Notes Table of Contents and Defin... 3

Part II Corporate Information and Key Financial In... 6

Part III Management Discussion and Analysis..........11

Part IV Corporate Governance.........................46

Part V Environmental and Social Responsibility...... 67

Part VI Significant Events.......................... 68

Part VII Share Changes and Shareholder Information...79

Part VIII Preferred Shares...........................89

Part IX Bonds....................................... 90

Part X Financial Statements..........................91

2Changchai Company Limited Annual Report 2021

Part I Important Notes Table of Contents and Definitions

The Board of Directors (or the “Board”) the Supervisory Committee as well as the directors

supervisors and senior management of Changchai Company Limited (hereinafter referred to

as the “Company”) hereby guarantee the factuality accuracy and completeness of the

contents of this Report and its summary and shall be jointly and severally liable for any

misrepresentations misleading statements or material omissions therein.Shi Xinkun the Company’s legal representative Zhang Xin the Company’s General Manager

and Jiang He head of the Company’s financial department (equivalent to financial manager)

hereby guarantee that the Financial Statements carried in this Report are factual accurate

and complete.All the Company’s directors have attended the Board meeting for the review of this Report

and its summary.Any plans for the future and other forward-looking statements mentioned in this Report shall

NOT be considered as absolute promises of the Company to investors. Therefore investors

are kindly reminded to pay attention to possible investment risks.The Company has described in detail the risks it might face in “XI Prospects” in “Part IIIManagement Discussion and Analysis” herein.The Board has approved a final dividend plan as follows: based on the 705692507 shares a

cash dividend of RMB0.26 (tax inclusive) per 10 shares is to be distributed to the shareholders

with no bonus issue from either profit or capital reserves.

3Changchai Company Limited Annual Report 2021

Documents Available for Reference

1. The financial statements signed and sealed by the Company’s legal representative General

Manager and head of the financial department.

2. The original copy of the Independent Auditor’s Report signed and sealed by the CPAs as well as

sealed by the CPA firm.

3. The originals of all the Company’s documents and announcements which were disclosed on

Securities Time and Ta Kung Pao (HK) (newspapers designated by the CSRC for information

disclosure) during the Reporting Period.

4. The Annual Report disclosed in other securities markets.

The above-mentioned documents available for reference are all kept in the Secretariat of the Board

of Directors of the Company and the Shenzhen Stock Exchange.This Report has been prepared in both Chinese and English. Should there be any discrepancies or

misunderstandings between the two versions the Chinese version shall prevail.

4Changchai Company Limited Annual Report 2021

Definitions

Term Definition

“Changchai” the “Company” or Changchai Company Limited and its consolidated

“we” subsidiaries except where the context otherwise requires

Changchai Benniu Changzhou Changchai Benniu Diesel Engine Fittings Co.Ltd.Changchai Wanzhou Changchai Wanzhou Diesel Engine Co. Ltd.Horizon Investment Changzhou Horizon Investment Co. Ltd.Horizon Agricultural Equipment Changzhou Changchai Horizon Agricultural EquipmentCo. Ltd.Changchai Robin Changzhou Fuji Changchai Robin Gasoline Engine Co.Ltd.Xingsheng Real Estate Management Changzhou Xingsheng Real Estate Management Co. Ltd.Changchai Machinery Jiangsu Changchai Machinery Co. Ltd.RMB RMB’0000 Expressed in the Chinese currency of Renminbi expressedin tens of thousands of Renminbi

The “Reporting Period” or “CurrentPeriod” The period from 1 January 2021 to 31 December 2021

5Changchai Company Limited Annual Report 2021

Part II Corporate Information and Key Financial Information

I Corporate Information

Changchai

Stock name Stock code 000570 200570

Changchai-B

Stock exchange for stock listing Shenzhen Stock Exchange

Company name in Chinese 常柴股份有限公司

Abbr. 苏常柴

Company name in English (if any) CHANGCHAI COMPANYLIMITED

Abbr. (if any) CHANGCAHI CO.LTD.Legal representative Shi Xinkun

Registered address 123 Huaide Middle Road Changzhou Jiangsu China

Zip code 213002

Office address 123 Huaide Middle Road Changzhou Jiangsu China

Zip code 213002

Company website http://www.changchai.com.cn

Email address cctqm@public.cz.js.cn

II Contact Information

Board Secretary Securities Representative

Name He Jianjiang

123 Huaide Middle Road

Address

Changzhou Jiangsu China

Tel. （86）519-68683155

Fax （86）519-86630954

Email address cchjj@changchai.com

III Media for Information Disclosure and Place where this Report Is Lodged

Newspapers designated by the Company for

Securities Times Ta Kung Pao (HK)

information disclosure

Website designated by CSRC for publication of

http://www.cninfo.com.cn

this Report

Board Secretariat of the Company and the Shenzhen

Place where this Report is lodged

Stock Exchange

IV Change to Company Registered Information

Unified social credit code 91320400134792410W

6Changchai Company Limited Annual Report 2021

Change to principal activity of the

No change

Company since going public

On 22 November 2018 the State-owned Assets Supervision and

Administration Commission of Changzhou Municipal People’s

Every change of controlling

Government transferred its entire holdings of 170845236 shares in the

shareholder since incorporation

Company (a stake of 30.43%) to Changzhou Investment Group Co.Ltd. for no compensation. These shares are non-restricted public shares.V Other Information

The independent audit firm hired by the Company:

Name Gongzheng Tianye Certified Public Accountants LLP

Office address Yingtong Commerce Building Changzhou Jiangsu China

Accountants writing signatures Wang Wenkai Qin Zhijun

The independent sponsor hired by the Company to exercise constant supervision over the Company in the

Reporting Period:

√ Applicable □ Not applicable

Name Office address Representatives Supervision period

10/F China Industrial

China Industrial Securities Plaza 36 Wang Lingxiao Li 5 July 2021-31

Securities Co. Ltd. Changliu Road Pudong Lihong December 2022

New District Shanghai

6/F Donghai Securities

Donghai Securities Co. Plaza 1928 Dongfang 5 July 2021-31

Wang Jiangqin Xu Qin

Ltd. Road Pudong New District December 2022

Shanghai

The independent financial advisor hired by the Company to exercise constant supervision over the Company in

the Reporting Period:

□ Applicable √ Not applicable

VI Key Financial Information

Indicate by tick mark whether there is any retrospectively restated datum in the table below.□ Yes √ No

2021-over-2020

202120202019

change (%)

Operating revenue (RMB) 2452430515.60 2296464711.24 6.79% 2045820801.10

Net profit attributable to

the listed company’s 103006232.54 52432443.05 96.46% 24966526.85

shareholders (RMB)

Net profit attributable to

the listed company’s

5329092.8725483147.57-79.09%14405485.64

shareholders before

exceptional gains and

7Changchai Company Limited Annual Report 2021

losses (RMB)

Net cash generated

from/used in operating -266323779.30 251796654.53 -- -20325189.56

activities (RMB)

Basic earnings per share

0.16570.093477.41%0.0445

(RMB/share)

Diluted earnings per share

0.16570.093477.41%0.0445

(RMB/share)

Weighted average return

3.86%2.40%1.46%1.21%

on equity (%)

Change of 31

December 2021

31 December 31 December

31 December 2021 over 31

20202019

December 2020

(%)

Total assets (RMB) 4860382961.26 3952954464.45 22.96% 3488820324.60

Equity attributable to the

listed company’s 3077550018.33 2273349347.02 35.38% 2110892767.58

shareholders (RMB)

Indicate by tick mark whether the lower of the net profit attributable to the listed company’s shareholders before

and after exceptional gains and losses was negative for the last three accounting years and the latest independent

auditor’s report indicated that there was uncertainty about the Company’s ability to continue as a going concern.□ Yes √ No

Indicate by tick mark whether the lower of the net profit attributable to the listed company’s shareholders before

and after exceptional gains and losses was negative.□ Yes √ No

VII Accounting Data Differences under China’s Accounting Standards for Business

Enterprises (CAS) and International Financial Reporting Standards (IFRS) and Foreign

Accounting Standards

1. Net Profit and Equity under CAS and IFRS

□ Applicable √ Not applicable

No difference for the Reporting Period.

2. Net Profit and Equity under CAS and Foreign Accounting Standards

□ Applicable √ Not applicable

No difference for the Reporting Period.

8Changchai Company Limited Annual Report 2021

3. Reasons for Accounting Data Differences Above

□ Applicable √ Not applicable

VIII Key Financial Information by Quarter

Unit: RMB

Q1 Q2 Q3 Q4

Operating revenue 774218489.69 722951966.11 484183670.58 471076389.22

Net profit attributable to the

24571254.83104617810.77-23478352.18-2704480.88

listed company’s shareholders

Net profit attributable to the

listed company’s shareholders

23604960.003555454.58-9073885.20-12757436.51

before exceptional gains and

losses

Net cash generated from/used in

-184484392.4591930272.39-223631620.0549861960.81

operating activities

Indicate by tick mark whether any of the quarterly financial data in the table above or their summations differs

materially from what have been disclosed in the Company’s quarterly or interim reports.□ Yes √ No

IX Exceptional Gains and Losses

√ Applicable □ Not applicable

Unit: RMB

Item 2021 2020 2019 Note

Gain or loss on disposal of

non-current assets (inclusive

155515.49263408.531914137.47

of impairment allowance

write-offs)

Government grants through

profit or loss (exclusive of

government grants

consistently given in the

4268950.187763215.655312295.51

Company’s ordinary course of

business at fixed quotas or

amounts as per governmental

policies or standards)

Capital occupation charges on

non-financial enterprises that 344842.86 536504.84

are recognized in profit or loss

Gain or loss on fair-value Increase in the fair

changes on held-for-trading 114738153.54 27526935.85 -49255.00 value of wholly-owned

financial assets and liabilities subsidiary Horizon

9Changchai Company Limited Annual Report 2021

& income from disposal of Investment’s interests

held-for-trading financial in Jiangsu Liance

assets and liabilities and Electromechanical

available-for-sale financial Technology Co. Ltd.assets (exclusive of the and Guilin Stars

effective portion of hedges Science and

that arise in the Company’s Technology Co. Ltd.ordinary course of business) as well as of the

Company’s interest in

Jiangsu Horizon New

Energy Technology

Co. Ltd.Impairment of receivables

tested separately is ready to be 147611.25

rolled back

Non-operating income and

2400863.71-1571453.49375943.68

expense other than the above

Reversed portions of

impairment allowances for

entrustment loans which are 4000000.00

tested individually for

impairment

Less: Income tax effects 24027164.56 7122148.63 1521028.42

Non-controlling

6789.94255505.297556.87

interests effects (net of tax)

Total 97677139.67 26949295.48 10561041.21 --

Particulars about other items that meet the definition of exceptional gain/loss:

□ Applicable √ Not applicable

No such cases for the Reporting Period.Explanation of why the Company reclassifies as recurrent an exceptional gain/loss item listed in the Explanatory

Announcement No. 1 on Information Disclosure for Companies Offering Their Securities to the

Public—Exceptional Gain/Loss Items:

□ Applicable √ Not applicable

No such cases for the Reporting Period.

10Changchai Company Limited Annual Report 2021

Part III Management Discussion and Analysis

I Industry Overview for the Reporting Period

We are a manufacturer of internal combustion engines and fittings in general equipment manufacturing. According

to the classification of fuel used internal combustion engines are mainly divided into diesel engines and gasoline

engines. Our diesel engines and gasoline engines are mainly used in non-road mobile machinery fields such as

agriculture and engineering represented by tractors plant protection machinery and small construction machinery.

(1) Basic information on the industry

The internal combustion engine is an important support for China's manufacturing industry security energy

security and national defense security and an important basic industry of national economy and national defense

construction. The internal combustion engine is the most power-dense thermally efficient and widely used heat

engine power unit. For some time to come the internal combustion engine will still be the dominant power for

automobiles construction machinery agricultural machinery ships and generator sets motorcycles garden

machinery and military equipment.In order to implement the national overall development strategy of energy conservation emission reduction

transformation and upgrading the internal combustion engine industry and agricultural machinery industry will

strengthen independent innovation and research and development accelerate the construction of a common basic

technology platform optimize the construction of the upstream and downstream industry chain implement

intelligent manufacturing and actively carry out international exchange and cooperation to accelerate the

realization of industrial technology upgrading.

(2) Development pattern and trend of the industry

China's diesel engine and gasoline engine industries present a pattern of multiple competitions. As the state adopts

increasingly strict environmental protection policy and the emission standards continue to upgrade especially as

China VI emission regulations for gasoline engines and China IV emission regulations for non-road mobile

machinery diesel engines are or will be implemented the core technology and key parts of internal combustion

engines will be rapidly developed and applied and the research development promoting and application of

environmentally friendly and efficient diesel engines and gasoline engines will become the mainstream trend

which promotes the wide use of the fuel injection system high-efficiency supercharger and high-efficiency

after-treatment. In the new normal the internal combustion engine industry and agricultural machinery industry

will improve the industry's capability of independent innovation support the whole machine development and

organize and implement green manufacturing and intelligent manufacturing so as to improve the overall strength

of the industry. The market share of diesel and gasoline engines is gradually concentrated in a few large-scale

enterprises with technical and capital strength.The present development trend of internal combustion engine industry is as follows: (1) energy saving and

emission reduction; (2) intelligent manufacturing; (3) lightweight. Medium- and low-end internal combustion

engines with low technical content and low added value will be gradually squeezed out of the market. The

upgrade of emission standards and the market's demand for high-end products will eliminate those small

enterprises with low level of research and development or less technology reserves. The industry leaders will

show the trend of increasing market share and rising gross profit margin center and have the power to fix the

market price of core products.

(3) Sales of internal combustion engine industry in 2021

11Changchai Company Limited Annual Report 2021

The total sales of internal combustion engines in 2021 were 50473600 units an increase of 7.82% compared to

2020 and 6.97% compared to 2019. The total power for the year was 2752177900 kilowatts up 5.71%

year-on-year. The total sales of diesel engines for the year were 6108400 units down 3.67% year-on-year.Specifically 1048100 engines for construction machinery 1464800 engines for agricultural machinery 40200

engines for shipborne machinery and 317500 engines for electricity generation were sold. The sales of gasoline

internal combustion engines were 44350600 an increase of 9.67% year-on-year. The overall situation of gasoline

engines was good. Since September the automotive market which accounts for a larger proportion has gradually

rebounded leading to an overall improvement in the industry. However due to the contradiction between supply

and demand of raw materials recurrent epidemics and other factors the market demand was still suppressed. Also

diesel engines have decreased year-on-year for eight consecutive months.In terms of the segments of the internal combustion engine market in 2021 1135800 units for construction

machinery were sold up 12.64% year-on-year; 5369200 units for agricultural machinery were sold up 27.44%

year-on-year; 40200 units for shipborne machinery were sold up 19.69% year-on-year; 1547300 units for

generator sets were sold up 30.24% year-on-year; 2498800 units for garden machinery were sold up 18.35%

year-on-year. Engines for generator sets and agricultural machinery performed well both with an increase of

around 30%. Construction shipborne and garden machinery also grew by 10-20%.II Principal Activity of the Company in the Reporting Period

1. Principal Operations of the Company

We mainly specialize in the R&D manufacture and sales of diesel engines under the brand "Changchai" and

gasoline engines under the brand "Robin". Our products are mainly used in agricultural machinery small

construction machinery light commercial vehicles generator sets and shipborne machinery and other fields

closely related to people's livelihood.In the Reporting Period there were no major changes in the Company's core business and main products.

2. Main Products of the Company

Our main products are divided into two categories: diesel engines and gasoline engines. The details are as follows:

Main Product Application

Graphic display Product description

products features fields

Our diesel engine products include

single-cylinder diesel engines and

High power low Agricultural

multi-cylinder engines covering

oil consumption machinery

power range from 1.62kW to

low noise construction

Diesel 117.6kW and cylinder diameters from

compact machinery

engine 65mm to 135mm with one or more

structure low generator sets

cylinders. Besides sale in domestic

emission good shipborne

market our diesel engines are sold to

reliability machinery

Southeast Asia South America the

Middle East and Africa.

12Changchai Company Limited Annual Report 2021

Our gasoline engines are mainly

general-purpose small gasoline

engines covering the power range Simple structure Agricultural

Gasoline from 1.5kW to 7.0kW. Besides sale in good reliability machinery small

engine domestic market our gasoline engines easy construction

are sold to Southeast Asia the Middle maintenance machinery

East Europe and America Africa

Japan and other countries and regions.

3. Major Business Models

(1) R&D model

We have established an innovative technology management system for internal combustion engine based on

market demand and forward-looking technologies. Prior to the new products or new technologies development

the marketing department first conducts market assessment and customer research and then initiates a project

according to the forecasted market demand; the technology center conducts development according to the project

materials and collects feedback information from the market and customers in real time during the development

process to ensure technology leadership and product suitability.

(2) Purchasing model

We adopt the "purchase-to-order" purchasing model. The ERP system converts the sales orders the sales plan

developed by the sales department and the production plan drawn up by the production department into the

demand of parts needed and the purchasing department organizes the purchase according to such demand.Meanwhile the purchasing department makes a plan to guide parts procurement according to the sales

department's sales plan and provide it to the supplier and urge the supplier to prepare for the goods.

(3) Production model

We adopt the "make-to-order" production management model. The sales department makes sales plans for

different stages according to the orders in hand sales data in previous years market demand judgment and

feedback of existing customers' purchasing intentions. The Company's production department makes the

production plan according to the sales orders displayed in the ERP system the sales plan made by the sales

department and the reserve inventory demand and organizes the production task in strict accordance with the plan.During the production process the quality assurance department arranges regular inspection to ensure the product

quality.

(4) Sale model

We adopt the sales model of "direct selling + distribution" i.e. the direct selling model for the main engine factory

and the distribution model for the individual circulation market represented by farmers and overseas market.

4. The Company's position in the market

We mainly specialize in the R&D manufacture and sales of diesel engines under the brand "Changchai" and

gasoline engines under the brand "Changchai Robin". Up to now we have successfully developed a number of

advanced core technologies with independent intellectual property rights. In terms of diesel engine according to

the statistics of China Internal Combustion Engine Industry Association (CICEIA) as the largest small- and

medium-sized single-cylinder diesel engine manufacturer in the agricultural machinery industry of China we have

maintained a high market share of single-cylinder engines and our market share of single-cylinder diesel engines

of some power ranges has ranked first in China. For many years in the process of achieving steady economic

development of the enterprise we developed in a sound manner and cultivated the "Changchai" brand a famous

small diesel engine brand of China with independent intellectual property rights.

5. Key Performance Drivers

13Changchai Company Limited Annual Report 2021

(1) National policy driver

In recent years various departments of the state have introduced a series of preferential policies to encourage the

development of internal combustion engine industry. In terms of agricultural machinery the central government

has taken solving the problems relating to "agriculture rural areas and farmers" as the top priority of the work of

the Party and the government and issued a series of policies to benefit farmers creating a good atmosphere for

promoting the development of agriculture and economy and society in rural areas; in terms of construction

machinery the strategy of "western development" the "eight vertical and eight horizontal" high-speed railway

network plan and the policy of "new rural construction" have all created a good policy environment for the

application of internal combustion engine in downstream construction machinery.

(2) Industrial chain synergy empowers the sustainable development of the Company

We have built our own casting manufacturing and processing plants to meet the use requirements of some diesel

engine parts. In terms of production and quality we have formed a significant synergy with its own internal

combustion engine assembly team. Our casting manufacturing team and internal combustion engine assembly

team work together to form a mutually reinforcing positive feedback loop to assist the Company in integrating the

internal combustion engine industry chain and building differentiated industry barriers. In terms of collaborative

production the reduction of external purchase is of great significance for the Company to reduce process flow

reduce intermediate loss improve production efficiency shorten delivery time and increase purchasing bargaining

power. In terms of quality coordination the self-built foundry can improve our quality control of parts to improve

the yield and reliability of internal combustion engines.

(3) Stable and efficient R&D team

We have experienced technical management team and perfect technical support team. Our key technical personnel

and R&D management personnel have been engaged in internal combustion engine R&D design production and

manufacturing for a long time. With profound professional knowledge and rich practical experience they can

make strong forward-looking and scientific judgment in the market direction and technical route. Also we have

established an effective training mechanism to foster talented persons for the follow-up R&D.

(4) Well-known brand with many well-known customers

The Company formerly known as Changzhou Diesel Engine Factory is a national industrial enterprise with a

history of a hundred years and one of the earliest professional internal combustion engine manufacturers in China.Our diesel and gasoline engines as power sources of agricultural machinery construction machinery and

commercial vehicles show excellent performance in power range reliability power per litre noise control and

emission standards and have been recognized by customers. We maintained a long-term partnership with major

customers with cumulative partnership time exceeding 15 years. Many main engine plant customers of the

Company are well-known enterprises in the agricultural machinery industry with their market shares being at the

forefront of the market.III Core Competitiveness Analysis

1. Advantages in Brand

Changchai is a national industrial enterprise with a history of over one hundred years. It is one of the earliest

professional manufacturers of internal combustion engines in China. The brand "Changchai" is the earliest

domestic trademark of production goods known as China's well-known trademarks. The diesel engine of

"Changchai" brand is China's brand-name product. The enterprise has been certified by ISO9001 and IATF16949

quality systems ISO14001 environmental management system IATF16949 automotive product quality

management system and accessed to the national export-free enterprise qualification. Changchai was honorably

14Changchai Company Limited Annual Report 2021

ranked among “the Top One Hundred Chinese Enterprises in Engineering Industry” and “China PacesetterEnterprise of Industrial Industry” for several times and was awarded the honorary title of “State-level Enterpriseof Observing Contracts and Keeping Promise” “China's Agricultural Machinery Parts and Components LeadingEnterprises” “China's Agricultural Machinery AAA Credit Enterprise” “Quality Management Excellence Awardof Jiangsu Province” and “Mayor Quality Award of Changzhou City”. The Company has been among the 10

users’ most satisfied leading brands in “Jing Geng” competition for many years. In 2021 the Company was

awarded honorary titles such as National Top 100 Enterprises of Machinery Industry National Demonstration

Enterprise of Product and Service Quality Integrity National Quality Leader of Internal Combustion Engine

Industry National Quality Leading Brand of Internal Combustion Engine Industry Top 100 Innovative

Enterprises of Jiangsu Province Demonstration Institution of Intelligent Agricultural Machinery Manufacturing of

Jiangsu Province "Five-star Enterprise in the Cloud" of Jiangsu Province. For many years in the process of

achieving steady economic development of the enterprise we developed in a sound manner and cultivated the

“Changchai” brand a famous small diesel engine brand of China with independent intellectual property rights.

2. Advantages in Technology

The Company has a state-level technology center and post-doctoral research station and a research center of small

and medium-power internal combustion engine engineering and technology in Jiangsu Province. Currently it is

mainly engaged in production of small and medium-power single-cylinder and multi-cylinder diesel engine. It has

a complete product range a wide power level coverage a high reputation and intellectual property rights for its

main products. During the Reporting Period two QC achievements won the first and second prizes of the

Achievements of 2021 Excellent National Quality Control Team's Activity of National Machinery Industry the

4G33V16 diesel engine was awarded the title of National Machinery Industry Customer Satisfaction Product the

project of Key Technology and Equipment for Design and Manufacture of Low Friction Functional Surface of

Power Assembly won the second prize of Science and Technology Award of Jiangsu Province the 4G33T and

4G33V16 diesel engines were recognized as High-tech Products of Changzhou City the project of Diesel

Outboard Engine Power and Assembly Development was listed in Science and Technology Plan of Changzhou

City in 2021 and the project of Development of Lightweight Low Emission Diesel Engine of Common Rail

Series won the third prize in the city's innovation and entrepreneurship competition in 2021. During the Reporting

Period a total of 22 patents were declared and 19 patents were granted. Currently the Company has a total of 152

patents granted by authorities at home and abroad including 12 invention patents.

3. Advantages in Marketing

Changchai has built up a sales service network covering the whole country with 5 sales business units 26 sales

service centers and 709 designated maintenance stations. In addition in order to meet the National Emission

Standard IV for Non-Road Vehicles and provide better after-sales service for customers a service monitoring

platform with Changchai characteristics has been put in place. With a perfect diesel sales service network system

the Company is able to provide high quality efficient and timely services for customers.IV Core Business Analysis

1. Overview

In 2021 in face of complex and severe situations such as adjustments to the agricultural machinery subsidy policy

recurrent domestic and overseas epidemics price increase of raw materials impact on the supply chain and

industry chain and shrinking market demand the Company focused on the implementation of annual policy and

target and promoted work in all respects with the main line of "strengthening the main business accelerating

15Changchai Company Limited Annual Report 2021

transformation expanding the areas and improving quality and efficiency". The Company maintained good

economic operation achieved good business performance and won a series of honors by focusing on technology

innovation and quality improvement and adhering to the dual drive by main business and capital operation.During the Reporting Period the Company sold 749300 diesel engines gasoline engines and related generator

sets including 153000 gasoline engines generating total sales revenue of RMB2452 million an increase of

6.79% year-on-year.

In terms of product development and support the Company made efforts in segments developed the CC12M

diesel engine for the motorcycle area and met the emission requirements through the plan of common rail EGR

and DOC. Light power made a breakthrough in cold chain and construction machinery support and multiple

varieties of diesel engines completed the performance tests and reliability verification with orderly carrying and

supporting; in the area of shipborne generator sets carrying of new products was conducted in small batches. For

advantageous products adaptive quality improvement and optimization and development of supporting

components were carried out.In terms of market services the Company made multi-dimensional efforts in both internal and external markets

continuously optimized the distribution network actively responded to the foreign trade market environment and

implemented a dual-brand and integrated sales strategy for whole machines and accessories fully guaranteeing

the continuous growth of product sales. The market service satisfaction of 2021 was 85.36% a steady increase

year-on-year. The service response and timeliness during the farming season were basically the same as last year.A year-on-year increase in revenue from sales of accessories and oil was achieved.In terms of quality management the Company strictly enforced the quality responsibility system strengthened the

quality control process management and effectively reduced quality loss while improving product reliability. The

Company conducted quality improvement focusing on quality problems of key products and major market failure

problems improved the rapid response mechanism and procedure for batch problems and continuously reduced

the on-site zero-kilometer failure rate of the whole vehicle enterprise.In terms of internal management the Company continuously strengthened refined management and

comprehensively improved the efficiency of production operation and management. The Company made solid

efforts to reduce costs and cut expenses strengthened standardized normalized and institutionalized safety

management and continued to carry out the three-year action of special safety rectification of safety production

with an overall stable safety production situation. The Company strengthened environmental protection

rectification work. The environmental management was effective and the Company successfully passed the

ISO14001 environmental system supervision and review during the year.During the Reporting Period the Company's non-public share issuance project was successfully issued the raised

funds were remitted to the Company's special account for fund raising and underwent capital verification and the

additional shares were listed on July 5. Changchai Machinery the implementation entity of the relocation project

of light engines and casting in the fund-raising project is currently in the equipment installation and

commissioning stage and is expected to have conditions for pilot production in May 2022. The development

project of the diesel outboard engine for the innovation capacity building project of the technical center is

progressing smoothly. The reliability verification of the outboard engine assembly has been implemented and the

user carrying test of the prototype has been organized which was recognized by users. Small batch production has

been arranged to expand the user test and further expand the market of diesel outboard engine.

16Changchai Company Limited Annual Report 2021

2. Revenue and Cost Analysis

(1) Breakdown of Operating Revenue

Unit: RMB

20212020

As % of total As % of total

Change (%)

Operating revenue operating Operating revenue operating

revenue (%) revenue (%)

Total 2452430515.60 100% 2296464711.24 100% 6.79%

By operating division

Internal

combustion 2404119747.06 98.03% 2252479553.51 98.08% 6.73%

engines

Other 48310768.54 1.97% 43985157.73 1.92% 9.83%

By product category

Diesel engines 2241032641.05 91.38% 2112251290.73 91.98% 6.10%

Gasoline

149717934.826.10%132735777.755.78%12.79%

engines

Other 61679939.73 2.52% 51477642.76 2.24% 19.82%

By operating segment

Domestic 2038317678.97 83.11% 1922972122.74 83.74% 6.00%

Overseas 414112836.63 16.89% 373492588.50 16.26% 10.88%

By marketing model

Distribution 689413386.97 28.11% 617839609.20 26.90% 11.58%

Direct sales 1763017128.63 71.89% 1678625102.04 73.10% 5.03%

(2) Operating Division Product Category Operating Segment or Marketing Model Contributing over 10%

of Operating Revenue or Operating Profit

√ Applicable □ Not applicable

Unit: RMB

YoY change

YoY change YoY change

Operating Gross profit in gross

Cost of sales in operating in cost of

revenue margin profit margin

revenue (%) sales (%)

(%)

By operating division

Internal

240411974205193267

combustion 14.65% 6.73% 6.96% -0.18%

7.067.42

engines

By product category

Diesel 224103264 192549524 14.08% 6.10% 7.02% -0.74%

engines 1.05 5.19

17Changchai Company Limited Annual Report 2021

Gasoline 149717934. 128977618.

13.85%12.79%19.13%-4.58%

engines 82 86

By operating segment

203831767168540346

Domestic 17.31% 6.00% 6.15% -0.12%

8.970.00

414112836.402517677.

Overseas 2.80% 10.88% 10.93% -0.05%

6320

By marketing model

689413386.572431613.

Distribution 16.97% 11.58% 11.95% -0.27%

9743

176301712151548952

Direct sales 14.04% 5.03% 5.30% -0.22%

8.633.77

Core business data of the prior year restated according to the changed statistical caliber for the Reporting Period:

□ Applicable √ Not applicable

(3) Whether Revenue from Physical Sales Is Higher than Service Revenue

√ Yes □ No

Operating

Item Unit 2021 2020 Change (%)

division

Unit sales Unit 596279 627331 -4.95%

Diesel engines Output Unit 601253 657917 -8.61%

Inventory Unit 83563 78589 6.33%

Any over 30% YoYmovements in the data above and why:

□ Applicable √ Not applicable

(4) Execution Progress of Major Signed Sales and Purchase Contracts in the Reporting Period

□ Applicable √ Not applicable

(5) Breakdown of Cost of Sales

Unit: RMB

20212020

As % of As % of

Product Change

Item total cost total cost

category Cost of sales Cost of sales (%)

of sales of sales

(%)(%)

Diesel Raw 1659710451.07 79.61% 1526191466.63 78.24% 8.75%

engines materials

Diesel Labor cost 240110930.78 11.52% 222248951.31 11.39% 8.04%

engines

Diesel Depreciati 71198110.78 3.42% 71562851.51 3.67% -0.51%

engines on

18Changchai Company Limited Annual Report 2021

Diesel Energy 30044125.27 1.44% 34214195.38 1.75% -12.19%

engines

(6) Changes in the Scope of Consolidated Financial Statements for the Reporting Period

□ Yes √ No

(7) Major Changes to the Business Scope or Product or Service Range in the Reporting Period

□ Applicable √ Not applicable

(8) Major Customers and Suppliers

Major customers:

Total sales to top five customers (RMB) 1163820018.04

Total sales to top five customers as % of total sales of the

47.46%

Reporting Period (%)

Total sales to related parties among top five customers as % of

0.00%

total sales of the Reporting Period (%)

Information about top five customers:

Sales revenue contributed

As % of total sales

No. Customer for the Reporting Period

revenue (%)

(RMB)

1 Customer 1 562503236.06 22.94%

2 Customer 2 233708017.39 9.53%

3 Customer 3 157425933.38 6.42%

4 Customer 4 105465470.21 4.30%

5 Customer 5 104717361.00 4.27%

Total -- 1163820018.04 47.46%

Other information about major customers:

□ Applicable √ Not applicable

Major suppliers:

Total purchases from top five suppliers (RMB) 327640433.65

Total purchases from top five suppliers as % of total purchases

16.88%

of the Reporting Period (%)

Total purchases from related parties among top five suppliers

0.00%

as % of total purchases of the Reporting Period (%)

Information about top five suppliers:

Purchase in the Reporting As % of total purchases

No. Supplier

Period (RMB) (%)

1 Supplier 1 153851839.50 7.93%

2 Supplier 2 70110846.63 3.61%

3 Supplier 3 46115577.30 2.38%

19Changchai Company Limited Annual Report 2021

4 Supplier 4 29257550.55 1.51%

5 Supplier 5 28304619.67 1.46%

Total -- 327640433.65 16.88%

Other information about major suppliers:

□ Applicable √ Not applicable

3. Expense

Unit: RMB

Reason for any significant

2021 2020 Change (%)

change

Selling expense 117242290.32 128372278.62 -8.67%

Administrative

98890284.2287446195.7413.09%

expense

Finance costs 1203615.80 15768310.32 -92.37% Decreased exchange losses

R&D expenses 82390284.14 72258781.08 14.02%

4. R&D Investments

√ Applicable □ Not applicable

Major R&D Expected impact on the

Purpose Progress Specific objectives

project Company

Improving the

automation and

intelligence level of the

generator set After the

Developing a

Development enhancing the implementation of the

higher-performance

of 12KW performance and project the technology

silent inverter

diesel engine In progress reliability of the set and market

generator set to

silent inverter and achieving set competitiveness of the

meet market

generator set operation with low product will be

demand

noise and low fuel enhanced.consumption to meet

the emission

requirements.After the

implementation of the

Developing a Conducting structural

project the product will

higher-performance optimization of diesel

Development meet the requirements

light multi-cylinder engine components to

of V402 diesel In progress of non-road China IV

diesel engine that improve product

engine vehicle emission

meets the emission performance and

regulations the

requirements reliability.supporting

requirements of

20Changchai Company Limited Annual Report 2021

machinery and market

demand.Conducting major

design optimization of After the

Developing more the engine structure and implementation of the

efficient performance to improve project the product will

Development

environmentally the reliability fuel meet the requirements

of D15 diesel

friendly and In progress consumption emissions of non-road China IV

outboard

energy-saving and other indicators of vehicle emission

engine

diesel-powered the product so as to regulations and open up

products reach the advanced the market of ship

level of similar foreign machinery.products.After the

implementation of the

Improving the emission project the product

characteristics and meets the market

Developing

Development economic demand and makes the

efficient and

of characteristics of goods quality and

environmentally

diesel-electric In progress diesel-electric hybrid logistics efficiency of

friendly

hybrid diesel engines to the cold chain timely

diesel-powered

products enhance the energy safe and efficient

products

efficiency endurance providing a

and reliability. whole-procedure

temperature and quality

management solution.Conducting major

design optimization of

Development the structure and

Improving product

of a performance of the It meets the supporting

performance and

multi-cylinder diesel engine to requirements of various

developing

series of diesel improve the reliability types of small

multi-cylinder Completed

engines that fuel consumption agricultural machinery

diesel engines that

meet non-road emissions and other and broadens the

better meet

European V indicators of the market.emission standards

standards product so as to meet

the European V

emission standards.Development Development of Optimizing components It enriches the product

of control technology related to emission series meets the

single-cylinder of emission performance to improve supporting

Completed

air-cooled reduction and the reliability fuel requirements of

diesel engines single-cylinder consumption emissions non-road machinery

that meet air-cooled diesel and other indicators of and further expands and

21Changchai Company Limited Annual Report 2021

non-road engines that are the product so as to consolidates the market

European V more compliant meet the European V share.standards with emission emission standards.standards

Details about R&D personnel:

2021 2020 Change (%)

Number of R&D personnel 264 253 4.35%

R&D personnel as % of total employees 9.55% 8.84% 0.71%

Educational background of R&D personnel —— —— ——

Bachelor’s degree 117 117 0.00%

Master’s degree 13 13 0.00%

Age structure of R&D personnel —— —— ——

Below 30 34 32 6.25%

30~409598-3.06%

Details about R&D investments:

2021 2020 Change (%)

R&D investments (RMB) 82390284.14 72258781.08 14.02%

R&D investments as % of operating

revenue 3.36% 3.15% 0.21%

Capitalized R&D investments (RMB) 0.00 0.00 ---

Capitalized R&D investments as % of

total R&D investments 0.00% 0.00% ---

Reasons for any significant change in the composition of R&D personnel and the impact:

□ Applicable √ Not applicable

Reasons for any significant YoY change in the percentage of R&D expense in operating revenue:

□ Applicable √ Not applicable

Reasons for any sharp variation in the percentage of capitalized R&D expense and rationale:

□ Applicable √ Not applicable

5. Cash Flows

Unit: RMB

Item 2021 2020 Change (%)

Subtotal of cash generated from

1878728640.472281623334.91-17.66%

operating activities

Subtotal of cash used in

2145052419.772029826680.385.68%

operating activities

Net cash generated from/used in

-266323779.30251796654.53--

operating activities

Subtotal of cash generated from

385966151.68564355776.61-31.75%

investing activities

Subtotal of cash used in

851480343.34717612880.1118.54%

investing activities

Net cash generated from/used in -465514191.66 -153257103.50 --

22Changchai Company Limited Annual Report 2021

investing activities

Subtotal of cash generated from

711844747.7922000000.003135.66%

financing activities

Subtotal of cash used in

45328892.6527732890.3863.45%

financing activities

Net cash generated from/used in

666515855.14-5732890.38--

financing activities

Net increase in cash and cash --

-67537318.9183979542.30

equivalents

Explanation of why any of the data above varies significantly:

√Applicable□ Not applicable

The significant change in net cash flow from operating activities over the same period is mainly caused by the

increase in the proportion of bank acceptance bills in the payment for goods received by the company during the

reporting period and the support of large purchase payment for suppliers due to the rising price of raw materials

and the impact of the epidemic

The significant year-on-year change in net cash generated from/used in investing activities was primarily due to

the input of the Company’s raised funds to Changchai Machinery’s construction in progress and the use of certain

idle raised funds for cash management.The significant year-on-year change in net cash generated from/used in financing activities was primarily because

the Company raised a gross amount of RMB634999936.40 (net amount: RMB620665733.97) in a private

placement of 144318181 RMB-denominated ordinary shares (A-stock) during the Reporting Period.Reason for any big difference between the net operating cash flow and the net profit for this Reporting Period

√Applicable□ Not applicable

The significant difference between the net cash flow generated by the company's operating activities during the

reporting period and the annual net profit is mainly caused by the increase in the proportion of bank acceptance

bills and the increase of operating receivables in the payment for goods received by the company during the

reporting period.V Analysis of Non-Core Businesses

□ Applicable √ Not applicable

VI Analysis of Assets and Liabilities

1. Significant Changes in Asset Composition

Unit: RMB

31 December 2021 1 January 2021 Chang

e in

As % of As % Reason for any

percent

Amount total Amount of total significant change

age

assets assets

(%)

23Changchai Company Limited Annual Report 2021

Monetary

707966678.7414.57%760728222.8519.24%-4.67%

assets

Accounts

375209126.487.72%397154016.4910.05%-2.33%

receivable

Inventories 651083758.18 13.40% 606680340.55 15.35% -1.95%

Investment

44597255.210.92%46239326.031.17%-0.25%

property

Fixed assets 402915521.65 8.29% 454181555.68 11.49% -3.20%

Wholly-owned

subsidiary Changchai

Construction Machinery was in a

270305690.915.56%66502432.411.68%3.88%

in progress construction period

during the Reporting

Period.Increased discounted

bank acceptance

Short-term

73971466.65 1.52% 22000000.00 0.56% 0.96% notes that were undue

borrowings

at the end of the

Reporting Period.Contract

26864081.970.55%35944517.150.91%-0.36%

liabilities

2. Assets and Liabilities at Fair Value

√ Applicable □ Not applicable

Unit: RMB

Gain/loss

Cumulati Impairme

on

ve nt Purchased Sold in

fair-value

Beginning fair-value allowance in the the Other Ending

Item changes

amount changes for the Reporting Reporting change amount

in the

charged Reporting Period Period

Reporting

to equity Period

Period

Financial

assets

1.

Held-for-t

rading

financial

1150027748104184488995727902456428404053

assets 0.00

2.001.8144.7116.7149.76261.57

(derivativ

e financial

assets

exclusive)

24Changchai Company Limited Annual Report 2021

2.

Derivativ

e financial

assets

3. Other

debt

investmen

t

4.

Investmen

t in other 6851379 5953076 779877

0.000.000.000.00

equity 50.87 46.53 646.53

instrumen

ts

Subtotal

of 6966382 7481041 5953076 8448899 5727902 456428 118393

0.00

financial 22.87 1.81 46.53 44.71 16.71 49.76 0908.10

assets

Investmen

t property

Productiv

e living

assets

987329333750006414822590088.8-45642150398

Other 0.00 0.00

8.630.006.397849.76226.39

Total of 7953711 1085604 5953076 9090381 5733803 133432

0.000.00

above 61.50 11.81 46.53 71.10 05.58 9134.49

Financial

0.000.00

liabilities

Significant changes to the measurement attributes of the major assets in the Reporting Period:

□ Yes √ No

3. Restricted Asset Rights as at the Period-End

Item Ending carrying value Reasons

Security deposits associated with bank acceptance

Monetary assets 145564457.15

notes environment etc.House constructions 1760577.22Collateral for bank loan

Land use right 911388.42Collateral for bank loan

Machinery equipment 30560526.26Collateral for bank loan

Payment obligations in

61971466.65

relation to discounted notes

25Changchai Company Limited Annual Report 2021

that were undue

Undue transferred bill 72391302.15

payment obligation

Total 313159717.85 --

VII Investments Made

1. Total Investment Amount

√ Applicable □ Not applicable

Investments made in Reporting Investments made in same period

+/-%

Period (RMB) of last year (RMB)

160000000.00154786000.003.37%

2. Major Equity Investments Made in the Reporting Period

√ Applicable □ Not applicable

Unit: RMB

Profi

ts or

Prog losse

ress s of Invo

Shar Disc Disc

Inve Inve Capi as of Esti inve lvin

ehol Inve Type losur losur

Inv Main stme stme tal the mate stme g in

ding Part stme of e e

este busin nt nt reso bala d nt in laws

perc ner nt prod date inde

e ess meth amo urce nce inco the uit

enta term ucts (if x (if

od unt s shee me Rep or

ge any) any)

t ortin not

date g

Peri

od

26Changchai Company Limited Annual Report 2021

Inter Inter

nal nal

Jian

comb com

gsu

ustio busti

Cha

n 160 on The

ngc Capi

engin 000 engi inpu -18 26

hai tal Self- Lon

e 000. 100. Non ne t has 683 Febr 2019

Ma cont fund g-ter 0.00 Not

relate 00 00% e relat been 43.8 uary -004

chi ribut ed m

d ed mad 0 2019

ner ion

gener gene e

y

ator rator

Co.sets sets

Ltd.and and

parts parts

Tot 000 683

----------------0.00------

al 000. 43.8

000

3. Major Non-Equity Investments Ongoing in the Reporting Period

□ Applicable √ Not applicable

4. Financial Investments

(1) Securities Investments

√ Applicable □ Not applicable

Unit: RMB

Gain

/loss Accu

on mulaAcco Begi fair ted PurcInitia untin fair hase Sold

Gain

Varie Code Nam g nnin value in

/loss Endi Acco Fund

l

ty of of e of meas g chan

value d in the in ngchan the the carry untin inginves

secur secur secur urem

carry ges

ing in ges Repo

Repo

rting Repo ing g sourctmen

ity ity ity ent amo the recor rting Perio rting amo title e

t cost meth unt Repo ded Perio d Perio untod rting in d d

Perio equit

d y

Dom Inves

Foto 417 Fair 455 455 497

estic/ tmen Self-

6001 n 840 value 175 296 080

forei 0.00 0.00 0.00 0.00 t in fund

66 Moto 00.0 meth 000. 000. 000.

gn other ed

r 0 od 00 00 00

stock equit

27Changchai Company Limited Annual Report 2021

y

instr

ume

nts

Inves

tmen

Dom t in

Bank 427 Fair 127 936 136

estic/ other Self-

6009 of 860 value 764 360 422

forei 0.00 0.00 0.00 0.00 equit fund

19 Jiang 00.0 meth 000. 00.0 000.

gn y ed

su 0 od 00 0 00

stock instr

ume

nts

Held

Kailo -for-t

Dom

ng 200 Fair 382 -141 -141 241 radin

estic/ Self-

3009 High 012 value 821 457 457 363 g

forei 0.00 0.00 0.00 fund

12 Tech 68.0 meth 05.0 66.0 66.0 39.0 finan

gn ed

nolog 0 od 0 0 0 0 cial

stock

y asset

s

Held

-for-t

Dom Lianc

Fair 806 806 878 radin

estic/ e 720 720 Self-

6881 value 400 400 400 g

forei Tech 000 000 0.00 0.00 0.00 fund

13 meth 00.0 00.0 00.0 finan

gn nolog 0.00 0.00 ed

od 0 0 0 cial

stock y

asset

s

Held

-for-t

Dom

Fair radin

estic/ Lanti 160 160 128 128 289 Self-

6053 value g

forei an 744. 744. 255. 0.00 0.00 0.00 255. 000. fund

68 meth finan

gn Gas 76 76 24 24 00 ed

od cial

stock

asset

s

Stars Held

Dom Scien -for-t

Fair

estic/ ce 360 360 607 607 967 radin Self-

8328 value

forei and 000 000 500 0.00 0.00 0.00 500 500 g fund

85 meth

gn Tech 0.00 0.00 0.00 0.00 0.00 finan ed

od

stock nolog cial

y asset

28Changchai Company Limited Annual Report 2021

s

1155632726548726755

320181974932974442

Total -- 0.00 0.00 -- --

12.7849.89.2000.89.2339.

676400400

Disclosure date of the

announcement on the

board’s approval of N/A

the securities

investments

(2) Investments in Derivative Financial Instruments

□ Applicable √ Not applicable

No such cases in the Reporting Period.

5. Use of Raised Funds

√ Applicable □ Not applicable

(1) Overall Use of Raised Funds

√ Applicable □ Not applicable

Unit: RMB’0000

rais

ed

Total

fun

raised

Proporti ds

funds Use

Total Total on of that

Total with and

raised accumu total hav

raised altere Total owner

funds lative accumu e

Year Metho funds d raised ship

Total that have raised lative bee

for d of that have purpo funds chang

raised been funds raised n

fund-ra fund-ra been ses that have e of

funds used in with funds left

ising ising used durin not been unuse

the altered with unu

accumula g the used yet d

current purpose altered sed

tively Repor raised

period s purpose for

ting funds

s over

Perio

two

d

year

s

Non-pu Speci

634999257383257383377616

2021 blic 0.00 0.00 0.00 al 0.00

996.40601.02601.02395.38

offerin accou

29Changchai Company Limited Annual Report 2021

g nt for

deposi

ting

raised

funds

634999257383257383377616

Total -- 0.00 0.00 0.00 -- 0.00

996.40601.02601.02395.38

Explanation of the overall use of raised funds

On 17 December 2020 the Company received the Reply Concerning the Approval of the Non-public Offering of

Shares of Changchai Co. Ltd. (CSRC Permit [2020] No. 3374) from the China Securities Regulatory

Commission which approved the non-public offering of up to 168412297 shares of the Company. On June 11

2021 the subscribers of this non-public offering have fully remitted the subscription funds to the bank account

designated by the sponsor institution and the total amount of funds raised was RMB634999996.40. After the

capital verification by Gongzheng Tianye Accounting Firm (Special General Partnership) the Capital Verification

Report of the Funds Raised by the Non-public Issuance of Changchai Co. Ltd. (S.G.W [2021] B061) was issued.With the issuance expenses deducted the actual net funds raised were RMB620665733.97. On June 15 2021

the aforementioned raised funds were remitted to the special account set up by the Company for raised funds from

the non-public offering of shares. After the capital verification by Gongzheng Tianye Accounting Firm (Special

General Partnership) the Capital Verification Report of the Funds Raised by the Non-public Issuance of

Changchai Co. Ltd. (S.G.W [2021] B062) was issued. The raised funds have all been deposited in the special

account for the raised funds and a tripartite supervision agreement has been signed with the sponsor institution

and the account opening bank for the funds raised. There is no material difference between the tripartite

supervision agreement and the model tripartite supervision agreement of Shenzhen Stock Exchange and the

Company strictly complies with it when using the raised funds.

(2) Committed Projects of Raised Funds

√ Applicable □ Not applicable

Unit: RMB’0000

Whet

Invest

Committ Wheth her

ment Date Benef

ed er Whet there

Accumul progre when its

investme project Total The her are

ative ss as the recor

nt s have committe Adjusted investme the mater

investme of the projec ded

projects been d total nt amount estim ial

nt amount end of ts are durin

and altered investme investme during ated chang

as of the the ready g the

investme (inclu nt with nt amount the benefi es in

end of the Report for Repor

nt of ding raised (1) Reporting ts are the

Reporting ing their ting

excessive partial funds Period reach proje

Period (2) Period intend Perio

raised alterna ed ct

(3) = ed use d

funds tion) feasib

(2)/(1)

ility

Committed investment projects

Relocatio No 547667 547667 241071 241071 44.02 May Not Not No

30Changchai Company Limited Annual Report 2021

n project 100.00 100.00 542.28 542.28 % 2022 applic applic

of light able able

engines

and

casting

Innovatio

n

capacity

Dece Not Not

building 873329 729986 1259250 1259250

No 1.73% mber applic applic No

project of 00.00 00.00 .00 .00

2023 able able

the

technical

center

Subtotal

of

committe

63500062066524233072423307

d -- -- -- - -- --

000.00700.0092.2892.28

investme

nt

projects

Investment of excessive raised funds

Not applicable

63500062066524233072423307

Total -- -- -- - -- --

000.00700.0092.2892.28

Cases

and

reasons

for

failing to

reach the

planned

Not applicable

progress

or

predicted

return

(by

specific

projects)

Explanati

ons of

the

Not applicable

material

changes

in the

31Changchai Company Limited Annual Report 2021

project

feasibilit

y

Amount Not applicable

use and

use

progress

of

excessive

raised

funds

Impleme Not applicable

ntation of

location

changes

in the

investme

nt

projects

with the

raised

funds

Impleme Not applicable

ntation of

method

adjustme

nts to the

investme

nt

projects

with the

raised

funds

Early Applicable

investme Prior to the availability of the raised funds in order to ensure the smooth implementation of the

nt and investment projects with raised funds the Company used its own funds to invest in part of the

placemen investment projects with raised funds and paid part of the issuance expenses. As of June 17 2021 the

t cumulative amount of the Company's self-financing funds pre-invested in the investment projects

concerni with raised funds was RMB181803327.94 the amount of issuance expenses advanced was

ng the RMB2358490.56 totaling RMB184161818.50 and the proposed replacement amount was

investme RMB184161818.50. The capitals were verified by the Gongzheng Tianye Accounting Firm (Special

nt General Partnership) and the Verification Report on the Pre-investment of Self-financing Funds into

projects the Investment Project with Raised Funds and the Payment of Issuance Expenses by Self-financing

with the Funds of Changchai Co. Ltd. (S.G.W [2021] E1347) was issued on June 25 2021. On June 28 2021

32Changchai Company Limited Annual Report 2021

raised the Third Interim Meeting of the Board of Directors of the Company in 2021 deliberated and

funds approved the Proposal on Replacing the Funds Pre-invested in the Project and Advanced Issuance

Expenses with the Raised Funds agreeing to use the raised funds from the non-public offering of

shares to replace the self-financing funds totaling RMB184161818.50 that had been pre-invested in

the project prior to the availability of the raised funds. In addition Xingye Securities Co. Ltd. and

Donghai Securities Co. Ltd. issued a verification opinion on the use of raised funds to replace

self-financing funds that had been invested in advance in the projects with raised funds. For details

see the Announcement on the Use of Raised Funds to Replace Pre-invested Project Funds and

Advanced Issue Expenses (Announcement No. 2021-036) published on Cninfo

(http://www.cninfo.com.cn) on June 30 2021.Temporar Not applicable

y

replenish

ment of

working

capital

with the

idle

raised

funds

Surplus Not applicable

raised

funds for

project

impleme

ntation

and

reasons

for the

surplus

Use and

ownershi

p change

of Deposited in the special account for raised funds

unused

raised

funds

Problems On July 13 2021 the Fourth Interim Meeting of the Board of Directors of the Company in 2021

in the use deliberated and approved the Proposal on Changing the Implementation Entity of Some Investment

of raised Projects with Raised Funds agreeing to change the implementation entity of the Company's

funds investment projects with funds raised through non-public offering of shares the "relocation project of

and light engines and casting" from Changchai Machinery a wholly-owned subsidiary of the Company

disclosur to the parent company of Changchai Co. Ltd. The matter did not change the use and implementation

e or of the funds raised and was not a significant change in the investment projects with raised funds.

33Changchai Company Limited Annual Report 2021

other The "relocation project of light engines and casting" was originally independently constructed by

cases Changchai Machinery and operated independently after the construction was completed. Currently

the main project of Changchai Machinery has been completed and some of the equipment will be

relocated from the current light engine and casting base to Changchai Machinery successively. After

the equipment invested by Changchai Machinery is installed commissioned and formally put into

operation the implementation entity of the project will change to Changchai's parent company. Based

on the scale and brand effect of the listed company the aforementioned changes will be more

beneficial to the actual operation of the project in the future and will not have a significant impact on

the consolidated statements of the listed company.

(3) Altered Projects of Raised Funds

□ Applicable √ Not applicable

No such cases in the Reporting Period.VIII Sale of Major Assets and Equity Interests

1. Sale of MajorAssets

□ Applicable √ Not applicable

No such cases in the Reporting Period.

2. Sale of Major Equity Interests

□ Applicable √ Not applicable

IX Major Subsidiaries

√ Applicable □ Not applicable

Major fully/majority-owned subsidiaries and those minority-owned subsidiaries with an over 10% effect on the

Company’s net profit:

Unit: RMB

Relation

ship with Principal Register Total Net Operatin Operatin

Name the activity ed Net profitassets assets g revenue g profit

Compan capital

y

Productio

n of diesel

Changchai Subsidia 550630 189600 883736 229098 231236 231894

engine

Benniu ry 00.00 396.86 37.91 137.33 4.88 5.21

accessorie

s

Changchai Subsidia Diesel 850000 723422 499162 426293 491150. 386567.Wanzhou ry engine 00.00 32.67 15.92 79.24 73 27

34Changchai Company Limited Annual Report 2021

assembly

External

Horizon Subsidia investmen 400000 137604 111368 688308 516543

0.00

Investment ry t and 00.00 313.27 910.56 21.65 76.43

consulting

agricultur

al

Horizon machinery

Subsidia 100000 148301 -108451 143628 -457970 -457970

Agricultural product of

ry 00.00 91.37 07.80 72.77 1.60 1.60

Equipment rice

transplant

er etc.Gasoline

Changchai Subsidia 372500 119883 999314 149717 303583 322890

engines

Robin ry 00.00 552.55 61.70 934.82 5.66 6.53

assembly

Internal

combustio

n engine

Changchai Subsidia 300000 362508 296143 -242870 -186834

and 0.00

Machinery ry 000.00 931.98 655.39 7.63 3.80

related

accessorie

s

Real

Xingsheng

estate

Real Estate Subsidia 100000 635617 421744 585883 894857. 808767.managem

Managemen ry 0.00 5.89 0.40 5.76 18 74

ent

t

service

Subsidiaries obtained or disposed in the Reporting Period:

□ Applicable √ Not applicable

Other information about principal subsidiaries and joint stock companies:

Changzhou Horizon Investment Co. Ltd. (Horizon Investment) a wholly-owned subsidiary of the Company

reported a net profit of RMB51.6544 million in 2021 up 342.06% year on year. This is mainly because Jiangsu

Liance Electromechanical Technology Co. Ltd. (Liance Technology) where Horizon Investment owns a stake

went public on the SSE STAR Market in May 2021 and the Company’s interest in Liance Technology is

recognized as “financial assets at fair value through profit or loss”. It is also a result of the increased fair value of

equity interests held in Liance Technology and Guilin Stars Science and Technology Co. Ltd. during the

Reporting Period.X Structured Bodies Controlled by the Company

□ Applicable √ Not applicable

35Changchai Company Limited Annual Report 2021

XI Prospects

1. Development strategy of the Company

The Company’s development strategy is to base on farm machinery become stronger in the engine business

explore more markets and develop in a scientific way.The Company will make full use of the policy-based dividend of strong national support for agricultural

production and development of agricultural machinery to accelerate the technological upgrade of traditional

power products and also to achieve diversified development of the industry. The Company will accelerate the

technological upgrade of traditional power products and also achieve diversified development of the industry. The

Company will start refinancing projects in due course based on the capital demand and product planning. The

main development directions are as follows:

(1) Accelerating technological upgrading and area expansion for traditional products

First traditional products will be developed in the direction of intelligent and networked high-end products. Based

on the three characteristics of agricultural machinery products will have namely electronic networked and

intelligent the Company will promote the application of advanced technologies such as the Internet big data

artificial intelligence and new materials to product development and make the products with intelligent control

real-time monitoring and big data collection and analysis functions while pursuing energy saving and emission

reduction so as to not only enhance the technical strength of products and strengthen the existing advantageous

products but also pursue user satisfaction and make Changchai products appreciate in value.Second traditional products will be developed in the terminal direction. The diesel engine is an intermediate

product and a core product to develop in the terminal direction. At present the Company's main products are small

and medium power diesel engines and general gasoline engines the market of supporting facilities is mainly

distributed in agricultural machinery plant protection machinery ships and other non-road areas and also in the

automobile area. The upstream and downstream of the industry chain contain greater development space and

opportunities. Currently Changchai is focusing on generator sets outboard engines cold chains fishing boats

towers and other terminal areas with broad prospects. The Company can make full use of the capital platform of

the listed company to cut in at the right time through joint venture cooperation mergers and acquisitions

restructuring etc. to accelerate the extension of the industrial chain and build new competitive advantages.

(2) Promoting industrial transformation and development in the direction of combination with new energy

The unstoppable development of new energy has impacted internal combustion engine products but the

opportunity exists for a long time. While tapping the advantages of traditional industries internal combustion

engines should develop with the development of new energy as well. At present the Company has invested in

Jiangsu Horizon New Energy Technology Co. Ltd. through equity participation and invested in a project of

wet-process separator film for lithium batteries. In the future the Company will increase its efforts to explore new

energy areas such as lithium battery and hydrogen fuel and promote the development of the enterprise toward the

new energy industry through capital operation.

2. Operation plan for the Year 2022:

The Company will consolidate the traditional market of agricultural machinery explore the emerging area of

power pay close attention to quality to create fine products innovate management to highlight efficiency promote

the sound operation of the park and leverage capital to promote development. In 2022 sales revenue is expected

to be RMB2.3 billion and the Company will ensure that new products sales will exceed 10000 units.The above operation plan does not represent the profit forecast of Y2022 by the listed company and whether can

be realized depends on various factors on the changes of market conditions and the effort level of the management

team. There is a lot of uncertainty and investors should pay special attention on it.

36Changchai Company Limited Annual Report 2021

3. Possible future risks and countermeasures of the Company

(1) Market risk:

In recent years the agricultural industry has still been in a period of deep adjustment subject to continued low

food prices market demand saturation upgrades of China IV vehicle emission standards and other uncertainties.The user purchase demand is also changing from the original rigid demand to a stock-based renewal while the

reduction in user revenue has lengthened the renewal cycle. Meanwhile the prevalence of global trade

protectionism the spread of COVID-19 abnormal fluctuations in international financial markets and other factors

have brought some uncertainty to the global macroeconomic outlook which has an impact on the area of non-road

mobile machinery.Countermeasures: First the Company solidifies the traditional supporting fields and further expands the

Company's advantages in the field of agricultural machinery. Second the Company expands more possibilities for

applications in shipborne generator sets high-speed rice transplanters cold chain vehicles excavators and other

small construction machinery conducts in-depth research and development in new areas and development and

supporting of key products. Third the Company makes active use of the capital platform to push ahead capital

operation projects in a steady and orderly manner to serve the Company's development.

(2) Industrial risk:

In recent years the state advocates energy conservation and emission reduction. New energy power represented

by pure electric hybrid power and hydrogen fuel power has grabbed the market share of diesel engine to a certain

extent. At present new energy power is mainly used in vehicles. Its use in agricultural machinery is still facing

problems such as high cost and complex operating environment. However as breakthroughs have been made in

new energy battery technology the local application scenario of diesel engine may be replaced by new energy

power.Countermeasures: With regard to the layout of new energy industry the Company intensifies efforts in exploring

the new energy area and actively promotes project construction and development. Meanwhile the Company

makes proper efforts in product R&D and expands new development directions and supporting areas.

(3) The risk of raw material price fluctuations

The Company's raw material purchase price is mainly affected by factors such as macroeconomic cycle industrial

policy adjustment market supply and demand changes. Price fluctuations of raw materials may affect Company's

business performance.Countermeasures: By strengthening inventory and plan management cost control and other measures the

Company further improves our operating efficiency and reduce the upward pressure on costs.

(4) Foreign trade risk

Against the backgrounds of complex and changeable global economic environment the epidemic brings more

tough challenges to the operation of foreign trades. The export of products could be affected to some extent due to

unstable factors.Countermeasures: The Company actively responds to the foreign trade market environment implements the

dual-brand and integrated sales strategy for whole machines and accessories and seeks progress while

maintaining stability; the Company strengthens the maintenance and management of overseas key markets and

customers intensifies efforts in the development of emerging markets and new users and strives to improve the

sales of high value-added products.

(5) Talent risk:

The Company needs high-level talents highly skilled talents and lacks talents to help the Company improve its

operational efficiency and strengthen technological innovation to cope with the increasingly fierce market

competition and industry development trend. Therefore the demand for professional talents and senior

37Changchai Company Limited Annual Report 2021

management talents has increased significantly.Countermeasures: First the Company insists on taking the initiative to promote the implementation and

effectiveness of staff training and talent introduction. Second the Company strengthens the management of

compensation and benefits and improves the performance appraisal policy and compensation and benefits policy.Third the Company increases the training of talents and improves the career management system of employees.Fourth the Company promotes the informationization of human resource management and further improves the

efficiency of human resource management.XII Communications with the Investment Community such as Researches Inquiries and

Interviews during the Reporting Period

√ Applicable □ Not applicable

Index to

Place of Way of Type of Contents and materials main

Date of visit Visitor

visit visit visitor provided inquiry

information

Individual Customers and operation of

2021-12-29 EasyIR Other Individual EasyIR

investor Horizon New Energy

Individual Capacity of Horizon New

2021-12-29 EasyIR Other Individual EasyIR

investor Energy

Individual Zhenjiang Siyang equity

2021-12-27 EasyIR Other Individual EasyIR

investor bidding transaction follow-up

Individual Investment of the Company in

2021-12-27 EasyIR Other Individual EasyIR

investor the new energy industry

R&D progress of the hybrid

Individual

2021-12-26 EasyIR Other Individual power platform of the EasyIR

investor

Company

Individual Development plan of Horizon

2021-12-24 EasyIR Other Individual EasyIR

investor New Energy

Suggestions for synergistic

Individual development between the

2021-12-23 EasyIR Other Individual EasyIR

investor Company and the controlling

shareholder

Progress of the Company's

Individual

2021-12-23 EasyIR Other Individual participation in the equity EasyIR

investor

auction of Zhenjiang Siyang

Individual Capacity of Horizon New

2021-12-09 EasyIR Other Individual EasyIR

investor Energy

Individual

2021-12-01 EasyIR Other Individual Product R&D of the Company EasyIR

investor

Individual

2021-11-30 EasyIR Other Individual Product R&D of the Company EasyIR

investor

Individual

2021-11-23 EasyIR Other Individual Segment of the Company EasyIR

investor

38Changchai Company Limited Annual Report 2021

Individual Progress of the relocation

2021-11-22 EasyIR Other Individual EasyIR

investor project of the Company

Individual Customers of Horizon New

2021-11-22 EasyIR Other Individual EasyIR

investor Energy

Individual Application of products of the

2021-11-09 EasyIR Other Individual EasyIR

investor Company

Individual Construction progress of

2021-11-02 EasyIR Other Individual EasyIR

investor Horizon New Energy

Individual Capacity planning of Horizon

2021-11-01 EasyIR Other Individual EasyIR

investor New Energy

Capacity and construction

Individual

2021-10-28 EasyIR Other Individual progress of Horizon New EasyIR

investor

Energy

Individual Shareholders' shareholding of

2021-10-26 EasyIR Other Individual EasyIR

investor Horizon New Energy

Individual Shareholders' shareholding of

2021-10-25 EasyIR Other Individual EasyIR

investor Horizon New Energy

Development trend of the

Individual

2021-10-20 EasyIR Other Individual industry and development plan EasyIR

investor

of the Company

Company's participation in

Individual China International Exhibition

2021-10-20 EasyIR Other Individual EasyIR

investor on Internal Combustion

Engines and Parts

Capacity of Horizon New

Energy progress of the

Individual

2021-10-19 EasyIR Other Individual relocation project of the EasyIR

investor

Company and suggestions of

the official website

Capacity of Horizon New

Individual Energy progress of the

2021-10-19 EasyIR Other Individual EasyIR

investor relocation project of the

Company

Impact of climate and

Individual

2021-10-18 EasyIR Other Individual environment on the Company's EasyIR

investor

business development

Individual R&D of new energy

2021-10-15 EasyIR Other Individual EasyIR

investor agricultural machinery

Individual Applicability of new energy to

2021-10-14 EasyIR Other Individual EasyIR

investor the Company's products

Individual Results forecast release of the

2021-10-13 EasyIR Other Individual EasyIR

investor Company

Individual Suggestions for interaction

2021-10-13 EasyIR Other Individual EasyIR

investor between the secretary of the

39Changchai Company Limited Annual Report 2021

Board of Directors and

investors

Individual

2021-10-09 EasyIR Other Individual Company's products EasyIR

investor

Individual Suggestions for expansion of

2021-10-04 EasyIR Other Individual EasyIR

investor the Company's products

Suggestions for investment and

Individual cooperation in the agricultural

2021-09-30 EasyIR Other Individual EasyIR

investor machinery industry chain of the

Company

Development of the Company

Individual after the strategic

2021-09-30 EasyIR Other Individual EasyIR

investor reorganization of state-owned

capital and subsequent planning

Individual Company's generator set

2021-09-27 EasyIR Other Individual EasyIR

investor business

Individual Company's generator set

2021-09-27 EasyIR Other Individual EasyIR

investor business

Individual Company's generator set

2021-09-27 EasyIR Other Individual EasyIR

investor business

Individual Company's generator set

2021-09-24 EasyIR Other Individual EasyIR

investor business

Construction progress of the

Individual

2021-09-22 EasyIR Other Individual separator film project of EasyIR

investor

Horizon New Energy

Individual Suggestions for Company's

2021-09-13 EasyIR Other Individual EasyIR

investor development

Construction of the separator

Individual

2021-09-13 EasyIR Other Individual film project of Horizon New EasyIR

investor

Energy

Individual Suggestions for Company's

2021-09-09 EasyIR Other Individual EasyIR

investor development

Suggestions for Company

Individual

2021-09-09 EasyIR Other Individual transformation and EasyIR

investor

development

Individual Suggestions for Company's

2021-09-09 EasyIR Other Individual EasyIR

investor development

Construction and capacity of

Individual the product line of the separator

2021-09-09 EasyIR Other Individual EasyIR

investor film project of Horizon New

Energy

Individual Issuance time of A and B

2021-08-27 EasyIR Other Individual EasyIR

investor Shares of the Company

2021-08-18 EasyIR Other Individual Individual Suggestions for development of EasyIR

40Changchai Company Limited Annual Report 2021

investor the new energy industry

Operation status of the

Individual

2021-08-17 EasyIR Other Individual subsidiary Changchai EasyIR

investor

Machinery

Individual Technology reserve of the

2021-08-11 EasyIR Other Individual EasyIR

investor Company

Progress of the Company's

Individual

2021-07-28 EasyIR Other Individual relocation project and the EasyIR

investor

impact on the Company

Follow-up planning on the

Individual

2021-07-27 EasyIR Other Individual original base of the Company's EasyIR

investor

relocation project

Capital increase plan and

Individual capacity and product

2021-07-26 EasyIR Other Individual EasyIR

investor technology of the separator film

project of Horizon New Energy

Individual Equity structure of Horizon

2021-07-20 EasyIR Other Individual EasyIR

investor New Energy

Individual Application of the separator

2021-07-20 EasyIR Other Individual EasyIR

investor film of Horizon New Energy

Individual Investment of the Company in

2021-07-18 EasyIR Other Individual EasyIR

investor the new energy industry

Individual Customers of the separator film

2021-07-13 EasyIR Other Individual EasyIR

investor project of Horizon New Energy

Main businesses of the

Individual

2021-07-13 EasyIR Other Individual subsidiary Horizon Agricultural EasyIR

investor

Equipment

Reasons and progress of the

Individual

2021-07-02 EasyIR Other Individual relocation project of light EasyIR

investor

engines and casting

Individual Project results of the non-public

2021-06-29 EasyIR Other Individual EasyIR

investor offering of shares

Individual

2021-06-29 EasyIR Other Individual Number of shareholders EasyIR

investor

Individual Project of the separator film for

2021-06-27 EasyIR Other Individual EasyIR

investor lithium batteries

Individual Company's shareholding in

2021-06-27 EasyIR Other Individual EasyIR

investor Horizon New Energy

Individual Company's external

2021-06-21 EasyIR Other Individual EasyIR

investor cooperation

Individual Project of the separator film for

2021-06-17 EasyIR Other Individual EasyIR

investor lithium batteries

Individual Capacity and shareholders'

2021-06-12 EasyIR Other Individual EasyIR

investor shareholding of Horizon New

41Changchai Company Limited Annual Report 2021

Energy

Individual Operation status of Horizon

2021-06-11 EasyIR Other Individual EasyIR

investor New Energy

Individual Related relationship of the

2021-06-07 EasyIR Other Individual EasyIR

investor Company

Individual Project of the separator film for

2021-06-05 EasyIR Other Individual EasyIR

investor lithium batteries in operation

Progress of the project of the

Individual

2021-06-04 EasyIR Other Individual separator film for lithium EasyIR

investor

batteries

Individual Number of shareholders of the

2021-06-02 EasyIR Other Individual EasyIR

investor Company

Reasons for the Company's net

Individual

2021-05-30 EasyIR Other Individual income growth in the first EasyIR

investor

quarter of 2020 and 2021

Project of the non-public

Individual

2021-05-28 EasyIR Other Individual offering of shares of the EasyIR

investor

Company

Individual

2021-05-27 EasyIR Other Individual Investment of the Company EasyIR

investor

Individual Impact of raw material price

2021-05-27 EasyIR Other Individual EasyIR

investor increase

Issuance of the project of the

Individual

2021-05-27 EasyIR Other Individual non-public offering of shares of EasyIR

investor

the Company

Individual Company's shareholding in

2021-05-25 EasyIR Other Individual EasyIR

investor Horizon New Energy

Applicability of the separator

Individual

2021-05-24 EasyIR Other Individual film for lithium batteries to EasyIR

investor

sodium batteries

Individual

2021-05-19 EasyIR Other Individual Company's generator business EasyIR

investor

Individual Development of the Company's

2021-05-12 EasyIR Other Individual EasyIR

investor product electrification

Reasons for the location choice

Individual

2021-05-11 EasyIR Other Individual of Horizon New Energy's EasyIR

investor

subsidiary

Individual Mixed-ownership reform of the

2021-05-11 EasyIR Other Individual EasyIR

investor Company

Countermeasures of the

Individual

2021-05-11 EasyIR Other Individual Company for the price increase EasyIR

investor

of raw materials

Individual

2021-04-25 EasyIR Other Individual Company sales overview EasyIR

investor

42Changchai Company Limited Annual Report 2021

Individual

2021-04-21 EasyIR Other Individual Company's objectives EasyIR

investor

Support and help of Changzhou

Individual

2021-04-21 EasyIR Other Individual Investment Group to the EasyIR

investor

Company

Individual

2021-04-21 EasyIR Other Individual Company's objectives EasyIR

investor

Individual Company's purchase and

2021-04-21 EasyIR Other Individual EasyIR

investor storage of land plots

Individual

2021-04-15 EasyIR Other Individual Company's dividends EasyIR

investor

Investment and R&D of the

Individual

2021-04-08 EasyIR Other Individual Company in the new energy EasyIR

investor

industry

Individual Transformation and upgrading

2021-04-08 EasyIR Other Individual EasyIR

investor of the Company

Individual Company's purchase and

2021-04-08 EasyIR Other Individual EasyIR

investor storage of plants

Individual Company's production and

2021-04-08 EasyIR Other Individual EasyIR

investor operation status

Individual Q1 results forecast of the

2021-04-08 EasyIR Other Individual EasyIR

investor Company

Individual Project of the separator film for

2021-04-08 EasyIR Other Individual EasyIR

investor lithium batteries in operation

Individual Company's plan for disposal of

2021-04-08 EasyIR Other Individual EasyIR

investor Bank of Jiangsu shares

Individual Company's operation and

2021-03-30 EasyIR Other Individual EasyIR

investor dividends

Project progress of the

Individual

2021-03-12 EasyIR Other Individual non-public offering of shares of EasyIR

investor

the Company

Individual Supporting of agricultural

2021-03-05 EasyIR Other Individual EasyIR

investor products of the Company

Individual Agricultural products of the

2021-03-05 EasyIR Other Individual EasyIR

investor Company

Individual Investment of the Company in

2021-03-04 EasyIR Other Individual EasyIR

investor the new energy industry

Individual Investment of the Company in

2021-03-02 EasyIR Other Individual EasyIR

investor the new energy industry

Individual Operation measures of the

2021-03-01 EasyIR Other Individual EasyIR

investor Company

Individual Compensation and bonuses for

2021-02-25 EasyIR Other Individual EasyIR

investor Company's employees

2021-02-24 EasyIR Other Individual Individual Suggestions for Company's EasyIR

43Changchai Company Limited Annual Report 2021

investor development

Individual Suggestions for investment of

2021-02-22 EasyIR Other Individual EasyIR

investor the Company

Project progress of the

Individual

2021-02-22 EasyIR Other Individual non-public offering of shares of EasyIR

investor

the Company

Individual Impact of policies on products

2021-02-22 EasyIR Other Individual EasyIR

investor of the Company

Individual

2021-02-22 EasyIR Other Individual Company's profits in 2020 EasyIR

investor

Individual Impact of policies on the

2021-02-21 EasyIR Other Individual EasyIR

investor Company

Individual Sales of agricultural machinery

2021-02-21 EasyIR Other Individual EasyIR

investor of the Company

Individual Sales of diesel generator sets of

2021-02-21 EasyIR Other Individual EasyIR

investor the Company

Individual Number of shareholders of the

2021-02-19 EasyIR Other Individual EasyIR

investor Company

Individual Project of the separator film for

2021-02-18 EasyIR Other Individual EasyIR

investor lithium batteries in operation

Individual Company's external

2021-02-18 EasyIR Other Individual EasyIR

investor cooperation

Suggestions for the Company's

Individual

2021-02-03 EasyIR Other Individual external cooperation and EasyIR

investor

development

Individual Compensation and bonuses for

2021-02-03 EasyIR Other Individual EasyIR

investor Company's employees

Individual Information disclosure of the

2021-02-03 EasyIR Other Individual EasyIR

investor Company

Individual

2021-02-02 EasyIR Other Individual Business scope of the Company EasyIR

investor

Individual Suggestions for Company's

2021-01-25 EasyIR Other Individual EasyIR

investor development

Individual Investment of the Company in

2021-01-25 EasyIR Other Individual EasyIR

investor the new energy industry

Customers of the project of the

Individual

2021-01-22 EasyIR Other Individual separator film for lithium EasyIR

investor

batteries

Individual Number of employees of the

2021-01-22 EasyIR Other Individual EasyIR

investor Company

Operation and profits of the

Individual

2021-01-18 EasyIR Other Individual project of the separator film for EasyIR

investor

lithium batteries

2021-01-06 EasyIR Other Individual Individual Company's external EasyIR

44Changchai Company Limited Annual Report 2021

investor cooperation

Phase II Construction of the

Individual

2021-01-05 EasyIR Other Individual project of the separator film for EasyIR

investor

lithium batteries

Investment and equity

Individual

2021-01-05 EasyIR Other Individual participation of the Company in EasyIR

investor

Kailong High-tech

Individual Investment of the Company in

2021-01-05 EasyIR Other Individual EasyIR

investor the new energy industry

Phase II Construction of the

Individual

2021-01-05 EasyIR Other Individual project of the separator film for EasyIR

investor

lithium batteries

45Changchai Company Limited Annual Report 2021

Part IV Corporate Governance

I General Information of Corporate Governance

In the Reporting Period the Company was strictly in line with laws statutes such as Company Law Securities

Laws Code of Corporate Governance of Listed Companies Guide Opinion on Establishment of Independent

Director System by Listed Companies and Guidelines on Internal Controls of Listed Companies and so on

continuously perfected corporate governance established and accomplished internal management and control

system consistently and deeply put forward corporate governance activities so as to further normalized operation

of the Company raising corporate governance level laying a guard for steady and healthy development of the

Company protect legal rights and interests of the Company and all shareholders.The Company promulgated or revised a series of internal control system through all aspects of normal operation

and management activities in accordance with each national laws and regulations characteristics of the industry

operation and self-managing business and improved it continuously and finally formed a normative management

system. And formulated a series of management system process and standard covered each operation link and

level of the financial assets control human resources management quality environment management and internal

audit supervisor etc. which ensured all the work had rules to follow.Indicate by tick market whether there is any material incompliance with the applicable laws administrative

regulations and regulations issued by the CSRC governing the governance of listed companies.□ Yes √ No

No such cases in the Reporting Period.II The Company’s Independence from Its Controlling Shareholder and Actual Controller in

Asset Personnel Financial Affairs Organization and Business

The Company was independent from the controlling shareholder Changzhou Investment Group Co. Ltd in terms

of assets business personnel organization and financing with independent & complete business and capability to

operate independently.

1. Assets: The property rights relationship between the Company and the controlling shareholder is clear assets

are clearly defined and there are no funds assets and other resources being occupied or used without

compensation between them.

2. Personnel: The Company and the controlling shareholder are independent of each other in terms of labor

personnel and salary management and each has an independent management organization a sound management

policy and an independent personnel appraisal and assessment system.

3. Finance: The Company has set up a special finance department established an independent accounting system

and financial management policy opened an independent bank account and implemented independent accounting

and independent tax payments. There is no interference in the financial activities of the Company by the

controlling shareholder.

4. Institution: The Company has a complete and independent corporate governance structure and has established a

sound organizational system that meets its own production and operation needs which operates independently and

well and there is no subordinate relationship with the functional departments of the controlling shareholder.

5. Business: The Company has an independent and complete business system with independent and autonomous

46Changchai Company Limited Annual Report 2021

production and operational capability. The Company conducts related transactions reasonably on the principle of

independence.III Horizontal Competition

□ Applicable √ Not applicable

IV Annual and Special General Meetings Convened during the Reporting Period

1. General Meeting Convened during the Reporting Period

Investor

Date of the Disclosure

Meeting Type participation Resolution

meeting date

ratio

All proposals were approved.The 2020

Annual See Announcement No.Annual

General 32.04% 7 May 2021 8 May 2021 2021-028 on Resolutions of

General

Meeting the 2020 Annual General

Meeting

Meeting.The 1st All proposals were approved.Extraordinar Extraordina See Announcement No.

2 September 3 September

y General ry General 32.26% 2021-061 on Resolutions of

20212021

Meeting of Meeting the 1st Extraordinary General

2021 Meeting of 2021.

2. Special General Meetings Convened at the Request of Preferred Shareholders with Resumed Voting

Rights

□ Applicable √ Not applicable

V Directors Supervisors and Senior Management

1. General Information

Ending

Incumbent

Name Office title Gender Age Start of tenure End of tenure

/Former shareholding

(share)

Shi Chairman of the

Board Incumbent Male 58 18 October 2016 Up to now 0Xinkun

Zhang Director

Incumbent Male 56 18 October 2016 Up to now 0

Xin General Manager

Lin Tian Director Incumbent Male 59 17 December 2018 Up to now 0

47Changchai Company Limited Annual Report 2021

Director

Xu Yi Vice-general Incumbent Male 58 16 April 2020 Up to now 0

Manager

Director Chief

Jiang He Incumbent Male 50 16 April 2020 Up to now 0

Accountant

Yang

Director Incumbent Male 50 16 April 2020 Up to now 0

Feng

Wang Independent

Incumbent Male 59 16 April 2020 Up to now 0

Mancang director

Xing Independent

Incumbent Male 68 16 April 2020 Up to now 0

Min director

Zhang Independent

Incumbent Female 52 16 April 2020 Up to now 0

Yan director

Yin Vice-general

Incumbent Male 58 18 October 2016 Up to now 0

Lihou Manager

Xie

Vice-general

Guozhon Incumbent Male 53 16 April 2020 Up to now 0

Manager

g

Sun

Vice-general

Jianzhon Incumbent Male 50 16 April 2020 Up to now 0

Manager

g

Vice-general

He Manager and

Incumbent Male 43 18 October 2016 Up to now 0

Jianjiang Secretary of the

Board

He Chairman of the

Jianguan Supervisory Incumbent Male 58 17 December 2020 Up to now 0

g Committee

Lu

Zhonggu Supervisor Incumbent Male 55 18 October 2016 Up to now 0

i

Liu Yi Supervisor Incumbent Male 53 18 October 2016 Up to now 0

48Changchai Company Limited Annual Report 2021

Chen

Supervisor Incumbent Female 39 16 April 2020 Up to now 0

Lijia

Ge

Supervisor Incumbent Female 52 16 April 2020 Up to now 0

Jiangli

Total -- -- -- -- -- -- 0

Indicate whether any director supervisor or senior management resigned before the expiry of their tenure during

the Reporting Period.□ Yes √ No

Change of directors supervisors and senior management:

√ Applicable □ Not applicable

Type of

Name Office title Date of change Reason for change

change

Vice-general Appointed by the

He Jianjiang 13 December 2021

Manager Appointed Board

2. Biographical Information

Professional backgrounds major work experience and current duties in the Company of the incumbent directors

supervisors and senior management:

Shi Xinkun: Now he acts as vice-president of Changzhou Investment Group Co. Ltd. the Chairman of the Board

and Party Secretary in the Company and the Chairman of the Board in Jiangsu Horizon New Energy Technology

Co. Ltd.Zhang Xin: He successively took the posts of Sales Manager General Manager Assistant and vice-general

manager in our company. Now he acts as Director General Manager deputy Party Secretary of the Company and

executive director of Jiangsu Changchai Machinery Co. Ltd.Lin Tian: He successively worked as deputy director of enterprise development Dept. GM of investment

management Dept. II and I assistant president in Changzhou Investment Group Co. Ltd. Now he is the vice

president director of Changzhou Investment Group Co. Ltd. and the director of the Company.Xu Yi: successively served as the director and assistant to the GM of the Company’s technology center and

currently serves as the director and deputy GM of the Company.Jiang He: successively served as the accountant assistant to the minister and vice minister of the financial

department of the Company. He is currently a director chief accountant and minister of the financial department

of the Company.Yang Feng: successively served as the business manager of the Shanghai Investment Banking Department of

China Economic Development Trust and Investment Co. Ltd. business director of the investment banking

department of Orient Securities Co. Ltd. GM of and assistant chairman of AJ Securities’ investment banking

department operation management headquarters worked in the development finance department and investment

banking department and served as the EGM in the equipment group investment recommendation group NEEQ

business department and comprehensive group of CITIC Securities Co. Ltd. Currently serving as the director and

GM of Shanghai Linghe Asset Management Partnership (LP) Daiwa Securities China Co. Ltd. and the director

49Changchai Company Limited Annual Report 2021

of the Company.Wang Mancang: successively served as a teacher lecturer lecturer and professor in the Department of Finance of

the School of Economics and Management of Northwest University and currently serves as the director of the

Department of Finance of the School of Economics and Management of Northwest University and the director of

Institute of Public Economics counselor of Xi'an municipal government expert of the "financial group" of the

government decision advisory committee independent director of Xi'an Chenxi Aviation Technology Corp. Ltd.Shaanxi Construction Machinery Co. Ltd Chang'an International Trust Co. Ltd. Focuslight Technologies Inc.and the Company.Xing Min: successively served as secretary of the Party Committee and administrative assistant general manager

(AGM) of China National Heavy Machinery Corporation; secretary of the Party Committee and GM of China

National Machine Tool Sales and Technical Service Corporation (CNMTC); currently Secretary-General of China

Internal Combustion Engine Industry Association (CICEIA) director of ActBlue Co. Ltd. Independent Director

of Zhejiang Zhongjian Technology Co. Ltd. Jiangsu Yunyi Electric Co. Ltd. Weifu High-Technology Group

Co. Ltd. Zhejiang Xinchai Co. Ltd. and the Company.Zhang Yan: successively served as chief accountant of Changzhou Zhengda Certified Public Accountants Co.Ltd. executive deputy chief accountant of Jiangsu Gongzheng Certified Public Accountants Co. Ltd. currently

associate professor of Business School of Jiangsu University of Technology independent non-executive director

of S-Enjoy Service Group Co. Limited independent director of Jiangsu Changhai Composite Materials Co. Ltd.Wuxi SAHAT Electric Technology Co. Ltd. Jiangsu Tianmu Lake Tourism Co. Ltd. and the Company.Yin Lihou: He worked as Minister of Human Resources Department and General Manager Assistant. Now he acts

as Deputy General Manager of the Company and the Chairman of the Board of Changchai Robin.Xie Guozhong: successively acts as General Manager Assistant of the Company Supervisor and Secretary of

Party General Branch.Now he is Deputy GM of the CompanyGeneral Manager of the Sales Companyand

Chairman of the Board of Changchai Wanzhou.Sun Jianzhong: successively served as the director of the technical center and assistant to the general manager of

the Company. He is currently the deputy general manager of the Company.He Jianjiang: He successively acted as the Staff Member Assistant to the Chief and Deputy Chief of the

Investment and Development Department and Securities Representative of the Company. Now he is Deputy

General Manager Secretary of the Board and Chief of the Investment and Development Department of the

Company as well as Director & GM of Horizon Investment Director of Horizon Agricultural Equipment and

Changchai Wanzhou.He Jianguang: successively served as deputy chief of Design Section of Changzhou Diesel Engine Factory

engineer of Product Development Department deputy director of the Company’s Joint Venture Office deputy

director of Technology Center chief engineer director general manager vice chairman of Changzhou Diesel

Engine Factory a member of the Party committee secretary of the Discipline Inspection Commission and

supervisor of Changzhou Investment Group Co. Ltd. currently a member of the Party Committee of Changzhou

Investment Group Co. Ltd. and chairman of the board of supervisors of the Company.Chen Lijia: vice president and general manager of risk control legal department of Changzhou Investment Group

50Changchai Company Limited Annual Report 2021

Co. Ltd. and supervisor of the Company.Ge Jiangli: director and supervisor of Human Resources Department of the Company.Lu Zhonggui: Now he acts as Minister of political Department of the Company Office Director Secretary of

Organ Party General Branch as well as employee supervisor of the Company and Director of Xingsheng Real

Estate Management.Liu Yi: He successively took the posts of Assistant Minister of Enterprise Management Department. Now he acts

as Director of Audit Department and Employee Supervisor of the Company Supervisor of Changchai Wanzhou

Changchai Benniu Horizon Investment Horizon Agricultural Equipment Changchai Robin Changchai

Machinery and Xingsheng Real Estate Management.Offices held concurrently in shareholding entities:

√ Applicable □ Not applicable

Remuneration

Name Shareholding entity Office held in the

or allowance

shareholding entity Start of tenure

End of

tenure from theshareholding

entity

Changzhou Investment Vice president December

Lin Tian Yes

Group Co. Ltd. director 2017

Vice President

Changzhou Investment GM of Risk

Chen Lijia March 2018 Yes

Group Co. Ltd. Control Legal

Department

Changzhou Investment

Shi Xinkun Vice president No

Group Co. Ltd.He Changzhou Investment Member of the

January 2019 Yes

Jianguang Group Co. Ltd. Party Committee

Notes N/A

Offices held concurrently in other entities:

√ Applicable □ Not applicable

Remuneration or

Name Other entity Office held in theentity Start of tenure

End of

tenure allowance fromthe entity

Shi Jiangsu Horizon New Energy Chairman of the 19 November 2021

Xinkun Technology Co. Ltd. Board

No

Yang Feng Daiwa Securities (China) Co.Ltd. Managing Director 1 January 2021 Yes

Finance Department of School of

Wang Economics & Management Teacher 1 October 1996

Mancang Northwest University

Yes

Xi’an Government Consultant 1 October 2015

51Changchai Company Limited Annual Report 2021

Decision-making Advisory Finance group

1 April 2017

Committee of Xi’an Government leader

Shaanxi Securities Research

President 1 October 2017

Association

Chang'an International Trust Independent

1 July 2018

Co.Ltd. Director

Shaanxi Construction Machinery Independent

16 November 2018

Co. Ltd. Director

Xi’an Focuslight Technology Co. Independent

1 October 2018

Ltd. Director

Standing Vice

China Internal Combustion Engine

Chairman and 1 August 2008

Industry Association

Secretary-general

Full-time April

Tianjin University 1 June 2019

professor 2021

Independent 21 May

ZYNP Corporation 29 January 2016

Director 2021

Independent

Zhongjian Technology Co.Ltd 20 June 2017

Xing Min Director Yes

Independent

Jiangsu Yunyi Electronic Co.Ltd. 15 July 2019

Director

Weifu High-Technology Group Co. Independent

20 May 2021

Ltd. Director

Independent

Zhejiang Xinchai Co. Ltd. 6 December 2019

Director

ActBlue Co. Ltd. Director 22 November 2021

Associate

Jiangsu University of Technology 1 August 2008

professor

Jiangsu Changhai Composite Independent

16 February 2016

Materials Co. Ltd. Director

Independent

S-Enjoy Service Group Co.Zhang Yan non-executive 20 October 2018Limited Yes

director

Wuxi SAHAT Electric Technology Independent

2 November 2020

Co. Ltd. Director

Jiangsu Tianmu Lake Tourism Co. Independent

8 February 2021

Ltd. Director

Notes None

Punishments imposed in the recent three years by the securities regulator on the incumbent directors supervisors

and senior management as well as those who left in the Reporting Period:

□ Applicable √ Not applicable

52Changchai Company Limited Annual Report 2021

3. Remuneration of Directors Supervisors and Senior Management

Decision-making procedure determination basis and actual payments of remuneration for directors supervisors

and senior management:

In 2021 the monthly salaries of directors supervisors and senior executives in the Company were in line with the

stipulations of relevant salary management and grade standards and the benefits of the Company and assessment

results. Director Lin Tian and Supervisors He Jianguang and Chen Lijia obtained salaries in shareholders' entities.Remuneration of directors supervisors and senior management for the Reporting Period

Unit: RMB’0000

Total

Any

before-tax

Incumbent/For remuneration

Name Office title Gender Age remuneration

mer from related

from the

party

Company

Chairman of the

Shi Xinkun

Board Male 58 Incumbent

93.46 No

Director 93.46

Zhang Xin No

General Manager Male 56 Incumbent

Lin Tian Director Male 59 Incumbent 0 Yes

Director

Xu Yi Vice-general Male 58 Incumbent 82.19 No

Manager

Director Chief

Jiang He Male 50 Incumbent 81.28 NoAccountant

Yang Feng Director Male 50 Incumbent 0 No

Wang Independent

Mancang director Male 59 Incumbent

10 No

Independent

Xing Min

director Male 68 Incumbent

10 No

Independent

Zhang Yan 10 No

director Female 52 Incumbent

Vice-general

Yin Lihou 80.98 No

Manager Male 58 Incumbent

Vice-general

Xie Guozhong

Manager Male 53 Incumbent

81.89 No

Vice-general

Sun Jianzhong

Manager Male 50 Incumbent

81.58 No

Vice-general

He Jianjiang Manager and Male 43 Incumbent 80.87 No

Secretary of the

53Changchai Company Limited Annual Report 2021

Board

Chairman of the

He Jianguang Supervisory Male 58 Incumbent 0 Yes

Committee

Chen Lijia Supervisor Female 39 Incumbent 0 Yes

Lu Zhonggui Supervisor Male 55 Incumbent 20.45 No

Ge Jiangli Supervisor Female 52 Incumbent 20.20 No

Liu Yi Supervisor Male 53 Incumbent 20.37 No

Total -- -- -- -- 766.73 --

VI Performance of Duty by Directors in the Reporting Period

1. Board Meetings Convened in the Reporting Period

Date of Disclosure

Meeting Resolution

meeting date

The 1st

Extraordinary The meeting deliberated on and approved the

Meeting of the 2021-01-20 2021-01-21 Obligations on Conducting Forward Foreign Exchange

Board of Directors Settlement

in 2021

The meeting deliberated on and approved the Report on

the Work of the General Manager for the Year 2020 the

Business Policy Objectives of the Company for the Year

The 7th Meeting of

th 2021 the Results of the Performance Appraisal of thethe 9 Board of 2021-01-29 --

Senior Management of the Company for the Year 2020

Directors

the Contract on the Performance Appraisal of the Senior

Management of the Company for the Year 2021 and the

Proposal on Application for Bank Credit Line

The meeting deliberated on and approved the Annual

Report for 2020 and Its Summary the Annual Work

Report of the Board of Directors for 2020 the Annual

Self-Evaluation Report on Internal Control for 2020 the

Proposal on the Provision of Reserves for Asset

The 8th Meeting of Impairment the Proposal on the Provision of Guarantees

the 9th Board of 2021-04-13 2021-04-15 for Bank Credit for Subsidiaries the Proposal on

Directors Extending the Validity Period of Resolutions of the

Company's Non-public Offering of Shares at the General

Meeting the Proposal on the Request for the General

Meeting to Extend the Validity Period of Resolutions of

the Company's Non-public Offering of Shares at the

General Meeting the Proposal on Amending the Articles

54Changchai Company Limited Annual Report 2021

of Association of the Company the Proposal on

Amending the Rules of Procedure of the General

Meeting the Proposal on Amending the Policy of

Independent Directors and the Proposal on Convening

the Annual General Meeting of the Company for 2020.The meeting deliberated on and approved the Report for

the First Quarter of 2021 the Proposal on Amending the

Rules of Implementation of the Audit Committee of the

Board of Directors the Proposal to Amend the

Implementation Rules of the Remuneration and

Evaluation Committee the Proposal on Amending the

The 9th Meeting of 2021-04-27 Work Policy of the Secretary of the Board of Directors

the 9th

2021-04-28

Board of the Proposal on Amending the Management Policy of

Directors Information Disclosure Matters the Proposal on

Amending the Registration Policy of Inside Information

Insider the Proposal on Amending the Management

Policy of External Information Users the Proposal on

Amending the Internal Audit Policy and the Proposal on

Amending the Decision-making Policy of Related

Transactions.The 2nd The meeting deliberated on and approved the Proposal

Extraordinary on the Proposed Opening of a Special Account for the

Meeting of the 2021-05-18 2021-05-19 Funds Raised from the Non-public Offering of Shares

Board of Directors and Authorization to Enter into a Supervision Agreement

in 2021 for the Funds Raised

The 3rd

Extraordinary The meeting deliberated on and approved the Proposal

Meeting of the 2021-06-28 2021-06-30 on Using Raised Funds to Replace Pre-invested Project

Board of Directors Funds and Advanced Issue Expenses

in 2021

The meeting deliberated on and approved the Proposal

on Amending the Articles of

The 4th Company> Proposal on Amending the

Extraordinary Policy of Wealth Management Products> Proposal on

Meeting of the 2021-07-13 2021-07-15 Using Own Idle Funds to Purchase Wealth Management

Board of Directors Products Proposal on Using Idle Funds to Purchase

in 2021 Wealth Management Products and Proposal on

Changing the Implementation Entity of Some

Investment Projects with Raised Funds

The 5th

The meeting deliberated on and approved the Proposal

Extraordinary

on Related-Party Transaction regarding the Use of Idle

Meeting of the 2021-07-26 2021-07-28

Raised Funds for Purchase of Return Certificate of

Board of Directors

Donghai Securities

in 2021

55Changchai Company Limited Annual Report 2021

The meeting deliberated on and approved the

Semi-annual Report for 2021 and Its Summary Proposal

on Change of Accounting Policy Proposal on Provision

of Reserves for Asset Impairment Proposal on Write-off

th of Certain Accounts Receivable Special Report on theThe 10 Meeting of

th Deposit and Use of Raised Funds for the Semi-annualthe 9 Board of 2021-08-16 2021-08-18

Period of 2021 Proposal on the Re-appointment of the

Directors

Financial Audit Institution for 2021 and Its Audit

Expenses Proposal on the Re-appointment of the

Internal Control Audit Institution for 2021 and Proposal

on Convening the First Extraordinary General Meeting

of Shareholders for 2021

The 6th The meeting deliberated on and approved the Report of

Extraordinary the Third Quarter of 2021 and Proposal on Participating

Meeting of the 2021-10-28 2021-10-29 in the Public Listed Transfer of 41.5% Equity Interests in

Board of Directors Zhenjiang Siyang Diesel Engine Manufacturing Co.in 2021 Ltd.The 7th

Extraordinary The meeting deliberated on and approved the Proposal

Meeting of the 2021-12-13 2021-12-14 on the Proposed Appointment of Mr. He Jianjiang as

Board of Directors Deputy General Manager of the Company

in 2021

2. Attendance of Directors at Board Meetings and General Meetings

Attendance of directors at board meetings and general meetings

Total

The

number of

Board Board director

board Board

Board meetings meetings failed to

meetings meetings General

meetings attended the attend two

Director the attended meetings

attended by way of director consecutiv

director through a attended

on site telecommu failed to e board

was proxy

nication attend meetings

eligible to

(yes/no)

attend

Shi Xinkun 11 5 6 0 0 No 2

Zhang Xin 11 5 6 0 0 No 2

Lin Tian 11 5 6 0 0 No 2

Jiang He 11 5 6 0 0 No 2

Yang Feng 11 5 6 0 0 No 2

Wang

11 5 6 0 0 No 2

Mancang

Xing Min 11 4 6 1 0 No 2

Zhang Yan 11 5 6 0 0 No 2

56Changchai Company Limited Annual Report 2021

Explanation of why any director failed to attend two consecutive board meetings:

N/A

3. Objections Raised by Directors on Matters of the Company

Indicate by tick mark whether any directors raised any objections on any matter of the Company.□ Yes √ No

No such cases in the Reporting Period.

4. Other Information about the Performance of Duty by Directors

Indicate by tick mark whether any suggestions from directors were adopted by the Company.√ Yes □ No

Suggestions from directors adopted or not adopted by the Company:

The independent directors of the Company in line with the law rules normative documents and obligations given

by the Company of the Company law Article of Associations and Independent Directors Work Rules

comprehensively focused on the development and operation of the Company actively attended the general

meeting of shareholder and meeting of board of directors and given independent opinions for the significant

events of the Company and effectively maintained the profits of the Company and all the shareholders. The

Company actively listened to the suggestions from the independent directors upon the significant events and

adopted them.VII Special Committees under the Board of Directors during the Reporting Period

Number Important Specific

Other

Name of of Date of comments disputed

Members Contents performance

committee meetings meeting and matters

of duties

convened suggestions (if any)

The

The meeting Company's

discussed and financial

approved the statements

Report on have been

Financial prepared in

Zhang

Pre-audit in 2020 accordance

Audit Yan 18

Report on Audit with the new

Committee Wang 3 January

Plan Arrangement Accounting

Mancang 2021

for 2020 and Standards for

Lin Tian

Report on Business

Internal Audit Enterprises

Work in 2020 and and the

Internal Audit provisions of

Plan for 2021 the

Company's

57Changchai Company Limited Annual Report 2021

relevant

financial

policies and

presented

fairly in all

material

respects the

financial

status of the

Company as

of 31

December

2020 and the

operating

results and

cash flows

for 2020. The

Company's

financial and

accounting

statements

are authentic

and accurate.The

Company's

statements

presented

fairly in all

material

respects the

The meeting

financial

reviewed and

status of the

approved the

Company as

6 April audited annual

of 31

2021 financial

December

statements of the

2020 and the

Company for

operating

2020

results and

cash flows

for 2020. It

was

consented

that they

shall be

58Changchai Company Limited Annual Report 2021

submitted to

the Board of

Directors for

review and

approval

The meeting

deliberated on

and approved the

Semi-annual

Work Summary

of the Audit

Department for

2021 Proposal on

Provision of

Reserves for

Asset

Impairment

Proposal on the

Write-off of It was

Certain Accounts consented

Receivable that both the

13 Special Report on proposals

August the Deposit and shall be

2021 Use of Raised submitted to

Funds for the the Board of

Semi-annual Directors for

Period of 2021 discussion

Proposal on the

Re-appointment

of the Financial

Audit Institution

for 2021 and Its

Audit Expenses

and Proposal on

the

Re-appointment

of the Internal

Control Audit

Institution for

2021

Shi The meeting It was

29

Strategy Xinkun deliberated on consented

1 January

Committee Xing and approved the that both the

2021

Min Operation Policy proposals

59Changchai Company Limited Annual Report 2021

Yang and Objectives shall be

Feng for 2021 submitted to

the Board of

Directors for

discussion

The meeting

deliberated on

and approved the It was

Encashment of consented

Xing

Appraisal of the that both the

Remuneration Min

20 Senior proposals

and Wang

1 January Management in shall be

Evaluation Mancang

2021 2020 and submitted to

Committee Shi

Appraisal the Board of

Xinkun

Contract of the Directors for

Senior discussion

Management for

2021

VIII Performance of Duty by the Supervisory Committee

Indicate by tick mark whether the Supervisory Committee found any risk to the Company during its supervision in

the Reporting Period.□ Yes √ No

The Supervisory Committee raised no objections in the Reporting Period.IX Employees

1. Number Functions and Educational Backgrounds of Employees

Number of in-service employees of the Company as

2240

the parent at the period-end

Number of in-service employees of major subsidiaries

524

at the period-end

Total number of in-service employees at the

2764

period-end

Total number of paid employees in the Reporting

2764

Period

Number of retirees to whom the Company as the

parent or its major subsidiaries need to pay retirement 0

pensions

Functions

Function Employees

Production 1845

60Changchai Company Limited Annual Report 2021

Sales 205

Technical 362

Financial 37

Administrative 294

Other 21

Total 2764

Educational backgrounds

Educational background Employees

Junior high school graduates and below 1198

High school graduates 776

College graduates and technical secondary school

508

graduates

Bachelors 263

Masters and above 19

Total 2764

2. Employee Remuneration Policy

The Company always adhered to the principle of tilting the remuneration incentive mechanism towards excellent

talents so as to display the roles of various professional technicians management staffs and skilled backbones.Besides it adhered to the principle of increasing the employee’s income integrated with increasing labor

production efficiency and production & operation efficiency so as to perfect the salary structure and further

increase employees’ income steadily.

3. Employee Training Plans

The Company established the Management Rules on the Education & Training for Employees aiming to enhance

employees’ quality and try its best to cultivate a team of faithful and highly professional talents. Besides it

innovated the training mechanism optimized the training environment and reinforced to encourage employees to

attend various training so as to inspire the employees’ potential to the maximum extent and further promote the

sustainable development of the Company.

4. Labor Outsourcing

□ Applicable √ Not applicable

X Profit Distributions (in the Form of Cash and/or Stock)

How the profit distribution policy especially the cash dividend policy was formulated executed or revised in the

Reporting Period:

√ Applicable □ Not applicable

In Articles of Association which had confirmed the specific profits distribution and cleared out the conditions

standards and proportion of the cash bonus stipulated the decision-making progress of the formulation and

61Changchai Company Limited Annual Report 2021

alternation of the profits distribution policies and the chapters as well as the regulations fully ensure the

opportunities for the medium and small shareholders to exert the functions and to provide advices as well as

appeals. The cash bonus of recent 3 years of the Company met with the regulations of the Articles of Association

and during the decision-making process of the profits distribution proposal the Independent Directors stated the

independent advices and fully respected the advices from the medium and small shareholders. The profits

distribution preplan and the turning capital reserve into share capital preplan of the Company were both met with

the relevant regulations of the Articles of Association and so on.Special statement about the cash dividend policy

In compliance with the Company’s Articles of Association and resolution of general

Yes

meeting

Specific and clear dividend standard and ratio Yes

Complete decision-making procedure and mechanism Yes

Independent directors faithfully performed their duties and played their due role Yes

Non-controlling interests are able to fully express their opinion and desire and their

Yes

legal rights and interests are fully protected

In case of adjusting or changing the cash dividend policy the conditions and

N/A

procedures involved are in compliance with applicable regulations and transparent

Indicate by tick mark whether the Company fails to put forward a cash dividend proposal despite the facts that the

Company has made profits in the Reporting Period and the profits of the Company as the parent distributable to

shareholders are positive.□ Applicable √ Not applicable

Final dividend plan for the Reporting Period:

√ Applicable □ Not applicable

Bonus shares for every 10 shares (share) 0

Dividend for every 10 shares (RMB) (tax inclusive) 0.26

Additional shares to be converted from capital reserve for every 10 shares

0

(share)

Total shares as the basis for the profit distribution proposal (share) 705692507

Cash dividends (RMB) (tax inclusive) 18348005.18

Cash dividends in other forms (such as share repurchase) (RMB) 0

Total cash dividends (including those in other forms) (RMB) 18348005.18

Distributable profit (RMB) 756037052.58

Total cash dividends (including those in other forms) as % of total profit

100%

distribution

Cash dividend policy

Other

Particulars about the dividend plan

The Board has approved a final dividend plan as follows: based on the total share capital of the Company at 31

December 2021 a cash dividend of RMB0.26 (tax inclusive) per 10 shares is to be distributed to the

shareholders with no bonus issue from either profit or capital reserves.

62Changchai Company Limited Annual Report 2021

XI Equity Incentive Plans Employee Stock Ownership Plans or Other Incentive Measures for

Employees

□ Applicable √ Not applicable

No such cases in the Reporting Period.XII Formulation and Implementation of Internal Control System during the Reporting

Period

1. Internal Control Formulation and Implementation

During the Reporting Period the Company strictly complied with national laws and regulations and relevant

regulations such as the Basic Code for Internal Control of Enterprises and the Guidelines for Application of

Enterprise Internal Control as well as the provisions and requirements of the Company's internal control standards

and optimized important business processes and improved and perfected the internal control system through

continuous supervision and effective evaluation of the operation of the Company's internal control so as to adapt

to the changing external environment and internal management requirements and improve the efficiency of the

Company's operation and management. By doing so the Company effectively prevented risks in operation and

management and promoted the achievement of internal control objectives. The Company's internal control system

can cover the major aspects of the Company's operation and management and the internal control design is sound

and reasonable with no material omissions.

2. Material Internal Control Weaknesses Identified for the Reporting Period

□ Yes √ No

XIII Management of Subsidiaries by the Company during the Reporting Period

Problems

Integration Progress on Solutions Solution Subsequent

Subsidiary found in

plan integration taken progress solution

integration

N/A N/A N/A N/A N/A N/A N/A

XIV Self-Evaluation Report or Independent Auditor’s Report on Internal Control

1. Internal Control Self-Evaluation Report

Disclosure date of the internal

13 April 2022

control self-evaluation report

Index to the disclosed internal

control self-evaluation report

Evaluated entities’ combined assets

100.00%

as % of consolidated total assets

Evaluated entities’ combined 100.00%

63Changchai Company Limited Annual Report 2021

operating revenue as % of

consolidated operating revenue

Identification standards for internal control weaknesses

Weaknesses in internal control over Weaknesses in internal control

Type

financial reporting not related to financial reporting

The Company classified the defects

as serious defect important defect

and general defect according to the

influence degree from the internal

control:

(1) Serious defect: refers to one or

multiple groups with control defect

which may lead the enterprise Defects with the following

seriously deviates the control target; random characteristics should be

(2) Important defect: refers to one or recognized as serious defect:

multiple groups with control defect 1) Seriously violated the national

with the severity and the economic laws and administrative

results lower than the great defect regulations and the normative

but may still lead the enterprise documents;

seriously deviates the control target; 2) “three significant one great”

(3) General defect: refers to other event had not been through the

defect except for the great defect collective decision-making

and significant defect. process;

Nature standard Nature standards: 3) the significant events involved

defects with the following random with the production and

characteristics should be recognized operation of the Company lacked

as serious defect: of systematic control or the

1) the defect involves with the institutional system was invalid;

malpractice of the Directors 4) the internal control of the

Supervisors and Senior Executives; information disclosure was

2) revised the disclosed financial invalid which led the Company

report; be open condemned by the

3) CPAs discovered the great supervision department;

misstatement among the current 5) the serious defect from the

financial statement while which assessment results of the internal

could not be found during the control had not been revised.operating process of the internal

control;

4) the supervision from the Audit

Committee and the internal audit

institution of the enterprise was

invalid.Quantitative standards: Refer to the quantitative criteria

The quantitative standards of of the internal control defect of

recognizing the significant degree of the financial report to recognize

the misstatement (including the false the quantitative criteria of the

Quantitative standard negatives) of the consolidated significant degree of the internalfinancial report of the Company control defect of the

based on the data from the 2020 non-financial report of the

consolidated statements was as: Company as:

Serious defect: misstatement≥5% of Serious defect: possibly caused

the annual profits directly losses≥0.1% of the net

64Changchai Company Limited Annual Report 2021

Important defect: 2.5% of the annual assets

profits≤ misstatement＜ 5% of the Important defect: 0.05% of the

annual profits net assets≤ possibly caused

General defect＜2.5% of the annual directly losses＜0.1% of the net

profits assets

General defect: possibly caused

directly losses＜0.05% of the net

assets

Number of material weaknesses in

internal control over financial 0

reporting

Number of material weaknesses in

internal control not related to 0

financial reporting

Number of serious weaknesses in

internal control over financial 0

reporting

Number of serious weaknesses in

internal control not related to 0

financial reporting

2. Independent Auditor’s Report on Internal Control

√ Applicable □ Not applicable

Opinion paragraph in the independent auditor’s report on internal control

We believed that Changchai Company Limited maintained effective internal control of the financial report in

significant aspects according to the Basic Norms of Internal Control and relevant regulations on 31 December

2021.

Independent auditor’s report on

Disclosed

internal control disclosed or not

Disclosure date 13 April 2022

Index to such report disclosed SGW[2022]ENo.1139

Type of the auditor’s opinion Unmodified unqualified opinion

Material weaknesses in internal

control not related to financial None

reporting

Indicate by tick mark whether any modified opinion is expressed in the independent auditor’s report on the

Company’s internal control.□ Yes √ No

Indicate by tick mark whether the independent auditor’s report on the Company’s internal control is consistent

with the internal control self-evaluation report issued by the Company’s Board.√ Yes □ No

65Changchai Company Limited Annual Report 2021

XV Remediation of Problems Identified by Self-inspection in the Special Action on the

Governance of Listed Companies

According to the deployment of China Securities Regulatory Commission the Company organized a

self-inspection of the special action of governance of listed companies in which it was identified that: Regarding

the Board of Directors the Supervisory Committee and the general meeting of the Company the term of office of

the Eighth Board of Directors expired on 17 October 2019 without re-election and the re-election was completed

on 16 April 2020.

66Changchai Company Limited Annual Report 2021

Part V Environmental and Social Responsibility

I Major Environmental Issues

Indicate by tick mark whether the Company or any of its subsidiaries was identified as a key polluter by the

environment authorities.□ Yes √ No

Administrative punishments received in the Reporting Period due to environmental issues:

Rectification

Company or Reason for Impact on the

Violation Punishment measures of the

subsidiary punishment Company

Company

N/A N/A N/A N/A N/A N/A

Actions taken during the Reporting Period to reduce carbon emissions and the impact:

√ Applicable □ Not applicable

See the 2021 Social Responsibility Report of Changchai Company Limited disclosed on

http://www.cninfo.com.cn dated 13 April 2022.Reasons for not disclosing other environment-related information:

N/A

II Social Responsibility

See the 2021 Social Responsibility Report of Changchai Company Limited disclosed on

http://www.cninfo.com.cn dated 13 April 2022.III Efforts in Poverty Alleviation and Rural RevitalizationThe Fifth Plenum of the 17th CPC Central Committee listed “consolidating poverty alleviation result and overallimplementation of rural revitalization strategy” the major targets of the economic and social development in the

“fourteenth five-year plan”.The Company will actively participate in poverty alleviation work according to the call of the Communist Party of

China and the governmental planning and make its own contribution for realizing common prosperity in China.

67Changchai Company Limited Annual Report 2021

Part VI Significant Events

I Fulfillment of Commitments

1. Commitments of the Company’s De Facto Controller Shareholders Related Parties and Acquirers as

well as the Company Itself and Other Entities Fulfilled in the Reporting Period or Ongoing at the

Period-End

√ Applicable □ Not applicable

Da

te

Ty

of

pe Fu

co

of Term lfi

m

co of ll

Commitment Promisor Details of commitment mit

m comm m

me

mi itment en

nt

tm t

ma

ent

kin

g

1. The company and its controlled

related parties have not reduced their

holdings of shares of Changchai

Company from the six months prior to

Ab the announcement of the decision of

out the Board of Directors of Changchai

2910

sh Company Limited ("Changchai

Se Octob

are Company") concerning the proposal to O

Changzhou pte er

hol consider the non-public offering of ng

Investment Group mb 2019

din shares to the date of issuance of this oi

Co. Ltd. er -30

Commitments g Letter of Commitment. ng

20 June

made in red 2. The company and its controlled

202022

refinancing uct related parties have no plan to reduce

ion their holdings of shares of Changchai

Company from the date of issuance of

this Letter of Commitment to six

months after the completion of this

issuance.

1. The company's funds for subscribing 29 21

Changzhou for the shares privately offered by Se Septe Ex

Ot

Investment Group Changchai Company Limited pte mber pir

her

Co. Ltd. (Changchai Company) are the mb 2020 ed

company's own funds or funds raised er -21

68Changchai Company Limited Annual Report 2021

by the company in legal forms. The 20 Septe

sources of the funds are legal and the 20 mber

company has full and effective disposal 2021

rights. There is no public offering

proxy holding structured arrangement

or direct or indirect use of funds of

Changchai Company and its affiliates

for this subscription. There is no

violation of the relevant provisions of

the Detailed Implementing Rules for

the Non-public Offering of Stocks of

Listed Companies or the Measures for

the Administration of the Offering and

Underwriting of Securities.

2. The company is responsible for the

authenticity of the foregoing

commitments and guarantees to bear

the losses caused to Changchai

Company due to the breach of the

foregoing commitments.Ab

out

sh

It will not transfer the shares it has

are 5

obtained in the private placement of 5 July O

Changzhou tra Jul

Changchai within 36 months starting 2021 ng

Investment Group din y

from the date when the private -5 July oi

Co. Ltd. g 20

placement of A-shares is allowed for 2024 ng

res 21

public trading.tri

cti

on

1. It undertakes not to interfere in the

Company's operation and management

activities beyond its authority and not

to encroach on the Company's 11

interests; 11 April

O

Changzhou 2. It undertakes not to transfer benefits Ap 2020

Ot ng

Investment Group to other entities or individuals free of ril -31

her oi

Co. Ltd. charge or on unfair terms nor to impair 20 Dece

ng

the interests of the Company by any 20 mber

other means; 9999

3. After the issuance of this Letter of

Commitment and before the

completion of the Company's

69Changchai Company Limited Annual Report 2021

non-public offering of shares if the

China Securities Regulatory

Commission (CSRC) makes other new

regulatory provisions on the return

filling measures and commitments and

the aforesaid commitments cannot

meet such provisions of the CSRC it

undertakes to issue supplementary

commitments in accordance with the

latest provisions of the CSRC;

4. It undertakes to effectively

implement the Company's measures to

fill the return and any commitments

made thereon. If the Company

breaches such commitments and causes

losses to the Company or the investors

the Company is willing to compensate

the Company or the investors

according to law.UBS AG Caitong

Fund Management

Co. Ltd. Changzhou

Traffic Construction

Investment

Development General

Company Chen

Beiwen Guotai Asset Ab

Management Co. out

Ltd. Jiangxi Jintou sh

I/We undertake that I/we will not C

Industrial are 5 5 July

transfer the shares I/we have obtained o

Development Co. tra Jul 2021-

in the private placement of Changchai m

Ltd. Li Xueqin din y 5

within 6 months starting from the date pl

Nanhua Fund Co. g 20 Januar

when the private placement of A-shares et

Ltd. Enjoy (Ningbo) res 21 y 2022

is allowed for public trading. ed

Asset Management tri

L.P. Nuode Asset cti

Management Co. on

Ltd. Sun Meichun

Minmetals Securities

Co. Ltd. Yao

Jianquan China

National Gold Group

Asset Management

Co. Ltd. and Zhou

70Changchai Company Limited Annual Report 2021

Zhiheng

Rewards Plan for Shareholders in Next

Three Years(2020-2022)

Under the premise of positive

distributive profit (remaining after-tax

profits after making up for the loss and

extracting for the common reserves) in

Ab this year or half year and abundantOther 8

money flow and no influence on the O

commitments out Ma Year

Changchai Company div following-up going concern after cash ngmade to Limited ide y 2020-bonus the profits allocated by cash oi

minority nd 20 2022every year shouldn’t be lower than ng

shareholders s 2010% of the allocable profits from

parent company. Meanwhile the

accumulated allocable profits by cash

in the arbitrary continuous three

accounting years should not be lower

than 30% of the annual average

allocable profits in those three years.Fulfilled on time

Yes

or not

Specific reasons

for failing to

fulfill

commitments on N/A

time and plans

for next step

(if any)

2. Where there had been an earnings forecast for an asset or project and the Reporting Period was still

within the forecast period explain why the forecast has been reached for the Reporting Period.□ Applicable √ Not applicable

II Occupation of the Company’s Capital by the Controlling Shareholder or any of Its Related

Parties for Non-Operating Purposes

□ Applicable √ Not applicable

During the reporting period of the company there was no non operating occupation of funds by the controlling

shareholders and other related parties of the listed company.III Irregularities in the Provision of Guarantees

□ Applicable √ Not applicable

71Changchai Company Limited Annual Report 2021

No such cases in the Reporting Period.IV Explanations Given by the Board of Directors Regarding the Independent Auditor's

“Modified Opinion” on the Financial Statements of the Latest Period

□ Applicable √ Not applicable

V Explanations Given by the Board of Directors the Supervisory Board and the Independent

Directors (if any) Regarding the Independent Auditor's “Modified Opinion” on the Financial

Statements of the Reporting Period

□ Applicable √ Not applicable

VI YoY Changes to Accounting Policies Estimates and Correction of Material Accounting

Errors

√Applicable □ Not applicable

Changes to the accounting policies and why Approval process

The Ministry of Finance issued the Accounting StandardsOn 16 August 2021 the 10th Meeting of the 9th Board

for Business Enterprises No.21-Leases (Revised) in 2018of Directors and the 10th Meeting of the 9th Supervisory

requiring that enterprises listed both domestically andCommittee were held by the Company on which the

abroad and overseas listed enterprises preparing financialProposal on Changes of Accounting Policies was

statements in accordance with the International Financialapproved and the Company was allowed to implement

Reporting Standards or the Accounting Standards forthe new standards governing leases since 1 January

Business Enterprises shall implement it since 1 January2021.

2019 and that others carry it out since 1 January 2021.

VII YoY Changes to the Scope of the Consolidated Financial Statements

□ Applicable √ Not applicable

No such cases in the Reporting Period.VIII Engagement and Disengagement of Independent Auditor

Current independent auditor:

Gongzheng Tianye Certified Public Accountants

Name of the domestic independent auditor

(Special General Partnership)

The Company’s payment to the domestic independent

60

auditor (RMB’0000)

How many consecutive years the domestic

independent auditor has provided audit service for the 20

Company

Names of the certified public accountants from the

Wang Wenkai Qin Zhijun

domestic independent auditor writing signatures on

72Changchai Company Limited Annual Report 2021

the auditor’s report

How many consecutive years the certified public

accountants have provided audit service for the One year for Wang Wenkai one year for Qin Zhijun

Company

Indicate by tick mark whether the independent auditor was changed for the Reporting Period.□ Yes √ No

Independent auditor financial advisor or sponsor engaged for the audit of internal controls:

√Applicable □ Not applicable

In this year the Company retained Gongzheng Tianye Certified Public Accountants (Special General Partnership)

as the audit institution for its internal control at the audit fees of RMB120000

IX Possibility of Delisting after Disclosure of this Report

□ Applicable √ Not applicable

X Insolvency and Reorganization

□ Applicable √ Not applicable

No such cases in the Reporting Period.XI Major Legal Matters

□ Applicable √ Not applicable

No such cases in the Reporting Period.XII Punishments and Rectifications

□ Applicable √ Not applicable

No such cases in the Reporting Period.XIII Credit Quality of the Company as well as Its Controlling Shareholder and Actual

Controller

√ Applicable □ Not applicable

The de facto controller of the Company is SASAC of Changzhou People’s Government and the controlling

shareholder of it is Changzhou Investment Group Co. Ltd. There is no such case that the controlling shareholder

fails to perform any legally effective judgment of courts or to pay off matured debts with a large amount.XIV Major Related-Party Transactions

1. Continuing Related-Party Transactions

□ Applicable √ Not applicable

No such cases in the Reporting Period.

73Changchai Company Limited Annual Report 2021

2. Related-Party Transactions Regarding Purchase or Disposal of Assets or Equity Investments

□ Applicable √ Not applicable

No such cases in the Reporting Period.

3. Related-Party Transactions Regarding Joint Investments in Third Parties

□ Applicable √ Not applicable

No such cases in the Reporting Period.

4. Amounts Due to and from Related Parties

□ Applicable √ Not applicable

No such cases in the Reporting Period.

5. Transactions with Related Finance Companies

□ Applicable √ Not applicable

The Company did not make deposits in receive loans or credit from and was not involved in any other finance

business with any related finance company or any other related parties.

6. Transactions with Related Parties by Finance Companies Controlled by the Company

□ Applicable √ Not applicable

The finance company controlled by the Company did not make deposits receive loans or credit from and was not

involved in any other finance business with any related parties.

7. Other Major Related-Party Transactions

√Applicable □ Not applicable

The Proposal on Using Idle Funds to Purchase Wealth Management Products was deliberated and approved at the

Fourth Interim Meeting of the Board of Directors in 2021 and the Second Interim Meeting of the Board of

Supervisors in 2021 held by the Company on 13 July 2021 allowing the Company and its wholly-owned

subsidiaries to use no more than RMB350 million of idle raised funds to purchase wealth management products

for cash management on the premise that the investment projects with raised funds are carried out normally and

the use of raised funds is not affected.On 27 July 2021 the Company entered into a subscription agreement with Donghai Securities Co. Ltd. for the

product "Donghai Securities Long Gain Return Certificate June Type Customized Issue No. 13". The subscription

amount is RMB50 million and the source of funds is idle raised funds. The return certificate matured on 25

January 2022 with a total of RMB50949300 in principal and return received.Index to the public announcements about the said related-party transactions disclosed

Title of public announcement Disclosure date Disclosure website

Announcement on Progress of Using Idle Funds to Purchase 28 July 2021 www.cninfo.com.cn

74Changchai Company Limited Annual Report 2021

Donghai Securities Return Certificate and Related-party

Transactions

XV Major Contracts and Execution thereof

1. Entrustment Contracting and Leases

(1) Entrustment

□ Applicable √ Not applicable

No such cases in the Reporting Period.

(2) Contracting

□ Applicable √ Not applicable

No such cases in the Reporting Period.

(3) Leases

□ Applicable √ Not applicable

No such cases in the Reporting Period.

2. Major Guarantees

√ Applicable □ Not applicable

Unit: RMB'0000

Guarantees provided by the Company for external parties (exclusive of those for subsidiaries)

Disclos Guara

ure date Actual Havin ntee

Actual

of the Line of occurrence g for a

Guarantee-receiv guarante Type of Term of

guarant guarant date expire relate

ing entity e guarantee guarantee

ee line ee (agreement d or d

amount

announc signing date) not party

ement or not

Guarantees provided by the Company as the parent for its subsidiaries

Disclos Guara

ure date Actual Havin ntee

Actual

of the Line of occurrence g for a

Guarantee-receiv guarante Type of Term of

guarant guarant date expire relate

ing entity e guarantee guarantee

ee line ee (agreement d or d

amount

announ signing date) not party

cement or not

Changzhou 15 April Joint

2000 7 May 2021 2000 1 year No No

Changchai 2021 liability

75Changchai Company Limited Annual Report 2021

Horizon

Agricultural

Equipment Co.Ltd.Total actual amount

Total approved line for such

of such guarantees in

guarantees in the Reporting 2000 2000

the Reporting Period

Period (B1)

(B2)

Total actual balance

Total approved line for such of such guarantees at

guarantees at the end of the 2000 the end of the 500

Reporting Period (B3) Reporting Period

(B4)

Guarantees between subsidiaries

Disclos

Guara

ure date Actual Havin

Actual ntee

of the Line of occurrence g

Guarantee-receiv guarante Type of Term of for a

guarant guarant date expire

ing entity e guarantee guarantee related

ee line ee (agreement d or

amount party

announ signing date) not

or not

cement

Total guarantee amount (total of the three kinds of guarantees above)

Total actual

Total guarantee line

guarantee amount in

approved in the Reporting 2000 2000

the Reporting Period

Period (A1+B1+C1)

(A2+B2+C2)

Total actual

Total approved guarantee

guarantee balance at

line at the end of the

2000 the end of the 500

Reporting Period

Reporting Period

(A3+B3+C3)

(A4+B4+C4)

Total actual guarantee amount (A4+B4+C4) as % of the

0.16%

Company’s net assets

Of which:

Balance of guarantees provided for shareholders the de

0

facto controller and their related parties (D)

Balance of debt guarantees provided directly or

indirectly for entities with an over 70% debt/asset ratio 500

(E)

Amount by which the total guarantee amount exceeds

0

50% of the Company’s net assets (F)

Total of the three amounts above (D+E+F) 500

Possibility of having to execute joint liability on

N/A

outstanding guarantees (if any)

76Changchai Company Limited Annual Report 2021

Irregularities in the provision of guarantees to external

N/A

parties (if any)

3. Cash Entrusted for Wealth Management

(1) Cash Entrusted for Wealth Management

√ Applicable □ Not applicable

Overviews of cash entrusted for wealth management during the Reporting Period

Unit: RMB’0000

Unrecovered

Unrecovered overdue

Capital

Specific type Amount incurred Undue balance overdue amount with

resources

amount provision for

impairment

Broker

financial Self-funded 980 0 0 0

products

Bank financial

Self-funded 2300 2000 0 0

products

Broker

financial Raised-funded 5000 5000 0 0

products

Bank financial

Raised-funded 41000 21000 0 0

products

Total 49280 28000 0 0

Details of high-risk entrusted financial management with significant single amount or low security and poor

liquidity

□ Applicable √ Not applicable

The principal of entrusted financial management is expected to be unable to be recovered or there are other

situations that may lead to impairment

□ Applicable √ Not applicable

(2) Entrusted Loans

□ Applicable √ Not applicable

No such cases in the Reporting Period.

4. Other Major Contracts

□ Applicable √ Not applicable

No such cases in the Reporting Period.

77Changchai Company Limited Annual Report 2021

XVI Other Significant Events

√ Applicable □ Not applicable

1. Accomplishment of non-public offering of shares

On 17 December 2020 the Company received the Reply concerning the Approval of the Non-public Offering of

Shares of Changchai Company Limited (ZJXK [2020] No. 3374) from the China Securities Regulatory

Commission which approved the non-public offering of up to 168412297 shares of the Company. The

Company's offered 144318181 RMB ordinary shares (A shares) in a non-public manner. The issuing price was

RMB4.40 per share total amount raised was RMB634999936.40 and the net amount actually raised was

RMB620665733.97 after deducting various issuance expenses. The new shares issued in a non-public manner

were listed on the Shenzhen Stock Exchange on 5 July 2021. Except for the shares subscribed by the Investment

Group the restriction has been lifted on 5 January 2022. For details please refer to the Report on Non-public

Offering by Changchai Company Limited and Listing Bulletin disclosed by the Company on www.cninfo.com.cn

on 1 July 2021.

2. Participating in the Public Listed Transfer of 41.5% Equity Interests in Zhenjiang Siyang Diesel Engine

Manufacturing Co. Ltd.The Sixth Interim Meeting of the Board of Directors in 2021 held by the Company on 28 October 2021

deliberated on and approved the Proposal on Participating in the Public Listed Transfer of 41.5% Equity Interests

in Zhenjiang Siyang Diesel Engine Manufacturing Co. Ltd. authorizing the Management of the Company to

participate in the bidding of the public listed transfer by Jiangsu University of Science and Technology Assets

Management Co. Ltd. (hereinafter referred to as "Science University Assets") of its 41.5% equity interest in

Zhenjiang Siyang Diesel Engine Manufacturing Co. Ltd. (hereinafter referred to as "Zhenjiang Siyang"). On 12

January 2022 Zhenjiang Siyang Diesel Engine Manufacturing Co. Ltd. issued the Confirmation of Transaction

on the Transfer of 41.5% Equity Interest (Corresponding to Capital Contribution of RMB830000).The Company

won the 41.5% equity interest in Zhenjiang Siyang at a price of RMB33520800.00. On 23 February 2022 the

Company signed the Contract on Transfer of State-owned Property Rights with Science University Assets. On 9

March 2022 Zhenjiang Siyang has completed the relevant registration alteration formalities with the competent

industrial and commercial administration.XVII Significant Events of Subsidiaries

□ Applicable √ Not applicable

78Changchai Company Limited Annual Report 2021

Part VII Share Changes and Shareholder Information

I Share Changes

1. Share Changes

Unit: share

Increase/decrease in the Reporting Period

Before After

(+/-)

Shares

Shares as

as divide

divide nd

Percen Percen

Numb New nd conver Subtot Numb

tage Other tage

er issues conver ted al er

(%)(%)

ted from

from capital

profit reserv

es

14431144311443120.45

1. Restricted shares 0 0.00%

818181818181%

1.1 Shares held by

00.00%0000.00%

government

1.2 Shares held by

72045720457204510.21

state-owned legal 0 0.00%

453453453%

persons

1.3 Shares held by

688636886368863

other domestic 0 0.00% 9.76%

638638638

investors

Among which: Shares

488184881848818

held by domestic legal 0 0.00% 6.92%

178178178

persons

Shares

200452004520045

held by domestic 0 0.00% 2.84%

460460460

natural persons

1.4 Shares held by 3409 3409 3409

00.00%0.48%

foreign investors 090 090 090

Among which: Shares

340934093409

held by foreign legal 0 0.00% 0.48%

090090090

persons

Shares

00.00%0000.00%

held by foreign natural

79Changchai Company Limited Annual Report 2021

persons

56137100.005613779.55

2. Unrestricted shares 0 0

4326%4326%

2.1 RMB-denominated 41137 73.28 41137 58.29

00

ordinary shares 4326 % 4326 %

2.2 Domestically listed 15000 26.72 15000 21.26

00

foreign shares 0000 % 0000 %

2.3 Oversea listed

00.00%0000.00%

foreign shares

2.4 Other 0 0.00% 0 0 0 0.00%

56137100.00144311443170569100.00

3. Total shares

4326%818181812507%

Reasons for the share changes:

√ Applicable □ Not applicable

On 17 December 2020 the Company received the Reply concerning the Approval of the Non-public Offering of

Shares of Changchai Company Limited (ZJXK [2020] No. 3374) from the China Securities Regulatory

Commission which approved the non-public offering of up to 168412297 shares of the Company. The

Company's offered 144318181 RMB ordinary shares (A shares) in a non-public manner. The new shares issued

in a non-public manner were listed on the Shenzhen Stock Exchange on 5 July 2021. For details please refer to

the Report on Non-public Offering by Changchai Company Limited and Listing Bulletin disclosed by the

Company on www.cninfo.com.cn on 1 July 2021.Approval of share changes:

√ Applicable □ Not applicable

On 17 December 2020 the Company received the Reply concerning the Approval of the Non-public Offering of

Shares of Changchai Company Limited (ZJXK [2020] No. 3374) from the China Securities Regulatory

Commission which approved the non-public offering of up to 168412297 shares of the Company. The

Company's offered 144318181 RMB ordinary shares (A shares) in a non-public manner. The new shares issued

in a non-public manner were listed on the Shenzhen Stock Exchange on 5 July 2021.Transfer of share ownership:

□ Applicable √ Not applicable

Effects of share changes on the basic and diluted earnings per share equity per share attributable to the

Company’s ordinary shareholders and other financial indicators of the prior year and the prior accounting period

respectively:

√ Applicable □ Not applicable

During the Reporting Period the Company completed the private placement of stocks. And the share capital of the

Company changed into 705692507 shares from 561374326 shares. Based on the weighted average share capital

on 31 December 2021 the basic earnings per share will be RMB0.1657 per share the diluted earnings per share

will be RMB0.1657 per share and the net assets per share will be RMB4.3610 per share.Other information that the Company considers necessary or is required by the securities regulator to be disclosed:

□ Applicable √ Not applicable

2. Changes in Restricted Shares

√ Applicable □ Not applicable

80Changchai Company Limited Annual Report 2021

Unit: share

Restricte Restrict

d shares Restricted ed Restricted

Restricted

Name of the amount shares shares shares

Restricted reasons shares

shareholders at the increased of relieved amount at the

relieved date

period-b the period of the period-end

egin period

Changzhou Additional issuance of

Investment 56818181 shares

0568181810568181812024-7-5

Group Co. through the private

Ltd. placement of shares

Additional issuance of

3409090 shares

UBS AG 0 3409090 0 3409090 2022-1-5

through the private

placement of shares

Additional issuance of

Caitong Fund

7909090 shares

Management 0 7909090 0 7909090 2022-1-5

through the private

Co. Ltd.placement of shares

Jiangxi Jintou Additional issuance of

Industrial 4545454 shares

04545454045454542022-1-5

Development through the private

Co. Ltd. placement of shares

Additional issuance of

Guotai Asset

8181818 shares

Management 0 8181818 0 8181818 2022-1-5

through the private

Co. Ltd.placement of shares

Enjoy

Additional issuance of

(Ningbo)

6818181 shares

Asset 0 6818181 0 6818181 2022-1-5

through the private

Management

placement of shares

L.P.Additional issuance of

3409090 shares

Zhou Zhiheng 0 3409090 0 3409090 2022-1-5

through the private

placement of shares

China

Additional issuance of

National Gold

10681818 shares

Group Asset 0 10681818 0 10681818 2022-1-5

through the private

Management

placement of shares

Co. Ltd.Additional issuance of

Sun Meichun 0 4545454 0 4545454 4545454 shares 2022-1-5

through the private

81Changchai Company Limited Annual Report 2021

placement of shares

Additional issuance of

Nuode Asset

11363636 shares

Management 0 11363636 0 11363636 2022-1-5

through the private

Co. Ltd.placement of shares

Additional issuance of

Minmetals

4545454 shares

Securities Co. 0 4545454 0 4545454 2022-1-5

through the private

Ltd.placement of shares

Additional issuance of

7272727 shares

Chen Beiwen 0 7272727 0 7272727 2022-1-5

through the private

placement of shares

Additional issuance of

Nanhua Fund 5454545 shares

05454545054545452022-1-5

Co. Ltd. through the private

placement of shares

Additional issuance of

4545454 shares

Yao Jianquan 0 4545454 0 4545454 2022-1-5

through the private

placement of shares

Changzhou

Transportation Additional issuance of

Construction 4545454 shares

04545454045454542022-1-5

Investment through the private

Development placement of shares

Co. Ltd.Additional issuance of

272735 shares

Li Xueqin 0 272735 0 272735 2022-1-5

through the private

placement of shares

Total 0 144318181 0 144318181 -- --

II. Issuance and Listing of Securities

1. Securities (Exclusive of Preferred Shares) Issued in the Reporting Period

√ Applicable □ Not applicable

Termi

Name of

issue nation

Stock and Approved Disclo

Issue price Issue Listing date

derivative amount Disclosure index sure

date (interes amount date for

securities for listing date

t) tradin

thereof

g

82Changchai Company Limited Annual Report 2021

Stock

For details please

refer to the Report on

Non-public Offering

RMB

by Changchai

Changcha 3 June 4.40 1443181 5 July 1443181 1 July

--- Company Limited

i 2021 per 81 2021 81 2021

and Listing Bulletin

share

disclosed by the

Company on

www.cninfo.com.cn

Convertible corporate bonds convertible corporate bonds separately traded and corporate bonds

Other derivative securities

Notes:

On 17 December 2020 the Company received the Reply concerning the Approval of the Non-public Offering of

Shares of Changchai Company Limited (ZJXK [2020] No. 3374) from the China Securities Regulatory

Commission which approved the non-public offering of up to 168412297 shares of the Company. The

Company's offered 144318181 RMB ordinary shares (A shares) in a non-public manner. The issuing price was

RMB4.40 per share total amount raised was RMB634999936.40 and the net amount actually raised was

RMB620665733.97 after deducting various issuance expenses. The new shares issued in a non-public manner

were listed on the Shenzhen Stock Exchange on 5 July 2021.

2. Changes to Total Shares Shareholder Structure and Asset and Liability Structures

√ Applicable □ Not applicable

During the Reporting Period the Company completed a non-public offering of 144318181 RMB ordinary shares

(A shares) changing the total number of shares of the Company from 561374326 shares to 705692507 shares

including 561374326 shares not subject to trading moratorium and 144318181 shares subject to trading

moratorium.At the end of the Reporting Period the Company's total assets increased by RMB907428496.81 or 22.96% and

equity attributable to owners of the Company as the parent increased by RMB804200671.31 or 35.38%

compared with the beginning of the year. The scale of the Company's total assets and equity attributable to owners

of the Company as the parent has increased which is conducive to further enhancing the capital strength. At the

same time the asset-liability ratio decreased which is conducive to enhancing the Company's stability of capital

structure and risk resistance.

3. Existing Staff-Held Shares

□ Applicable √ Not applicable

III Shareholders and Actual Controller

Unit: share

83Changchai Company Limited Annual Report 2021

Number of

Number of

preferred

ordinary Number of

shareholders with

Number of shareholders at preferred

resumed voting

ordinary 49947 the month-end 53650 shareholders 0 0

rights at the

shareholders prior to the with resumed

month-end prior

disclosure of this voting rights

to the disclosure

Report

of this Report

5% or greater shareholders or top 10 shareholders

Increase/d Shares in pledge

Shareho

Total shares ecrease in or frozen

Name of Nature of lding Restricted Unrestricted

held at the the

shareholder shareholder percent shares held shares held

period-end Reporting Status Shares

age

Period

Changzhou

State-owned 5681818 5681818

Investment Group 32.26% 227663417 170845236

corporation 1 1

Co. Ltd

Nuode Fund-

Huazhang Tiandi

Media Investment

1136363

Co. Ltd.-Nuode Other 1.61% 11363636 11363636 0

6

Fund Pujiang

No.64 Single Asset

Management Plan

China National

Gold Group Asset State-owned 1068181 1068181

1.51%106818180

Management Co. corporation 8 8

Ltd.Domestic

Chen Beiwen 1.03% 7272727 7272727 7272727 0

individual

Enjoy(Ningbo)Ass

et Management

L.P.-Enjoy

Yingshanhong Other 0.97% 6818181 6818181 6818181 0

No.9 Private

Securities

Investment Fund

Foreign

UBS AG 0.66% 4631555 3409090 3409090 1222465

corporation

Changzhou

Transportation

State-owned

Construction 0.65% 4595454 4545454 4545454 50000

corporation

Investment

Development Co.

84Changchai Company Limited Annual Report 2021

Ltd.Domestic

Yao Jianquan 0.64% 4545454 4545454 4545454 0

individual

Domestic

Sun Meichun 0.64% 4545454 4545454 4545454 0

individual

Jiangxi Jintou Domestic

Industrial non-state-ow

0.64%4545454454545445454540

Development Co. ned

Ltd. corporation

Strategic investor or general legal

person becoming a top-10

N/A

ordinary shareholder due to rights

issue (if any)

It is unknown whether there is among the top 10 public shareholders and the

Related or acting-in-concert

top 10 unrestricted public shareholders any related parties or acting-in-concert

parties among the shareholders

parties as defined in the Administrative Measures for Information Regarding

above

Shareholding Alteration.Above shareholders involved in

entrusting/being entrusted with

N/A

voting rights and giving up voting

rights

Special account for share

repurchases (if any) among the N/A

top 10 shareholders

Top 10 unrestricted shareholders

Unrestricted shares held at the Shares by type

Name of shareholder

period-end Type Shares

Changzhou Investment Group RMB-denominated

170845236170845236

Co. Ltd ordinary share

RMB-denominated

Chen Jian 3999400 3999400

ordinary share

Domestically listed

KGI ASIA LIMITED 3101695 3101695

foreign share

Domestically listed

Li Suinan 1548100 1548100

foreign share

Domestically listed

Huang Guoliang 1528891 1528891

foreign share

RMB-denominated

Chen Xiaojing 1423700 1423700

ordinary share

Domestically listed

Lu Zhang 1409512 1409512

foreign share

RMB-denominated

Tao Xiaofang 1240000 1240000

ordinary share

Xue Hong 1240000 Domestically listed 1240000

85Changchai Company Limited Annual Report 2021

foreign share

RMB-denominated

UBS AG 1222465 1222465

ordinary share

Related or acting-in-concert

parties among top 10 unrestricted It is unknown whether there is among the top 10 public shareholders and the

public shareholders as well as top 10 unrestricted public shareholders any related parties or acting-in-concert

between top 10 unrestricted parties as defined in the Administrative Measures for Information Regarding

public shareholders and top 10 Shareholding Alteration.shareholders

Top 10 ordinary shareholders

Shareholders Chen Jian and Chen Xiaojing respectively held 2473000 shares

involved in securities margin

and 1194000 shares of the Company through their credit accounts.trading (if any)

Indicate by tick mark whether any of the top 10 ordinary shareholders or the top 10 unrestricted ordinary

shareholders of the Company conducted any promissory repo during the Reporting Period.□ Yes √ No

No such cases in the Reporting Period.

2. Controlling Shareholder

Nature of the controlling shareholder: Controlled by a local state-owned legal person

Type of the controlling shareholder: Legal person

Legal

Name of controlling representative/ Date of Unified social

Principal activity

shareholder person in establishment credit code

charge

Changzhou Investment 913204004672839 Property investment

Chen Limin 20 June 2002

Group Co. Ltd 80X and management

Controlling shareholder’s

holdings in other listed

companies at home or None

abroad in the Reporting

Period

Change of the controlling shareholder in the Reporting Period:

□ Applicable √ Not applicable

No such cases in the Reporting Period.

3. Actual Controller and Its Acting-in-Concert Parties

Nature of the actual controller: Local institution for state-owned assets management

Type of the actual controller: Legal person

Legal

Date of Unified social

Name of actual controller representativ Principal activity

establishment credit code

e/person in

86Changchai Company Limited Annual Report 2021

charge

State-owned Assets

Supervision and

Administration Wang

01411025-1 Not applicable

Commission of Wenzhuo

Changzhou Municipal

People’s Government

Other listed companies at

home or abroad

controlled by the actual None

controller in the

Reporting Period

Change of the actual controller during the Reporting Period:

□ Applicable √ Not applicable

No such cases in the Reporting Period.Ownership and control relations between the actual controller and the Company:

Indicate by tick mark whether the actual controller controls the Company via trust or other ways of asset

management.□ Applicable √ Not applicable

4. Number of Accumulative Pledged Shares held by the Company’s Controlling Shareholder or the Largest

Shareholder as well as Its Acting-in-Concert Parties Accounts for 80% of all shares of the Company held

by Them

□ Applicable √ Not applicable

5. Other 10% or Greater Corporate Shareholders

□ Applicable √ Not applicable

6. Limitations on Shareholding Decrease by the Company’s Controlling Shareholder Actual Controller

Reorganizer and Other Commitment Makers

√ Applicable □ Not applicable

Changzhou Investment Group Co. Ltd. the controlling shareholder of the Company participated in the

non-public offering of shares of the Company and was allotted 56818181 shares with a subscription amount of

87Changchai Company Limited Annual Report 2021

RMB249999996.40. The shares were listed on 5 July 2021 with a 36-month lock-up period and a release date of

5 July 2024.

IV Specific Implementation of Share Repurchase during the Reporting Period

Progress on any share repurchase

□ Applicable √ Not applicable

Progress on reducing the repurchased shares by means of centralized bidding

□ Applicable √ Not applicable

88Changchai Company Limited Annual Report 2021

Part VIII Preference Shares

□ Applicable √ Not applicable

No preference shares in the Reporting Period.

89Changchai Company Limited Annual Report 2021

Part IX Bonds

□ Applicable √ Not applicable

90Changchai Company Limited Annual Report 2021

Part X Financial Statements

I Independent Auditor’s Report

Type of the independent auditor’s opinion Unmodified unqualified opinion

Date of signing this report 11 April 2022

Gongzheng Tianye Certified Public Accountants

Name of the independent auditor

(Special General Partnership)

No. of the auditor’s report SGW[2022]ANo.315

Name of the certified public accountants Wang Wenkai Qin Zhijun

Text of the Independent Auditor’s Report

To the Shareholders of Changchai Company Limited

I Opinion

We have audited the accompanying financial statements of Changchai Company Limited. (together with its

consolidated subsidiaries included in the consolidated financial statements the “Company”) which comprise the

parent’s and consolidated balance sheets as at 31 December 2021 the parent’s and consolidated income statements

the parent’s and consolidated cash flow statements the parent’s and consolidated statements of changes in owners’

equity for the year then ended as well as the notes to the financial statements.In our opinion the financial statements attached were prepared in line with the regulations of Accounting

Standards for Business Enterprises in all significant aspects which gave a true and fair view of the consolidated

and parent financial position of Changchai Company Limited. As at 31 December 2021 and the consolidated and

parent business performance and cash flow for 2021.II Basis for Opinion

We conducted our audits in accordance with the Audit Standards for Chinese Registered Accountants. Our

responsibilities under those standards are further described in the Auditor’s Responsibilities for Audit of Financial

Statements section of our report. We are independent of the Company in accordance with the China Code of

Ethics for Certified Public Accountants and we have fulfilled our other ethical responsibilities in accordance with

the said Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to

provide a basis for our opinion.III Key Audit Matters

Key audit matters are those matters that in our professional judgment were of most significance in our audit of

the financial statements of the current period. These matters were addressed in the context of our audit of the

financial statements as a whole and in forming our opinion thereon and we do not provide a separate opinion on

these matters. And key audit matter identified in our audit is summarized as follows:

(I) Recognition of revenue

1. Description of the item

For details and analysis of the accounting policies for revenue recognition please refer to the accounting policies

described in notes 3 30 Revenue and 5 37 Operating Revenue and Operating costs to the financial statements.In 2021 the operating revenue of Changchai Stock is RMB 2452430500.Since the operating revenue is one of key performance indicators of the Company and there is the inherent risk

that the management may manipulate the timing of revenue recognition for the purpose of achieving certain goals

or expectations so we identify the revenue recognition as a key audit item.

91Changchai Company Limited Annual Report 2021

2. Response for audit

(1) Know the key internal control related to revenue recognition evaluate whether its design and execution are

valid or not and test the operation effectiveness of the related internal control.

(2) Interview the management know about the recognition policies regarding revenue of the Company get and

check contracts or agreements of the Company signed with customers identify contract terms related to the

recognition of sales revenue of products and evaluate whether the revenue recognition of the Company meets the

requirements of accounting standards for business enterprises.

(3) Apply sampling test for sales revenue check the supporting documents related to revenue recognition check

the provision of goods transfer control to the sales contract and supporting manufacturers recipients and confirm

the receiving of documents and other supporting documents (including but not limited to sales contracts orders

sales invoices invoices export customs declaration).

(4) Check the operating revenue recognized before and after the balance sheet date to the supporting documents

such as shipping order declaration for exportation and etc by sampling method to assess whether the operating

revenue is recognized within appropriate period.

(5) Implement the confirmation by drawing sample to recognize the balance of accounts receivable and the

amount of sales revenue according to the features and natures of customer transaction.(II) Bad debt provision for accounts receivable

1. Description of the item

As described in the accounting policies described in "3 10 Impairment of financial instruments" and "5 4

Accounts receivable" in the notes to the financial statements. On December 31 2021 the book balance of

accounts receivable of Changchai Stock was 554530200 yuan the allowance for bad debts was 179321100

yuan and the book value was 375209100 yuan accounting for 7.72% of the total assets at the end of the period.Because the accounts receivable balance is significant and the provision for doubtful accounts receivable takes

management's judgment in consideration we identified it as a key audit item.

2. Response for audit

(1) Access Changchai’s internal control systems of sales and accounts receivable management to understand and

evaluate the design of internal control and carry out walk-through test to confirm the implementation of internal

control systems.

(2) Analyze and confirm the reasonableness of Changchai’s accounting estimates of bad debt provision for

accounts receivable including the basis for determining the combination of accounts receivable the expected

credit loss rate and the judgment of impairment test of accounts receivable evaluated individually.

(3) Combined with the policy of accounts receivable bad debt provision review to determine whether the basis of

accounts receivable combination is accurate and whether the judgment of individual bad debt provision is

reasonable;

(4)Access and check the account receivable details aging schedule statement of provisions for bad debts and

confirm the reasonableness of bad debt provision for accounts receivable by combining with the request of

confirmation of balance and subsequent collection inspection;

(5) For the accounts receivable divided into individual provision for bad debt refer to the corresponding contract

and other information understand its sales and payment collection and judge whether the provision for bad debt

is sufficient;

(6)Send request for confirmation of balance and confirm the authenticity and accuracy of the amount of accounts

receivable on the balance sheet date by combining with subsequent inspection and other procedures.IV Other Information

The Company’s management (hereinafter referred to as “management”) is responsible for the other information.

92Changchai Company Limited Annual Report 2021

The other information comprises all of the information included in the Company’s 2020 Annual Report other than

the financial statements and our auditor’s report thereon.Our opinion on the financial statements does not cover the other information and we do not express any form of

assurance conclusion thereon.In connection with our audit of the financial statements our responsibility is to read the other information and in

doing so consider whether the other information is materially inconsistent with the financial statements or our

knowledge obtained in the audit or otherwise appears to be materially misstated. If based on the work we have

performed we conclude that there is a material misstatement of this other information; we are required to report

that fact. We have nothing to report in this regard.V Responsibilities of Management and Those Charged with Governance for Financial Statements

The management is responsible for the preparation of the financial statements that give a fair view in accordance

with CAS and for designing implementing and maintaining such internal control as the management determines

is necessary to enable the preparation of financial statements that are free from material misstatement whether

due to fraud or error.In preparing the financial statements the management is responsible for assessing the Company’s ability to

continue as a going concern disclosing matters related to going concern (if applicable) and using the going

concern basis of accounting unless the management either intends to liquidate the Company or to cease operations

or have no realistic alternative but to do so.Those charged with governance are responsible for overseeing the Company’s financial reporting process.VI Auditor’s Responsibilities for Audit of Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from

material misstatement whether due to fraud or error and to issue an auditor’s report that includes our opinion.Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance

with CAS will always detect a material misstatement when it exists. Misstatements can arise from fraud or error

and are considered material if individually or in the aggregate they could reasonably be expected to influence the

economic decisions of users taken on the basis of these financial statements.As part of an audit in accordance with CAS we exercise professional judgment and maintain professional

skepticism throughout the audit. We also:

(1) Identify and assess the risks of material misstatement of the financial statements whether due to fraud or error

design and perform audit procedures responsive to those risks and obtain audit evidence that is sufficient and

appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from

fraud is higher than for one resulting from error as fraud may involve collusion forgery intentional omissions

misrepresentations or the override of internal control.

(2) Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are

appropriate in the circumstances.

(3) Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and

related disclosures made by the management.

(4) Conclude on the appropriateness of the management’s use of the going concern basis of accounting and based

on the audit evidence obtained whether a material uncertainty exists related to events or conditions that may cast

significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material

uncertainty exists we are required by CAS to draw users’ attention in our auditor’s report to the related

disclosures in the financial statements. If such disclosures are inadequate we need to modify our opinion. Our

conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However future events

or conditions may cause the Company to cease to continue as a going concern.

93Changchai Company Limited Annual Report 2021

(5) Evaluate the overall presentation structure and content of the financial statements and whether the financial

statements represent the underlying transactions and events in a manner that achieves fair presentation.

(6) Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business

activities within the Company to express an opinion on the financial statements. We are responsible for the

direction supervision and performance of the Company audit. We remain solely responsible for our audit opinion.We communicate with those charged with governance regarding the planned scope and timing of the audit and

significant audit findings including any noteworthy deficiencies in internal control that we identify during our

audit.We also provide those charged with governance with a statement that we have complied with relevant ethical

requirements regarding independence and communicate with them all relationships and other matters that may

reasonably be thought to bear on our independence and where applicable related safeguards.From the matters communicated with those charged with governance we determine those matters that were of

most significance in the audit of the financial statements of the current period and are therefore the key audit

matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure

about the matter or when in extremely rare circumstances we determine that a matter should not be

communicated in our report because the adverse consequences of doing so would reasonably be expected to

outweigh the public interest benefits of such communication.Gongzheng Tianye Certified Public Accountants Chinese CPA: Wang Wenkai

(Special General Partnership) (Engagement Partner)

Chinese CPA: Qin Zhijun

Wuxi · China 11April 2022

II Financial Statements

Currency unit for the financial statements and the notes thereto: RMB

1. Consolidated Balance Sheet

Prepared by Changchai Company Limited

31 December 2021

Unit: RMB

Item 31 December 2021 31 December 2020

Current assets:

Monetary assets 707966678.74 760728222.85

Settlement reserve

Interbank loans granted

Held-for-trading financial

404053261.5711500272.00

assets

Derivative financial assets

Notes receivable 334311236.78 600140938.05

Accounts receivable 375209126.48 397154016.49

Accounts receivable

497388826.02

financing

Prepayments 8197418.39 9357840.75

Premiums receivable

Reinsurance receivables

94Changchai Company Limited Annual Report 2021

Receivable reinsurance

contract reserve

Other receivables 19515350.52 6212062.80

Including: Interest

receivable

Dividends

receivable

Financial assets purchased

under resale agreements

Inventories 651083758.18 606680340.55

Contract assets

Assets held for sale

Current portion of

non-current assets

Other current assets 44060822.57 27299362.72

Total current assets 3041786479.25 2419073056.21

Non-current assets:

Loans and advances to

customers

Investments in debt

37898226.39

obligations

Investments in other debt

obligations

Long-term receivables

Long-term equity investments

Investments in other equity

779877646.53685137950.87

instruments

Other non-current financial

112500000.0098732938.63

assets

Investment property 44597255.21 46239326.03

Fixed assets 402915521.65 454181555.68

Construction in progress 270305690.91 66502432.41

Productive living assets

Oil and gas assets

Right-of-use assets

Intangible assets 155154745.91 158870631.71

Development costs

Goodwill

Long-term prepaid expense 110345.30 13693.20

Deferred income tax assets 10693809.23 4231873.15

Other non-current assets 4543240.88 19971006.56

Total non-current assets 1818596482.01 1533881408.24

Total assets 4860382961.26 3952954464.45

95Changchai Company Limited Annual Report 2021

Current liabilities:

Short-term borrowings 73971466.65 22000000.00

Borrowings from the central

bank

Interbank loans obtained

Held-for-trading financial

liabilities

Derivative financial liabilities

Notes payable 550774400.00 595346000.00

Accounts payable 666186668.82 612757392.46

Advances from customers 660965.62 661612.17

Contract liabilities 26864081.97 35944517.15

Financial assets sold under

repurchase agreements

Customer deposits and

interbank deposits

Payables for acting trading of

securities

Payables for underwriting of

securities

Employee benefits payable 45385667.48 50127161.47

Taxes payable 5306378.82 2869485.41

Other payables 148361373.29 197545076.08

Including: Interest payable

Dividends

3891433.833891433.83

payable

Handling charges and

commissions payable

Reinsurance payables

Liabilities directly associated

with assets held for sale

Current portion of

non-current liabilities

Other current liabilities 88938192.79 5233947.12

Total current liabilities 1606449195.44 1522485191.86

Non-current liabilities:

Insurance contract reserve

Long-term borrowings

Bonds payable

Including: Preferred shares

Perpetual bonds

Lease liabilities

Long-term payables

96Changchai Company Limited Annual Report 2021

Long-term employee benefits

payable

Provisions

Deferred income 39615355.40 56949737.60

Deferred income tax

117344161.1180671598.82

liabilities

Other non-current liabilities

Total non-current liabilities 156959516.51 137621336.42

Total liabilities 1763408711.95 1660106528.28

Owners’ equity:

Share capital 705692507.00 561374326.00

Other equity instruments

Including: Preferred shares

Perpetual bonds

Capital reserves 640676218.40 164328665.43

Less: Treasury stock

Other comprehensive income 506011499.55 425482758.24

Specific reserve 18812950.04 18812986.55

Surplus reserves 334144488.46 325451531.14

General reserve

Retained earnings 872212354.88 777899079.66

Total equity attributable to

owners of the Company as the 3077550018.33 2273349347.02

parent

Non-controlling interests 19424230.98 19498589.15

Total owners’ equity 3096974249.31 2292847936.17

Total liabilities and owners’

4860382961.263952954464.45

equity

Legal representative: Shi Xinkun General Manager: Zhang Xin

Head of the accounting department: Jiang He

97Changchai Company Limited Annual Report 2021

2. Balance Sheet of the Company as the Parent

Unit: RMB

Item 31 December 2021 31 December 2020

Current assets:

Monetary assets 615184387.01 682322659.41

Held-for-trading financial

262004030.14

assets

Derivative financial assets

Notes receivable 312118296.88 581230938.05

Accounts receivable 349135255.42 317828161.25

Accounts receivable

497388826.02

financing

Prepayments 2727652.23 6592567.26

Other receivables 26497081.34 24327355.36

Including: Interest

receivable

Dividends

receivable

Inventories 516588187.24 475688026.57

Contract assets

Assets held for sale

Current portion of

non-current assets

Other current assets 21292211.46 17521203.46

Total current assets 2602935927.74 2105510911.36

Non-current assets:

Investments in debt

37898226.39

obligations

Investments in other debt

obligations

Long-term receivables

Long-term equity investments 535752730.03 375752730.03

Investments in other equity

779877646.53685137950.87

instruments

Other non-current financial

112500000.0052500000.00

assets

Investment property 44597255.21 46239326.03

Fixed assets 325034679.67 369194314.03

Construction in progress 15557418.76 26195189.06

Productive living assets

Oil and gas assets

Right-of-use assets

Intangible assets 66621426.26 68088982.37

98Changchai Company Limited Annual Report 2021

Development costs

Goodwill

Long-term prepaid expense

Deferred income tax assets 9613375.32 4179544.86

Other non-current assets

Total non-current assets 1927452758.17 1627288037.25

Total assets 4530388685.91 3732798948.61

Current liabilities:

Short-term borrowings 58971466.65 5000000.00

Held-for-trading financial

liabilities

Derivative financial liabilities

Notes payable 544444400.00 589534000.00

Accounts payable 546689207.59 550360564.07

Advances from customers 660965.62 661612.17

Contract liabilities 24730270.44 32344514.86

Employee benefits payable 37861577.50 42455158.67

Taxes payable 2955053.82 1099861.63

Other payables 135773368.98 184513545.20

Including: Interest payable

Dividends

3243179.973243179.97

payable

Liabilities directly associated

with assets held for sale

Current portion of

non-current liabilities

Other current liabilities 63535570.11 2426575.40

Total current liabilities 1415621880.71 1408395832.00

Non-current liabilities:

Long-term borrowings

Bonds payable

Including: Preferred shares

Perpetual bonds

Lease liabilities

Long-term payables

Long-term employee benefits

payable

Provisions

Deferred income 39615355.40 56949737.60

Deferred income tax

95034251.5075460192.63

liabilities

Other non-current liabilities

Total non-current liabilities 134649606.90 132409930.23

99Changchai Company Limited Annual Report 2021

Total liabilities 1550271487.61 1540805762.23

Owners’ equity:

Share capital 705692507.00 561374326.00

Other equity instruments

Including: Preferred shares

Perpetual bonds

Capital reserves 659418700.67 183071147.70

Less: Treasury stock

Other comprehensive income 506011499.55 425482758.24

Specific reserve 18812950.04 18812986.55

Surplus reserves 334144488.46 325451531.14

Retained earnings 756037052.58 677800436.75

Total owners’ equity 2980117198.30 2191993186.38

Total liabilities and owners’

4530388685.913732798948.61

equity

100Changchai Company Limited Annual Report 2021

3. Consolidated Income Statement

Unit: RMB

Item 2021 2020

1. Revenue 2452430515.60 2296464711.24

Including: Operating revenue 2452430515.60 2296464711.24

Interest income

Insurance premium

income

Handling charge and

commission income

2. Costs and expenses 2399524185.52 2267289166.18

Including: Cost of sales 2084671762.08 1950573991.27

Interest expense

Handling charge and

commission expense

Surrenders

Net insurance claims

paid

Net amount provided as

insurance contract reserve

Expenditure on policy

dividends

Reinsurance premium

expense

Taxes and surcharges 15125948.96 12869609.15

Selling expense 117242290.32 128372278.62

Administrative expense 98890284.22 87446195.74

R&D expense 82390284.14 72258781.08

Finance costs 1203615.80 15768310.32

Including: Interest

5907625.427302086.80

expense

Interest

7921535.625467634.76

income

Add: Other income 6633332.38 7808732.52

Return on investment (“-” for

9327296.956545826.85

loss)

Including: Share of profit or

loss of joint ventures and associates

Income from the

derecognition of financial assets at

amortized cost (“-” for loss)

Exchange gain (“-” for loss)

Net gain on exposure hedges

101Changchai Company Limited Annual Report 2021

(“-” for loss)

Gain on changes in fair value

104570498.3620981109.00

(“-” for loss)

Credit impairment loss (“-” for

-52017151.822378630.68

loss)

Asset impairment loss (“-” for

-8676024.20-11155930.76

loss)

Asset disposal income (“-” for

155515.49229121.29

loss)

3. Operating profit (“-” for loss) 112899797.24 55963034.64

Add: Non-operating income 4037896.76 1047114.21

Less: Non-operating expense 1637033.05 2629797.33

4. Profit before tax (“-” for loss) 115300660.95 54380351.52

Less: Income tax expense 12368786.58 2085600.33

5. Net profit (“-” for net loss) 102931874.37 52294751.19

5.1 By operating continuity

5.1.1 Net profit from continuing

102931874.3752294751.19

operations (“-” for net loss)

5.1.2 Net profit from

discontinued operations (“-” for net

loss)

5.2 By ownership

5.2.1 Net profit attributable to

shareholders of the Company as the 103006232.54 52432443.05

parent

5.2.1 Net profit attributable to

-74358.17-137691.86

non-controlling interests

6. Other comprehensive income net

80528741.31108771351.91

of tax

Attributable to owners of the

80528741.31108771351.91

Company as the parent

6.1 Items that will not be

80528741.31108771351.91

reclassified to profit or loss

6.1.1 Changes caused by

remeasurements on defined benefit

schemes

6.1.2 Other comprehensive

income that will not be reclassified to

profit or loss under the equity method

6.1.3 Changes in the fair

value of investments in other equity 80528741.31 108771351.91

instruments

6.1.4 Changes in the fair

102Changchai Company Limited Annual Report 2021

value arising from changes in own

credit risk

6.1.5 Other

6.2 Items that will be

reclassified to profit or loss

6.2.1 Other comprehensive

income that will be reclassified to

profit or loss under the equity method

6.2.2 Changes in the fair

value of investments in other debt

obligations

6.2.3 Other comprehensive

income arising from the

reclassification of financial assets

6.2.4 Credit impairment

allowance for investments in other

debt obligations

6.2.5 Reserve for cash flow

hedges

6.2.6 Differences arising from

the translation of foreign

currency-denominated financial

statements

6.2.7 Other

Attributable to non-controlling

interests

7. Total comprehensive income 183460615.68 161066103.10

Attributable to owners of the

183534973.85161203794.96

Company as the parent

Attributable to non-controlling

-74358.17-137691.86

interests

8. Earnings per share

8.1 Basic earnings per share 0.1657 0.0934

8.2 Diluted earnings per share 0.1657 0.0934

Legal representative: Shi Xinkun General Manager: Zhang Xin

Head of the accounting department: Jiang He

103Changchai Company Limited Annual Report 2021

4. Income Statement of the Company as the Parent

Unit: RMB

Item 2021 2020

1. Operating revenue 2267232119.78 2123200238.11

Less: Cost of sales 1944820462.59 1823443404.79

Taxes and surcharges 11893439.38 10349672.15

Selling expense 106770873.83 110774087.06

Administrative expense 80635862.36 70342720.73

R&D expense 75021386.36 67074041.38

Finance costs -2350968.39 10879173.24

Including: Interest expense 3932469.12 5197914.71

Interest income 8354523.54 6017663.50

Add: Other income 5810480.10 5478200.87

Return on investment (“-” for loss) 8352714.26 5437925.05

Including: Share of profit or loss of

joint ventures and associates

Income from the derecognition of

financial assets at amortized cost (“-” for loss)

Net gain on exposure hedges (“-” for

loss)

Gain on changes in fair value (“-” for

35754030.142500000.00

loss)

Credit impairment loss (“-” for loss) -16143004.02 2599053.83

Asset impairment loss (“-” for loss) -3866890.01 -18384759.06

Asset disposal income (“-” for loss) 6642.47 80014.23

2. Operating profit (“-” for loss) 80355036.59 28047573.68

Add: Non-operating income 3441588.57 542506.89

Less: Non-operating expense 1086173.24 262488.62

3. Profit before tax (“-” for loss) 82710451.92 28327591.95

Less: Income tax expense -4219121.23 -3554013.58

4. Net profit (“-” for net loss) 86929573.15 31881605.53

4.1 Net profit from continuing operations (“-”

86929573.1531881605.53

for net loss)

4.2 Net profit from discontinued operations

(“-” for net loss)

5. Other comprehensive income net of tax 80528741.31 108771351.91

5.1 Items that will not be reclassified to profit

80528741.31108771351.91

or loss

5.1.1 Changes caused by remeasurements

on defined benefit schemes

5.1.2 Other comprehensive income that

will not be reclassified to profit or loss under

104Changchai Company Limited Annual Report 2021

the equity method

5.1.3 Changes in the fair value of

80528741.31108771351.91

investments in other equity instruments

5.1.4 Changes in the fair value arising

from changes in own credit risk

5.1.5 Other

5.2 Items that will be reclassified to profit or

loss

5.2.1 Other comprehensive income that

will be reclassified to profit or loss under the

equity method

5.2.2 Changes in the fair value of

investments in other debt obligations

5.2.3 Other comprehensive income arising

from the reclassification of financial assets

5.2.4 Credit impairment allowance for

investments in other debt obligations

5.2.5 Reserve for cash flow hedges

5.2.6 Differences arising from the

translation of foreign currency-denominated

financial statements

5.2.7 Other

6. Total comprehensive income 167458314.46 140652957.44

7. Earnings per share

7.1 Basic earnings per share

7.2 Diluted earnings per share

105Changchai Company Limited Annual Report 2021

5. Consolidated Cash Flow Statement

Unit: RMB

Item 2021 2020

1. Cash flows from operating activities:

Proceeds from sale of commodities

1806075487.792230952492.49

and rendering of services

Net increase in customer deposits and

interbank deposits

Net increase in borrowings from the

central bank

Net increase in loans from other

financial institutions

Premiums received on original

insurance contracts

Net proceeds from reinsurance

Net increase in deposits and

investments of policy holders

Interest handling charges and

commissions received

Net increase in interbank loans

obtained

Net increase in proceeds from

repurchase transactions

Net proceeds from acting trading of

securities

Tax rebates 50016426.49 33693741.46

Cash generated from other operating

22636726.1916977100.96

activities

Subtotal of cash generated from

1878728640.472281623334.91

operating activities

Payments for commodities and

1648743526.281571967433.96

services

Net increase in loans and advances to

customers

Net increase in deposits in the central

bank and in interbank loans granted

Payments for claims on original

insurance contracts

Net increase in interbank loans

granted

Interest handling charges and

commissions paid

Policy dividends paid

106Changchai Company Limited Annual Report 2021

Cash paid to and for employees 323020547.09 294472502.80

Taxes paid 31276348.44 39853712.33

Cash used in other operating activities 142011997.96 123533031.29

Subtotal of cash used in operating

2145052419.772029826680.38

activities

Net cash generated from/used in

-266323779.30251796654.53

operating activities

2. Cash flows from investing activities:

Proceeds from disinvestment 373180033.58 557198253.76

Return on investment 11396891.86 6545826.85

Net proceeds from the disposal of

fixed assets intangible assets and other 589226.24 275546.00

long-lived assets

Net proceeds from the disposal of

subsidiaries and other business units

Cash generated from other investing

336150.00

activities

Subtotal of cash generated from

385166151.68564355776.61

investing activities

Payments for the acquisition of fixed

assets intangible assets and other 139772849.33 133737262.64

long-lived assets

Payments for investments 709038171.10 579733766.76

Net increase in pledged loans granted

Net payments for the acquisition of

subsidiaries and other business units

Cash used in other investing activities 1869322.91 4141850.71

Subtotal of cash used in investing

850680343.34717612880.11

activities

Net cash generated from/used in

-465514191.66-153257103.50

investing activities

3. Cash flows from financing activities:

Capital contributions received 633873281.14

Including: Capital contributions by

non-controlling interests to subsidiaries

Borrowings raised 19000000.00 22000000.00

Cash generated from other financing

58971466.65

activities

Subtotal of cash generated from

711844747.7922000000.00

financing activities

Repayment of borrowings 29000000.00 22000000.00

Interest and dividends paid 1707729.02 3232890.38

Including: Dividends paid by

107Changchai Company Limited Annual Report 2021

subsidiaries to non-controlling interests

Cash used in other financing activities 14621163.63 2500000.00

Subtotal of cash used in financing

45328892.6527732890.38

activities

Net cash generated from/used in

666515855.14-5732890.38

financing activities

4. Effect of foreign exchange rates

-2215203.09-8827118.35

changes on cash and cash equivalents

5. Net increase in cash and cash

-67537318.9183979542.30

equivalents

Add: Cash and cash equivalents

629939540.50545959998.20

beginning of the period

6. Cash and cash equivalents end of the

562402221.59629939540.50

period

108Changchai Company Limited Annual Report 2021

6. Cash Flow Statement of the Company as the Parent

Unit: RMB

Item 2021 2020

1. Cash flows from operating activities:

Proceeds from sale of commodities and

1721407332.481963288154.66

rendering of services

Tax rebates 39451775.67 25903016.36

Cash generated from other operating

16788453.399006278.01

activities

Subtotal of cash generated from operating

1777647561.541998197449.03

activities

Payments for commodities and services 1632770616.35 1388644147.32

Cash paid to and for employees 267953154.75 247717051.40

Taxes paid 21295926.17 26755852.89

Cash used in other operating activities 129115999.33 110744198.57

Subtotal of cash used in operating activities 2051135696.60 1773861250.18

Net cash generated from/used in operating

-273488135.06224336198.85

activities

2. Cash flows from investing activities:

Proceeds from disinvestment 500487.00

Return on investment 10222037.17 5437925.05

Net proceeds from the disposal of fixed

assets intangible assets and other long-lived 124954.89 183890.00

assets

Net proceeds from the disposal of

subsidiaries and other business units

Cash generated from other investing activities 9718669.72

Subtotal of cash generated from investing

10346992.0615840971.77

activities

Payments for the acquisition of fixed assets

5665400.944071225.07

intangible assets and other long-lived assets

Payments for investments 484148226.39 154786000.00

Net payments for the acquisition of

subsidiaries and other business units

Cash used in other investing activities 1869322.91 9000000.00

Subtotal of cash used in investing activities 491682950.24 167857225.07

Net cash generated from/used in investing

-481335958.18-152016253.30

activities

3. Cash flows from financing activities:

Capital contributions received 633873281.14

Borrowings raised 5000000.00 5000000.00

Cash generated from other financing

58971466.65

activities

109Changchai Company Limited Annual Report 2021

Subtotal of cash generated from financing

697844747.795000000.00

activities

Repayment of borrowings 10000000.00 5000000.00

Interest and dividends paid 160362.10 1027748.70

Cash used in other financing activities 14621163.63 2500000.00

Subtotal of cash used in financing activities 24781525.73 8527748.70

Net cash generated from/used in financing

673063222.06-3527748.70

activities

4. Effect of foreign exchange rates changes on

-1401721.22-6995969.85

cash and cash equivalents

5. Net increase in cash and cash equivalents -83162592.40 61796227.00

Add: Cash and cash equivalents beginning of

559573331.81497777104.81

the period

6. Cash and cash equivalents end of the period 476410739.41 559573331.81

110Changchai Company Limited Annual Report 2021

7. Consolidated Statements of Changes in Owners’ Equity

2021

Unit: RMB

2021

Equity attributable to owners of the Company as the parent

Other L

equity e

instruments s

s

:

G

P T

P e

re r

er n

fe e Other Non-cont Total

Item p er Ot

Share rr Capital a compre Specific Surplus Retained rolling owners’

et al he Subtotal

capital e O reserves s hensive reserve reserves earnings interests equity

u re r

d th u income

al se

s er r

b rv

h y

o e

ar s

n

e t

ds

s o

c

k

1. Balance as at the end of the 561374 164328 425482 18812 325451 777899 227334 194985 229284

prior year 326.00 665.43 758.24 986.55 531.14 079.66 9347.02 89.15 7936.17

Add: Adjustment for change in

accounting policy

Adjustment for correction of

previous error

111Changchai Company Limited Annual Report 2021

Adjustment for business

combination under common

control

Other adjustments

2. Balance as at the beginning 561374 164328 425482 18812 325451 777899 227334 194985 229284

of the year 326.00 665.43 758.24 986.55 531.14 079.66 9347.02 89.15 7936.17

3. Increase/ decrease in the 144318 476347 80528 869295 943132 804200 -74358. 804126

-36.51

period (“-” for decrease) 181.00 552.97 741.31 7.32 75.22 671.31 17 313.14

3.1 Total comprehensive 80528 103006 183534 -74358. 183460

income 741.31 232.54 973.85 17 615.68

3.2 Capital increased and 144318 476347 620665 620665

reduced by owners 181.00 552.97 733.97 733.97

3.2.1 Ordinary shares 144318 476347 620665 620665

increased by owners 181.00 552.97 733.97 733.97

3.2.2 Capital increased by

holders of other equity

instruments

3.2.3 Share-based

payments included in owners’

equity

3.2.4 Other

869295-86929

3.3 Profit distribution

7.3257.32

3.3.1 Appropriation to 869295 -86929

surplus reserves 7.32 57.32

3.3.2 Appropriation to

general reserve

3.3.3 Appropriation to

owners (or shareholders)

3.3.4 Other

112Changchai Company Limited Annual Report 2021

3.4 Transfers within owners’

equity

3.4.1 Increase in capital (or

share capital) from capital

reserves

3.4.2 Increase in capital (or

share capital) from surplus

reserves

3.4.3 Loss offset by surplus

reserves

3.4.4 Changes in defined

benefit schemes transferred to

retained earnings

3.4.5 Other comprehensive

income transferred to retained

earnings

3.4.6 Other

3.5 Specific reserve -36.51 -36.51 -36.51

40232402320402320

3.5.1 Increase in the period

00.240.240.24

40232402323402323

3.5.2 Used in the period

36.756.756.75

3.6 Other

4. Balance as at the end of the 705692 640676 506011 18812 334144 872212 307755 194242 309697

period 507.00 218.40 499.55 950.04 488.46 354.88 0018.33 30.98 4249.31

2020

Unit: RMB

2020

Item

Equity attributable to owners of the Company as the parent Non-cont Total

113Changchai Company Limited Annual Report 2021

Other L rolling owners’

equity e interests equity

instruments s

s

:

T G

P

r en

Pr er

e Other er

ef p Specifi Ot

Share Capital a compre Surplus al Retained

er et c he Subtotal

capital O reserves s hensive reserves re earnings

re u reserve r

th u income se

d al

er r rv

sh b

y e

ar o

s

es n

t

ds

o

c

k

1. Balance as at the end of the 561374 164328 317059 17560 322226 726689 210923 196362 212887

prior year 326.00 665.43 775.00 202.07 700.34 929.10 9597.94 81.01 5878.95

Add: Adjustment for change in

accounting policy

Adjustment for correction of 165133 165316 165316

1833.38

previous error 6.26 9.64 9.64

Adjustment for business

combination under common

control

Other adjustments

2. Balance as at the beginning 561374 164328 317059 17560 322228 728341 211089 196362 213052

of the year 326.00 665.43 775.00 202.07 533.72 265.36 2767.58 81.01 9048.59

114Changchai Company Limited Annual Report 2021

3. Increase/ decrease in the 108422 12527 322299 495578 162456 -137691 162318

period (“-” for decrease) 983.24 84.48 7.42 14.30 579.44 .86 887.58

3.1 Total comprehensive 108771 524324 161203 -137691 161066

income 351.91 43.05 794.96 .86 103.10

3.2 Capital increased and

reduced by owners

3.2.1 Ordinary shares

increased by owners

3.2.2 Capital increased by

holders of other equity

instruments

3.2.3 Share-based

payments included in owners’

equity

3.2.4 Other

322299-32229

3.3 Profit distribution

7.4297.42

3.3.1 Appropriation to 322299 -32229

surplus reserves 7.42 97.42

3.3.2 Appropriation to

general reserve

3.3.3 Appropriation to

owners (or shareholders)

3.3.4 Other

3.4 Transfers within owners’ -34836 348368.

equity 8.67 67

3.4.1 Increase in capital (or

share capital) from capital

reserves

115Changchai Company Limited Annual Report 2021

3.4.2 Increase in capital (or

share capital) from surplus

reserves

3.4.3 Loss offset by

surplus reserves

3.4.4 Changes in defined

benefit schemes transferred to

retained earnings

3.4.5 Other comprehensive

income transferred to retained

earnings

-34836348368.

3.4.6 Other

8.6767

12527125278125278

3.5 Specific reserve

84.484.484.48

37662376629376629

3.5.1 Increase in the period

91.741.741.74

25135251350251350

3.5.2 Used in the period

07.267.267.26

3.6 Other

4. Balance as at the end of the 561374 164328 425482 18812 325451 777899 227334 194985 229284

period 326.00 665.43 758.24 986.55 531.14 079.66 9347.02 89.15 7936.17

116Changchai Company Limited Annual Report 2021

8. Statements of Changes in Owners’ Equity of the Company as the Parent

2021

Unit: RMB

2021

Other equity

instruments

Le

P

ss:

Pr er

Tr Other

efe pe O Total

Item Capital eas comprehe Specific Surplus Retained

Share capital rre tu Ot th owners’

reserves ur nsive reserve reserves earnings

d al he er equity

y income

sh b r

sto

are o

ck

s n

ds

1. Balance as at the end of the 561374326.0 18307114 4254827 18812986. 325451531 677800436. 21919931

prior year 0 7.70 58.24 55 .14 75 86.38

Add: Adjustment for change in

accounting policy

Adjustment for correction of

previous error

Other adjustments

2. Balance as at the beginning of 561374326.0 18307114 4254827 18812986. 325451531 677800436. 21919931

the year 0 7.70 58.24 55 .14 75 86.38

3. Increase/ decrease in the 144318181.0 47634755 8052874 8692957.3 78236615.8 78812401

-36.51

period (“-” for decrease) 0 2.97 1.31 2 3 1.92

3.1 Total comprehensive 8052874 86929573.1 16745831

income 1.31 5 4.46

3.2 Capital increased and 144318181.0 47634755 62066573

reduced by owners 0 2.97 3.97

117Changchai Company Limited Annual Report 2021

3.2.1 Ordinary shares 144318181.0 47634755 62066573

increased by owners 0 2.97 3.97

3.2.2 Capital increased by

holders of other equity

instruments

3.2.3 Share-based payments

included in owners’ equity

3.2.4 Other

8692957.3-8692957.3

3.3 Profit distribution

22

3.3.1 Appropriation to 8692957.3 -8692957.3

surplus reserves 2 2

3.3.2 Appropriation to

owners (or shareholders)

3.3.3 Other

3.4 Transfers within owners’

equity

3.4.1 Increase in capital (or

share capital) from capital

reserves

3.4.2 Increase in capital (or

share capital) from surplus

reserves

3.4.3 Loss offset by surplus

reserves

3.4.4 Changes in defined

benefit schemes transferred to

retained earnings

118Changchai Company Limited Annual Report 2021

3.4.5 Other comprehensive

income transferred to retained

earnings

3.4.6 Other

3.5 Specific reserve -36.51 -36.51

4023200.24023200.2

3.5.1 Increase in the period

44

4023236.74023236.7

3.5.2 Used in the period

55

3.6 Other

4. Balance as at the end of the 705692507.0 65941870 5060114 18812950. 334144488 756037052. 29801171

period 0 0.67 99.55 04 .46 58 98.30

2020

Unit: RMB

2020

Other equity

instruments

Le

P

ss:

Pr er

Tr Other

efe pe O Total

Item Capital ea comprehe Specific Surplus Retained

Share capital rre tu O th owners’

reserves sur nsive reserve reserves earnings

d al th er equity

y income

sh b er

sto

are o

ck

s n

ds

1. Balance as at the end of the 561374326.0 18307114 3170597 17560202 322226700 648776959. 20500691

prior year 0 7.70 75.00 .07 .34 53 10.64

Add: Adjustment for change in

accounting policy

119Changchai Company Limited Annual Report 2021

Adjustment for correction of

1833.3816500.4418333.82

previous error

Other adjustments

2. Balance as at the beginning of 561374326.0 18307114 3170597 17560202 322228533 648793459. 20500874

the year 0 7.70 75.00 .07 .72 97 44.46

3. Increase/ decrease in the 1084229 1252784. 3222997.4 29006976.7 14190574

period (“-” for decrease) 83.24 48 2 8 1.92

3.1 Total comprehensive 1087713 31881605.5 14065295

income 51.91 3 7.44

3.2 Capital increased and

reduced by owners

3.2.1 Ordinary shares

increased by owners

3.2.2 Capital increased by

holders of other equity

instruments

3.2.3 Share-based payments

included in owners’ equity

3.2.4 Other

3222997.4-3222997.4

3.3 Profit distribution

22

3.3.1 Appropriation to 3222997.4 -3222997.4

surplus reserves 2 2

3.3.2 Appropriation to

owners (or shareholders)

3.3.3 Other

3.4 Transfers within owners’ -348368.6

348368.67

equity 7

120Changchai Company Limited Annual Report 2021

3.4.1 Increase in capital (or

share capital) from capital

reserves

3.4.2 Increase in capital (or

share capital) from surplus

reserves

3.4.3 Loss offset by surplus

reserves

3.4.4 Changes in defined

benefit schemes transferred to

retained earnings

3.4.5 Other comprehensive

-348368.6

income transferred to retained 348368.67

7

earnings

3.4.6 Other

1252784.1252784.4

3.5 Specific reserve

488

3766291.3766291.7

3.5.1 Increase in the period

744

2513507.2513507.2

3.5.2 Used in the period

266

3.6 Other

4. Balance as at the end of the 561374326.0 18307114 4254827 18812986 325451531 677800436. 21919931

period 0 7.70 58.24 .55 .14 75 86.38

121Changchai Company Limited Annual Report 2021

III. Company Profile

Changchai Company Limited (hereinafter referred to as “the Company”) was founded on 5 May 1994 which is a

company limited by shares promoted solely by Changzhou Diesel Engine Plant through the approval by the State

Commission for Restructuring the Economic Systems with document TGS [1993] No. 9 on 15 January 1993 by

way of public offering of shares. With the approved of the People’s Government of Jiangsu Province SZF [1993]

No. 67 as well as reexamined and approved by China Securities Regulatory Commission (“CSRC”) through

document ZJFSZ (1994) No. 9 the Company initially issued A shares to the public from 15 March 1994 to 30

March 1994. As approved by the Shenzhen Stock Exchange through document SZSFZ (1994) No. 15 such

tradable shares of the public got listing on 1 July 1994 at Shenzhen Stock Exchange with “Su Changchai A” for

short of stock as well as “0570” as stock code (present stock code is “000570”).In 1996 with the recommendation of the Office of the People’s Government of Jiangsu Province SZBH [1996]

No. 13 as well as first review by Shenzhen Municipal Securities Administration Office through SZBZ [1996] No.

24 and approval of the State Council Securities Commission ZWF [1996] No. 27 the Company issued 100

million B shares to qualified investors on 27 August 1996 to 30 August 1996 getting listed on 13 September

1996.

On 9 June 2006 the Company held a shareholders’ general meeting related to A shares market to examine and

approve share merger reform plan and performed the share merger reform on 19 June 2006.As examined and approved at the 2nd Extraordinary General Meeting of 2009 in September 2009 based on the

total share capital of 374249551 shares as at 30 June 2009 the Company implemented the profit distribution plan

i.e. to distribute 5 bonus shares and cash of RMB0.80 for every 10 shares with registered capital increased by

RMB187124775.00 as well as registered capital of RMB561374326.00 after change which verified by Jiangsu

Gongzheng Tianye Certified Public Accountants Company Limited with issuing Capital Verification Report SGC

[2010] No. B002.A non-public offering of up to 168412297 new shares was deliberated on and approved as a resolution of the

2020 Annual General Meeting held on 7 May 2021 and approved by the Approval of the Non-public Offering of

Shares of Changchai Co. Ltd. (CSRC Permit [2020] No. 3374) issued by Changchai Company Limited the China

Securities Regulatory Commission. On 16 June 2021 the capital verification report "S.G. W [2021] B062" was

issued by Gongzheng Tianye Accounting Firm (Special General Partnership) confirming that the Company had

issued 144318181 RMB ordinary shares (A shares) in a non-public offering with an additional paid-in capital

(share capital) of RMB144318181. The total amount raised was RMB634999996.40; the net amount raised was

RMB620665733.97 which increased the capital reserve (share capital premium) by RMB476347552.97. As of

31 December 2021 the total share capital of the Company was RMB705692507.

The unified social credit code of the company's business license is 91320400134792410W.The Company’s registered address is situated at No. 123 Huaide Middle Road Changzhou Jiangsu as well as its

head office located at No. 123 Huaide Middle Road Changzhou Jiangsu.The Company belongs to manufacturing with business scope including manufacturing and sale of diesel engine

diesel engines part and casting grain harvesting machine rotary cultivators walking tractor mould and fixtures

assembling and sale of diesel generating set and pumping unit. The Company mainly engaged in the production

and sales of small and medium-sized single cylinders and multi-cylinder diesel engine with the label of Changchai

Brand. The diesel engine produced and sold by the Company were mainly used in tractors combine harvest

models light commercial vehicle farm equipment small-sized construction machinery generating sets and

shipborne machinery and equipment etc. The Company’s main business remained unchanged in the Reporting

122Changchai Company Limited Annual Report 2021

Period.The Company established the Shareholders’ General Meeting the Board of Directors and the Supervisory

Committee Corporate office Financial Department Political Department Investment and Development

Department Audit Department Human Recourses Department Production Department Procurement Department

Sales Company Chief Engineer Office Technology Center QA Department Foundry Branch Machine

Processing Branch Single-cylinder Engine branch Multi-cylinder Engine Branch and Overseas Business

Department in the Company.The financial report has been approved to be issued by the Board of Directors on 11April 2022.The consolidated scope of the Company of the Reporting Period includes the Company as the parent and 7

subsidiaries. For the details of the consolidated scope of the Reporting Period and the changes situation please

refer to the changes of the consolidated scope of the notes to the financial report and the notes to the equities

among other entities.IV. Basis for Preparation of the Financial Report

1. Basis for Preparation

With the going-concern assumption as the basis and based on transactions and other events that actually occurred

the Group prepared financial statements in accordance with The Accounting Standards for Business

Enterprises—Basic Standard issued by the Ministry of Finance with Decree No. 33 and revised with Decree No.

76 the various specific accounting standards the Application Guidance of Accounting Standards for Business

Enterprises the Interpretation of Accounting Standards for Business Enterprises and other regulations issued andrevised from 15 February 2006 onwards (hereinafter jointly referred to as “the Accounting Standards for BusinessEnterprises” “China Accounting Standards” or “CAS”) as well as the Rules for Preparation Convention of

Disclosure of Public Offering Companies No.15 – General Regulations for Financial Reporting (revised in 2014)

by China Securities Regulatory Commission.In accordance with relevant provisions of the Accounting Standards for Business Enterprises the Group adopted

the accrual basis in accounting. Except for some financial instruments where impairment occurred on an asset an

impairment reserve was withdrawn accordingly pursuant to relevant requirements.

2. Continuation

The Company comprehensively evaluated the information acquired recently that there would be no such factors in

the 12 months from the end of the Reporting Period that would obviously influence the continuation capability of

the Company and predicted that the operating activities would continue in the future 12 months of the Company.The financial statement compiled base on the continuous operation.V. Important Accounting Policies and Estimations

1. Statement of Compliance with the Accounting Standards for Business Enterprises

The financial statements prepared by the Group are in compliance with in compliance with the Accounting

Standards for Business Enterprises which factually and completely present the Company’s and the Group’s

financial positions business results and cash flows and other relevant information.

123Changchai Company Limited Annual Report 2021

2. Fiscal Period

The fiscal periods are divided into fiscal year and metaphase the fiscal year is from January 1 to December 31

and as the metaphase included monthly quarterly and semi-yearly periods.

3. Operating Cycle

A normal operating cycle refers to a period from the Group purchasing assets for processing to realizing cash or

cash equivalents. An operating cycle for the Group is 12 months which is also the classification criterion for the

liquidity of its assets and liabilities.

4. Currency Used in Bookkeeping

Renminbi is functional currency of the Company.

5. Accounting Methods for Business Combinations under the Same Control and Business Combinations not

under the Same Control

(1) Business combinations under the same control:

A business combination under the same control is a business combination in which all of the combining

enterprises are ultimately controlled by the same party or the same parties both before and after the business

combination and on which the control is not temporary.For the merger of enterprises under the same control if the consideration of the merging enterprise is that it makes

payment in cash transfers non-cash assets or bear its debts it shall on the date of merger regard the share of the

book value of the owner's equity of the merged enterprise as the initial cost of the long-term equity investment.The difference between the initial cost of the long-term equity investment and the payment in cash non-cash

assets transferred as well as the book value of the debts borne by the merging party shall offset against the capital

reserve. If the capital reserve is insufficient to dilute the retained earnings shall be adjusted.If the consideration of the merging enterprise is that it issues equity securities it shall on the date of merger

regard the share of the book value of the owner's equity of the merged enterprise as the initial cost of the

long-term equity investment. The total face value of the stocks issued shall be regarded as the capital stock while

the difference between the initial cost of the long-term equity investment and total face value of the shares issued

shall offset against the capital reserve. If the capital reserve is insufficient to dilute the retained earnings shall be

adjusted.All direct costs for the business combination including expenses for audit evaluating and legal services shall be

recorded into the profits and losses at the current period. The expenses such as the handling charges and

commission etc premium income of deducting the equity securities and as for the premium income was

insufficient to dilute the retained earnings shall be written down.Owning to the reasons such as the additional investment for the equity investment held before acquiring the

control right of the combined parties the confirmed relevant gains and losses other comprehensive income and

the changes of other net assets since the date of the earlier one between the date when acquiring the original equity

right and the date when the combine parties and combined ones were under the same control to the combination

date should be respectively written down and compared with the beginning balance of retained earnings or the

current gains and losses during the statement period.

(2) Business combinations not under the same control

124Changchai Company Limited Annual Report 2021

A business combination not under the same control is a business combination in which the combining enterprises

are not ultimately controlled by the same party or the same parties both before and after the business combination.The combination costs of the acquirer and the identifiable net assets obtained by the acquirer in a business

combination shall be measured at the fair values. The acquirer shall recognize the positive balance between the

combination costs and the fair value of the identifiable net assets it obtains forms the acquiree as business

reputation. The direct relevant expenses occurred from the enterprise combination should be included in the

current gains and losses when occurred. The combination costs of the acquirer and the identifiable net assets

obtained by it in the combination shall be measured according to their fair values at the acquiring date. The

difference between the fair value of the assets paid out by the Company and its book value should be included in

the current gains and losses. The purchase date refers to the date that the purchaser acquires the control right of the

acquiree.For the business combinations not under the same control realized through step by step multiple transaction as for

the equity interests that the Group holds in the acquiree before the acquiring date they shall be re-measured

according to their fair values at the acquiring date; the positive difference between their fair values and carrying

amounts shall be recorded into the investment gains for the period including the acquiring date. The equity holed

by the acquiree which involved with the other comprehensive income and the other owners’ equities changes

except for the net gains and losses other comprehensive income and the profits distribution and other related

comprehensive gains and other owners’ equities which in relation to the equity interests that the Group holds in

the acquiree before the acquiring date should be transferred into the current investment income on the acquiring

date except for the other comprehensive income occurred from the re-measurement of the net profits of the

defined benefit plans or the changes of the net assets of the investees.

6. Methods for Preparing Consolidated Financial Statements

The Company confirms the consolidated scope based on the control and includes the subsidiaries with actual

control right into the consolidated financial statement.The consolidated financial statement of the Company is compiled according to the regulations of No. 33 of

ASBE-Consolidated Financial Statement and the relevant regulations and as for the whole significant

come-and-go balance investment transaction and the unrealized profits should be written off when compiling the

consolidated financial statement. The portion of a subsidiary’s shareholders’ equity and the portion of a

subsidiary’s net profits and losses for the period not held by the Group are recognized as minority interests and

minority shareholder profits and losses respectively and presented separately under shareholders’ equity and net

profits in the consolidation financial statements. The portion of a subsidiary’s net profits and losses for the period

that belong to minority interests is presented as the item of “minority shareholder profits and losses” under the

bigger item of net profits in the consolidated financial statements. Where the loss of a subsidiary shared by

minority shareholders exceeds the portion enjoyed by minority shareholders in the subsidiary’s opening owners’

equity minority interests are offset.The accounting policy or accounting period of each subsidiary is different from which of the Company which

shall be adjusted as the Company; or subsidiaries shall prepare financial statement again required by the Company

when preparing the consolidated financial statements.As for the added subsidiary company not controlled by the same enterprise preparing the consolidated financial

statement shall adjust individual financial statement based on the fair value of the identifiable net assets on the

acquisition date; as for the added subsidiary companies controlled by the same enterprise preparing the financial

statement shall not adjust the financial statement of the subsidiaries namely survived by integration as

125Changchai Company Limited Annual Report 2021

participating in the consolidation when the final control party starts implementing control and should adjust the

period-begin amount of the consolidated balance sheet and at the same time adjust the relevant items of the

compared statement.As for the disposed subsidiaries the operation result and the cash flow should be included in the consolidated

income statement and the consolidated cash flow before the disposing date; the disposed subsidiaries of the

current period should not be adjusted the period-begin amount of the consolidated balance sheet.Where the Group losses control on its original subsidiaries due to disposal of some equity investments or other

reasons the residual equity interests are re-measured according to the fair value on the date when such control

ceases. The summation of the consideration obtained from the disposal of equity interests and the fair value of the

residual equity interests minus the portion in the original subsidiary’s net assets measured on a continuous basis

from the acquisition date that is enjoyable by the Group according to the original shareholding percentage in the

subsidiary is recorded in investment gains for the period when the Group’s control on the subsidiary ceases. Other

comprehensive incomes in relation to the equity investment and the other owners’ equities changes except for the

net gains and losses other comprehensive income and profits distribution in the original subsidiary are treated on

the same accounting basis as the acquiree directly disposes the relevant assets or liabilities (that is except for the

changes in the net liabilities or assets with a defined benefit plan resulted from re-measurement of the original

subsidiary the rest shall all be transferred into current investment gains) when such control ceases. And

subsequent measurement is conducted on the residual equity interests according to the No.2 Accounting Standard

for Business Enterprises-Long-term Equity Investments or the No.22 Accounting Standard for Business

Enterprises-Recognition and Measurement of Financial Instruments.For the disposal of equity investment belongs to a package deal should be considered as a transaction and conduct

accounting treatment. However Before losing control every disposal cost and corresponding net assets balance of

subsidiary of disposal investment are confirmed as other comprehensive income in consolidated financial

statements which together transferred into the current profits and losses in the loss of control when the Group

losing control on its subsidiary.For the disposal of the equity investment not belongs to a package deal should be executed accounting treatment

according to the relevant policies of partly disposing the equity investment of the subsidiaries under the situation

not lose the control right before losing the control right; when losing the control right the former should be

executed accounting treatment according to the general disposing method of the disposal of the subsidiaries.

7. Classification of Joint Arrangements and Accounting Treatment of Joint Operations

The Group classifies joint arrangements into joint operations and joint ventures.A joint operation refers to a joint arrangement where the Group is the joint operations party of the joint

arrangement and enjoys assets and has to bear liabilities related to the arrangement. The Company confirms the

following items related to the interests share among the joint operations and executes accounting treatment

according to the regulations of the relevant ASBE:

(1) Recognizes the assets that it holds and bears in the joint operation and recognizes the jointly-held assets

according to the Group’s stake in the joint operation;

(2) Recognizes the liabilities that it holds and bears in the joint operation and recognizes the jointly-held liabilities

according to the Group’s stake in the joint operation;

(3) Recognizes the income from sale of the Group’s share in the output of the joint operation

(4) Recognizes the income from sale of the joint operation’s outputs according to the Group’s stake in it

126Changchai Company Limited Annual Report 2021

(5) Recognizes the expense solely incurred to the Group and the expense incurred to the joint operation according

to the Group’s stake in it.

8. Recognition Standard for Cash and Cash Equivalents

In the Group’s understanding cash and cash equivalents include cash on hand any deposit that can be used for

cover and short-term (usually due within 3 months since the day of purchase) and high circulating investments

which are easily convertible into known amount of cash and whose risks in change of value are minimal.

9. Foreign Currency Businesses and Translation of Foreign Currency Financial Statements

(1) Foreign currency business

Concerning the foreign-currency transactions that occurred the foreign currency shall be converted into the

recording currency according to the middle price of the market exchange rate disclosed by the People’s Bank of

China on the date of the transaction. Among the said transactions that occurred those involving foreign exchanges

shall be converted according to the exchange rates adopted in the actual transactions.On the balance sheet date the foreign-currency monetary assets and the balance of the liability account shall be

converted into the recoding currency according to the middle price of the market exchange rates disclosed by the

People’s Bank of China on the Balance Sheet Date. The difference between the recording-currency amount

converted according to the exchange rate on the Balance Sheet Date and the original book recording-currency

amount shall be recognized as gains/losses from foreign exchange. And the exchange gain/loss caused by the

foreign-currency borrowings related to purchasing fixed assets shall be handled according to the principle of

capitalizing borrowing expenses; the exchange gain/loss incurred in the establishment period shall be recorded

into the establishment expense; others shall be recorded into the financial expenses for the current period.On the balance sheet date the foreign-currency non-monetary items measured by historical cost shall be converted

according to the middle price of the market exchange disclosed by the People’s Bank of China on the date of the

transaction with no changes in the original recording-currency amount; while the foreign-currency non-monetary

items measured by fair value shall be converted according to the middle price of the market exchange disclosed by

the People’s Bank of China on the date when the fair value is recognized and the exchange gain/loss caused

thereof shall be recognized as the gain/loss from fair value changes and recorded into the gain/loss of the current

period.

(2) Translation of foreign currency

The assets and liabilities items among the balance sheet of the foreign operation shall be translated at a spotexchange rate on the balance sheet date. Among the owner’s equity items except for the items as “undistributedprofits” other items shall be translated at the spot exchange rate at the time when they are incurred. And the

revenues and expenses items among the balance sheet of the foreign operation shall be translated at the

approximate exchange rate of the transaction date. The difference caused from the above transaction of the foreign

currency statement should be listed in the other comprehensive income among the owners’ equities.

10. Financial Instruments

(1) Classification of Financial Instruments

The Company classifies the financial assets when initially recognized into the following three categories based on

the business model for financial assets management and characteristics of contractual cash flow of financial assets:

financial assets measured at amortized cost financial assets at fair value through other comprehensive income

127Changchai Company Limited Annual Report 2021

(debt instruments) and financial assets at fair value through profit or loss

Financial liabilities were classifies when initially recognized into financial liabilities at fair value through profit or

loss and financial liabilities measured at amortized cost.

(2) Recognition Basis and Measurement Method for Financial Instruments

* Financial assets measured at amortized cost

Financial assets at amortized cost include notes receivable accounts receivable other receivables long-term

receivables and investment in debt obligations which are initially measured at fair value and related transaction

cost shall be recorded into the initial recognized amount. For accounts receivable excluding significant financing

and accounts receivable that the Company decides not to consider financing components less than one year the

initial measurement shall be made at the contract transaction price. The interest calculated with actual rates for the

holding period shall be recorded into the current profit or loss. When recovered or disposed the difference

between the price obtained and the carrying value of the financial assets shall be recorded into the current profit or

loss.* Financial assets at fair value through other comprehensive income (debt instruments)

Financial assets at fair value through other comprehensive income (debt instruments) include accounts receivable

financing and investment in other debt obligations which are initially measured at fair value and related

transaction cost shall be recorded into the initial recognized amount. The subsequent measurement of the financial

assets shall be at fair value and changes of fair value except for interest calculated with actual rates impairment

losses or gains and exchange gains or losses shall be recorded into other comprehensive income. When

derecognized the accumulated gains or losses originally recorded into other comprehensive income shall be

transferred into the current profit or loss.* Financial assets at fair value through other comprehensive income (equity instruments)

Financial assets at fair value through other comprehensive income (equity instruments) include investment in

other equity instruments etc. which are initially measured at fair value and related transaction cost shall be

recorded into the initial recognized amount. The subsequent measurement of the financial assets shall be at fair

value and changes of fair value shall be recorded into other comprehensive income. The dividends obtained shall

be recorded into the current profit or loss. When derecognized the accumulated gains or losses originally recorded

into other comprehensive income shall be transferred into retained earnings.* Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss include held-for-trading financial assets derivative financial

assets and other non-current financial assets which are initially measured at fair value and the related transaction

cost shall be recorded into the current profit or loss. The subsequent measurement of the financial assets shall be

at fair value and the changes of fair value shall be recorded into the current profit or loss.* Financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or loss include held-for-trading financial liabilities and derivative

financial liabilities which are initially measured at fair value and the related transaction cost shall be recorded into

the current profit or loss. The subsequent measurement of the financial liabilities shall be at fair value and the

changes of fair value shall be recorded into the current profit or loss. When derecognized the difference between

the carrying value and the paid consideration shall be recorded into the current profit or loss.* Financial liabilities at amortized cost

Financial liabilities at amortized cost include short-term borrowings notes payable accounts payable other

payables long-term borrowings bonds payable and long-term payables which are initially measured at fair value

and the related transaction cost shall be recorded into the initial recognized amount. The interest calculated with

actual rates for the holding period shall be recorded into the current profit or loss. When derecognized the

128Changchai Company Limited Annual Report 2021

difference between the paid consideration and the carrying value of the financial liabilities shall be recorded into

the current profit or loss.

(3) Recognition Basis and Measurement of Transfer of Financial Assets

Where the Company has transferred nearly all of the risks and rewards related to the ownership of the financial

asset to the transferee it shall stop recognizing the financial asset and separately recognize the rights and

obligations generated retained from the transfer as assets or liabilities. If it retained nearly all of the risks and

rewards related to the ownership of the financial asset it shall continue to recognize the transferred financial asset.Where the Company does not transfer or retain nearly all of the risks and rewards related to the ownership of a

financial asset it shall deal with it according to the circumstances as follows respectively: (1) If it gives up its

control over the financial asset it shall stop recognizing the financial asset and separately recognize the rights and

obligations generated retained from the transfer as assets or liabilities; (2) If it does not give up its control over the

financial asset it shall according to the extent of its continuous involvement in the transferred financial asset

recognize the related financial asset and recognize the relevant liability accordingly.If the transfer of an entire financial asset satisfies the conditions for stopping recognition the difference between

the amounts of the following 2 items shall be recorded in the profits and losses of the current period: (1) The

carrying value of the transferred financial asset on the derecognition date; (2) The sum of consideration received

from the transfer of financial assets and derecognition amount among the accumulative amount of the changes of

the fair value originally recorded in the other comprehensive income (the financial assets involve transfer are

investments in debt instruments at fair value through other comprehensive income. If the transfer of partial

financial asset satisfies the conditions to stop the recognition the entire carrying value of the transferred financial

asset shall between the portion whose recognition has been stopped and the portion whose recognition has not

been stopped be apportioned according to their respective relative fair value on the transfer date and the

difference between the amounts of the following two items shall be included into the profits and losses of the

current period: (1)The carrying value of the portion whose recognition has been stopped; (2)The sum of

consideration of the portion whose recognition has been stopped and derecognition amount among the

accumulative amount of the changes of the fair value originally recorded in the other comprehensive income (the

financial assets involve transfer are investments in debt instruments at fair value through other comprehensive

income.

(4) Derecognition Basis of Financial Liabilities

A financial liability or part of it can be derecognized after its current obligation has been relieved in full or in part.

(5) Recognition of Fair Value of Financial Assets and Financial Liabilities

The fair value of financial instruments with an active market is determined by the quoted price in the active

market. For financial instruments without active market the fair value is determined by valuation techniques. The

Company adopts the valuation techniques applicable to the current conditions which are supported by sufficient

data and other information for valuation and selects the input values consistent with the characteristics of assets

or liabilities considered by market participants in asset or liability transactions with priority to observable input

values. Unobservable input values are used only when relevant observable input values are not available or

practical.

(6) Impairment of financial instrument

* Impairment measurement and accounting handling of financial instrument

Based on expected credit loss the Company conducts impairment handling and confirms credit impairment loss

for financial assets which is measured by amortized cost debt instrument investment which is measured by fair

value and whose change is calculated into other comprehensive profits financial guarantee contract.Expected credit loss refers to weighted average of credit loss of financial instrument which takes the risk of

129Changchai Company Limited Annual Report 2021

contract breach occurrence as the weight. Credit loss refers to the difference between all contract cash flow which

is converted into cash according to actual interest rate and receivable according to contract and all cash flow

which to be charged as expected i.e. current value of all cash shortage. Among it as for financial asset purchased

or original which has had credit impairment it should be converted into cash according actual interest rate of this

financial asset after credit adjustment.Lifetime expected credit losses refer to those caused by possible defaults during the entire expected duration of a

financial instrument.The expected credit losses in the next 12 months refers to those caused by the default events of the financial

instrument that may occur within 12 months (or the expected duration if the expected duration of the financial

instrument is less than 12 months) after the balance sheet date and is part of the expected credit losses in the

entire duration.On each balance sheet date the Company respectively measured the expected credit losses of financial

instruments in different stages. If the credit risk of a financial instrument has had no significant increase since its

initial recognition the instrument shall fall in the first stage for which the Company would measure the loss

reserves according to the expected credit losses in the future 12 months. If the credit risk of a financial instrument

has had a significant increase since its initial recognition but no credit impairment has occurred the instrument

shall fall in the second stage for which the Company would measure the loss reserves according to the expected

credit losses in the entire duration of the instrument. If the credit impairment has occurred since its initial

recognition the financial instrument shall fall in the third stage for which the Company would measure the loss

reserves according to the expected credit losses in the entire duration of the instrument.As for a financial instrument with low credit risks on the balance sheet date the Company measured the loss

reserves according to the expected credit losses in the future 12 months assuming that its credit risk has had no

significant increase since its initial recognition.For financial instruments with low credit risks in stages 1 and 2 the Company calculated the interest income at the

effective interest rate and on the carrying amount of the instruments without deductions for provisions for asset

impairment. For financial instruments in stage 3 interest income was calculated at the effective interest rates and

on the amortized cost by reducing the provisions for asset impairment from the carrying amount.For notes receivables accounts receivables and financing receivables whether there was a significant financial

component or not the Company measured the loss reserves based on the expected credit losses for the entire

duration.A. Accounts receivable

For notes receivable accounts receivable other receivables and accounts receivable financing with objective

evidence indicating impairment and those suitable for individual evaluation the Company carries out impairment

test separately to confirm expected credit loss and prepare provision for impairment of single items. For notes

receivable accounts receivable other receivables accounts receivable financing contract assets and long-term

receivables without objective evidence of impairment or a single financial asset with expected credit loss

impossible to be assessed at a reasonable cost the Company divides the notes receivable accounts receivable

other receivables and accounts receivable financing into groups according to the characteristics of credit risk and

calculates the expected credit loss based on receivable groups. The basis for recognizing groups is as follows:

Item Recognition basis Method of measuring expected credit losses

Group 1 of notes Consulting historical experience in credit losses

All commercial bills

receivable combining current situation and prediction for future

Group 2 of notes Bank’s acceptance bills economic situation the expected credit loss shall be

receivable with low credit rating accounted through exposure at default and the expected

130Changchai Company Limited Annual Report 2021

credit loss rate over the entire life

Bank’s acceptance bills Consulting historical experience in credit losses

with high credit rating combining current situation and prediction for future

Accounts receivable

economic situation the expected credit loss shall be

financing

accounted through exposure at default and the expected

credit loss rate over the entire life

Prepare the comparative list between aging of accounts

receivable and expected credit loss rate over the entire

life and calculate the expected credit loss by consulting

Accounts Accounts receivable

historical experience in credit losses combining current

receivable-credit risk portfolio with credit

situation and prediction for future economic situation.characteristics group period

The Company takes aging as credit risk characteristics

groups and calculates the expected credit loss for

accounts receivable.Accounts Consulting historical experience in credit losses

receivable-intercourse combining current situation and prediction for future

Related party within the

funds among related economic situation the expected credit loss shall be

consolidation scope

party group within the accounted through exposure at default and the expected

consolidation scope credit loss rate over the entire life

Basis for recognizing groups of other receivables is as follows:

Item Recognition basis Method of measuring expected credit losses

Consulting historical experience in credit losses

Other receivables combining current situation and prediction for future

excluding those from economic situation the expected credit loss shall be

Group 1 of other receivables

related parties-aging accounted through exposure at default and the expected

group credit loss rate within the next 12 months or over the

entire life

Consulting historical experience in credit losses

combining current situation and prediction for future

Related party within

economic situation the expected credit loss shall be

Group 2 of other receivables the consolidation

accounted through exposure at default and the expected

scope

credit loss rate within the next 12 months or over the

entire life

11. Accounts Receivable

See “10. Financial Instruments”.

12. Accounts Receivable Financing

See “10. Financial Instruments”.

131Changchai Company Limited Annual Report 2021

13. Other Receivables

See “10. Financial Instruments”.

14. Inventory

(1) Category of Inventory

Inventory refers to the held-for-sale finished products or commodities goods in process materials consumed in

the production process or the process providing the labor service etc. Inventory is mainly including the raw

materials low priced and easily worn articles unfinished products inventories and work in process–outsourced

etc.

(2) Pricing method

Purchasing and storage of the various inventories should be valued according to the planed cost and the dispatch

be calculated according to the weighted average method; carried forward the cost of the finished products

according to the actual cost of the current period and the sales cost according to the weighted average method.

(3) Determination basis of the net realizable value of inventory and withdrawal method of the provision for falling

price of inventory

At the balance sheet date inventories are measured at the lower of the costs and net realizable value. When all the

inventories are checked roundly for those which were destroyed outdated in all or in part sold at a loss etc the

Company shall estimate the irrecoverable part of its cost and withdrawal the inventory falling price reserve at the

year-end. Where the cost of the single inventory item is higher than the net realizable value the inventory falling

price reserve shall be withdrawn and recorded into profits and losses of the current period. Of which: in the

normal production and operating process as for the commodities inventory directly for sales such as the finished

products commodities and the materials for sales should recognize the net realizable value according to the

amount of the estimated selling price of the inventory minuses the estimated selling expenses and the relevant

taxes; as for the materials inventory needs to be processed in the normal production and operating process should

recognize its net realizable value according to the amount of the estimated selling price of the finished products

minuses the cost predicts to be occur when the production completes and the estimated selling expenses as well as

the relevant taxes; on the balance sheet date for the same inventory with one part agreed by the contract price

and other parts not by the contract price should be respectively recognized the net realizable value. For items of

inventories relating to a product line that are produced and marketed in the same geographical area have the same

or similar end users or purposes and cannot be practicably evaluated separately from other items in that product

line provision for decline in value is determined on an aggregate basis; for large quantity and low value items of

inventories provision for decline in value is made based on categories of inventories.

(4) The perpetual inventory system is maintained for stock system.

(5) Amortization method of low-value consumables and packages

One time amortization method is adopted for low-value consumables and packages.

132Changchai Company Limited Annual Report 2021

15. Contract Assets

Contract Assets means that the Company is endowed with the right to charge the consideration through

transferring any commodity or service to the client and such right depends on other factors except the passing of

time. The Company’s unconditional right (only depending on the passing of time) of charging the consideration

from the client shall be separately presented as receivables.The recognition method and accounting treatment method of the estimated credit loss of contract assets are

consistent with that specified in Notes V.11.

16. Contract Costs

(1) Costs from Acquiring Contract

If the incremental cost resulting from the Company’s acquiring of contract (namely costs merely resulting from

the acquiring of contract) is predicted to be retrieved it shall be recognized as an assets amortized by adopting

the same basis with the recognition of commodities or service revenues related to the assets and included into the

current profit and loss. If the assets’ amortization period does not exceed one year it shall be immediately

included into the current profit and loss. Other expenses resulting from the Company’s acquiring of contract shall

also be included into the current profit and loss unless it is explicitly borne by the client.

(2) Costs from Executing Contract

The Company’s costs from executing contract is not covered by other ASBE except for Revenue Standards and

when the following situations are met such costs can be recognized as an assets: * the costs are directly related

to a current or predicted contract; * the costs increase the Company’s resources applied to fulfill performance

obligations in the future; * the costs are predicted to be retrieved. The recognized assets shall be amortized by

adopting the same basis with the recognition of commodities or service revenues related to the assets and included

into the current profit and loss.If the book value of contract costs is higher than the difference of the following two items corresponding

depreciation reserves shall be counted and withdrawn and it shall be recognized as the assets depreciation loss: *

the residual consideration predicted to be acquired by transferring commodities related to the assets; * the costs

predicted to occur due to the transfer of related commodities.If the difference between * and * is higher than the book value of contract costs due to any change in various

factors causing depreciation in previous periods it shall be restituted to the withdrawn assets depreciation reserves

and included in the current profit and loss. However the book value of restituted contract costs shall not exceed

the book value of the assets on the day of restitution based on the hypothesis that depreciation reserves are not

counted and withdrawn.

17. Assets Held for Sale

The Company recognizes the components (or the non-current assets) which meet with the following conditions as

assets held for sale:

(1) The components must be immediately sold only according to the usual terms of selling this kind of

components under the current conditions;

133Changchai Company Limited Annual Report 2021

(2) The Company had made solutions on disposing the components (or the non-current assets) for example the

Company should gain the approval from the shareholders according to the regulations and had acquired the

approved from the Annual General Meeting or the relevant authority institutions;

(3) The Company had signed the irrevocable transformation agreement with the transferee;

(4) The transformation should be completed within 1 year.

18. Long-term Equity Investments

(1) Judgment standard of joint control and significant influences

Joint control refers to the control jointly owned according to the relevant agreement on an arrangement by the

Company and the relevant activities of the arrangement should be decided only after the participants which share

the control right make consensus. Significant influence refers to the power of the Company which could anticipate

in the finance and the operation polices of the investees but could not control or jointly control the formulation of

the policies with the other parties.

(2) Recognition for initial investment cost

The initial investment cost of the long-term equity investment shall be recognized by adopting the following ways

in accordance with different methods of acquisition:

1) As for those forms under the same control of the enterprise combine if the combine party takes the cash

payment non-cash assets transformation liabilities assumption or equity securities issuance as the combination

consideration should take the shares of the book value by the ultimate control party in the consolidate financial

statement of the owners’ equities of the combiners acquired on the merger date as the initial investment cost. The

difference between the initial investment cost and the book value of the paid combination consideration or the

total amount of the issued shares of the long-term equity investment should be adjusted the capital reserve; If the

capital reserve is insufficient to dilute the retained earnings shall be adjusted. To include each direct relevant

expense occurred when executing the enterprise merger into the current gains and losses; while the handling

charges and commission occurs from the issuing the equity securities or the bonds for the enterprise merger

should be included in the initial measurement amount of the shareholders’ equities or the liabilities.

2) As for long-term equity investment acquired through the merger of enterprises not under the same control its

initial investment cost shall regard as the combination cost calculated by the fair value of the assets equity

instrument issued and liabilities incurred or undertaken on the purchase date adding the direct cost related with the

acquisition. The identifiable assets of the combined party and the liabilities (including contingent liability)

undertaken on the combining date shall be measured at the fair value without considering the amount of minority

interest. The acquirer shall recognize the positive balance between the combination costs and the fair value of the

identifiable net assets it obtains from the acquiree as business reputation. The acquirer shall record the negative

balance between the combination costs and the fair value of the identifiable net assets it obtains from the acquiree

into the consolidated income statement directly. The agent expense and other relevant management expenses such

as the audit legal service and evaluation consultation occurs from the enterprise merger should be included in the

current gains and losses when occur; while the handling charges and commission occurs from the issuing the

equity securities or the bonds for the enterprise merger should be included in the initial measurement amount of

the shareholders’ equities or the liabilities.

3) Long-term equity investment obtained by other means

The initial cost of a long-term equity investment obtained by making payment in cash shall be the purchase cost

which is actually paid.The initial cost of a long-term equity investment obtained on the basis of issuing equity securities shall be the fair

134Changchai Company Limited Annual Report 2021

value of the equity securities issued.The initial cost of a long-term equity investment of an investor shall be the value stipulated in the investment

contract or agreement the unfair value stipulated in the contract or agreement shall be measured at fair value.As for long-term investment obtained by the exchange of non-monetary assets where it is commercial in nature

the fair value of the assets surrendered shall be recognized as the initial cost of the long-term equity investment

received; where it is not commercial in nature the book value of the assets surrendered shall be recognized as the

initial cost of the long-term equity investment received.The initial cost of a long-term equity investment obtained by recombination of liabilities shall be recognized at

fair value of long-term equity investment.

(3) Subsequent measurement and recognition of profits and losses

1) An investment in the subsidiary company shall be measured by employing the cost method

Where the Company hold and is able to do equity investment with control over an invested entity the invested

entity shall be its subsidiary company. Where the Company holds the shares of an entity over 50% or while the

Company holds the shares of an entity below 50% but has a real control to the said entity then the said entity

shall be its subsidiary company.

2) An investment in the joint enterprise or associated enterprise shall be measured by employing the equity

method

Where the Company hold and is able to do equity investment with joint control with other parties over an

invested entity the invested entity shall be its joint enterprise. Where the Company hold and is able to have

equity investment with significant influences on an invested entity the invested entity shall be its associated

entity.After the Company acquired the long-term equity investment should respectively recognize investment income

and other comprehensive income according to the net gains and losses as well as the portion of other

comprehensive income which should be enjoyed or be shared and at the same time adjust the book value of the

long-term equity investment; corresponding reduce the book value of the long-term equity investment according

to profits which be declared to distribute by the investees or the portion of the calculation of cash dividends which

should be enjoyed; for the other changes except for the net gains and losses other comprehensive income and the

owners’ equity except for the profits distribution of the investees should adjust the book value of the long-term

equity investment as well as include in the owners’ equity .The investing enterprise shall on the ground of the fair value of all identifiable assets of the invested entity when

it obtains the investment recognize the attributable share of the net profits and losses of the invested entity after it

adjusts the net profits of the invested entity.If the accounting policy adopted by the investees is not accord with that of the Company should be adjusted

according to the accounting policies of the Company and the financial statement of the investees during the

accounting period and according which to recognize the investment income as well as other comprehensive

income.For the transaction happened between the Company and associated enterprises as well as joint ventures if the

assets launched or sold not form into business the portion of the unrealized gains and losses of the internal

transaction which belongs to the Company according to the calculation of the enjoyed proportion should

recognize the investment gains and losses on the basis. But the losses of the unrealized internal transaction

happened between the Company and the investees which belongs to the impairment losses of the transferred assets

should not be neutralized.The Company shall recognize the net losses of the invested enterprise according to the following sequence: first of

all to write down the book value of the long-term equity investment. Secondly if the book value of the long-term

135Changchai Company Limited Annual Report 2021

equity investment is insufficient for written down should be continued to recognized the investment losses limited

to the book value of other long-term equity which forms of the net investment of the investees and to written

down the book value of the long-term accounts receivable etc. Lastly through the above handling for those

should still undertake the additional obligations according to the investment contracts or the agreements it shall

be recognized as the estimated liabilities in accordance with the estimated duties and then recorded into

investment losses at current period. If the invested entity realizes any net profits later the Company shall after the

amount of its attributable share of profits offsets against its attributable share of the un-recognized losses resume

recognizing its attributable share of profits.In the preparation for the financial statements the balance existed between the long-term equity investment

increased by acquiring shares of minority interest and the attributable net assets on the subsidiary calculated by

the increased shares held since the purchase date (or combination date) the capital reserves shall be adjusted if

the capital reserves are not sufficient to offset the retained profits shall be adjusted; the Company disposed part of

the long-term equity investment on subsidiaries without losing its controlling right on them the balance between

the disposed price and attributable net assets of subsidiaries by disposing the long-term equity investment shall be

recorded into owners’ equity.For other ways on disposal of long-term equity investment the balance between the book value of the disposed

equity and its actual payment gained shall be recorded into current profits and losses.For the long-term equity investment measured by adopting equity method if the remained equity after disposal

still adopts the equity method for measurement the other comprehensive income originally recorded into owners’

equity should adopt the same basis of the accounting disposal of the relevant assets or liabilities directly disposed

by the investees according to the corresponding proportion. The owners’ equity recognized owning to the changes

of the other owners’ equity except for the net gains and losses other comprehensive income and the profits

distribution of the investees should be transferred into the current gains and losses according to the proportion.For the long-term equity investment which adopts the cost method of measurement if the remained equity still

adopt the cost method the other comprehensive income recognized owning to adopting the equity method for

measurement or the recognition and measurement standards of financial instrument before acquiring the control of

the investees should adopt the same basis of the accounting disposal of the relevant assets or liabilities directly

disposed by the investees and should be carried forward into the current gains and losses according to the

proportion; the changes of the other owners’ equity except for the net gains and losses other comprehensive

income and the profits distribution among the net assets of the investees which recognized by adopting the equity

method for measurement should be carried forward into the current gains and losses according to the proportion.For those the Company lost the control of the investees by disposing part of the equity investment as well as the

remained equity after disposal could execute joint control or significant influences on the investees should change

to measure by equity method when compiling the individual financial statement and should adjust the

measurement of the remained equity to equity method as adopted since the time acquired; if the remained equity

after disposal could not execute joint control or significant influences on the investees should change the

accounting disposal according to the relevant regulations of the recognition and measurement standards of

financial instrument and its difference between the fair value and book value on the date lose the control right

should be included in the current gains and losses. For the other comprehensive income recognized by adopting

equity method for measurement or the recognition and measurement standards of financial instrument before the

Company acquired the control of the investees should execute the accounting disposal by adopting the same basis

of the accounting disposal of the relevant assets or liabilities directly disposed by the investees when lose the

control of them while the changes of the other owners’ equity except for the net gains and losses other

comprehensive income and the profits distribution among the net assets of the investees which recognized by

136Changchai Company Limited Annual Report 2021

adopting the equity method for measurement should be carried forward into the current gains and losses

according to the proportion. Of which for the disposed remained equity which adopted the equity method for

measurement the other comprehensive income and the other owners’ equity should be carried forward according

to the proportion; for the disposed remained equity which changed to execute the accounting disposal according to

the recognition and measurement standards of financial instrument the other comprehensive income and the other

owners’ equity should be carried forward in full amount.For those the Company lost the control of the investees by disposing part of the equity investment the disposed

remained equity should change to calculate according to the recognition and measurement standards of financial

instrument and difference between the fair value and book value on the date lose the control right should be

included in the current gains and losses. For the other comprehensive income recognized from the original equity

investment by adopting the equity method should execute the accounting disposal by adopting the same basis of

the accounting disposal of the relevant assets or liabilities directly disposed by the investees when terminate the

equity method for measurement while for the owners’ equity recognized owning to the changes of the other

owner’s equity except for the net gains and losses other comprehensive income and the profits distribution of the

investees should be transferred into the current investment income with full amount when terminate adopting the

equity method.

19. Investment Real Estate

Measurement mode of investment real estate:

Measurement of cost method

Depreciation or amortization method

The investment real estate shall be measured at its cost. Of which the cost of an investment real estate by

acquisition consists of the acquisition price relevant taxes and other expense directly relegated to the asset; the

cost of a self-built investment real estate composes of the necessary expenses for building the asset to the hoped

condition for use. The investment real estate invested by investors shall be recorded at the value stipulated in the

investment contracts or agreements but the unfair value appointed in the contract or agreement shall be entered

into the account book at the fair value.As for withdrawal basis of provision for impairment of investment real estates please refer to withdrawal method

for provision for impairment of fixed assets.

20. Fixed Assets

(1) Recognition Conditions

Fixed assets refers to the tangible assets that simultaneously possess the features as follows: (a) they are held for

the sake of producing commodities rendering labor service renting or business management; and (b) their useful

life is in excess of one fiscal year. The fixed assets are only recognized when the relevant economic benefits

probably flow in the Company and its cost could be reliable measured.

(2) Depreciation Method

Category of fixed assets Method Useful life Annual deprecation

Housing and building Average method of

20-402.50%-5%

useful life

Machinery equipment Average method of

6-156.67%-16.67%

useful life

137Changchai Company Limited Annual Report 2021

Transportation Average method of

5-1010%-20%

equipment useful life

Average method of

Other equipment 5-10 10%-20%

useful life

(3) Recognition Basis Pricing and Depreciation Method of Fixed Assets by Finance Lease

The Company recognizes those meet with the following one or certain standards as the fixed assets by finance

lease:

1) The leasing contract had agreed that (or made the reasonable judgment according to the relevant conditions on

the lease starting date) when the lease term expires the ownership of leasing the fixed assets could be transferred

to the Company;

2) The Company owns the choosing right for purchasing and leasing the fixed assets with the set purchase price

which is estimated far lower than the fair value of the fixed assets by finance lease when executing the choosing

right so the Company could execute the choosing right reasonably on the lease starting date;

3) Even if the ownership of the fixed assets not be transferred the lease period is of 75% or above of the useful

life of the lease fixed assets;

4) The current value of the minimum lease payment on the lease starting date of the Company is equal to 90% or

above of the fair value of the lease fixed assets on the lease starting date; the current value of the minimum lease

receipts on the lease starting date of the leaser is equal to 90% or above of the fair value of the lease fixed assets

on the lease starting date;

5) The nature of the lease assets is special that only the Company could use it if not execute large transformation.

The fixed assets by finance lease should take the lower one between the fair value of the leasing assets and the

current value of the minimum lease payment on the lease starting date as the entry value. As for the minimum

lease payment which be regarded as the entry value of the long-term accounts payable its difference should be

regarded as the unrecognized financing expense. For the initial direct expenses occur in the lease negotiations and

the signing process of the lease contracts that attribute to the handling expenses counsel fees travel expenses and

stamp taxes of the lease items should be included in the charter-in assets value. The unrecognized financing

expenses should be amortized by adopting the actual interest rate during the period of the lease term.The fixed assets by finance lease shall adopt the same depreciation policy for self-owned fixed assets. If it is

reasonable to be certain that the lessee will obtain the ownership of the leased asset when the lease term expires

the leased asset shall be fully depreciated over its useful life. If it is not reasonable to be certain that the lessee will

obtain the ownership of the leased asset at the expiry of the lease term the leased asset shall be fully depreciated

over the shorter one of the lease term or its useful life

21. Construction in Progress

(1) Valuation of the progress in construction

Construction in progress shall be measured at actual cost. Self-operating projects shall be measured at direct

materials direct wages and direct construction fees; construction contract shall be measured at project price

payable; project cost for plant engineering shall be recognized at value of equipments installed cost of installation

trail run of projects. Costs of construction in process also include borrowing costs and exchange gains and losses

which should be capitalized.

(2) Standardization on construction in process transferred into fixed assets and time point

The construction in process of which the fixed assets reach to the predicted condition for use shall carry forward

fixed assets on schedule. The one that has not audited the final accounting shall recognize the cost and make

138Changchai Company Limited Annual Report 2021

depreciation in line with valuation value. The construction in process shall adjust the original valuation value at its

historical cost but not adjust the depreciation that has been made after auditing the final accounting.

22. Borrowing Costs

(1) Recognition principle of capitalization of borrowing costs

The borrowing costs shall include the interest on borrowings amortization of discounts or premiums on

borrowings ancillary expenses and exchange balance on foreign currency borrowings. Where the borrowing

costs occurred belong to specifically borrowed loan or general borrowing used for the acquisition and construction

of investment real estates and inventories over one year (including one year) shall be capitalized and record into

relevant assets cost. Other borrowing costs shall be recognized as expenses on the basis of the actual amount

incurred and shall be recorded into the current profits and losses. The borrowing costs shall not be capitalized

unless they simultaneously meet the following three requirements: (1) The asset disbursements have already

incurred; (2) The borrowing costs have already incurred; and (3) The acquisition and construction or production

activities which are necessary to prepare the asset for its intended use or sale have already started.

(2) The period of capitalization of borrowing costs

The borrowing costs arising from acquisition and construction of fixed assets investment real estates and

inventories if they meet the above-mentioned capitalization conditions the capitalization of the borrowing costs

shall be measured into asset cost before such assets reach to the intended use or sale Where acquisition and

construction of fixed assets investment real estates and inventories is interrupted abnormally and the interruption

period lasts for more than 3 months the capitalization of the borrowing costs shall be suspended and recorded

into the current expense till the acquisition and construction of the assets restarts. When the qualified asset is

ready for the intended use or sale the capitalization of the borrowing costs shall be ceased the borrowing costs

occurred later shall be included into the financial expense directly at the current period.

(3) Measurement method of capitalization amount of borrowing costs

As for specifically borrowed loans for the acquisition and construction or production of assets eligible for

capitalization the to-be-capitalized amount of interests shall be determined in light of the actual cost incurred of

the specially borrowed loan at the present period minus the income of interests earned on the unused borrowing

loans as a deposit in the bank or as a temporary investment.Where a general borrowing is used for the acquisition and construction or production of assets eligible for

capitalization the enterprise shall calculate and determine the to-be-capitalized amount of interests on the general

borrowing by multiplying the weighted average asset disbursement of the part of the accumulative asset

disbursements minus the general borrowing by the capitalization rate of the general borrowing used. The

capitalization rate shall be calculated and determined in light of the weighted average interest rate of the general

borrowing.

23. Intangible Assets

(1) Pricing Method Service Life and Impairment Test

(1) Pricing method of intangible assets

Intangible assets purchased should take the actual payment and the relevant other expenses as the actual cost.For the intangible assets invested by the investors should be recognized the actual cost according to the value of

the investment contracts or agreements however for the value of the contracts or agreements is not fair the actual

cost should be recognized according to the fair value.

139Changchai Company Limited Annual Report 2021

For the intangible assets acquires from the exchange of the non-currency assets if own the commercial nature

should be recorded according to the fair value of the swap-out assets; for those not own the commercial nature

should be recorded according to the book value of the swap-out assets.For the intangible assets acquires from the debts reorganization should be recognized by the fair value.

(2) Amortization method and term of intangible assets

As for the intangible assets with limited service life which are amortized by straight-line method when it is

available for use within the service period shall be recorded into the current profits and losses. The Company

shall at least at the end of each year check the service life and the amortization method of intangible assets with

limited service life. When the service life and the amortization method of intangible assets are different from those

before the years and method of the amortization shall be changed.Intangible assets with uncertain service life may not be amortized. However the Company shall check the service

life of intangible assets with uncertain service life during each accounting period. Where there are evidences to

prove the intangible assets have limited service life it shall be estimated of its service life and be amortized

according to the above method mentioned.The rights to use land of the Company shall be amortized according to the rest service life.

(2) Accounting Polices of Internal R & D Costs

The internal research and development projects of an enterprise shall be classified into research phase and

development phase: the term “research” refers to the creative and planned investigation to acquire and understand

new scientific or technological knowledge; the term “development” refers to the application of research

achievements and other knowledge to a certain plan or design prior to the commercial production or use so as to

produce any new material device or product or substantially improved material device and product.The Company collects the costs of the corresponding phases according to the above standard of classifying the

research phase and the development phase. The research expenditures for its internal research and development

projects of an enterprise shall be recorded into the profit or loss for the current period. The development costs for

its internal research and development projects of an enterprise may be capitalized when they satisfy the following

conditions simultaneously: it is feasible technically to finish intangible assets for use or sale; it is intended to

finish and use or sell the intangible assets; the usefulness of methods for intangible assets to generate economic

benefits shall be proved including being able to prove that there is a potential market for the products

manufactured by applying the intangible assets or there is a potential market for the intangible assets itself or the

intangible assets will be used internally; it is able to finish the development of the intangible assets and able to

use or sell the intangible assets with the support of sufficient technologies financial resources and other resources;

the development costs of the intangible assets can be reliably measured.

24. Impairment of Long-term Assets

For non-current financial Assets of fixed Assets projects under construction intangible Assets with limited

service life investing real estate with cost model long-term equity investment of subsidiaries cooperative

enterprises and joint ventures the Company should judge whether decrease in value exists on the date of balance

sheet. Recoverable amounts should be tested for decrease in value if it exists. Other intangible Assets of reputation

and uncertain service life and other non-accessible intangible assets should be tested for decrease in value no

matter whether it exists.If the recoverable amount is less than book value in impairment test results the provision for impairment of

differences should include in impairment loss. Recoverable amounts would be the higher of net value of asset fair

140Changchai Company Limited Annual Report 2021

value deducting disposal charges or present value of predicted cash flow. Asset fair value should be determined

according to negotiated sales price of fair trade. If no sales agreement exists but with asset active market fair

value should be determined according to the Buyer’s price of the asset. If no sales agreement or asset active

market exists asset fair value could be acquired on the basis of best information available. Disposal expenses

include legal fees taxes cartage or other direct expenses of merchantable Assets related to asset disposal. Present

value of predicted asset cash flow should be determined by the proper discount rate according to Assets in service

and predicted cash flow of final disposal. Asset depreciation reserves should be calculated on the basis of single

Assets. If it is difficult to predict the recoverable amounts for single Assets recoverable amounts should be

determined according to the belonging asset group. Asset group is the minimum asset combination producing cash

flow independently.In impairment test book value of the business reputation in financial report should be shared to beneficial asset

group and asset group combination in collaboration of business merger. It is shown in the test that if recoverable

amounts of shared business reputation asset group or asset group combination are lower than book value it should

determine the impairment loss. Impairment loss amount should firstly be deducted and shared to the book value of

business reputation of asset group or asset group combination then deduct book value of all assets according to

proportions of other book value of above assets in asset group or asset group combination except business

reputation.After the asset impairment loss is determined recoverable value amounts would not be returned in future.

25. Long-term Deferred Expenses

Long-term deferred expanses of the Company shall be recorded in light of the actual expenditure and amortized

averagely within benefit period. In case of no benefit in the future accounting period the amortized value of such

project that fails to be amortized shall be transferred into the profits and losses of the current period.

26. Contract Liabilities

Contract liabilities refer to the Company’s obligations in transferring commodities or services to the client for the

received or predicted consideration. Contract assets and contract liabilities under the same contract shall be

presented based on the net amount.

27. Employee Benefits

(1) Accounting Treatment of Short-term Compensation

Short-term compensation mainly including salary bonus allowances and subsidies employee services and

benefits medical insurance premiums birth insurance premium industrial injury insurance premium housing

fund labor union expenditure and personnel education fund non-monetary benefits etc. The short-term

compensation actually happened during the accounting period when the active staff offering the service for the

Company should be recognized as liabilities and is included in the current gains and losses or relevant assets cost.Of which the non-monetary benefits should be measured according to the fair value.

(2) Accounting Treatment of the Welfare after Demission

The Company classifies the welfare plans after demission into defined contribution plans and defined benefit

plans. Welfare plans after demission refers to the agreement on the welfare after demission reaches between the

141Changchai Company Limited Annual Report 2021

Company and the employees or the regulations or methods formulated by the Company for providing the welfare

after demission for the employees. Of which defined contribution plans refers to the welfare plans after demission

that the Company no more undertake the further payment obligations after the payment of the fixed expenses for

the independent funds; defined benefit plans refers to the welfare plans after demission except for the defined

contribution plans.Defined contribution plans

During the accounting period that the Company providing the service for the employees the Company should

recognize the liabilities according to the deposited amount calculated by defined contribution plans and should be

included in the current gains and losses or the relevant assets cost.

(3) Accounting Treatment of the Demission Welfare

The Company should recognize the payroll payment liabilities occur from the demission welfare according to the

earlier date between the following two conditions and include which in the current gains and losses when

providing the demission welfare for the employees: the Company could not unilaterally withdraw the demission

welfare owning to the relieve plans of the labor relationship or reduction; when the Company recognizing the

costs or expenses related to the reorganization involves with the demission welfare payments.

28. Lease Liabilities

On the commencement date of the lease term the Company recognizes the present value of outstanding lease

payments as lease liabilities. The amount of lease payment includes the following five contents: fixed amount and

substantial fixed amount. If there is lease incentive the amount related to lease incentive will be deducted.Variable lease payments subject to an index or ratio which at the time of initial measurement is based on the

index or ratio of the commencement date of the lease term; The exercise price of the purchase option provided that

the lessee is reasonably certain that the option will be exercised; The amount payable for exercising the

termination option provided that the lease term reflects that the Lessee will exercise the termination option; The

amount expected to be paid based on the residual value of the security provided by the lessee.When calculating the present value of the lease payment the lease embedded interest rate is used as the discount

rate; if the lease embedded interest rate cannot be determined the company's incremental loan interest rate is used

as the discount rate. The company calculates the interest expense of the lease liability in each period of the lease

term according to the fixed periodic interest rate and records it into the profit and loss of the current period except

otherwise stipulated to record it into the cost of related assets. Variable lease payments that are not included in the

measurement of lease liabilities shall be included in current profit and loss when actually incurred unless

otherwise stipulated to be included in the cost of related assets. Lease term began in the future when substantial

changes occurred in the fixed payment the guaranteed residual value is expected to cope with the amount of

change is used to determine the lease payment ratio index or change call options renewal options or terminate

the option evaluation results or the actual exercise changes the company in accordance with the changes of the

lease the present value of the payments to measure lease liability.

29. Provisions

(1) Criteria of provisions

Only if the obligation pertinent to a contingencies shall be recognized as an estimated debts when the following

conditions are satisfied simultaneously:

142Changchai Company Limited Annual Report 2021

1) That obligation is a current obligation of the Company;

2) It is likely to cause any economic benefit to flow out of the Company as a result of performance of the

obligation;

3) The amount of the obligation can be measured in a reliable way.

(2) Measurement of provisions

The Company shall measure the provisions in accordance with the best estimate of the necessary expenses for the

performance of the current obligation.The Company shall check the book value of the provisions on the Balance Sheet Date. If there is any conclusive

evidence proving that the said book value can’t truly reflect the current best estimate the Company shall subject

to change make adjustment to carrying value to reflect the current best estimate.

30. Revenue

Accounting policies for recognition and measurement of revenue:

When the Company fulfills its due performance obligations (namely when the client obtains the control over

related commodities or services) revenues shall be recognized based on the obligation’s amortized transaction

price. Performance Obligation refers to the Company’s promise of transferring commodities or services that can

be clearly defined to the client. Transaction Price refers to the consideration amount duly charged by the Company

for transferring commodities or services to the client excluding any amount charged by the third party and any

amount predicted to be returned to the client. Control Over Relevant Commodities means that the use of

commodities can be controlled and almost all economic interests can be obtained.On the contract commencement day the Company shall evaluate the contract recognize individual performance

obligation and confirm that individual performance obligation is fulfilled in a certain period. When one of the

following conditions is met such performance obligation shall be deemed as fulfilled in a certain period and the

Company shall recognize it as revenue within a certain period according to the performance schedule: (1) the

client obtains and consumes the economic interests resulting from the Company’s performance of contract while

performing the contract; (2) the client is able to control the commodities under construction during the

performance; (3) commodities produced by the Company during the performance possess the irreplaceable

purpose and the Company has the right to charge all finished parts during the contract period; otherwise the

Company shall recognize the revenue when the client obtains the control over relevant commodities or services.The Company shall adopt the Input Method to determine the Performance Schedule. Namely the Performance

Schedule shall be determined according to the Company’s input for fulfilling performance obligations. When the

Performance Schedule cannot be reasonably determined and all resulting costs are predicted to be compensated

the Company shall recognize the revenue based on the resulting cost amount till the Performance Schedule can be

reasonably determined.When the contract involves two or more than two performance obligations the transaction price shall be

amortized to each single performance obligation on the contract commencement day according to the relative

proportion of the independent selling price of commodities or services under each single performance obligation.If any solid evidence proves that the contract discount or variable consideration only relates to one or more than

one (not all) performance obligation under the contract the Company shall amortize the contract discount or

variable consideration to one or more than one related performance obligations. Independent selling price refers to

the price adopted by the Company to independently sell commodities or services to the client. However

independent selling price cannot be directly observed. The Company shall estimate the independent selling price

by comprehensively considering all related information that can be reasonably obtained and maximally adopting

143Changchai Company Limited Annual Report 2021

the observable input value.Variable Consideration

If any variable consideration exists in the contract the Company shall determine the optimal estimation of the

variable consideration based on the expected values or the most possible amount. The variable consideration’s

transaction price shall be included without exceeding the total revenue amount recognized without the risk of

significant restitution when all uncertainties are eliminated. On each balance sheet day the Company shall

re-estimate the variable consideration amount to be included in the transaction price.Consideration Payable to the Client

If any consideration payable to the client exists in the contract the Company shall use such consideration to offset

the transaction price unless such consideration is paid for acquiring other clearly-defined commodities or services

from the client and write down the current revenue at the later time between the time of recognizing relevant

revenues and the time of paying (or promising the payment) the consideration to the client.Sales with the Quality Assurance

For sales with the Quality Assurance if the Quality Assurance involves another separate service except for the

guarantee of all sold commodities or services meeting all established standards the Quality Assurance shall

constitute a single Performance Obligation; otherwise the Company shall make corresponding accounting

treatment to the Quality Assurance according to ASBE No.13--Contingency.Main Responsibility Person/Agent

According to whether the control over commodities or services is obtained before they are transferred to the client

the Company can judge whether it is Main Responsibility Person or Agent based on its status during the

transaction. If the Company can control commodities or services before they are transferred to the client the

Company shall be Main Responsibility Person and revenues shall be recognized according to the total

consideration amount received or to be received; otherwise the Company shall be Agent and revenues shall be

recognized according to the commission or service fees predicted to be duly charged. However such amount shall

be determined based on the net amount after deducting other amounts payable to other related parties from the

total consideration received or to be duly received or the fixed commission amount or proportion.Specific methods

The specific methods of the Company's revenue recognition are as follows:

The sale contract between the Company and its customers usually contains only the performance obligation for

the transfer of goods which is satisfied at a point in time.The following requirements must be met to confirm the revenue of domestic products: The Company has

delivered the goods to the customer in accordance with the contract and the customer has accepted the goods. The

payment has been recovered or the receipt voucher has been obtained and the relevant economic benefits are

likely to flow in. The customer has obtained control of the relevant goods. The main risks and rewards of product

ownership have been transferred. The legal ownership of the goods has been transferred.The following requirements must be met to confirm the revenue of export products: The Company has declared

the products in accordance with the contract obtained the bills of lading and received the payment or obtained the

receipt voucher and the related economic benefits are likely to flow in. The main risks and rewards of product

ownership have been transferred. The legal ownership of the goods has been transferred.Interest Revenue

Interest Revenue shall be determined according to the time of the Company’s use of monetary capital and the

actual interest rate.

144Changchai Company Limited Annual Report 2021

Rental Income

The rental income from operating lease shall be recognized during each lease period according to the straight-line

method and the contingent rent shall be included into the current profit and loss without delay.

31. Government Grants

(1) Type

A government grant means the monetary or non-monetary assets obtained free by an enterprise from the

government. Government grants consist of the government grants pertinent to assets and government grants

pertinent to income according to the relevant government documents.For those the government documents not definite stipulate the assistance object the judgment basis of the

Company classifies the government grants pertinent to assets and government subsidies pertinent to income is:

whether are used for purchasing or constructing or for forming the long-term assets by other methods.

(2) Recognition of Government Subsidies

The government subsidies should be recognized only when meet with the attached conditions of the government

grants as well as could be acquired.If the government grants are the monetary assets should be measured according to the received or receivable

amount; and for the government grants are the non-monetary assets should be measured by fair value.

(3) Accounting Treatment

The government grants pertinent to assets shall be recognized as deferred income and included in the current

gains and losses or offset the book value of related assets within the useful lives of the relevant assets with a

reasonable and systematic method. Government grants pertinent to income used to compensate the relevant costs

expenses or losses of the Company in the subsequent period shall be recognized as deferred income and shall be

included in the current profit and loss during the period of confirming the relevant costs expenses or losses; those

used to compensate the relevant costs expenses or losses of the Company already happened shall be included in

the current gains and losses or used to offset relevant costs directly.For government grants that include both assets-related and income-related parts they should be distinguished

separately for accounting treatment; for government subsidies that are difficult to be distinguished they should be

classified as income-related.Government grants related to the daily activities of the Company shall be included into other income or used to

offset relevant costs by the nature of economic business; those unrelated shall be included into non-operating

income.The government grants recognized with relevant deferred income balance but need to return shall be used to offset

the book balance of relevant deferred income the excessive part shall be included in the current gains and losses

or adjusting the book value of assets for the government grants assets-related that offset the book value of relevant

assets when they are initially recognized; those belong to other cases shall be directly included in the current gains

and losses.

32. Deferred Income Tax Assets/Deferred Income Tax Liabilities

(1) Basis of recognizing the deferred income tax assets

According to the difference between the book value of the assets and liabilities and their tax basis a deferred tax

asset shall be measured in accord with the tax rates that are expected to apply to the period when the asset is

realized or the liability is settled.

145Changchai Company Limited Annual Report 2021

The recognition of the deferred income tax assets is limited by the income tax payable that the Company probably

gains for deducting the deductible temporary differences. At the balance sheet date where there is strong evidence

showing that sufficient taxable profit will be available against which the deductible temporary difference can be

utilized the deferred tax asset unrecognized in prior period shall be recognized.The Company assesses the carrying amount of deferred tax asset at the balance sheet date. If it’s probable that

sufficient taxable profit will not be available against which the deductible temporary difference can be utilized the

Company shall write down the carrying amount of deferred tax asset or reverse the amount written down later

when it’s probable that sufficient taxable profit will be available.

(2) Basis of recognizing the deferred income tax liabilities

According to the difference between the book value of the assets and liabilities and their tax basis A deferred tax

liability shall be measured in accord with the tax rates that are expected to apply to the period when the asset is

realized or the liability is settled.

33. Lease

Lease refers to a contract whereby the lessor assigns the right to use an asset to the lessee for consideration within

a certain period of time. On the commencement date of the contract the company evaluates whether the contract

is a lease or includes a lease. The contract is a lease or includes a lease if a party in the contract cedes the right to

control the use of one or more identified assets for a specified period in exchange for consideration. If the contract

contains multiple separate leases at the same time the company will divide the contract and conduct accounting

treatment for each separate lease. If the contract contains both the leased part and the non-leased part the lessee

and the lessor shall divide the leased part and the non-leased part.

(1) The Company acts as the lessee

The general accounting treatment of the Company as a lessee is shown in Note 28 Lease Liabilities.For short-term leases with a lease term of less than 12 months and low-value asset leases with a low value when a

single asset is brand-new the Company chooses not to recognize the right to use assets and lease liabilities and

will record the relevant rental expenses into current profits and losses or the cost of relevant assets in each period

of the lease term according to the straight-line method.If the lease changes and the following conditions are met the company will treat the lease change as a separate

lease: the lease change expands the scope of the lease by adding the right to use one or more leased assets; The

increased consideration is equivalent to the amount of the separate price for the extended portion of the lease

adjusted for the circumstances of the contract. If the lease change is not accounted for as a separate lease on the

effective date of the lease change the Company shall re-apportion the consideration of the contract after the

change re-determine the lease term and re-measure the lease liability according to the present value calculated

from the lease payment after the change and the revised discount rate.

(2) The Company acts as the lessor

On the lease commencement date the Company classifies the leases that substantially transfer almost all risks and

rewards related to the ownership of the leased assets as financial leases and all other leases as operating leases.

1) Operating lease

During each period of the lease term the Company recognizes rental income as rental income in accordance with

the straight-line method and the initial direct expenses incurred are capitalized and apportion on the same basis as

rental income recognition and recorded into current profit and loss by stages. The variable lease payments

obtained by the company related to operating leases and not included in the lease receipts shall be included in the

146Changchai Company Limited Annual Report 2021

current profit and loss when actually incurred.

2) Finance lease

On the beginning date of the lease term the company recognizes the finance lease receivables and terminates the

recognition of finance lease assets in accordance with the net amount of lease investment (the sum of the

unguaranteed residual value and the amount of lease receipts not received on the beginning date of the lease term).During each period of the lease term the company calculates and recognizes the interest income in accordance

with the inherent interest rate of the lease. The variable lease payments obtained by the company which are not

included in the net lease investment measurement shall be included in the current profit and loss when actually

incurred.

(3) After-sales leaseback

The Company evaluates and determines whether the transfer of assets in a sale-and-leaseback transaction is a sale

in accordance with the accounting Standards for Business Enterprises No. 14 - Revenue.

1) The Company acts as the lessee

If the transfer of assets in the sale and leaseback transaction is a sale the Company shall measure the right to use

assets formed by the sale and leaseback according to the part of the book value of the original asset related to the

right to use acquired by leaseback and shall only recognize the relevant gains or losses in respect of the right

transferred to the lessor.If the transfer of assets in a sale-and-leaseback transaction is not a sale the Company shall continue to recognize

the transferred assets and at the same time recognize a financial liability equal to the transfer income and conduct

accounting treatment for the financial liability in accordance with the Accounting Standards for Business

Enterprises No. 22 - Recognition and Measurement of Financial Instruments.

2) The Company acts as the lessor

If the transfer of assets in a sale-and-leaseback transaction is a sale the Company shall provide accounting

treatment for the purchase of assets in accordance with other applicable accounting standards for enterprises and

the lease of assets in accordance with accounting Standards for Business Enterprises No. 21 - Lease.If the transfer of assets in a sale-leaseback transaction is not a sale the Company does not recognize the

transferred asset but recognizes a financial asset equal to the transfer income and conducts accounting treatment

on the financial asset in accordance with the Accounting Standards for Business Enterprises No. 22 - Recognition

and Measurement of Financial Instruments.

34. Other Significant Accounting Policies and Accounting Estimates

The Company evaluates the important accounting estimates and key assumptions adopted on an ongoing basis

based on historical experience and other factors including reasonable expectations of future events. Important

accounting estimates and critical assumptions that have a significant risk of causing a material adjustment to the

carrying amounts of assets and liabilities within the next fiscal year are listed as follows:

(1) Classification of financial assets

The significant judgments involved when the Company determines the classification of financial assets include

analysis of business models and contractual cash flow characteristics. The Company determines the business

model for managing financial assets at the level of the financial asset portfolio taking into account factors such as

the approach of evaluating and reporting the performance of financial assets to key management personnel the

risks affecting the performance of financial assets and the manner in which they are managed and way in which

the relevant business management personnel are compensated.The following main judgments exist in assessing whether the contractual cash flows of financial assets are

147Changchai Company Limited Annual Report 2021

consistent with the basic lending arrangements:

Whether the time distribution or amount of the principal amount during the duration may change due to early

repayment or for other reasons; whether the interest includes only the time value of money credit risk other basic

lending risks and consideration against costs and profits. For example whether the amount of early repayment

reflects only the outstanding principal and interest based on the outstanding principal as well as reasonable

compensation paid for early termination of the contract.

(2) Measurement of expected credit losses of accounts receivable

The Company calculates the expected credit loss of accounts receivable using the exposure to default risk of

accounts receivable and the expected credit loss ratio and determines the expected credit loss ratio based on the

probability of default and the default loss ratio. When determining the expected credit loss ratio the Company

uses data such as internal historical credit loss experience and adjusts historical data to take into account current

conditions and forward-looking information. When considering forward-looking information the Company uses

indicators such as the risk of economic downturn and changes in the external market environment technological

environment and customer profile. The Company regularly monitors and reviews the assumptions related to the

calculation of expected credit losses.

(3) Inventory falling price reserves

The Company follows the inventory accounting policy and carries out measurement based on which is smaller

between the cost and the net realizable value. If the cost of inventories is higher than its net realizable value then

the inventory falling prices reserves were implemented. The impairment of inventories to net realizable value is

based on an assessment of the marketability of the inventories and their net realizable value. The management

shall determine the impairment of inventories after obtaining reliable evidence while taking into account the

purpose of holding inventories the effect of items after the balance sheet date and other factors. Differences

between actual results and original estimates will affect the carrying value of inventories and the provision or

reversal of reverses for falling prices of inventories in the period in which the estimates are changed.

(4) Determination of fair value of unlisted equity investment

The fair value of unlisted equity investment is the expected future cash flows discounted at the current discount

rate for items with similar terms and risk characteristics. Such valuation requires the Company to estimate

expected future cash flows and discount rates and is therefore subject to uncertainty. Under limited circumstances

if the information used to determine fair value is insufficient or if the range of possible estimates of fair value is

wide and the cost represents the best estimate of fair value within that range the cost may represent its appropriate

estimate of fair value within that range of distribution.

(5) Reserves for long-term assets impairment

The Company determines at the balance sheet date whether there is any indication that a non-current asset other

than a financial asset may be impaired. For intangible assets with an uncertain useful life impairment tests shall

be conducted when there is an indication of impairment besides the annual impairment test. Other non-current

assets other than financial assets shall be tested for impairment when there is an indication that the carrying

amount is irrecoverable.An impairment is indicated when the carrying amount of an asset or asset group is greater than the recoverable

amount which is the higher of the fair value minus disposal expenses and the present value of estimated future

cash flows.The net value of the fair value minus disposal expenses is determined by referring to the negotiable sale price or

observable market price of similar assets in a fair transaction and deducting incremental costs directly attributable

to the disposal of the asset.Estimating the present value of future cash flows requires significant judgments with respect to the production

148Changchai Company Limited Annual Report 2021

volume of the asset (or asset group) the selling price the related operating costs and the discount rate used in

calculating the present value. The Company uses all available relevant information in estimating recoverable

amounts including projections of volumes selling prices and related operating costs based on reasonable and

supportable assumptions.

(6) Depreciation and amortization

The Company depreciates and amortizes investment properties fixed assets and intangible assets on a straight-line

basis within their service lives after taking into account their residual values. The Company regularly reviews

service lives to determine the amount of depreciation and amortization expenses to be included in each reporting

period. The service life is determined by the Company based on past experience with similar assets and expected

technological updates. Depreciation and amortization expenses will be adjusted in the future period if there is a

significant change in previous estimates.

(7) Deferred income tax assets

To the extent that it is probable that sufficient taxable profit will be available to offset the losses the Company

recognizes deferred income tax assets for all unused tax losses. This requires the Company's management to use

many judgments to estimate the timing and amount of future taxable profits taking into account tax planning

strategies so as to determine the amount of deferred income tax assets to be recognized.

(8) Income tax

In the normal operating activities of the Company the ultimate tax treatment and calculation of certain

transactions are subject to certain uncertainties. Whether some items can be disbursed before tax requires the

approval of the tax authorities. If the final determination of these tax matters differs from the amounts initially

estimated the difference will have an impact on current and deferred income taxes in the period in which they are

finally determined.

35. Changes in Main Accounting Policies and Estimates

(1) Change of Accounting Policies

√ Applicable □ Not applicable

Changes to the accounting policies and why Approval process Remark

The Ministry of Finance issued the Accounting The 10th meeting of the 9th

Standards for Business Enterprises No.21-Leases Board of Directors held on

(Revised) in 2018 requiring that enterprises listed August 16 2021

both domestically and abroad and overseas listed

enterprises preparing financial statements in

accordance with the International Financial

Reporting Standards or the Accounting Standards for

Business Enterprises shall implement it since 1

January 2019 and that others carry it out since 1

January 2021.In 2018 the Ministry of Finance issued the revised Accounting Standards for Business Enterprises No. 21 --

Leases (referred to as the "New Lease Standards"). The new lease standards require the lessee to recognize the

right to use assets and lease liabilities as well as depreciation and interest expenses for all leases except

short-term leases and low-value asset leases.Since January 1 2021 the Company has conducted accounting treatment in accordance with the newly revised

lease standards. For contracts existing prior to the first execution the Company has chosen not to re-evaluate

149Changchai Company Limited Annual Report 2021

whether they are leases or include leases and will not adjust the information for comparable periods in accordance

with the cohesion provisions. Adopting the newly revised leasing standards The newly revised leasing standards

have no significant impact on the company's net profit total assets and net assets of the current and early period

and there is no adjustment of the amount of retained earnings at the beginning of the period and other relevant

items in the financial statements.

(2) Changes in Accounting Estimates

□ Applicable √ Not applicable

(3) Adjustments to the Financial Statements at the Beginning of the First Execution Year of any New

Standards Governing Revenue or Leases since 2020

□ Applicable √ Not applicable

(4) Retroactive Adjustments to Comparative Data of Prior Years when First Execution of any New

Standards Governing Revenue or Leases since 2020

□ Applicable √ Not applicable

VI. Taxation

1. Main Taxes and Tax Rate

Category of taxes Tax basis Tax rate

VAT Payable to sales revenue 13% 9% 6% 5%

Urban maintenance and Tax paid in accordance with the tax

Taxable turnover amount

construction tax regulations of tax units location

Enterprise income tax Taxable income 25%、15%、2.5%

Education surcharge Taxable turnover amount 5%

Notes of the disclosure situation of the taxpaying bodies with different enterprises income tax rate

Name Income tax rate

Changchai Company Limited 15%

Changchai Wanzhou Diesel Engine Co. Ltd. 15%

Changzhou Changchai Benniu Diesel Engine Fittings

25%

Co. Ltd.Changzhou Horizon Investment Co. Ltd. 25%

Changzhou Changchai Horizon Agricultural

25%

Equipment Co. Ltd.Changzhou Fuji Changchai Robin Gasoline Engine

15%

Co. Ltd.Jiangsu Changchai Machinery Co. Ltd. 25%

Changzhou Xingsheng Real Estate Management Co.

2.5%

Ltd.

2. Tax Preference

On 30 November 2021 the Company obtained the Certificates for High-tech Enterprises again and it still enjoys

15-percent preferential rate for corporate income tax during the Reporting Period; the Company’s controlling

subsidiary-Changchai Wanzhou Diesel Engine Co. Ltd. the controlling subsidiary company shall pay the

150Changchai Company Limited Annual Report 2021

corporate income tax at tax rate 15% from 1 January 2011 to 31 December 2030 in accordance with the Notice of

the Ministry of Finance the General Administration of Customs of PRC and the National Administration of

Taxation about the Preferential Tax Policies for the Western Development and Ministry of Finance Announcement

No. 23 [2020] Announcement of the Ministry of Finance the State Administration of Taxation and the National

Development and Reform Commission on Continuing the Enterprise Income Tax Policy for the Great Western

Development. On 2 December 2020 the wholly-owned subsidiary Changzhou Fuji Changchai Robin Gasoline

Engine Co. Ltd. obtained the "High-tech Enterprise Certificate" and enjoyed a 15% preferential corporate income

tax rate during the Reporting Period; The wholly-owned subsidiary Changzhou Xingsheng Real Estate

Management Co. Ltd. is eligible small enterprise with low profits and shall pay the corporate income tax at tax

rate 2.5% for small enterprises with low profits during the Reporting Period.VII. Notes to Major Items in the Consolidated Financial Statements of the Company

1. Monetary Assets

Unit: RMB

Item Ending balance Beginning balance

Cash on hand 145594.98 287505.91

Bank deposits 561746767.12 620966786.57

Other monetary assets 146074316.64 139473930.37

Total 707966678.74 760728222.85

Of which: Total amount deposited

overseas

Total amount of

restriction in use by mortgage 145564457.15 130788682.35

pledge or freeze

At the period-end the restricted monetary assets of the Company was RMB145564457.15 of which

RMB141773647.60 was the cash deposit for bank acceptance bills RMB2993220.00 was cash deposit for L/G

and RMB797589.55 was cash deposit for environment.

2. Trading Financial Assets

Unit: RMB

Item Ending balance Beginning balance

Financial assets at fair value

404053261.5711500272.00

through profit or loss

Of which: Stocks 121940343.76

Forward settlement 200272.00

Financial products 282112917.81 11300000.00

Total 404053261.57 11500272.00

151Changchai Company Limited Annual Report 2021

3. Notes Receivable

(1) Notes Receivable Listed by Category

Unit: RMB

Item Ending balance Beginning balance

Bank acceptance bill 334311236.78 600140938.05

Total 334311236.78 600140938.05

If the bad debt provision for notes receivable was withdrawn in accordance with the general model of expected

credit losses information related to bad debt provision shall be disclosed by reference to the disclosure method of

other receivables:

□ Applicable √ Not applicable

(2) There Were No Notes Receivable Pledged by the Company at the Period-end

(3) Notes Receivable which Had Endorsed by the Company or had Discounted but had not Due on the

Balance Sheet Date at the Period-end

Unit: RMB

Amount of recognition termination Amount of not terminated

Item

at the period-end recognition at the period-end

Bank acceptance bill 135391302.15

Total 135391302.15

(4) There Were No Notes Transferred to Accounts Receivable because Drawer of the Notes Failed to

Execute the Contract or Agreement at the Period-end

4. Accounts Receivable

(1) Accounts Receivable Classified by Category

Unit: RMB

Ending balance Beginning balance

Carrying Bad debt Carrying Bad debt

amount provision amount provision

Carryi

Category Withd Withd Carryin

ng

Amou Propo Amou rawal Amou Propor Amou rawal g value

value

nt rtion nt propo nt tion nt propor

rtion tion

Accounts

receivable for

504344056383337031807

which bad debt 94.38 18955

7453.9.104367.87.34086.43039.5.98%452.8

provision % 86.83

63158729

separately

accrued

Of which:

152Changchai Company Limited Annual Report 2021

Accounts

receivable for

504013523688529413422

which bad debt 94.02 25.35 395258

927290.90666826.83260486387952.

provision % % 429.66

0.080.080.002.0943

accrued by

group

Of which:

Accounts

receivable for

which bad debt 5040 1352 3688 5294 13422

94.0225.35395258

provision 9272 90.90 6668 26.83 2604 8638 7952.%%429.66

accrued by 0.08 0.08 0.00 2.09 43

credit risk

features group

554517933752563116603

100.0100.0029.48397154

Total 3017 2104 32.34 0912 8942 5405.

0%%016.49

3.717.236.481.8132

Account receivables withdrawn bad debt provision separately with significant amount at the period end:

Unit: RMB

Ending balance

Name Carrying Bad debt Withdrawal

Reason of withdrawal

amount provision proportion

Customer 1 1470110.64 1470110.64 100.00% Difficult to recover

Customer 2 1902326.58 1902326.58 100.00% Difficult to recover

Customer 3 6215662.64 6215662.64 100.00% Difficult to recover

Customer 4 2797123.26 2194980.28 78.47% Expected to difficultly recover

Customer 5 3633081.23 2122165.73 58.41% Expected to difficultly recover

Customer 6 2584805.83 2584805.83 100.00% Difficult to recover

Customer 7 1523110.59 1523110.59 100.00% Difficult to recover

Customer 8 1511937.64 302387.53 20.00% Expected to difficultly recover

Customer 9 3780509.60 720031.71 19.05% Expected to difficultly recover

Customer 10 1962873.80 1962873.80 100.00% Difficult to recover

Customer 11 2790920.00 2790920.00 100.00% Difficult to recover

Customer 12 2025880.18 2025880.18 100.00% Difficult to recover

Customer 13 2589892.74 2589892.74 100.00% Difficult to recover

Customer 14 2837045.23 2837045.23 100.00% Difficult to recover

Customer 15 5972101.90 5972101.90 100.00% Difficult to recover

Customer 16 4592679.05 4592679.05 100.00% Difficult to recover

Total 48190060.91 41806974.43 -- --

Accounts receivable for which bad debt provision accrued by credit risk features group:

Unit: RMB

153Changchai Company Limited Annual Report 2021

Ending balance

Aging

Carrying amount Bad debt provision Withdrawal proportion

Within 1 year 349034264.26 6980685.29 2.00%

1 to 2 years 22333500.04 1116675.00 5.00%

2 to 3 years 2363804.88 354570.74 15.00%

3 to 4 years 2689676.16 806902.85 30.00%

4 to 5 years 4159071.34 2495442.80 60.00%

Over 5 years 123512403.40 123512403.40 100.00%

Total 504092720.08 135266680.08 --

Notes of the basis of determining the group:

The accounts receivable was adopted the aging analysis based on the months when the accounts incurred actually

among which the accounts incurred earlier will be priority to be settled in terms of the capital turnover.Explanation of the input value and assumption adopted to determine the withdrawal amount of bad debt provision

on the Current Period: With reference to the experience of the historical credit loss combining with the prediction

of the present status and future financial situation the comparison table was prepared between the aging of the

accounts receivable and estimated credit loss rate in the duration and to calculate the estimated credit loss.Please refer to the relevant information of disclosure of bad debt provision of other accounts receivable if

adopting the general mode of expected credit loss to withdraw bad debt provision of accounts receivable.□ Applicable √ Not applicable

Disclosure by aging

Unit: RMB

Aging Carrying amount

Within 1 year (including 1 year) 353357486.52

1 to 2 years 45104892.94

2 to 3 years 4591959.37

Over 3 years 151475834.88

3 to 4 years 4639425.72

4 to 5 years 6695361.09

Over 5 years 140141048.07

Total 554530173.71

(2) Bad Debt Provision Withdrawn Reversed or Recovered in the Reporting Period

Information of bad debt provision withdrawn:

Unit: RMB

Changes in the Reporting Period

Beginning

Category Reversal or Ending balance

balance Withdrawal Write-off

recovery

Bad debt

provision

31807452.8924084034.50147611.2511689508.9944054367.15

withdrawn

separately

154Changchai Company Limited Annual Report 2021

Bad debt

provision

134227952.4327517871.7026479144.05135266680.08

withdrawn by

group

Total 166035405.32 51601906.20 147611.25 38168653.04 179321047.23

Of which bad debt provision reversed or recovered with significant amount in the Reporting Period: No.

(3) There Were No Accounts Receivable with Actual Verification during the Reporting Period.

Unit: RMB

Item Verified amount

Accounts receivable with actual verification 38168653.04

Of which the verification of significant accounts receivable:

Unit: RMB

Nature Arising

of the from

Name of the accou Verified Reason for related-pa

Verification procedures performed

entity nts amount verification rty

receiv transactio

able ns or not

Customer 1 997047.83 The account age The Company held the 10th

Customer 2 516384.40 of the debtor is Meeting of the 9th Board of

Customer 3 5359381.00 more than 5 Directors and the 10th Meeting of

Customer 4 5309605.00 years and the the 9th Supervisory Committee on

Customer 5 3662926.13 debtor has no 16 August 2021 and approved the

Customer 6 3279100.00 assets to pay off Proposal on Verification of SomeAccou

Customer 7 nts 2295898.35

due to the Accounts Receivable；On

Customer 8 1617988.01 cancellation or December 23 2021 the 30th Notreceiv

Customer 9 707050.39 debt meeting of the board of 2ndable

Customer 10 612001.02 restructuring of Directors of Changzhou Changchai

Customer 11 583558.66 the other party Benniu Diesel Engine Fittings Co.Customer 12 533146.26 bankruptcy Ltd. decided to review and approve

Customer 13 978233.10 liquidation or the Proposal on the write-off of

judicial part of receivables by Changzhou

Customer 14 1217860.04 litigation. Changniu Machinery Co. LTD.Total -- 27670180.19 -- -- --

(4) Top 5 of the Ending Balance of the Accounts Receivable Collected according to the Arrears Party

Unit: RMB

Ending balance of Proportion to total ending balance of Ending balance of

Name of the entity

accounts receivable accounts receivable bad debt provision

Customer 1 174635898.30 31.49% 3492717.97

Customer 2 64375015.92 11.61% 1287500.32

Customer 3 37370796.27 6.74% 747415.93

Customer 4 18082456.14 3.26% 361649.12

Customer 5 8152568.83 1.47% 163051.38

155Changchai Company Limited Annual Report 2021

Total 302616735.46 54.57%

5. Accounts Receivable Financing

Unit: RMB

Item Ending balance Beginning balance

Bank acceptance bills 497388826.02

Total 497388826.02

Changes of accounts receivable financing and fair value thereof in the Reporting Period

√ Applicable □ Not applicable

Please refer to the relevant information of disclosure of bad debt provision of other accounts receivable if

adopting the general mode of expected credit loss to withdraw bad debt provision of accounts receivable

financing.□ Applicable √ Not applicable

Other notes:

The Company discounts and endorses a portion of its bank acceptances based on its routine fund management

needs and the conditions for derecognition are met so the bank acceptances are classified as financial assets

measured at fair value whose change is included in other comprehensive income.On 31 December 2021 there was no bank acceptance for which bad debt provision accrued separately in the

Company. The Company measures the provision of bad debt provision on the basis of expected credit losses

throughout the duration. The Company believes that the credit risk characteristics of the bank acceptances it holds

are similar and there was no bank acceptance for which bad debt provision accrued separately. In addition there

was no significant credit risk in the bank acceptance and no significant loss would be caused by bank defaults.

(1) Accounts receivable financing which had endorsed by the Company or had discounted but had not due at the

period-end

Amount of recognition Amount of not terminated

Item

termination at the period-end recognition at the period-end

Bank acceptance bill 214422574.14

Total 214422574.14

6. Prepayments

(1) List by Aging Analysis

Unit: RMB

Ending balance Beginning balance

Aging

Amount Proportion Amount Proportion

Within 1 year 6706970.55 81.82% 7039656.05 75.23%

1 to 2 years 94583.55 1.15% 641762.79 6.86%

2 to 3 years 362397.67 4.42% 673819.29 7.20%

Over 3 years 1033466.62 12.61% 1002602.620 10.71%

Total 8197418.39 -- 9357840.75 --

156Changchai Company Limited Annual Report 2021

There was no prepayment with significant amount aging over one year as of the period-end.

(2) Top 5 of the Ending Balance of the Prepayments Collected according to the Prepayment Target

At the period-end the total top 5 of the ending balance of the prepayments collected according to the prepayment

target was RMB2411854.81 accounting for 29.42% of the total ending balance of prepayments.

7. Other Receivables

Unit: RMB

Item Ending balance Beginning balance

Interest receivable

Dividend receivable

Other receivables 19515350.52 6212062.80

Total 19515350.52 6212062.80

(1) Other Receivables

1) Other Receivables Classified by Accounts Nature

Unit: RMB

Nature Ending carrying value Beginning carrying value

Margin and cash pledge 1299600.00 4200.00

Intercourse funds 35889738.80 22967220.99

Petty cash and borrowings by

1184204.411359483.08

employees

Other 13630284.64 13806779.19

Total 52003827.85 38137683.26

2) Withdrawal of Bad Debt Provision

Unit: RMB

First stage Second stage Third stage

Expected loss in Expected loss in

Expected credit

Bad debt provision the duration (credit the duration Total

loss of the next

impairment not (credit impairment

12 months

occurred) occurred)

Balance of 1 January

31925620.4631925620.46

2021

Balance of 1 January

2021 in the Current

Period

--Transfer to Second

-26783142.1926783142.19

stage

-- Transfer to Third stage -5039368.41 5039368.41

-- Reverse to Second

stage

-- Reverse to First stage

Withdrawal of the

184499.59674822.50859322.09

Current Period

157Changchai Company Limited Annual Report 2021

Reversal of the Current

296465.22296465.22

Period

Write-offs of the Current

Period

Verification of the

Current Period

Other changes

Balance of 30 December

287609.4526486676.975714190.9132488477.33

2021

Changes of carrying amount with significant amount changed of loss provision in the current period

□ Applicable √ Not applicable

Disclosure by aging

Unit: RMB

Aging Ending balance

Within 1 year (including 1 year) 17631994.08

1 to 2 years 1416120.16

2 to 3 years 116820.58

Over 3 years 32838893.03

3 to 4 years 396819.78

4 to 5 years 1119890.57

Over 5 years 31322182.68

Total 52003827.85

3) Bad Debt Provision Withdrawn Reversed or Recovered in the Reporting Period

Information of withdrawal of bad debt provision:

Unit: RMB

Changes in the Reporting Period

Beginning Ending

Category Withdraw Reversal or Write-

balance Other balance

al recovery off

Bad debt

provision for 674822.5

5039368.415714190.91

which accrued 0

separately

Bad debt

provision for

26886252.05111965.6326774286.42

which accrued by

group

674822.5

Total 31925620.46 111965.63 32488477.33

0

4) There Was No Particulars of the Actual Verification of Other Receivables during the Reporting Period

5) Top 5 of the Ending Balance of Other Receivables Collected according to the Arrears Party

Unit: RMB

158Changchai Company Limited Annual Report 2021

Proportion to

Ending

Ending ending balance

Name of the entity Nature Aging balance of bad

balance of other

debt provision

receivables%

Interco

Changzhou

urse 2940000.00 Over 5 years 5.65% 2940000.00

Compressor Factory

funds

Interco

Changchai Group

urse 2853188.02 Over 5 years 5.49% 2853188.02

Imp. & Exp. Co. Ltd.funds

Changzhou New Interco

District Accounting urse 1626483.25 Over 5 years 3.13% 1626483.25

Center funds

Interco 1140722.16

Changchai Group

urse 1140722.16 Over 5 years 2.19%

Settlement Center

funds

Changzhou Huadi Engine 53270.00

Engineering ering 1065400.00 1-2 years 2.05%

Guarantee Co. Ltd. deposit

Total 9625793.43 18.51% 8613663.43

8. Inventory

Whether the Company needs to comply with the requirements of real estate industry

No

(1) Category of Inventory

Unit: RMB

Ending balance Beginning balance

Item Carrying Falling price Carrying Carrying Falling price Carrying

amount reserves value amount reserves value

Raw 148617321. 141356757. 134712519. 129153006.

7260564.475559513.66

materials 85 38 83 17

Materials

13877280.613877280.614065866.513996989.9

processed on 68876.57

0025

commission

Goods in 119354374. 15534236.3 103820137. 134454109. 18512449.0 115941660.process 14 5 79 88 8 80

Finished 403855588. 13029104.2 390826484. 361975004. 15261416.1 346713588.goods 94 6 68 89 7 72

Low priced

and easily 1203097.73 1203097.73 1906803.53 1031708.62 875094.91

worn articles

686907663.35823905.0651083758.647114304.40433964.1606680340.

Total

2681865055

159Changchai Company Limited Annual Report 2021

(2) Provision for inventory depreciation and provision for impairment of contract performance costs

Unit: RMB

Increase Decrease

Beginning

Item Reversal or Ending balance

balance Withdrawal Other Other

write-off

Raw materials 5559513.65 5635488.24 3934437.42 7260564.47

Materials

processed on 68876.57 68876.57

commission

Goods in

18512449.094137802.167116014.9015534236.35

process

Finished goods 15261416.17 2232311.91 13029104.26

Low priced and

easily worn 1031708.62 1031708.62

articles

Total 40433964.10 9773290.40 14383349.42 35823905.08

(3) There Was No Capitalized Borrowing Expense in the Ending Balance of Inventories

9. Other Current Assets

Unit: RMB

Item Ending balance Beginning balance

The VAT tax credits 37806274.29 22534134.72

Private placement of intermediary

2358490.56

agency fees

Prepaid corporate income tax 6143886.15 2240396.88

Prepaid expense 110662.13 80070.32

Other 86270.24

Total 44060822.57 27299362.72

10. Investments in Debt Obligations

Unit: RMB

Ending balance Beginning balance

Item Carrying Falling price Carrying Carrying Falling price Carrying

amount reserves value amount reserves value

Three-year

37898226.337898226.3

fixed term

99

deposit

37898226.337898226.3

Total

99

Significant investments in debt obligations

Unit: RMB

Item Ending balance Beginning balance

160Changchai Company Limited Annual Report 2021

Actual Actual

Par Coupon Maturity Par Coupon Maturity

interest interest

value rate date value rate date

rate rate

Three-year fixed 370000 26 April

3.80%

term deposit 00.00 2024

370000

Total —— —— —— —— —— ——

00.00

Changes of carrying amount with significant amount changed of loss provision in the reporting period

□ Applicable √ Not applicable

11. Long-term Equity Investment

Unit: RMB

Increase/decrease

Gain Adjust Endin

Begin Cash Endin

or loss ment Withd g

ning bonus g

recogn of rawal balanc

balanc Additi Reduc Chang or balanc

Invest ized other of e of

e onal ed es in profit e

ees under compr deprec Other deprec

(carryi invest invest other annou (carryi

the ehensi iation iation

ng ment ment equity nced ng

equity ve reserv reserv

value) to value)

metho incom es es

issue

d e

II. Associated enterprises

Beijin

g

Tsingh

ua

Indust

rial 44182

0.000.00

Invest .50

ment

Mana

gemen

t Co.Ltd.Subtot 44182

0.000.00

al .50

44182

Total 0.00 0.00 .50

12. Other Equity Instrument Investment

Unit: RMB

161Changchai Company Limited Annual Report 2021

Item Ending balance Beginning balance

Changzhou Synergetic Innovation Private Equity

146375646.53102198950.87

Fund (Limited Partnership)

Other equity instrument investment measured by

633502000.00582939000.00

fair value

Total 779877646.53 685137950.87

Non-trading equity instrument investment disclosed by category

Unit: RMB

Reason for

Amount of Reason for assigning

other

Accu other to measure by fair

Dividend comprehensi

Accumulative mulat comprehensiv value of which

Item income ve income

gains ive e transferred changes be included to

recognized transferred to

losses to retained other comprehensive

retained

earnings income

earnings

Foton Motor Co. Non-trading equity

455296000.00

Ltd. investment

Non-trading equity

Bank of Jiangsu 7394400.00 93636000.00

investment

Changzhou

Synergetic

Innovation Non-trading equity

46375646.53

Private Equity investment

Fund (Limited

Partnership)

Other notes:

The corporate securities of accommodation business still on lending at the period-end: 3276000 shares of Foton

Motor Co. Ltd.

13. Other Non-current Financial Assets

Unit: RMB

Item Ending balance Beginning balance

Jiangsu Liance Electromechanical Technology

7200000.00

Co. Ltd.Kailong High Technology Co. Ltd. 38282105.00

Guizhou Weimen Pharmaceutical Co. Ltd. 200104.80

Guizhou Anda Technology Energy Co. Ltd. 195297.49

Henan Lantian Gas Co. Ltd. 160744.76

Hebei Songhe Renewable Resources Co. Ltd. 104699.44

Anhui Haofang Electromechanical Co. Ltd. 89987.14

Jiangsu Horizon New Energy Technology 112500000.00 52500000.00

162Changchai Company Limited Annual Report 2021

Co. Ltd.Total 112500000.00 98732938.63

14. Investment Property

(1) Investment Property Adopting the Cost Measurement Mode

√ Applicable □ Not applicable

Unit: RMB

Item Houses and buildings Total

I. Original carrying value

1. Beginning balance 87632571.14 87632571.14

2. Increased amount of the period 5444908.38 5444908.38

(1) Outsourcing

(2) Transfer from inventories/fixed

5444908.385444908.38

assets/construction in progress

(3) Enterprise combination increase

3. Decreased amount of the period

(1) Disposal

(2) Other transfer

4. Ending balance 93077479.52 93077479.52

II. Accumulative depreciation and

accumulative amortization

1. Beginning balance 41393245.11 41393245.11

2. Increased amount of the period 7086979.20 7086979.20

(1) Withdrawal or amortization 2208340.80 2208340.80

(2) Transferred into 4878638.40 4878638.40

3. Decreased amount of the period

(1) Disposal

(2) Other transfer

4. Ending balance 48480224.31 48480224.31

III. Depreciation reserves

1. Beginning balance

2. Increased amount of the period

(1) Withdrawal

3. Decreased amount of the period

(1) Disposal

(2) Other transfer

4. Ending balance

IV. Carrying value

1. Ending carrying value 44597255.21 44597255.21

2. Beginning carrying value 46239326.03 46239326.03

163Changchai Company Limited Annual Report 2021

15. Fixed Assets

Unit: RMB

Item Ending balance Beginning balance

Fixed assets 402915521.65 454181555.68

Disposal of fixed assets

Total 402915521.65 454181555.68

(1) List of Fixed Assets

Unit: RMB

Houses and Machinery Transportation Other

Item Total

buildings equipment equipment equipment

I. Original

carrying value

1. Beginning

465428975.71996970879.6516939308.0142124393.111521463556.48

balance

2. Increased

amount of the 2893957.93 24394538.81 746936.13 1132052.80 29167485.67

period

(1) Purchase 890191.23 1758130.59 499325.51 553980.35 3701627.68

(2) Transfer

from

2003766.7022636408.22247610.62578072.4525465857.99

construction in

progress

(3) Enterprise

combination

increase

3. Decreased

amount of the 10947523.68 8814883.34 2176590.76 1901608.94 23840606.72

period

(1) Disposal or

5502615.308814883.342176590.761901608.9418395698.34

scrap

(2) Transfer out 5444908.38 5444908.38

4. Ending 1012550535.1

457375409.9615509653.3841354836.971526790435.43

balance 2

II.Accumulative

depreciation

1. Beginning

298167122.41718498347.7013464995.7836670860.661066801326.55

balance

164Changchai Company Limited Annual Report 2021

2. Increased

amount of the 16282369.02 55623684.44 937276.73 1076506.45 73919836.64

period

(1) Withdrawal 16282369.02 55623684.44 937276.73 1076506.45 73919836.64

3. Decreased

amount of the 4911488.40 8529943.08 2002885.69 1882606.49 17326923.66

period

(1) Disposal or

32850.008529943.082002885.691882606.4912448285.26

scrap

(2) Transfer out 4878638.40 4878638.40

4. Ending

309538003.03765592089.0612399386.8235864760.621123394239.53

balance

III.Depreciation

reserves

1. Beginning

480674.25480674.25

balance

2. Increased

amount of the

period

(1) Withdrawal

3. Decreased

amount of the

period

(1) Disposal or

scrap

4. Ending

480674.25480674.25

balance

IV. Carrying

value

1. Ending

147837406.93246477771.813110266.565490076.35402915521.65

carrying value

2. Beginning

167261853.30277991857.703474312.235453532.45454181555.68

carrying value

(2) List of Temporarily Idle Fixed Assets

Original Accumulative Depreciation

Item Carrying value Note

carrying value depreciation reserves

Machinery

561589.5080915.25480674.25

equipment

16. Construction in Progress

Unit: RMB

165Changchai Company Limited Annual Report 2021

Item Ending balance Beginning balance

Construction in progress 268417880.66 44844896.77

Engineering materials 1887810.25 21657535.64

Total 270305690.91 66502432.41

(1) List of Construction in Progress

Unit: RMB

Ending balance Beginning balance

Item Carrying Depreciatio Carrying Carrying Depreciati Carrying

amount n reserves value amount on reserves value

Expansion

capacity of

multi-cylinde 1097435.90 1097435.90 1128887.90 1128887.90

r (The 2nd

Period)

Innovation

capacity

construction

3714601.763714601.76

of

technology

center

Relocation

project of 254748122.4 254748122.4

40307243.3540307243.35

light engine 9 9

and casting

Equipment to

be installed

8857720.518857720.513408765.523408765.52

and payment

for projects

268417880.6268417880.6

Total 44844896.77 44844896.77

66

(2) Changes in Significant Construction in Progress during the Reporting Period

Unit: RMB

Propo Of Capit

Accu

rtion which alizati

mulat

of : on

ed

Trans Other accu Amo rate

Begin Incre Endin amou Capit

ferred decre mulat Job unt of of

Budg ning ased g nt of al

Item in ased ed sched capita intere

et balan amou balan intere resou

fixed amou invest ule lized sts for

ce nt ce st rces

assets nt ment intere the

capita

in sts for Repor

lizati

constr the ting

on

uctio Repor Perio

166Changchai Company Limited Annual Report 2021

ns to ting d

budge Perio

t d

Expa

nsion

capac

ity of

multi- 7900 1128 1097 Unco

3145 Self-r

cylin 0000 887. 435. mplet

2.00 aised

der .00 90 90 ed

(The

2nd

Perio

d)

Innov

ation

capac Self-r

ity aised

9606 3714 3714 Unco

constr 3.87 funds

6200 601. 601. mplet

uctio % and.00 76 76 ed

n of raised

techn fund

ology

center

Reloc

ation

Self-r

proje

aised

ct of 1000 4030 2144 2547 Unco

25.47 funds

light 1187 7243 4087 4812 mplet

% and

engin 00.00 .35 9.14 2.49 ed

raised

e and

fund

castin

g

Noise

reduc

tion

19721972

renov Comp Self-r

314.314.

ation leted aised

7070

of the

house

s

11754340218120032595

Total 184 8445 5548 766. 6016 -- -- --

900.0.950.90700.15

167Changchai Company Limited Annual Report 2021

0

(3) Engineering Materials

Unit: RMB

Ending balance Beginning balance

Depreciati

Item Carrying Carrying Carrying Depreciation Carrying

on

amount value amount reserves value

reserves

Engineerin

1887810.251887810.2521657535.6421657535.64

g materials

Total 1887810.25 1887810.25 21657535.64 21657535.64

17. Intangible Assets

(1) List of Intangible Assets

Unit: RMB

Trademark use

Item Land use right Software License fee Total

right

I. Original carrying

value

1. Beginning balance 206783546.68 14067915.16 5488000.00 1087042.79 227426504.63

2. Increased amount of

the period 1668804.50 563930.68 2232735.18

(1) Purchase 1668804.50 563930.68 2232735.18

(2) Internal R&D

(3) Business

combination increase

3. Decreased amount of

the period

(1) Disposal

4. Ending balance 206783546.68 15736719.66 5488000.00 1650973.47 229659239.81

II. Accumulated

amortization

1. Beginning balance 54545676.02 11879287.65 2103733.18 27176.07 68555872.92

2. Increased amount of

the period 4259967.94 977672.47 548799.96 162180.61 5948620.98

(1) Withdrawal 4259967.94 977672.47 548799.96 162180.61 5948620.98

3. Decreased amount of

the period

(1) Disposal

4. Ending balance 58805643.96 12856960.12 2652533.14 189356.68 74504493.90

III. Depreciation

reserves

1. Beginning balance

168Changchai Company Limited Annual Report 2021

2. Increased amount of

the period

(1) Withdrawal

3. Decreased amount of

the period

(1) Disposal

4. Ending balance

IV. Carrying value

1. Ending carrying

value 147977902.72 2879759.54 2835466.86 1461616.79 155154745.91

2. Beginning carrying

value 152237870.66 2188627.51 3384266.82 1059866.72 158870631.71

18. Long-term Prepaid Expenses

Item Beginning Increase Amortized Decrease Ending balance

balance amount

Furniture of

employee 13693.20 13693.20

dormitory etc.Trademark

114257.433912.13110345.30

renewal fee

Total 13693.20 114257.43 17605.33 110345.30

19. Deferred Income Tax Assets/Deferred Income Tax Liabilities

(1) Deferred Income Tax Assets that Had not Been Off-set

Unit: RMB

Ending balance Beginning balance

Deductible Deductible

Item Deferred income Deferred income

temporary temporary

tax assets tax assets

difference difference

Bad debt provision 7196880.38 1087755.38 6544083.47 981314.04

Deductible loss 59064221.02 9085419.14 21670394.08 3250559.11

Inventory falling

2990223.81448533.57

price reserves

Impairment of fixed

480674.2572101.14

assets

Total 69731999.46 10693809.23 28214477.55 4231873.15

(2) Deferred Income Tax Liabilities Had Not Been Off-set

Unit: RMB

Item Ending balance Beginning balance

169Changchai Company Limited Annual Report 2021

Taxable temporary Deferred income Taxable temporary Deferred income

difference tax liabilities difference tax liabilities

Changes in fair

value of other

595307646.5389296146.98500567950.8775085192.63

equity instrument

investment

Changes in fair

value of trading 89101335.36 22064042.06 18481109.00 4600250.05

financial assets

Changes in fair

value of other

36250000.005437500.002500000.00375000.00

non-current

financial assets

Assets evaluation

appreciation for

business

3643147.16546472.074074374.26611156.14

combination not

under the same

control

Total 724302129.05 117344161.11 525623434.13 80671598.82

(3) List of Unrecognized Deferred Income Tax Assets

Unit: RMB

Item Ending balance Beginning balance

Bad debt provision 204612644.18 191416942.31

Falling price reserves of

32833681.2740433964.10

inventories

Deductible loss 14716019.78 13352584.61

Total 252162345.23 245203491.02

(4) Deductible Losses of Unrecognized Deferred Income Tax Assets will Due in the Following Years

Years Ending amount Beginning amount Note

20211490211.13

2022434000.66769219.70

2023940673.562275610.42

20246538363.996538363.99

20252279179.372279179.37

20264523802.20

Total 14716019.78 13352584.61 --

20. Other Non-current Assets

Unit: RMB

Item Ending balance Beginning balance

170Changchai Company Limited Annual Report 2021

Depreciati

Carrying Carrying Depreciation Carrying

on Carrying value

amount amount reserves value

reserves

Advances

19971006.519971006.5

payment of 4543240.88 4543240.88

66

equipments

19971006.519971006.5

Total 4543240.88 4543240.88

66

21. Short-term Borrowings

(1) Category of Short-term Borrowings

Unit: RMB

Item Ending balance Beginning balance

Mortgage loans 7000000.00 7000000.00

Guaranteed loans 5000000.00 10000000.00

Credit loans 5000000.00

Obligation to pay bills discounted

61971466.65

before maturity

Total 73971466.65 22000000.00

(2) There Was No Short-term Borrowings Overdue but Unpaid.

22. Notes Payable

Unit: RMB

Category Ending balance Beginning balance

Bank acceptance bill 550774400.00 595346000.00

Total 550774400.00 595346000.00

At the end of the current period there were no notes payable due and not paid.

23. Accounts Payable

(1) List of Accounts Payable

Unit: RMB

Item Ending balance Beginning balance

Payment for goods 666186668.82 612757392.46

Total 666186668.82 612757392.46

(2) Significant Accounts Payable Aging over One Year

Item Ending balance Unpaid/ Un-carry-over reason

Supplier terminates cooperation

Payment for goods 12367497.92

pending payment

Payment for equipment 1845062.03 Equipment warranty

171Changchai Company Limited Annual Report 2021

Total 14212559.95

24. Advances from Customers

Unit: RMB

Item Ending balance Beginning balance

Payment for goods 660965.62 661612.17

Total 660965.62 661612.17

There were no significant advances from customers aging over one year at the end of the period.

25. Contract Liabilities

Unit: RMB

Item Ending balance Beginning balance

Contract liabilities 26864081.97 35944517.15

Total 26864081.97 35944517.15

There were no significant contract liabilities aging over one year at the end of the period.

26. Payroll Payable

(1) List of Payroll Payable

Unit: RMB

Item Beginning balance Increase Decrease Ending balance

I. Short-term salary 50127161.47 285683270.01 290424764.00 45385667.48

II.Post-employment

benefit-defined 32595783.09 32595783.09

contribution plans

III. Termination

benefits

IV. Current portion

of other benefits

Total 50127161.47 318279053.10 323020547.09 45385667.48

(2) List of Short-term Salary

Unit: RMB

Item Beginning balance Increase Decrease Ending balance

1. Salary bonus

41908627.17240287147.00244820001.4037375772.77

allowance subsidy

2.Employee welfare 1592.74 2040614.93 2040614.93 1592.74

3. Social insurance 19165330.63 19165330.63

Of which: Medical

insurance 15877310.21 15877310.21

premiums

Work-related injury

1747668.071747668.07

insurance

172Changchai Company Limited Annual Report 2021

Maternity insurance 1540352.35 1540352.35

4. Housing fund 19414745.80 19414745.80

5.Labor union

budget and

8216941.564775431.654984071.248008301.97

employee education

budget

6. Short-term

absence with salary

7. Short-term profit

sharing scheme

Total 50127161.47 285683270.01 290424764.00 45385667.48

(3) List of Defined Contribution Plans

Unit: RMB

Item Beginning balance Increase Decrease Ending balance

1. Basic pension

benefits 31606867.16 31606867.16

2. Unemployment

988915.93988915.93

insurance

3. Enterprise

annuities

Total 32595783.09 32595783.09

27. Taxes Payable

Unit: RMB

Item Ending balance Beginning balance

VAT 372401.11 461.22

Corporate income tax 470363.07 531557.38

Personal income tax 76559.47 114208.40

Urban maintenance and

957520.42879346.31

construction tax

Property tax 1160865.33 94863.50

Land use tax 1026217.69 100135.19

Stamp duty 44759.84 6851.35

Education Surcharge 90862.46 35023.81

Comprehensive fees 1075134.76 1075134.76

Environmental protection tax 31694.67 31903.49

Total 5306378.82 2869485.41

28. Other Payables

Unit: RMB

Item Ending balance Beginning balance

173Changchai Company Limited Annual Report 2021

Interest payable

Dividends payable 3891433.83 3891433.83

Other payables 144469939.46 193653642.25

Total 148361373.29 197545076.08

(1) Dividends Payable

Unit: RMB

Item Ending balance Beginning balance

Ordinary share dividends 3243179.97 3243179.97

Interest of preferred shares/

perpetual bond classified as equity

instrument

Dividends for non-controlling

648253.86648253.86

shareholders

Other

Total 3891433.83 3891433.83

The reason for non-payment for over one year: Not gotten by shareholders yet.

(2) Other Payables

1) Other Payables Listed by Nature of Account

Unit: RMB

Item Ending balance Beginning balance

Margin & cash pledged 5045246.58 3406041.83

Intercourse funds among units 8364769.41 9309617.95

Intercourse funds among

402661.041256848.49

individuals

Sales discount and three

114581855.32147739746.71

guarantees

Other 16075407.11 31941387.27

Total 144469939.46 193653642.25

2) Significant Other Payables Aging over One Year

The significant other payables aging over one year at the period-end mainly referred to the unsettled temporary

credits and charges owned.

29. Other Current Liabilities

Unit: RMB

Item Ending balance Beginning balance

Sale service fee 460437.94 365047.65

Transportation storage fee 870397.06 260055.33

Electric charge 3131920.88 1972314.61

Tax to be transferred 2250515.65 2636529.53

Estimated share value added tax 3989913.45

174Changchai Company Limited Annual Report 2021

Obligation to pay bills transferred

72391302.15

before maturity

Other withholding expenses 5843705.66

Total 88938192.79 5233947.12

30. Deferred Income

Unit: RMB

Beginning Reason for

Item Increase Decrease Ending balance

balance formation

Government Government

56949737.60-14970000.002364382.2039615355.40

grants appropriation

Total 56949737.60 -14970000.00 2364382.20 39615355.40 --

Item involving government grants:

Unit: RMB

Amount

recorded Amount

Amou into recorded Amount Related

Beginni nt of non-oper into other offset Other Ending to

Item ng new ating income in cost in the chan balanc assets/re

balance subsid income in the Reporting ges e lated

y the Reporting Period income

Reporting Period

Period

National major

project special -1477 13040

allocations- Flexible 28770 759633.0 2000 Related

processing production 0000. 367.0000.00 0 00.00 to assets

line for cylinders of 00 0

diesel engines

18513

19179 665973.6 Related

Remove 763.9

737.60 2 to assets

compensation 8

Research and

development and

industrialization

allocations of national 90000 938775.5 8061 Related

III/IV standard 00.00 8 224.42 to assets

high-powered

efficient diesel engine

for agricultural use

-147720039615

569492364382.

Total 0000. 000. 355.4

737.6020

00000

175Changchai Company Limited Annual Report 2021

Notes: The national major special project - the flexible processing production line for diesel engine cylinder

blocks underwent comprehensive performance evaluation by the Industrial Development Promotion Center of the

Ministry of Industry and Information Technology (MIIT) and it was determined that the final appropriation

income was RMB13.8 million with RMB28.77 million received from the country and the balance of RMB14.77

million returned to MIIT.

31. Share Capital

Unit: RMB

Increase/decrease (+/-)

Beginning Bonus Ending

New shares Bonus

balance issue from Other Subtotal balance

issued shares

profit

The sum of 56137432 14431818 14431818 70569250

shares 6.00 1.00 1.00 7.00

Note: A non-public offering of up to 168412297 new shares was deliberated on and approved as a resolution of

the 8th Meeting of the 9th Board of Directors held on 13 April 2021 and the 2020 Annual General Meeting held on

7 May 2021 and approved by the Approval of the Non-public Offering of Shares of Changchai Co. Ltd. (CSRC

Permit [2020] No. 3374) issued by Changchai Company Limited the China Securities Regulatory Commission.On June 16 2021 the capital verification report "S.G. W [2021] B062" was issued by Gongzheng Tianye

Accounting Firm (Special General Partnership) confirming that the Company had issued 144318181 RMB

ordinary shares (A shares) in a non-public offering with an additional paid-in capital (share capital) of

RMB144318181. The total amount raised was RMB634999996.40; the net amount raised after deducting

related issuance expenses of RMB14334262.43 was RMB620665733.97 which increased the capital reserve

(share capital premium) by RMB476347552.97. After this alteration the total share capital was

RMB705692507.00. The Company has completed corresponding registration procedures for industrial and

commercial change on 17 September 2021.

32. Capital Reserves

Unit: RMB

Item Beginning balance Increase Decrease Ending balance

Capital premium

143990690.24476347552.97620338243.21

(premium on stock)

Other capital reserves 20337975.19 20337975.19

Total 164328665.43 476347552.97 640676218.40

Other notes including changes and reasons thereof: The increase in premium on stock for the current period is

shown in the paid-in capital statement.

33. Other Comprehensive Income

Unit: RMB

176Changchai Company Limited Annual Report 2021

Reporting Period

Less:

Record

Less: ed in

Recorded other

in other compre

comprehe hensiv Attribu

nsive e table to Attribu

Income

income in income owners table to

before Less: Endin

Beginni prior in prior of the non-co

taxatio Income g

Item ng period period Compa ntrollin

n in the tax balan

balance and and ny as g

Curren expens ce

transferre transfe the interest

t e

d in rred in parent s after

Period

profit or retaine after tax

loss in d tax

the earning

Current s in the

Period Curren

t

Period

I. Other comprehensive 5060

425482947391421080528

income that will not be 1149

758.24695.66954.35741.31

reclassified to profit or loss 9.55

Of which: Changes caused

by re-measurements on

defined benefit pension

schemes

Share of other

comprehensive income of

investees that will not be

reclassified to profit or loss

under equity method

Changes in fair value of 5060

425482947391421080528

other equity instrument 1149

758.24695.66954.35741.31

investment 9.55

Changes in fair value of

corporate credit risk

II. Other comprehensive

income that may

subsequently be

reclassified to profit or loss

Of which: Share of other

comprehensive income of

177Changchai Company Limited Annual Report 2021

investees that will be

reclassified to profit or loss

under equity method

Changes in fair value of

investment in other debt

obligations

Amount of financial assets

reclassified to other

comprehensive income

Credit depreciation

reserves of investment in

other debt obligations

Reserves for cash flow

hedges

Differences arising from

translation of foreign

currency-denominated

financial statements

5060

Total of other 425482 94739 14210 80528

1149

comprehensive income 758.24 695.66 954.35 741.31

9.55

34. Specific Reserve

Unit: RMB

Item Beginning balance Increase Decrease Ending balance

Safety production

18812986.554023200.244023236.7518812950.04

cost

Total 18812986.55 4023200.24 4023236.75 18812950.04

35. Surplus Reserves

Unit: RMB

Item Beginning balance Increase Decrease Ending balance

Statutory surplus

312294673.248692957.32320987630.56

reserves

Discretional surplus

13156857.9013156857.90

reserves

Total 325451531.14 8692957.32 334144488.46

36. Retained Earnings

Unit: RMB

178Changchai Company Limited Annual Report 2021

Item Reporting Period Same period of last year

Beginning balance of retained earnings before

777899079.66726689929.10

adjustments

Total retained earnings at the beginning of the

adjustment period (“+” means up “-” means 1651336.26

down)

Beginning balance of retained earnings after

777899079.66728341265.36

adjustments

Add: Net profit attributable to owners of the

103006232.5452432443.05

Company as the parent

Less: Withdrawal of statutory surplus reserves 8692957.32 3222997.42

Withdrawal of discretional surplus

reserves

Withdrawal of general reserve

Dividend of ordinary shares payable

Dividends of ordinary shares transferred as

share capital

Recorded in other comprehensive income in

prior period and transferred in retained profits in

the Current Period

Ending retained earnings 872212354.88 777899079.66

List of adjustment of beginning retained earnings:

1) RMB0 beginning retained earnings was affected by retrospective adjustment conducted according to the

Accounting Standards for Business Enterprises and relevant new regulations.

2) RMB0 beginning retained earnings was affected by changes in accounting policies.

3) RMB0 beginning retained earnings was affected by correction of significant accounting errors.

4) RMB0 beginning retained earnings was affected by changes in combination scope arising from same control.

5) RMB0 beginning retained earnings was affected totally by other adjustments.

37. Operating Revenue and Cost of Sales

Unit: RMB

Reporting Period Same period of last year

Item

Operating revenue Cost of sales Operating revenue Cost of sales

Main operations 2404119747.06 2051932677.42 2252479553.51 1918486625.85

Other operations 48310768.54 32739084.66 43985157.73 32087365.42

Total 2452430515.60 2084671762.08 2296464711.24 1950573991.27

Whether the lower of the audited net profit before and after deduction of non-recurring gains and losses is

negative

□ Yes √ No

Relevant information of revenue:

Unit: RMB

Category of contracts Segment 1

Product Types

179Changchai Company Limited Annual Report 2021

Of which:

Single-cylinder diesel engines 1050641417.26

Multi-cylinder diesel engines 1091284576.58

Other products 181798390.14

Accessories 80395363.08

Classified by business area

Of which:

Sales in domestic market 1990006910.43

Export sales 414112836.63

Total 2404119747.06

Information related to performance obligations: none

38. Taxes and Surtaxes

Unit: RMB

Item Reporting Period Same period of last year

Urban maintenance and

1472605.592090758.82

construction tax

Education surcharge 1051826.51 1493399.12

Property tax 6157554.67 4573282.78

Land use tax 5226882.22 3752947.49

Vehicle and vessel use tax 2875.00 1350.00

Stamp duty 969210.59 698047.82

Environment tax 204133.44 221775.24

Other 40860.94 38047.88

Total 15125948.96 12869609.15

39. Selling Expense

Unit: RMB

Item Reporting Period Same period of last year

Employee benefits 42968060.55 38670632.17

Office expenses 11247378.94 15665504.29

Sales promotional expense 1435536.25 6859494.25

Three guarantees 60722393.46 65108496.52

Transport charge 320853.84

Other 548067.28 2068151.39

Total 117242290.32 128372278.62

180Changchai Company Limited Annual Report 2021

40. Administrative Expense

Unit: RMB

Item Reporting Period Same period of last year

Employee benefits 51646790.82 54275945.07

Office expenses 9359397.93 10970658.73

Depreciation and amortization 9925872.31 10255597.50

Safety expenses 4023200.24 3766291.74

Repair charge 1985784.26 788498.70

Inventory scrap and inventory loss

5218542.74

(profit)

Other 16730695.92 7389204.00

Total 98890284.22 87446195.74

41. Development Costs

Unit: RMB

Item Reporting Period Same period of last year

Direct input expense 49871973.96 43808908.87

Employee benefits 21059641.45 20288706.97

Depreciation and amortization 4240194.24 4534946.69

Design costs 250000.00

Entrusted development charges 5521861.13 430000.00

Other 1446613.36 3196218.55

Total 82390284.14 72258781.08

42. Finance Costs

Unit: RMB

Item Reporting Period Same period of last year

Interest expense 5907625.42 7302086.80

Less: Interest income 7921535.62 5467634.76

Net foreign exchange gains or

3969634.6314491248.00

losses

Other -752108.63 -557389.72

Total 1203615.80 15768310.32

43. Other Income

Unit: RMB

Sources Reporting Period Same period of last year

181Changchai Company Limited Annual Report 2021

Government grants directly

recorded into the current profit or 4234711.29 5848842.03

loss

Government grants related to

2364382.201914373.62

deferred income

Others 34238.89 45516.87

44. Investment Income

Unit: RMB

Item Reporting Period Same period of last year

Long-term equity investment income accounted by

equity method

Investment income from disposal of long-term

equity investment

Investment income from holding of trading

financial assets

Investment income from disposal of trading

450637.63-25036.13

financial assets

Dividend income from holding of other equity

7394400.005004000.00

instrument investment

Income from re-measurement of residual stock

rights at fair value after losing control power

Interest income from holding of investment in debt

obligations

Interest income from holding of investment in

other debt obligations

Investment income from disposal of investment in

other debt obligations

Income from debt reorganization

Investment income from disposal of other

-221711.92149821.58

non-current financial assets

Dividend income from holding of held-for-trading

189085.80

financial assets

Dividend income from holding of other

non-current financial assets

Income from refinancing business 1028964.68 433925.05

Investment income from financial products 2292008.67 753991.35

Forward income from foreign exchange settlement 63235.00 229125.00

Accounts receivable financing-discount interest of

-1869322.91

bank acceptance bills

Total 9327296.95 6545826.85

182Changchai Company Limited Annual Report 2021

45. Gain on Changes in Fair Value

Unit: RMB

Sources Reporting Period Same period of last year

Held-for-trading financial assets 70820498.36 200272.00

Other non-current financial assets 33750000.00 20780837.00

Total 104570498.36 20981109.00

46. Credit Impairment Loss

Unit: RMB

Item Reporting Period Same period of last year

Bad debt loss of other receivables -562856.87 1498356.99

Bad debt loss of accounts

-51454294.95880273.69

receivable

Total -52017151.82 2378630.68

47. Asset Impairment Loss

Unit: RMB

Item Reporting Period Same period of last year

I. Bad debt loss

II. Loss on inventory valuation and contract

-8676024.20-11155930.76

performance cost

III. Impairment loss on long-term equity

investment

IV. Impairment loss on investment property

V. Impairment loss on fixed assets

VI. Impairment loss on engineering materials

VII. Impairment loss on construction in progress

VIII. Impairment loss on productive living assets

IX. Impairment loss on oil and gas assets

X. Impairment loss on intangible assets

XI. Impairment loss on goodwill

XII. Other

Total -8676024.20 -11155930.76

48. Asset Disposal Income

Unit: RMB

Sources Reporting Period Same period of last year

Disposal income of fixed assets 155515.49 229121.29

183Changchai Company Limited Annual Report 2021

49. Non-operating Income

Unit: RMB

Amount recorded in the

Item Reporting Period Same period of last year current non-recurring

profit or loss

Income from scrapping

5825.245825.24

fixed assets

Income from scrapping

projects under 2089369.81 2089369.81

construction

Income from penalty 398143.00 267439.00 398143.00

Accounts not required to

1429558.71399049.911429558.71

be paid

Other 115000.00 380625.30 115000.00

Total 4037896.76 1047114.21 4037896.76

50. Non-operating Expense

Unit: RMB

Amount recorded in the

Item Reporting Period Same period of last year current non-recurring

profit or loss

Retirement loss of

22405.7234356.4422405.72

non-current assets

Compensation for quality 507265.91 2085438.03 507265.91

Donation 250000.00

Other 1107361.42 260002.86 1107361.42

Total 1637033.05 2629797.33 1637033.05

51. Income Tax Expense

(1) List of Income Tax Expense

Unit: RMB

Item Reporting Period Same period of last year

Current income tax expense 443034.91 838369.52

Deferred income tax expense 15999671.86 1247230.81

Adjustment of income tax of prior

-4073920.19

years

Total 12368786.58 2085600.33

(2) Adjustment Process of Accounting Profit and Income Tax Expense

Unit: RMB

184Changchai Company Limited Annual Report 2021

Item Reporting Period

Profit before taxation 115300660.95

Current income tax expense accounted at statutory/applicable tax rate 17295099.15

Influence of applying different tax rates by subsidiaries 6503621.47

Influence of income tax before adjustment -4073920.19

Influence of non-taxable income -1156431.45

Influence of non-deductable costs expenses and losses 812440.52

Influence of deductable losses of unrecognized deferred income tax at the

-89988.54

beginning of the Reporting Period

Influence of deductable temporary difference or deductable losses of

1898604.18

unrecognized deferred income tax assets in the Reporting Period

Tax preference from eligible expenditures -8820638.56

Income tax expense 12368786.58

52. Other Comprehensive Income

See Note 33 for details.

53. Cash Flow Statement

(1) Cash Generated from Other Operating Activities

Unit: RMB

Item Reporting Period Same period of last year

Subsidy and appropriation 4240292.03 5857679.00

Other intercourses in cash 6603764.28 5144619.79

Interest income 7921535.62 5467634.76

Other 3871134.26 507167.41

Total 22636726.19 16977100.96

(2) Cash Used in Other Operating Activities

Unit: RMB

Item Reporting Period Same period of last year

Selling and administrative expense

101602750.69120289403.78

paid in cash

Handling charges 1220112.47 1776237.12

Other 15807386.22 777383.09

Other transactions 23381748.58 690007.30

Total 142011997.96 123533031.29

(3) Cash Generated from Other Investing Activities

Unit: RMB

Item Reporting Period Same period of last year

Deposit of construction unit 336150.00

Total 336150.00

185Changchai Company Limited Annual Report 2021

(4) Cash Used in Other Investing Activities

Unit: RMB

Item Reporting Period Same period of last year

Project margin 4141850.71

Accounts receivable

financing-discount interest from bank 1869322.91

acceptance bills

Total 1869322.91 4141850.71

(5) Cash Generated from Other Financial Activities

Unit: RMB

Item Reporting Period Same period of last year

Discount of undue bank acceptance bills

58971466.65

with low credit rating

Total 58971466.65

(6) Cash Used in Other Financial Activities

Unit: RMB

Item Reporting Period Same period of last year

Intermediary agency fees for private

10849056.612500000.00

placement

Discount interest from bank

3772107.02

acceptance bills

Total 14621163.63 2500000.00

54. Supplemental Information for Cash Flow Statement

(1) Supplemental Information for Cash Flow Statement

Unit: RMB

Same period of last

Supplemental information Reporting Period

year

1. Reconciliation of net profit to net cash flows generated

----

from operating activities

Net profit 102931874.37 52294751.19

Add: Provision for impairment of assets 60693176.02 8777300.08

Depreciation of fixed assets of oil and gas assets of

76128177.4480616241.38

productive living assets

Depreciation of right-of-use assets

Amortization of intangible assets 4711649.34 5129822.75

Amortization of long-term deferred expenses 17605.33 39804.60

Losses on disposal of fixed assets intangible assets and other

-155515.49-229121.29

long-term assets (gains by “-”)

Losses on the scrapping of fixed assets (gains by “-”) -2072789.33 34356.44

Losses on the changes in fair value (gains by “-”) -104570498.36 -20981109.00

186Changchai Company Limited Annual Report 2021

Financial expenses (gains by “-”) 8122828.51 16911546.38

Investment losses (gains by “-”) -9327296.95 -6545826.85

Decrease in deferred income tax assets (increase by “-”) -6461936.08 -3208010.11

Increase in deferred income tax liabilities (decrease by “-”) 22461607.94 4455240.92

Decrease in inventory (increase by “-”) -53079441.83 -144477102.41

Decrease in accounts receivable from operating activities

-286670314.4716892902.36

(increase by “-”)

Increase in payables from operating activities (decrease by

-79052905.74278992494.07

“-”)

Other -36906635.98

Net cash flows generated from operating activities -266323779.30 251796654.53

2. Investing and financing activities that do not involving cash

receipts and payment:

Debt transferred as capital

Convertible corporate bond due within one year

Fixed assets from financing lease

3. Net increase in cash and cash equivalents

Ending balance of cash 562402221.59 629939540.50

Less: Beginning balance of cash 629939540.50 545959998.20

Add: Ending balance of cash equivalents

Less: Beginning balance of cash equivalents

Net increase in cash and cash equivalents -67537318.91 83979542.30

(2) Cash and Cash Equivalents

Unit: RMB

Item Ending balance Beginning balance

I. Cash 562402221.59 629939540.50

Including: Cash on hand 145594.98 287505.91

Bank deposit on demand 561746767.12 620966786.57

Other monetary assets on demand 509859.49 8685248.02

Accounts deposited in the central bank

available for payment

Deposits in other banks

Accounts of interbank

II. Cash equivalents

Of which: Bond investment expired within

three months

III. Ending balance of cash and cash

562402221.59629939540.50

equivalents

Of which: Cash and cash equivalents with

restriction in use for the Company as the

parent or subsidiaries of the Group

187Changchai Company Limited Annual Report 2021

55. Assets with Restricted Ownership or Right to Use

Unit: RMB

Item Ending carrying value Reason for restriction

As cash deposit for bank acceptance bill

Monetary assets 145564457.15

and for environment

Houses and buildings 1760577.22 Mortgaged for borrowings from banks

Land use right 911388.42 Mortgaged for borrowings from banks

Machinery equipment 30560526.26 Mortgaged for borrowings from banks

Obligation to pay bills discounted

61971466.65

before maturity

Undue transferred bill payment 72391302.15

obligation

Total 313159717.85

56. Foreign Currency Monetary Items

(1) Foreign Currency Monetary Items

Unit: RMB

Ending foreign currency Ending balance

Item Exchange rate

balance converted to RMB

Monetary assets -- --

Of which: USD 16223008.73 6.3757 103433038.04

EUR

HKD 285401.45 0.8176 233344.23

SGD 54427.95 4.7179 256785.63

Accounts receivable -- --

Of which: USD 10773556.74 6.3757 68688965.83

GBP -67212.27 8.6064 -578455.68

Accounts payable

Of which: USD 302.60 6.3757 1929.29

Contract liabilities

Of which: USD 784613.15 6.3757 5002458.10

EUR 117145.84 7.2197 845757.83

(2) Notes to Overseas Entities Including: for Significant Oversea Entities Main Operating Place Recording

Currency and Selection Basis Shall Be Disclosed; if there Are Changes in Recording Currency Relevant

Reasons Shall Be Disclosed.□ Applicable √ Not applicable

188Changchai Company Limited Annual Report 2021

57. Government Grants

(1) Basic Information on Government Grants

Unit: RMB

Amount recorded in

Category Amount Listed items the current profit or

loss

Industrial and information industry

70000.00 Other income 70000.00

transformation and upgrading subsidies

Project fund for the first purchase of special

innovative products for industrial high-quality 200000.00 Other income 200000.00

development and application promotion

Changzhou industrial Internet special fund 100000.00 Other income 100000.00

Subsidy for Changzhou Strong Quality City

100000.00 Other income 100000.00

Award

Subsidy for stabilizing posts 61713.39 Other income 61713.39

Business development fund 693000.00 Other income 693000.00

Discount interest for loans from Finance

Bureau for Science and Technology 1391000.00 Other income 1391000.00

Achievement Transformation Fund Project

Benniu Town 2020 Gas Boiler Low Nitrogen

20000.00 Other income 20000.00

Combustion Reconstruction Subsidy

Special fund for high-quality development 37000.00 Other income 37000.00

Tax contribution award 20000.00 Other income 20000.00

Funding for the first year of the demonstration

30000.00 Other income 30000.00

base for training advanced skilled personnel

Subsidies for training by work 468621.90 Other income 468621.90

Epidemic subsidy 100000.00 Other income 100000.00

Post-doctoral grants outbound awards and site

120000.00 Other income 120000.00

establishment awards

Financial center subsidy 240376.00 Other income 240376.00

Innovation-driven rewards 30000.00 Other income 30000.00