SecProbe.io

United States securities and exchange commission logo
May 22, 2023
Yu Gong
Chief Executive Officer
iQIYI, Inc.
No. 21, North Road of Workers' Stadium
Chaoyang District, Beijing 100027
People’s Republic of China
Re:iQIYI, Inc.
Form 20-F for Fiscal Year Ended December 31, 2022
Filed March 22, 2023
Form 6-K Filed February 22, 2023
File No. 1-38431
Dear Yu Gong:
            We have reviewed your filings and have the following comments.  In some of our
comments, we may ask you to provide us with information so we may better understand your
disclosure.
            Please respond to these comments within ten business days by providing the requested
information or advise us as soon as possible when you will respond.  If you do not believe our
comments apply to your facts and circumstances, please tell us why in your response.
            After reviewing your response to these comments, we may have additional comments.
Form 20-F for Fiscal Year Ended December 31, 2022
Introduction, page 1
1.Please revise to include a definition of "China" and the "PRC."  If your definitions of
"China" and the "PRC" exclude the special administrative regions of Hong Kong and
Macau, please additionally clarify that the legal and operational risks associated with
operating in China also apply to operations in Hong Kong and Macau.  This
clarification may appear in the definition itself or in an appropriate discussion of legal and
operational risks.
Item 3. Key Information, page 3
2.We note your disclosure on pages 4 and 5 regarding the legal and operational risks
associated with being based in or having the majority of your operations in China.  Your

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disclosure should make clear that these risks could result in a material change in your
operations and/or the value of your securities or could significantly limit or completely
hinder your ability to offer or continue to offer securities to investors and cause the value
of such securities to significantly decline or be worthless.  Please also disclose the location
of your auditor’s headquarters and discuss how the Consolidated Appropriations Act
in 2023, and related regulations, will affect your company.  Disclose that trading in your
securities may be prohibited under the Holding Foreign Companies Accountable Act, as
amended by the Consolidated Appropriations Act, 2023, and related regulations if the
PCAOB determines that it cannot inspect or investigate completely your auditor for a
period of two consecutive years, and that as a result an exchange may determine to delist
your securities.
3.It appears that you have operations in, and, have at least one director or officer located in,
Hong Kong.  Please discuss here the applicable laws and regulations in Hong Kong as
well as the related risks and consequences accordingly.
4.Please refer to the section captioned "Cash Flows through Our Organization."  We note
your disclosure that although the VIEs received "nil, nil and nil as loans" for the years
ended December 31, 2020, 2021 and 2022, the VIEs also appear to have repaid "RMB90.5
million, nil and nil" for the years ended December 31, 2020, 2021 and 2022,
respectively.  Please address this discrepancy and clarify your intentions to settle any
amounts owed under the VIE agreements. Additionally, for the transfers made to the
Cayman Islands holding company, please state which entity made the transfer and explain
the tax consequences. Describe any restrictions on foreign exchange and your ability to
transfer cash between entities, across borders, and to U.S. investors. Describe any
restrictions and limitations on your ability to distribute earnings from the company,
including your subsidiaries and/or the consolidated VIEs, to the parent company and U.S.
investors as well as the ability to settle amounts owed under the VIE agreements. Provide
a cross-reference to your discussion of this issue in your summary risk factors and risk
factors sections.
5.Please amend your disclosure here, in the summary risk factors, and risk factors sections
to state that, to the extent cash or assets in the business is in the PRC/Hong Kong or a
PRC/Hong Kong entity, the funds or assets may not be available to fund operations or for
other use outside of the PRC/Hong Kong due to interventions in or the imposition of
restrictions and limitations on the ability of you, your subsidiaries, or the consolidated
VIEs by the PRC government to transfer cash or assets. In your Item 3 disclosure, provide
cross-references to the discussions in the summary risk factors and risk factors sections.
6.Please refer to the section captioned "Cash Flows through Our Organization."  To the
extent you have cash management policies that dictate how funds are transferred between
you, your subsidiaries, the consolidated VIEs or investors, summarize the policies here,
and disclose the source of such policies (e.g., whether they are contractual in nature,
pursuant to regulations, etc.); alternatively, state here that you have no such cash
management policies that dictate how funds are transferred. Please also include this

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iQIYI, Inc.
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disclosure in Item 5. Operating and Financial Review and Prospects.
7.Please revise to provide here, as you do on page 90, disclosure that the company uses a
structure that involves VIEs based in China and what that entails, along with a diagram of
the company’s corporate structure, identifying the person or entity that owns the equity in
each depicted entity and using dashed lines without arrows to denote relationships with
the VIEs.  Please also revise your diagram of the company's corporate structure on page
90 and use dashed lines without arrows to denote relationships with the VIEs. Describe in
greater detail all contracts and arrangements through which you claim to have economic
rights and exercise control that results in consolidation of the VIEs operations and
financial results into your financial statements.  Identify clearly the entity in which
stockholders hold an interest and the entity(ies) in which the company’s operations are
conducted.  Describe the relevant contractual agreements between the entities and how
this type of corporate structure may affect investors and the value of their investment,
including how and why the contractual arrangements may be less effective than direct
ownership and that the company may incur substantial costs to enforce the terms of the
arrangements. Disclose the uncertainties regarding the status of the rights of the Cayman
Islands holding company with respect to its contractual arrangements with the VIEs, its
founders and owners, and the challenges the company may face enforcing these
contractual agreements due to legal uncertainties and jurisdictional limits.
8.We note the following disclosure:

•"Our wholly-owned subsidiaries, Beijing QIYI Century and iQIYI New Media, have
entered into contractual arrangements with the variable interest entities and their
respective shareholders, and such contractual arrangements enable us to impose
control over, receive the economic benefits of, and have an exclusive option to
purchase all or part of the equity interest and assets in the variable interest entities
when and to the extent permitted by PRC law."

•"We have control over and are the primary beneficiary of Beijing iQIYI, Shanghai
iQIYI and Shanghai Zhong Yuan through a series of contractual arrangements."

•"We have control and are the primary beneficiary of iQIYI Pictures and Intelligent
Entertainment through a series of contractual arrangements."

•"Such contractual arrangements enable us to impose control over activities that most
significantly affect the economic performance of the variable interest entities, receive
economic benefits of and absorb losses that potentially could be significant to the
variable interest entities, and have an exclusive option to purchase all or part of the
equity interest and assets in the variable interest entities when and to the extent
permitted by PRC law. Because of these contractual arrangements, we are the
primary beneficiary of the variable interest entities in mainland China and hence
consolidate their financial results as our variable interest entities."

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However, neither the investors in the holding company nor the holding company itself
have an equity ownership in, direct foreign investment in, or control of, through such
ownership or investment, the VIEs. Accordingly, please refrain from implying that the
contractual agreements are equivalent to equity ownership in the business of the VIEs.
Any references to control or benefits that accrue to you because of the VIEs should be
limited to a clear description of the conditions you have satisfied for consolidation of the
VIEs under U.S. GAAP. Additionally, your disclosure should clarify that you are the
primary beneficiary of the VIEs for accounting purposes.
9.With respect to the Summary of Risk Factors that disclose the risks related to your
corporate structure and being based in or having the majority of your operations in China,
please revise your disclosure to provide specific cross-references (title and page) to the
more detailed discussion of these risks in the prospectus.
10.Please refer to the sections captioned "Permissions Required from the PRC Authorities for
Our Operations" and "Permissions Required from the PRC Authorities for Overseas
Financing Activities." Please disclose each permission or approval that you, your
subsidiaries, or the VIEs are required to obtain from Chinese authorities to operate your
business and to offer the securities being registered to foreign investors. State whether
you, your subsidiaries, or VIEs are covered by permissions requirements from the China
Securities Regulatory Commission (CSRC), Cyberspace Administration of China (CAC)
or any other governmental agency that is required to approve the VIEs' operations, and
state affirmatively whether you have received all requisite permissions or approvals and
whether any permissions or approvals have been denied. Please also describe the
consequences to you and your investors if you, your subsidiaries, or the VIEs: (i) do not
receive or maintain such permissions or approvals, (ii) inadvertently conclude that such
permissions or approvals are not required, or (iii) applicable laws, regulations, or
interpretations change and you are required to obtain such permissions or approvals in the
future. With respect to the disclosure in these sections, we note that you do not appear to
have relied upon an opinion of counsel with respect to your implied conclusions that you
do not need any additional permissions and approvals to operate your business and to
offer securities to investors. If true, state as much and explain why such an opinion was
not obtained.
11.Please refer to the section captioned "Permissions Required from the PRC Authorities for
Our Operations."  We note your disclosure that you "have obtained the requisite licenses
and permits from the PRC government authorities that are material" for your
operations.  The disclosure here should not be qualified by materiality. Please make
appropriate revisions to your disclosure.
12.Please refer to the section captioned "Financial Information Related to the Variable
Interest Entities."  Please revise your condensed consolidating schedule to separately
present your WFOE, Beijing QIYI Century Science & Technology Co., Ltd, in the
condensed consolidating schedule.  The schedule should disaggregate the parent company,
the VIEs and its consolidated subsidiaries, the WFOEs that are the primary beneficiary of

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the VIEs, and an aggregation of other entities that are consolidated. The objective of this
disclosure is to allow an investor to evaluate the nature of assets held by, and the
operations of, entities apart from the VIEs, as well as the nature and amounts associated
with intercompany transactions.  Additionally, please revise your tabular disclosure on
pages 11 and 13 to present major line items, such as revenue and cost of goods/services,
and subtotals and disaggregated intercompany amounts, such as separate line items for
intercompany receivables and investment in subsidiary.
Risk Factors
Our business is subject to complex and evolving Chinese and international laws and regulations
regarding cybersecurity . . ., page 19
13.Please state to what extent you believe that you are compliant with the regulations or
policies that have been issued by the CAC to date.
Our ADSs may be prohibited from trading in the United States under the HFCAA in the future . .
., page 45
14.Please expand your disclosure here to disclose that the Holding Foreign Companies
Accountable Act, as amended by the Consolidated Appropriations Act, 2023, decreases
the number of consecutive “non-inspection years” from three years to two years, and
thus, reduces the time before your securities may be prohibited from trading or delisted.
Additionally, we note that you have listed as a Commission-Identified Issuer. Your
revised disclosure should explain why you were identified and provide any additional
context necessary for investors to understand the meaning and significance to your
operations of this determination. Update your disclosure to describe the potential
consequences to you if the PRC adopts positions at any time in the future that would
prevent the PCAOB from continuing that it is unable to inspect or investigate completely
accounting firms headquartered in mainland China or Hong Kong.
Item 16I. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections, page 147
15.We note your statement that you reviewed your register of members and public filings
made by your shareholders in connection with your required submission under paragraph
(a). Please supplementally describe any additional materials that were reviewed and tell us
whether you relied upon any legal opinions or third party certifications such as affidavits
as the basis for your submission. In your response, please provide a similarly detailed
discussion of the materials reviewed and legal opinions or third party certifications relied
upon in connection with the required disclosures under paragraphs (b)(2) and (3).
16.We note that your Ex. 8.1 identifies principal subsidiaries in mainland China, Hong Kong,
and Singapore. Please note that 16I(b) requires that you provide disclosures for yourself
and your consolidated foreign operating entities, including variable interest entities or
similar structures.

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•With respect to (b)(2), please supplementally clarify the jurisdictions in which your
material consolidated foreign operating entities are organized or incorporated and
confirm, if true, that you have disclosed the percentage of your shares or the shares of
your consolidated operating entities owned by governmental entities in each foreign
jurisdiction in which you have consolidated operating entities in your supplemental
response. Alternatively, please provide this information in your supplemental
response.

•With respect to (b)(3), in your response please confirm that you have addressed all
consolidated operating entities in mainland China, including your subsidiaries, or
provide the information in your supplemental response.
17.In order to clarify the scope of your review, please supplementally describe the steps you
have taken to confirm that none