SecProbe.io

Mail Stop 4720
February 5, 2018

Yue (Justin) Zhang, Chief Executive Officer  and Chairman
X Financial
7-8F, Block A, Aerospace Science and Technology Plaza
No. 168, Haide Third Avenue, Nanshan District
Shenzhen, 518067, the People's Republic of China

Re: X Financial
Draft Registration Statement on Form F -1
Submitted January 8, 2018
  CIK No. 0001725033

Dear Mr. Zhang :

We have reviewed your draft registration statement  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 this letter by providing the requested information and either submitting
an amended draft registration statement or  publicly  filing your registration statement on
EDGAR.  If you do not believe our comments apply to your facts and circumstances or do not
believe an amendment is appropriate, please tell us why in your response.

After reviewing the information you provide in response to these  comments  and your
amende d draft registration statement or filed registration statement,  we may have  additional
comments.

General

1. Please supplementally provide us with copies of all written communications, as defined
in Rule 405 under the Securities Act, that you , or anyone authorized to do so on your
behalf , present to potential investors in reliance on Section 5(d) of the Securities Act,
whether or not they retain copies of the communications .

2. Based on your current disclosure, it appears that recent PRC regula tions, such as Circular
141, Notice on Rectification of Cash Loan Business , issued on December 1, 2017 and
Circular 57, Notice on the Special Rectification and Inspection of Risk of Online Lending
Intermediaries , may have a material effect on your business  model .  Please expand your
Summary, Risk Factor and Business disclosure to fully treat the implications of this
circular and any other recent PRC regulations directed to P2P lenders, as applicable, on

Yue (Justin) Zhang
X Financial
February 5, 2018
Page  2

 your product offerings, funding sources, business prac tices, strategic partnerships and
other relevant loan, investment, intermediation, servicing and collection attributes .
Please identify the specific activities, and their respective amounts, affected and describe
specific steps you have taken or plan to t ake in response to the regulations .

Prospectus Summary

Overview, page 1

3. Please enhance the key operating data of your business to include the following metrics
for the periods presented:

 Number of repeat borrowers;

 Number of active repeat investor s,

 Number and value of loans by product as described on page 126, including
average loan amount; and

 New borrower acquisition costs.

4. We note that the Oliver Wyman Report determined that you were a “leading technology -
driven personal finance company in C hina focused on serving China’s underserved prime
borrowers and mass affluent investors.”  Please describe the “mass affluent investors”
category and disclose the number of other marketplaces against which you were
measured .  We also note your statement th at your platform is “one of the very few
platforms able to enhance investors' confidence in the investment products with insurance
protection.”  Please also disclose the number of other marketplaces against which you
compared yourself for determining that there were “very few” marketplaces that offer
insurance .  In this regard, please tell us how you are defining “insurance protection.”

5. Please revise to describe the types and ranges of fees that you charge, describing the
services provided and the proportion of your revenues attributable to each over recent
periods .  In addition, please disclose the APR range on a product by product basis for
your major loan products .

Our Industry, page 3

6. You state that the Chinese credit card balance transfer l oan market emerged due to very
different reasons than in the United States and the market in China emerged as to credit
card holders not having sufficient credit lines from issuing banks, and need to repay in
advance to free up their credit lines .  Clarify  if the credit lines from issuing banks are paid
off as a requirement for obtaining a loan through your platform or if the credit card
transfer loan is an additional credit facility for the borrower .

Yue (Justin) Zhang
X Financial
February 5, 2018
Page  3

Risk Factors

Risks Relating to Our Business and Indu stry

If we are unable to maintain or increase the amount of loans we facilitate or if we are unable to
retain existing bor rowers or attract new borrowers  . . . , page 21

7. Please expand this risk factor to explicitly address and identify, as applicable, whether
any of your products will be prohibited under recent PRC guidelines.

Our platform requires adequate funding from investors and access to adequate lending capital on
terms acceptable to us cannot be assured, page 21

8. Please revise your disclosure to clarif y which third party entities currently providing
credit enhancement services in relation to your products that lack the qualifications to
provide those services .  Please also identify the total amount, and percentage, of loans
you facilitate that are subje ct to credit enhancement services by these entities.

Delinquency Rate by Balance, page 85

9. We note that your delinquency rate is calculated excluding interest and only includes
outstanding principal .  We also note your guarantee agreement with ZhongAn includes
both principal and interest .  Please revise to present your delinquency rate including
accrued and outstanding interest .

10. Please enhance your disclosure to discuss trends in delinquency rates in th e periods
presented .  On this topic, we noted that delinquency rates on loans 31 -90 days past due as
a percentage of total loans increased from 0.30% to 0.51% from December 31, 2016 to
June 30, 2017 and delinquency rates on loans 91 -180 days past due as a percentage of
total loans increased from 0.21% to 0.41% from December 31, 2016 to June 30, 2017 .
Please discuss in sufficient detail the drivers of these trends in the periods presented.

Delinquency Rate by Vintage of Xiaoying Card Loans, page 86

11. Enhance your disclosure to explain the reason for the steady increase in delinquency rate
from 0% in March 2017 to 6+% in November 2017 .

Results of Operations, page 87

12. Please enhance your discussion to address the underlying reason for material change s in
results, period -over-period .  For example, explain the reason for the increase in Post -
origination service fee from US$1.2 million in 2016 to US$3.2 million for the six months

Yue (Justin) Zhang
X Financial
February 5, 2018
Page  4

 ended June 30, 2017 .  Consider providing enhanced disaggregating operating metrics
such as loan volume to support your discussion .

Operating Expenses, page 90

13. Please break out origination and servicing expenses by type (i.e ., credit assessment,
customer acquisition, etc.) and discuss any material changes period over period.

14. Please break out general and administrative expenses by type (i.e ., salaries and benefits,
research and development, etc.) and discuss any material changes period over period.

Non-GAAP Measures, page 91

15. We note your presentation of Adjusted net (loss)/in come adding back share -based
compensation expenses .  Please confirm that the share -based compensation expenses
added back to get to the Non -GAAP financial measure Adjusted net (loss)/income are net
of taxes and update your disclosure accordingly.

Liquidit y and Capital Resources, page 95

16. Please enhance your discussions to address the trends in your cash flows, including the
impact of anticipated future growth and how you expect to fund future operations .
Additionally, enhance your financing activities discussion to separately describe internal
and external sources of liquidity, including any material unused sources of liquid assets .
Refer to Regulation S -K, Item 30 3(a)(1).

17. We note your disclosure on page 95 that your, “primary sources of liquidity hav e been
cash provided by  . . . funds provided by our shareholders.”  We note disclosures
throughout the document, including in Related Party Transactions on page 170, of a
single shareholder (Mr . Tang) providing financing cash flows .  Please clarify in your next
amendment if you receive related party loans from any other shareholders.

18. We note your disclosure on page 95 that your primary source of liquidity during the six
months ended June 30, 2017 was from funds provided by your shareholders as a result of
the negative operating cash flow generated .  Please discuss further in your Liquidity
section the ability and willingness of the shareholder(s) to continue to finance X
Financial’s negative cash flows from operations .  Please also consider adding a risk
factor, or revise your risk factor on page 30, to discuss your reliance on a single
shareholder or shareholders to finance current operations .  Please factor into your
disclosure in the Liquidity section and risk factors the potential impact of the legal
proceedings related to Mr . Tang.

19. We note your disclosure on pages 95 and 96 concerning the loan to Zi Jin Zhong Hao
(Tianjin) Investment Co., Ltd (ZJZH), an entity controlled by a shareholder (Mr . Tang),

Yue (Justin) Zhang
X Financial
February 5, 2018
Page  5

 of RMB 217.0 million .  Please expand your disclosures  in the Investing Activities section
of your Liquidity discussion to address the following related to this loan:

 The business purpose of the loan;

 Why the loan was interest -free;

 Any credit analysis performed before extending a loan of this size given y our
negative operating cash flow generated;

 Any commitments or plans to extend loans to ZJZH or any other entities
controlled by Mr . Tang or other shareholder in the future; and

 Any loan concentrations as a result of the loan.

Cash Flows and Working Ca pital, page 96

20. Please revise your disclosure of cash provided  by operating activities of RMB 421,760
and US$ 62,213 .  It appears you had cash used in operating activities of (RMB 421,760)
and (US$ 62,213) as presented in your unaudited interim consolidate d statement of cash
flows on page F -47.

Intermediary Model, page 101

21. You state that you ceased the online intermediary model in April  2017 .  Enhance your
discussion to explain the reasons for the cessation and if you ceased all operations related
to the intermediary model or just certain operations related to the intermediary model .
We noted that you earned 76% of total net revenues in 2016 from loan facilitation service
related to the intermediary model .

Critical Accounting Policies, Judgments and Es timates

Revenue Recognition

Incentives to Investors, page 102

22. Please expand your disclosure in your next amendment to define “red packets.”

23. We note that you provide incentives to investors in a variety of forms that either reduces
the amount of investm ent required to purchase financial products or entitles them to
receive higher interest rates in products they purchase and that such incentives are
accounted for as a reduction of revenue .  Please disclose incentives provided to investors
for the periods presented .

Yue (Justin) Zhang
X Financial
February 5, 2018
Page  6

 Industry Overview

Online Consumer Finance and Investment Platforms are Filling the Gap, page 110

24. For greater balance and context, please revise to discuss recent developments in the peer -
to-peer lending industry in China, such as recent len ding platform failures, over -
leveraging, issues related to the industries’ fast growth in relation to regulation and any
resulting impact on China’s online or mobile consumer finance marketplace industry in
general, including the regulatory and political c limate and response .

High -Credit -Limit Unsecured Loan Market, page 113

25. You state that the borrowers of property -owner loans will use their property ownership
certificates as the proof of credit verification to obtain loans without providing properties
as collateral .  Clarify if property -owner loans are the same as Xiaoying Housing Loans
and why for property -owner loans, properties are not provided as collateral whereas
Xiaoying Housing Loans are secured by properties .

Business

Overview, page 117

26. To the extent that you experience seasonality in your business, please discuss
accordingly .  Refer to Item 4.B.3 of Form 20 -F.

Our Borrowers and Loan Products, page 124

27. We note that you define your customers as “prime borrowers . . . .”  Please clarify if  the
definition that you use for “prime borrowers” is unique to your business or an industry
standard definition .  In addition, please disclose the percentage of your active borrowers
that are categorized as “prime.”  To the extent there are other classifi cations of borrowers
that comprise your active borrowers, please disclose as such.

28. Disclose how you calculated 1,200,914 cumulative borrowers .

29. You state that you price loans based on total borrowing costs, which comprises (i)
nominal interest rates tha t borrowers pay investors, (ii) the service fee that you charge,
payable by borrowers, for your services, including your guarantee service, if applicable;
and (3) the insurance premium paid to ZhongAn .  Tell us and clarify if there are
circumstances in whi ch you would not provide guarantee services .

30. Enhance your discussions to clarify the terms of your loan products, including when
principal payments are due, how interest is accrued and whether a borrower may have
more than one loan outstanding at any on e time.

Yue (Justin) Zhang
X Financial
February 5, 2018
Page  7

31. Please also disclose the range of annual interest rates for each of your loan products
facilitated on your platform.

Transaction Process, page 127

32. Enhance your discussion; Stage 3: Credit Assessment, to clarify how you consider
updated borrower  credit information, including if and how often you update a borrower’s
credit grade .

Borrower Acquisition and Retention, page 130

33. Tell us and disclose whether you pay any fees or offer any incentive rewards to
borrowers directly .  If material, please tell us how you account for incentive rewards to
borrowers.

Loan Facilitation Services to Other Platforms, page 131

34. We note that you “may also require” the selected financial technology company with
which you cooperate to pay you a deposit.  Please expan d your disclosure to clarify when
a deposit is required and how the amount of the deposit is calculated .

Investment Products and Services

Loan Products, page 132

35. Please discuss the features driving variation within the range of expected annualized rate
of returns.

Other Products, page 133

36. In your discussion of Other Products, you identify money market and insurance products .
On page F -61, you disclose that during the six months ended June 30, 2017, you
recognized an expense of RMB 73,492,088 or US$ 10,840,660 for contingent liability
concerning certain loans offered as part of “Other Products” in which the estimated
default amount was in excess of the stand -ready liability provided .  Tell us and clarify the
types of products included in Other Product s, excluding money market and insurance
products, that gave rise to the contingent liability, and if guarantees are provided, your
accounting policy .

37. We note your disclosure that investors are able to “invest in a wide range of products,
such as loans . . .  facilitated on [your] platform, money market products and insurance
products.”  Please expand your disclosure to describe your money market products in
more detail .  For example, please identify the types of instruments offered .  In addition,

Yue (Justin) Zhang
X Financial
February 5, 2018
Page  8

 in the Regulation section of your prospectus, please explicitly address the rules