Financial lease refers to a lease that essentially transfers all risks and rewards related to asset ownership. Its ownership may or may not be transferred in the end. If one or more of the following criteria are met, it shall be recognized as a financial lease:

1) Upon the expiration of the lease term, the ownership of the leased assets is transferred to the lessee.

2) The lessee has the option to purchase the leased assets, and it is expected that the purchase price will be much lower than the fair value of the leased assets when exercising this option, so it can be reasonably determined that the lessee will exercise this option on the lease start date.

3) Even if the ownership of the assets is not transferred, the lease term accounts for most of the service life of the leased assets (usually most of them are interpreted as equal to or greater than 75%).

4) The present value of the lessee's minimum lease payment on the lease start date is almost equivalent to the fair value of the leased assets on the lease start date, and the present value of the lessee's minimum lease payment on the lease start date is almost equivalent to the fair value of the leased assets on the lease start date (almost equivalent to being generally interpreted as equal to or greater than 90%).

5) The leased assets are special in nature, and only the lessee can use them if there are no major changes.

Operating lease refers to other leases except financial lease.

Legal basis: Civil Code of People's Republic of China (PRC).

Article 735 A financial lease contract is a contract in which the lessor purchases the lease item from the seller according to the lessee's choice of the seller and the lease item, provides it to the lessee for use, and the lessee pays the rent.

Article 736 The contents of a financial lease contract generally include the name, quantity, specifications, technical performance, inspection method, lease term, rent composition, payment term, method and currency of the lease item, and the ownership of the lease item at the expiration of the lease term.

The financial lease contract shall be in written form.

Article 737 A financial lease contract concluded by the parties with a virtual lease item is invalid.

Article 738 Where the laws and administrative regulations stipulate that the operation and use of the lease item shall obtain an administrative license, the lessor's failure to obtain an administrative license shall not affect the validity of the financial lease contract.

Article 739 In the sales contract concluded by the lessor according to the lessee's choice of the seller and the lease item, the seller shall deliver the subject matter to the lessee as agreed, and the lessee shall enjoy the rights of the buyer related to the collection of the subject matter.