In 2022, Midea mainly adhered to the business principles of “Generate Income & Drive Profit”. In keeping with its strategy of “refocusing” on and “returning” to the basics, Midea worked hard to improve its profitability, achieve robust operations, and make new strides in terms of its strategic layout. Midea rose to No. 245 on the 2022 Fortune Global 500 list and No. 36 on the 2022 Brand Finance Tech 100 list. The Company was also selected as one of the ESG case companies with practical reference significance according to the “ESG Inspiring Cases” results released by Forbes China. By early 2023, five of Midea’s factories had been included in the “Global Lighthouse Network” initiated by the World Economic Forum, demonstrating Midea’s leading position in intelligent manufacturing and digital development among manufacturers worldwide.

In this bustling age of uncertainty, industries have undergone tremendous changes. Given this context, no business can maintain rapid growth forever, because the nature of the world is that industries, the economy, technologies, and even globalization itself are cyclical. Nevertheless, a few companies can still achieve sustained growth and earnings and create value. How to build Midea into one of those “few companies”? This is one of the core issues that must be resolved. To this end, we must bid farewell to the past and The 2022 Annual Report of Midea Group Co., Ltd. 3 push ahead with transformation and innovation going forward in order to build the Company’s strengths for whatever the next round of competition may bring. In order to make this happen, this is the only option we can choose now.

We need to first experience life's ups and downs before we can understand the simple truth. As the writer Albert Camus once said, “Whenever it seemed to me that I felt a deep sense of the world, it was its simplicity that always moved me.” Successful businesses understand the basic principles of corporate organization, while decaying businesses all have distinct causes that are responsible for this decay. The most basic principle, law, and truth are what keeps driving the world. Therefore, when running a business, we must return to the basics and continue to uphold these basic principles. More specifically, we must maintain our cash flows and product capabilities and continue to accumulate technology; this is the law and orientation to which we must adhere. Additionally, the secret to the success of any company lies in such basic principles as “corporate culture and values”, “corporate governance structure”, “entrepreneurship”, “a value-creating business model”, “being capable of persistent learning and introspection”, and “being capable of creating a second growth curve”. To evolve into a great enterprise that stands out from our peers, we must not only possess these basic principles, but also hold fast to them.

When facing this era of tremendous changes, long-term development is no longer an option, but an intrinsic competence that must be built up on an ongoing basis. Strategies tell us what we should do to ensure that we have a tomorrow; they do not necessarily tell us what we will actually end up doing in the future. Therefore, Midea must be cautiously open-minded, always be prepared for the worst-case scenario, and stay alert to potential challenges. A coordinated emphasis will be placed on breakthroughs in our ToC and ToB businesses. We will strive to boost the strength of our products and core technologies in our ToC business while stabilizing and improving our profitability to provide strategic support for the transformation of our ToB business. Additionally, the transformation of Midea from a Chinese business into an international one will be advanced by expediting the layout and growth of the Company’s overseas business, developing the capabilities of The 2022 Annual Report of Midea Group Co., Ltd. 4 global industrial chains, and continually enhancing the impact of our brands. We will also extend Midea’s advantages in efficiency to products, technologies, and innovation, and continue to consolidate and develop Midea’s capabilities over the long term in terms of sustainable development.

Midea’s business principle for 2023 is “Stabilize Profit & Drive Growth”. “Drive Profit” means going outside our comfort zone and rising to meet the challenge of unknowns and uncertainties. This requires Midea to keep pace with the times and dare to take risks that arise from the exploration of new markets, product categories, mechanisms, and growth opportunities, and seek out new paths, new growth drivers, and new methodologies. “Drive Profit” does not necessarily refer to organic or natural growth. It is both an option and a commitment, one that urges Midea to seek out a new intrinsic motivation: Entrepreneurship. To this end, Midea must curb any tendency towards institutionalization, fully delegate power, and find and inspire talent with the elements of entrepreneurship. By doing so, the density of Midea’s entrepreneurship will take shape and become stronger. Concurrently, internal entrepreneurial groups can be formed, and that will help Midea achieve even more breakthroughs. During the three decades starting from the establishment of Midea through all the hardships it endured and overcame to achieve its listing, Midea has evolved into a great company that engages in more than just one product, one market, or one industry. Behind this significant progress lies the power of perseverance and conviction. Midea’s most invaluable assets include sharing the fruits and gains of its efforts, sharing a sense of achievement and impact, and sharing dreams and visions, as well as its advanced governance mechanism, its future-proof values, and its entrepreneurial spirit.

As time goes by, some businesses decay while others prosper. No matter what, there are always businesses that remain unshakable and become stronger, even as many of their peers fall. Likewise, even as some existing industries decay, new ones will emerge. Despite the many hardships and challenges, the current era is still the best-ever in terms of the number of opportunities. “Ever Onwards, Look to the Stars.” We cannot speak of the The 2022 Annual Report of Midea Group Co., Ltd. 5 ocean to a frog that lives in a well, as it is a creature of a narrower sphere. We also cannot speak of ice to a summer insect, as it is a creature of a single season. What we can do, however, is stay calm and composed, even when confronted with all the changes and challenges of this era. We can also push ahead with Midea’s growth, upward and onward, by stabilizing our principal business, creating a second growth curve, and fearlessly going global to achieve our “Global Impact”.

Ever Onwards, I hope I possess the courage that you do! As always, we look forward to sharing and witnessing Midea’s transformation and its every breakthrough with all of you.

Board of Directors, Midea Group April 2023