Name
Global FinTech Guide
Country _ Name
China
SectionTitle
Crowdfunding / crowdinvesting / crowdlending
Body
FinTechs belonging to this category operate crowdfunding, crowdinvesting and crowdlending platforms on which money is raised to invest in various projects, mainly start-up companies and real estate projects.

Crowdfunding is not a defined financial service, but generally used to describe donation-based crowdfunding (the investor donates the money to the project), reward-based crowdfunding (the investor receives an often symbolic consideration for his investment), equity-based crowdfunding (crowdinvesting: the investor participates in the profits of the financed project or acquires shares or debt instruments) or lending-based crowdfunding (crowdlending: the investor is reimbursed at the end of the project with or without interest).

Introduction

Attitude of the country towards crowdfunding, crowdinvesting and crowdlending platforms

From the perspective of public interest, crowdfunding was very popular in China between 2014 and 2016. However, with the occurrence of related negative events, the authorities started to issue warnings to the public about the risks of illegal fund-raising under the cover of the crowdfunding. Nowadays, people are no longer scramble for crowdfunding. 

Legal affairs

Obligations and requirements to provide crowdfunding, crowdinvesting and crowdlending platforms described above

  • Donation-based crowdfunding: In China, donation-based crowdfunding is usually charity crowdfunding, including that: (i) the donation-based crowdfunding platform is a charitable organisation itself; or (ii) the donation-based crowdfunding platform is not a charitable organisation itself, but it cooperates with qualified charitable organisation and release fundraising information as an information platform. According to the Charity Law, the charitable organisation is required to only release the information in relation to public solicitation for charity on the unified/designated charitable information platform of the civil affairs department of the State Council and its own website. Therefore, FinTechs operating the donation-based crowdfunding shall apply and try to be selected as the Charity Organisation Internet Fundraising Information Platform.
  • Reward-based crowdfunding: Reward-based crowdfunding is seen as a form of pre-order or customization in China. This type of crowdfunding is very similar to online shopping: consumers pay a price to a merchant or producer and then get tangible or intangible product. For such crowdfunding, there is also no clear regulatory approach and no license requirement. The most well-known reward-based crowdfunding platforms in China are under some online shopping platforms – i.e. JD, Taobao and Suning.
  • Equity-based crowdfunding: As the complement to multi-level capital markets, the equity-based crowdfunding was popular in 2014 and 2015. However, along with the risks of illegal fund-raising, 15 government departments jointly issued the Implementation Plan for the Special Rectification of Equity-based crowdfunding Risks in 2016, prohibiting a series of illegal activities, such as the illegally issuance of securities in the platform without proper approval by CSRC. The said document resulted in the rapid reduction of equity-based crowdfunding companies. In May 2021, the State Council further emphasised that the names/business scopes of the enterprises shall not contain words or contents such as “equity-based crowdfunding” unless otherwise approved by the authorities. It shows the regulatory attitude, that the authorities are still cautious about the risks of equity-based crowdfunding. As of today, CSRC has never officially approved the establishment of an equity-based crowded funding platform. 
  • Lending-based crowdfunding: It is generally considered that crowdlending can be regarded as loan service. Please refer to our reply to section g. for details.

    • Additional comments regarding the legal situation for crowdfunding, crowdinvesting and crowdlending platforms or what FinTech’s must be aware of in this business area

    Currently, Chinese authorities have not issued any laws, regulations or policy documents specifically targeting crowdfunding. Subject to the limited regulation, FinTechs in this area shall be very cautious to carry out their business in China, as it might be easily deemed as “illegal fund-raising activities” and adversely affected by the tightening of the policies. 

    Economic conditions

    Market size for crowdfunding, crowdinvesting and crowdlending platforms and biggest companies in this business area

    There are no accurate official statistics on the market size of crowdfunding platforms. 

    The most well-known donation-based crowdfunding platforms are Waterdrop, Aixin Chou, Qingsong Chou etc. The most famous reward-based crowdfunding platforms are Taobao, JD and Suning. The equity-based crowdfunding platforms have almost disappeared now.

    Additional comments regarding the economic situation for crowdfunding, crowdinvesting and crowdlending platforms or what FinTech’s must be aware of in this business area

    The development and prosperity of the crowdfunding is closely related to the regulatory attitudes of the Chinese government. Due to the increasing concerns about the illegal fund-raising in recent years, the crowdfunding platforms’ business model has been very popular in China. 

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