Crowdfunding is a growing phenomenon that in less than a decade is reaching a global dimension. It is thus no surprise to find out that this phenomenon is promisingly developing in China too: the World bank estimated that the Chinese crowdfunding industry will be worth approximately $ 50 billion by 2025.
The situation did not go unnoticed by the Chinese Securities Regulatory Commission (CSRC) which, last May, during a press conference, announced that after having studied the phenomenon through local surveys and research and having observed international cases, it was ready to start drafting rules for online equity investing in China.
And so it did. Last December, CSRC released a draft of private equity crowdfunding rules, that is online equity investments limited to wealthy individuals. Public equity crowdfunding (i.e. offerings to the general public) remained instead still unregulated. Nevertheless, CSRC is likely to release in the future guidelines for the latter form of crowdfunding, as part of its effort to facilitate capital formation for local SMEs.
The drafted rules for private equity crowdfunding mainly contained criteria according to which an investor can qualify as eligible to invest through equity crowdfunding portals. Furthermore, the maximum number of investors per offering is set up to 200 as indicated by an existing law which also apply to securities crowdfunding. For many, this cap is too low and loopholes around it, such as creating an investment fund, have already been experimented.
In the last months, several players have entered the online equity investing space. Interestingly enough, it looks like this new market has an appeal particularly on Internet industry’s large incumbents, such as Alibaba and JD.com, a leading online retailer, both of which launched an operating portal recently. Although we see internationally more and more interest from the corporate world in the crowdfunding market, it is worth to observe that in China large corporations were among the first to jump on this opportunity. This begs the questions: would large players push the market’s development and education faster ahead compared to other international realities and where could smaller players carve their niche to secure their survival?
Bailey, J. (2014). Equity Crowdfunding in China. BOP Consulting blog
China Securities Regulatory Commission (2014). Press Conference on May 30, 2014
China Securities Regulatory Commission (2014). Press Conference on December 26, 2014
Xiang, T. (2015). China’s Crowdfunding Market as of 2014. Technode
Image credit to: Adam.
About the author - Irene Tordera
Born and raised in Milan, Italy, Irene is an International Business graduate, with a strong interest for innovative ideas that can simplify our lives.
During her studies, she co-founded an online community for sportspeople and worked in marketing positions at Ogilvy & Mather Advertising and at the European Business Angel Network, in Brussels. She is a passionate blogger about crowdfunding and the startup ecosystem.