 | Lately we have mostly heard talking about China in relation to the booming market of peer to peer lending. Little instead has been said on equity crowdfunding, at least since December 2014 when the Chinese Securities Regulatory Commission (CSRC) released a draft of private equity crowdfunding rules. However at the end of September, online investing in equity capital came up on the news where the government has declared its intention of doing more to promote the financing tool in China. |
The main reason behind the Chinese announced support to the sector of online investing is to stimulate entrepreneurship and provide a complementary way to access capital for SMEs. Like in the rest of the world, SME’s are facing more and more difficulties in accessing credit from banks and local authorities.
While the document released by the government on the topic includes actions to cut red tape for new companies entering the online investing sector - like taxation incentives -, it does only generally mention investor protection, without providing much details on specific actions to limit the risks associated with digital investing. It has been,however, reported that the Chinese Securities Regulatory Commission authority will soon start an inspection tour of the operating equity crowdfunding portals to address risks from illegal activities.
While this is certainly a first step on the authority’s side to support the creation of a local online investing sector providing capital to local SMEs, the experience of the regional peer-to-peer lending market suggests that stronger regulations and requirements are needed to make sure the sector grows healthy and sustainable and that investors are protected as much as possible from fraudulent behaviors and other risks. When the drafted regulations for equity crowdfunding enter into act, it will certainly be a big step forward, not only for the Chinese online investing sector, but for the entire digital investing market.
References
China says to promote equity crowdfunding to support startups. Reuters (2015)
photo credit to: Luke Deer, frontiersoffinanceinchina.com
While the document released by the government on the topic includes actions to cut red tape for new companies entering the online investing sector - like taxation incentives -, it does only generally mention investor protection, without providing much details on specific actions to limit the risks associated with digital investing. It has been,however, reported that the Chinese Securities Regulatory Commission authority will soon start an inspection tour of the operating equity crowdfunding portals to address risks from illegal activities.
While this is certainly a first step on the authority’s side to support the creation of a local online investing sector providing capital to local SMEs, the experience of the regional peer-to-peer lending market suggests that stronger regulations and requirements are needed to make sure the sector grows healthy and sustainable and that investors are protected as much as possible from fraudulent behaviors and other risks. When the drafted regulations for equity crowdfunding enter into act, it will certainly be a big step forward, not only for the Chinese online investing sector, but for the entire digital investing market.
References
China says to promote equity crowdfunding to support startups. Reuters (2015)
photo credit to: Luke Deer, frontiersoffinanceinchina.com
 | 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. |
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