Role of alternative finance
The Chinese crowdfunding market is the largest in the world. This is not surprising, knowing that China is the second largest economy in the world, it has the largest internet user base and that the Chinese alternative finance market is largely unregulated.
The first crowdfunding platform appeared in China in July 2011, and after 5 years of rapid development, the number of various crowdfunding platforms in China had reached 332 by the end of April 2016. In 2015, RMB 11.424 billion (about $101.69 billion) was successfully raised by crowdfunding platforms in China, an upsurge of 305.1% over RMB 2.82 billion in 2014.
Amongst various kinds of crowdfunding, equity-based crowdfunding is favored by capitals. During 2014-2015, Internet companies, brokerages, insurance groups, equity transaction centres, and equity investment funds have sped up their layout in the equity-based crowdfunding field.
Zhang B. et al (2016).Harnessing Potential: the Asia-Pacific alternative finance benchmarking report. Cambridge Centre for Alternative Finance, March 2016
China’s alternative finance market grew from USD $5.56 billion in 2013 to $101.7 billion in 2015. China delivered over $100 billion in alternative finance, including peer to peer lending and crowdfunding, in 2015. This was more than a 3X jump from 2014 (305%). An astounding number and incredible rate of growth. Yet this entire sector of finance has grown large.
The number of various crowdfunding platforms in China had reached 332 by the end of April 2016.
In 2015, private equity financing raised the most funds which amounted to RMB 27.119 billion, representing 54.79% of the total expected funds.
|Reward and donation-based crowdfunding||
In 2015, rewards-based crowdfunding accounted for 42.24% with RMB 20.904 billion
The CBRC (China Banking Regulatory Commission) has targeted loans-based crowdfunding and its P2P lending structure for stricter regulations, and it is drafting rules to regulate P2P activities.
(source: China Crowdfunding Report, China Impact Fund of Dao Ventures, 2014
|Is there a specific national regulation in place applying to crowdfunding?||
On July 28th, 2015, ten Chinese central regulatory agencies and industry regulators, including the People’s Bank of China (PBOC), the China Banking Regulatory Commission (CBRC), the China Insurance Regulatory Commission (CIRC) and the China Internet Information Technology Office (CIITO) jointly released the Guiding Opinions on Promoting the Healthy Development of Internet Finance (Guiding Opinions). This is the first step towards a more comprehensive regulation issued by the Chinese government in relation to Internet finance.
- Firstly, according to the Guiding Opinions, innovation in relation to Internet finance platforms, products and services will be encouraged to stimulate market vitality.
In the Guiding Opinions, the government sets out general rules (including governmental policy commitments), basic rules and specific preferential measures relating to Internet finance covering Internet payment, online lending, equity crowd funding, Internet fund sales, online insurance services and Internet consumer finance. The Guiding Opinions’ positive attitude towards Internet finance is demonstrated by a variety of supportive policies and rules.
The China Banking Regulatory Commission (“CBRC”) issued the highly anticipated draft rules for online lending on December 28th, 2015:
In recent years, China has witnessed an unprecedented boom in Internet banking and finance covering a wide range of financial services provided over the Internet, such as online money transfer, peer-to-peer (P2P) lending, equity crowd funding and online wealth management.
However, laws and regulations have not kept up with these developments. Even though there has been a huge increase in the number of emerging service providers of Internet financial services and new customers subscribing to Internet financial services on a daily basis, there has been a legal vacuum until recently, when the Chinese authorities issued a series of regulations to tighten their grip on Internet finance.
China Banking Regulatory Commission (CBRC)
|Matching funds initiatives|
According to the Guiding Opinions (see Regulation), innovation in relation to Internet finance platforms, products and services will be encouraged to stimulate market vitality.
- Industry Players in the embryonic stage may enjoy preferential taxation policies if certain conditions are satisfied.
Given current Chinese taxation laws do not provide special rules for Internet enterprises, these preferential taxation policies will probably only benefit small or innovative enterprises which will also enjoy preferential taxation treatment in relation to income tax and stamp duty, etc.
|Crowdfunding guidelines for entrepreneurs / investors|
|Guidelines for researchers on crowdfunding for R&I|
DESCRIPTION: Dreamore is a Chinese crowdfunding platform that accepts creative projects and has adopted the all-or-nothing crowdfunding model. It is classified by CrowdCrux as as one of the top 7 crowdfuding sites in China. Its strategy is to play down the investment aspect and emphasise their role in product innovation and public welfare.
(Sources: http://www.scmp.com/business/banking-finance/article/1445904/chinese-flo... - http://www.crowdcrux.com/top-7-chinese-crowdfunding-sites/)
PROJECT NAME: eyeForce VR Headset
DESCRIPTION: The project has the goal of developing a device able to enhance human vision up to a 210-degree-field-of-view. The success factor of this project is due to its technological validity. Moreover, the eyeForce Project is trying to enter into an expanding market, full of potential for future expansion. LINK: https://www.kickstarter.com/projects/1226248519/eyeforce-vr-headset-no-b...