New crowdfunding association
As more Internet financing activities such as online payments, loans and consumer finance are being conducted in China, a national level crowdfunding industry association was established on Wednesday in Xiamen to help individuals and companies further diversify their investments.
Crowdfunding refers to the financing of a project or venture by raising money from a large number of people, typically through the Internet. It has become a global phenomenon amid the current global economic climate.
People can propose a project to be funded through a platform with investors offering to put in a share of the total money needed. In return, investors receive a product, service or shares.
The association will assist major crowdfunding platforms, including Taobao.com, JD.com and Zhongchou.com, in promoting and diversifying existing equity crowdfunding products. It will also establish research branches and innovation centers in major cities, including Shanghai, Hangzhou and Xiamen, to provide more products for projects such as big-ticket estate development and publishing.
Wu Xiaoling, deputy director of the Financial and Economic Affairs Committee under the National People’s Congress, said with a guideline regulating financing activities on the Internet issued by the central government in July, China has been encouraging innovation in Internet finance while introducing measures to prevent potential risks.
China’s crowdfunding market could reach $46 billion to $50 billion by 2025, according to a report released by the World Bank in 2014.
Sun Hongsheng, CEO of Beijingbased Zhongchou.com, China’s leading crowdfunding website, said there are a number of differences in China’s property crowdfunding investment models from those in Europe and the United States.
“Investors can participate in a project simply to receive a financial return. They can also get special deals from retailers, win prizes or a combination of all three,” said Sun.
“Many small developers consider crowdfunding as a marketing tool that will help them sell unsold properties,” Sun said.
“But to prevent risks, we only cooperate with a few State-owned enterprises and big-name developers from the private sector.”
Yao Yudong, head of the People’s Bank of China’s Research Institute of Finance, said as the country’s economy slows, the central government is keen to accelerate development of finance based on the Internet and telecommunication technology as part of its “Internet Plus” plan to better support real economic growth.
“However, the less-regulated Internet financial products may cause risks in the entire financial system if they cannot be properly managed, with more online financing platforms reporting defaults and even fraud, tightened regulation for the sector is definitely required,” said Yao.