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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 from 2014 to 2016. However, with the occurrence of related negative events, the authorities started to issue warnings to the public about the risks of illegal fundraising under the guise of the crowdfunding. As of today, apart from the approach of donation-based crowdfunding, most other crowdfunding approaches are regarded as illegal financial activities under the PRC laws thus no longer exist in the Chinese market.
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 organization itself; or (ii) the donation-based crowdfunding platform is not a charitable organization itself, but it cooperates with qualified charitable organization after signing cooperation agreement and release fundraising information as an information platform. According to the Charity Law of China, the charitable organization 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 Organization Internet Fundraising Information Platform. In addition, unauthorized donation-based crowdfunding activities organized by FinTechs will result in warnings or administrative penalties from the authorities.
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 or cultural communities – i.e. JD, Tmall Suning and BiliBili.