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Supporting Startups, China to Boost Equity Crowdfunding

| Sep 29, 2015 07:39 AM EDT

The country's economy is currently state-dominated.

In the government's bid to support startups, China announced that it will help boost equity crowdfunding and encourage entrepreneurship, a cabinet document issued on Saturday stated.

As employment is one growth driver prioritized by the world's second largest economy, China's leaders claimed that they have long been wanting to promote more entrepreneurial activities.

The country's economy is currently state-dominated.

According to the State Council document, the government calls for equity crowdfunding project expansion to provide smaller enterprises a "useful complement" to the conventional equity financing. The call also highlights the need to minimize financial risks and protect the rights of investors.

Aided by platforms established by e-commerce powerhouses such as JD.com Inc., crowdfunding has seen rapid growth in the recent period, albeit the unwillingness of most Chinese banks to finance startups.

The process of crowdfunding has also helped established firms as monetary resources from traditional platforms dry up. For instance, Dalian Wanda Group raised 5 billion yuan online from investors, as they stated in June, and announced its plan to continue raising money from the public.

However, reports have also laid out some risks brought about by the still unregulated market. Earlier this month, a Beijing court levied a 15,000-yuan fine to a restaurant for publicly deceiving investors who were able to raise 700,000 yuan online.

The government committed that it would give startups easier market access, though the document provided no details as to how they will address the market risks.

According to a World Bank forecast, China could account for half of the developing world's crowdfunding market in a decade's time. The projected value is $50 billion.

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