Learnings from Crowdfunding in China

Abstract

Crowdfunding is a recent but promising phenomenon as it provides an alternative financial tool with an integrated marketing function for people and organisations that lack access to traditional forms of finance. The global crowdfunding market is driven by China, though the country has a comparably short history of crowdfunding. In fact, the Chinese market provides unique prerequisites for a prosperous development of crowdfunding. First and foremost, it has an established informal finance sector as formal finance cannot meet overall financial demand. Therefore, Chinese are used to applying alternative financial tools. Secondly, China has an agile internet sector, driven by e-commerce giants and social media providers, which next to their core business also provide financial services like crowdfunding. As a consequence, banks and other traditional financial institutions have to face competition. Thirdly, the Chinese government welcomes and promotes this development as internet finance could become a motor for financial reform. This triad of an underdeveloped formal financial sector, an established informal finance sector, and a dynamic internet finance sector provides a unique setting for crowdfunding in China.